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How Russian Antitrust Enforcers Defeated Google’s Monopoly

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Matt Stoller publishing some interesting stuff these days. Take a look:

Today I’m going to write about what I think is a fascinating example of how antitrust enforcers can win in the most unlikely places. To set up the story, I’ll start with some conventional wisdom about enforcement. Most people in the antitrust world think that European antitrust agencies are strong and aggressive, in particular against big tech giants like Google, and that American enforcers are far more feeble.

I’m going try and turn this story on its head, not by showing whether Americans or Europeans are exerting more power, but by showing who is getting results. And by that metric, if you want a competitive search market where Google faces competition, there’s only one place in the world to find it, and it’s not in Western Europe or America. It’s in Russia.

But first some news.

News Update

Netflix’s content strategy isn’t working, so expect even more drops in the stock(Marketwatch) Netflix’s stock dropped 11% as its subscriber base in the U.S. shrank for the first time. The key content suppliers – Disney, AT&T, CBS – have learned from Netflix’s monopoly play, and are going to crush the company and then replicate its model, only with must-have content. The slow death of Hollywood continues.

Boeing’s 737 MAX Grounding Spills Over Into Economy, Weighs on GDP (WSJ) The problem with having one aerospace maker is when that company has serious trouble, so does your entire industry. And when that industry is an important part of your economy and your export mix, well… it hits the nation at large. It also undermines the value of the Pentagon’s $100B+ shadow bailout of Boeing via an unnecessary upgraded nuclear arsenal. We get nuclear missiles we don’t need, in return for having no more competent civilian aircraft makers.

Republican and Democratic reps slam Facebook’s Libra (Video on Mashable) Everyone in Congress hated Facebook’s Libra. It was a dumb idea, executed poorly. Why? Well read on.

Meet Morgan Beller, the 26-year-old woman behind Facebook’s plan to make its own currency (CNBC) One of the co-creators of Libra is a 26 year old with zero experience in finance. I wonder what happens next oh wait here we go:

So, let me offer my thoughts, HAHAHAAHAHAHAHA, sorry, I’ll try to, HAHAHAHAHA. Never mind.

DOJ: Antitrust ruling against Qualcomm could ‘put our nation’s security at risk’ (CNET) I wrote about Trump DOJ chief Makan Delrahim in the first issue of Big. He’s a lot like Trump, he hands out favors and has no coherent view on the law. Qualcomm is a former client of his.

And now.

How Russia Defeated Google’s Monopoly

This is a chart of the Russian search market. Notice anything?

Yes, that’s right. In this search market, there’s competition. In fact, outside of China, there is only one search engine market with any rivals to Google, and that is in Russia.

We hear a lot these days about antitrust, and particularly big tech. But why do we not hear about the only success story in the entire world? I don’t know, but my guess is that it’s a social phenomenon. The agency that did the enforcement was the Federal Antimonopoly Service of Russia, and the story causes a great deal of embarrassment for the enforcers in Europe and America. Reporters, enforcers, and fancy prize givers don’t tend to trust the Russian government.

In this case, however, there’s a lot to learn from what the Russians did. The history of the competitive Russian search market isn’t just about aggressive and intelligent antitrust enforcement. It also involves innovation outside of California. So that’s where I’ll start.

The Rise of Yandex

For much of the Cold War period, Silicon Valley in the United States was a key center of innovation around computers. It wasn’t the only center, but it mattered a great deal, both in hardware and software. The Soviet Union also trained a large community of engineers and scientists to wage their Cold War, many of whom were amazing software creators. Tetris, for instance, was invented in Russia. After the Soviet Union fell apart, some of these engineers started tech companies.

In 1990, two Russians launched the company that would become the Russian search giant Yandex, which is now the fifth largest search company in the world and which has – like Google – become a tech conglomerate. By the mid-1990s these engineers were experts in Russian language search. In 1997 they launched a Russian-language search engine, and by 1998 Yandex (named for “Yet Another Index”) was in the contextual advertising business. Yandex chose a business model similar to what Google, founded that year, would also eventually select a few years later.

In the U.S., Google was a better search engine than its competitors (like Infoseek and Altavista), and beat them to dominate the market with a better experience and more relevant results. Google used a more efficient algorithm for indexing the web, had faster servers, and began plowing user data back into its search results to make the results more accurate. I remember the first time I used Google search, it was like magic. With the rest of the search engines you had to go through lots of results, whereas Google just helped me find what I wanted.

In 2000, Google took its search product global to beat out potential foreign competition, launching in ten languages. By 2001, it had an office in Tokyo. The company was quickly conquering the world faster than local search players could get up and running. In Russia, however, Google was never able to dominate. Instead, Yandex offered a competitive search product; it was as good as Google, but in Russian.

