Facebook Told to Cough Up Books in Cambridge Analytica Spat

DOVER, Del. (CN) – Investors who blame Facebook’s Cambridge Analytica scandal on lax oversight from the top persuaded a judge Thursday to let them inspect the books.

Underway for over a year in Delaware Chancery Court, the lawsuit follows one of the market’s sharpest single-day stock declines in history.

Shareholders lost about $120 billion in July 2018 on the heels of reports that the political consultancy Cambridge Analytica had poached the private data of 50 million Facebook users three years earlier, and that Facebook was keeping users in the dark about the breach.

Though Facebook produced some redacted records to its investors, it balked at their demand for more complete production. Facebook said the conduct of a third party like Cambridge Analytica could not be imputed to show any breach on its part, but Vice Chancellor Joseph Slights disagreed Thursday following what he called a paper-record trial.

Noting that the Cambridge Analytica scandal erupted while Facebook was already supposed to have implemented more robust data-security protocols as part of a 2011 settlement with the Federal Trade Commission, Slights said there is “a credible basis from which the court can infer that wrongdoing occurred at the board level.”

“Plaintiffs have presented a credible basis to infer that the board acted with disobedience by allowing Facebook to violate the consent decree,” the 57-page opinion states. “They are entitled to inspect books and records to investigate that potential wrongdoing.”

The numerous lawsuits Facebook faces over the scandal “further support plaintiffs’ credible basis to infer wrongdoing,” Slights added.

Slights specified five categories of nonprivileged documents that Facebook must disclose, beginning with hard copies of the records it provided to, or generated by, its board “with regard to investigations conducted by the FTC, DOJ, SEC, FBI and ICO regarding Facebook’s data privacy practices.”

Slights will allow Facebook to withhold 2011-era correspondence with the FTC, as well as “documents relating to ‘third party access to and handling of Facebook user data, including agreements with other companies regarding the same’ beyond any such documents that might be within the ordered documents.”

As for management-level communications, Slights found such documents “not necessary and essential to plaintiffs’ investigation.”