law

21 Nov Michael Daugherty CEO of LabMD speaks for the first time after landmark FTC Ruling

 

Reblogged from here

Michael Daugherty Founder President and CEO of LabMD speaks to Government and IT Business Leaders for the first time after landmark court ruling at November 2015 GTRA Council Meeting.

 

GTRA November 17 2015 – Founder President and CEO of LabMD and author Michael Daugherty discussed his major win against the Federal Trade Commission at GTRA’s SecureGOV summit yesterday. After seven years of litigation court battles and testimonials ALJ ruled in favor of LabMD determining that the FTC failed to provide substantial evidence of any theft-related or emotional harm in the aftermath of an alleged security breach.

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28 Sep Closing Argument: The FTC dismisses their behavior as irrelevant

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On September 16, 2015, closing arguments were held in FTC Administrative court in Washington, DC.

This is the court Congress created over a century ago. They allowed this court to be subject to FTC rules. Rules that are stacked way in the FTC’s favor. And because Congress created the beast there is very little the courts can do about what goes down here.

When you read the transcript you will immediately note the judge going after the FTC. You’ll note his frustration as he grapples with the fact that the FTC argues that their behavior before they sued LabMD is irrelevant.

Working with thieves, not cooperating with a congressional investigation, not verifying evidence, refusing to tell the court or the world what standards and rules exist for cybersecurity compliance, destroying a medical facility, allowing hearsay, recusing a commissioner, speaking to the press, knowingly relying on tainted evidence and still moving forward, and helping create a third party shell company to deceive the public….none of this matters.

At least until they want to use some of it to lie about LabMD.

And because they write the rules, stack the deck, and lie to win….they just might just get away with it. Morality and truth isn’t on the table here. Only shredded reality. Please think hard if this is who you want our government regulating cybersecurity.

The FTC IS CHOCKED FULL OF LAWYERS who don’t care what carnage they wreak on the backs of consumers.

Our cyberdefences are way down and that’s due to their bully idiocy.  Enjoy the show…but their tactics will not create a safer world.

May 5, 2015 PUBLIC Final Trial Transcript

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17 Sep New Comic Strip Highlights The Story Of How Washington Caused A Successful Small Business To Close

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Comic debuts as LabMD makes final arguments in its years-long legal battle against the Federal Trade Commission

 

 

WASHINGTON – Cause of Action, a nonpartisan strategic oversight group committed to ensuring that government decision-making is open, honest, and fair, is releasing a comic strip today outlining the case of LabMD vs. the Federal Trade Commission (FTC).

 

Click here to view the full comic strip.

 

The FTC’s complaint against LabMD, a small, but successful cancer detection facility based in Georgia, relied on faulty allegations made by Tiversa, Inc., a data security company with a direct financial interest in FTC enforcement action against LabMD and others.

 

The toll of the lawsuit eventually destroyed LabMD, which is making closing arguments in the case today.

 

Cause of Action Executive Director Daniel Epstein issued the following statement:

 

“The comic is funny, but the sad reality is that this comic outlines a common example of what happens when the government colludes with crony companies to target the little guy. What may seem like a complicated and convoluted legal case is actually a very simple case of cronyism and federal overreach at its worst.”

 

Cause of Action is a non-profit, nonpartisan government accountability organization that fights to protect economic opportunity when federal regulations, spending and cronyism threaten it. For more information, visitwww.causeofaction.org.

FOR IMMEDIATE RELEASE: September 16, 2015

Media Contact: Geoff Holtzman | Geoff.holtzman@causeofaction.org | 703-405-3511

 

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22 Jun The FTC Goes Whistling Past the Graveyard

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The FTC has decided not to oppose LabMD’s request for a criminal investigation into Tiversa’s behavior…AS THEY SPIT IN THE FACE OF JUSTICE. They have enabled crime, ignored evidence, and are now sitting on the sidelines. These are hypocritical tyrants as they boast they are out to protect consumers. Their energy is being spent on keeping their incompetent and corrupt culture under wraps.

Not this time.

Look at the facts.

It’s unbelievable but sadly true.

 

LabMD – Mtn Referral 6 19 15

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10 May Bombshell Testimony as FTC Fails to Verify Evidence

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Grab your popcorn and turn off House of Cards because it doesn’t get better than this.

The testimony of former Tiversa employee Rick Wallace is bombshell transparent testimony.

