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	From The Post Driver's license photos used in firm's anti-fraud database. Drivers angered over purchase of license photos. Fla. governor stops sale of photos. 1998 series on privacy: " Eye in the Keyhole."

By Robert O'Harrow Jr. and Liz Leyden
Washington Post Staff Writers
Thursday, February 18, 1999; Page A1

A small New Hampshire company that wants to build a national database of driver's license photographs received nearly $1.5 million in federal funds and technical assistance from the U.S. Secret Service last year, according to documents and interviews with officials involved in the project.

Congressional leaders who helped make those arrangements envisioned using the photo file to combat terrorism, immigration abuses and other identity crimes – applications that appear to go beyond recent company claims the database would only be used to prevent check and credit card fraud.

"The TrueID technology has widespread potential to reduce crime in the credit and checking fields, in airports to reduce the chances of terrorism, and in immigration and naturalization to verify proper identity," said a letter about Image Data LLC from eight members of Congress in September 1997. "The Secret Service can provide technical assistance and assess the effectiveness of this new technology."

These details about Image Data's development add fuel to an intense privacy debate that was touched off last month by reports that the Nashua, N.H., company recently bought more than 22 million drivers' images in South Carolina, Florida and Colorado.

As the company lobbied to gain access to motor vehicle files, officials apparently told few people about its ties to the Secret Service or the money it received from Congress. State legislators, motor vehicle administrators and others who worked with the company said in interviews they had no inkling that federal officials might be involved. Several officials from Florida and South Carolina said they now feel misled by the company.

In response to a surge of complaints after news reports on the transfer of license images, Florida Gov. Jeb Bush (R) canceled a contract to sell 14 million photographs. Colorado Gov. Bill Owens (R) halted the sale of 5 million images, while the state legislature pushed through a bill that would ban the transfer.

South Carolina Attorney General Charles M. Condon sued the company for the return of 3.5 million digital photographs already being used in a pilot project there. A state judge rejected that claim last week, saying the company's True ID system is "no more intrusive on the privacy of an individual than showing the driver's license itself." But Condon is appealing the decision to the state supreme court.

State legislators, meanwhile, have proposed laws blocking future sales and a South Carolina woman filed a class-action lawsuit this week seeking to stop Image Data from using the images. Officials in Florida, Colorado and New York also have said they intend to study sales of personal information by their states, with an eye toward new restrictions.

Officials at Image Data have consistently defended the company's efforts, saying that photographs, names, addresses, Social Security numbers and personal data would only be used in a secure computer network to stop retail fraud. They said their computers can briefly flash a tamper-proof photo of a person named on a check or credit card to a tiny screen at a retailer, enabling a clerk to verify the shopper's identity. A pilot program for check writers started in South Carolina last August.

In an interview yesterday, Image Data founder Robert Houvener said he believes his company has the potential to save consumers, businesses and governments billions of dollars in losses to identity theft – a fast-growing crime in which fraud artists take on the persona of victims and rack up bills in their names. Houvener said that's why he sought out federal assistance and welcomed the expert advice of the Secret Service, which investigates identity theft and electronic crimes.

Houvener played down any contradiction between his recent statements and the potential uses cited by congressional supporters, saying in every instance the technology would be used to prevent a fraudulent transaction. That holds true for airlines that use it to screen passengers buying tickets, Houvener said, or for banks verifying the identity of welfare recipients getting their benefit.

"An airline counter is the same as a counter at a 7-Eleven," Houvener said. "It's the exact same situation. All you're trying to do is prevent fraudulent transactions."

But state officials said they are skeptical.

"The arguments against this program become much more credible if the federal government and others ultimately intended to use the technology and data on Americans for purposes broader than fighting retail fraud," said Tom Feeney, a Florida Republican legislator who, after meeting with an Image Data's lobbyist, sponsored a law enabling the sale of the state's driver photographs last year.

As recently as two weeks ago, during a court hearing in South Carolina about the company's purchases of the images, Houvener passed up several opportunities to discuss the federal funding when asked about the company's financing, according to a transcript of the hearing.

Houvener said several newspapers mentioned the federal funds and the Secret Service role when they were first approved and so he assumed that people knew about these matters. The one article in a national newspaper cited by Houvener, however, briefly referred to the funds in a long report on the federal budget. He said Condon, who questioned him in the case, had asked about investors – not federal financing.

Condon said he intends to review Houvener's statements to determine if he misled the court. "This office is going to investigate," said Condon, who predicted that South Carolina drivers will not appreciate hearing about the ties between Image Data and the Secret Service. "We don't want to be a guinea pig for the federal government to experiment on how to solve federal problems," he said.

A Secret Service official said the agency did not seek to be included in the effort. But the official, who is overseeing the project, also saw a chance to help Image Data tailor its technology to fight a vexing crime.

"We were trying to show them positive ways the system could work," said Cary Rosoff, a special agent in charge who visited the company's pilot program in South Carolina in December. "Our feeling was, if the government was going to invest money into the program, why not make it work as well as it can?"

Company officials have portrayed themselves as well-meaning corporate newcomers, overwhelmed by attention from the media and policymakers.

Houvener said some critics mistakenly believe the images will be sold or made available on the Internet. "We've been forthright with everyone," Houvener said yesterday. "There's nothing inconsistent here at all."

With help from an influential Boston public relations firm, the Rasky/Baerlein Group, Image Data hired lobbyists in Florida and South Carolina. The company spent about $25,000 on the South Carolina lobbyist – five times the cost of the database it eventually bought. It contributed $500 to state Sen. John Land, the legislator who sponsored a bill enabling the sale, as well as $1,000 to former governor David Beasley.

Image Data also received help from eight legislators on Capitol Hill. They include Sen. Judd Gregg (R-N.H.), who received $2,000 in campaign contributions in his last campaign from the company's officials or their families, and Rep. Charles F. Bass (R-N.H.), who received $3,000 in contributions from company officials since 1995, according to Federal Election Commission data.

In the September 1997 letter written to Sen. Ben Nighthorse Campbell (R-Colo.), chairman of the Appropriations Committee panel that oversees the Secret Service, Gregg, Bass, Sen. Ernest F. Hollings (D-S.C.) and the others expressed thanks "for including $1.46 million for a pilot program to combat identity-based crimes."

A spokeswoman for Gregg said he was not available for comment. Bass was also unavailable for comment, but spokeswoman Sally Tibbetts said he remains supportive of the company's effort.

Hollings continues to support the company's anti-fraud initiatives, as long as drivers can choose not to participate, according to his spokesman.