This post deals with another data breach, yes, hackers were able to compromise the organization’s systems and exfiltrate personal information relating to over 45,000 Pennsylvania and Ohio residents. However, there are several important takeaways from this case, including cybersecurity in corporate transactions, data retention and destruction, and incident response planning.

According to the Assurance of Voluntary Compliance agreed to in this matter with Pennsylvania’s Acting Attorney General Michelle Henry:

  • As part of the 2021 breach, the hackers exfiltrated 28 databases from the organization’s network. Those databases were obtained by the organization as part of an acquisition that occurred nearly 10 years earlier, and they had not been used for any business purpose since. The organization claimed that the databases were inadvertently transferred to it as part of the transaction without the organization’s knowledge.
  • In May of 2021, the organization began receiving alerts concerning suspicious activity on its networks. When additional alerts came in August of 2021, indicating Cobalt Strike malware in the environment, the organization initiated its incident response plan.

In response to these and other allegations made by the Acting AG Henry and in coordination with the Ohio Attorney General’s office, the organization settled. According to the settlement, it will pay each state $200,000 and will adopt a compliant information security program within 180 days of the settlement.

So, what are the takeaways?

Transactions. As one cyber leader put it recently:

Mergers and acquisitions give organizations the potential to increase capabilities, diversify offerings and expand market share, but they also present considerable risks. And while companies usually review financial, strategic, legal and operational details before completing an M&A transaction, another important concern is often overlooked: cybersecurity.

The obligations to assess data risk in a transaction extend to that which is acquired (What are the reps? What are we getting? Do we want/need it? etc.) and that which is divested (Can we disclose? How should we transfer? etc.).  A complete inventory of systems and information assets in a transaction clearly would help acquiring organizations make prudent decisions about what should be retained, how best to safeguard what is retained and used, and do public statements about safeguards track their practices with respect to that data.

Data Retention and Destruction. Simply stated, organizations should only collect personal information they need, keep it only for as long as they need it, and when it is no longer needed, it should be destroyed or made unreadable. This is much more difficult in practice, of course. However, a good starting point is inventorying what personal information the organization has and continues to collect, and then make some determinations about whether that information is needed or can be eliminated. Increasingly, regulations are mandating implementation of these principles. See, for example, section 7002(d) of the CCPA regulations (awaiting final approval) which states:

“Whether a business’s collection, use, retention, and/or sharing of a consumer’s personal information is reasonably necessary and proportionate to achieve the purpose identified [the regulations], or any purpose for which the business obtains consent, shall be based on the following: (1) The minimum personal information that is necessary to achieve the purpose identified…or any purpose for which the business obtains consent.”

If those purposes cease to exist, retention also may need to cease.

Incident response planning. Simply having an incident response plan is not enough, although it is a good start. According to a WSJ survey, 74% of companies say they have “an incident response management strategy,” but only 23% surveyed tested their plan twice a year or more. For a whole host of reasons, responding to an incident can take time, but reacting as quickly as possible can help minimize the scope of the incident and mitigate harm. Regular and frequent training and tabletop exercises on a well-developed incident response plan can go a long way toward preparing the organization to face significant security incidents. 

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Photo of Joseph J. Lazzarotti Joseph J. Lazzarotti

Joseph J. Lazzarotti is a principal in the Berkeley Heights, New Jersey, office of Jackson Lewis P.C. He founded and currently co-leads the firm’s Privacy, Data and Cybersecurity practice group, edits the firm’s Privacy Blog, and is a Certified Information Privacy Professional (CIPP)…

Joseph J. Lazzarotti is a principal in the Berkeley Heights, New Jersey, office of Jackson Lewis P.C. He founded and currently co-leads the firm’s Privacy, Data and Cybersecurity practice group, edits the firm’s Privacy Blog, and is a Certified Information Privacy Professional (CIPP) with the International Association of Privacy Professionals. Trained as an employee benefits lawyer, focused on compliance, Joe also is a member of the firm’s Employee Benefits practice group.

In short, his practice focuses on the matrix of laws governing the privacy, security, and management of data, as well as the impact and regulation of social media. He also counsels companies on compliance, fiduciary, taxation, and administrative matters with respect to employee benefit plans.

Privacy and cybersecurity experience – Joe counsels multinational, national and regional companies in all industries on the broad array of laws, regulations, best practices, and preventive safeguards. The following are examples of areas of focus in his practice:

  • Advising health care providers, business associates, and group health plan sponsors concerning HIPAA/HITECH compliance, including risk assessments, policies and procedures, incident response plan development, vendor assessment and management programs, and training.
  • Coached hundreds of companies through the investigation, remediation, notification, and overall response to data breaches of all kinds – PHI, PII, payment card, etc.
  • Helping organizations address questions about the application, implementation, and overall compliance with European Union’s General Data Protection Regulation (GDPR) and, in particular, its implications in the U.S., together with preparing for the California Consumer Privacy Act.
  • Working with organizations to develop and implement video, audio, and data-driven monitoring and surveillance programs. For instance, in the transportation and related industries, Joe has worked with numerous clients on fleet management programs involving the use of telematics, dash-cams, event data recorders (EDR), and related technologies. He also has advised many clients in the use of biometrics including with regard to consent, data security, and retention issues under BIPA and other laws.
  • Assisting clients with growing state data security mandates to safeguard personal information, including steering clients through detailed risk assessments and converting those assessments into practical “best practice” risk management solutions, including written information security programs (WISPs). Related work includes compliance advice concerning FTC Act, Regulation S-P, GLBA, and New York Reg. 500.
  • Advising clients about best practices for electronic communications, including in social media, as well as when communicating under a “bring your own device” (BYOD) or “company owned personally enabled device” (COPE) environment.
  • Conducting various levels of privacy and data security training for executives and employees
  • Supports organizations through mergers, acquisitions, and reorganizations with regard to the handling of employee and customer data, and the safeguarding of that data during the transaction.
  • Representing organizations in matters involving inquiries into privacy and data security compliance before federal and state agencies including the HHS Office of Civil Rights, Federal Trade Commission, and various state Attorneys General.

Benefits counseling experience – Joe’s work in the benefits counseling area covers many areas of employee benefits law. Below are some examples of that work:

  • As part of the Firm’s Health Care Reform Team, he advises employers and plan sponsors regarding the establishment, administration and operation of fully insured and self-funded health and welfare plans to comply with ERISA, IRC, ACA/PPACA, HIPAA, COBRA, ADA, GINA, and other related laws.
  • Guiding clients through the selection of plan service providers, along with negotiating service agreements with vendors to address plan compliance and operations, while leveraging data security experience to ensure plan data is safeguarded.
  • Counsels plan sponsors on day-to-day compliance and administrative issues affecting plans.
  • Assists in the design and drafting of benefit plan documents, including severance and fringe benefit plans.
  • Advises plan sponsors concerning employee benefit plan operation, administration and correcting errors in operation.

Joe speaks and writes regularly on current employee benefits and data privacy and cybersecurity topics and his work has been published in leading business and legal journals and media outlets, such as The Washington Post, Inside Counsel, Bloomberg, The National Law Journal, Financial Times, Business Insurance, HR Magazine and NPR, as well as the ABA Journal, The American Lawyer, Law360, Bender’s Labor and Employment Bulletin, the Australian Privacy Law Bulletin and the Privacy, and Data Security Law Journal.

Joe served as a judicial law clerk for the Honorable Laura Denvir Stith on the Missouri Court of Appeals.