A whistleblower who leveled charges of widespread security failures at Twitter Inc. is testifying at a Senate hearing Tuesday, hours before shareholders are scheduled to finish voting on whether to approve Elon Musk's $44 billion takeover that the billionaire is trying to abandon.
Twitter shares slid 2% in morning trading.
Former Twitter security executive Peiter Zatko, who was fired by the company in January, told the Senate Judiciary Committee Tuesday that Twitter executives' "incentives led them to prioritize profits over security," echoing his whistleblower complaint.
Twitter has pushed back against his charges, and said he was making misleading statements. He has been called before the committee to provide more information on his assertions.
Democrats and Republicans have raised concerns about social-media companies in recent years over how they use and protect customer data. "Twitter is an immensely powerful platform that cannot afford gaping security vulnerabilities," Sen. Dick Durbin, chairman of the Judiciary Committee and a Democrat from Illinois, said in opening remarks at the hearing.
"The whistleblower disclosures paint a very disturbing picture of a company that's solely focused on profits at any expense, including at the expense of the safety and security of its users," Sen. Chuck Grassley, from Iowa and the committee's top Republican, said.
Mr. Grassley said Twitter Chief Executive Parag Agrawal declined to answer questions at the hearing, citing the ongoing litigation over Mr. Musk's takeover bid of the company. The Senator added the allegations raised questions about the CEO's leadership.
Twitter didn't immediately respond to a request for comment.
Mr. Zatko has become a factor in the legal drama unfolding over Mr. Musk's effort to walk away from the Twitter takeover. Twitter sued Mr. Musk in July over his attempt to renege on the deal. Mr. Musk filed a countersuit, accusing the company of misrepresenting the condition of its business and key metrics about the users on its platform.
Twitter has argued Mr. Musk got cold feet after market conditions deteriorated. Last week, Mr. Musk got court approval to amend his suit to include aspects of Mr. Zatko's assertions.
The case is being fought out in Delaware Chancery Court, with a five-day nonjury trial set to start Oct. 17.
Separately, Twitter is moving ahead with trying to secure investor buy-in for the takeover. The company has been asking shareholders to vote to back the deal. Voting should conclude during a special shareholder meeting due to kick off at 1 p.m. Eastern time.
Twitter shareholders are poised to approve the deal by a wide margin based on early voting, The Wall Street Journal first reported Monday.
Twitter needs investors representing a majority of shares to vote for the takeover offer of $54.20 per share. The company's stock closed at $41.41 Monday, valuing the business at around $32 billion.
If the judge were to force Mr. Musk to consummate the transaction, he could be on the hook for more than $33 billion in equity financing, according to a regulatory filing. The Tesla Inc. boss in August sold roughly $7 billion worth of the electric-vehicle maker's stock, according to regulatory disclosures, and suggested he did so in case he is forced to buy Twitter.
Mr. Zatko filed his complaint with the Securities and Exchange Commission, the Federal Trade Commission and the Justice Department, which are expected to investigate.
Mr. Zatko was hired by Twitter in 2020 after an embarrassing hack of some high-profile users' accounts, including then-presidential candidate Joe Biden and former President Barack Obama, as well as Amazon.com Inc. founder Jeff Bezos and Mr. Musk.
Mr. Zatko said he was fired after clashing repeatedly with top executives over the depth of the company's security problems and appropriate solutions.
Twitter has said Mr. Zatko was fired "for ineffective leadership and poor performance" and that his whistleblower complaint "is riddled with inconsistencies and inaccuracies and lacks important context."
Twitter has come under FTC scrutiny previously.
The agency in 2011 prohibited Twitter from "misrepresenting the extent to which the company maintains and protects the security, privacy, confidentiality, or integrity of any nonpublic consumer information," according to an FTC summary.
The FTC and Justice Department said in May that Twitter had violated the 2011 order by collecting users' personal information -- ostensibly for security reasons -- and using it to sell ads to them over the past decade or so. Twitter agreed to pay a $150 million civil penalty to resolve the claims.
At a recent company all-hands meeting, an executive told employees that Twitter is in full compliance with its FTC consent decree and that an external auditor reviews Twitter's compliance with the decree every two years, according to a spokesman.
--Sarah E. Needleman contributed to this article.
Write to Alexa Corse at alexa.corse@wsj.com and John D. McKinnon at john.mckinnon@wsj.com
(END) Dow Jones Newswires
September 13, 2022 10:42 ET (14:42 GMT)
Copyright (c) 2022 Dow Jones & Company, Inc.