Information giant LexisNexis Group said yesterday it will pay $775 million in cash for Seisint Inc., a privately held data service that created a controversial tool called the Matrix, which gave state and federal authorities new power to analyze records about Americans after the Sept. 11, 2001, terror attacks.
Officials at LexisNexis, an Ohio-based subsidiary of UK-based Reed Elsevier Group, said Seisint's supercomputers will give them an important edge over its commercial competitors at a time when government investigators are scrambling to improve the collection, analysis and sharing of information in the war on terror.
"This is definitely next generation," said Norm Willox, LexisNexis's chief officer for privacy, industry and regulatory affairs. "This is the latest and greatest."
Industry rivals, including ChoicePoint Inc. and International Business Machines Corp., also expressed interest in buying Seisint, officials familiar with the sale said. LexisNexis expects Seisint revenue to grow by more than 40 percent this year to $115 million, officials said, helping to boost the revenue of the LexisNexis risk-management division to around $300 million a year.
LexisNexis maintains billions of records, including media reports, legal documents and public records collected from thousands of sources. It has some 13,000 employees around the world. Officials there believe the deal will boost the company's already extensive role in homeland security initiatives and expand the information and analytical services it already provides under contract to police departments across the country and federal agencies such as the Justice Department and the CIA.
Civil liberties activists warned that the combination of Seisint technology and LexisNexis's global reach could be massively intrusive if used in the wrong way. "It will hurtle us even faster toward a surveillance society," said Barry Steinhardt, director of the Technology and Liberty Project at the American Civil Liberties Union. "It can't be good news here."
Willox said such fears are overblown because of the care his company takes to ensure that individual privacy is not abused. "LexisNexis has a long history and is well respected for going the extra mile to protect personal privacy," Willox said. "This or any acquisition is not going to change that."
Seisint, based in Boca Raton, Fla., was started by data entrepreneur Hank Asher as a marketing firm in 1998, and it evolved into a leading purveyor of personal information to corporations, reporters, police and federal investigators in recent years. It relied on a supercomputer and software system that tags records about almost every American adult with a unique identifier. Seisint's Accurint service, drawing on billions of records, can deliver dossiers online in an instant, including addresses, jobs, assets, voter registration and associates. The company employs about 300 people.
Asher, who still owns a large share of the company, said in an interview that he would earn more than $250 million from the sale.
The acquisition follows months of controversy about the Matrix system, which combined commercial records and government files in a new way to enable investigators to rapidly pull together lists of suspects, based on characteristics such as age, race and an individual's associates. Asher spent millions of dollars of his own money creating the system.
Control of the system was handed over to law enforcement officials and, after a demonstration of the system at the White House in January 2003, Matrix received $12 million in grants from the Justice and Homeland Security departments. Law enforcement authorities, as well as officials in the White House and the Justice Department, praised Matrix as an extraordinary new resource. They used it to generate lists of possible terrorists. As many as 16 states agreed to share information with other Matrix users.
After Matrix became public last year, it was criticized by civil liberties activists as intrusive. Critics also complained about the government doing business with Asher, who was allegedly involved in drug smuggling in the early 1980s, according to state police records and Asher's own public remarks. Asher stepped down from the company's board of directors because of the controversy and all but five of the original participating states backed away from the program, some of them citing concerns about privacy.
Yesterday, Mark Zadra, a top investigator for the Florida Department of Law Enforcement and one of the officials responsible for overseeing Matrix, said the system will remain as a pilot program longer than planned, through June next year. Zadra said officials will announce changes to the system next week that will put more control of states' information in the hands of state officials.
Asher said he was proud of the company he built. "To me, my inventions are like children. I want them to grow up and be great adults. Lexis will see that that happens."