Social Media Archives

Social media evolving as new platform for investment scams

The Securities and Exchange Commission (SEC) today charged an Illinois-based investment adviser with offering to sell fictitious securities through social media sites. According to the SEC’s Division of Enforcement, Anthony Fields of Lyons, IL, offered more than $500 billion in fictitious securities, and in some instances, used LinkedIn discussions to promote fraudulent “bank guarantees” and “medium-term notes.”

The SEC’s order instituting administrative proceedings against Fields charges that he made multiple fraudulent offers through his two sole proprietorships – Anthony Fields & Associates (AFA) and Platinum Securities Brokers. Fields allegedly provided false and misleading information concerning AFA’s assets under management, clients, and operational history to the public through its website and in SEC filings. Fields also failed to maintain required books and records, did not implement adequate compliance policies and procedures, and promoted himself as a broker-dealer while he was not registered with the SEC.
Also today, in recognition that fraudsters are now turning to new and evolving platforms to peddle their scams, the SEC issued two alerts to highlight the risks investors and advisory firms face when using social media.

One of these alerts, a National Examination Risk Alert titled “Investment Adviser Use of Social Media,” provides staff observations based on reviews of investment advisers of varying sizes and strategies that use social media. The bulletin addresses issues that may arise from social media usage by firms and their associated persons, and offers suggestions for managing the antifraud, compliance, and recordkeeping provisions of the federal securities laws. The alert notes that firms need to consider how to implement new compliance programs or revisit their existing ones to align with the rapidly changing technology.

In the SEC’s second bulletin, an Investor Alert titled “Social Media and Investing: Avoiding Fraud” prepared by the Office of Investor Education and Advocacy, the aim is to help investors be aware of fraudulent investment schemes that use social media, and provide tips for checking the backgrounds of advisers and brokers.

January 4th, 2012|Categories: Criminal Activity|Tags: Fraud, Social Media|

Controversy abounds in employment decisions based on social media searches

In May 2011, the Federal Trade Commission (FTC) ruled that companies providing social media information to employers – and employers who use the reports – must follow the same Fair Credit Reporting Act (FCRA) regulations that apply to more traditional sources. The FTC also stated that postings on any social media site can be saved by on-line background screening companies for up to seven years.

According to the FTC’s letter dated May 9, 2011 to a company that sells information from social networking sites for employment purposes, such a company is considered a Consumer Reporting Agency (CRA) and thus must take reasonable steps to ensure the accuracy of the information obtained from online social networks (as well as other sources) and positively identify it with the subject. It also must comply with other FCRA provisions, such as providing a copy of the report to the subject and maintaining an established protocol if the subject disputes the reported information. As with “traditional” background investigations, employers who use a report prepared by a CRA must certify to the CRA that the report will not be used in violations of federal or state equal employment opportunity laws or regulations. Additionally, both the CRA and the employer have a legal obligation to keep and dispose of the reports securely and properly. (For more information, see the FTC blog, “The Fair Credit Reporting Act & Social Media: What Businesses Should Know.”)

Social media legal experts and various literature point to a multitude of issues and risks faced by both the CRA and the employer who uses social media checks, which include, but are not limited to:

Problems under FCRA section 607(b) in exercising “reasonable procedures to assure maximum possible accuracy” of the information.
Since the information on social media sites is self-reported and can be changed at any time, it is often difficult if not impossible to ascertain that the information is accurate, authentic and belongs to the subject. Online identity theft is not uncommon, as are postings under another person’s name for the purpose of “cyber–slamming” (which refers to online defamation, slander, bullying, harassment, etc.)

Information may be discriminatory to job candidates or employees, or in violation of anti-retaliation laws.
Social sites and postings may reveal protected concerted activity under the National Labor Relations Act (NLRA,) and protected class information under Title VII of the Civil Rights Act and other federal laws, such as race, age, creed, nationality, ancestry, medical condition, disability, marital status, gender, sexual preference, labor union affiliations, certain social interests, or political associations. And while the information may have no impact on the employment decision, the fact that the information was accessed may support claims for discrimination, retaliation or harassment.

Accessing the information may be in violation of the federal Stored Communications Act (SCA).
To the extent that an employer requests or requires an employee’s login or password information, searches of social networking sites may implicate the SCA (18 U.S.C. § 2701) and comparable state laws which prohibit access to stored electronic communications without valid authorization. A California court recently ruled that the SCA also may protect an employee’s private information on social networking sites from discovery in civil litigation.

Assessing the information may violate terms of use agreements and privacy rights.
While certain social media sites have stricter privacy controls than others, most if not all limit the use of their content. The terms of use agreements typically state that the information is for “personal use only” and not for “commercial” purposes. Although the definition of “commercial” in connection with employment purposes is interpretive, most legal experts indicate that employment screening fits that scope.

Information may be subjective and irrelevant to the employment decision.
Blogs, photos and similar postings often do not provide an objective depiction of the subject or predict job performance. The California Labor Code, for example, specifically provides that an employer is prevented from making employment-related decisions based on an employee’s legal off-duty conduct. Employers may use such information only if the off-duty conduct is illegal, if it presents a conflict of interest to the business or if it adversely affects the employee’s ability to do his/her job. And the evidence of such activities must be clear.

