The Rhode Island State Treasury has filed a lawsuit against Facebook in connection with its record-setting $5 billion settlement with the Federal Trade Commission (FTC) over the Cambridge Analytica scandal.
The lawsuit alleges that Facebook had agreed to pay the FTC a record-setting $5 billion fine, which was “more than it believed was required, in a bid to assuage regulators and win other concessions from the feds,” the lawsuit said. The Cambridge Analytica scandal broke in early 2018, when it was revealed the firm had used the personal data of millions of Facebook profiles without the owners’ consent for the purpose of political advertising.
The suit says that there is evidence of a $3 billion settlement being discussed between Facebook and the FTC, and suspects that the $2 billion overpay was to gain a “critical concession: a lack of personal consequences for [Facebook CEO Mark] Zuckerberg.”
Rhode Island is requesting that the FTC disclose the settlement agreement and associated documentation related to its investigation of the problem, including draft agreements, electronic communications with each board member, and other documentation so that it may “investigate potential wrongdoing, mismanagement, and/or breaches of fiduciary duty by all current members of the board,” the suit reads.
“There is simply no way for Rhode Island to evaluate properly the fairness of the process and price negotiated in the Second FTC Agreement without access to Facebook’s privileged documents, which will contain information that is not available anywhere else,” the litigation stated.
Rhode Island said Facebook refused to provide it with the books and records demanded.
“After months of negotiations, we reached an agreement with the FTC that is in the best interests of the company and our community. We believe this suit is without merit,” a Facebook company spokesperson said.
Rhode Island has been at the forefront of institutional investors with concerns related to Facebook’s governance practices. The state joined a stakeholder initiative alleging that Zuckerberg holds a “totalitarian grip’” on the company’s practices as a result of his dual role as both chairman and CEO.
“There is no check-and-balance at Facebook without an independent board chair—and Mark Zuckerberg’s totalitarian grip as both CEO and board chair must end,” said New York City Comptroller Scott M. Stringer, one of the co-filers. “Facebook’s unrelenting turmoil shows why independence and accountability matter—and why power should not be consolidated around one person. Outside shareholders have sounded the alarm on the need for real oversight and governance reforms, and it’s time for Facebook to listen.”
Zuckerberg’s ownership of about 60% of the company’s voting shares would leave him with full control of the business no matter what happens at its governance level.
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Tags: Facebook, FTC, Lawsuit, Litigation, Mark Zuckerberg, Pension Fund, Retirement System, Rhode Island, Rhode Island Pension, Settlement