Ernst & Young accused by Canadian used computer dealer of data breach

A used computer dealer in Canada claims he discovered a trove of Ernst & Young data on Dell servers bought back in 2006

A used computer dealer in Canada claims he discovered a trove of Ernst & Young customer business data on Dell servers bought back in 2006 -- and he wants the global consultancy to pay him to return the data. But is the breach for real or just a hoax?

Mark Morris, who describes himself as the owner of a small used computer dealership in Calgary that doesn't have a website, claims that in March of this year he discovered a huge amount of business data associated with Ernst & Young clients that had been left mainly on one of two servers he bought for $300 after Synergy Partners, the firm he had been working for as an independent contractor, was bought by Ernst & Young in 2003. Morris says he has reported the breach to a Canadian privacy commission.

"I told [Ernst & Young] I do not work for free," Morris said. He says that he first contacted Ernst & Young in March and that the company "just demanded I give them the server back."

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Ernst & Young says because the conflict with Morris is a subject of continuing legal proceedings, it can't comment except to say it's "committed to the protection of the confidentiality and privacy of client information. As part of this commitment, our business operations are founded on robust data privacy and information security programs." Ernst & Young says it "takes proactive physical, technical and administrative measures to safeguard documents, computers and other data devices that contain client information."

Not surprisingly, the confrontation with Morris has triggered a legal response from the Canadian arm of Ernst & Young, and legal documents the firm has filed in a Calgary judicial setting reveal some aspects of it.

Ernst & Young states in court filings made by Calgary law firm Osler, Hoskin & Harcourt LLC that it doesn't know if the Morris claims about finding customer data on the used servers are genuine. The company is asking for any data that might be on those old servers to simply be disposed of or returned.

But according to the legal documents, Morris is making monetary demands relative to any work he might be called on to do in all this and his view of the value of the data. He has indicated he has received bids of about $1.2 million for what's being called the "primary server," where the bulk of the old business data supposedly resides. At one point, Morris said he wanted Ernst & Young to give him a $50,000 retainer to begin deleting the purported customer data from where he has stored it, though not on the primary server.

"Mr. Morris has repeatedly threatened to sell the servers (including the data that he claims exists on the server) to a third party," states an affidavit from Elizabeth Kiss, chief compliance officer and privacy officer at the Canadian member firm of Ernst & Young, which was filed in July.

According to that affidavit, Morris approached a former Ernst & Young partner in June to tell him that a law firm, a data company and an M&A advisory firm were interested in acquiring the alleged Ernst & Young data, with bids for it supposedly reaching $1.2 million.

Morris says he's contacted some of the customers and "demonstrated to the customers what data I have." The court filings also indicate Morris has said he sold the second server he allegedly bought to a law firm, which would consider selling it, through him, to Ernst & Young for $320,000.

"Denying something doesn't change the facts," says Morris in e-mailed remarks. "I have the data and have provided proof and a full list of names." Morris is believed to have stored copies of the sensitive data on a number of devices he has.

At this point, an order from a Calgary court requires Morris to provide Ernst & Young's legal counsel with copies of the alleged data and the primary server's serial number by Sept. 15. By Sept. 30, he's supposed to give inspectors from Ernst & Young, such as computer forensics specialists, access to the servers and devices that Morris controls that might have any Ernst & Young data stored on it.

Today, Morris said in a phone call he does intend to comply with the order, and he expects the meeting with Ernst & Young to take place in a warehouse he has. Morris says he anticipates Ernst & Young to start going through the data he has and deleting any associated with Ernst & Young, which he says is quite a lot. His time is worth money, says Morris, and he claims Ernst & Young has agreed via an e-mail exchange to pay him $1,500 per day to cooperate with the data inspection. Morris says he does about $300,000 annually in used computer equipment sales.

For Ernst & Young, there's the gnawing possibility that Morris isn't bluffing.

"They say if the data exists on the server, then it was by mistake," says Morris, who contends what he has includes a lot of sensitive financial information on businesses that all adds up to a significant data breach. Whether that's true or not could become clear in a matter of weeks.

Ellen Messmer is senior editor at Network World, an IDG website, where she covers news and technology trends related to information security. Twitter: MessmerE. E-mail: emessmer@nww.com

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