Evan Schuman's StorefrontBacktalk

When a Kmart (NASDAQ:SHLD)suffered the loss of sensitive pharmacy customer information in mid-March during an armed robbery, Sears officials and lawyers quickly reviewed details and made sure to follow all federal rules—especially HIPAA guidelines. Somehow, though, Kmart never got around to mentioning the data loss to the police, who were never able to find the gunman because the only physical evidence he took with him—a disk containing that day’s data backup—was unknown to them, thanks to Sears.

The Little Rock, Arkansas, police investigating the armed robbery—where the gunman slashed the assistant manager’s tires to distract him before ordering him at gunpoint to open the safe—were not happy about being kept in the dark and possibly lied to.

The investigating detective, Det. Julio Gil, “only learned of the cartridges being stolen from Kmart when he was called by media,” said Sgt. Cassandra Davis, who is in charge of the Little Rock Police Department’s public affairs unit. What prompted those media calls was an April 22 national news release from Kmart, which they issued a month and five days after the robbery happened. (Such a statement is required by HIPAA within 60 days.)

When investigating the incident, police asked the Kmart assistant manager whether anything other than the money had been taken and police were told that nothing else had been taken. After receiving those media calls more than a month later, Det. Gil “called Kmart and Kmart only then confirmed. He had to call them and ask about it before he learned what (the gunman) had actually taken. No one from Kmart made a report,” Davis said, meaning that no supplemental report was filed after the initial report said that only about $6,000 cash was taken.

That omission was key as the backup disk was the only piece of physical evidence the suspect took with him. Did the gunman take it home with him? If so, might detectives have seen it in plain sight when interviewing suspects in their homes? Might he have thrown it away, possibly leaving fingerprints on the item in a nearby trashcan? Might he have tried selling the disk or disks (the number of disks is unclear) to a pawnshop or EBay, areas that Little Rock police are well skilled in tracking?

When Davis was asked whether the department was considering a false police report claim, she said no, that the circumstances would be closer to interfering with a police investigation. But the department is not prepared now to file that charge, either.

“We would have liked them to report everything. They could be charged with obstruction, but in this case, no charges are planned,” Davis said, adding that charges would have been filed “if the detective had been able to prove that there was a deliberate attempt to obstruct.”

That brings us back to the retail IT issue and, more broadly, a retail structure issue. This case brought together two areas of retail security that rarely come together: a direct physical attack (pointing a gun to the head of an employee, ordering that a safe be opened) and data management security issues (PCI, HIPAA and Sarbanes-Oxley type of issues, plus the occasional data breach by way of remote access).

Put another way, it’s the more genteel procedures of corporate IT versus the more physical issues of store-level Loss Prevention.