In a prepared testimony ahead of his appearance before a congressional panel, former Equifax CEO Richard Smith said he was “deeply sorry” about a data breach last month that exposed the personal data of more than 143 million consumers, saying his company “failed to prevent sensitive information from falling into the hands of wrongdoers.”
But how exactly did that happen? Smith, who had served as chairman and CEO of Equifax for 12 years before stepping down in light of the breach last month, will offer his own version of events in a Tuesday morning appearance before the U.S. House Committee on Energy and Commerce Subcommittee on Digital Commerce and Consumer Protection. But his prepared remarks offer a glimpse of what occurred.
At the hearing, Smith will likely face more of the anger that followed the initial announcement of the breach — which compromised names, birth dates and social security numbers, among other sensitive data — last month. More than two dozen class-action lawsuits have been filed against Equifax over the hack. The state of Massachusetts has also filed a separate suit.
On Monday, Equifax announced some 2.5 more million people were affected in the breach than it originally thought, bringing the total number of affected customers to 145.5 million, the Associated Press reported.
An independent investigation of the hack conducted by Mandiant is also expected “promptly,” the Associated Press reported. Read Smith’s version of events below. You can read his full testimony on the committee’s website.
Americans want to know how this happened and I am hopeful my testimony will help in that regard. As I will explain in greater detail below, the investigation continues, but it appears that the breach occurred because of both human error and technology failures. These mistakes – made in the same chain of security systems designed with redundancies – allowed criminals to access over 140 million Americans’ data.
Upon learning of suspicious activity, I and many others at Equifax worked with outside experts to understand what had occurred and do everything possible to make this right. Ultimately we realized we had been the victim of a massive theft, and we set out to notify American consumers, protect against increased attacks, and remediate and protect against harm to consumers. We developed a robust package of remedial protections for each and every American consumer – not just those affected by the breach – to protect their credit information. The relief package includes: (1) monitoring of consumer credit files across all three bureaus, (2) access to Equifax credit files, (3) the ability to lock the Equifax credit file, (4) an insurance policy to cover out-of-pocket costs associated with identity theft; and (5) dark web scans for consumers’ social security numbers. All five of these services are free and without cost to all Americans. Equifax also recently announced an important new tool that has been under development for months that will allow consumers to lock and unlock their credit files repeatedly, for life, at no cost. This puts the control of consumers’ credit information where it belongs – with the consumer. We have also taken steps to better protect consumer data moving forward.
We were disappointed with the rollout of our website and call centers, which in many cases added to the frustration of American consumers. The scale of this hack was enormous and we struggled with the initial effort to meet the challenges that effective remediation posed. The company dramatically increased the number of customer service representatives at the call centers and the website has been improved to handle the large number of visitors. Still, the rollout of these resources should have been far better, and I regret that the response exacerbated rather than alleviated matters for so many.
How It Happened
First and foremost, I want to respond to the question that is on everyone’s mind, which is, “How did this happen?” In my testimony, I will address both what I learned and did at key times in my role as CEO, and what I have since learned was occurring during those times, based on the company’s ongoing investigation. Chronologically, the key events are as follows:
On March 8, 2017, the U.S. Department of Homeland Security, Computer Emergency Readiness Team (“U.S. CERT”) sent Equifax and many others a notice of the need to patch a particular vulnerability in certain versions of software used by other businesses. Equifax used that software, which is called “Apache Struts,” in its online disputes portal, a website where consumers can dispute items on their credit report.
On March 9, Equifax disseminated the U.S. CERT notification internally by email requesting that applicable personnel responsible for an Apache Struts installation upgrade their software. Consistent with Equifax’s patching policy, the Equifax security department required that patching occur within a 48 hour time period. We now know that the vulnerable version of Apache Struts within Equifax was not identified or patched in response to the internal March 9 notification to information technology personnel.
On March 15, Equifax’s information security department also ran scans that should have identified any systems that were vulnerable to the Apache Struts issue identified by U.S. CERT. Unfortunately, however, the scans did not identify the Apache Struts vulnerability. Equifax’s efforts undertaken in March 2017 did not identify any versions of Apache Struts that were subject to this vulnerability, and the vulnerability remained in an Equifax web application much longer than it should have. I understand that Equifax’s investigation into these issues is ongoing. The company knows, however, that it was this unpatched vulnerability that allowed hackers to access personal identifying information.
Based on the investigation to date, it appears that the first date the attacker(s) accessed sensitive information may have been on May 13, 2017. The company was not aware of that access at the time. Between May 13 and July 30, there is evidence to suggest that the attacker(s) continued to access sensitive information, exploiting the same Apache Struts vulnerability. During that time, Equifax’s security tools did not detect this illegal access.
