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I work for a California company, and they had me sign a non-compete. I asked them why considering that California courts will not enforce them. Response from the legal department--just in case the court changes their mind.

Agreed, I see the trio of tech, business, and law creating a juggernaut of a CIO/CTO executive.

BA - check
MBA - check
Law Degree - currently in progress

:D

That's a pretty naive thing to say. Hefty fines do have an impact on earning will most definitely reflect poorly upon an executive. Its also not the executive's place to micro-manage each and every department. This law is a civil regulation, not criminal law. There isn't much criminal basis for this sort of infraction. Its tortious in nature, specifically negligence (possibly product liability), and the state governments have created statute to coordinate expectations and further define liability.

The law is already on the books in Massachusetts. Check out my comment below.

Not only is this violation bad in principle, its a violation in Massachusetts and several other states: http://privacylaw.proskauer.com/2007/08/articles/security-breach-notification-l/massachusetts-is-39th-state-to-mandate-breach-notification/
The really kicker is the law requires the firm with a data breach to inform several state agencies AS WELL AS the person who's data has been compromised: