September 2019 – Page 181

Creeping a Little Faster Toward Impeachment

I first became interested in high-profile federal impeachments in the early 1990s. I had my reasons. They eventually became a central component of my one of my first books on the significance over the course of American history of elected officials shaping the effective constitutional understandings, practices and norms that governed much of American politics. Impeachments were one way that politicians struggled to remake constitutional meaning. Impeachments were tools of constitutional construction.

That seemed like an admittedly arcane thing to study at the time, but soon enough Bill Clinton got himself impeached and suddenly esoteric knowledge seemed relevant—even as the Republican Congress did not seem to be doing a very good job of explaining why an impeachment was either necessary or useful. The question is what lessons we would learn from that experience. But as I noted in Reason at the time,

In the end, Congress seems to have stumbled to the right conclusion, and the American people appear to be making an appropriate assessment of last year’s events.

Maybe we’ll do better this time, but I wouldn’t bet on it. In any case, I’ve been writing a lot about impeachment issues over the past couple of years. They are collected here. For a deep dive into the impeachment process and the standards for assessing potentially impeachable offenses, I have posted a longer review essay here.

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Scraping A Public Website Doesn’t Violate the CFAA, Ninth Circuit (Mostly) Holds

The Ninth Circuit Court of Appeals has handed down a groundbreaking decision today on the federal computer hacking law, the Computer Fraud and Abuse Act (CFAA). In HiQ Labs v. LinkedIn, the court held that scraping a public website is likely not a CFAA violation.

Under the new decision, violating the CFAA requires “circumvent[ing] a computer’s generally applicable rules regarding access permissions, such as username and password requirements,” that thus “demarcate[]” the information “as private using such an authorization system.” If the data is available to the general public, the court says, it’s not an unauthorized access to view it—even when the computer owner has sent a cease-and-desist letter to the visitor telling them not to visit the website.

This is a major case that will be of interest to a lot of people and a lot of companies. But it’s also pretty complicated and easy to misunderstand. This post will go through it carefully, trying to explain what it says and what it doesn’t say.

I. The Context

To really understand the new decision, I think it helps to start with some context. The CFAA is a computer trespass statute that prohibits accessing a computer “without authorization.” It is primarily a criminal statute, but it also has civil remedies that permit private parties to bring CFAA lawsuits for damages or injunctive relief.

Importantly, the meaning of the CFAA is the same in both civil and criminal settings. This means that whatever courts say about the CFAA when a computer owner sues a user is equally applicable when the federal government arrests and prosecutes the user with substantial jail time in play.

The big question under the CFAA has long been what counts as “authorization.” Does authorization depend on how the computer architecture is designed, with users authorized to use a computer if it’s available to the public and not authorized if the access is technically blocked? Or does it depend on what the computer owners says they want, either through terms of use posted on the computer or through letters directed to potential visitors?

Courts have been all over the map, and the Ninth Circuit’s decisions have zigzagged a bit on this. There are four big Ninth Circuit precedents to consider:

(1) In LVRC Holdings LLC v. Brekka, 581 F.3d 1127, 1133 (9th Cir. 2009), the Ninth Circuit held that an employee who gathers information on a company computer for his own purposes does not violate the CFAA merely because that personal use was adverse to the interests of the employer. The parties agreed that access to the company computer would be unauthorized after the employee left the company. But when the employee was working at the company, accessing the company’s files was not made a crime simply because the employee was doing so for a secret purpose to help himself and hurt the company. (Another circuit had disagreed, but I’ll stick to Ninth Circuit caselaw in this post.)

(2) Three years later, in United States v. Nosal, 676 F.3d 854 (9th Cir. 2012) (en banc) (“Nosal I“), the Ninth Circuit held that it doesn’t violate the CFAA to use a website in violation of written restrictions like employment agreements or Terms of Service posted on websites. The CFAA was designed to “punish hacking — the circumvention of technological access barriers,” the Court noted. Given that narrow focus, it was wrong to construe the statute to also encompass the very common and innocuous act of using a website or company computer in a way contrary to terms of use and employment policies. (There is a circuit split on this issue, too. But again, I’m focused on the Ninth Circuit here.)

(3) Four years later, in a follow up case, United States v. Nosal, 844 F.3d 1024 (9th Cir. 2016) (“Nosal II”), the Ninth Circuit held that it does violate the CFAA for a former employee to get a current employee’s username and password and to use their account with their permission. That’s different from violating an employment agreement or terms of use, the court held, as the former employee has no right to access the computer under Brekka. Leaving the company ended the access rights, and a former employee can’t work around that to restore those rights just because a current employee was willing to hand him her username and password.

(4) Shortly after Nosal II, the Ninth Circuit handed down Facebook v. Power Ventures, 844 F.3d 1058 (9th Cir. 2016). Power Ventures was a service that accessed users’ Facebook profiles with the users’ permission and moved the data to a different website run by Power Ventures. Power Ventures held that it’s an unauthorized access to visit a computer after receiving a cease-and-desist letter from the computer owner prohibiting the visit based on it violating terms of service. That’s like Brekka, the Ninth Circuit reasoned, because the cease-and-desist letter withdraws permission to use the computer. And it’s not like Nosal I, the court argued, because cease-and-desist letters (unlike posted terms of service) put the visitor on clear notice that the visit to the computer is prohibited by the computer owner.

II. The Facts and Procedural History of HiQ Labs

That brings us finally to the new case, HiQ Labs v. LinkedIn. HiQ Labs is a data analytics company. It scrapes information on LinkedIn profiles that LinkedIn users have set be viewable by the general public without a LinkedIn account. HiQ Labs combines that information with other information and sells it to companies.

