Posts tagged ‘fbi’

The Question the NSA is Not Answering

The NSA is claiming that the data that they grabbed in essentially warrant-less Hoovering up of telephone and Internet metadata has helped in certain investigations.

I have no doubt that is probably true.

But that is not the right way to frame the problem.  The real issue is:  Did being able to data mine metadata for all Americans help solve the case better and faster than had they been required to seek specific probable cause warrants for data from specific people?

To make clear the distinction, let's suppose I were trying to justify stealing a copy of every book in Barnes & Noble.  I might be able to accurately say that those books helped me writing a good Napoleon paper for school.   But could I have achieved the same goal - writing a paper on Napoleon - by purchasing individual books as needed via legal shopping processes?  The answer is probably "yes."  Having all the books pre-stolen only contributed in that it saved me the hassle of going down to the store and finding a specific book I needed.

In the same way, I suspect that having this data base merely saved FBI and others the hassle of filling out some paperwork in each case.  I am not sure incremental success rates in a few cases is enough justification to rip up the Constitution, but I am sure that laziness is not.

Judge Rules National Security Letters Are Unconstitutional

This is good ... hope it withstands appeal

Ultra-secret national security letters that come with a gag order on the recipient are an unconstitutional impingement on free speech, a federal judge in California ruled in a decision released Friday.

U.S. District Judge Susan Illston ordered the government to stop issuing so-called NSLs across the board, in a stunning defeat for the Obama administration’s surveillance practices. She also ordered the government to cease enforcing the gag provision in any other cases. However, she stayed her order for 90 days to give the government a chance to appeal to the Ninth Circuit Court of Appeals.

“We are very pleased that the Court recognized the fatal constitutional shortcomings of the NSL statute,” said Matt Zimmerman, senior staff attorney for the Electronic Frontier Foundation, which filed a challenge to NSLs on behalf of an unknown telecom that received an NSL in 2011. “The government’s gags have truncated the public debate on these controversial surveillance tools. Our client looks forward to the day when it can publicly discuss its experience.”

The telecommunications company received the ultra-secret demand letter in 2011 from the FBI seeking information about a customer or customers. The company took the extraordinary and rare step of challenging the underlying authority of the National Security Letter, as well as the legitimacy of the gag order that came with it.

Both challenges are allowed under a federal law that governs NSLs, a power greatly expanded under the Patriot Act that allows the government to get detailed information on Americans’ finances and communications without oversight from a judge. The FBI has issued hundreds of thousands of NSLs over the years and has been reprimanded for abusing them — though almost none of the requests have been challenged by the recipients.

After the telecom challenged the NSL, the Justice Department took its own extraordinary measure and sued the company, arguing in court documents that the company was violating the law by challenging its authority.

This is My Take As Well

From Foreign Policy

Every turn in the investigation that led to Petraeus's resignation perfectly illustrates the incredible and dangerous reach of the massive United States surveillance apparatus, which, through hundreds of billions of dollars in post-9/11 programs -- coupled with weakened privacy laws and lack of oversight -- has affected the civil liberties of every American for years. The only difference here is the victim of the surveillance state's reach was not a faceless American, but the head one of the agencies tasked to carry it out.....

It seems the deciding factor in opening the investigation was not the emails' content, but the fact that the FBI agent was friendly with Kelley. (Even more disturbing, the same FBI agent has now been accused of becoming "obsessed" with the Tampa socialite, sent shirtless pictures to her, and has been removed from the case.)...

One would assume, and hope, police have to get probable cause for all emails, just like they would for a physical letter or a phone call. But the law governing email -- the Electronic Communications Privacy Act (ECPA) -- doesn't have such requirements for emails more than 180 days old. Because ECPA was written in 1986, before the World Wide Web even existed, archived emails were an afterthought given the incredibly small storage space on email servers....

While these details may shock the average reader, these privacy-invasive tactics are used regularly by both federal and local law enforcement around the United States. In fact, as the New York Times reported, referring to Petraeus, "Law enforcement officials have said they used only ordinary methods in the case." The only difference here is the target was the director of the CIA and one of the most decorated soldiers in modern military history.

Electronic communication needs better Fourth Amendment protection.

By the way, another scandal here that interests me more than the sex thing is that the head of the CIA has such a terrible grasp on basic fieldcraft

Petraeus and Kelley were communicating not by sending each other emails, but using an old (and apparently ineffective) trick -- "used by terrorists and teenagers alike" -- of saving drafts in the draft folder of Gmail, thinking this was more private than if they sent them to each other. But as the ACLU's Chris Soghoian explained, this was not so

I Am More Worried About How They Got There In The First Place

A lot of folks are criticizing the FBI for losing about 12 million ipod/iphone/ipad records, many of which included user name and addresses as well as their device's unique identifier.

What I would like to know is how all that ended up on an FBI laptop in the first place.  I know there are those who have rooted on Jack Bauer for 6 or 7 seasons who expect that the FBI should have all this data -- but this is not the case.  I know of no law that grants the FBI automatic access to all cell phone records or Apple accounts.

Why Sheriff Joe is Still Sheriff

For those of you not in Arizona that wonder from all the articles about him why Sheriff Joe is still elected by almost landslide majorities, and why Republicans all over the state still beg him for his endorsement, here it is:

A subsequent examination of the sheriff's file showed that residents of Maricopa County wrote to him regarding the presence of Mexicans in greater Phoenix.

Citizens saw day laborers. They saw people with brown skin. They heard Spanish spoken.

