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Washington Steps Up Data Security Focus

The Justice Department is investigating the security data breach at Target Corp. as House Democrats have expanded their probe into the issue.

WASHINGTON — U.S. Attorney General Eric Holder told a Senate hearing Wednesday that the Justice Department is investigating the security data breach at Target Corp. as House Democrats expanded their probe into the issue, asking Neiman Marcus to explain why it took the retailer so long to discover and report a breach of its consumer data.

In a rare disclosure, Holder, who was testifying before the Senate Judiciary Committee, confirmed that his agency has opened an investigation into the Target breach, which potentially affected more than 100 million consumers.

“The Department of Justice takes seriously reports of any data breach, particularly those involving personally identifiable or financial information, and looks into allegations that are brought to its attention,” Holder said. “While we generally do not discuss specific matters under investigation, I can confirm the department is investigating the breach involving the U.S. retailer Target, and we are committed to working to find not only the perpetrators of these sorts of data breaches, but also any individuals and groups who exploit that data via credit card fraud.”

Target reported a breach last month that the retailer initially said affected 40 million consumers who purchased goods in stores and who potentially had their debit and credit card information stolen. The retailer later said another 70 million consumers may have had personal data such as their names, addresses, e-mail addresses and phone numbers taken.

Shortly thereafter, Neiman Marcus Group Ltd. LLC reported a similar data security breach and disclosed on Jan. 10 that 1.1 million payment cards may have been compromised.

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The cyber attacks have sparked probes on Capitol Hill and have prompted lawmakers to schedule hearings on the issue. John Mulligan, Target’s executive vice president and chief financial officer, is slated to testify Tuesday at a hearing on cyber crime and privacy before the Senate Judiciary Committee.

In separate action on Wednesday, two House Democrats, Henry Waxman of California and Jan Schakowsky of Illinois, sent a letter to Karen Katz, Neiman’s president and chief executive officer, seeking information about the security breach at the chain, as the House Energy and Commerce Committee prepares to hold its own hearing into the incident next week.

“While the immediate concerns relate to securing customer information and preventing fraudulent charges, there are many unanswered questions about this cyber attack and its implications for consumer privacy and data security,” the lawmakers wrote. “Questions remain about how exactly this attack was carried out, who was responsible, whether it could have been prevented, how Neiman Marcus responded, and how retailers and customers can protect themselves going forward.”

Waxman and Schakowsky said their key questions include whether the attacks against Target, Neiman’s and possibly Michaels Stores were related; why the breach took so long to discover, and why Neiman’s took as long as it did to disclose the breach and notify customers.

They asked Katz for all of Neiman’s written policies or guidelines related to threat monitoring, network security or point-of-sale protection, all documents listing how much Neiman’s has spent on network security systems and personnel, and all documents pertaining to Neiman’s response and public notification activities relating to the breach.

“Although we are still in the middle of our forensic investigation and therefore do not have all of the information about the data security incident, we want to assist Congress as it attempts to be responsive to the important data security issues facing our country,” a Neiman’s spokeswoman said in an e-mail. “We have been open and forthright in responding to requests from members of Congress, including our detailed response to Senator [Richard] Blumenthal [D., Conn.] last week, and Neiman Marcus therefore looks forward to participating in the upcoming Congressional hearings and to providing information we have available to us at this time.”

Earlier this month, Blumenthal called on Neiman’s to provide two years of free credit monitoring and identity theft insurance to all of its customers, which the company agreed to do.

“I’m pleased Neiman Marcus responded promptly and thoroughly to my inquiry,” Blumenthal said. “The month required to uncover and confirm this sophisticated malware scheme left consumers severely at risk, but the company apparently moved diligently and quickly when its investigation warranted. This incident shows how innovative, malicious software with self-concealing, camouflaging features is difficult to successfully and rapidly investigate or stop.”

“All retailers have an obligation to enhance protections against cyber attacks with better cyber firewalls and fortresslike defenses. Consumers deserve and need these protections,” Blumenthal said.