ATLANTA (CNN) -
The chairman and the president of ChoicePoint -- under fire for allowing phony businesses to buy access last fall to their database of personal information on consumers -- have between them sold almost 500,000 shares of company stock for a profit of $17.6 million since November, according to Securities and Exchange Commission filings.
The stock sales continued this week, even as ChoicePoint's shares declined as much as 10 percent as the company revealed new details about the number of people whose personal information was compromised.
The stock sales by Chairman & CEO Derek Smith and President & COO Doug Curling are not illegal because they are a part of a prearranged stock trading plan ChoicePoint established for the two last fall. The plan, known as an SEC Rule 10b5-1 Trading plan, allows corporate officers and directors to adopt pre-arranged stock trading plans when they do not have material, non-public information that might prompt such a sale.
The sale -- totaling 486,998 shares -- was first reported by the Atlanta Journal-Constitution, which raised questions about the timing of the sale relative to the public disclosure of the security breach. The trades began about three months before the company disclosed the breach.
ChoicePoint (Research) denies that any improper trading occurred. Late Friday, ChoicePoint spokesman Chuck Jones told CNN, "The record is not only clear, it's public. ... (The trading plans) provide for pre-arranged sales of stock over a six-month period. These plans are typical for senior executives of public companies and the plans were approved by the company's board of directors."
The Atlanta Journal-Constitution reports that Smith said he first found out about the identity theft problem in late December or January, which would be about two months after the company notified California law enforcement officials.
Jacob Frenkel, a securities lawyer with Shulman, Rogers, Gandal, Pordy and Ecker in Rockville, Md., told CNN that if that timeline is accurate, it could lead to an investigation by the Securities and Exchange Commission.
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The SEC would not comment, but a government source familiar with the matter told CNN that the timing and size of the ChoicePoint executives' stock sales and the related news of data theft makes an SEC investigation a near certainty. However, the source pointed out that it may never rise to the level of a formal investigation.
At least one class action lawsuit has been filed against ChoicePoint alleging fraud, negligent misrepresentation, and violations of business practices.