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Tiversa, congressman debate credibility of whistle-blower

| Saturday, June 6, 2015, 9:00 p.m.
Richard Wallace, 41, of Harmony, Butler County, clutches the FBI Director’s Community Leadership Award he received from FBI Director Robert Mueller in 2013. His wife, Amy, is at right. 
Wallace, who said he received the award for his work identifying online child pornographers, has become a whistleblower against his former employer, Tiversa, a cybersecurity company based in Pittsburgh. The company denies that it did anything improper.
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Richard Wallace, 41, of Harmony, Butler County, clutches the FBI Director’s Community Leadership Award he received from FBI Director Robert Mueller in 2013. His wife, Amy, is at right. Wallace, who said he received the award for his work identifying online child pornographers, has become a whistleblower against his former employer, Tiversa, a cybersecurity company based in Pittsburgh. The company denies that it did anything improper.
An employee at Pittsburgh-based Tiversa, which tracks all files shared between peer-to-peer networks either purposely or accidentally, works at the company's Downtown office. Former director of special operations-turned-whistleblower Richard Wallace accused the company of predatory practices in efforts to sell its cybersecurity services. Tiversa officials say the company has done nothing wrong and experts told the Tribune-Review the company's practices are not illegal.
Andrew Russell | Tribune-Review
An employee at Pittsburgh-based Tiversa, which tracks all files shared between peer-to-peer networks either purposely or accidentally, works at the company's Downtown office. Former director of special operations-turned-whistleblower Richard Wallace accused the company of predatory practices in efforts to sell its cybersecurity services. Tiversa officials say the company has done nothing wrong and experts told the Tribune-Review the company's practices are not illegal.

It's hard to find a perfect whistle-blower.

That's the situation that U.S. Rep. Darrell Issa said he found during his committee's investigation of Tiversa, a Pittsburgh cybersecurity company that makes money-tracking information.

Tiversa collects millions of files shared on file-sharing services by computer users around the world. Most people use the services to share and download music, movies, software and other large files — but many end up inadvertently sharing private files, as well. When they use the software at work, they can end up leaking out their employer's information.

A Butler County man at the center of the investigation, Richard Wallace, Tiversa's former director of special operations, has had a string of personal and legal problems since losing his job early last year, court records show.

“Since most of Mr. Wallace's problems occurred after he became a whistle-blower and was severed from the company ... and they appear to be primarily excess alcohol consumption or related activities while under the influence of alcohol, they don't particularly bear on his testimony,” Issa told the Tribune-Review.

More importantly, the California Republican said, the House Oversight and Government Reform Committee staff he chaired until January either directly corroborated Wallace's testimony or his comments fell in line with facts that were verified.

Downtown-based Tiversa said it did nothing wrong, issuing detailed counterpoints to the committee staff's findings.

“Because of its reliance on a so-called whistle-blower whose statements cannot be trusted, the (Oversight Committee) staff has accepted an incorrect accounting of events,” Tiversa said in a statement.

The committee staff report fails to cite any other substantiation of the whistle-blower's statements, said Tiversa's lawyer, Jarrod Shaw of the Downtown-based Reed Smith law firm.

Wallace, 41, of Harmony was fired by Tiversa in February 2014 after seven years. He has been arrested multiple times since early last year and charged with multiple counts, including simple assault, driving under the influence, driving an unregistered vehicle, driving without a license and domestic violence. He spent time in the Butler County jail three times last year — twice for a day and once for three days.

Wallace received the FBI Director's Community Leadership Award in 2013 for his work at Tiversa to help identify child pornographers. He had been a board member with the Pittsburgh chapter of the FBI Citizens Academy Alumni Board, a nonprofit that supports the agency. But other members of the citizens board voted to remove him in January 2014 because he was charged with simple assault and resisting arrest.

“I'm wondering why this is relevant,” Wallace replied when the Trib asked about the criminal charges. “... My credibility is impeccable.”