It took over a year to get Rick on the stand with criminal immunity. This is no “he said she said” game, criminal immunity isn’t easily approved by the Justice Department, but the consistency and forensic evidence provided to Chairman Darreell Issa and the Justice Department must have done the trick.

Tsk Tsk Tsk, if the FTC had only verified evidence before embarking on their shameless seek and destroy fishing expedition.

Download it if you like…and grab a highlighter.

May 5, 2015 PUBLIC Final Trial Transcript

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07 May Whistleblower accuses cybersecurity company of extorting clients – CNN Money

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As reported in CNN Money today by   @Jose_Pagliery

A cybersecurity company faked hacks and extorted clients to buy its services, according to an ex-employee.
In a federal court this week, Richard Wallace, a former investigator at cybersecurity company Tiversa, said the company routinely engaged in fraud — and mafia-style shakedowns.

To scare potential clients, Tiversa would typically make up fake data breaches, Wallace said. Then it pressured firms to pay up.
“Hire us or face the music,” Wallace said on Tuesday at a federal courtroom in Washington, D.C.

CNNMoney obtained a transcript of the hearing.

The results were disastrous for at least one company that stood up to Tiversa and refused to pay.

In 2010, Tiversa scammed LabMD, a cancer testing center in Atlanta, Wallace testified. Wallace said he tapped into LabMD’s computers and pulled the medical records.

The cybersecurity firm then alerted LabMD it had been hacked. Tiversa offered it emergency “incident response” cybersecurity services. After the lab refused the offer, Tiversa threatened to tip off federal regulators about the “data breach.”

When LabMD still refused, Tiversa let the Federal Trade Commission know about the “hack.”

The FTC went after the lab, giving the company a choice: sign a consent decree (basically a plea deal which means years of audits and a nasty public statement) or fight in court. The CEO of LabMD, Michael Daugherty, chose to fight, because a plea deal would have tarnished his reputation and killed the business anyway, he said.

Daugherty lost that battle in 2014, having run out of steam. The lawsuit killed LabMD, which was forced to fire its 40 employees last year.

“We were a small company,” he said. “It’s not like we had millions of dollars to fight this and tons of employees.”

“The fight with the government was psychological warfare,” he told CNNMoney. “There was reputation assassination. There was intimidation. We thought we were extorted. My staff and management team was demoralized. My VP left. My lawyer left.”

Daugherty launched a website and wrote a book about the ordeal. Cause of Action, a government watchdog group, picked up his case.

Wallace’s testimony casts doubt on the FTC’s case against LabMD. If Wallace is telling the truth, the FTC aggressively prosecuted a company based on bogus evidence.

The FTC declined to comment, citing an ongoing lawsuit against LabMD, which still hasn’t reached its conclusion.

LabMD wasn’t the first time Tiversa’s false hacks made national news, Wallace said. He claimed that Tiversa also made up information in 2009 pointing to Iran for supposedly stealing blueprints for President Obama’s helicopter, Marine One. That scare that led to several news stories published byNBC, Fox, CNET and others.

According to Wallace, Tiversa did this by using phony IP addresses — on the orders of Tiversa’s CEO, Bob Boback. The company, which works closely with law enforcement, would look up the Internet addresses that were used by known criminals or identity thieves, then claim that those IP addresses were sharing stolen files online. Wallace said it was a scare tactic that added “spread” to the supposed damage — and “wow factor.”

“So, to boil this down, you would make the data breach appear to be much worse than it actually had been?” FTC Administrative Judge Michael Chappell asked.

“That’s correct,” Wallace responded.

Tiversa denies Wallace’s allegations. On Thursday, Tiversa’s CEO told CNNMoney that the recent revelations were “baseless” and came from an ex-employee still angry for being fired.

“This is an overblown case of a terminated employee seeking revenge,” Boback said. “Tiversa has received multiple awards from law enforcement for our continued efforts to help support them in cyber activities.”

Tiversa is a small cybersecurity consultancy based in Pittsburgh. Its board members include several highly-decorated experts in the security and privacy fields, including the retired four-star U.S. Army General Wesley K. Clark (formerly NATO’s Supreme Allied Commander in Europe) and Larry Ponemon (founder of the Ponemon Institute, a pro-privacy think tank).

