January 26, 2010

Alan Chapell Goes Public on Privacy, Part 1.



By Wendy McHale

For the last 200 years we've had a Bill of Rights. In the last two, a Bill of Wrongs. The Federal Government has been unable to make up its mind between the two, so it was with great relief when Alan Chapell was appointed as privacy ombudsman in two of the most significant bankruptcy proceedings in our nation's history.

The assignment? To check out two companies located in Detroit which have been collecting data on their customers for over a hundred years.

Constitutional scholars have had it easy. If they think the right to privacy was complex by 18th Century standards (or even the 20th), consider how business, government and private citizens need to exercise Thomas Jefferson's 4th Amendment in the 21st.

What exactly is the Right to Privacy? It's the 4th Amendment , which protects our rights from unreasonable search and seizure:

[It is] "the right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no Warrants shall issue, but upon probable cause, supported by Oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized."

After a jam-packed year overseeing how databases are and/or should be managed, we tracked Alan down and asked if he would go public with what he learned. Much to our delight he said yes! Editor Tim McHale sat down with Mr. Chapell to chat about a range of topics. This kicks off Part 1 of our 3-Part Series with Alan as he goes public on privacy!

Tim: How are you?

Alan: I'm doing well, thanks.

Tim: Great. Tell us a little about yourself and your career track to date.

Alan: Well, I've taken somewhat of an unconventional route. For the first few years out of college I was a touring musician.

Tim: Really? Tell us about it.

Alan: I recorded a bunch of albums in a style that today is called "alt-pop." I was in a band that unfortunately never made it big outside of the northeast. At our peak we drew crowds of a thousand people or more at times. We also played shows with, or otherwise crossed musical paths with some other fantastic musicians.

Tim: Like whom?

Alan: Well, there was Echo and the Bunnymen, Flock of Seagulls, 10,000 Maniacs and the Talking Heads. I have some very entertaining stories from those days!

Tim: I expect that's true. I bet it's good that a lot of them are best left private! What did you do after your recording career?


Alan: I got the opportunity to spend time in India for a spell in the mid-90's - playing in an East/West fusion band, and writing jingles for Indian TV. My current band still plays one of the tunes I wrote while in Bombay!

Tim: That's great! Can you sing one for our readers?

Alan: Have them email me and I'll invite them as a guest to my band's next performance.

Tim: Not before I get to be one! What did you do next?

Alan: I moved back to the states and found a great opportunity at a Direct Marketing agency in Stamford, CT. I helped them open an office for them in NYC while I was applying for law school. Then, kind of on a lark, I joined Jupiter Communications - mostly to kill time until law school began. But the more I learned about Jupiter, the more I realized that this is the industry where I wanted to be. So, I went to law school at night and continued to work at Jupiter - spending nearly five years at Jupiter.

Tim: Jupiter was great. It was like the bible.


Alan: Unfortunately, I graduated from Fordham in December of 2000 - just as Internet 1.0 had burned to the ground.

Tim: Didn't everyone? I think we all graduated from one thing to another.

Alan: Definitely.

Tim: What did you do next?

Alan: Well, I knew I didn't want to go to a law firm, and I was pretty sure I wanted to venture out on my own. But I wasn't exactly sure how or in which direction. Then I heard about an opportunity at DoubleClick; to join the research division in a sales support and product management capacity. After I arrived there I inevitably moved into the email space for the company.

Tim: Smooth operator. Seems like the tumblers were all in place. No doubt your Jupiter experience was helpful. Plus being an attorney must have made them confident you were the guy.

Alan: LOL! While it may appear that way, I did not feel on solid footing at that point in my career, but I'm really glad I did it. Nothing educates you on the concept of urgency like jumping into tech sales in a crummy economy. I learned a lot during that time - and was able to apply a lot of what I learned when I started Chapell & Associates in 2003.

Tim: Which brings us closer to today. How large is Chapell and Associates and what makes it unique?

Alan: I currently partner with a bunch of different folks as needed. A couple of years ago, I had a handful of people working full time - including Elise Berkower, a long time friend from my days at DoubleClick and at the time, DLCK's privacy compliance officer. Elise is now doing excellent work as Neilson Online's CPO.

Tim: She's incredible. How do you like being an entrepreneur?

Alan: I love it. One of the things that I discovered over the years is that scaling this type of business is tricky. The way most traditional law firms or consulting firms scale, is by getting that huge client - like a Citibank - and throwing a truckload of attorneys or MBA's at them.

Tim: I think it's caught up with them, at all of our expense in one way or another. What was it like?

