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Blackbaud CEO’s DUI Arrest Comes At Pivotal Moment For Company

South Carolina-based software giant under fire …

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Last month, our media outlet reported on the February 16, 2024 arrest of Blackbaud chief executive officer Michael P. Gianoni on suspicion of driving under the influence. Gianoni, 63, was pulled over by an officer of the Isle of Palms police department after his Mercedes-Benz SUV allegedly failed to dim its high beams, drifted across a white fog line on the side of the roadway and failed to signal both a turn and a lane change.

According to an incident report (.pdf), IOP officers “immediately smelled the overwhelming scent of an alcoholic beverage coming from (Gianoni)’s breath” upon initiating a traffic stop. Gianoni – who refused a breathalyzer examination – was also “slurring his speech,” officers alleged.

This media outlet recently obtained dash cam footage from Gianoni’s arrest. This footage shows him taking a field sobriety test after being pulled over and being placed under arrest after officers determined he was “materially and appreciably impaired.”

According to the arresting officers, Gianoni allegedly “got argumentative” during the test and repeatedly asked them: “Why are we doing this?”

Gianoni’s arrest took place at a pivotal time for Blackbaud – a company which bills itself as “the leading software provider exclusively dedicated to powering social impact” and the “world’s leading cloud software company powering social good.”

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Founded in 1981 in New York City, Blackbaud relocated to the Palmetto State in 1989. The firm did more than a billion dollars of business in 2022 and had total assets of nearly $3 billion. Blackbaud employed more than 3,000 people around the globe, as of 2023 – most of them remote employees. An estimated 1,000 of those employees live and work in South Carolina.

The company’s stock – which had climbed as high as $82.65 last month – took a nosedive on February 13, 2024, closing at $70.38. That’s a 14.8 percent drop – in one day. The reason for the decline? According to MarketWatch, the company’s “fourth quarter revenue and 2024 adjusted earnings guidance both fell short of analyst expectations.”

On February 20, 2024 – just four days after his arrest – Gianoni sold 25,354 shares of Blackbaud, according to SEC filings. Over the past year, he has sold a total of 49,354 shares and has made no purchases of company stock. Last week, Blackbaud’s chief technology officer Kevin McDearis sold 3,479 shares – bringing his total of shares sold over the past year to 13,479. Like Gianoni, McDearis has not made any purchases of Blackbaud stock over the past year.

According to GuruFocus, these transactions continued “a trend of insider sales at the company” over the past year.

Blackbaud is currently the focus of multiple lawsuits tied to a May 2020 ransomware hack that impacted over a million files belonging to 13,000 customers (and their consumer constituents). Just last week, U.S. district court judge Joseph Anderson heard arguments on consolidating these lawsuits into a single class action complaint against the company.

Anderson is expected to issue a decision within the next few weeks …

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Entrance to U.S. district courthouse in Charleston, South Carolina. (Dylan Nolan/ FITSNews)

How did we get here?

In early 2020, a hacker used login information from a Blackbaud customer to exploit the company’s “lax security” and access numerous company databases, according to the Federal Trade Commission (FTC).

“The attacker rummaged around undetected for three months until Blackbaud finally spotted a suspicious login on a backup server,” the FTC’s senior attorney Leslie Fair noted in a scathing critique of the company published just last month. “But by then, the attacker had stolen data from tens of thousands of Blackbaud’s customers, which compromised the personal information of millions of consumers.

The breach was discovered in May of 2020 and a ransom of approximately $250,000 was paid to the hacker – who has yet to be identified or apprehended. Blackbaud did not notify its customers of the ransomware attack until July 2020 – and even then it “misrepresented the scope and severity of the breach,” according to Fair.

“The cybercriminal did not access credit card information, bank account information, or social security numbers,” Blackbaud told its customers. “No action is required on your end because no personal information about your constituents was accessed.”

That statement was patently false – but the company did not acknowledge the truth about the incursion until October 2020. Meanwhile, as for the hacker, the company cannot be certain they deleted the stolen data as promised upon receipt of the ransom payment.

“Blackbaud hasn’t been able to verify that the attacker actually followed through with their part of the bargain,” Fair noted.

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In fact, the company “has received multiple complaints from consumers about attempted identity theft and fraud involving personal information exposed during the breach,” according to Fair.

Last fall, Blackbaud reached a $49.5 million settlement with the attorneys general of 49 states – including South Carolina – related to the attack. According to a release from the office of S.C. attorney general Alan Wilson, Blackbaud “violated state consumer protection laws, breach notification laws, and HIPAA by failing to implement reasonable data security and remediate known security gaps, which allowed unauthorized persons to gain access to Blackbaud’s network, and then fail(ed) to provide its customers with timely, complete, or accurate information regarding the breach, as required by law.”

Additionally, last April the company agreed to a $3 million fine for making “misleading disclosures” to the public about the ransomware attack.

“Blackbaud failed to disclose the full impact of a ransomware attack despite its personnel learning that its earlier public statements about the attack were erroneous,” a statement from the SEC noted. “Public companies have an obligation to provide their investors with accurate and timely material information; Blackbaud failed to do so.”

As Gianoni prepares for his first court date next month, count on this media outlet to keep its audience posted on any new developments related to this ongoing corporate drama …

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ABOUT THE AUTHOR …

(Travis Bell Photography)

Will Folks is the founding editor of the news outlet you are currently reading. Prior to founding FITSNews, he served as press secretary to the governor of South Carolina and before that he was a bass guitarist and dive bar bouncer. He lives in the Midlands region of the state with his wife and eight children.

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