Google nonetheless came into Russia, and did fairly well. The two search engines had different strengths; Yandex was very good at indexing Russian, appealed to users in all regions of Russia, and had a smaller index. Google had superior results on technical topics in Russia, had appeal among IT professionals and young people, and was more popular in big cities. Up until 2012, Yandex held roughly 60% of the search market in Russia.

Google Makes Its Move on Yandex

Google had conquered the market for desktop search throughout most of the world, but Yandex had a majority (though not overwhelming) share in Russia. But as is often the case, the most vulnerable time for a monopoly, as well as its moment of greatest opportunity, at a technological inflection point when a new market structure is emerging. From 2007-2014, the computing world shifted to mobile, and this shift was such an inflection point. For example, in 2011, Facebook was a profitable social network without a mobile ad business, today the company gets roughly 90% of its revenue from mobile advertising and is far larger and more powerful. For search, the shift was similarly critical, people would search on their phones as much or more than they did on desktop computers, and would include geolocation data and maps in those searches.

Desktop and mobile search are deeply related products, but they operate in slightly different contexts. In the early 2010s, mobile search was growing rapidly, but nearly all monetization took place on desktop. Google’s strategy to conquer mobile search took shape in 2012, and played out all over the world. It had to do with the company’s control of a mobile phone operating system, Android, which it bought in 2005.

In 2008, Google experimented by building its first Android phone. The company eventually settled on a strategy of having original equipment manufacturers (OEMs) like Samsung use Android as the brains of their phones. The price was irresistible: zero. Google gave away Android, and starting in 2012, gave away their app store known as Google Play.  . . .

Continue reading. There’s much more.

Written by LeisureGuy

23 July 2019 at 12:40 pm

The Four Ordinary People Who Took On Big Pharma

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Beth Macy writes in the NY Times:

In the beginning, there were just four: the Godfather from Philly, the Army sergeant from Georgia, the professor from California and the feisty mom from Florida.

It was the early 2000s, and they usually talked over old-school computer message boards. Occasionally they gathered in person, carrying posters of their children and middle-aged spouses — all dead from OxyContin overdoses.

Today we know just how dangerous this drug is. Purdue Pharma, the company that made OxyContin, the first extended-release opioid to be widely prescribed, may finally be held to account. Some 200,000 people have died from overdosing on prescription opioids, and around 2,000 lawsuits attempting to make opioid makers and distributors pay for the damage unleashed by careless overprescribing are wending their way through the courts. But experts predict it will take more than $100 billion to turn the crisis around, and it’s hard to feel optimistic when you know the story of how long and hard these four labored in obscurity before anyone listened to them.

The four called themselves RAPP, short for Relatives Against Purdue Pharma, and they testified at hearings, lent support at whistle-blower trials and marched outside pharmaceutical-funded physician meetings at fancy resorts. They were outgunned at every pass — by a pharma-funded phalanx of lawyers and by doctors who had become paid spokesmen for the company. One resort even turned a sprinkler on them. But they picked up new members by the week.

Their leader was Ed Bisch, an I.T. worker from Philadelphia who’d lost his 18-year-old son, Eddie, in 2001. They called him the Godfather because he’d brought them together in the first place, via his website, OxyKills, shortly after Eddie’s death.

Mr. Bisch had wanted to believe Purdue’s excuses at first. He was persuaded, even, to change the name of his message board to OxyAbuseKills, after the company approached him about softening his tone, then gave him a $10,000 grant to put toward his education efforts. “They kept blaming it on the ‘abusers,’ but finally I said, ‘Look, at least 50 percent of my emails are from relatives of peoplewho are patients who are either dead or addicted,’” Mr. Bisch recalled. “It took me a while to realize how evil this company was.”

Barbara Van Rooyan, a professor of counseling at Folsom Lake College in California until she retired in 2012, told Mr. Bisch recently that finding his website “saved my life and gave me hope that the grief could be used for some good.” Her 24-year-old son, Patrick, died after taking OxyContin at a Fourth of July party in 2004. “It’s kind of like a muscle relaxant, and it’s F.D.A.-approved, so it’s safe,” the friend told Patrick.

The following year, with support from RAPP, Ms. Van Rooyan petitioned the Food and Drug Administration to recall OxyContin until it could be reformulated to make it harder for abusers to crush or dissolve the pills for a more intense high; she also wanted the drug restricted to end-of-life care and to treatment of cancer and other severe pain. It took eight years before the F.D.A. responded by noting that Purdue had voluntarily reformulated the drug in 2010 (so that point was moot), and her restriction petition was denied.

By 2007, RAPP numbered in the hundreds. That August scores of them converged in the rain outside a tiny federal courthouse in Abingdon, Va., because they wanted “to look evil in the face,” as the Florida mother, Lee Nuss, put it. Three of Purdue’s top executives had flown in to be sentenced on misdemeanor misbranding charges. Purdue’s parent company pleaded guilty to a felony misbranding charge, admitting that for six years it had fraudulently marketed OxyContin as being less prone to abuse and having fewer narcotic side effects than competing drugs.

