Clips 2/26/02

[Lillie Coney <lillie.coney@xxxxxxx>]

New York Times
February 26, 2002
U.S. Agency's Computers Didn't Protect Indian Fund
By JOHN MARKOFF

Instructed by a federal district judge to determine whether the computer
network at the Bureau of Indian Affairs was secure from malicious intruders,
Alan Balaran decided to infiltrate it.

He did this not once, but three times, and determined among other things that
skilled hackers would be able to bilk Indian funds in trust at the bureau by
having checks sent to themselves. 

First Mr. Balaran went to a bureau building in Virginia, walked in through a
loading platform and asked directions to the computing nerve center, where he
plucked from a shredder a lengthy printout of data on some of the trust fund
accounts that the agency manages for half a million Indians. Nobody stopped
him.

Then he hired a team of hackers to break into the bureau's computers, using
commonly available software.

Finally, after the bureau complained that the computer assault had been unfair
because it relied on inside knowledge of the agency's network, Mr. Balaran's
team broke in again, without such help, even setting up a trust fund account in
his name.

Mr. Balaran is no computer rogue. He is a Washington lawyer appointed as a
special master by the federal judge, Royce C. Lamberth, who, hearing the
largest class-action suit ever filed by Indians, has already determined that
for more than a century the government has mismanaged accounts held in trust
for them. Judge Lamberth, who sits in Washington, will now determine whether
the government should be held in contempt for failure to abide by past orders
to repair its work.

Mr. Balaran, appointed by the judge in 2000 to oversee a variety of issues
related to the suit, began looking into computer security at the bureau early
last year. The effort intensified when a group of plaintiffs discovered, in the
April 2001 issue of Government Executive magazine, an interview in which the
agency's chief information officer, Dominic Nessi, confessed that its systems
were vulnerable to hacking.

"For all practical purposes, we have no security," Mr. Nessi said in that
interview.

Computer security experts say that although the problems at the bureau are
particularly striking, they are not isolated. Many federal agencies are
vulnerable, they say, despite years of public concern. 

Mr. Balaran declined to comment publicly on his investigation, citing his
continuing role in the court case. But the report on what he found, filed with
the court in November, is a litany of security lapses stemming from what the
report portrays as official neglect for over a decade.

A spokesman for the Interior Department, parent of the Bureau of Indian
Affairs, defended the bureau's computer security efforts, saying it had tried
to deal with vulnerabilities long before the report. "I don't propose to defend
all of the shortcomings," said the spokesman, John Wright. But "it's not like
they didn't try to fix the problems. There were a number of attempts. We were
led to believe" by consultants that the bureau's systems worked, "and they
didn't work."

Mr. Balaran's infiltration began last February, when, accompanied by a Justice
Department lawyer, he drove to the bureau's supposedly secure data processing
center in Reston, Va. After Mr. Balaran asked his companion to remove his tie
so as to attract less attention, they entered the building from the loading
dock. Although they wore no badges, they were able to walk past a guard at the
entrance ? twice, simply to make the point ? without being questioned.

Once inside and searching for the secure computing area responsible for
processing and storing data related to Indian trust funds, Mr. Balaran asked
directions from a passer-by. He was escorted to the computing room on the
second floor. There he was able to walk to a shredder and pick up a voluminous
computer printout with detailed information about trust funds ? money
controlled by the government for the benefit of Indians whose property,
descended from a system of tribal ownership and managed by Washington, is
generally leased to oil, gas or timber companies.

Mr. Balaran filed a report in March alerting the court to the break-in and the
outcome, and then struck again a few months later. He hired Predictive Systems
Inc. (news/quote), a computer security company based in New York, to perform a
"pen test" ? industry jargon for any electronic effort to penetrate the
defenses of a computer system. When the Predictive Systems team examined the
bureau's network, it was immediately apparent that it would be possible to gain
access to sensitive data via the Internet using readily available software
tools. 

Once the company penetrated the network and reported its findings to Mr.
Balaran, the bureau protested the results, saying that the pen test ordinarily
would have failed but that the Predictive Systems penetration team, as part of
the exercise, had had detailed information about the agency's network.
So Mr. Balaran asked the company on Aug. 30 to attack the agency's computers
again. This time he authorized the consultants to create a trust account in his
name.

