Last month I received an anonymous email from a tipster warning me that there was “a scandal about to pop” about an Arizona credit protection startup called LifeLock. The email made a number of serious allegations around CEO Todd Davis, co-founder Robert Maynard and investor Howard Lindzon – basically accusing them all of fraud, perjury or other crimes. The email also suggested that investors Bessemer and Kleiner Perkins didn’t bother to check out the company’s founders before putting money in: “Did anyone there bother to even do a Google search on the founder’s name?”
The story was juicy. Maynard in particular has a history of questionable actions. In 1997 the FTC ordered him not to engage in any business related to credit improvement services after accusing him of fraud:
The Complaint seeks permanent injunctive relief against defendant Maynard for alleged unfair or deceptive acts or practices by the defendants in connection with the sale of credit improvement services advertised in an infomercial and the collection of fees by depositing drafts drawn on consumers’ checking accounts…Defendant Maynard, without admitting the allegations set forth in the Complaint, agrees to entry of this final Order under Section 13(b) of the FTC Act.
Given that his new business was consumer credit protection, the irony was ripe.
I haven’t shied away from writing stories about founders with checkered pasts – see my posts on Rivals and Statsaholic, for example.
But something wasn’t quite right with the email. It wasn’t just a tip. It had eight PDF attachments with carefuly organized background materials. A fifteen page “dossier” went into excruciating detail on the personal and business histories of Davis and Maynard. Facts were mixed with lots of speculation. This wasn’t a tip, it was a hit job.
I met with David Cowan, the Bessemer partner who invested in LifeLock, to hear his side of the story. He told me they were fully aware of Maynard’s past when they made their investment in 2006. By the time they invested Maynard was no longer an officer of the company, Cowan said.
I contemplated writing an article on this, and started talking with Maynard via email. Before I wrote, however, a bunch of articles came out – see the Phoenix New Times and Wired, for example. Valleywag practically wet their pants over the story. I didn’t really have anything to add to what was already published.
In the aftermath of those articles Maynard resigned from the company. Cowan wrote about all of this yesterday on his personal blog, explaining that they invested with their eyes wide open and expressing his sadness over Maynard’s resignation.
There is More To This Story
It’s clear to me that the authors of those articles were sent the same email I was, or else the timing was a massive coincidence.
Who spent the time to put together all of this information on the company, and send it to all these reporters and bloggers? And what is their motivation?
The company is killing it, according to Cowan, adding 3,000 new customers per day. Their core product allows customers to put a “fraud block” on their credit. A new credit account cannot be opened by a person with a fraud block notation on their credit reports unless the company opening the account talks to them in person or over the phone and gets their permission. In addition to putting a fraud block on accounts, LifeLock also regularly renews customers’ “opt-out” status with bureaus to prohibit them from selling this information. This makes it much more difficult for someone with personal information about you, including your social security number, to steal your identity and get credit cards with your name sent to them. I’m a big fan of these kinds of services (see my coverage of TrustedID, another company fighting identity theft).
There are a lot of people who don’t like what LifeLock is doing. And those people all work for or own the big three credit reporting agencies (Experian, Equifax, and TransUnion) and the lawyers, lobbyists and other paid shills who represent them. The primary businesses of the credit bureaus is selling our personal information to credit card, mortgage and other credit-issuing companies. They are one of the primary facilitators of identity theft and credit fraud.
Bureaus don’t like services like LifeLock because they pull people out of their information-selling machine. LifeLock is a direct threat to their revenue.
Is this enough of an incentive for the bureaus to organize a hit job on a company?
I don’t particularly like what Maynard did in the past. It’s good that he’s no longer with the company, which can now focus on its core business of helping people try to fight what the credit bureaus are doing with their personal information. I also don’t think it is a good idea for venture funds to invest in companies founded by people who have been convicted of committing fraud, or most other crimes. Maynard should never have started another company that had anything to do with consumer credit, and the VCs should have only invested if he was completely out of the company.
I’ll probably never know who sent me that well organized, methodical email, or what motivation they had for getting the stories written. But I do know this: after researching this story, I’m more afraid of the credit bureaus and their perverse business models than ever before.