All four of the original members of RAPP spoke at the hearing. They knew one another so well by then that they car-pooled to Abingdon and doubled up in hotel rooms to save money. One of them, Ed Vanicky, had fed evidence to the Virginia prosecutors — including a now-infamous cassette tape of a public-relations conference in which a Purdue spokesman brushed off the problems of OxyContin in Appalachia by saying, “The fact is, these rural areas have had problems with prescription drug abuse since the Civil War.” (In other words, the hillbillies, not Purdue’s drug, were defective.)

Mr. Vanicky was an Army sergeant in 2000 when he found his 44-year-old wife, Mary Jo, in bed dead after taking OxyContin for a herniated disc. He had just returned home from a yearlong posting in Korea and had never even heard the word OxyContin until the coroner who performed his wife’s autopsy inquired about it.

As she stepped down from the Abingdon witness stand, the Florida mother, Ms. Nuss, brandished a small brass urn containing some of the ashes of her son, Randall, who was 18 when he overdosed on OxyContin. There was a metal detector in the courthouse, and her friends still can’t figure out how she managed to sneak in that urn.

In the end, the company was forced to pay some $634 million in fines. A pittance, compared to the billions it had earned on the drug.

That fine is still the largest paid by Purdue to date, and it would do nothing to slow the epidemic. Not a single executive went to jail, and none of the settlement money went to treatment. OxyContin sales surged in its aftermath, topping $2 billion in 2008.

When Purdue finally reformulated OxyContin to make it abuse-resistant, the pill-addicted switched to heroin and, later, fentanyl to keep their dopesickness at bay. Within another decade, nearly 400,000 people would be deadMore than 2.6 million Americans are now addicted.

Today, the group’s prescience is clear. But they are sad, and they are tired. They still believe the company’s owners, the Sackler family, and executives should go to jail. But more than anything, they want the judges overseeing the lawsuits to make sure Purdue and the family use their riches to guarantee Americans access to treatment.

Recent news of the company’s misdeeds — like the allegation from New York’s attorney general, Letitia James, that Sackler family members moved hundreds of millions of dollars into private or offshore accounts, paying themselves when they knew the company was already insolvent or close to it — only confirms what the four have long believed.

In March, Oklahoma settled its case against Purdue and the Sacklers for $270 million — in part because the company was contemplating filing bankruptcy, and the state feared bankruptcy claims would insulate it from paying restitution. That meant all the documents in the case would remain sealed — a fate RAPP laments because it allows the company to hide its tactics from public scrutiny, occluding the dangers of the drug. “I have been saying for years that sealing the lawsuits let them get away with murder,” Mr. Bisch said.

This summer Vanity Fair published a rare interview with David Sackler, grandson of one of the three brothers who founded Purdue Pharma, who said his family had suffered “endless castigation,” including the taunting of his 4-year-old at nursery school. With a tone-deafness reserved for people who can afford to surround themselves with sycophants, he told the writer Bethany McLean, “Look at all the good Purdue has done.”

Mr. Vanicky read the article and told me, “I bet it sucks to be a Sackler these days.” He has personally called the offices of many attorneys general to thank them for filing suit against the Sacklers and Purdue.

Now 72,  . . .

Continue reading.

Written by LeisureGuy

21 July 2019 at 3:27 pm

The Economist Who Would Fix the American Dream

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Gareth Cook writes in the Atlantic:

Raj Chetty got his biggest break before his life began. His mother, Anbu, grew up in Tamil Nadu, a tropical state at the southern tip of the Indian subcontinent. Anbu showed the greatest academic potential of her five siblings, but her future was constrained by custom. Although Anbu’s father encouraged her scholarly inclinations, there were no colleges in the area, and sending his daughter away for an education would have been unseemly.

But as Anbu approached the end of high school, a minor miracle redirected her life. A local tycoon, himself the father of a bright daughter, decided to open a women’s college, housed in his elegant residence. Anbu was admitted to the inaugural class of 30 young women, learning English in the spacious courtyard under a thatched roof and traveling in the early mornings by bus to a nearby college to run chemistry experiments or dissect frogs’ hearts before the men arrived. Anbu excelled, and so began a rapid upward trajectory. She enrolled in medical school. “Why,” her father was asked, “do you send her there?” Among their Chettiar caste, husbands commonly worked abroad for years at a time, sending back money, while wives were left to raise the children. What use would a medical degree be to a stay-at-home mother?

In 1962, Anbu married Veerappa Chetty, a brilliant man from Tamil Nadu whose mother and grandmother had sometimes eaten less food so there would be more for him. Anbu became a doctor and supported her husband while he earned a doctorate in economics. By 1979, when Raj was born in New Delhi, his mother was a pediatrics professor and his father was an economics professor who had served as an adviser to Prime Minister Indira Gandhi.