LinkedIn wants to monetize that data itself, so it sent a cease-and-desist letter to HiQ telling it to stop accessing and copying the data publicly posted on LinkedIn. LinkedIn threatened to sue HiQ on various grounds if HiQ refused to stop. HiQ instead filed suit in federal court seeking an injunction based on state law and a declaratory judgment that its conduct was legal.

The district court granted a preliminary injunction, setting up this appeal.

That brings me to a warning: The new Ninth Circuit decision is a little bit tricky to analyze because of its procedural posture. That’s true for two reasons that are helpful to flag now.

First, at this stage of the case, HiQ is only seeking a preliminary injunction—basically, a ruling from the judge preserving the status quo so LinkedIn can’t stop HiQ in the initial period when the lawsuit is pending. The standard for a preliminary injunction considers the merits of the legal claims, but it does not make a definitive ruling about them. For that reason, the opinion’s conclusions about the CFAA are written tentatively. The court talks about what is “likely” the correct interpretation of the CFAA, what raises “serious questions,” et cetera.

Second, the CFAA issues enter the case somewhat indirectly. HiQ is seeking a preliminary injunction based on a state law claim, that LinkedIn is tortiously interfering with its business contracts by trying to block it and stop its conduct. LinkedIn is then raising the CFAA as a defense. You can’t sue us for tortiously interfering with your business contracts, LinkedIn is saying, because the entire HiQ business is illegal under federal law.

All of this means that the CFAA ruling is a bit indirect. Technically, the issue being decided is whether there’s a serious question that HiQ’s scraping complies with the CFAA, which is needed to say that LinkedIn trying to stop HiQ may be tortious interference with HiQ’s legitimate business, which is needed to know if was an abuse of discretion for the trial court to temporarily stop LinkedIn from trying to interfere with HiQ’s business.

Got it? I know, I know. Lawyers always have to make everything so complicated. (Sorry.)

III. The CFAA Ruling

That brings us to the CFAA ruling. It’s hugely important. The Ninth Circuit views the CFAA has a hacking statute (like Nosal I did), and it presumes a right to open access under the CFAA unless there is some technological measure placed on access. Because HiQ did not circumvent a technological access measure to get to the data publicly posted on LinkedIn’s website, the CFAA was not violated. (Or rather, “likely” was not violated, see the reason for the tentative language above.)

Here’s the key language, with the particularly important language in bold and a few paragraph breaks added by me for web readability. The opinion was by Judge Berzon, joined by Judge Wallace and District Judge Berg sitting by designation.

We . . . look to whether the conduct at issue is analogous to “breaking and entering.” H.R. Rep. No. 98-894, at 20. Significantly, the version of the CFAA initially enacted in 1984 was limited to a narrow range of computers—namely, those containing national security information or financial data and those operated by or on behalf of the government. See Counterfeit Access Device and Computer Fraud and Abuse Act of 1984, Pub. L. No. 98- 473, § 2102, 98 Stat. 2190, 2190–91. None of the computers to which the CFAA initially applied were accessible to the general public; affirmative authorization of some kind was presumptively required.

When section 1030(a)(2)(c) was added in 1996 to extend the prohibition on unauthorized access to any “protected computer,” the Senate Judiciary Committee explained that the amendment was designed to “to increase protection for the privacy and confidentiality of computer information.” S. Rep. No. 104-357, at 7 (emphasis added).

The legislative history of section 1030 thus makes clear that the prohibition on unauthorized access is properly understood to apply only to private information—information delineated as private through use of a permission requirement of some sort. As one prominent commentator has put it, “an authentication requirement, such as a password gate, is needed to create the necessary barrier that divides open spaces from closed spaces on the Web.” Orin S. Kerr, Norms of Computer Trespass, 116 Colum. L. Rev. 1143, 1161 (2016). Moreover, elsewhere in the statute, password fraud is cited as a means by which a computer may be accessed without authorization, see 18 U.S.C. § 1030(a)(6), bolstering the idea that authorization is only required for password-protected sites or sites that otherwise prevent the general public from viewing the information.

We therefore conclude that hiQ has raised a serious question as to whether the reference to access “without authorization” limits the scope of the statutory coverage to computer information for which authorization or access permission, such as password authentication, is generally required.

Put differently, the CFAA contemplates the existence of three kinds of computer information: (1) information for which access is open to the general public and permission is not required, (2) information for which authorization is required and has been given, and (3) information for which authorization is required but has not been given (or, in the case of the prohibition on exceeding authorized access, has not been given for the part of the system accessed).

Public LinkedIn profiles, available to anyone with an Internet connection, fall into the first category. With regard to such information, the “breaking and entering” analogue invoked so frequently during congressional consideration has no application, and the concept of “without authorization” is inapt.

Neither of the cases LinkedIn principally relies upon is to the contrary. LinkedIn first cites Nosal II, 844 F.3d 1024 (9th Cir. 2016). As we have already stated, Nosal II held that a former employee who used current employees’ login credentials to access company computers and collect confidential information had acted “‘without authorization’ in violation of the CFAA.” Nosal II, 844 F.3d at 1038. The computer information the defendant accessed in Nosal II was thus plainly one which no one could access without authorization.

So too with regard to the system at issue in Power Ventures, 844 F.3d 1058 (9th Cir. 2016), the other precedent upon which LinkedIn relies. In that case, Facebook sued Power Ventures, a social networking website that aggregated social networking information from multiple platforms, for accessing Facebook users’ data and using that data to send mass messages as part of a promotional campaign. Id. at 1062–63. After Facebook sent a cease-and-desist letter, Power Ventures continued to circumvent IP barriers and gain access to password-protected Facebook member profiles. Id. at 1063.