Check out LifeLock’s profile
Based on your description of their business model, it’s certainly easy to connect the dots and conclude that credit agencies have every reason to try and torpedo LifeLock. Based on my experience in the banking industry, that’s exactly the type of behavior that I would expect from large corporations in the sector.
In this case, you have to wonder if Maynard didn’t have a number of other parties who wanted to see him go down in flames. If he committed fraud in the past, there could be any number of individual victims who had every incentive to see him take a hard fall. Then again, a 15 page dossier sounds more like the output of a high paid corporate consultant than a disgruntled, individual consumer.
Great reporting Michael! I heard their ad on Sirius a while back where Todd Davis, their CEO gives out his ssn as a demo of his faith in their system. It’s a very convincing ad and I was taken in. My wife and I have been chatting about signing up because she had her id stolen a year ago. [The good old DMV send new drivers licenses via regular mail dontcha know] We haven’t done it yet and now probably won’t. It sucks that you can’t trust the agencies and the protection services now seem just as dodgy.
Mark M.
Jon – You’re right about him possibly having others in his past that would have an incentive to do this. A lot of tips we get are clearly motivated by someone wanting to do a company harm, but they have never been this detailed or organized. As you said, this points to a corporate-led effort.
Mark – l found no evidence suggesting Lifelock as a company has done anything wrong at any point. Debix is a competitor that you may feel more comfortable with.
DISAGREE, …whatever mistakes or misdeeds an intelligent person has made in the past, should not prevent them from making a contribution to society in the field they are most expert in.
The past is the past – whatever is done, is done!!
Why should Good Ideas suffer because of the past history of the person who thought of them?
One good idea that is successfully implemented, can change the lives of millions of people.
Not only does society need people to THINK UP good ideas, it also needs people to persistently strategize to get those ideas off the ground – then be passionate and obsessive enough to get them implemented.
It is not uncommon for those types of super ambitious people to have skeletons in their closets – but they should be allowed to recreate themselves to maximize their potential to help society at whatever they are good at doing.
Hopefully, they will learn from their misdeeds – and checks and balances will be put in place to prevent them from their own self destruction – but these types of people are rare in a world dominated by passive mediocrity.
Surely others thought of this same business model before Maynard did, but he was the only one to get it done. It took personality as well as serendipity and deception – but none the less, his creation may live and benefit others long after he has passed away.
If he had not deceived, what are the odds of him having gotten success in this business endeavor? For better or worse, social Darwinism is not always ethical.
Really? The past is the past and whatever someone has done should be forgotten?
By this logic, a pedifile that worked at a day care center who decides to open his own facility should have the right to do so because he is contributing to the betterment of society?
I think that if anyone is convicted of a crime pertaining to fraud that should not be allowed to engage in business in the same industry allowing them access to commit the same type of crime. Espeically in a case like this. Not only did he have access to be able to commit additional crimes, but people are sending in their personal information willingly. Your arguement was well thought out and very well worded, I am surprised that you didn’t see any type of conflict here.
Yes. Smearing reputations for cash. What a pathetic way to make money.
Way to differentiate yourself from other blogs/news sources. Its stuff like this that will keep us coming back to TC long after valleywag has cried wolf for the last time. excellent.
This is bad…
Not only does opt-out take people out of their inventory, it competes with the bureaus’ “fraud detection” products. For ten dollars a month, you can find out (after the fact) if someone has stolen your identity.
It’s obvious who’s behind the email – the same scumbags who claim to be the exclusive and beneficent stewards of our identities!
Well … I’ve learnt a new lesson from this.
“To understand LifeLock, people need understand the difference between identity fraud and identity theft.
Identity fraud is when someone gets hold of your credit card and uses it. Identity theft is when someone assumes your identity to open a new line of credit.” – Todd Davis
Regards,
Coral
Mike, can you make the headers of the original tipoff emails public? Depending on how careful the people were, it might provide some interesting leads to follow.
I’ll make sure the next hit-job to you contains much less information
– signed, The Man.
Mike – Very interesting article. Based on your recommendation, I checked into Debix and decided to sign up for their service.
Thanks – Bill R.
thanks for the reporting. the more info we have, the better it is for consumers
Here is the problem
I understand that motivation behind the info is important but this story exposes the real problem with sites like this one and gigaom. The line is really blurred between journalism and promotion.