When Chetty was 9, his family moved to the United States, and he began a climb nearly as dramatic as that of his parents. He was the valedictorian of his high-school class, then graduated in just three years from Harvard University, where he went on to earn a doctorate in economics and, at age 28, was among the youngest faculty members in the university’s history to be offered tenure. In 2012, he was awarded the MacArthur genius grant. The following year, he was given the John Bates Clark Medal, awarded to the most promising economist under 40. (He was 33 at the time.) In 2015, Stanford University hired him away. Last summer, Harvard lured him back to launch his own research and policy institute, with funding from the Bill & Melinda Gates Foundation and the Chan Zuckerberg Initiative.

Chetty turns 40 this month, and is widely considered to be one of the most influential social scientists of his generation. “The question with Raj,” says Harvard’s Edward Glaeser, one of the country’s leading urban economists, “is notif he will win a Nobel Prize, but when.”

The work that has brought Chetty such fame is an echo of his family’s history. He has pioneered an approach that uses newly available sources of government data to show how American families fare across generations, revealing striking patterns of upward mobility and stagnation. In one early study, he showed that children born in 1940 had a 90 percent chance of earning more than their parents, but for children born four decades later, that chance had fallen to 50 percent, a toss of a coin.

In 2013, Chetty released a colorful map of the United States, showing the surprising degree to which people’s financial prospects depend on where they happen to grow up. In Salt Lake City, a person born to a family in the bottom fifth of household income had a 10.8 percent chance of reaching the top fifth. In Milwaukee, the odds were less than half that.

Since then, each of his studies has become a front-page media event (“Chetty bombs,” one collaborator calls them) that combines awe—millions of data points, vivid infographics, a countrywide lens—with shock. This may not be the America you’d like to imagine, the statistics testify, but it’s what we’ve allowed America to become. Dozens of the nation’s elite colleges have more children of the 1 percent than from families in the bottom 60 percent of family income. A black boy born to a wealthy family is more than twice as likely to end up poor as a white boy from a wealthy family. Chetty has established Big Data as a moral force in the American debate.Now he wants to do more than change our understanding of America—he wants to change America itself. His new Harvard-based institute, called Opportunity Insights, is explicitly aimed at applying his findings in cities around the country and demonstrating that social scientists, despite a discouraging track record, are able to fix the problems they articulate in journals. His staff includes an eight-person policy team, which is building partnerships with Charlotte, Seattle, Detroit, Minneapolis, and other cities.

For a man who has done so much to document the country’s failings, Chetty is curiously optimistic. He has the confidence of a scientist: If a phenomenon like upward mobility can be measured with enough precision, then it can be understood; if it can be understood, then it can be manipulated. “The big-picture goal,” Chetty told me, “is to revive the American dream.”

Last summer, I visited Opportunity Insights on its opening day. The offices are housed on the second floor of a brick building, above a café and across Massachusetts Avenue from Harvard’s columned Widener Library. Chetty arrived in econ-casual: a lilac dress shirt, no jacket, black slacks. He is tall and trim, with an untroubled air; he smiled as he greeted two of his longtime collaborators—the Brown University economist John Friedman and Harvard’s Nathaniel Hendren. They walked him around, showing off the finished space, done in a modern palette of white, wood, and aluminum with accent walls of yellow and sage.

Later, after Chetty and his colleagues had finished giving a day of seminars to their new staff, I caught up with him in his office, which was outfitted with a pristine whiteboard, an adjustable-height desk, and a Herman Miller chair that still had the tags attached. The first time I’d met him, at an economics conference, he had told me he was one of several cousins on his mother’s side who go by Raj, all named after their grandfather, Nadarajan, all with sharp minds and the same long legs and easy gait. Yet of Nadarajan’s children, only Chetty’s mother graduated from college, and he’s certain that this fact shaped his generation’s possibilities. He was able to come to the United States as a child and attend an elite private school, the University School of Milwaukee. New York Raj—the family appends a location to keep them straight—came to the U.S. later in life, at age 28, worked in drugstores, and then took a series of jobs with the City of New York. Singapore Raj found a job in a temple there that allows him to support his family back in India, but means they must live apart. Karaikudi Raj, named for the town where his mother grew up, committed suicide as a teenager.

I asked Boston Raj to consider what might have become of him if that wealthy Indian businessman had not decided, in the precise year his mother was finishing high school, to create a college for the talented women of southeastern Tamil Nadu. “I would likely not be here,” he said, thinking for a moment. “To put it another way: Who are all the people who are not here, who would have been here if they’d had the opportunities? That is a really good question.”

