S.C. Revenue Department chief resigns

Staff Report
Published Nov. 21, 2012

Data swiped by hackers from computers at the S.C. Department of Revenue came from tax returns that had been filed electronically, state officials said Tuesday.

During a news conference to offer updates on the investigation, Gov. Nikki Haley also said she had accepted the resignation of Jim Etter as executive director of the Revenue Department.

William Blume, executive director of the S.C. Public Employee Benefit Authority, has been named to take over DOR, Haley added. Etter will remain on the job until Dec. 31 to help with the transition, Haley said.

The report

To read the Mandiant report on how attackers breached the state Department of Revenue computers, click here.
The DOR has now determined whose information was stolen, and the victims will receive letters of confirmation either by mail or email, Haley said.

The hacker, who law enforcement authorities said was based in Russia, stole 74.7 gigabytes of data containing information on individual and business tax returns that had been filed electronically since 1998.

That information includes Social Security and business ID numbers, bank accounts and credit cards listed on tax returns.

The latest report shows that information from 3.8 million individual taxpayers, 1.9 million dependents, 699,900 businesses, 3.3 million bank accounts and 5,000 credit cards was stolen by the hackers, Haley said. She added that all of the credit card accounts are expired.

The state has offered victims access to a free credit report service from Experian for one year to guard against potential ID theft.

When the security breach was first announced Oct. 26, Haley said she thought there was no way the incident could have been prevented.

However, on Tuesday, Haley conceded the state didn’t do enough to protect its citizens. She said the Revenue Department is using 1970s technology and the Internal Revenue Service does not require state agencies to encrypt individual and business tax returns.

Aging equipment and IRS rules was a “cocktail for an attack,” Haley said, adding that she had sent a letter to the IRS asking the agency to require all states to encrypt taxpayer information.

The DOR is now in the process of encrypting information, she said.

Turning to Etter’s resignation, Haley insisted he is not to blame for the cyberattack.

“We were in compliance,” Haley said, “That's why I don't want this to be about Jim Etter.”

Still, the governor accepted Etter’s resignation.

“Jim and I both agreed that we need a new set of eyes on the Department of Revenue,” Haley said.

A native of Charleston, Blume took over at the employee benefits administration in July. The agency is responsible for the administration and management of the state’s employee insurance programs and retirement systems.

Prior to joining the S.C. Retirement Systems in March 2011, Blume was a retired senior tax partner at Ernst & Young.

He holds a bachelor’s degree in economics from Presbyterian College, a master’s degree in accountancy from the University of South Carolina and a master’s degree in taxation from the University of Denver Law School. Blume is a certified public accountant.

Etter was appointed to the revenue post in January 2011.

Haley said the state needs to develop a cybersecurity plan much like it has a plan for hurricanes.

Every year the state has a hurricane drill where emergency agencies respond as if a real storm had hit the coast, she said.

State government agencies need to take the same approach to guarding against cyberattacks, she said.

Previous coverage

Cyberattack affects at least 657,000 South Carolina businesses
Cyberattack puts IDs of 3.6M South Carolinians at risk
Haley orders Cabinet agencies to work with state IT division
Senate subcommittee to examine S.C. security breach

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