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Be Skeptical of ChoicePoint

Editor's Note: Jon D. Markman writes a weekly column for CNBC on MSN Money that is republished here on TheStreet.com . He's also a regular contributor to RealMoney , TheStreet.com's subscription site. If you'd like to see all of Jon Markman's RealMoney commentary, click here for information about a free trial.


Every few months, the author of this column answers questions from readers who implore, "Hey Modelman!"

Hey Modelman: What do you think of the ChoicePoint (CPS) scandal? Is the stock a buy now?

Modelman: ChoicePoint's business is to discover, acquire and maintain records on everyone so that they can be used to deny credit, employment, insurance or admission to myriad venues.

Since being spun off from Equifax (EFX - Get Report) in 1997, its shares advanced tenfold on the wings of authorities' quest to categorize customers and citizens by creditworthiness. The idea is that in a nation built on debt, companies and governments need as much data as possible about individuals to build accurate actuarial tables aimed at predicting the potential payback. Fair enough.

But identity profiles are built on trust, and last month we learned that ChoicePoint violated its customers' confidence in a big way: The company was a victim of an absurdly easy-to-spot Nigeria-based identity scam that compromised 145,000 customer profiles.

Not long afterward, we learned that rival LexisNexis, a unit of the Anglo-Dutch data conglomerate Reed Elsevier (ENL), likewise placed more than 30,000 customer profiles in the hands of scamsters. And now we hear that Bank of America (BAC - Get Report) has lost the details of 1.2 million government customers, probably to identity thieves.

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