In October, Predictive Systems supplied a report reiterating its findings that
the bureau's computer systems were vulnerable to attack. In the second test,
conducted without any prior reference material, the consultants used a
completely different computer network to gain access.

As instructed, they also set up an account in Mr. Balaran's name. Since the
attack took place during the middle of the trust fund billing cycle, no check
was issued. But Mr. Balaran said the group had proved to his satisfaction that
it would be possible to send money to any address.

After reading Mr. Balaran's report, Judge Lamberth forced the entire Interior
Department in December to shut down virtually all its computer systems, since
access to the systems of the Indian affairs bureau could be gained through the
systems of other Interior agencies. This month, with Mr. Balaran's oversight
and the help of Predictive Systems, the department finally began restoring the
interrupted operations, among other things sending checks to thousands of
Indians to whom trust-fund payments had been suspended as a result of the
shutdown. 

Mr. Wright, the Interior Department spokesman, says that 52 percent of the
department's systems are now back online and that Interior is working with Mr.
Balaran, system by system, to return to complete operation. He could not say
when that would be. 

Mr. Balaran's report noted that there had been at least four earlier ones
indicating computer security weaknesses at the bureau. Those warnings date from
1989, when the accounting firm of Arthur Andersen first raised concerns.

Most recently, in late 1999, Mr. Nessi, then special adviser to the assistant
interior secretary for Indian affairs, commissioned such a report from SeNet
International, a computer security company. The evaluation, completed in the
spring of 2000, cost nearly $1 million and identified hundreds of weaknesses.

But Mr. Balaran noted in his report that when he interviewed Mr. Nessi in June
of last year, he discovered that the SeNet report had been read by neither Mr.
Nessi nor any other Indian affairs official.

Mr. Balaran's report quoted Mr. Nessi as saying, "You know, with all the duties
that I have, I would not be able to get to each of them."

Reached last night at his Virginia home, Mr. Nessi, who now has another job at
Interior, said he had in fact read part of the report and in any case had been
briefed by SeNet on all of it. He said he had spent his time at the bureau
trying to address the very problems Mr. Balaran ultimately identified.
**************
New York Times
February 26, 2002
State Pulls Data From Internet in Attempt to Thwart Terrorists
By JAMES C. McKINLEY Jr.

ALBANY, Feb. 25 ? The Pataki administration has quietly ordered state agencies
to restrict information available on the Internet and limit its release through
New York's Freedom of Information Law to prevent terrorists from using the
material, which includes maps of electrical grids and reservoirs as well as
building floor plans.

The new policy, laid out in a confidential memorandum to agency heads from the
state's director of public security, James K. Kallstrom, is one of the most
far-reaching and restrictive in the nation, according to research librarians
and advocates for open government.

Mr. Kallstrom, a former high-ranking official of the Federal Bureau of
Investigation, said the order was aimed at preventing details about potential
targets, like bridges and nuclear power plants, from falling into the hands of
terrorist groups like Al Qaeda.

"The intent, clearly, is to remove from the public Web sites that information
that serves no other purpose than to equip potential terrorists," Mr. Kallstrom
said. "This is not an attempt just to shield legitimate information from the
public."

Some state agencies had removed material in the immediate aftermath of the
World Trade Center attack. But in the memorandum Mr. Kallstrom issued last
month, he said the Pataki administration was concerned "that there is a
disconcerting amount of potentially compromising information still publicly
accessible."

The agency commissioners were not only instructed to review again what might be
accessible, but were also asked to classify as "sensitive" and make exempt
"information related to systems, structures, individuals and services essential
to the security, government or economy of the state." He directed agency heads
to remove things like data about electrical power, gas and oil storage,
transportation, banking and finance, water supply, emergency services and the
continuity of government operations. 

The state's new policy guidelines to restrict information and tighten security
are occurring in lock step with the national debate over how to balance the
need for safety and the public's right to information. 

While acknowledging the need for protections against terrorism, Donna
Lieberman, the executive director of the New York Civil Liberties Union, said
the Pataki administration's new policy "raises serious concerns about the
future of open government" and would allow, in the worst case, the government
to become "a series of secret operations."

Federal officials have removed information, like the operational status of
nuclear plants and certain maps of the nation's infrastructure, that was once
at the fingertips of anyone with a computer.

The Environmental Protection Agency, for example, has blocked access to the
toxic-release inventory, a listing of all factories and other sources that emit
poisonous pollution, and has taken information about dangerous pesticides off
its site, environmentalists say.