On July 29, however, Equifax’s security department observed suspicious network traffic associated with the consumer dispute website (where consumers could investigate and contest issues with their credit reports). In response, the security department investigated and immediately blocked the suspicious traffic that was identified. The department continued to monitor network traffic and observed additional suspicious activity on July 30, 2017. In response, they took the web application completely offline that day. The criminal hack was over, but the hard work to figure out the nature, scope, and impact of it was just beginning.
I was told about the suspicious activity the next day, on July 31, in a conversation with the Chief Information Officer. At that time, I was informed that there was evidence of suspicious activity on our dispute portal and that the portal had been taken offline to address the potential issues. I certainly did not know that personal identifying information (“PII”) had been stolen, or have any indication of the scope of this attack.
On August 2, consistent with its security incident response procedures, the company: 1) retained the cybersecurity group at the law firm of King & Spalding LLP to guide the investigation and provide legal and regulatory advice; 2) reached out, though company counsel, to engage the independent cybersecurity forensic consulting firm, Mandiant, to investigate the suspicious activity; and 3) contacted the Federal Bureau of Investigation (“FBI”).
Over the next several weeks, working literally around the clock, Mandiant and Equifax’s security department analyzed forensic data seeking to identify and understand unauthorized activity on the network. Their task was to figure out what happened, what parts of the Equifax network were affected, how many consumers were affected, and what types of information was accessed or potentially acquired by the hackers. This effort included identifying and analyzing available forensic data to assess the attacker activity, determining the scope of the intrusion, and assessing whether the intrusion was ongoing (it was not; it had stopped on July 30 when the portal was taken offline). Mandiant also helped examine whether the data accessed contained personal identifying information; discover what data was exfiltrated from the company; and trace that data back to unique consumer information.
By August 11, the forensic investigation had determined that, in addition to dispute documents from the online web portal, the hackers may have accessed a database table containing a large amount of consumers’ PII, and potentially other data tables.
On August 15, I was informed that it appeared likely that consumer PII had been stolen. I requested a detailed briefing to determine how the company should proceed.
On August 17, I held a senior leadership team meeting to receive the detailed briefing on the investigation. At that point, the forensic investigation had determined that there were large volumes of consumer data that had been compromised. Learning this information was deeply concerning to me, although the team needed to continue their analysis to understand the scope and specific consumers potentially affected. The company had expert forensic and legal advice, and was mindful of the FBI’s need to conduct its criminal investigation.
A substantial complication was that the information stolen from Equifax had been stored in various data tables, so tracing the records back to individual consumers, given the volume of records involved, was extremely time consuming and difficult. To facilitate the forensic effort, I approved the use by the investigative team of additional computer resources that significantly reduced the time to analyze the data.
On August 22, I notified Equifax’s lead member of the Board of Directors, Mark Feidler, of the data breach, as well as my direct reports who headed up our various business units. In special telephonic board meetings on August 24 and 25, the full Board of Directors was informed. We also began developing the remediation we would need to assist affected consumers, even as the investigation continued apace. From this point forward, I was updated on a daily – and sometimes hourly – basis on both the investigative progress and the notification and remediation development.
On September 1, I convened a Board meeting where we discussed the scale of the breach and what we had learned so far, noting that the company was continuing to investigate. We also discussed our efforts to develop a notification and remediation program that would help consumers deal with the potential results of the incident. A mounting concern also was that when any notification is made, the experts informed us that we had to prepare our network for exponentially more attacks after the notification, because a notification would provoke “copycat” attempts and other criminal activity.
By September 4, the investigative team had created a list of approximately 143 million consumers whose personal information we believed had been stolen, and we continued our planning for a public announcement of a breach of that magnitude, which included a rollout of a comprehensive support package for consumers. The team continued its work on a dedicated website, www.equifaxsecurity2017.com, where consumers could learn whether they were impacted and find out more information, a dedicated call center to assist consumers with questions, and a free credit file monitoring and identity theft protection package for all U.S. consumers, regardless of whether they were impacted.
I understand that Equifax kept the FBI informed of the progress and significant developments in our investigation, and felt it was important to notify the FBI before moving forward with any public announcement. We notified the FBI in advance of the impending notification.
On September 7, 2017, Equifax publicly announced the breach through a nationwide press release. The release indicated that the breach impacted personal information relating to 143 million U.S. consumers, primarily including names, Social Security numbers, birth dates, addresses and, in some instances, driver’s license numbers.
These are the key facts as I understand them. I also understand that the FBI’s investigation and Equifax’s own review and remediation are ongoing, as are, of course, numerous other investigations.