U.S. Rep. Darrell Issa, chairman of the House Oversight Committee, demanded last year that the FTC look into allegations of “corporate blackmail” by Tiversa. In a letter to the FTC in December, Issa noted that Tiversa assisted the FTC on data leak investigations of “nearly 100 companies.” This link potentially taints evidence in those cases too.

To see the original article, click HERE

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06 May Analyst Backs LabMD In FTC Row, Alleges Fraud At Tiversa

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Originally posted on Law 360

By Jimmy Hoover

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Law360, Washington (May 05, 2015, 9:16 PM ET) — LabMD Inc. on Tuesday scored a major hit in its data security fight with the Federal Trade Commission after a former analyst at the cybersecurity firm Tiversa Inc. testified that his company lied to the agency about the extent of LabMD’s data leaks after the medical testing firm turned down its services.

Richard E. Wallace said in a hearing that during his time as one of the company’s chief forensic analysts from 2007 to 2014, he helped Tiversa and CEO Robert J. Boback spin lies to the FTC about the “proliferation” of LabMD-held insurance records among identity thieves — which LabMD claims is the sole basis for the agency’s 2013 administrative complaint against it for alleged data protection failures.

Wallace said that, rather than a proliferation, he merely downloaded a file off of LabMD’s own server and manufactured those claims per Boback’s orders, who he said wanted to steer LabMD into using Tiversa’s monitoring and remedial services.

According to Wallace, Boback became infuriated that LabMD’s president and CEO, Michael J. Daugherty, rejected their services.

“[Boback] basically said F-him, make sure he’s at the top of the list,” Wallace said at the hearing, describing the Tiversa CEO’s reaction to LabMD’s refusal of services.

Atlanta-based LabMD conducts laboratory tests on samples that physicians obtain from patients and also performs medical testing for consumers around the country.

Tuesday’s proceedings before Administrative Law Judge D. Michael Chappell had stalled for several months after Wallace revealed that Tiversa had emerged as the subject of an investigation from the House Committee on Oversight and Government Reform and that he was pursuing immunity for his testimony in the FTC proceedings — immunity he finally received.

Wallace said that he left the company in February 2014 after Boback had pressured him to lie under oath in a planned deposition from LabMD’s attorneys about the extent of LabMD’s data leaks.

According to LabMD’s attorney Reed Rubinstein of Dinsmore & Shohl LLP, the testimony marked a “remarkable day” in the case and vindicated the company’s assertion that “the FTC action was based on manufactured evidence.” At the close of the hearing Tuesday, Rubenstein announced that LabMD will seek a criminal investigation against the Tiversa.

“Obviously the FTC never checked what came in from Tiversa,” Rubinstein said in an interview with Law360.

Under direct examination from William A. Sherman II of Dinsmore & Shohl, Wallace outlined a pattern of fraud and deception at his former company and said it was “common practice” at Tiversa to deceive companies into believing identity thieves had stolen their files off of peer-to-peer networks in an effort to charge for remedial services.

Wallace said Tiversa carried out the scheme by inserting the IP addresses of known identity thieves into a “data store” and making it appear to the companies that the identity thieves had pilfered their files, despite the fact that they had already been shut down by law enforcement. Because their computers were down, Wallace said, “there was no way to contradict what Tiversa was saying.”

During a re-direct examination Tuesday from his own attorney, Mary Beth Buchanan of Bryan Cave LLP, Wallace also recounted an episode in which Boback allegedly forced him to conjure up a report claiming that trade secrets related to the avionics found in the cockpit of Marine One, the helicopter for presidential transport, had been stolen by Iranian nationals — a fake story later plastered in headlines across major news outlets including, CBS News, NBC News and Fox News.

“It was very big press for Tiversa. And believe it or not, it was not easy to find an active Iranian IP address that law enforcement couldn’t get a hold of,” Wallace said.

The FTC declined an opportunity to depose as well as cross-examine Wallace on Tuesday, though FTC attorney Laura Riposo VanDruff indicated that she may file a motion to introduce a rebuttal witness within the next week.

Counsel for Tiversa and Boback could not be immediately reached Tuesday for comment.

LabMD is represented by William A. Sherman II, Reed Rubinstein and Sunni Harris of Dinsmore & Shohl LLP and Hallee Morgan, Kent Huntington, Daniel Epstein, Patrick Massari and Prashant K. Khetan of Cause of Action.

