Cisco Pays $8.6M in First False Claims Suit for Vulnerabilities in Security Product

Cisco Systems agreed on July 31 to pay $8.6 million to settle litigation that the enterprise-technology giant violated the US False Claims Act for years when it failed to patch vulnerabilities in its family of video-surveillance products while continuing to sell the devices and software to the US government.

The whistleblower lawsuit, brought by law firm Constantine Cannon LLP, alleged that Cisco violated the US act when it sold vulnerable video-surveillance systems to federal agencies, state governments, and the District of Columbia. The lawsuit originated from issues in Cisco's Video Surveillance Manager that were reported in 2009 by a security consultant, James Glenn, while working for a Cisco partner. After initially listening to Glenn, the company fired him and continued selling the product, the lawsuit maintained.

"Cisco markets the product as particularly suited for government customers, and knows that the product is routinely sold to government customers, even though Cisco knows that these critical security flaws render the product largely ineligible for purchase by government entities," the court filing states.

The settlement is part of a trend of companies having to increasingly pay fines for their lapses in cybersecurity. In July, a UK regulator notified British Airways that the airline will face a $229 million fine for a 2018 data breach, the largest fine to date under the European Union's General Data Protection Regulation (GDPR).

For security companies, the settlement should be seen as a warning that they could be held liable for vulnerabilities in their products if the issues are not handled in a timely manner.

"The False Claims Act exists to protect the government from being sold products that fail to comply with their standards and specifications," says Anne Hartman, a partner at Constantine Cannon. "That part is not novel, but with regard to the cybersecurity standards, this is the first time that the government has recovered money on that theory."

Because the vulnerable product exposed government agencies to greater cyber-risk, the lawyers brought the whistleblower lawsuit under the US False Claims Act in federal court in the Western District of New York. Under the settlement, which is not a court ruling, Cisco agreed to partially refund the government. The $8.6 million penalty includes 20% paid to Glenn for his role in reporting the issue to the government.

"It will inspire other people to step forward and speak up when they have inside information about vulnerabilities and breaches," says Mary Inman, a partner at Constantine Cannon. "We are now in an era when we are increasingly reliant on tech companies, and we need — more than ever — the voices of whistleblowers like James." 

While Cisco accepted responsibility for the vulnerable product, the company partially blamed the issue on changing perceptions of the acceptability of vulnerable software.

"We intend to stay ahead of what the world is willing to accept," said Mark Chandler, chief legal officer for Cisco, in a blog post published by the company. "Nothing illustrates better the way standards are changing than our engagement in resolving a dispute involving video security software products sold by us in Cisco's fiscal years 2008 through 2013. In short, what seemed reasonable at one point no longer meets the needs of our stakeholders today."

The fine is a relatively modest sum to pay to shut down an 8-year-old lawsuit. Cisco underscored that "the total sales at issue were well under one one-hundredth of one percent of Cisco's total sales."

Glenn, the consultant who brought the lawsuit, argues that companies need to be ready to work with anyone who reports a vulnerability in order to make their products better.

"Companies often see security researchers as troublemakers and disrupters, but the only way [that is true is] if their objectives are not the same as the researchers — to find these problems and get them fixed," he says.

In 2013, Cisco published information on three vulnerabilities that would allow an attacker to gain access to the video information and "create, modify and remove camera feeds, archives, logs and users." The vulnerabilities are the same as those originally reported in 2009, Glenn says.

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