Charlotte is one of America’s great urban success stories. In the 1970s, it was a modest-size city left behind as the textile industry that had defined North Carolina moved overseas. But in the 1980s, the “Queen City” began to lift itself up. US Airways established a hub at the Charlotte Douglas International Airport, and the region became a major transportation and distribution center. Bank of America built its headquarters there, and today Charlotte is in a dead heat with San Francisco to be the nation’s second-largest banking center, after New York. New skyscrapers have sprouted downtown, and the city boundary has been expanding, replacing farmland with spacious homes and Whole Foods stores. In the past four decades, Charlotte’s population has nearly tripled.

Charlotte has also stood out in Chetty’s research, though not in a good way. In a 2014 analysis of the country’s 50 largest metropolitan areas, Charlotte ranked last in ability to lift up poor children. Only 4.4 percent of Charlotte’s kids moved from the bottom quintile of household income to the top. Kids born into low-income families earned just $26,000 a year, on average, as adults—perched on the poverty line. “It was shocking,” says Brian Collier, an executive vice president of the Foundation for the Carolinas, which is working with Opportunity Insights. “The Charlotte story is that we are a meritocracy, that if you come here and are smart and motivated, you will have every opportunity to achieve greatness.” The city’s true story, Chetty’s data showed, is of selective opportunity: All the data-scientist and business-development-analyst jobs in the thriving banking sector are a boon for out-of-towners and the progeny of the well-to-do, but to grow up poor in Charlotte is largely to remain poor.

To help cities like Charlotte, Chetty takes inspiration from medicine. For thousands of years, he explained, little progress was made in understanding disease, until technologies like the microscope gave scientists novel ways to understand biology, and thus the pathologies that make people ill. In October, Chetty’s institute released an interactive map of the United States called the Opportunity Atlas, revealing the terrain of opportunity down to the level of individual neighborhoods. This, he says, will be his microscope.

Drawing on anonymized government data over a three-decade span, the researchers linked children to the parents who claimed them as dependents. The atlas then followed poor kids from every census tract in the country, showing how much they went on to earn as adults. The colors on the atlas reveal a generation’s prospects: red for areas where kids fared the worst; shades of orange, yellow, and green for middling locales; and blue for spots like Salt Lake City’s Foothill neighborhood, where upward mobility is strongest. It can also track children born into higher income brackets, compare results by race and gender, and zoom out to show states, regions, or the country as a whole.

The Opportunity Atlas has a fractal quality. Some regions of the United States  . . .

Continue reading.

Written by LeisureGuy

21 July 2019 at 11:47 am

How the sugar industry manipulated science

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Written by LeisureGuy

21 July 2019 at 7:58 am

Safe Deposit Boxes Are Not Safe

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Stacy Cowley reports in the NY Times:

In the early 1980s, when Philip Poniz moved to New Jersey from Colorado, he needed a well-protected place to stash his collection of rare watches. He had been gathering unusual pieces since he was a teenager in 1960s Poland, fascinated by their intricate mechanics. His hobby became his profession, and by the time of his relocation, Mr. Poniz was an internationally known expert in the history and restoration of high-end timepieces.

At first, he kept his personal collection in his house, but as it grew, he wanted something more secure. The vault at his neighborhood bank seemed ideal. In 1983, he signed a one-page lease agreement with First National State Bank of Edison in Highland Park, N.J., for a safe deposit box.

Over the next few decades, the bank — a squat brick building on a low-rise suburban street — changed hands many times. First National became First Union, which was sold to Wachovia, which was then bought by Wells Fargo. But its vault remained the same. A foot-thick steel door sheltered cabinets filled with hundreds of stacked metal boxes, each protected by two keys. The bank kept one; the customer held the other. Both were required to open a box.

In 1998, Mr. Poniz rented several additional boxes, and stored in them various items related to his work. He separated a batch of personal effects — photographs, coins he had inherited from his grandfather, dozens of watches — into a box labeled 105. Every time he opened it, he saw the glinting accumulation of his life’s work.

Then, on April 7, 2014, he lifted the thin metal lid. Box 105 was empty.

“I thought my heart would fail,” Mr. Poniz said. He paused in his retelling of the memory. At age 67, he has a strong Polish accent and speaks English carefully. He struggled to find the right words to describe the day he discovered his watches were missing. “I was devastated,” he said. “I was never like that in my life before. I had never known that one can have a feeling like that.”

There are an estimated 25 million safe deposit boxes in America, and they operate in a legal gray zone within the highly regulated banking industry. There are no federal laws governing the boxes; no rules require banks to compensate customers if their property is stolen or destroyed.

Every year, a few hundred customers report to the authorities that valuable items — art, memorabilia, diamonds, jewelry, rare coins, stacks of cash — have disappeared from their safe deposit boxes. Sometimes the fault lies with the customer. People remove items and then forget having done so. Others allow children or spouses access to their boxes, and don’t realize that they have been removing things. But even when a bank is clearly at fault, customers rarely recover more than a small fraction of what they’ve lost — if they recover anything at all. The combination of lax regulations and customers not paying attention to the fine print of their box-leasing agreements allows many banks to deflect responsibility when valuables are damaged or go missing.