And what the letters reveal is enormous anxiety about Hispanics:

  • "I always see numerous Mexicans standing around in that area . . . These Mexicans swarmed around my car, and I was so scared and alarmed . . . I was never so devastated in my life regarding these circumstances . . . Although the Mexicans at this location may be within their legal right to be there . . . I merely bring this matter to your attention in order that all public agencies, FBI, etc., may be kept informed of these horrific circumstances."
  • "I would love to see an immigrant sweep conducted in Surprise, specifically at the intersection of Grand and Greenway. The area contains dozens of day workers attempting to flag down motorists seven days a week."
  • "The Mesa police chief drags his feet and stalls . . . the head of the Mesa police union is a Hispanic."
  • "As a retiree in Sun City, formerly from Minnesota, I am a fan of yours and what you are doing to rid the area of illegal immigrants . . . when I was in McDonald's at Bell Road and Boswell (next to the Chase Bank) this noon, there was not an employee in sight, or within hearing, who spoke English as a first language — to my dismay. From the staff at the registers to the staff back in the kitchen area, all I heard was Spanish — except when they haltingly spoke to a customer. You might want to check this out."

And Sheriff Arpaio did check it out.

None of the Hispanics described in the letters had broken the law. It is not against the law to speak Spanish or work as a day laborer.

Arpaio nonetheless gave the correspondence to Deputy Chief Brian Sands. Federal Judge Snow determined that raids and roundups quickly followed. Hispanics were rousted because white people were uncomfortable.

Sheriff Joe once did a roundup in tony Fountain Hills, which I would be surprised if it had even 5% Hispanic population, and managed to drag in for various petty violations (e.g. cracked windshield) a group that was about 95% Hispanic.  His favorite thing to do, when he isn't busting into homes with Hollywood celebrities, is to send his deputies into a business and have them handcuff everyone with brown skin and refuse to release them until they or their family members have arrived to prove they are in the US legally.

This whole article is a good roundup of yet another abusive side of Arpaio, his flagrant disregard for public records laws and the rules of evidence.  In Maricopa County, "exculpatory evidence" and "shredded" have roughly the same meaning.

Notes on Government Transparency

Transparency and accountability are always loved by those out of power but seldom by those in power.  Thus we hear a lot about them on the campaign trail, and then suddenly, once folks are in office, silence.  Two examples today.

First, this unbelievably anti-democratic and egregious proposal

A proposed rule to the Freedom of Information Act would allow federal agencies to tell people requesting certain law-enforcement or national security documents that records don't exist—even when they do.

Under current FOIA practice, the government may withhold information and issue what's known as a Glomar denial that says it can neither confirm nor deny the existence of records.

The new proposal—part of a lengthy rule revision by the Department of Justice—would direct government agencies to "respond to the request as if the excluded records did not exist."

The second story is in the same spirit, of using secrecy to avoid scrutiny and accountability

Sometime in 2012, I will begin the ninth year of my life under an FBI gag order, which began when I received what is known as a national security letter at the small Internet service provider I owned. On that day in 2004 (the exact date is redacted from court papers, so I can’t reveal it), an FBI agent came to my office and handed me a letter. It demanded that I turn over information about one of my clients and forbade me from telling “any person” that the government had approached me....

For years, the government implausibly claimed that if I were able to identify myself as the plaintiff in the case, irreparable damage to national security would result. But I did not believe then, nor do I believe now, that the FBI’s gag order was motivated by legitimate national security concerns. It was motivated by a desire to insulate the FBI from public criticism and oversight.

When Investors Have Police Forces

I have argued many times that private investors, over the long haul, will make better investment choices than the government, in part because they have better incentives and information to guide their decision-making.  The straw-man argument against this is to point out anecdotes of failed private investments.  Heck, I can do that.  Pets.com famously blew through $300 million of private capital with a corporate strategy that never made much sense to people.

The Pets.com investors were chagrined, and probably learned a lesson from their mistake.  Certainly most of us thought the blame, if blame existed, for the debacle rested on the investors for pouring money into a bad proposition.  Certainly no one accused the management of fraud -- I am sure they were diligently, honestly trying to make the company a success, even if they were misguided as to where that success lay.

As it turned out, everyone, not just the Pets.com investors, learned from the mistake.  The failure was an important driver in an industry-wide rethink as to what a successful Internet business model might look like.  This benefit only came because people were willing to acknowledge not just that the Pets.com investment was flawed, but that it represented a systematic mistake that was being made vis a vis Internet startup investments.

Now, consider solar manufacturer Solyndra.  It failed this week, likely taking with it most of $535 million in taxpayer money that the Obama Administration was so eager to give them that it short-cutted its internal processes to fork over the cash more quickly.

Many of us on the outside would love to see the government rethink such investments in a systematic way, and reconsider if it is even possible for the government to make such investments, and in particular whether "green jobs" investments make any sense at all.

But the likelihood of that kind of introspection happening in the public world is about zero, and my bet is that Obama is going to propose more of the same tonight in his speech.

In fact, the Department of Energy (the source of the loan) and the FBI have today sent armed agents into Solyndra looking for evidence of fraud.   While Zero Hedge argues that fraud would be bad for Obama, in fact I think it would probably be the best possible outcome and one he is hoping for.  If he can say, "wow, you and I both got tricked here by some evil folks we are going to put in jail" it deflects attention from the fact that he put a half billion dollars of taxpayer money into a business plan that never made a lick of sense.

Another me-too solar manufacturer with a factory in California of all places was never going to compete in a global commodity market.  This company's plan was always to sell dollars for 50 cents and to make it up on volume.  I don't see how any investor thought this was going to work.  My guess is that the private investors didn't know much about solar and invested because it had a certain hip-ness to it, or less charitably, they knew it never made sense but hoped that Uncle Sam, once it was already in for a half billion, would keep more money flowing or perhaps agree to buy out their production at above market prices.

There may have indeed been fraud, but as in the case of Pets.com, it is perfectly possible no real internal fraud existed and they ran through a ton of money against a stupid business plan that should never have been funded.  Obama would greatly prefer to call it fraud rather than his own failure of judgement.  As an aside, Fannie and Freddie are pursuing exactly the same course in suing banks, arguing that they were defrauded by the banks in buying mortgages, a fairly laughable proposition in the great scheme of things when one considers Fannie and Freddie were at the forefront of the industry in driving down lending standards and promoting the expansion of the mortgage market.