Alan: I learned very quickly that I was unlikely to work much with the Citibanks of the world. Even where I'm the best option (which I believe I often am) the safe choice for a large company, the choice that DOESN'T get you fired, is the choice to work with the large consulting or law firm. And that's ok.

Tim: How did you come to that conclusion?

Alan: Over time, I realized that I would have a lot more fun, and a significantly more fulfilling experience working with start-ups and mid-size media and technology companies. The passion that my first experience in music gave me understanding of being true to your trade.

Tim: Wow.


Alan: I've also realized that it's much more interesting being a consigliore to the CEO of a start-up than it is to manage a large team that's pouring over data files, or doing large scale litigation.

Tim: LOL!

Alan: It's also much more profitable - because I'm not necessarily as worried about bringing in revenue to sustain a team, I'm able to be a bit more selective in who I work with.

Tim: Give me an example.

Alan: Sure, the core competency of the firm is privacy and data strategy. As you know, any time an ad is served in an interactive environment such as on websites, software, phone, iTV, Etc... There is a data trail associated with that advertisement.

Tim: So I've heard (grinning)

Alan: I'm able to help companies understand who has the rights to that data. So, while there's certainly a consumer privacy aspect to that conversation, there's also an intellectual property discussion in play. Not to mention significant regulatory and business strategy issues to address.

Tim: Absolutely, how did you get involved with the Chrysler and GM Bankruptcies?

Alan: Well, my firm had previously worked on a number of bankruptcies, including REFCO and Sharper Image. When the US Trustee's office determined that a privacy ombudsman was required in the Chrysler proceeding, they reached out to me. And right on the heels of the Chrysler bankruptcy was General Motors.

Tim: Wild times for sure. The media went bananas over it!

Alan: Indeed. While I'd like to think that the U.S. Trustee was so happy with how I handled Chrysler, it was incredibly gratifying to have then been selected for the General Motors case as well.

Tim: It must have been a busy time.

Alan: It was. It was an incredible honor to have worked on Chrysler - and to have also been selected to help on GM. it's hard not to feel pretty good about being involved in such high profile cases.

Tim: Hot stuff. Then what?

Alan: Shortly after GM, I was asked to do the Eddie Bauer bankruptcy proceeding in Delaware.


Tim: That actually sounds really cool.

Alan: Yeah, it was also about the time that the idea of working on yet another long-term brand going-under really hit me. I remember thinking to myself about the time applying to work in the stock room at Eddie Bauer when I was in high school - and now they were going through a restructuring. Stunning.

Tim: How much did you know about these companies before you were asked to review their privacy policy? With all this experience what perceptions do you have now about how they operate?

Alan: In the beginning I didn't know much about either company prior to their bankruptcy filling. I read the news like anyone else, and was floored by the prospect of economic giants such as GM and Chrysler literally going out of business. But the past year has been unprecedented for a number of reasons, eh?

Tim: Oh yeah, for sure!

Alan: My opinion going into these proceedings, and I say this admittedly as an outsider, was that both companies had focused on cost cutting at the expense of quality and innovation. It's hard to run a long term sustainable business that way. But the larger issue regarding the automotive industry is that it functioned as an oligopoly for decades. The oligopoly kept prices artificially high. The oligopoly resisted innovations like seat belts, and fuel efficiency standards. It sent jobs overseas. And the oligopoly ceded most of its market share over the years as non-U.S. automakers innovated.

Tim: What a mess! What were your stated goals? Can you give me a project plan, if you will of the privacy project from start to finish?

Alan: My goal in both proceedings was to ensure that consumer data transferred from entity #1 ("Old Company") to entity #2 ("New Company") was being transferred in accordance with existing privacy law and regulation.

Tim: Okay.

Alan: Essentially, my role was to evaluate what, if any, representations were made by the Debtor to customers at the point that those customers were making their consent decisions. In other words, did the Debtor adequately inform consumers regarding how the Debtor would use their information, and to make sure that the transfer of consumer information as contemplated in the bankruptcy proceeding was in accordance with Debtor's representations.

Tim: Right. How did you do that?

Alan: Well, I spent a fair amount of time reviewing the website privacy policies and similar documents - current policies, and previous policies to help me understand what was communicated to consumers. I also spent a good deal of time understanding what types of data are collected by the Debtors, where it's stored, with whom it is shared and where it is transferred.

Tim: Sounds thorough.

Alan: It was. The size of the car companies and from a data perspective the complex relationship they share with their dealership franchises made this a challenge.