“The big banks fight tooth and nail, and prolong and delay — whatever it takes to wear people down,” said David P. McGuinn, the founder of Safe Deposit Specialists, an industry consulting firm. “The larger the claim, the more likely they are to battle it for years.”

In the days after Mr. Poniz found his box empty, he began piecing together what had happened: Wells Fargo had apparently tried to evict another customer for not keeping up with payments, and bank employees had mistakenly removed his box instead. After drilling No. 105 open, the bank shipped its contents to a storage facility in North Carolina. After Mr. Poniz discovered the loss, Wells Fargo sent back everything it had in storage, but some items had vanished.

In a six-page report filed with the Highland Park Police, Mr. Poniz described the watches, coins, documents and other items that were gone. Using auction records and sales reports, he estimated that their combined value was more than $10 million. That would make it one of the largest safe-deposit-box losses in American history.

Moviemakers love safe deposit boxes much more than bank executives do. On film, they’re an essential tool for spies — Jason Bourne, for example, retrieved cash and passports from a Swiss box with the help of a device implanted in his hip — and a magnet for cunning thieves. Cinematic burglars have raided highly secured vaults by tunneling in (“The Bank Job”), drilling through a wall (“Sexy Beast”), disabling alarms (“King of Thieves”), taking hostages (“Inside Man”) or simply blowing off the doors (“The Dark Knight”).

Real-world criminals have tried similarly spectacular attacks. In Conroe, Tex., someone cut through the roof of a bank last year and looted its safe deposit vault. Robbers took a similar route three years ago into two banks in Brooklyn and Queens, where they left empty boxes scattered in their wake. (Four men were convicted of the crime, which netted them more than $20 million in cash and goods.) But such capers are rare. Of the 19,000 bank robberies reported to the F.B.I. in the last five years, only 44 involved safe-deposit heists.

Banks increasingly regard safe deposit boxes as more of a headache than they’re worth. They’re expensive to build, complicated to maintain and not very lucrative. The four largest American banks — JPMorgan Chase, Bank of America, Wells Fargo and Citigroup — rarely install them in new branches. Capital One stopped renting out new boxes in 2016. A dwindling number of customers wanted them, a bank spokeswoman said.

“All of the major national banks would prefer to be out of the safe-deposit-box business,” said Jerry Pluard, the president of Safe Deposit Box Insurance Coverage, a small Chicago firm that insures boxes. “They view it as a legacy service that’s not strategic to anything they do, and they’ve stopped putting any real focus or resources into it.” He estimates that about half of the safe deposit boxes in the country are empty.

The number of bank branches in the United States has been steadily declining — down 10 percent in the last decade — and safe deposit boxes are being relocated, evicted and sometimes misplaced. In Maryland, a large bank closed several branches and lost track of hundreds of safe deposit boxes, according to a lawsuit filed by a customer who said he lost gold and gems valued at $500,000. In Florida, a customer accused Chase of losing her box and all of its contents — coins, jewelry and family heirlooms worth more than $100,000. (She sued; a federal judge ruled that she had waited too long to file her negligence claim and decided in the bank’s favor.) In California, a Wells Fargo customer said the bank accidentally re-rented her box; the diamond necklace and other jewels she had in it were never found.

When such cases go to court, the bank often has the upper hand. Lianna Saribekyan and her husband, Agassi Halajyan, leased a large safe deposit box at a Bank of America branch in Universal City, Calif., in 2012. They filled it with jewelry, cash, gemstones and family heirlooms that they wanted to keep safe as they renovated their home. They paid $246 for a one-year rental. Nine months later, Ms. Saribekyan returned to the branch and discovered that her box was gone. The Bank of America location was closing, employees told her; the bank had drilled open all of its safe deposit boxes. (The bank said it sent multiple letters to customers about the branch closure. Ms. Saribekyan said she never received them.)

When Bank of America retrieved her items from its storage depot, many were missing. The bank’s own before-and-after inventories, written by its employees, showed discrepancies, according to court records. Among the items that vanished, Ms. Saribekyan said, were 44 loose diamonds, a gold-and-diamond necklace, valuable coins and more than $24,000 in rare United States currency.

She sued the bank in Los Angeles Superior Court, seeking $7.3 million. Bank of America sought to have the case dismissed, citing language in its lease agreement stating that the renter “assumes all risks” of leaving property in the box. But in 2017, after a monthlong trial, a jury awarded Ms. Saribekyan $2.5 million for her lost items and an additional $2 million in punitive damages. Bank of America then challenged the verdict, arguing that any recovery should be restricted by the terms detailed in its rental contract: “The bank’s liability for any loss in connection with the box for whatever reason shall not exceed ten (10) times the annual rent charged for the box.”