We held that after receiving an individualized cease-and-desist letter, Power Ventures had accessed Facebook computers “without authorization” and was therefore liable under the CFAA. Id. at 1067–68. But we specifically recognized that “Facebook has tried to limit and control access to its website” as to the purposes for which Power Ventures sought to use it. Id. at 1063. Indeed, Facebook requires its users to register with a unique username and password, and Power Ventures required that Facebook users provide their Facebook username and password to access their Facebook data on Power Ventures’ platform. Facebook, Inc. v. Power Ventures, Inc., 844 F. Supp. 2d 1025, 1028 (N.D. Cal. 2012). While Power Ventures was gathering user data that was protected by Facebook’s username and password authentication system, the data hiQ was scraping was available to anyone with a web browser.

In sum, Nosal II and Power Ventures control situations in which authorization generally is required and has either never been given or has been revoked. As Power Ventures indicated, the two cases do not control the situation present here, in which information is “presumptively open to all comers.” Power Ventures, 844 F.3d at 1067 n.2.

. . . Both the legislative history of section 1030 of the CFAA and the legislative history of section 2701 of the SCA, with its similar “without authorization” provision, then, support the district court’s distinction between “private” computer networks and websites, protected by a password authentication system and “not visible to the public,” and websites that are accessible to the general public.

Finally, the rule of lenity favors our narrow interpretation of the “without authorization” provision in the CFAA. The statutory prohibition on unauthorized access applies both to civil actions and to criminal prosecutions— indeed, “§ 1030 is primarily a criminal statute.” LVRC Holdings LLC v. Brekka, 581 F.3d 1127, 1134 (9th Cir. 2009). “Because we must interpret the statute consistently, whether we encounter its application in a criminal or noncriminal context, the rule of lenity applies.” Leocal v. Ashcroft, 543 U.S. 1, 11 n.8 (2004). As we explained in Nosal I, we therefore favor a narrow interpretation of the CFAA’s “without authorization” provision so as not to turn a criminal hacking statute into a “sweeping Internet-policing mandate.” Nosal I, 676 F.3d at 858; see also id. at 863.

For all these reasons, it appears that the CFAA’s prohibition on accessing a computer “without authorization” is violated when a person circumvents a computer’s generally applicable rules regarding access permissions, such as username and password requirements, to gain access to a computer. It is likely that when a computer network generally permits public access to its data, a user’s accessing that publicly available data will not constitute access without authorization under the CFAA. The data hiQ seeks to access is not owned by LinkedIn and has not been demarcated by LinkedIn as private using such an authorization system. HiQ has therefore raised serious questions about whether LinkedIn may invoke the CFAA to preempt hiQ’s possibly meritorious tortious interference claim.

The court goes on to note that website owners have other legal options and causes of action outside the CFAA. First, the court suggests that website scraping might violate the common law tort of trespass to chattels, “at least when it causes demonstrable harm.” Second, depending on the case, there may also be civil causes of action for “copyright infringement, misappropriation, unjust enrichment, conversion, breach of contract, or breach of privacy.” But not the combined civil/criminal provisions of the CFAA.

IV. A Few Reactions

What do I make of the new decision?

On the substance of the reasoning, I’m delighted. Of course, that’s easy for me to say. Given my prior writing on this topic, including writing that the court very graciously cited, the decision seems quite brilliant to me.

More seriously, this is a really important decision that embraces the open presumption of the Internet far more clearly and directly than prior cases. The Ninth Circuit’s approach to the CFAA has zigzagged a bit over time. Some cases have embraced a more open Internet, and others have been quick to say that computer owners can close it easily. This is a big step in the direction of openness.

I also think this decision renders Power Ventures an outlier. I may be biased, as I thought Power Ventures was wrong. As regular readers may remember, I represented Power Ventures on the petition for rehearing to try to get the panel decision overturned. But Power Ventures seemed to give cease-and-desist letters magical powers given their clarity and notice. It was possible to read Power Ventures broadly as saying that as long as the computer owner sends the cease-and-desist letter, the computer owner’s written directive controls the CFAA question—the recipient is sent into Brekka-land where their access rights were withdrawn.

HiQ Labs now places a critical limit on Power Ventures. Under HiQ Labs, the cease-and-desist letter only controls access rights to non-public data. That seems to reduce Power Ventures to a limited application of Nosal II. Under both Nosal II and Power Ventures-as-construed-in-HiQ, once a computer owner tells you to go away, you can’t then rely on a current legitimate user’s permission to let you back in.

Putting the cases together, the Ninth Circuit law right now seems to go like this. You can scrape a public website, and you can violate terms of service, without violating the CFAA. However, you can only access non-public areas of a computer if you haven’t had your access rights canceled before, either through a cease-and-desist letter or through the relationship ending that had granted you access rights.

It’s worth stressing that all of this is only the law in the Ninth Circuit. There are clear circuit splits on how the CFAA has been interpreted that only the U.S. Supreme Court can resolve. I suspect some of that resolution will happen pretty soon. When it happens, the Supreme Court’s guidance will of course mean much more than the view of one court of appeals. But the Ninth Circuit has handed down significantly more CFAA caselaw than any other circuit court. In the interim, before the Supreme Court takes a look at these issues, HiQ Labs is a really big deal.

One last point: There’s more in the new decision on issues beyond the CFAA that is worth checking out. The whole opinion is worth a read.

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This Professor Has Helped Guide 1,000 Youths Into Transgender Identities

Authored by Kyle Hooten via The College Fix,

Only one of them has switched back…

One doctor and medical school professor at the University of Southern California is reportedly responsible for guiding some 1,000 children into transgender identities, according to a Reutersnews report.

