Lawsuits claim directors protected CEO from being held personally liable for Cambridge Analytica breach
Facebook Inc. overpaid billions of dollars to the Federal Trade Commission as part of an agreement to keep CEO Mark Zuckerberg from being personally sued, shareholders claim in a pair of lawsuits.
Two separate groups of Facebook (FB) shareholders filed suit Tuesday, Politico first reported, alleging that Facebook's board approved an over-payment on its settlement with the FTC over the Cambridge Analytica scandal to protect Zuckerberg.
One of the lawsuits claimed that in early 2019, a draft complaint from the FTC named both Facebook and Zuckerberg as defendants.
The suit cited minutes from a subsequent Facebook board meeting, and claimed "Zuckerberg, [COO Sheryl] Sandberg, and other Facebook directors agreed to authorize a multi-billion settlement with the FTC as an express quid pro quo to protect Zuckerberg from being named in the FTC's complaint, made subject to personal liability, or even required to sit for a deposition."
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In July 2019, Facebook agreed to pay the FTC a record fine of $5 billion to settle the investigation into the Cambridge Analytics data breach.
The suit was filed on behalf of the Employees' Retirement System of Rhode Island and the City of Warwick (R.I.) Retirement System.
The second lawsuit also claimed Facebook has failed in its obligation to protect the private data of its users, and alleged that the Cambridge Analytics' data scraping was a "destined consequence" of Facebook's business plan.
Plaintiffs in that suit include the California State Teachers' Retirement System, New York's construction and laborers' Local No. 79 general fund, the City of Birmingham (Ala.) retirement system and Firemen's Retirement System of St. Louis.
Facebook did not immediately respond for a request for comment Tuesday night.
Facebook shares have fallen 5% over the past week, following a revelatory series of investigations by the Wall Street Journal, which the company called a collection of "mischaracterizations." But the stock is still up 31% year to date, compared to the S&P 500's 16% gain.