Banality of Evil

I am afraid we are on a path to thoroughly eviscerating the Fourth Amendment simply because police forces find it too big of a hassle to comply.  Just look at almost every case of abuses of search and seizure rules or of missing search warrants and you almost never see a time-based urgency that is often used as an excuse to end-around the rules.   What you almost always see is just, well, laziness.

Here is yet another example (bold added):

Now comes the news that the FBI intends to grant to its 14,000 agents expansive additional powers that include relaxing restrictions on a low-level category of investigations termed “assessments.” This allows FBI agents to investigate individuals using highly intrusive monitoring techniques, including infiltrating suspect organizations with confidential informants and photographing and tailing suspect individuals, without having any factual basis for suspecting them of wrongdoing. (Incredibly, during the four-month period running from December 2008 to March 2009, the FBI initiated close to 12,000 assessments of individuals and organizations, and that was before the rules were further relaxed.)

This latest relaxing of the rules, justified as a way to cut down on cumbersome record-keeping, will allow the FBI significant new powers to search law enforcement and private databases, go through household trash, and deploy surveillance teams, with even fewerchecks against abuse. The point, of course, is that if agents aren’t required to maintain a paper trail documenting their activities, there can be no way to hold the government accountable for subsequent abuses.

Freedom dies because we couldn't be bothered with all the work to protect it.

PS-  why is it no one wants to address any of the paperwork hassles in starting construction or opening a restaurant or getting a liquor license or starting a taxi service or any number of other private enterprises, but the government jumps right on the task of streamlining the work it takes to spy on me.

Arming Government Agencies

The PJ Tatler has this bit on the arming of government bureaucrats:

Quin Hillyer discusses the increasing armed firepower of the federal government.  Most people expect agencies like the FBI to be well armed for law enforcement purposes.  But the Railroad Retirement Board?  He reports that federal agencies far and wide now have armed agents, including the Small Business Administration.  For what?  To scare away phony 8(a) applications??  The United States Department of Education bought 27 Remington Model 870 12-gauge shotguns last year

I have no insight into what is going on in these particular agencies.  But I can comment on another agency.  Nearly every state parks organization has seen a proliferation of law enforcement titles among its employees.  Seemingly every field employee nowadays needs to have a gun and a badge.  Why?

Well, there are those who say that this arms race is necessary to keep the parks safe against some mythical crime wave.  But I can say with some authority, since our company runs over 150 public parks across the country, that with very, very few exceptions, parks don't need this kind of on-site law enforcement support.  Most problems can be handled with on-site customer service employees, with the occasional call the the sheriff if things get rough.  In fact, customer service is actually improved without all the badges around.  Rangers with law enforcement credentials tend to solve issues with their visitors by issuing citations.  This is awful customer service -- I am sure McDonald's doesn't like it if someone messes up the bathroom or parks across two parking spaces, but you won't see them issuing citations to their customers.

The reason for this proliferation of law enforcement titles in parks is not demand for order, but incentives among employees.  In most states, getting a law enforcement title in a parks organization gives one an automatic raise, participation in the far-more-lucrative state law enforcement pension plan, and training that can be valuable when one leaves the parks organization.  Also, for some, it carries non-monetary benefits -- some folks think its cool to wield a gun and a badge.

So Much for Judicial Review

Wow, it is a wonder that the FBI works so hard to gain warrant-less search powers when the judiciary seems hell-bent on rubber stamping every request that comes along

The secretive Foreign Intelligence Surveillance Court approved all 1,506 government requests to electronically monitor suspected “agents” of a foreign power or terrorists on US soil last year, according to a Justice Department report released via the Freedom of Information Act....

“The FISC did not deny any applications in whole, or in part,” according to the April 19 report to Sen. Majority Leader Harry Reid, (D-NV.)

The 11-member court denied two of 1,329 applications for domestic-intelligence surveillance in 2009. The FBI is the primary agency making those requests.

This is the problem with such a narrow court - it tends to get co-opted by the FBI in the same way that regulatory agencies get captured by the groups they regulate.  I am not sure how the court is picked, but some sort of rotation of the membership might help bring a bit more skepticism to the group

Congrats to Massachussetts

Apparently, they have had three straight speakers of their state House of Representatives facing criminal charges.  And by the way parents .... unless you want to almost guarantee your kid is going to be investigated for corruption and racketeering by the FBI, don't name him Salvatore.

Prior Restraint

National security letters strike me as one of the worst Constitutional abuses to come out of the last 10 years, which is saying a lot given the post-9/11 theories of executive authority from torture to indefinite detention to even ordering people killed.

The national security letters deserve particular scrutiny because they evade the Fourth Amendment while building in a prior restraint on speech that prevents recipients from challenging the letters or even complaining about them.  This is self-sustaining policy -- ie policy that prevents the dissemination of information that might prove it is a threat or a failure -- at its worst.

The Justice Department's inspector general revealed on March 9 that the FBI has been systematically abusing one of the most controversial provisions of the USA Patriot Act: the expanded power to issue "national security letters." It no doubt surprised most Americans to learn that between 2003 and 2005 the FBI issued more than 140,000 specific demands under this provision -- demands issued without a showing of probable cause or prior judicial approval -- to obtain potentially sensitive information about U.S. citizens and residents. It did not, however, come as any surprise to me.

Three years ago, I received a national security letter (NSL) in my capacity as the president of a small Internet access and consulting business. The letter ordered me to provide sensitive information about one of my clients. There was no indication that a judge had reviewed or approved the letter, and it turned out that none had. The letter came with a gag provision that prohibited me from telling anyone, including my client, that the FBI was seeking this information. Based on the context of the demand -- a context that the FBI still won't let me discuss publicly -- I suspected that the FBI was abusing its power and that the letter sought information to which the FBI was not entitled.

