The American technology giant Google’s parent company Alphabet is facing a lawsuit in the US appeals court as the company’s shareholders have accused it of fraudulently hiding security vulnerabilities, including in its Google+ social network.
The 9th US Circuit Court of Appeals in San Francisco stated that the lawsuit raised a “strong inference” that Alphabet’s then-Chief Executive Larry Page and his successor, Sundar Pichai, had knowledge about the bugs and an internal memo on security issues but they concealed the information from investors.
The lawsuit, led by the state of Rhode Island, was followed by a media report in October 2018 that said Google concealed the exposure of private data for nearly 500,000 Google+ users because it feared regulatory scrutiny and reputational harm. Alphabet and its lawyers did not immediately respond to requests for comment.
Over the following three days, Alphabet’s share price fell more than 6 percent, reducing the California-based company’s market value by more than $50 billion.
In March 2018, Google admitted that it had discovered the data exposure, though there was no evidence of misuse, and decided to shut down the consumer version of Google+. The company’s failure to disclose the vulnerabilities sooner drew bipartisan condemnation from Congress.
In the last day’s decision, Circuit Judge Sandra Ikuta accepted the shareholders’ argument that Alphabet stayed silent to “buy time,” and avoid the spotlight that Facebook was then under because Britain’s Cambridge Analytica had taken data from tens of millions of its users.
“As it turned out, Alphabet successfully bought itself about six months of time. The competing inference that Alphabet knew of this information but was merely negligent in not disclosing it is not plausible,” Ms. Ikuta wrote.
The case was returned to US District Judge Jeffrey White in San Francisco, who had dismissed it in February 2020.
“We are grateful to have the opportunity to sit down with Mr. Pichai, Mr. Page and others to get the bottom of what they did,” the accuser’s lawyer Jason Forge said.