Data Break-in Affects Millions (ADS, WAG, JPM, COF, C, USB, BX, KFT)

By Jon C. Ogg Updated Apr 27, 7:57PM EDT · Published Apr 4, 10:25AM EDT

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Dallas-based Epsilon reported a break-in to the company’s email system that exposed some of the data the company maintains for clients using its email marketing services. Epsilon is a subsidiary of Alliance Data Systems Corp. (NYSE: ADS) and the company claims more than 2,200 customers. Among these customers is the College Board, well-known among high school and college students as purveyors of standardized tests such as the SAT, Advanced Placement (AP) tests, and the CSS/Financial Aid Profile. Altogether, the College Board counts some 7 million students in its customer base.

Other customers of Epsilon include Walgreen Co. (NYSE: WAG), JP Morgan Chase & Co. (NYSE: JPM), Capital One Financial Corp. (NYSE: COF), Citigroup, Inc. (NYSE: C), U.S. Bancorp (NYSE: USB), the Hilton Hotel chain owned by The Blackstone Group (NYSE: BX), and Kraft Foods Inc. (NYSE: KFT).

Because our son is a second-year college student, we received a letter on Sunday, April 3rd, from the College Board. Here’s part of the text:

“Epsilon has assured us that the only information that may have been obtained was your first and last name and e-mail address. REST ASSURED THAT THIS VENDOR DID NOT HAVE ACCESS TO OTHER MORE SENSITIVE INFORMATION SUCH AS SOCIAL SECURITY NUMBER OR CREDIT CARD DATA.”

The letter goes on to warn us about the possibility of receiving spam emails and urges us “to be cautious when opening links or attachments from unknown third parties.” The letter also states that the College Board never asks a customer to “provide or confirm any information, including credit card numbers, unless you are on a secure College Board site.”

Our son’s college requires us to submit a CSS/Financial Aid Profile every year, which includes a great deal of personal and other financial information. The College Board is trying to assure us that none of this information was accessible by Epsilon and therefore, it has not been compromised.

Maybe. But that is not the same as saying that the information remains safely stowed away on one of the College Board’s servers, locked inside a virtual safe that the Epsilon culprit can never get access to.

And the same is true for other recipients of emails from customers of Epsilon. Email marketers like Alliance/Epsilon and their customers would like everyone to believe that there are impenetrable walls between different pieces of their businesses. In the real world, that is very difficult, and costly, to achieve. It is especially hard to believe in light of the break-in to Epsilon’s own systems. Color me skeptical.

Alliance shares are down about 4% in the first half-hour of trading today, at $82.47, within the company’s 52-week range of $53.15-$87.85.

Paul Ausick

About the Author Jon C. Ogg →

Jon Ogg has been a financial news analyst since 1997. Mr. Ogg set up one of the first audio squawk box services for traders called TTN, which he sold in 2003. He has previously worked as a licensed broker to some of the top U.S. and E.U. financial institutions, managed capital, and has raised private capital at the seed and venture stage. He has lived in Copenhagen, Denmark, as well as New York and Chicago, and he now lives in Houston, Texas. Jon received a Bachelor of Business Administration in finance at University of Houston in 1992. a673b.bigscoots-temp.com.