As it moves to spin off a recently acquired unit, Equifax Inc. is being entangled in a dispute over an alleged breach of privacy.
A shareholder is demanding that the board investigate whether the information services company knew or should have known about what he claims was misuse of voter registration data by CDB Infotek.
Atlanta-based Equifax acquired a 70% stake in the Santa Ana, Calif., company last August and plans to spin it off as soon as the Internal Revenue Service rules on a tax issue.
The shareholder making the accusation is John Aristotle Phillips, who owns Aristotle Publishing Inc., Washington. His company competes with Equifax as a supplier of voter registration data.
Mr. Phillips said the board should make a full disclosure to shareholders and government authorities.
His request, obtained by the American Banker, states that "when Equifax purchased its CDB interest, CDB's own sales literature advertised the sale of voter registration data from a number of states, including Georgia, for unlawful purposes."
Commercial use of voter registration information is a felony or misdemeanor in some states.
J. Blair Richardson, attorney for Aristotle Publishing, said the advertisements suggested using voter registration data for collecting bills.
"You have been placed on notice of the problems," Mr. Phillips' request tells board members, "and I believe these matters deserve investigation, regardless of who brought them to your attention."
"We have no response at all," said Equifax spokesman Norman Black when asked last week to comment on the shareholder request and related issues.
Equifax has stressed previously that it is not the target of Mr. Phillips, but rather that CDB is. Equifax also has said its data bases have been kept strictly separate from CDB's.
Equifax's "boilerplate responses" to the issues raised by Mr. Phillips do not satisfy privacy watchdog Evan Hendricks, editor and publisher of Privacy Times, Washington.
Mr. Hendricks said that though Equifax has "done some good things on the privacy front" its failure to respond publicly-citing pending litigation- could blemish the company's record on privacy issues.
"I don't think they've yet moved aggressively to get all the facts out," he said.
Asked if Mr. Phillips' being a competitor to Equifax hurt his case, Mr. Hendricks said it does not. The issues raised should be examined on their merits, he said.
In December Mr. Phillips filed suit in U.S. District Court for the District of Columbia against CDB Infotek over contractual issues. The suit includes a charge that CDB had obtained an unfair trade advantage by using information illegally.
CDB countersued March 3, seeking damages and claiming breach of contract. Both suits are pending.
"In light of what I have discovered during my relationship with CDB, the Equifax board of directors should have serious concerns about a pattern of conduct by company officers that could expose the company to fines, sanctions, and significant harm to the company's investment in a reputation for responsible privacy policies," Mr. Phillips said in his request.
"Equifax may have been misled, or the due diligence may have been negligent," the shareholder request states. "An even more troubling possibility is that Equifax knew but chose to look the other way."
Mr. Richardson said that regardless of whether CDB intended to use the voter information illegally, Aristotle would be satisfied if Equifax ordered CDB to give back any revenues derived from any illegal use of data.
"For a privacy-conscious company like Equifax, you just don't keep the money," he said.