Some other states have also taken action to limit the free flow of information.
Florida, for instance, has stopped posting records of drivers' licenses on the
state Web sites.

In New York, the Public Service Commission stopped posting the locations of
power plants, including nuclear reactors. The state's Energy Department erased
a detailed map of power lines and substations from its site. Directions to
stockpiles of water pumps and generators used by the state's Emergency
Management Office during floods or other disasters are gone from the Internet.
So are the locations of wastewater treatment plants, floor maps of state
buildings and some mapping databases used to analyze everything from
demographics to infrastructure.

A spokeswoman for Governor Pataki said the administration was still writing
more concrete guidelines on what information would be classified and no longer
available. "It's a work in progress," said Mollie Fullington, the spokeswoman.
"We are putting together a team to review these very issues."

Some advocates of open government contended that New York's new rules were too
broad and could cover information ? like the locations of chemical factories
that emit toxic pollution ? that fuels debates at the core of modern democracy.

"No one would argue that the Pataki administration has been transparent," said
Blair Horner, the chief lobbyist for the New York Public Interest Research
Group. "I think there is a real danger that this directive could be used to
further block from public view information the public should have access to.
The decision on what should be on the Internet or not on the Internet should be
a public discussion, not a private edict." 

Robert J. Freeman, the executive director of the State Committee on Open
Government, said the Freedom of Information Law in New York State allows
officials to censor some information if releasing it would endanger people's
lives or compromise criminal investigations.

The administration's new directive to block the release of what it deems
sensitive information to people who file requests under the law could easily be
justified under those rules, he said. "All they are saying is be careful, be
wise," Mr. Freeman said. "All the memo says is comply with the law." 

Ms. Fullington, the governor's spokeswoman, said such requests would be
determined in the future on a "case-by-case basis."

Mr. Kallstrom's directive also ordered agency heads to review requests made
under the state's Freedom of Information Law over the last year to determine if
anyone had requested information that might be useful to terrorists. The
purpose, he said, was to find leads for investigators trying to thwart
terrorist plots.

"We are concerned that terrorism ? a very serious issue ? doesn't get used to
take away information from the public," said Rachel Leon, a lobbyist for Common
Cause. "You have to have a balance between security and the public's right to
information. We have to make sure the government doesn't overstep."

Mr. Kallstrom says his directives are not intended to keep the public in the
dark on policy matters. He said the diameter and location of a suspension
bridge's cables and fasteners, for instance, should not be made public. Neither
should details be available about the fencing and gates around nuclear plants
or the access roads leading to water reservoirs.

One example of the new policy is that fuel delivery schedules and the locations
of fuel storage tanks used by state agencies are no longer posted on the Web,
aides to Mr. Pataki said. Nor are many details about the state's National Guard
posts and units available.

The memorandum also directs agencies to set up security systems using passwords
and other devices to protect the information they deem sensitive. Mr. Kallstrom
has also led an effort to improve defenses against computer hackers, offering
agencies help in constructing stronger fire walls against intruders.

As a practical matter, winnowing the information available on the Internet will
force more people to request documents under the Freedom of Information Law,
state officials said. Since the law requires a written request, a paper trail
would be created for any release of information, making it easier for law
enforcement officials to find out who had sought the documents. 

New York's open-records law does not require public information to be posted on
the Internet, though some bills have been circulating in the State Legislature
that would do just that. Other laws require that campaign contributions,
payments to lobbyists and information about doctors be published on the
Internet.

Experts on Internet security say the state's crackdown on information may not
be immediately effective. Once something has been published on the Web, it is
hard to control who copies it or where those copies end up. Some search engines
save information from old Web sites, for instance, so a terrorist might still
be able to find a map of New York's power grid.

"It's a bit of a horse out of the barn," Mr. Kallstrom acknowledged. "But you
have to start somewhere. We don't want to unnecessarily and stupidly aid people
who want to kill us."
*********************
February 25, 2002 
State Department gains access to FBI crime database 
By Kellie Lunney
klunney@xxxxxxxxxxx 

The State Department will be able to access certain FBI records to conduct more
extensive background checks on foreigners applying for visas under an interim
rule published in the Federal Register Monday. 

The rule allows authorized State Department officials to access the FBI?s
National Crime Information Center (NCIC) database, which contains more than 40
million records on criminals, suspects and stolen property. State Department
officials will use the database to check the names of foreigners applying for
both immigrant and nonimmigrant visas for criminal records. 