Anyone want to bet how many of these things really are national security related, and how many are related to other investigations (particularly drugs)?

There are zillions of people involved in these major investigations.  There is no good argument against adding one more who is in on the secret - ie a judge - and a lot of reasons to do so.

Things I Am Tired of Hearing

Because I take cash deposits at a number of campgrounds around the country, we have accounts with 30+ different banks.  Every few weeks one of them asks for some outrageously intrusive piece of information or paperwork.  And I ask them, what is this for, and get told that it is "a new requirement of the federal government."  I appreciate the feds have put in all kinds of new bank account controls in a misguided attempt to do something about terrorism (side bet:  most of these have more to do with the drug war than terrorism).  But in most of these cases, either my 29 other banks are breaking the law, or my bank is misguided.  Or worse, BS'ing me by falsely blaming their own information acquisitiveness on the feds.

Today I had a tiny, tiny telephone company in southern New Mexico call me to say they needed my drivers license and a utility bill from a New Mexico resident to add a phone line.  This new phone line is 1) for my corporation and 2) about the 8th account with this same phone company.  Given the area they operate, I may be their largest customer in town.  I told her I thought the requirement that a corporate officer give up his drivers license to get an extra corporate phone line was absurd, and further if they wanted a personal utility bill in New Mexico they would be waiting forever.  After being kicked up to their supervisor, I was told that they would settle for proof of my corporations federal tax ID # and a copy of my lease for the campground in question proving I was the legal occupant.  When asked why -- I mean, do they really have a problem with people paying the phone bill for locations that are not theirs -- they said it was now required by the federal government.

Really?  this sounds like BS.  Again, my 30 other phone companies would probably like to know they are breaking the law.  But who knows, maybe the feds really care.  If I had to bet, this would again be chalked up to the war on terror, but if I really could get to the bottom of it, I would find its about the drug war -- one time somewhere a drug dealer set up a phone line in an assumed name in an abandoned building and now I have to get fingerprinted and have an FBI check to get a phone line (don't laugh at the latter, one still has to get fingerprinted for every liquor license as a holdover from 80 years ago when gangs ran speakeasy's).

I Have Ripped All My DVD's to a Video Server

The first thing I do when I buy a DVD is rip it to my video server.  I have a 10TB RAID and I don't even try to compress the disks, just copy them over in video_ts format using DVDfab6.    I run SageTV on the server with the absolutely essential SageMC mod.  I then can watch the video at every TV that has a Sage HD200 box.  The whole system works for Bluray as well.

I built the system to try to duplicate a $60,000+ Kaleidoscape system for less than $2000, and the functionality, with some tweaking, comes pretty dang close.  The real work was the drudgery for ripping hundreds of DVD's, but I had already performed this death march with a much larger CD collection so I knew what I was getting into.   SageTV, by the way, is very rewarding if you want to get your hands dirty messing around in the innards but it is not for those who want plug and play.

Anyway, one of the reasons I did all this, beyond the coolness factor, was this.  I can rip just the main movie out of the DVD, leaving behind menus, trailers, FBI warmings, special features, etc.

Executive Power Only A Problem When Someone Else Has It

On the day of Obama's inauguration,  I wr0te:

I will be suitably thrilled if the Obama administration renounces some of the creeping executive power grabs of the last 16 years, but he has been oddly silent about this.  It seems that creeping executive power is a lot more worrisome when someone else is in power.

I want to highlight two recent stories.  First, via Popehat:

The White House is considering endorsing a law that would allow the indefinite detention of some alleged terrorists without trial as part of efforts to break a logjam with Congress over President Barack Obama's plans to close the Guantanamo Bay prison, Sen. Lindsey Graham (R-S.C.) said Monday.

Last summer, White House officials said they had ruled out seeking a "preventive detention" statute as a way to deal with anti-terror detainees, saying the administration would hold any Guantanamo prisoners brought to the U.S. in criminal courts or under the general "law of war" principles permitting detention of enemy combatants.

However, speaking at a news conference in Greenville, S.C., Monday, Graham said the White House now seems open to a new law to lay out the standards for open-ended imprisonment of those alleged to be members of or fighters for Al Qaeda or the Taliban.

That is a really, really bad idea.  What would J Edgar Hoover had done with such a law?  Would Martin Luther King have been declared a terrorist.  And speaking of King, who the FBI kept under illegally deep surveillance for years, we have a second related story via Disloyal Opposition:

Last Friday, federal attorneys told the U.S. Third Circuit Court of Appeals that government officials should be able to track the location of Americans by following their cell phone transmissions -- without having to get a warrant. While the FBI and state and local officials have already obtained logs from mobile phone companies that reveal the locations of customers' telephones, the practice has never formally been endorsed by the courts. The latest federal arguments -- and rebuttals by civil liberties organizations -- give the courts the opportunity to either support or repudiate federal claims that Americans have no "reasonable expectation of privacy" so long as they carry cell phones.

Yes, I blame Bush for getting the ball rolling on both these fronts, but wtf did we elect Obama for?  Many libertarians held their nose at his interventionist economics in order to try to thwart what they saw as a scary trajectory for executive power and civil liberties.  If we had wanted populist economic machinations combined with limitations on individual liberties, we could have voted for Pat Buchanon.

Napolitano: Last Politician to Head DHS

I have said for a while that Homeland Security is the worst possible job for any politician who actually wants to have a future political career.  The job is all downside.  I wrote a year ago:

Yeah, I know it is not a done deal, but the rumors are that our governor Janet Napolitano will be Obama's choice for Homeland Security.

On its face, this both makes a ton of sense, and simultaneously is odd.  It makes sense because Napolitano is one of those rising Democratic stars who get special love in part for not being white males.  It is odd because pulling her up to Washington would, by law, pass the governorship for the next two years to the Republicans (the Secretary of State completes the term, and she is a Republican).  It also strikes me as odd because I think Homeland Security would be an absolutely awful platform for launching a run for higher office.  That job has no upside "“ it is all downside.

