Facebook allegedly agreed to overpay on the original $106 million penalty so its CEO and COO could avoid deposition and personal liability.
Facebook paid billions extra to the FTC to spare Zuckerberg in data suit, shareholders allege
Facebook conditioned its $5 billion payment to the Federal Trade Commission to resolve the Cambridge Analytica data leak probe on the agency dropping plans to sue Facebook CEO Mark Zuckerberg individually, shareholders allege in a lawsuit.
In suits made public Tuesday, two groups of shareholders claimed that members of Facebook’s board allowed the company to overpay on its fine in order to protect Zuckerberg, the company’s founder and largest shareholder. The complaints, which cite internal discussions among Facebook’s board members, were filed in Delaware Court of Chancery last month.
“Zuckerberg, Sandberg, and other Facebook directors agreed to authorize a multi-billion 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,” one of the suits alleged.
The FTC has never disclosed that it originally planned to name Zuckerberg personally in the lawsuit, and the agency's two Democrats at the time voted against the settlement in part because of the lack of personal liability for the CEO.
The multi-front battle: The lawsuits show that Facebook has still yet to move beyond the Cambridge Analytica scandal, even as antitrust, alleged privacy failures and other problems plague the company. The Senate Commerce Committee said last week that it was opening a probe into how the company downplayed its own research on how Facebook's photo-sharing app Instagram worsens mental health and body image issues for teens.
Newly public: The groups originally filed their suits last year. They amended the complaints last month after receiving internal files about the board’s discussions on privacy, which a federal judge had ordered Facebook to provide.
How it went down: In February 2019, the FTC sent Facebook’s lawyers a draft complaint that named both the company and Zuckerberg personally as a defendant, the shareholders said. The FTC also said in court that Facebook’s fine would have been closer to $106 million, but the company agreed to the $5 billion penalty to avoid having Zuckerberg or Chief Operating Officer Sheryl Sandberg deposed and any liability for the CEO, the suit alleged.
“The Board has never provided a serious check on Zuckerberg’s unfettered authority,” one set of shareholders said. “Instead, it has enabled him, defended him, and paid billions of dollars from Facebook’s corporate coffers to make his problems go away.”
They also alleged that Zuckerberg and Sandberg both declined to be interviewed by PricewaterhouseCoopers, the firm hired to audit Facebook’s privacy compliance as part of a 2012 settlement with the FTC, allowed other managers to provide untrue statements about the company’s practices and never provided the board with copies of PwC’s audits.
The accounting firm concluded that Facebook didn’t have enough controls in place to protect user data, the second suit alleged, and “that Facebook’s privacy controls were not operating with sufficient effectiveness to provide reasonable assurance to protect the privacy of covered information.”
Facebook staying out of it: Facebook declined to comment on the suits.
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