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Monday, August 2, 2021

State retirement fund sues Facebook, Zuckerberg over misconduct that cost shareholders at least $5 billion in fines

Facebook customer personal data was used to promote Trump’s campaign

General Treasurer Seth Magaziner announced that this month, the Employees’ Retirement System of Rhode Island filed a lawsuit against certain officers, including co-founder and CEO Mark Zuckerberg and Chief Operating Officer Sheryl Sandberg, and members of the board of directors of Facebook (NYSE: FB) alleging breaches of fiduciary duties pertaining to the Facebook-Cambridge Analytica data-privacy scandal.   

“As Treasurer, my job is to stand up for the financial wellbeing of all Rhode Islanders, including the teachers, first responders and other community servants who depend on the Rhode Island pension fund for their retirement security,” said General Treasurer Seth Magaziner.

 "When Facebook leaders improperly allowed user data to fall into the hands of bad actors trying to influence  elections in support of Donald Trump and others, they not only put our democratic system of government at risk, they also put shareholder capital at risk.”  

In the years leading up to the 2016 Presidential election, Facebook user data was obtained by Cambridge Analytica without users’ consent and then used to promote the campaigns of Donald Trump for President, Ted Cruz for Senate, and the pro-Brexit movement.

Facebook agreed to pay a $5 billion fine to the Federal Trade Commission (FTC) for this incident and other related issues; by far the largest fine ever assessed by the FTC.

This materially impacted the value of Facebook stock and harmed Facebook shareholders including the Employees Retirement System of Rhode Island, which currently holds 151,533 shares of Facebook.   

The lawsuit alleges that these breaches of fiduciary duty caused significant damage to Facebook and continue to impair long-term shareholder value. It details the allegations against certain Facebook board of directors and top executives for failing to ensure that Facebook complied with privacy laws and regulations and a prior consent agreement with the FTC.   

Treasurer Magaziner has also  repeatedly advocated publicly that Facebook adopt an independent board chair, along with inadequate board governance, to prevent the mishandling of controversies like the Cambridge Analytica privacy scandal.  

The civil case was filed in the Court of Chancery of the State of Delaware. Under the current schedule a public version of the complaint, with redactions of confidential information, is set to be filed this August 6th.