In this week’s episode (#131): a shareholder lawsuit targeting Yahoo! executives was settled quietly. But it could have big implications for the C-Suite at breached firms. Also: as the US pursues criminal charges against Huawei for corporate espionage, we look at one of the federal government’s most potent tools to stop the transfer of sensitive IP: the Committee on Foreign Investment in the US.

The C-Suite’s Bitter Pill

This week, U.S. District Court judge Lucy Koh slapped down a proposed settlement of a class action lawsuit filed against Yahoo! (now part of Verizon Media) over a 2013 hack that exposed data on billions of its users. It’s just the latest twist in the saga of the once great search giant, who fell victim to hackers and then – astoundingly – conspired to keep the breach a secret for years. But another Yahoo! lawsuit that was quietly settled late last year may have far bigger long term consequences for breached private sector firms and their executives.

That case, a so-called “derivative lawsuit,” was filed on behalf of Yahoo! shareholders against the company’s executives, including former CEO Marissa Mayer. The suit alleged that they breached their fiduciary duties in the reckless handling of customer data. The result: a $29 million settlement, including $11 million in attorneys’ fees. The balance, some $18 million will go to Yahoo or, as it is now known, Altaba, part of Verizon. (PDF)

Craig Newman is a partner and head of the data privacy practice at the New York law firm of Patterson, Belknap, Web and Tyler

While that might not sound like much, our first guest on the podcast this week notes that derivative suits are notoriously hard to win and that, even when they are won, any cash settlement in a derivative suit beyond attorneys fees is exceedingly rare.

What does the success of the suit mean for the heads of other companies that are the victims of sophisticated hacks? Craig Newman, the head of the data privacy practice at the New York law firm of Patterson, Belknap, Web and Tyler dropped in to the Security Ledger studios to talk about the derivative suit against Marissa Mayer and the other Yahoo! executives and its ramifications. 

CFIUS Interest in Cyber Deals Grows

As hearings on Capitol Hill confirmed this week, cyber offensives by U.S. adversaries like Russia, China, Iran and North Korea are at the forefront of U.S. foreign policy.

And, in the background of those hearings was evidence of a more muscular U.S. response, as prosecutors at the Department of Justice filed criminal charges against Huawei Technologies Co., China’s largest technology company, alleging it stole trade secrets from an American rival and committed bank fraud by violating sanctions against doing business with Iran.