What happened to the Industry Standard? This story should have been on Tech Crunch first not on a New Time site. lets not forget the guy lied about his motivation for starting the site. And while getting of the ground was using his father’s credit and identity to live off of.
LifeLock is a big advertiser on the Rush Limbaugh show. That’s the only place I have ever heard mention them (until now on TC).
This is another sign that we are headed for a Federal ID card/system with mandatory identity theft/fraud insurance. Who do you think is going to make money hand-over-fist selling the required insurance?
I think…. There are some crazy people hate U.S and jews.
Even some backed VC companies have power to shipped illegal weapons, bombs, biological weapons, counterfeit items or toothpaste into the U.S. All they need is VC money, SS#, CC# ,etc and buy overseas weapons and ship into private cargo. Founders won’t tell the truth.
Lifelock could turn into new Enron story… Hidden, weapons, fraud, and scandals, etc..
Michael,
I read regularly and this may be the best story that I’ve read here. Thanks, and I’m definitely going to check out LifeLock.
It happens all the time. A person’s past should not prevent him or her from making contributions to the society.
Mike, I’m sorry, I don’t see how you can be a “big fan” of these kinds of services. They may be a bit better than the credit bureaus in that they didn’t cause the problem of identity theft in the first place, but they profit from keeping consumers powerless and fearful. The only reason they exist is because how insanely predatory, reckless and anti-consumer the credit industry is. But ask yourself this: if Congress is going to consider legislation to regulate and reform the practices of the credit industry, which side will the LifeLocks and Debixes of the world be on? Where will their lobbying dollars be when there’s a proposal to allow us to control our own credit files? Their business model is based on maintaining the status quo and they’re yet another roadblock to real, substantive change in the credit industry. Sure, the credit bureaus hate them, but that’s like the lions hating the hyenas and we’re the zebra carcass that’s being fought over. In this fight, the enemy of my enemy is not my friend.
I have very smart question. I’m good with my eyes. Uhm… I was reading Board of Directors website. Okay, they have college degree or master degree and worked former bank companies.
Is Lifelock — C Corporation, or S corporation or LLC or Limited Partnership? It does say in Lifelock website?
I read term of Use…
1. “we’re going to make sure that you get every dollar back, lost wages, costs, actual losses, every dollar up to $1,000,000. Period. ”
Hmmm, “we’re going”…. Are you going to do it now or later?
2. “In order to implement your locks, we must share your personal information to third parties including but not limited to: TransUnion, Experian and Equifax. Once this information is in their hands, we can’t be responsible for what they do with it.”
…Wait… We can’t be responsible… You said you are going and now… can’t be responsible. WTF. What business is this? Is this AOL brand?
2. “Once we are comfortable that you are innocent due to Identity Theft that occurred while you are our client, we will advance all fees and costs as discussed above. Note that we do not necessarily require that you are found innocent by the authorities before performing on our guarantee.”
“We will advance all fees and costs as discussed above? ” Lifelock — What does that mean? No… No.. You have pay me for going your website. Pay me now for writing question.
3.”If we are confident that you did not commit the crime, we will advance any legal fees, bail or other costs required to get you out of jail and back to your life. ”
WTF. Are you trying to blackmail government and state law? Are you trying to make Paris hilton media hype?
I agree with #18.
It’s legitimate website. Stay away from Lifelock… It’s scam….
I don’t give damn if Lifelock files chapter 11.
#10 has a good idea — will you post the headers of the email? You would be alienating a “source”, but you may well have already.
No, I won’t post the email headers. Talking about what a source said is very different from identifying the source.
I put faith in myself. God know his name…. Arrington. I counted it’s actually 4 power ball blogs… Powerset partying, Rivals, Statsaholic, and Lifelock.
If mike ever caught more VC crooks or CEO who committed fraud. Wooooahhh… Mike is undefeated!!!
wow, that is really scary, sounds like a pretty deliberate hatchet job coming from some threatened power. this kind of stuff really riles, excellent observation on who some the biggest facilitators of identity theft/credit fraud. are, weren’t they also trying to attach this whole thing to some presidential candidate as well? sometimes it seems like the little guy is roadkill before he even starts, great post!
I remember ABC news show up on TV… Thousand military SS# , information, and laptop was stolen. They couldn’t get it back.
things that make you go hmmm.