But the final reason in the end that this may make sense can be seen in this table below from Paul Kedrosky on projected state budget deficits as a percentage of state revenues

Arizona is almost in as bad of shape as California, and California is a disaster area.  So the financial chickens are about to come to roost here in Arizona for the drunken spending spree the state has been on, presided over by Napolitano.  To preserve her from going to the Gray Davis Memorial Retirement Home for Failed Governors, Obama is likely to beam her up to Washington.

As I wrote before, I don't think Napolitano would normally have accepted this job had she not been desperate for a face-saving way to escape Arizona mid-term.  But after recent events, I think it is highly unlikely anyone else on an elected-official career track will take this job.  Look senior FBI or CIA types on the future.

Update: More here from Expresso Pundit.

So in the next six months--probably much sooner--Janet will move on and the President will pick an obscure, non-political, retired General who is clearly qualified and above reproach.

Three Quarters of A Million Americans Arrested For Marijuana Possession in 2008

In the US last year, 754,224 people were arrested for possession (not dealing or production) of marijuana.  By the logic of US drug laws, all of these folks are better off with an arrest record and possible incarceration that they are from the nominal negative effects of smoking marijuana (FBI report here, via Radley Balko).  These numbers are just insane.  And while the report only gives race numbers for total drug arrests rather than for just marijuana offenses, a hugely disproportionate number are black (over 1/3 of arrests).

And speaking of equal protection, the arrest numbers for gambling are eye-opening (table 43).  75% of all people arrested for gambling last year in the US were black, including 90% of the arrests of those under 18 for this offense.  It seems it is A-OK for whites to play poker at home for money (I'm guilty) or to bet in Super Bowl pools (guilty again) or to clad themselves in polyester and head to the casino boat, but blacks who choose to compete with the state gambling/lottery monopoly will get arrested.  As an aside, I have always laughed at the government piously suing tobacco companies for targeting minorities with their advertising and then using the same techniques themselves to target minorities for their lottery sales.

Another Fallout From the War on Drugs: Asset Seizures

One of the least-discussed but quite important fallouts from the war on drugs has been the incredible power we seem to have handed police authorities to seize assets.  While theoretically, it should be impossible to be fined or punished without being convicted, in fact it is perfectly possible for police to shut down businesses and impose enormous fines without trial through this confiscation authority.   Here is just one recent example that came up this morning:

The FBI on Tuesday defended its raids on at least two data centers in Texas, in which agents carted out equipment and disrupted service to hundreds of businesses.

The raids were part of an investigation prompted by complaints from AT&T and Verizon about unpaid bills allegedly owed by some data center customers, according to court records....

According to the owner of one co-location facility, Crydon Technology, which was raided on March 12, FBI agents seized about 220 servers belonging to him and his customers, as well as routers, switches, cabinets for storing servers and even power strips. Authorities also raided his home, where they seized eight iPods, some belonging to his three children, five XBoxes, a PlayStation3 system and a Wii gaming console, among other equipment. Agents also seized about $200,000 from the owner's business accounts, $1,000 from his teenage daughter's account and more than $10,000 in a personal bank account belonging to the elderly mother of his former comptroller.

FBI agents displayed their usual level of competance when it comes to technology-related matters:

Faulkner says the FBI appears to have assumed that all the servers located at Crydon's address belonged to him, and didn't seem to understand the concept of co-location.

This is over a private billing dispute?  The FBI claims its a much bigger matter - since there was fraud involved as one of the target companies faked some credit references.  Oh, OK, then go right ahead and seize all the family's iPods.

Bear Stearns & Enron

I wondered if folks would find my analogy from Bear Stearns to Enron I posted the other day stretched. 

Because Enron's demise came in exactly this sort of liquidity crisis,
and the situations are nearly entirely parallel, all the way up to and
including the CEO telling the world all is well just days before the
failure.  But no one understood Enron's business, so its failure seemed
"out of the blue" and therefore was attributed by many to fraud,
lacking any other ready explanation.   In the case of Bear Stearns, the
public was educated in advance as to the problems in their portfolio
(with mortgage loans) such that the liquidity crisis was less of a
surprise and, having ready source of blame (subprime loans) no one has
felt the need to apply the fraud tag.

Apparently, the Economist sees the same connection (via a reader):

For many people, the mere fact of Enron's collapse is evidence that
Mr Skilling and his old mentor and boss, Ken Lay, who died between his
conviction and sentencing, presided over a fraudulent house of cards.
Yet Mr Skilling has always argued that Enron's collapse largely
resulted from a loss of trust in the firm by its financial-market
counterparties, who engaged in the equivalent of a bank run. Certainly,
the amounts of money involved in the specific frauds identified at
Enron were small compared to the amount of shareholder value that was
ultimately destroyed when it plunged into bankruptcy.

Yet recent events in the financial markets add some weight to Mr
Skilling's story"”though nobody is (yet) alleging the sort of fraudulent
behaviour on Wall Street that apparently took place at Enron. The
hastily arranged purchase of Bear Stearns by JP Morgan Chase is the
result of exactly such a bank run on the bank, as Bear's counterparties
lost faith in it. This has seen the destruction of most of its roughly
$20-billion market capitalisation since January 2007. By comparison,
$65 billion was wiped out at Enron, and $190 billion at Citigroup since
May 2007, as the credit crunch turned into a crisis in capitalism.

Mr Skilling's defence team unearthed another apparent inconsistency
in Mr Fastow's testimony that resonates with today's events. As Enron
entered its death spiral, Mr Lay held a meeting to reassure employees
that the firm was still in good shape, and that its "liquidity was
strong". The composite suggested that Mr Fastow "felt [Mr Lay's
comment] was an overstatement" stemming from Mr Lay's need to "increase
public confidence" in the firm.