The State Department issues immigrant visas to foreigners who are sponsored by
an employer or a relative with a ?green card? or U.S. citizenship. The agency
issues nonimmigrant visas to foreigners studying or visiting the United States
for temporary periods. 

Prior to enactment of the 2001 U.S.A. Patriot Act (H.R. 3162), the State
Department typically checked only the criminal histories of people applying for
visas to immigrate, according to Nancy Altman, an official in the agency?s visa
services department. The law, which allows federal agencies to share more
sensitive intelligence with one another than before, directs the FBI to provide
the State Department and the Immigration and Naturalization Service with access
to certain information in the NCIC database. 

Under the interim rule, State Department officials will enter an applicant?s
name and date and place of birth into the department?s ?Lookout? database,
which will be connected to certain portions of NCIC?s criminal history records.
If there are any hits that match the applicant?s name or other information
closely, the official must fingerprint the applicant and send the prints to the
FBI for processing. 

To see how the system would work, consider the following hypothetical example:
Jane Doe, born on Feb. 25, 1975 in Paris, applies for a U.S. student visa. A
State Department official types her information into the database and sees two
entries with a code indicating a criminal history: Jeanne Douet, born March 1,
1974 in Dijon, France and Janice E. Doe, born Feb.10, 1975 in Brussels.
Although the spelling of the applicant?s name and the date and place of birth
are not exact matches, they are close enough to warrant a fingerprint check. 

The applicant must pay $25 for the government to run the check. If an
applicant?s fingerprints match an NCIC criminal history record, the FBI will
give the State Department the full record. 

Although the State Department and the FBI have always shared a certain amount
of information, the interim rule gives State a more proactive role in checking
the backgrounds of applicants, Altman said. ?The rule expands checks for
nonimmigrant visa applicants, and facilitates a discussion between agencies on
which information databases are the most useful to them.? 

More than 31 million nonimmigrant foreigners legally enter this country every
year through 300 checkpoints. Some 3 million to 4 million visitors each year
remain in the United States illegally after their visas expire. 

The interim rule took effect Feb. 25, and written comments must be submitted on
or before April 26, 2002. 

Individuals can send their comments to: 

Chief, Legislation and Regulations Division

Visa Services
State Department
2201 C Street, NW
Washington, D.C. 20520-0106
Email: VisaRegs@xxxxxxxxx
Fax: 202-663-3898 
********************
E-Government Will Aid Anti-Terrorism Effort - Poll  
By Brian Krebs, Newsbytes
WASHINGTON, D.C., U.S.A.,
26 Feb 2002, 2:18 AM CST

A majority of Americans believe e-government initiatives will help federal,
state, and local governments track down criminals and terrorists and respond to
threats, according to a new poll released today. 

In its latest e-government survey, ?To Connect, Protect, and Serve Us,? the
Council for Excellence in Government found that 90 percent of the public feels
?very? or ?highly favorable? toward e-government systems that would help
federal, state and local law enforcement officials exchange information to help
apprehend and prosecute criminals and terrorists. 

More than 70 percent of the public believe e-government initiatives will help
agencies such as the FBI and the Centers for Disease Control and Prevention to
coordinate an effective response to a public emergency, the poll found. 

The FBI already makes frequent use of public outreach programs via the
Internet. The FBI received and processed tens of thousands of tips on its Web
site immediately following the Sept. 11 attacks. 

The agency also accepts thousands of Internet fraud complaints via the Web each
month. In addition, the FBI?s National Infrastructure Protection Center issues
periodic alerts about computer viruses, and security holes in computer hardware
and software. 

Fully 57 percent of Americans agree that Internet users should be willing to
give up some privacy if it strengthens national security, according to the
survey. 

Patricia McGinnis, CEO of the council, said the poll shows Americans look to
government with greater respect and confidence in times of crisis. 

?This poll shows that the public is also confident that information and
communications technology can help government agencies work together to fight
terrorism,? she said. 

The study indicates that many Americans continue to be concerned about Internet
security and online voting. Sixty-four percent of Internet users rated
themselves ?extremely concerned? about hackers breaking into government
computers. An equal majority of the public rejects the idea of allowing people
to vote online for federal offices such as the Presidency or Congress. 