The popularity of employment-related background checks that include social media searches is growing rapidly. But the unreliable and unverifiable information from these sources is a potential landmine of legal liabilities.

August 8th, 2011|Categories: Employment Decisions|Tags: Employment Decisions, FCRA, Social Media|

More on legal troubles from employer misuse of social media information

Legal experts say that litigation resulting from employer misuse of social media information is likely to rise, at least until more case law is established. And even if the company prevails in such lawsuits, there may be reputational risks as the cases grab national spotlight.

Media sources reported that next week, for example, a National Labor Relations Board judge will rule whether American Medical Response of Connecticut illegally fired a worker after she criticized her boss on
Facebook. In what labor officials and lawyers view as a ground-breaking case involving employees and social media, the NLRB stepped in to argue that workers’ criticisms of their supervisors or companies on social networking sites are generally a protected activity and
that employers are violating the law by punishing workers for such statements. According to media reports, American Medical denied the board’s allegations, stating they are without merit, and that “the
employee was discharged based on multiple, serious complaints about her behavior.” The company added that “the employee was also held accountable for negative personal attacks against a coworker posted publicly on Facebook…”

Media sources reported on another pending case, filed in Georgia against a school district, a former high school teacher is claiming that she was essentially forced to resign over Facebook photos that
showed her drinking alcohol during a European vacation.

And in a case settled in 2009, two workers in New Jersey sued their employer, Hillstone Restaurant Group, after they were fired for violating the company’s core values. According to court documents, their supervisors gained access to postings on a password-protected
Myspace page meant for employees but not managers. The jury found that the employer violated the federal Stored Communications Act and the equivalent New Jersey law, and awarded the employees $3,403 in back pay and $13,600 in punitive damages. Hillstone appealed before the parties reached an undisclosed settlement.

Labor relations pros caution that before taking any adverse action based on social media postings, the employer should consider whether the information could be construed as a complaint or report of inappropriate or unlawful behavior. This includes, but is not limited
to discrimination, harassment, unpaid overtime and other wage violations, or any activities that may trigger an employee’s whistleblower protection.

January 23rd, 2011|Categories: Employment Decisions|Tags: Employment Decisions, Social Media|

Lawsuit shows legal risks in using information from social media

Media sources reported that a settlement was reached January 18, 2011 in a civil rights case re C. Martin Gaskell v. University of Kentucky, whereby the University agreed to pay Gaskell and his attorneys $125,000. Gaskell was a leading candidate in 2007 to be the director of a new observatory at the University of Kentucky; however, he was denied employment allegedly in part because of his apparent views on evolution. Media reports and court documents stated that during the candidate selection process, committee members conducted searches on Gaskell on the Internet, and discovered his personal Web which contained an article entitled “Modern Astronomy, the Bible, and Creation” among other notes. The sources also reported that “Gaskell had given lectures to campus religious groups around the country in which he said that while he has no problem reconciling the Bible with the theory of evolution, he believes the theory has major flaws. He recommended students read … critics

[of evolution] in the intelligent-design movement.”

According to the Courier-Journal, the University “acknowledged that concern over Gaskell’s views on evolution played a role in the decision to choose another candidate.” But it argued that this was a valid scientific concern, particularly with regard to the prospect that “Gaskell’s views on evolution would interfere with his ability to serve effectively as director of the observatory. And there were other factors, including a poor review from a previous supervisor and UK faculty views that he was a poor listener.”

January 19th, 2011|Categories: Employment Decisions|Tags: Social Media|

What’s wrong with using information from Facebook, MySpace, Friendster or personal Web sites for hiring decisions?

Some companies believe this is a cheap way to obtain information about an applicant. Unfortunately for the applicant, this type of background check is not covered by the Fair Credit Reporting Act (FCRA) if it is performed by the employer. And since the sites are not mandated to investigate and correct errors, the employer may miss out on hiring a qualified candidate. Additionally, much of the information posted on these sites cannot be discussed in an interview, and if not handled properly, the employer may be sued for claims under various anti-discrimination statutes, ADA, privacy laws, and state “off-duty” conduct statutes. Employers who use third-parties to conduct background investigations by searching social Web sites and Internet postings must comply with the FCRA, and thus explicitly state in the background check authorization that social networking and/or other such sites will be accessed. The FCRA does not prohibit employers from obtaining consumer reports that contain information compiled from Internet sites; however, employers are required to disclose to the applicant that the information was the basis of an adverse employment decision (Id. § 1681b(b)(3)(B)(i)(I).

Despite the liability exposure and unreliability of the information, various surveys show that employers do use information from social networking sites and blogs to support their decision to hire or disqualify an applicant. The most common causes for disqualification include:

Information or photographs about drinking or using drugs
Provocative or inappropriate photographs or information
Poor communication skills evident in postings
Bad-mouthing previous employer or fellow employee
Misrepresentation of qualifications
Discriminatory remarks related to race, gender, religion, etc.
Unprofessional or provocative screen name
Indications of criminal behavior
Posted confidential information from previous employers

July 1st, 2010|Categories: Employment Decisions|Tags: FCRA, Social Media|