The original FBI notes say that Mr Fastow thought the comment
"fair". The jury found Mr Lay guilty of fraud at least partly because
it believed the government's allegations that Mr Lay knew such bullish
statements were false when he made them.

As recently as March 12th, Alan Schwartz, the chief executive of
Bear Stearns, issued a statement responding to rumours that it was in
trouble, saying that "we don't see any pressure on our liquidity, let
alone a liquidity crisis." Two days later, only an emergency credit
line arranged by the Federal Reserve was keeping the investment bank
alive. (Meanwhile, as its share price tumbled on rumours of trouble on
March 17th, Lehman Brothers issued a statement confirming that its
"liquidity is very strong.")

Although it can do nothing for Mr Lay, the fate of Bear Stearns
illustrates how fast quickly a firm's prospects can go from promising
to non-existent when counterparties lose confidence in it. The rapid
loss of market value so soon after a bullish comment from a chief
executive may, judging by one reading of Enron's experience, get
prosecutorial juices going, should the financial crisis get so bad that
the public demands locking up some prominent Wall Streeters.

The article also includes more details of exculpatory evidence that was withheld from the Skilling team and will very likely lead to a new trial.  The Enron prosecution team has not had a very good record in appeals court scrutiny of their actions at trial:

For what it is worth, prosecutors have had a tougher time in the
appeals court with Enron-related cases than in the initial jury trials.
Convictions have been overturned in a case relating to Nigerian barges
that Enron sold to Merrill Lynch. The conviction of the chief financial
officer of Enron Broadband has also been vacated, after two trials. So,
too, was the decision to convict Enron's auditor, Arthur Andersen
(albeit too late to save the venerable firm from liquidation).

Thoughts on Prosecutorial Abuse

With Eliot Spitzer going down for what shouldn't be a crime (paying for sex) rather than what should be (abuse of power), now is as good a time as ever to focus on prosecutorial abuse.  As in the case of Spitzer, the media seems to have little desire to investigate overly-aggressive prosecution tactics.  In fact, in most cities, the local media cheer-leads abusive law enforcement practices.  It makes heroes of these abusive officials, whether their abuses be against the wealthy (in the case of Spitzer) or the powerless (as is the case of our own Joe Arpaio here in Phoenix).

Tom Kirkendall continues to be on the case of the Enron prosecution team for their abuses, which have been ignored in the media during the general victory dance of putting Jeff Skilling in jail and running Arthur Anderson out of business.  But, guilty or innocent, Skilling increasingly appears to have solid grounds for a new trial.  In particular, the Enron prosecution team seems to have bent over backwards to deny the Skilling team exculpatory evidence.  One such tactic was to file charges against every possible Skilling witness, putting pressure on them not to testify for Skilling.  Another tactic was more traditional - simply refuse to turn over critical documents and destroy those that were the most problematic:

The controversy regarding what Fastow told
prosecutors and FBI agents who were investigating Enron became a big
issue in the Lay-Skilling prosecution when the prosecution took the
unusual step of providing the Lay-Skilling defense team a "composite
summary" of the Form 302 ("302's") interview reports that federal
agents prepared in connection with their interviews of Fastow. Those
composites claimed that the Fastow interviews provided no exculpatory
information for the Lay-Skilling defense, even though Fastow's later
testimony at trial indicated all sorts of inconsistencies

However,
I have spoken with several former federal prosecutors about this issue
and all believe that the government has a big problem in the Skilling
case on the way in which the information from the Fastow interviews was
provided to the Lay-Skilling defense team. None of these former
prosecutors ever prepared a composite 302 in one of their cases or ever
used such a composite in one of their cases. The process of taking all
the Fastow interview notes or draft 302's and creating a composite is
offensive in that it allowed the prosecution to mask inconsistencies
and changing stories that Fastow told investigators as he negotiated a
better plea deal from the prosecutors. 

Similarly,
the Enron Task Force's apparent destruction of all drafts of the
individual 302s of the Fastow interviews in connection with preparing
the final composite is equally troubling. Traditionally, federal agents
maintain their rough notes and destroy draft 302s. However, in regard
to the Fastow interviews, my sense is that the draft 302s were not
drafts in the traditional sense. They were probably finished 302's that
were deemed "drafts" when the Enron Task Force decided to prepare a
composite summary of the 302's.

Note that showing how a person's story has changed over time is a key prosecution tactic, but one that is being illegally denied to Skilling.  Apparently Skilling's team has now seen the actual interview notes, and believe they have found "a sledgehammer that destroys Fastow's testimony" against Skilling.  Stay tuned, a new trial may be on the horizon.

Prosecutorial Abuse

Tom Kirkendall has stayed on the case of Enron Task Force prosecutorial abuse even while most of the world has turned away, apparently believing that "mission accomplished"  (ie putting Skilling in jail) justifies about any set of shady tactics.

But the evidence continues to grow that Skilling did not get a fair trial.  We know that the task force bent over backwards to pressure exculpatory witnesses from testifying for Skilling, but now we find that prosecutors may have hidden a lot of exculpatory evidence from the defense.

Meanwhile, continuing to fly under the mainstream media's radar
screen is the growing scandal relating to the Department of Justice's
failure to turnover potentially exculpatory evidence to the defense
teams in two major Enron-related criminal prosecutions (see previous
posts here and here). The DOJ has a long legacy of misconduct in the Enron-related criminal cases that is mirrored by the mainstream media's myopia in ignoring it (see here, here, here, here and here).

This motion
filed recently in the Enron-related Nigerian Barge criminal case
describes the DOJ's non-disclosure of hundreds of pages of notes of FBI
and DOJ interviews of Andrew Fastow, the former Enron CFO who was a key prosecution witness in the Lay-Skilling trial and a key figure in the Nigerian Barge trial.

Enron Task Force prosecutors withheld the notes of the Fastow
interviews from the defense teams prior to the trials in the
Lay-Skilling and Nigerian Barge cases. If the Fastow notes turn out to
reflect that prosecutors withheld exculpatory evidence or induced
Fastow to change his story over time, then that would be strong grounds
for reversal of Skilling's conviction and dismissal of the remaining
charges against the Merrill Lynch bankers in the Nigerian Barge case.