I have to chime in, as both an EIR at Bessemer and founder of the “troubled flock”. I’d have done this on Valleywag, but didn’t feel like registering and the meme has since moved to TC. First, I do encourage you to read David Cowan’s blog (whohastimeforthis.blogspot.com), as he really does tell all about this investment, which was made shortly before I joined Bessemer. Of the many reasons I joined Bessemer after deciding to move on from Flock, the primary was the opportunity to work with Cowan. David, despite his off the charts IQ, is easy to understand; he always tries to do what he believes is right and fair and isn’t afraid to make difficult or unpopular decisions to support those beliefs. I know this first hand on several counts, including Bessemer’s decision to invest in LifeLock, as well as Bessemer’s handling of Flock’s delays in product shipment. On the former, I talked to David before the investment was made and sat in on partner meetings after the fact and have been repeatedly impressed by both David, and the firm’s, support of the investment, the concept, and the team (based on FAR more foreknowledge than any of these sensational posts will acknowledge). Now, on the latter, all I can say is that when I decided to move on from Flock (driven mostly by my realization that the product would need more time to come to fruition and that there was little for me to do on the BD and marketing front), Cowan (and BVP) labored to come up with an arrangement that made sense for Flock, the investors, and me. It would have been easier for them to isolate me as a recalcitrant co-founder and/or distance themselves from this investment altogether. However, they hunkered down on the investment, helped to rebuild the management team, and the results will speak for themselves. I got a recent demo of the upcoming release and got a glimpse of the first version of Flock that is finally (yes we are tired of the wait as well!) starting to reach the potential of the original vision that Anthony, Bart, and I had when we started the company in Feb ‘05. My point in all of this is that investors have many different styles, but the styles are only as good as the integrity of the people behind them. I have seen Bessemer, and Cowan, in both success and adversity and remain impressed.
The laws are currently a bit of a patchwork, but many states allow consumers to put a freeze on their own credit for a small fee. If you’re lucky enough to live in one of these states, it’s much less than these types of services charge and without having to give out your personal information and power of attorney.
http://www.cons...03484indiv.html
If you don’t live in a state that is progressive enough to allow you to freeze your credit, I suggest contacting your representatives to ask them why. You can submit a message to your reps from here: http://www.fina...privacynow.org/
These types of services are simply a stopgap to what the real solution to this problem should be.
Yes, somebody has to lose their job at both Bessemer and Kleiner Perkins. Unfortunately, it will probably be an analyst at the firm and not a Partner.
FUNDAMENTAL DUE DILIGENCE!
What lifelock is selling is (mostly) a commodity product. Bureaus are the ones that are actually “locking” the credit records (forced to by certain state regulation/consumer backlash etc.) I believe someone can actually call up the credit agencies and place the lock yourself. WIHOUT paying LifeLock.
If you need the insurance portion, you still need to go to lifelock for it.
To SEARCH ENGINES WEB:
Should Mitnick be allowed to re-enter the industry? Should Blodget be able to publish stock research again? Should sexual predators not have to register to the community they settle in? I know your point, and I generally agree, but in a some cases, people do not deserve “a second chance.” I do not know the detail of his past crime, but its not our place to judge if we do not know the details. At this point, we have to trust that the justice system kept him out of the industry for THE PUBLIC GOOD.
Dang, I hate when stuff like this happens.
Regards,
Drew
http://www.mrgpt.com
Michael –
Perhaps you can elaborate on your reasoning why you won’t use the header information your possess to unmask the person(s) who sent you the dossier and unmaking the hitmen.
It’s one thing for you to protect your sources if you have promised them anonymity, however it doesn’t seem that you owe any ethical obligation to someone who sends you information blindly with the intention of smearing someone’s reputation.
If I were you, I would pursue this story to its conclusion and try to find out who is behind this.
SCARY!!!!
This is why I want to avoid talking LifeLock workers. I would heck run away from them. If ever meet them hotel, airport, etc… I would change seats….
The company sound much like clonaid
This sounds very interesting but I also think that there is no need to identify the anonymous email sender.
Thanks for the thrill ride. Farhan, relax dude. Wth do you care. Maybe he doesn’t want to invade someone’s privacy on a story about privacy protection. Maybe Michael actually respects people’s privacy. I like that about him.
