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2018-05-02 23:33:02
Cambridge Analytica to File for Bankruptcy After Misuse of Facebook Data

The embattled political consulting firm Cambridge Analytica announced on Wednesday that it would cease most operations and file for bankruptcy amid growing legal and political scrutiny of its business practices and work for Donald J. Trump’s presidential campaign.

The decision was made less than two months after Cambridge Analytica and Facebook became embroiled in a data-harvesting scandal that compromised the personal information of up to 87 million people. Revelations about the misuse of data, published in March by The New York Times and The Observer of London, plunged Facebook into crisis and prompted regulators and lawmakers to open investigations into Cambridge Analytica.

In a statement posted to its website, Cambridge Analytica said the controversy had driven away virtually all of the company’s customers, forcing it to file for bankruptcy in both the United States and Britain. The elections division of Cambridge’s British affiliate, SCL Group, will also shut down, the company said.

But the company’s announcement left several questions unanswered, including who would retain the company’s intellectual property — the so-called psychographic voter profiles built in part with data from Facebook — and whether Cambridge Analytica’s data-mining business would return under new auspices.

“Over the past several months, Cambridge Analytica has been the subject of numerous unfounded accusations and, despite the company’s efforts to correct the record, has been vilified for activities that are not only legal, but also widely accepted as a standard component of online advertising in both the political and commercial arenas,” the company’s statement said.

Cambridge Analytica also said the results of an independent investigation it had commissioned, which it released on Wednesday, contradicted assertions made by former employees and contractors about its acquisition of Facebook data. The report played down the role of a contractor turned whistle-blower, Christopher Wylie, who helped the company acquire Facebook data, calling it “very modest.”

Cambridge Analytica did not reply to requests for comment. The news of Cambridge ceasing operations was earlier reported by The Wall Street Journal and Gizmodo.

The company, bankrolled by Robert Mercer, a wealthy Republican donor who invested at least $15 million, offered tools that it claimed could identify the personalities of American voters and influence their behavior. Those modeling techniques underpinned Cambridge Analytica’s work for the Trump campaign and for other candidates in 2014 and 2016.

But Cambridge Analytica came under scrutiny over the past year, first for its purported methods of profiling voters and then over allegations that it improperly harvested private data from Facebook users. Last year, the company was drawn into the special counsel investigation of Russian interference in the 2016 election.

The company was also forced to suspend its chief executive, Alexander Nix, after a British television channel released an undercover video. In it, Mr. Nix suggested that the company had used seduction and bribery to entrap politicians and influence foreign elections.

Facebook has since announced changes to its policies for collecting and handling user data. Its chief executive, Mark Zuckerberg, testified last month before Congress, where he faced criticism for failing to protect users’ data.

The controversy dealt a major blow to Cambridge Analytica’s ambitions of expanding its commercial business in the United States, while also bringing unwanted attention to the American government contracts sought by SCL Group, an intelligence contractor.

Besides working for the Trump campaign, Cambridge Analytica was previously hired by the political action committee founded by John R. Bolton, the national security adviser. It had also worked for the 2016 presidential campaigns of Ben Carson and Senator Ted Cruz.

But no candidates for federal office in the United States have disclosed paying Cambridge Analytica during the 2018 cycle. A Republican congressional candidate in California did report voiding a $10,000 transaction with the company in early March, according to federal election records.

The company also unsuccessfully tried to court some major commercial clients in the last year, including Mercedes-Benz and Anheuser-Busch InBev, the global brewer, according to one former employee. Cambridge pitched AB InBev by claiming that it could position Bud Light as the beer for the young party crowd and Budweiser for old-school conservatives, according to the former employee, who asked not to be named because the person was restricted from speaking about the company’s business.

In recent months, executives at Cambridge Analytica and SCL Group, along with the Mercer family, have moved to created a new firm, Emerdata, based in Britain, according to British records. The new company’s directors include Johnson Ko Chun Shun, a Hong Kong financier and business partner of Erik Prince. Mr. Prince founded the private security firm Blackwater, which was renamed Xe Services after Blackwater contractors were convicted of killing Iraqi civilians.

Cambridge and SCL officials privately raised the possibility that Emerdata could be used for a Blackwater-style rebranding of Cambridge Analytica and the SCL Group, according two people with knowledge of the companies, who asked for anonymity to describe confidential conversations. One plan under consideration was to sell off the combined company’s data and intellectual property.

An executive and a part owner of SCL Group, Nigel Oakes, has publicly described Emerdata as a way of rolling up the two companies under one new banner. Efforts to reach him by phone on Wednesday were unsuccessful.

The former Cambridge Analytica employee said that staff members were originally told there would be an all-hands meeting in London on Tuesday, but that it was pushed back a day. Then, after assembling at 9:30 a.m. Wednesday, they were kept waiting through the morning and much of the afternoon before Julian Wheatland, the company’s chief executive, delivered the news.

The damage to the company’s reputation was simply too severe, and it was “futile” and “pointless” to try to rebuild amid investigations in the United States and Britain, Mr. Wheatland said, according to the former Cambridge Analytica employee, who was informed by those in attendance.

Employees in Washington were notified during a conference call later in the day. They were then told to turn over their identification cards and any company property and to go home. By 2 p.m., Cambridge Analytica offices on Pennsylvania Avenue were empty save for a single man, who refused to answer questions from a reporter.