The FTC is represented by Alain Sheer, Laura Riposo VanDruff, Megan Cox, Ryan Mehm, John Krebs and Jarad Brown.

The case is In the Matter of LabMD Inc., docket number 9357, before the Federal Trade Commission Office of the Administrative Law Judges.

–Editing by Emily Kokoll.

To download your own copy of this article, click here

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19 Mar LabMD, FTC Data Security Fight Delayed Again

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Screen shot 2014-08-22 at 5.55.03 AMLaw360, New York (March 16, 2015, 8:34 PM ET) —

 

 

An administrative law judge has postponed until May 5 the resumption of proceedings in the Federal Trade Commission‘s closely watched data security fight with LabMD Inc., marking the latest delay in a case that has been on hold for almost a year.

In an order dated Thursday, Chief Administrative Law Judge D. Michael Chappell revealed that the evidentiary hearing in the case, which was scheduled to resume on March 19, would instead be rescheduled to May 5.

The order offered no reason for the extension, saying only that the decision was “based upon good cause” and had been made following a conference call with the parties during which there had been no objections. The case has been on hold since May 30, when witness Rick Wallace revealed a congressional investigation into a key player in the FTC’s case.

“The judge told us the hearing was postponed, so we’ll show up on May 5 and we’ll see what Mr. Wallace has to say then,” Reed Rubinstein, a Dinsmore & Shohl LLP partner and the senior vice president of litigation at Cause of Action, which is representing LabMD in the administrative proceeding, told Law360 on Monday.

A spokeswoman for the FTC said that the commission did not have a comment on the extension.

Thursday’s order marks the latest twist in the long-running and hotly contested battle between the regulator and medical testing laboratory.

After a lengthy probe into the laboratory’s data security practices, and shortly after the company’s CEO released an online trailer to his book highlighting corruption at the FTC, the regulator in August 2013 filed an administrative complaint alleging that LabMD violated Section 5 of the FTC Act by failing to safeguard medical and financial information on nearly 10,000 customers.

LabMD shot back that the unfairness prong of Section 5 didn’t give the FTC authority to regulate how a business protects consumer information. And even if it did, LabMD argued, the Health Insurance Portability and Accountability Act would trump it because the information at stake is sensitive medical information.

After the FTC commissioners affirmed the agency’s authority to bring the suit in a January 2014 ruling rejecting the laboratory’s bid to dismiss the action, the focus of the case shifted to whether the data security standards that LabMD had in place to protect consumers’ sensitive medical and personal information could be considered reasonable.

However, shortly after the trial to resolve these issues began, Judge Chappell brought the proceedings to a halt, due to testimony by Wallace that the House Intelligence Committee on Oversight and Government Reform was conducting an investigation into data security firm Tiversa Inc., which had provided the FTC with a the file containing sensitive information that had purportedly been found outside the medical testing laboratory’s internal network.

The FTC’s data security suit rests in large part on Tiversa’s claims that its routine scanning activities found that the LabMD patient file had leaked outside the company, an assertion that Wallace — a former Tiversa employee — is expected to refute by testifying that the file had only been found on the LabMD server.

But while the House Oversight Committee concluded its probe by releasing a Dec. 1 report that Tiversa failed to provide complete information about work it performed, the committee did not address the question of whether Wallace could be granted immunity for his testimony in the administrative proceedings, which Judge Chappell had elected to keep on hold until the immunity issue had been resolved.

The quandary was finally put to rest in January, when after receiving permission from theU.S. Department of Justice, Judge Chappell granted LabMD’s request to give immunity to Wallace, and ordered him to testify at the resumption of the evidentiary hearing, which the judge scheduled for March 3.

As the proceedings were about to get underway, Judge Chappell issued an order granting Wallace’s request to adjourn the trial and his appearance for deposition until March 19, a plan that remained in place until the judge issued his latest extension order Thursday.

LabMD is represented by William A. Sherman II, Reed Rubinstein and Sunni Harris of Dinsmore & Shohl LLP and Hallee Morgan, Kent Huntington, Daniel Epstein, Patrick Massari and Prashant K. Khetan of Cause of Action.

The FTC is represented by Alain Sheer, Laura Riposo VanDruff, Megan Cox, Ryan Mehm, John Krebs and Jarad Brown.

The case is In the Matter of LabMD Inc., docket number 9357, before the Federal Trade Commission Office of the Administrative Law Judges.

–Editing by John Quinn.

 

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