Judge Rita Miller agreed. She reduced the compensation for lost items to $2,460 and cut the punitive damages to $150,000.

“We were shocked, furious and in disbelief that such a thing could happen,” Mr. Halajyan said. “The attorneys were throwing stupid counterarguments at us, asking, ‘Why would you put so many valuables in the safe deposit box?’ We were like, where else do you want us to put it? The word ‘safe’ is supposed to mean ‘safe.’”

A Bank of America spokeswoman declined to comment on the case.

The company’s restrictive terms aren’t unusual. Wells Fargo’s safe-deposit-box contract caps the bank’s liability at $500. Citigroup limits it to 500 times the box’s annual rent, while JPMorgan Chase has a $25,000 ceiling on its liability. Banks typically argue — and courts have in many cases agreed — that customers are bound by the bank’s most-current terms, even if they leased their box years or even decades earlier.

No regulator formally tallies customer losses in safe deposit boxes.  . .

Continue reading. There’s much more.

Written by LeisureGuy

20 July 2019 at 2:31 pm

Posted in Business, Daily life

Researchers Easily Trick Cylance’s AI-Based Antivirus Into Thinking Malware Is ‘Goodware’

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AI is not so clever as human criminals. Kim Zetter reports in Vice:

Artificial intelligence has been touted by some in the security community as the silver bullet in malware detection. Its proponents say it’s superior to traditional antivirus since it can catch new variants and never-before-seen malware—think zero-day exploits—that are the Achilles heel of antivirus. One of its biggest proponents is the security firm BlackBerry Cylance, which has staked its business model on the artificial intelligence engine in its endpoint PROTECT detection system, which the company says has the ability to detect new malicious files two years before their authors even create them.

But researchers in Australia say they’ve found a way to subvert the machine-learning algorithm in PROTECT and cause it to falsely tag already known malware as “goodware.” The method doesn’t involve altering the malicious code, as hackers generally do to evade detection. Instead, the researchers developed a “global bypass” method that works with almost any malware to fool the Cylance engine. It involves simply taking strings from a non-malicious file and appending them to a malicious one, tricking the system into thinking the malicious file is benign.

The benign strings they used came from an online gaming program, which they have declined to name publicly so that Cylance will have a chance to fix the problem before hackers exploit it.

“As far as I know, this is a world-first, proven global attack on the ML [machine learning] mechanism of a security company,” says Adi Ashkenazy, CEO of the Sydney-based company Skylight Cyber, who conducted the research with CTO Shahar Zini. “After around four years of super hype [about AI], I think this is a humbling example of how the approach provides a new attack surface that was not possible with legacy [antivirus software].”

The method works because Cylance’s machine-learning algorithm has a bias toward the benign file that causes it to ignore any malicious code and features in a malicious file if it also sees strings from the benign file attached to a malicious file—essentially overriding the correct conclusion the detection engine should otherwise make. The trick works even if the Cylance engine previously concluded the same file was malicious, before the benign strings were appended to it.

The researchers tested their attack against the WannaCry ransomware that crippled hospitals and businesses around the world in 2017, as well as the more recent Samsam ransomware, the popular Mimikatz hacking tool, and hundreds of other known malicious files—adding the same benign strings from the gaming program to each malicious file—and in nearly all cases, they were able to trick the Cylance engine. . .

Continue reading.

Written by LeisureGuy

19 July 2019 at 12:06 pm

Health Insurers Make It Easy for Scammers to Steal Millions. Who Pays? You.

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Marshall Allen reports in ProPublica:

Ever since her 14-year marriage imploded in financial chaos and a protective order, Amy Lankford had kept a wary eye on her ex, David Williams.

Williams, then 51, with the beefy body of a former wrestler gone slightly to seed, was always working the angles, looking for shortcuts to success and mostly stumbling. During their marriage, Lankford had been forced to work overtime as a physical therapist when his personal training business couldn’t pay his share of the bills.

So, when Williams gave their three kids iPad Minis for Christmas in 2013, she was immediately suspicious. Where did he get that kind of money? Then one day on her son’s iPad, she noticed numbers next to the green iMessage icon indicating that new text messages were waiting. She clicked.

What she saw next made her heart pound. Somehow the iPad had become linked to her ex-husband’s personal Apple device and the messages were for him.

Most of the texts were from people setting up workouts through his personal training business, Get Fit With Dave, which he ran out of his home in Mansfield, Texas, a suburb of Fort Worth. But, oddly, they were also providing their birthdates and the group number of their health insurance plans. The people had health benefits administered by industry giants, including Aetna, Cigna and UnitedHealthcare. They were pleased to hear their health plans would now pay for their fitness workouts.

