Responding to a Federal Hacking or Data Breach Investigation

Getting hacked or suffering a data breach can be incredibly stressful and scary for any organization. If the breach involves sensitive customer data or impacts critical systems, the federal government may get involved in the investigation. Knowing how to respond appropriately is crucial.

Understanding the Investigation Process

When a major hacking incident or data breach occurs, the impacted organization will likely face scrutiny from federal agencies like the FBI, FTC, SEC, and others. Here’s a quick overview of how a federal investigation typically unfolds:

• Discovery: The organization discovers suspicious activity or is notified of a breach by law enforcement. Forensic investigators are brought in to determine the scope of the incident.
• Notification: If the breach impacted personal customer data, notification may be required under state and federal laws. The organization should consult counsel on proper notification procedures.
• Federal Investigation: Depending on the severity, federal agencies will open a formal investigation. Investigators will collect evidence, interview employees, and determine if any laws were violated.
• Charges or Settlement: If laws were broken, the Department of Justice may file criminal charges against the organization or responsible individuals. Even without charges, the FTC or other agencies may seek a settlement.
• Ongoing Compliance: Any settlement will likely involve long-term monitoring and compliance requirements, audits, fines for future issues, etc.

The process can easily take many months or even years depending on the complexity of the incident. Organizations should be prepared for a lengthy investigation.

Cooperating with Investigators

When federal investigators come knocking, cooperation is key. Obstruction or failing to comply can lead to further charges and make any settlement much more painful. Here are some tips for working with investigators:

• Designate a point person to coordinate with investigators and ensure they get what they need in a timely manner. This helps avoid any miscommunication.
• Be transparent and provide all relevant information, even if it’s unflattering. Only provide factual information supported by evidence. Avoid speculation.
• Consult legal counsel before responding to any requests. Counsel can help ensure you avoid missteps and don’t accidentally waive privileges or rights.
• Notify employees who will be interviewed so they understand their rights and responsibilities. Make sure they have legal counsel present if needed.
• Preserve all evidence related to the incident. Investigators will likely want access to logs, emails, forensic artifacts, etc. Failure to preserve evidence can lead to obstruction charges.
• Limit public statements about the investigation while it is ongoing. Even innocent remarks could be problematic.
• Begin remediation efforts like improving security controls before the investigation concludes. It shows regulators you take the situation seriously.

Full cooperation doesn’t necessarily mean the outcome will be positive. But it can help demonstrate your organization is acting in good faith to address the situation responsibly.

Understanding the Charges and Liabilities

If investigators determine federal cybersecurity or privacy laws were violated, several criminal and civil charges could come into play:

Criminal Charges

• Computer Fraud and Abuse Act (CFAA): Broadly makes it illegal to access a computer without authorization or exceed authorized access. Both insiders and external hackers can be charged.
• Wire Fraud: Covers any fraud schemes executed using electronic communications like email, texts or online messaging.
• Identity Theft: Applies when PII like social security numbers are stolen with intent to commit fraud.
• Obstruction of Justice: Destroying evidence, lying to investigators, or impeding the investigation may constitute obstruction.

Civil and Regulatory Actions

• FTC Enforcement: The FTC can fine organizations and file lawsuits for unfair or deceptive business practices related to data security and privacy.
• State AG Enforcement: State attorneys general are increasingly aggressive in using state consumer protection laws to punish organizations for breaches involving residents. Multistate actions are common.
• SEC Enforcement: Public companies may face SEC fines or charges for failure to disclose breaches or cybersecurity risks to investors.
• Class Action Suits: Customers, employees or other parties may file class action lawsuits seeking damages related to the breach.

The specific laws and regulations involved depend heavily on the nature of the incident, types of data impacted, and level of negligence demonstrated by the organization. Experienced legal counsel is invaluable in navigating these risks.

Mitigating Fines and Exposure

For many organizations, the civil fines and settlements resulting from an investigation present major financial risk. There are several steps that can be taken to reduce fines and liability:

• Show regulators your security program was reasonable: Document security policies, training, and technology investments to counter claims you were negligent.
• Demonstrate prompt response and notification: Regulators will look for good faith efforts to notify customers, secure data and remediate issues.
• Implement stronger controls post-breach: Efforts to improve security can help offset claims you are reckless regarding privacy.
• Offer remedies to customers: Providing credit monitoring, identity theft protection or reimbursement for losses can reduce class action claims.
• Cooperate fully with investigators: Obstruction and failure to comply only raises fines and invites criminal charges.
• Retain experienced counsel: Skilled lawyers who have navigated federal cyber investigations are invaluable for avoiding missteps.
• Consider cyber insurance: Policies may cover a portion of costs related to the investigation, fines and lawsuits.

There are never any guarantees when it comes to federal enforcement actions. But thoughtful preparation and cooperation can significantly reduce the pain of settlements and judgments.

Navigating the PR Aspects

Beyond the investigative and legal aspects, major breaches often involve dealing with negative press and reputational damage. PR mismanagement can further erode public trust. Consider these PR tips:

• Designate an experienced spokesperson to shape the public narrative and communicate responsibly. Avoid mixed messages.
• Be prompt and transparent in notifying customers of the breach. Downplaying issues only backfires when the truth emerges.
• Show empathy and accountability in public statements. Avoid language blaming external factors or minimizing impact on customers.
• Highlight remediation efforts like free credit monitoring and improved security controls. This reassures customers.
• Proactively engage the media with frequent updates and maximum transparency. Avoid the appearance of hiding details.
• Let law enforcement announce developments on the investigation itself. Avoid making statements that could impede their work.
• Remain calm and constructive in the face of criticism. Lashing out defensively only amplifies negativity towards your brand.
• Focus messaging on business continuity. Ensure customers understand critical services remain operational and their needs are still being met.

With proper PR strategy, organizations can gradually rebuild trust and limit long-term damage to their reputation. The court of public opinion often matters as much as the legal outcomes when it comes to cyber incidents.

Final Thoughts

Dealing with a federal investigation related to a data breach or hacking incident is daunting for any organization. However, by understanding the process, cooperating responsibly with investigators, mitigating legal exposure, and managing public communications, the worst outcomes can be avoided. Experienced legal counsel and PR guidance are essential when navigating a major federal inquiry following a breach.

Sources

• FBI Cyber Crime
• Responding to a Data Breach
• Cyber Insurance Benefits
• Data Breach Response Guide
• Crisis Communications During Data Breach