Bank tape breach may affect 4.5 million: BNY Mellon promises fraud protection

By Cara Baruzzi

May 31, 2008 (McClatchy-Tribune Regional News delivered by Newstex) -- The Bank of New York Mellon (NYSE:BK) security breach that ensnared some People's United Bank customers -- in which the New York bank lost an unencrypted backup tape containing Social Security and bank account numbers -- has spread far beyond People's and put as many as 500,000 Connecticut residents' personal information at risk, Attorney General Richard Blumenthal said Friday.

Depositors and shareholders of at least 25 companies are at risk of identity theftafterBNYMellon lost the tape several months ago, Blumenthal said. The security breach jeopardizes as many as 4.5 million people nationwide.

The vast majority of affected state residents are depositors of People's or shareholders of John Hancock Financial Services Inc., Walt D i s n e y C o . a n d TD Bank Financial Group (NYSE:TD) , according to Blumenthal. About 404,000 are People's account holders, he said.

BNY Mellon issued a statement Friday saying it will provide "comprehensive fraud protection" to all affected consumers, including two years of free credit monitoring, $25,000 worth of identity theft insurance and credit freeze benefits. A credit freeze allows consumers to prohibit credit issuers from accessing a consumer's credit files unless they are given permission directly by the consumer.

"We deeply regret that this occurred and sincerely apologize to all of those impacted," Todd Gibbons, chief risk officer at BNY Mellon, said in the statement. "Although there is no indication that the data on these tapes has been misused, we are working with our clients to notify individuals who may be affected and offering these individuals two years of comprehensive fraud protection. We also are conducting a thorough, top-to-bottom review of our existing security policies and procedures, particularly related to vendors and outside contractors used by the company."

All of those who are affected will receive a letter from BNY Mellon, if they have not already, Blumenthal said.

Word of the security breach -- which occurred in February -- first surfaced publicly last week, brought to light by Blumenthal, and has spurred a classaction lawsuit from customers holding individual and business accounts with People's. The lawsuit was filed in Superior Court in Bridgeport this week against People's and BNY Mellon. State officials also have subpoenaed both banks, seeking information about the security breach.

People's gave a tape containing confidential information -- including Social Security and bank account numbers -- to BNY Mellon in 2007, when People's was in the process of going public. While the information given to BNY Mellon was encrypted, the backup tape was not, according to People's officials. The Bridgeport-based bank hired BNY Mellon to screen depositors to ensure they met the requirements for purchasing stock shares in the conversion.

On Feb. 27, BNY Mellon gave the backup tape, along with nine other tapes, to a storage firm called Archive Systems Inc. to be transported to a storage facility. However, the tape was missing when the delivery truck arrived at the facility.

People's officials said they were not notified of the security breach until a few weeks ago.

People's spokeswoman Valerie Carlson said the company is pleased with BNY Mellon's decision to offer increased security protection to People's customers and others affected by the breach, and said People's officials remain in daily contact with BNY Mellon officials.

Blumenthal urged consumers to take advantage of all the identity theft protections BNY Mellon is offering. "I appreciate Bank of New York Mellon's very encouraging cooperation," he said. "So far, thankfully, there are no reports of identity theft, but the risk may last months or years."

Blumenthal added that he will continue to investigate the matter, and may be joined by other states. "The bank must explain to consumers how it lost their information, why it took so long to inform them and law enforcement, and how it will prevent future data breaches," he said.

Consumers with questions are urged to contact BNY Mellon's toll-free hotlines at 1-877-278-3451 or 1-877-278-3461.

Newstex ID: KRTB-0141-25662186