Apparently there is a bug in Lion 10.7.3 update that allows an unencrypted log file to be placed in a location so passwords can be easily compromised:
Since the log file is accessible outside of the encrypted area, anyone with administrator or root access can grab the user credentials for an encrypted home directory tree. They can also access the files by connecting the drive via FireWire. Having done that, they can then not only read the encrypted files that are meant to be hidden from prying eyes, but they can also access anything else meant to be protected by that user name and password.
This leak of credentials could be catastrophic for businesses that have relied on the FileVault feature in Macs for years. FileVault is intended to protect sensitive information stored by providing an encrypted user home directory contained in an encrypted file system mounted on top of the user’s home directory. If an employee has their Mac stolen, however, anything they encrypted, as well as anything that requires those credentials, can be accessed without hindrance if the vulnerable configuration is in place.
http://www.zdnet.com/blog/security/apple-s...lear-text/11963