Johanna Olson-Kennedy is an associate professor of clinical pediatrics at USC’s Keck School of Medicine as well as the medical director of the Center for Transyouth Health and Development at the Los Angeles Children’s Hospital. Olson-Kennedy has advocated “gender affirming treatment” for significant numbers of children who claim transgender identities, comparing them to diabetic patients who need insulin.

She has also advised that the minimum age for cross-sex hormones treatment can be as young as 8-years-old.

According to Reuters, Olson-Kennedy has worked with about 1,000 children and youths, assisting and affirming them as they adopt a transgender identity. Writing on Olson-Kennedy’s work helping transgender youth with “social transitions,” the news service reported: “Of some 1,000 patients [Olson-Kennedy] has dealt with, only one switched back to the natal gender.”

That rate of successful “transition” is staggering when compared to the purported average. At PsyPost, writing on numerous studies analyzing the long-term experiences of transgender youths, clinical psychologist James Cantor writes that “the majority of kids cease to feel transgender when they get older.” Cantor cites research indicating that the rate of “desistance” in transgender children ranges from 54 percent to around 90 percent, depending on the study. The desistance rate for Olson-Kennedy’s patients appear to be around 0.1 percent.

Olson-Kennedy, the Keck Medical School and the Center for Transyouth Health and Development all declined to comment for this story. Olson-Kennedy initially indicated a willingness to speak to The Fix about transgender clinical practices; later the professor wrote: “I have been advised by my PR people to pass on this.” Olson-Kennedy did not respond to further queries about the 1,000-patient number cited by Reuters.

Extensive work with transgender youth

Some of Olson-Kennedy’s critics point to a seven minute recording from 2017 in which the professor relates a story about dealing with a purported transgender student.

At one point during the recording, Olson-Kennedy is heard relaying a story about a young patient who was struggling with gender confusion:

I said, “Do you ever eat pop tarts?”

And the kid was like, oh, of course.

And I said, “well you know how they come in that foil packet?”

Yes.

“Well, what if there was a strawberry pop tart in a foil packet, in a box that said ‘Cinnamon Pop Tarts.’? Is it a strawberry pop tart, or a cinnamon pop tart?”..

The kid’s like, “Duh! A strawberry pop tart.”

And I was like, “so…”

And the kid turned to the mom and said, “I think I’m a boy and the girl’s covering me up.”

“It was an amazing experience,” Olson-Kennedy told her audience.

The doctor provides a wide variety of transgender-related services to children as the Medical Director of the Center for Transyouth Health and Development.

“We work with mental health providers who engage in individual and group therapy with transgender youth, as well as a network of mental health providers in the community who we believe are outstanding resources for these young people,” Olson-Kennedy told the Children’s Hospital of Los Angeles.

“We also have case management here. Young people often need assistance with paperwork with legal-name changes, gender changes, etc,” Olson-Kennedy added.

Via @MLaidlawMD : In 2017, Dr. Johanna Olson-Kennedy informed the @NIH that minimum age for cross-sex hormones was now reduced from 13 to 8.

8-yr-old children on cross-sex hormones.

Progress report/change document submitted by Dr. Olson-Kennedy here:https://t.co/BZzGAPv4i9 pic.twitter.com/90URAlrIRq

— 4thWaveNow (@4th_WaveNow) March 30, 2019

Despite the sheer number of kids the professor has assisted in “transitioning,” Olson-Kennedy is apparently unable to explain how to tell if a kid is actually trans. The doctor toldthe Human Rights Campaign:

“In much of the current research about this, there isn’t a clear consensus in the community or among providers.”

“The truth is that we don’t really know whether that child who is gender non-conforming in childhood is going to go on to have a trans identity in adolescence or adulthood.”

Tyler Durden

Mon, 09/09/2019 – 19:25

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Health Medical Pharma

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via ZeroHedge News https://ift.tt/2HYzDr5 Tyler Durden

Border Arrests Plummet 60% Since May As Trump Immigration Crackdown Gets Results

US immigration authorities arrested 64,000 migrants at the southern border in August – approximately 22% fewer people than July, and a 60% decrease from the 130,000 apprehensions in May, according to a Monday statement by Customs and Border Protection (CBP) Commissioner Mark Morgan.

Perhaps immigrants are rethinking an uncertain future in an ICE detention center after a sweltering trek through Mexico?

“The president has made it very clear that he’s going to use every tool available to him and this administration to address this unprecedented crisis at the southern border,” said Morgan during a White House briefing.

As The Hill notes, while border crossings tend to decrease during the hot summer months, this year’s precipitous drop is significant.

Trump threatened in June to impose tariffs on Mexican goods if the country did not take stronger actions to curb the flow of migrants headed for the U.S. border. Trump backed off the tariffs after Mexico said it would do more to address immigration.

In the months since, Trump has often praised Mexico for its enforcement measures, and Morgan said Monday that the Mexican government has apprehended roughly 134,000 people so far this year, up from 83,000 in all of 2018.

“The government of Mexico has taken meaningful and unprecedented steps to help curb the flow of illegal immigration to our border,” said Trump, who has made immigration a central issue to his administration – wall or not. Moreover, Trump has attempted to limit asylum claims while pressuring other countries to take in more migrants.

“In 22 years of patrolling our Southern Border, I have never seen Mexico act like a true Border Security Partner until President Trump got involved, and now they are stepping up to the plate and doing what they need to do.” Brandon Judd, National Border Patrol

— Donald J. Trump (@realDonaldTrump) September 7, 2019

And as Politico notes, “The decline in border traffic — if sustained — could amount to a major victory for Trump as he heads into the 2020 election,” adding “Perhaps more important, the experimental measures taken by his administration could reshape immigration enforcement for years to come.”

