Facebook Investor: Company Paid $5 Billion to FTC as ‘Quid Pro Quo’ to Shield Zuckerberg
A recently filed lawsuit against Facebook reveals new details about the Cambridge Analytica data breach scandal, claiming among other allegations that company executives massively overpaid the Federal Trade Commission to shield CEO Mark Zuckerberg from personal liability.
The lawsuit was filed in a Delaware state court by the Employees’ Retirement System of Rhode Island (ERSRI), following a battle over whether troves of internal Facebook communications should be publicly disclosed. The pension fund won that case in February, and used those records to file its latest lawsuit in August.
ERSRI, an investor in Facebook, claims that the $5 billion settlement harmed the social media company—thereby breaching its fiduciary duty to the pension fund.
According to the 200-plus page claim, Zuckerberg, Chief Operating Officer Sheryl Sandberg, and other Facebook directors agreed to authorize a multibillion-dollar settlement with the FTC as an “express quid pro quo to protect Zuckerberg from being named in the FTC’s complaint, made subject to personal liability, or even required to sit for a deposition.”
The lawsuit suggests that Facebook overpaid the FTC by some $4.9 billion, since the commission’s previous record fine was $168 million.
The lawsuit seeks a declaration that the Facebook executives’ actions were improper, as well as awards for damages. ERSRI may have a difficult time proving harm in this case, as Facebook’s stock has risen from about $198 when the FTC issued its enforcement action in July, to nearly $350 per share today.
The lawsuit doesn’t suggest impropriety by the FTC, whose budget doesn’t benefit from the $5 billion since that money goes to the Treasury Department.
However, the lawsuit does allege wrongdoing by other parties, including billionaire Facebook investor Peter Thiel and his data analytics firm Palantir—naming them as defendants in the case along with Zuckerberg and other Facebook board members.
ERSRI’s lawsuit corroborates earlier reports that Thiel—a Trump donor—used his analytics firm to help facilitate the privacy violations committed by Facebook and Cambridge.
“Palantir employees, including at least one of Palantir’s lead data scientists, regularly worked in person, during normal business hours, at the offices of Cambridge Analytica in London,” the lawsuit says. “It was a Palantir employee, Alfredas Chmieliauskas, who first suggested that Cambridge Analytica create its own app—specifically, a mobile-based personality quiz—to gain access to Facebook users’ friend networks.”
According to the lawsuit, Palantir and Thiel benefited from Trump and the Republicans winning, with the analytics firm becoming “one of the largest recipients of government defense contracts with the United States government since Trump took office.”
Facebook and the FTC declined to comment; Palantir didn’t immediately respond to a request by The Epoch Times for comment.
Though the lawsuit was filed in August, it has only recently been widely publicized.
According to Digital Content Next CEO Jason Kint, the suit wasn’t initially noticed due to exorbitant fees the Delaware court registry charges for court records.
“As to how this suit wasn’t noticed, Delaware Chancery charges a fortune per document limiting public awareness,” Kint said Sept. 21 on Twitter. “Original case to inspect board docs (Rhode Island) was won, derivative suits were amended/filed/consolidated in shell game. I followed the breadcrumbs.”
The now-defunct company Cambridge Analytica used an app called “This Is Your Digital Life” to scrape the data of millions of users, and then allegedly used that data to target people with pro-Republican ads ahead of the 2016 elections.
It was never found that Cambridge Analytica affected the results of the 2016 election. Publications such as the National Review—which came out in opposition to Donald Trump—described it as a “nothingburger.”
However, the scandal did reveal the startling extent to which Facebook and its app developers have access to intimate details about its users, including demographics, internet activity, consumer behavior, and political beliefs—thousands of data points on each user, according to numerous sources.
In total, Cambridge Analytica collected data on some 70 million people—30 million Americans—including those who never used Cambridge Analytica’s “This Is Your Digital Life” app.
Facebook still faces lawsuits and regulatory actions over the scandal worldwide, including places such as the Netherlands. The company also faces an antitrust case brought by the FTC, driven in part by the political backlash from the scandal.