The poll also appears to show more Americans are warming up to the benefits
offered by e-government: 64 percent expect e-government to have a positive
effect on the way government operates, compared to just 56 percent who said so
in August 2000. 

The study was conducted by Hart-Teeter and paid for by EDS Corp. The poll
includes surveys of 961 adults nationwide, 400 of which were government
decision makers, including 200 at the federal level, 100 in state government,
and 100 in local government. 

The Council for Excellence poll is online at: http://www.excelgov.org 
Reported by Newsbytes.com, http://www.newsbytes.com 
02:18 CST

Reposted 08:38 CST 

****************************
AOL Accused Over Charging Customers 
Mon Feb 25, 8:07 PM ET 
By DAVID KRAVETS, Associated Press Writer 

SAN FRANCISCO (AP) - America Online Inc. was accused of charging thousands of
its customers for merchandise they did not buy, according to a federal lawsuit
made available Monday.

The suit claims that the AOL Time Warner Inc. subsidiary "unlawfully charged
and collected money for this unordered merchandise and shipping and handling
charges from subscriber's credit card, debit card and checking accounts."

The suit, filed in U.S. District Court here late Friday, accused the nation's
largest online service of shipping products  including books, stereos and
bedsheets  advertised on its service even when subscribers clicked the "no
thanks" button on their computer screens.

Barry R. Himmelstein, one of several lawyers suing the Internet provider, said
the company should change its "You Got Mail" slogan to "You got a package." He
said his law firm has received dozens of consumer complaints against the
company.

The suit seeks nationwide class-action status. No court date has been set.

The suits names three plaintiffs but claims the company misbilled "thousands of
Internet service subscribers."AOL has 33 million subscribers.

An AOL spokesman dismissed the suit.

"These allegations are without merit and we intend to vigorously contest this
lawsuit in court," said Nicholas Graham, spokesman for the Dulles, Va.-based
company.

Subscriber Dawn Brisky of Fresno said she was charged $74 in December for bed
sheets she did not purchase.

"It just came to my house," Brisky said.

The suit also alleges that an Oakland woman was charged $10 for a desk planner
and $171 for a stereo she never bought. A Rialto man was charged $60 for some
books and charged $90 for a "Cyber Sonic Tooth Care System" he did not
purchase, according to the suit.

The suit seeks unspecified damages, the return of unauthorized payments, and to
let consumers keep the unauthorized merchandise at America Online's expense.

The case is Buckley v. America Online Inc., C02-0918.
************************
Associated Press News Service
Copy-Protected Music CD Suit Settled 
Mon Feb 25, 6:31 PM ET 
By MAY WONG, AP Technology Writer 

SAN JOSE, Calif. - Makers of a Charley Pride CD, the first known copy-protected
compact disc released in the United States, have agreed to warn consumers it is
not compatible with computer CD-ROM drives or DVD players.

  
The agreement settles a lawsuit filed in a Marin County court by Karen DeLise,
a California woman who was upset after she discovered her new "Charley Pride  A
Tribute to Jim Reeves" CD contained a copy protection scheme from SunnComm Inc.
that prevented the disc from being played in her PC. The technology deters
consumers from swapping music over the Internet or making unlimited personal
copies of a CD for car stereos or portable MP3 music players.

DeLise sued SunnComm and the record's distributors, independent record label
Music City Records and Fahrenheit Entertainment, in September, claiming they
failed to put an adequate disclaimer on the CD's package.

As part of the settlement, reached Friday, the CD's makers will provide a more
detailed disclosure in the packaging. They will also stop requiring consumers
to enter their names and e-mail addresses as a condition of downloading the
music from a Web site, which DeLise's attorney, Ira Rothken, contends was a way
for the record labels to track listener habits.

"This sets an excellent example for the record industry to follow in adopting
digital management schemes in the future while preserving consumer privacy,"
Rothken said.

The settlement does not apply to other secure CDs.

Various record labels, including Universal, Warner, EMI, BMG and Sony, are
exploring technologies that will limit the digital duplication of CDs. Most
copy-protected releases have been secret, with no disclosure to buyers.

Executives at SunnComm, one of several providers of so-called digital rights
management technology, said they thought they had disclosed enough already by
including a label that stated the Charley Pride CD was "designed to play in
standard audio CD players only."

"It was the first time out of the box for anybody to do this. There wasn't a
format for anybody to go by and we did the best we could," said Bill Whitmore,
SunnComm's chief operating officer. "But we were willing to settle the suit to
communicate with the consumers."