“I think that they are getting exactly what they said they would get, by forcing the hand of Mexico,” said pro-migrant group Alianza Americas executive director, Oscar Chacón, who added “But the question is, ‘Is it sustainable?'”

“People know that if they come into Mexico, they have to respect the Mexican law,” said Mexican Ambassador to the US, Martha Bárcena in a statement to Politico, adding that migrants looking to enter the US now realize that it’s “not as easy as they were told it was going to be.”

On Tuesday, Secretary of State Mike Pompeo and Vice President Mike Pence will meet in Washington with Mexcian Foreign Affairs Secretary Marcelo Ebrard along with other officials to discuss the immigration strategy between the two countries, according to Mexican officials.

Mexico’s delegation will press the U.S. to process asylum cases faster, as migrants from Central America and elsewhere pile up in Mexican border towns. It will also push for increased aid to Central America and efforts to stop the flow of guns from the U.S. to Mexico.

The Mexico agreement followed threats from Trump to impose across-the-board escalating tariffs on Mexican goods that would likely have resulted in severe economic costs on both sides of the border. When the agreement was announced, it was widely interpreted as a fig leaf that would allow Trump to back down but wouldn’t likely have much impact on migration.

But the deal’s components appear to have contributed to the steep drop in border arrests, according to interviews with six former officials and advocates both for and against greater levels of immigration, as well as a POLITICO analysis of enforcement data. –Politico

The deal between the US and Mexico is centered around two main goals; heightened enforcement by Mexico – which yielded a three-fold y/y increase in arrests in June of 32,000 migrants, and an expansion of the “remain in Mexico” program – a.k.a. the Migrant Protection Protocols.

Mexico’s National Guard, meanwhile, has established a stronghold along their southern border with Guatemala – including key migrant crossing points in the city of Ciudad Hidalgo in the Mexican state of Chiapas. 6,000 troops have been committed to the anti-migration effort.

“They really have made it harder to cross where people were crossing before,” said Andrew Selee, president of the non-partisan Migration Policy Institute, who called Mexico’s actions an “all-out enforcement effort like we’ve never seen before,” according to Politico.

Mexican officials have also stepped up enforcement in the city of Tapachula – roughly 45 minutes north of Ciudad Hidalgo.

“Particularly in the area around the Suchiate River at the Ciudad Hidalgo crossing, it seems like it is almost impossible to cross in a balsa boat as an undocumented migrant and not get detained by a National Guard agent,” according to Maureen Meyer – director for Mexico and migrant rights with the Washington Office on Latin America.

“Leaving the Tapachula area has also become more complicated given enforcement at different checkpoints in the highways around the city.”

Tyler Durden

Mon, 09/09/2019 – 19:05

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via ZeroHedge News https://ift.tt/2ZLyQ7T Tyler Durden

Bankrupting National Security?

Camille Stewart talks in this episode about a little-known national security risk: China’s propensity to acquire US technology through the bankruptcy courts—and the many ways in which the bankruptcy system isn’t set up to combat improper tech transfers. Published by the Journal of National Security Law & Policy, Camille’s paper is available here. Camille has enjoyed great success in her young career, working with the Transformative Cyber Innovation Lab at the Foundation for Defense of Democracies, as a Cybersecurity Policy Fellow at New America, and as a 2019 Cyber Security Woman of the Year, among other achievements. Plus, of course, the great honor of working for DHS Policy. We talk at the end of the session about life and advancement as an African American woman in cybersecurity.

In the News Roundup, Maury Shenk tells us that UK courts have so far resisted a sustained media narrative that all facial recognition tech is inherently evil. Americans seem to agree with the UK court, Matthew Heiman notes, since a majority trust law enforcement to use it responsibly. Which is more than you can say for Silicon Valley, which only 36% of Americans trust with the technology.

Mieke Eoyang and I talk about DHS’s plan to use fake identities to view publicly available social media postings and the conflict between that plan and social media sites’ terms of service. I am unsympathetic, given the need for operational security in conducting such reviews, but we agree that DHS may be biting off more than it can chew, especially in languages other than English. And really, DHS, how clueless do you look when the list of social media you’ll be scrutinizing includes sites like the three-years-dead Vine but not TikTok, which Mieke notes ironically, is “what all the kids are using these days.”

Maury brings us up to speed on EU plans for the tech sector, which will be familiar to Brits contemplating the EU’s plans for them. And speaking of EU hypocrisy and incoherence (we were, weren’t we?), Erin Egan of Facebook has written a paper on data portability that deserves more attention, since it shows the impossibility of squaring the EU’s snit over Cambridge Analytica with its insistence on the inherently vague principle of “data portability.” The paper also calls out our FTC for slamming Facebook over Cambridge Analytica while Commissioner Noah Phillips is warning that restricting data transfers can be an anticompetitive weapon. I promise to invite the commissioner on the podcast again to explore that issue.

Well, that was quick: Fraudsters used AI to mimic a CEO’s voice – German accent, “melody,” and all – in an unusual cybercrime case. But it won’t be unusual long. Anyone can do this now, Maury explains.

In short hits, Mieke and I mock Denmark’s appointment of an “ambassador” to Silicon Valley. Way to cut the Valley down to size, Denmark! Maury notes that FinFisher is under investigation for violating EU export control law by selling spyware. Mieke does her best to rebut my suggestion that Silicon Valley’s bias is showing in the latest actuarial stat: Turns out that 10% of the accounts that President Trump has retweeted have already been deplatformed. Matthew and I note that China has been caught hacking several Asian telcos to spy on Uighurs. To give the devil his due, though, if the US had 5,000 citizens fighting for ISIS and al-Qaeda, as China claims to have, we’d probably be hacking all the same telcos to keep an eye on them.

