Last month I received an anonymous email from a tipster warning me that there was “a scandal about to pop” about an Arizona credit protection startup called LifeLock. The email made a number of serious allegations around CEO Todd Davis, co-founder Robert Maynard and investor Howard Lindzon – basically accusing them all of fraud, perjury or other crimes. The email also suggested that investors Bessemer and Kleiner Perkins didn’t bother to check out the company’s founders before putting money in: “Did anyone there bother to even do a Google search on the founder’s name?”
The story was juicy. Maynard in particular has a history of questionable actions. In 1997 the FTC ordered him not to engage in any business related to credit improvement services after accusing him of fraud:
The Complaint seeks permanent injunctive relief against defendant Maynard for alleged unfair or deceptive acts or practices by the defendants in connection with the sale of credit improvement services advertised in an infomercial and the collection of fees by depositing drafts drawn on consumers’ checking accounts…Defendant Maynard, without admitting the allegations set forth in the Complaint, agrees to entry of this final Order under Section 13(b) of the FTC Act.
Given that his new business was consumer credit protection, the irony was ripe.
But something wasn’t quite right with the email. It wasn’t just a tip. It had eight PDF attachments with carefuly organized background materials. A fifteen page “dossier” went into excruciating detail on the personal and business histories of Davis and Maynard. Facts were mixed with lots of speculation. This wasn’t a tip, it was a hit job.
I met with David Cowan, the Bessemer partner who invested in LifeLock, to hear his side of the story. He told me they were fully aware of Maynard’s past when they made their investment in 2006. By the time they invested Maynard was no longer an officer of the company, Cowan said.
I contemplated writing an article on this, and started talking with Maynard via email. Before I wrote, however, a bunch of articles came out – see the Phoenix New Times and Wired, for example. Valleywag practically wet their pants over the story. I didn’t really have anything to add to what was already published.
In the aftermath of those articles Maynard resigned from the company. Cowan wrote about all of this yesterday on his personal blog, explaining that they invested with their eyes wide open and expressing his sadness over Maynard’s resignation.
There is More To This Story
It’s clear to me that the authors of those articles were sent the same email I was, or else the timing was a massive coincidence.
Who spent the time to put together all of this information on the company, and send it to all these reporters and bloggers? And what is their motivation?
The company is killing it, according to Cowan, adding 3,000 new customers per day. Their core product allows customers to put a “fraud block” on their credit. A new credit account cannot be opened by a person with a fraud block notation on their credit reports unless the company opening the account talks to them in person or over the phone and gets their permission. In addition to putting a fraud block on accounts, LifeLock also regularly renews customers’ “opt-out” status with bureaus to prohibit them from selling this information. This makes it much more difficult for someone with personal information about you, including your social security number, to steal your identity and get credit cards with your name sent to them. I’m a big fan of these kinds of services (see my coverage of TrustedID, another company fighting identity theft).
There are a lot of people who don’t like what LifeLock is doing. And those people all work for or own the big three credit reporting agencies (Experian, Equifax, and TransUnion) and the lawyers, lobbyists and other paid shills who represent them. The primary businesses of the credit bureaus is selling our personal information to credit card, mortgage and other credit-issuing companies. They are one of the primary facilitators of identity theft and credit fraud.
Bureaus don’t like services like LifeLock because they pull people out of their information-selling machine. LifeLock is a direct threat to their revenue.
Is this enough of an incentive for the bureaus to organize a hit job on a company?
I don’t particularly like what Maynard did in the past. It’s good that he’s no longer with the company, which can now focus on its core business of helping people try to fight what the credit bureaus are doing with their personal information. I also don’t think it is a good idea for venture funds to invest in companies founded by people who have been convicted of committing fraud, or most other crimes. Maynard should never have started another company that had anything to do with consumer credit, and the VCs should have only invested if he was completely out of the company.
I’ll probably never know who sent me that well organized, methodical email, or what motivation they had for getting the stories written. But I do know this: after researching this story, I’m more afraid of the credit bureaus and their perverse business models than ever before.
Check out LifeLock’s profile