The post goes on to describe pretty substantial violations of FBI rules in handling interviews with Fastow, including destruction of some of the Form 302's summarizing early interviews.  The defense hypothesis is that Fastow changed his story over time, particularly vis a vis Skilling's involvement, under pressure from the task force and the 302's were destroyed and modified to hide this fact from the defense, and ultimately the jury.

National Security Letters

From the beginning, national security letters had to end badly.  One only has to understand incentives to know that things were going to go off the rails.  Specifically, national security letters are an easy way to for investigators to short-circuit a lot of procedural steps, including review and approval of warrants by judges, steps that have been put in place for a real Constitutional purpose.  Anyone who is at all familiar with the operation of any government bureaucracy had to know that their use would steadily grow well outside the narrow bounds of urgent national security issues.  Anytime government employees can grow their power without supervision or accountability, they will tend to do so.  What absolutely guaranteed that this would happen, and sooner rather than later, was the legal non-disclosure requirements around these letters that prevents anyone from discussing, investigation, or discovering their abuse and misuse.

The Washington Post carries a great anonymous editorial from one person served with such a letter:

Three years ago, I received a national security letter (NSL) in my
capacity as the president of a small Internet access and consulting
business. The letter ordered me to provide sensitive information about
one of my clients. There was no indication that a judge had reviewed or
approved the letter, and it turned out that none had. The letter came
with a gag provision that prohibited me from telling anyone, including
my client, that the FBI was seeking this information. Based on the
context of the demand -- a context that the FBI still won't let me
discuss publicly -- I suspected that the FBI was abusing its power and
that the letter sought information to which the FBI was not entitled....

Without the gag orders issued on recipients of the letters, it is
doubtful that the FBI would have been able to abuse the NSL power the
way that it did. Some recipients would have spoken out about perceived
abuses, and the FBI's actions would have been subject to some degree of
public scrutiny. To be sure, not all recipients would have spoken out;
the inspector general's report suggests that large telecom companies
have been all too willing to share sensitive data with the agency -- in
at least one case, a telecom company gave the FBI even more information
than it asked for. But some recipients would have called attention to
abuses, and some abuse would have been deterred.

I found it
particularly difficult to be silent about my concerns while Congress
was debating the reauthorization of the Patriot Act in 2005 and early
2006. If I hadn't been under a gag order, I would have contacted
members of Congress to discuss my experiences and to advocate changes
in the law.

Tim Lynch makes a point about the national security letters I found intriguing and that has not been discussed very often, that the letters represent effect conscription of ordinary citizens into an intelligence or even big brother role.  The author of the WaPo editorial makes the same point:

I resent being conscripted as a secret informer for the government and
being made to mislead those who are close to me, especially because I
have doubts about the legitimacy of the underlying investigation.

I'll Make a Bet

Via Hit and Run:

A blistering Justice Department report accuses the FBI of
underreporting its use of the Patriot Act to force businesses to turn
over customer information in terrorism cases....The report, to be
released Friday, also says the FBI failed to send follow-up subpoenas
to telecommunications firms that were told to expect them.....

Overall,
the FBI underreported the number of national security letters it issued
by about 20 percent between 2003 and 2005..... In 2005 alone, the FBI
delivered a total of 9,254 letters relating to 3,501 U.S. citizens and
legal residents.

The Patriot Act....allows the FBI to issue national
security letters without a judge's approval in terrorism and espionage
cases.

Here is my bet:  Even more interesting will be a review of these letters, if that is ever allowed, to see how many really had any burning relation to national security.  My guess is that many of these are being used in drug cases and financial cases that only the most creative FBI agent could twist into a national security situation.

I Hate the Liquor Licensing Process

I have liquor licenses in about six different states, and like sales taxes, the process varies a lot by state.  But one universal impression I have is that the whole liquor licensing process has long ago ceased to serve its original purpose and has instead become either become captive to rent-seekers or has become a bureaucratic jobs program or both.  Al Capone died more than half a century ago.  And while one might argue there is some government interest in making sure minors don't buy the product and similar rules are followed, the liquor licensing process is orders of magnitude more complex and onerous than, say, getting a license to sell cigarettes or to prepare foods on site, both of which have similar features.

The liquor licensing process in most states was crafted in the 1930s, with the end of prohibition.  At that time, the primary concern was to keep out organized crime interests who had run the liquor business during prohibition.  So the process includes FBI background checks, as well as minute disclosure of every single person who has ever loaned you money, so they can be checked out to make sure you are in no way beholden to anyone who is a bad guy in the FBI computers.  The licenses take months to obtain (including a fingerprinting process) and cost thousands of dollars a year, presumably to offset the bureaucracy required to review all the applications.  Here in Arizona, minuscule errors, such as abbreviating "Boulevard" in an address to "Blvd" can cause the application to be rejected and have to be resubmitted.  Believe me, I know.

Worse than the ridiculous jobs-program-and-mindless-bureaucracy-fighting-a-threat-that-no-longer-exists problem is the way liquor licenses are now used in many locales for rent-seeking.  The worst offenders are states that purposefully artificially limit the number of liquor licenses.  This is quite obviously an incumbent protection program, protecting current liquor businesses from new competition.  California is one such state.  Even after I had purchased an existing license for a ridiculous amount of money ($5000 I think), I still had to make my case to the local county planning board who had final approval as to whether they would allow me a license into the county.  I asked them why this was necessary, and they were very up front about it (the following is paraphrased but accurate):

If we issue too many licenses, then it would be hard for you to make money.  We are really just helping you.

Sorry, but I don't need help.  I am willing to take the risk.  And does anyone really think that Shasta County California is looking after me, an out-of-state business just entering the area?  Of course not.  What they are really saying is "let us decide if all our buddies here in the county who we play golf with and who donate to our campaigns are OK with you competing with them."