State attorneys general will launch sweeping and apparently bipartisan antitrust probes into Facebook and Google this week. Good to see Silicon Valley bringing Rs and Ds together at last; who says its business model is fomenting social division? Finally, Mieke leaves us uneasy about the online security of our pensions, as hackers steal $4.2 million from one fund via compromised email.

Download the 277th Episode (mp3).

Want to hear more from Camille on bankruptcy and national security? She’ll be speaking Friday, September 13, at a lunch event hosted by the Foundation for Defense of Democracies. She’ll be joined by fellow panelists Giovanna Cinelli, and two other Cyberlaw Podcast alums, Jamil Jaffer and Harvey Rishikof, along with moderator Dr. Samantha Ravich. The event will be livestreamed at www.fdd.org/events. If you would like to learn more about the event, contact Abigail Barnes at FDD. If you are a member of the press, please direct your inquiries to press@fdd.org.

You can subscribe to The Cyberlaw Podcast using iTunes, Google Play, Spotify, Pocket Casts, or our RSS feed!

As always, The Cyberlaw Podcast is open to feedback. Be sure to engage with @stewartbaker on Twitter. Send your questions, comments, and suggestions for topics or interviewees to CyberlawPodcast@steptoe.com. Remember: If your suggested guest appears on the show, we will send you a highly coveted Cyberlaw Podcast mug!

The views expressed in this podcast are those of the speakers and do not reflect the opinions of the firm.

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Illinois’ Record $47 Billion Loss Ignored By Mainstream Media. Why?

Authored by Mark Glennon via WirePoints.org,

The State of Illinois recently reported its biggest annual financial loss ever. Instead of clear reporting on that, we’ve seen perhaps the most glaring example yet of how the state’s finances can be misunderstood, misreported and intentionally distorted.

The loss of $47 billion for the state’s 2018 fiscal year, shown in audited financial statements released late last month, is an astonishing number. For some perspective, that’s about $7 billion more than the entire, current annual budget.

But most of the regular press downplayed or entirely ignored the loss. Many even saw good news. A Reuters headline, for example, read “Illinois budget deficit shrank to $7.8 billion in FY 2018.” You can find similar headlines from across the state.

Why would media coverage differ so drastically from what the audited financial statements really said? Which is right?

Two factors account for the difference, and both should be understood. This is a lesson in how misunderstanding of our financial crisis is created and propagated.

First, the loss was shrugged off because it stemmed mostly from an accounting change, which we will explain below. But that’s only a partial excuse. In truth, the accounting change exposed a huge liability that has been all but ignored in the past.
Second, most media reports seem to have blindly repeated a very misleading press release by the Illinois Comptroller that accompanied the financials.

Some background before we elaborate: The new financial statements are in the state’s recently released, long overdue CAFR — the Comprehensive Annual Financial Report for the fiscal year that ended in June 2018. The $47 billion loss is shown in the statements as a drop in “net position,” which is the government’s rough equivalent of net worth that you commonly see in the private sector. Changes in it are comparable to net income. As the CAFR itself says, “Over time, increases and decreases in net position measure whether the State’s financial position is improving or deteriorating.”

The big loss was overwhelmingly due to an accounting change that had a $42 billion impact. That change was for healthcare costs owed in the future to state retirees, called OPEBs (other post-employment benefits). In Illinois, those benefits are constitutionally protected just like pensions. Unlike pensions, however, they are entirely unfunded. New accounting rules now taking effect require full disclosure of that liability, which the CAFR says totals $55 billion.

But should we dismiss the massive loss as a bookkeeping quirk? Hardly.

While the $42 billion loss didn’t occur in one year, it’s a growing monster that has been hidden for many years, unknown to most reporters and the public. Including it now as part of the state’s financial report card is an admission about how deficient previous reporting has been. The Governmental Accounting Standards Board couldn’t keep a straight face any longer as it watched governments like Illinois hide OPEB obligations, so it issued a new standard requiring better disclosure, which is now fully in effect.

The simple is fact is that the state’s true condition is indeed a full $47 billion worse than most Illinoisans were told a year ago. That’s because the regular media, like the accountants, have long ignored OPEB liabilities. If you know about them it’s probably only because you read about them here or in other alternate sources, or have expertise in the area.

The chart below shows the full story properly over time. Since 2002 the state has lost $178 billion. The big jump down in 2015 was also due to an accounting change. There have been other, smaller ones. However, had the proper accounting rules been in place from the start, the line would still end in the same place. Its downward slope would only have been less jagged.

The second reason why the 2018 loss wasn’t reported properly was misleading spin put on by Illinois Comptroller Susana Mendoza when she released the CAFR. Her press release starts as follows:

ILLINOIS CUT ITS DEFICIT IN HALF IN FISCAL YEAR 2018, ANNUAL CAFR SHOWS

The Comprehensive Annual Financial Report (CAFR) released today shows Illinois cut its general funds deficit by $6.849 billion — from a deficit of $14.612 billion in fiscal year 2017 to a deficit of $7.763 billion in fiscal year 2018. That is largely because of a refinancing of state debt from high-interest to low-interest repayment.

Many news stories repeated that or something like it with happy headlines like “Annual report: Illinois cuts deficit in half in fiscal year 2018.” Most of those stories buried the huge loss and the OPEB issue or didn’t mention them at all A notable exception was The Bond Buyer, with a more appropriate headline, “Illinois CAFR arrives, late and covered in red ink.”

Comptroller Susana Mendoza

In truth, Mendoza cherry-picked an extremely unrepresentative element of the CAFR. Note that she referred only to the “general funds” to claim the deficit reduction. The general funds are only part of the picture, and they effectively count borrowed money as if it is income!