As for the corporate smear tactics, if it looks like a .PDF file and reads like a…Let’s face it, the way these BS credit bureaus are set up, they don’t have any problem with these kind of products being in the market at all. The problem they have is anyone selling them other than them. They don’t like that one bit.
I think it’s interesting that you were the only one that questioned the email.
The illiterate comments #17, #21, #23 and #35 crack me up. Was the tipster email as badly written?
LifeLock and Debix both sound like a great idea, but they only serve customers in the States. I wonder if there is a similar service available to UK residents?
This is probably the single most interesting and well covered piece of reporting I have seen by a TechCrunch author. Kudos. And I mean that – this piece goes well beyond the simple review or writeup and crosses over into the realms of investigative reporting or journalism.
I knew there was a reason I read TechCrunch, and after a few quick downers it’s good to have that reason reaffirmed. Anyone can re-write what is handed to them on a platter, but it takes guts to risk missing out on that first-to-press opportunity in order to get a story right, and demonstrates a respect for both your material and your audience. Hats off…
Michael–excellent story. I am especially impressed that you will not post the email header. I am especially unimpressed that your source wasn’t bright enough to cover his tracks. A 15 page document? The good news is these the credit bureau behind this is not very good at being under handed. The bad news seems to be that many reporters either didn’t notice or didn’t care. I wonder how many other editors/writers received the email and did not publish anything?
Here’s an article on how to lock or freeze your credit report yourself by dealing with the credit agencies directly:
http://www.bank.../20030613c1.asp
Does look like a hit job /
– seems to have worked atleast got the main target ‘ killed out of his job ‘
i will avoid this as well.scary
It’s interesting to speculate as to who helped pull these facts about the fraudulent past of Maynard and LifeLock together, but in the end, it doesn’t matter. It’s likely that a lot of people realized what liars and crooks these guys are and spilled the beans. Whether you think Maynard’s bankruptcies are relevant is your own opinion, but when a man defrauds lenders and legitimate businesses, uses his father’s identity and is then held up as a victim by his company and investors who claim to know the truth, that casts a shadow on the entire company not just the founder, who incidently, still works for them as a consultant. LifeLock has no credibility. They are just a marketing scam. When I investigated options to protect myself, my first consideration was reputatation. When I learned that RelyData (http://www.relydata.com/) was the only company recommended by the credit bureaus, that told me a lot, and I’d found a solution provider.
Bureas have a biz model of selling negative info. if a bank buys a credit report and doesn’t lend $X,000, then the $1.10 for the credit report was well worth it
The 3 bureaus TU, E and E are NEVER going to ever change
p.s. there is a VIP bureau list (just like Harlot). These people will always have perfect scores. If your voice can be heard, i.e. are a Congressman, CEO of a company OR have a blog, you’re on it.
I’m happy to get more coverage of this story and to find out that things were not as cut and dried as they seemed. It doesn’t surprise me at all to find out that one or more of the credit bureaus may have been behind getting the Lifelock scandal perpetuated.
Given the increasing consumer dissatisfaction with their continually sloppy and error-filled business practices, they should be spending more time preparing for the inevitable changes to their models that will come from an equally dissatisfied Congress, and less using personal drama to smear a company’s practices.
P.S. Mike, since you’re clearly interested in new identity theft protection companies, I’d be remiss if I didn’t pimp my company’s chief offering: IdentitySweep. (http://www.identitysweep.com) Take a look and tell us what you think.
Martin Bosworth
MyPublicInfo.com
ConsumerAffairs.Com
Hey, Michael Arrington,
Your speculation on the “hit job” on LifeLock isn’t worth a damn. I didn’t get an e-mail from you, and I’m not hard to find: ray.stern@newtimes.com. If you’d bothered to research your article, you’d have learned that the “dossier” on LifeLock” you received is probably the same one I got AFTER my article was published. Plus, the dossier only had the “background” part of the story. This wasn’t a story about Maynard’s distant past. You conveniently forgot to reference Maynard’s Vegas whopper.
The timing of the dossier and the New Times article was indeed a coincidence — one had nothing to do with the other.
Oh, and by the way, what other interesting stories are you sitting on right now? If you’re not going to do anything with them, shoot me an e-mail.
Sincerely,
Ray Stern