Wallace initially told the newspaper he had not spent time in jail for any of his charges — a statement disproven by court records.

Wallace is represented by attorney Mary Beth Buchanan, the former U.S. Attorney for Western Pennsylvania. She blamed stress for Wallace's legal woes.

Buchanan said discussion of Wallace's criminal charges is “impertinent, scandalous and improper” with regard to his testimony about Tiversa and a defamation lawsuit the company has filed against him.

“Those issues were resolved and do not in any way affect his credibility as a whistleblower,” Buchanan said. “...Those things did happen. It's not pretty, but it's also not relevant.”

The Justice Department provided Wallace with limited immunity to testify about Tiversa to the Federal Trade Commission last month. The protection does not cover Wallace's statements to the media, and Buchanan has told him not to talk about the details of his claims.

Because whistle-blowers' claims often are tied up in some wrongdoing, government investigators have to verify the information they provide, Issa said.

Speaking at an Oversight Committee hearing about Tiversa and the FTC last summer, the ranking minority member, Rep. Elijah Cummings, D-Md., said Democrats considered giving immunity to the then-unnamed whistle-blower but could not independently verify his statements.

“We have said consistently and repeatedly that we are willing to consider immunity,” Cummings said. “... At this stage, the committee has not identified evidence that would substantiate or corroborate the allegations of this witness against other individuals.”

Issa said “whistle-blowers almost always come with less-than-clean hands because they almost always have a history of knowing for a time some level of wrong-doing before it reached a point where they were willing to come forward and tell us about it. That's not uncommon. We protect whistle-blowers. ... But we do check them to see, are they giving us factual information?”

Wallace said he first reached out to Michael Daugherty, the founding CEO of LabMD, an Atlanta cancer-screening laboratory, that had a lawsuit pending against Tiversa. LabMD's initial federal lawsuit was dismissed for lack of jurisdiction, but it filed another suit against Tiversa in January.

Tiversa has a separate libel lawsuit against LabMD, Daugherty and Wallace pending in Allegheny County.

Daugherty said he told Wallace that he only wanted to know information that could be corroborated. Wallace's personal problems have no bearing on the validity of his claims, he said.

“It is true that all those things happened,” Daugherty said. “It does not change the credibility of what Tiversa did because, Congress and myself, we did not rely on Rick's words. We have forensic evidence.”

Tiversa CEO Robert Boback alerted LabMD about finding its billing records on the Internet, Daugherty said. He added that Boback offered to help the clinic find the leak and recover its information at a cost of $475 an hour. Daugherty said he was immediately suspicious and opened his own investigation.

“We held him at bay because he wouldn't tell us anything unless we paid him, and then we went off on our own,” Daugherty told the Trib. “...Right away, we were like, ‘This is just some shakedown racket.' ”

Shaw, Tiversa's lawyer, disagreed with Daugherty's description of events. He said Tiversa did share the missing document with LabMD and made it aware of an ongoing problem.

“At the point Tiversa provided the information, LabMD was unaware they had a LimeWire file-sharing client downloaded on one of their computers,” Shaw said. “Tiversa's information allowed LabMD to identify that information and to remediate the issue.”

Issa said he feels Tiversa crosses a line when it goes from just finding information to trying to make money from it and then taking actions such as alerting regulators. Tiversa later provided information about LabMD's missing document to the FTC, the congressional staff report states.

“This is a company that has done well, but it's done well based on a single technology — finding peer-to-peer vulnerabilities, exploiting them and then convincing clients and companies to pay them money,” Issa said.

Shaw said Tiversa provided information about LabMD to the FTC only when it received a civil investigative demand from the agency, requiring the company to cooperate.

Wallace and his wife, Amy, said they have been through a lot of hard times since he started speaking out against his former employer.

Given the chance to do it all over, she said, they probably would just walk away.

Andrew Conte is a staff writer for Trib Total Media. He can be reached at 412-320-7835 or andrewconte@tribweb.com.

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