Cambridge Analytica CEO claims influence on U.S. election, Facebook faces questions

By Eric Auchard and David Ingram

LONDON/SAN FRANCISCO (Reuters) – The suspended chief executive of Cambridge Analytica said in a secretly recorded video broadcast on Tuesday that his UK-based political consultancy’s online campaign played a decisive role in U.S. President Donald Trump’s 2016 election victory.

His comments, which could not be verified, are potentially a further problem for Facebook Inc as it faces lawmakers’ scrutiny in the United States and Europe over Cambridge Analytica’s improper use of 50 million Facebook users’ personal data.

The social media network’s shares fell for a second day, closing down 2.5 percent to $168.15, as investors worried that its dealings with Cambridge Analytica might damage its reputation, deter advertisers and invite restrictive regulation. The company has lost $60 billion of its stock market value over the last two days.

Cambridge Analytica said on Tuesday its board of directors suspended CEO Alexander Nix, shortly before the second part of British broadcaster Channel 4’s expose of the firm’s methods. In the program Nix boasts he met Trump when he was the Republican presidential candidate “many times”.

Nix’s comments “do not represent the values or operations of the firm and his suspension reflects the seriousness with which we view this violation,” Cambridge Analytica said in a statement on Tuesday.

U.S. and European lawmakers have demanded an explanation of how Cambridge Analytica gained access to user data in 2014 and why Facebook failed to inform its users, raising broader industry questions about consumer privacy.

Facebook said it had been told by the Federal Trade Commission (FTC), the leading U.S. consumer regulator, that it would receive a letter this week with questions about the data acquired by Cambridge Analytica. It said it had no indication of a formal investigation.

“The entire company is outraged we were deceived,” Facebook said in a statement on Tuesday. “We are committed to vigorously enforcing our policies to protect people’s information and will take whatever steps are required to see that this happens.”

FTC REVIEW

The FTC is reviewing whether Facebook violated a 2011 consent decree it reached with the authority over its privacy practices, a person briefed on the matter told Reuters.

“We are aware of the issues that have been raised but cannot comment on whether we are investigating. We take any allegations of violations of our consent decrees very seriously as we did in 2012 in a privacy case involving Google,” an FTC spokesman said.

Under the 2011 settlement, Facebook agreed to get user consent for certain changes to privacy settings as part of a settlement of federal charges that it deceived consumers and forced them to share more personal information than they intended, Bloomberg reported.

If the FTC finds Facebook violated terms of the consent decree, it has the power to fine the company thousands of dollars a day per violation.

In a research note, Deutsche Bank analysts said government scrutiny could hurt Facebook’s ability to gather and deploy data for advertising targeting – critical to its growth.

Fear of regulation hurt other social media firms. Shares of Snap Inc fell 2.5 percent and Twitter Inc fell more than 10 percent.

Facebook and its peers Alphabet Inc’s Google and Twitter already face a backlash over their role during the U.S. presidential election by allowing the spread of false information that might have swayed voters toward Trump.

U.S. Senator Dianne Feinstein, the top Democrat on the Judiciary Committee, called on Tuesday for Facebook CEO Mark Zuckerberg to testify in Congress. Congressional staff said the company would brief U.S. Senate and House aides on Wednesday.

A Congressional official said House Intelligence Committee Democrats plan to interview Cambridge Analytica whistleblower Christopher Wylie. The committee interviewed Nix by video teleconference, according to the Congressional official, but a transcript of that interview has not yet been made public.

The Senate Intelligence Committee, which is conducting a long-term investigation of alleged Russian interference in U.S. politics and a detailed examination of U.S. election security precautions, would carry out its own inquiry of Cambridge Analytica, a Congressional official with direct knowledge of the investigation said.

The White House said it welcomed inquiries, and that the President believes that Americans’ privacy should be protected.

PERSONAL INFORMATION

In Britain, the Information Commissioner’s Office, an independent authority set up to uphold information rights in the public interest, was seeking a warrant from a judge to search the offices of London-based Cambridge Analytica. It was unclear late on Tuesday whether it had obtained it.

Created in 2013, Cambridge Analytica markets itself as a source of consumer research, targeted advertising and other data-related services to both political and corporate clients.

According to the New York Times, it was launched with $15 million in backing from billionaire Republican donor Robert Mercer and a name chosen by the-then future Trump White House adviser Steve Bannon.

Facebook says the data were harvested by a British academic, Aleksandr Kogan, who created an app on the platform that was downloaded by 270,000 people, providing access not only to their own personal data but also their friends’.

Facebook said Kogan then violated its policies by passing the data to Cambridge Analytica. Facebook has since suspended both the consulting firm and SCL (Strategic Communication Laboratories), a government and military contractor.

Facebook said it had been told that the data were destroyed. Kogan was not immediately reachable for comment.

Cambridge Analytica has denied all the media claims and said it deleted the data after learning the information did not adhere to data protection rules.

(Reporting by David Ingram in San Francisco, Kate Holton and Paul Sandle in London, David Shephardson, Susan Heavey and Mark Hosenball in Washington; Additional reporting by Munsif Vengattil; Writing by Susan Thomas; Editing by Nick Zieminski and Bill Rigby)

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