Lankford’s mind raced as she scrolled through the messages. It appeared her ex-husband was getting insurance companies to pay for his personal training services. But how could that be possible? Insurance companies pay for care that’s medically necessary, not sessions of dumbbell curls and lunges.

Insurance companies also only pay for care provided by licensed medical providers, like doctors or nurses. Williams called himself “Dr. Dave” because he had a Ph.D. in kinesiology. But he didn’t have a medical license. He wasn’t qualified to bill insurance companies. But, Lankford could see, he was doing it anyway.

As Lankford would learn, “Dr. Dave” had wrongfully obtained, with breathtaking ease, federal identification numbers that allowed him to fraudulently bill insurers as a physician for services to about 1,000 people. Then he battered the system with the bluntest of ploys: submit a deluge of out-of-network claims, confident that insurers would blindly approve a healthy percentage of them. Then, if the insurers did object, he gambled that they had scant appetite for a fight.

By the time the authorities stopped Williams, three years had passed since Lankford had discovered the text messages. In total, records show, he ran the scheme for more than four years, fraudulently billing several of the nation’s top insurance companies — United, Aetna and Cigna — for $25 million and reaping about $4 million in cash.

In response to inquiries, Williams sent a brief handwritten letter. He didn’t deny billing the insurers and defended his work, calling it an “unprecedented and beneficial opportunity to help many people.”

“My objective was to create a system of preventative medicine,” he wrote. Because of his work, “hundreds of patients” got off their prescription medication and avoided surgery.

There are a host of reasons health care costs are out-of-control and routinely top American’s list of financial worries, from unnecessary treatment and high prices to waste and fraud. Most people assume their insurance companies are tightly controlling their health care dollars. Insurers themselves boast of this on their websites.

In 2017, private insurance spending hit $1.2 trillion, according to the federal government, yet no one tracks how much is lost to fraud. Some investigators and health care experts estimate that fraud eats up 10% of all health care spending, and they know schemes abound.

Williams’ case highlights an unsettling reality about the nation’s health insurance system: It is surprisingly easy for fraudsters to gain entry, and it is shockingly difficult to convince insurance companies to stop them.

Williams’ spree also lays bare the financial incentives that drive the system: Rising health care costs boost insurers’ profits. Policing criminals eats away at them. Ultimately, losses are passed on to their clients through higher premiums and out-of-pocket fees or reduced coverage.

Insurance companies “are more focused on their bottom line than ferreting out bad actors,” said Michael Elliott, former lead attorney for the Medicare Fraud Strike Force in North Texas.

As Lankford looked at the iPad that day, she knew something else that made Williams’ romp through the health care system all the more surprising. The personal trainer had already done jail time for a similar crime, and Lankford’s father had uncovered the scheme.


Scanning her ex-husband’s texts, Lankford, then 47, knew just who to call. During the rocky end of her marriage, her dad had become the family watchdog. Jim Pratte has an MBA in finance and retired after a career selling computer hardware, but even the mention of Williams flushed his face red and ratcheted up his Texas twang. His former-son-in law is the reason he underwent firearms training.

Lankford lived a few minutes away from her parents in Mansfield. She brought her dad the iPad and they pored over message after message in which Williams assured clients that their insurance would cover their workouts at no cost to them.

Lankford and Pratte, then 68, were stunned at Williams’ audacity. They were sure the companies would quickly crackdown on what appeared to be a fraudulent scheme.

Especially because Williams had a criminal record.

In early 2006, while Williams and Lankford were going through their divorce, the family computer started freezing up. Lankford asked her dad to help her recover a document. Scrolling through the hard drive, Pratte came upon a folder named “Invoices,” and he suspected it had something to do with Williams.

His soon to be ex-son-in-law had had a promising start. He’d wrestled and earned bachelor’s and master’s degrees at Boise State University, and a Ph.D. at Texas A&M University, before landing a well-paying job as a community college professor in Arlington. But the glow faded when the school suddenly fired him for reasons hidden by a confidential settlement and by Williams himself, who refused to reveal them even to his wife.

Out of a job, Williams had hustled investments from their friends to convert an old Winn-Dixie grocery store into a health club called “Doc’s Gym.” The deal fell apart and everyone lost their money. The failure was written up in the local newspaper under the headline: “What’s up with Doc’s?”

Inside the “Invoices” folder, Pratte found about a dozen bills that appeared to be from a Fort Worth nonprofit organization where his daughter and Williams took their son Jake for autism treatment. As Pratte suspected, the invoices turned out to be fake. Williams had pretended to take Jake for therapy, then created the false bills so he could pocket a cash “reimbursement” from a county agency. . .

Continue reading. There’s more. And see also:

Health Insurance Hustle: The Confounding Way We Pay for Care

That’s a series of stories, of which the blogged report is one.

Written by LeisureGuy

19 July 2019 at 12:02 pm

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