It’s like claiming you cut your losses in half by putting that half on a credit card. During the year, Illinois sold bonds to pay down $6.5 billion of its huge backlog of unpaid bills. Refinancing from one debt to another in that manner has little genuine impact, aside from some interesting savings that, for 2018, would be a tiny portion of the supposed deficit reduction.

This is a common trick politicians use. I checked in with Sheila Weinberg, CEO of Truth in Accounting, about the Illinois CAFR issue. She repeated what she has long taught: “General fund accounting is incomplete and misleading, for many reasons including the fact that bond proceeds are accounted for as income.” (For those interested in the details, see the page from the CAFR reproduced below listing all the items ignored in the Governmental Funds, which include the general fund, which is why it is so misleading.)

Mendoza certainly had a different lens on CAFR numbers two years ago when we had a governor she didn’t like, Bruce Rauner. Her press release for the 2016 CAFR started as follows, focusing on the entire net position instead of just general funds:

With no relief in sight, Illinois’ finances deteriorated at an alarming rate in fiscal year 2016 as net deficit totals spiked to a staggering $126.7 billion…. The State’s [CAFR] paints a worsening outlook for the State’s financial future on this unsustainable path. Mendoza said the CAFR findings reflect a lawless fiscal climate.

Well, that “staggering” negative $126.7 billion is now negative $184 billion. It had worsened by $5.8 billion under that “lawless fiscal climate,” which is about the same as last year if you ignore the OPEB loss. No moral outrage now from Mendoza, however.

I called Abdon Pallasch, Mendoza’s press director, to comment on why I thought her most recent press release is so misleading. “It’s all in the CAFR” that was published, he said, adding that they selected the parts they did, focused on the general fund, and that those wishing to write about other aspects can look at the other sections.

Yes, literally read, Mendoza’s press release is correct. I say it’s also grossly misleading.

Keep in mind that the 2018 fiscal year was an unusually good year in the markets, which temporarily reduced the state’s deficit. Stocks returned some 14% that year, about twice what the state pensions assume they will return per year. That allowed the pensions to actually improve a bit – the net unfunded pension liability shrank by $4 billion to $134 billion. Had they deteriorated as rapidly as they typically do, the overall report would have been far worse.

Finally, if you’ve been wondering how much the recent state income tax hikes would solve, you now have the answer. Those increases took effect at the start of the fiscal year covered by the new CAFR. They obviously didn’t materially change the state’s direction downward, even if you ignore the OPEB issue.

Page 39 from CAFR, listing matters not recorded in Governmental Funds that do impact change in net position:

Tyler Durden

Mon, 09/09/2019 – 18:45

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North Korea Test-Fires Two More Missiles Just Hours After Suggesting “Willingness To Sit With US”

Just a few short hours after North Korea said it was willing to resume denuclearization talks with the United States in late September, South Korea’s Yonhap news reports that North Korea fired unidentified projectiles toward the eastern sea twice, citing South Korea’s Joint Chiefs of Staff.

The projectiles were launched from the western province of South Pyongan, according to the Joint Chiefs of Staff.

“Our military is monitoring the situation in case of additional launches and maintaining a readiness posture,” they said in a statement carried by Yonhap.

Choe Son-hui, North Korea’s first vice foreign minister, made the announcement in a statement carried by the North’s official Korean Central News Agency, saying she has taken note of Washington’s repeated calls for talks.

“We have willingness to sit with the U.S. side for comprehensive discussions of the issues we have so far taken up at the time and place to be agreed late in September,” she said.

President Trump later told reporters he had seen the statement but stopped short of giving a definite answer.

“We’ll see what happens, but I always say having meetings is a good thing, not a bad thing,” he said at the White House.

And now, in what is hardly a show of good faith, North Korea tests two more missiles.

Tyler Durden

Mon, 09/09/2019 – 18:38

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Bankrupting National Security?

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House Dems Probe Whether Trump, Giuliani Pressured Ukraine To Hurt Biden’s Campaign

Not the Onion, but astounding and absurd in its shameless bombasity nonetheless: House Democrats have launched an investigation into ~~Biden’s glaring obstruction of a legal probe in Ukraine~~ Trump and his personal lawyer Rudy Giuliani for alleged interference in Ukraine’s government.

Democrats are charging the Trump administration with pursuing “politically-motivated investigations” in Ukraine under the guise of “anti-corruption activity” in order to target and smear former Vice President Joe Biden. They allege the White House is using its influence to target Trump’s likely key Democrat presidential challenger for 2020.

On Monday The Hill reported that three House committees “sent joint letters to White House and State Department demanding documents related to whether Trump and Giuliani sought to pressure Ukraine to target Biden, a 2020 Democratic White House hopeful.”

Giuliani has long pursued the very obvious question (that we ourselves and many others have asked) as to why neither Kiev authorities nor the media have investigated then Vice President Biden’s successful attempt in 2016 to get the country’s top prosecutor removed at a crucial moment during an ongoing investigation into Burisma Holdings — the Ukrainian natural gas company advised at the time by Biden’s son Hunter.

A joint statement issued Monday from the chairmen of the House Intelligence, Oversight and Reform, and Foreign Affairs said as follows:

“A growing public record indicates that, for nearly two years, the President and his personal attorney, Rudy Giuliani, appear to have acted outside legitimate law enforcement and diplomatic channels to coerce the Ukrainian government into pursuing two politically-motivated investigations under the guise of anti-corruption activity.”

“As the 2020 election draws closer, President Trump and his personal attorney appear to have increased pressure on the Ukrainian government and its justice system in service of President Trump’s reelection campaign, and the White House and the State Department may be abetting this scheme,” they continued.

