Are Your Secrets Safe?

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What the hearings will likely discover is how much the government itself has fueled the explosive growth of ChoicePoint, Westlaw and other top data aggregators--Acxiom, credit-reporting agency Equifax, HNC Software and Lexis Nexis. For decades such firms, especially credit-reporting agencies, collected financial and personal data on most Americans. Governments had their own databases of licenses, crime stats, voter records and the like. Today, thanks to the exponential growth in computing power, the rise of the Internet and industry consolidation, data companies can bring all that together in one place. Properly harnessed, such networked information can lubricate commerce or thwart terrorism, and after 9/11, government agencies flocked to the new powerful resource. But in the wrong hands, it can harm innocent citizens' lives.

ChoicePoint, led by CEO Derek Smith, 50, was among the first to realize that those conflating data streams were a huge business opportunity. Smith took over an underperforming division of Equifax that sold financial data to the insurance industry, and after the unit was spun off, he went on a buying spree. Since 1997, ChoicePoint has made 58 acquisitions, from Bode Technology Group, which does DNA analysis and handled the task of identifying remains of World Trade Center victims, to i2, an outfit that provides actionable intelligence by devouring police reports. ChoicePoint, with sales of $918 million in 2004 and profits of $141 million, is now a leader in biometric identification, postcrime forensic DNA analysis and sophisticated criminal-profiling tools. It also does background checks and manages government databases. That's a long way from credit reports but reflects Smith's view that information, once used strictly to manage financial risks, can be profitably adapted to manage security risks too.

ChoicePoint's analytic capability gives privacy advocates the creeps and has made ChoicePoint, in the eyes of some, an outsourced intelligence agency. The company works for thousands of government units, performing such mundane tasks as screening job applicants and looking for deadbeat dads, as well as doing antiterrorism analysis for the Department of Homeland Security. Its powerful search algorithms can worm through vast databases to see outliers that separate systems could not. Had such a system been operating in 2001, Smith has said, it could have highlighted the 9/11 hijackers before they got on the planes.

Smith is an entrepreneur, but he's not insensitive to the philosophical issues of data mining. "ChoicePoint doesn't tell society what the rules should be. We create fundamental risk profiles that help society manage itself," he told Georgia Trend in 2002. "Ultimately, that process will create huge consequences both positive and negative." For years, he has been asking for a dialogue on the whole issue of privacy, security and identity fraud. In the aftermath of the California scam, he's about to get one. --Reported by Greg Fulton/ Atlanta and Mark Thompson/ Washington