Tim: Interesting. Let me ask you a question, in year 2000, Larry Ellison (Oracle) was interviewed by the New York Times and stated at that time that the idea of people having privacy is more theory than actuality. Is he correct?

Alan: Ha! Usually when people are making this point - they refer to Scott McNealy at Sun Microsystem's infamous statement - ""You have no privacy. Get over it."

Tim: LOL!

Alan: My favorite privacy quote was given a few years ago by a good friend when we were on a panel. She said, "Most people will gladly trade their mother's social security for five cents off a BIG MAC." That speaks for itself.

Tim: Can you share why the Government created the role of privacy ombudsman in certain bankruptcy proceedings?

Alan: Sure, this is an interesting story - as it has its roots in the online world. I don't know if you remember the company Toysmart.com - one of the casualties of the shakeout that we now refer to as Web 1.0.

Tim: Vaguely.


Alan: Like most ecommerce websites, Toysmart collected information from its customers, including, among other things, its customers' names, addresses, billing information, and shopping preferences. And unfortunately, like many ecommerce websites that had emerged in the late 1990's, the company ran out of gas and had to liquidate all of its assets.

Tim: Right. What was the issue?

Alan: The problem was that Toysmart's website privacy policy assured customers that Toysmart "never shared [its customers' personally identifiable info] with a third party." And therefore, by selling its customer information, the company would be violating its own privacy policy.

Tim: Now I remember!

Alan: Toysmart sought to sell the PII of its customers as part of its Plan of Liquidation, in direct contravention of its privacy policy. The FTC was all over it. They charged Toysmart with engaging in a deceptive trade practice, in violation of Section 5 of the FTC Act, and with violating the Children's Online Privacy Protection Act (COPPA), because its customer data included the PII of children under the age of 13.

Tim: Yikes!

Alan: And even after the FTC entered into a Stipulation and Settlement that would enable Toysmart to sell its customers' PII under certain conditions, forty-six (46) States' Attorneys General (and two of the FTC's own commissioners) objected. In any event, it was a mess.

Tim: Wow

Alan: Ultimately, Toysmart withdrew the sale, and one of its equity owners, Disney, paid $50,000 for the data and destroyed it.

Tim: Smart move.

Alan: So as a result of the Toysmart privacy fiasco, Congress stepped in and changed the bankruptcy law - and in certain bankruptcy proceedings where customer data is one of the assets being sold, and where the privacy policy does not contemplate such a situation, the U.S. Bankruptcy Trustee is required to appoint a consumer privacy ombudsman.

Tim: Let me ask you this. Do the media play a role in how a privacy ombudsman operates? Like for example, if media companies have the freedom to act as the 4th estate, isn't that contrary to the trend that enable media companies to collect more data about consumers and companies than any other kind of company?


Alan: This is a great question - Congress didn't really give much guidance regarding transparency and accountability for the privacy ombudsman. And I can tell you first hand, that this became an issue in both the Chrysler and GM bankruptcies. Without naming names, someone at the State level had reached out to me and started asking questions about my approach, about what information I'd obtained during my investigation - that sort of thing. And this person may very well have had the best of intentions. The problem is that I didn't know of any law that entitled this person to the level of transparency that they were seeking. And I felt like if I had provided them with that transparency, then I would also need to grant the same level of transparency to others that requested it. Moreover, given that some of the information provided to me by the debtor was of a confidential nature, I didn't feel that it was appropriate to be out there talking specifics with anyone absent an order from the judge.

Tim: That's interesting.

Alan: But I think there's a larger point here - I was really concerned about politicizing the role of the privacy ombudsman. The role of the privacy ombudsman is to protect consumers. However, in certain instances - particularly in high profile proceedings such as Chrysler and GM -those without a direct interest in the case could seek to obtain information in order to derail the process for a whole host of reasons. I really don't like the idea of operating with limited transparency, but one could easily envision a situation where partisan interests are able to object to every step of the ombudsman's proceedings and bring the entire process to a halt.

Tim: Is there one way to do your job for a project that is under the radar versus one as headline driven due to the public company status?

Alan: As I mentioned earlier, the privacy ombudsman role is certainly at risk of being overly politicized. That said I operate on a confidential basis for every project in which I'm engaged. I just don't see any other way of doing things. One of the reasons that I've been as successful as I've been - that I'm able to be effective - is that there is a veil of confidentiality. Nobody would tell me anything if they didn't trust me not to go around telling others.

Tim: Does not the PR in privacy also extend into fairly managing an investigation without hurting a company's reputation?

Alan: Absolutely.


Stay tuned to tomorrow's segment, where Alan covers his DCLK experience, BT and the FTC!

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