Leading the charge is Intelligence Chairman Adam Schiff (D-Calif.), Oversight Chairman Elijah Cummings (D-Md.) and Foreign Affairs Chairman Eliot Engel (D-N.Y.), who have demanded all documents related to their probe no later than September 16.

As the The New York Times reported previously, during the final year of the Obama presidency, VP Biden “threatened to withhold $1 billion in United States loan guarantees if Ukraine’s leaders did not dismiss the country’s top prosecutor” — Viktor Shokin — “who had been accused of turning a blind eye to corruption in his own office and among the political elite.”

Crucially last month Giuliani was reported to have again raised the issue with Ukrainian officials — which he recently indicated he had done in the capacity of a private citizen in order to help the country deal with corruption, according to his account in an interview.

From the start the mainstream media has largely ignored the Biden scandal, opting instead to attack the messengers — even after his own very public admissions of his prior quid pro quo personal interventions in Ukraine under Obama.

For example, Biden has in the past positively bragged about many of the very things at the heart of the Burisma Holdings scandal:

“Son Of A Bitch Got Fired!” Joe Biden Brags He Forced Ukraine To Fire Key Official In Exchange For Money https://t.co/BVz6vNdl73

— zerohedge (@zerohedge) January 25, 2018

CNN cynically asserted it in its latest report, “the former New York mayor is making a renewed push for the country to investigate Trump’s political enemies.”

It appears House Dems are taking up where CNN left off by initiating its formal probe, all the while continuing to ignore the much more glaring original scandal.

Tyler Durden

Mon, 09/09/2019 – 18:25

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Is Hong Kong’s Outrageously Expensive Housing Fueling Civil Unrest?

An important backdrop to the ongoing anti-government / pro-democracy protests in Hong Kong is the widening wealth gap between the city’s billionaire developers, and fed-up citizens trying to carve out an existence amid an outrageous cost of living.

To that end, Bloomberg‘s Shawna Kwan notes: “Widening inequality has long contributed to tension in the city, and nothing exemplifies the divide between the haves and have-nots better than the sky-high cost of residential property.“

As Kwan continues, via Bloomberg:

1. Just how expensive is property?

Hong Kong’s real estate has for years been ranked the world’s least affordable. For example, a one-bedroom unit in Tuen Mun in the New Territories — about an hour away from Central, the main business district, by subway — costs the same as a two-bedroom apartment on New York’s upmarket Upper East Side. Prices have risen by 48% over the past five years. According to Demographia, it takes almost 21 years of an average household’s entire income to purchase a home, compared with 12.6 years in Vancouver and 8.3 years in London. Renting is hardly more palatable. Rates for apartments in the ex-British colony are higher than for similar-sized dwellings in San Francisco, New York City and Zurich.

2. Why’s it so expensive?

At first glance, it’s a simple supply-demand mismatch. Hong Kong crams 7.5 million people into 427 square miles (1,105 square kilometers) — roughly the same size as Los Angeles with its 3.9 million people. What’s more, less than 25% of the territory is developed, with 40% of it country parks or nature reserves. That makes Hong Kong one of the world’s most densely populated regions with 17,311 people per square mile. But there’s more to it than that. The city has long been a popular destination for Chinese property investors, while the constant influx of mainland immigrants has underpinned housing demand. There’s also a view among local owner-occupiers, borne out by the relentless climb of home prices, that real estate is a one-way bet.

3. How reliant is the government on real estate?

Heavily. Being a low-tax economy, land sales comprised 27% of government revenue in 2018, the biggest single source of funding. The proceeds pay for infrastructure, from building bridges and highways to rolling out IT systems. The city’s property tycoons also hold great sway in local politics. Prominent developers including Li Ka-shing and Sun Hung Kai Properties Ltd.’s Adam Kwok are among the exclusive 1,200-member election committee that voted for the city’s chief executive, Carrie Lam, in the last election. Then, some 90% of voters from the real estate sector publicly sided with Lam, the Beijing-approved candidate who has been at the center of protesters’ ire.

4. How does this fuel the protests?

While the ultra-wealthy have built their fortunes on property and live in multimillion-dollar, multi-room houses, at the other end of the spectrum are the masses squeezed into apartments barely the size of parking spots. Some people resort to dwelling illegally in industrial buildings or converted shipping containers. Young people despair they’ll never be able to own their own home, hampering their chances of marriage and having a family. Some demonstrators, filled with the sense they have little to lose, are willing to resort to ever more extreme ways to protest at the expense of the economy. A property market crash? Yes, please. Even Lam herself has said the lack of housing for the young is an underlying issue that needs addressing to resolve the crisis.

5. What’s the government doing?

To be fair, Lam’s administration has been more proactive than previous governments in increasing the supply of land for housing. It’s proposed an $80 billion plan to build four artificial islands equal to about a fifth the size of Manhattan that could house more than 1 million people but would take years to complete. Other ideas such as building on golf courses, barren farmland or open-air parking lots have been floated. Lam has also introduced more government-subsidized apartments, though the supply has come nowhere near to matching demand. But none of the measures has made getting on the property ladder any easier for the majority of people.

6. So there’s no short-term fix?

Not really. And with the government’s authority being eroded by the months-long protests, it’s less likely to put forward any controversial policies, such as the artificial islands. Nearly 6,000 people protested after Lam detailed the project in 2018. Adding to the general unhappiness is the theory outlined by some lawmakers that the government avoids taking land from developers and the indigenous communities in the New Territories because it would be too politically damaging. Those groups are traditionally pro-government.

Tyler Durden

Mon, 09/09/2019 – 18:05

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