In fact, this is exactly what happens in Lake Havasu City, AZ.  Though Arizona is not a state that limits liquor licenses, Lake Havasu required some kind of local board meeting to approve our license in that city.  The stated reason was that they wanted to make sure the new liquor business would not bring down the image of the city.  Which is hilarious, for anyone who has been to Lake Havasu City, particularly in spring break.  In fact, I am pretty sure it was an excuse for all the local interests to decide if they could tolerate another competitor or not.

All this comes to mind after I read this article by Radley Balko.  It is a good example of what can happen to you if your business depends on a government license and the local rent-seekers decide that your business needs to go.  A very brief excerpt:

I'll get into the
harassment, entrapment, and defamation Mr. Ruttenberg has endured in a
bit. For the moment, I'd like to focus on possible reasons for the
harassment. Why has this been going on for several years? I think there
are a few minor motivating factors. For one, I think there is,
unfortunately, some antisemitism at play. There's also a strange
rivalry Mr. Ruttenberg had with a Manassas Park police officer over a
girl. And I think part of this may be driven by city officials who for
whatever reason simply began to harbor a grudge against Ruttenberg.
Remember Milton Friedman's old axiom: Hell hath no fury like a bureaucrat scorned.

But I think something else is going on, here. And Black Velvet Bruce
Li has hit it. I believe there is some very strong circumstantial
evidence suggesting that Mr. Ruttenberg's bar was targeted by the city
of Manassas Park because the city had its eye on the property as a
possible site for an off-track betting facility for the Colonial Downs
horse racing track in New Kent County, Virgina.

Update:  I guess this is the day to blog about outdated 1930's liquor legislation.

When the Legislature wrote the first alcohol laws after
Prohibition was repealed in 1933, California defined what a beer is and
what wine is. The definition was simple"”anything added to beer or wine
renders it something else. Sometime thereafter beer and wine producers
started adding things such as preservatives, flavor enhancers and other
things. So narrowly reading the law there is NO such product as either
beer or wine sold in California today. Now common sense and alcohol
regulators know that is not true and so for years have ignored this
narrow interpretation.

Last week [on December 13] a bare
majority of the Board of Equalization voted for the narrow
interpretation of the law, and have begun the process to tax all
alcohols with any additives as distilled spirits. This will increase
the taxes charged on beers, wines, flavored malt beverages, and
flavored beers to the level on hard liquor.

The dated California
law defines beer as having no additives whatsoever. No beer that I know
of"” except perhaps some home brews"”meets this definition.

Sanction of the Victim

This has been an incredible week in the ongoing culture clash between the western democracies and radical Islam.  In a series of events right out of the Onion or Monty Python, radical Muslims around the world protested the Pope calling them violent with ... waves of violence.  Once his remarks were proven right in such an obvious and public way the Pope reacted by ... apologizing for his remarks.**   

I am tired of apologizing to radical Islam (for some silly, bland cartoons, for god sakes!)  I am tired of bending over backwards into pretzels to give them the benefit of the doubt.  I am extremely tired of being told these folks are just aggrieved and in reality they share my values, because it is very very clear that they don't share my values.  I am tired of being told most Muslims are peaceful --  when these peaceful folks give their sanction and support to the violent ones and accept the most radical as their leaders. 

Radical Islam is, with the downfall of soviet communism and the painfully gradual opening up of China, the most illiberal force in the modern world. By a long shot.  It treats individual life with contempt, has no concept of rights, and in particular treats women far worse than apartheid South Africa ever treated blacks.  The theocracy we fear from certain Republican 700 Club folks is like 3.2 beer compared to full 200 proof Islamic theocratic fascism. 

I don't know why the left in this country has been hesitant to call out illiberal practices in the Middle East as vociferously as they have in other circumstances.  A part of this hesitation is probably opposition to the Iraq war, and fear that denouncing radical Islam for its faults might somehow give the administration a stronger mandate for more military adventures.  A less charitable explanation is that the hesitation is an extension of political correctness and cultural relativism run wild).

Well, I opposed the Iraq war:  The Augean stables are just too dirty to clean up by sending the military from dictator to dictator. I will go further and say I actually think the terrorist threat is exaggerated (and yes I do remember 9/11) in order to keep giving the FBI more powers and help politicians get elected.  Get tough on terrorism is sort of the new get tough on crime election speak.

But I don't think the threat to liberal values posed by Islamic fundamentalism is exaggerated.  And the first step in fighting it is to not give it, as Ayn Rand would say, the sanction of the victim.  People sometimes email me and say "who are we to talk -- America is not clean."  I will agree we have our warts - and much of this blog is taken up with pointing some of them out.  But what I always tell people, and still believe, is the following:

The US does harm when we fail to live up to our values.  Radical Islam does harm when they successfully pursue what they value.

**Postscript:   I don't pretend to understand all the 13th century quotations in the Pope's speech.  I don't think it matters.  If he had simply said "radical Islam preaches too much violence and it has to stop" he would have gotten the same reaction.  By the way, every person in the world seems to say bad things about the US, many of these comments are untrue or apply only to a minority of our leaders and not to myself. I can't remember anyone ever apologizing to me.   This story  that Muslims will do more violence unless the Pope apologizes some more reminds me of Sir Robin in the Monty Python and the Holy Grail.  "Perhaps if we run away more..."

And here is my message to the right -- I acknowledge that radical Islamic leaders treat apologies, backing-down, etc. as weakness to be exploited rather than preludes to reasonable compromise.   For this reason, I thought the invasion of Afghanistan was a necessity.  However, this general fact does NOT automatically justify the Iraq war.  If it did, it would also justify invading any Islamic country we want.  I still don't understand the strategic sense of Iraq and now we are stuck there, because I agree that once in, backing off will only embolden the radicals in the area to further hi-jinx.