Target Settles Yet Another Breach Claim
Target has agreed to pay $39+ million to banks and credit unions who had to reissue cards as a result of the breach of 40 million cards in late 2013. This still has to be approved by the judge in the case. An earlier settlement for a lower amount was dismissed by the judge as too low. Target also agreed to pay plaintiff’s legal fees of not more than $20 million. The banks have said that they spent more than $200 million for losses and reissuing cards.
Target has already agreed to pay Visa $67 million and shoppers another $10 million.
There are still several class action lawsuits not settled including shareholder lawsuits, an FTC investigation and probes by state Attorneys General.
Last week Target said that it has spent $290 million on costs related to the breach. It is not clear if this new $39+ million plus $20 million in legal fees is included in that number. The $290 million is offset by $90 million in insurance payments, meaning that the breach only cost them $200 million out of pocket. They get to count that as a loss against income, so assuming they have a 33% tax burden (just a guess), that brings the total down to a piddly $135 million. Plus, possibly, yesterday’s announcement and whatever it costs them to settle the remaining lawsuits plus lost business plus the distraction for executives over the last two years – so far.
Occasionally I hear people say that they are not worried about a breach because they have cyber liability insurance. While the SCALE of the costs is likely different for other companies, the ratio is likely the same. For Target, SO FAR, insurance will likely cover less than ONE HALF of their net costs, and likely significantly less depending on how much the remaining lawsuits cost them.
While Target’s stock price is actually up from pre-breach values, their balance sheet has not recovered.
Their sales are basically flat over 2013 and 2014 at around $73 billion, but their net income is off a little bit. Their operating profit was down between 2013 and 2015 by over a billion dollars and their net income for the year ending Jan 31, 2015 was negative $1.6 billion vs. a positive $2.99 billion for the year ending Feb 2, 2013.
And of course, this is far from over.
Information for this post came from Yahoo Finance and Reuters.
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