Cambridge Analytica – an object lesson in failed due diligence and deception

Liam O’Hare at Bellacaledonia has done a first-rate job investigating the ties between Cambridge Analytica, the British political establishment and espionage services. (hat tip to James Governor)

O’Hare uncovers a web of connections between powerful politicians, the people who run Cambridge Analytica, SCL and its primary trading group member SCL Elections Ltd.

For my part, I’ve been digging around in the Companies House records to figure out who owns what and what those companies do. The trading results are interesting and I’ll get to those in a moment.

Reported facts

First, it is important to ask whether the reported suspension of Alexander Nix, CEO is real or imagined. CNN, The Guardian and the BBC are all reporting the suspension. From The Guardian:

The company said in a statement: “The board of Cambridge Analytica has announced today that it has suspended CEO Alexander Nix with immediate effect pending a full, independent investigation.

“In the view of the board, Mr Nix’s recent comments secretly recorded by Channel 4 and other allegations do not represent the values or operations of the firm and his suspension reflects the seriousness with which we view this violation.”

Cambridge Analytica said its chief data officer, Alexander Tayler, had been appointed acting chief executive while an investigation was carried out by Julian Malins QC, whose findings they would “share publicly in due course”.

“The board will be monitoring the situation closely, working closely with Dr Tayler, to ensure that Cambridge Analytica, in all of its operations, represents the firm’s values and delivers the highest-quality service to its clients.”

The real facts

So far, so good. But documents filed at Companies House paint a different picture.

Cambridge Analytica UK Limited is controlled by SCL Elections Ltd which in turn is controlled by SCL Analytics Ltd. Nix is named as directors of all three companies. But it gets a tad more complex at this point because SCL Analytics is recorded as partially owned by SCL Group. Accounts filed show that SCL Group owns 30% of SCL Analytics with Nix owning the other 70%.

The SCL Group board comprises Nix and three others. the exact ownership structure of SCL Group is unknown since the company expanded its share capital significantly in February, 2018 and has yet to file a statement setting out who owns what.

This begs the question – who constitutes the board of Cambridge Analytica UK Limited when currently available company records say that Nix both directly and indirectly controls that company?

Follow the money

Following the money inside a privately held UK company is never easy because while UK legislation requires all companies to file annual accounts, the amount of information required to be disclosed is limited by a variety of exemptions. However, we can glean some insights from reported figures.

It seems that in U.S. election year, SCL Elections had a good year,showing retained profits increased from just shy of £380,000 to £2.39 million. The latest available accounts for SCL Elections, for the year to 31st December 2016 (PDF) state:

The Company owns a 19.0% share in Cambridge Analytica LLC, a US entity in which Alexander Nix is a board member. £24.2m (2015: £12.4m) income was received from this entity during the year and no costs were due by the Company in respect of losses incurred by the entity. There was no cost of this investment. At the year-end, the Company was owed £869,595 (2015: £922,440) by this entity.

While most media reports refer to Cambridge Analytica, as O’Hare points out, it is SCL Elections where the action is. Accounts for Cambridge Analytica UK show that it didn’t trade. (PDF)

Another company, SCL Social Ltd, which is owned by SCL Analytics and provides data services to commercial organizations, also did rather well, (PDF) raising retained earnings from £174,000 to a just under £1 million. The company made an inferred profit of around £870,000 and was owed £1.1 million from group undertaking, presumably SCL Analytics. SCL Social states that its primary business is that of research and communications.

What makes this interesting is that SCL Elections is heavily implicated in election interference, principally via Facebook. But if that company relied upon services from SCL Social, then what does that say about tactics used by commercial organizations in furtherance of their social marketing tactics?

The Mercer connection

Looking through the various accounts and company records. it is clear that SCL is a fluid group where structures and activities are shunted between companies that appear to trade at modest scale for a couple of years before activity is moved elsewhere.

For example, a new company, Emerdata was formed late 2017 with Alexander Nix as one of the directors. Guess who else is on the board? None other than Rebekah Anne Mercer, who is widely thought of as at the center of the Trump election campaign who is also the daughter of billionaire Robert Mercer, who bankrolled Breitbart when Steve Bannon was running the show. Rebekah’s sister, Jennifer is also on the board. Emerdata reports its activities as ‘Data processing, hosting and related activities,’ whatever that means.

My take

When a company’s business is to show deception then you have to dig into statements, assuming that there is misdirection along the way. When you discover that operations are fluid and that external actors who are already associated with acquisitions of election tampering, then, as Nix said in The Guardian article:

Looks can be deceptive.

Once again, we have an example of a business where due diligence is useful because if your business is seeking to influence buying outcomes, then it’s useful to know who is pulling the strings before someone else finds out.

In short, if there are any doubts then dig, dig and dig again.

Image credit – via The Daily Kos