Representatives of Music City Records and Fahrenheit Entertainment did not
immediately return phone calls for comment.
**********************
USA Today
PC makers soon may be forced to recycle
By Michelle Kessler, USA TODAY 

SAN FRANCISCO  Pressure is building on computer and electronics makers to
recycle old equipment to curb toxic electronics waste. On Tuesday, California
state Sen. Gloria Romero, a Democrat from Los Angeles, is expected to propose
legislation to force manufacturers to take back used PCs, televisions and other
high-tech junk for recycling. So-called e-waste, which often contains toxic
chemicals, is clogging U.S. landfills and, environmental groups say, polluting
Third World countries.

But recycling is expensive: about $20 per PC. And manufacturers say they'll
have little choice but to pass the cost on to consumers, which could hurt
sales. Romero disagrees. "The same arguments were made when we started talking
about recycling plastic bottles. And we're still drinking Coke and Pepsi."

Lawmakers in Massachusetts, Nebraska and South Carolina are considering bills
like Romero's. E-waste is a growing problem; about 1.8 million tons were
created in the USA in 1999, according to the latest Environmental Protection
Agency data.

Romero's proposal would require all "hazardous" electronics sold in California
to be recycled by 2006. Manufacturers that don't have recycling programs would
have to pay a fee to the state. How the law would be enforced is unclear. It
would be tough, for example, to keep track of a PC sold in California, then
used in offices elsewhere.

Europe and Japan have led with laws requiring manufacturers to recycle their
products. No such law exists in the USA. And PC and electronics makers have
been slow to launch U.S. recycling programs. Hewlett-Packard and IBM have them,
but they charge consumers a fee that runs about $20 per PC.

PC makers say they cannot recycle for free without putting themselves at a
competitive disadvantage. Several, including IBM and Compaq Computer, say they
would if their competitors did. "We'd rather be part of the solution," Compaq
CEO Michael Capellas says.

Environmental groups, in a report released Monday, say that 50% to 80% of
e-waste collected for recycling in the USA is exported to countries such as
China, Pakistan and India. The report by five groups, including the Basel
Action Network and Silicon Valley Toxics Coalition, alleges that much of that
waste is dismantled by hand. 

That's a problem because the chemicals inside electronics  including lead,
cadmium and mercury  can poison groundwater and cause damage to the nervous and
reproductive systems. The EPA "is not aware of a broad problem overseas" but is
in talks with industry and state legislators to come up with an e-waste
platform, says EPA assistant administrator Michael Shapiro.

The report focuses on electronics recycling in one region in China, where an
estimated 100,000 workers handle e-waste. The environmentalists witnessed tons
of e-waste being dumped along rivers, in open fields and in irrigation canals,
the report says.
********************
Washington Post
Rocky Start in 'Cyber' Classrooms 
Pa. School Districts' Resistance Slows Online Charter Schools 
By Michael A. Fletcher
Washington Post Staff Writer
Tuesday, February 26, 2002; Page A01 

LANCASTER, Pa. -- Jonathan Shelley, 12, sits in front of hishome computer and
pulls up the day's science lesson. Downstairs in the living room, his
13-year-old brother, Joshua, taps away at his keyboard, taking part in a
discussion about short stories led by his English teacher 90 miles away.

For the Shelley boys, it's another day in what school choice advocates and some
entrepreneurs call the classroom of the future. The children, and 5,100
Pennsylvania students like them, are enrolled in "cyber charter schools" --
online home schools funded by tax dollars and supervised by far-flung public
school systems.

The schools have the potential to provide an array of new educational options
to underserved students and home schoolers, offering almost complete
flexibility to children served best by a custom-tailored curriculum.

Instead, the cyber charter movement in Pennsylvania is bogging down in a morass
of lawsuits and bureaucratic battles. School districts have refused to pay
millions of dollars to cyber charter schools whose costs are unclear and whose
performance they can't monitor. Starved for funds, the state's largest cyber
charter company is on the verge of collapse. Others were weeks late in sending
essential supplies, including computers and books, to students.

More than 100 of Pennsylvania's 501 school districts have joined in lawsuits
challenging the legitimacy of virtual charter schools. The suits argue that the
cyber schools are not covered by the state's 1997 charter school law.

"We don't oppose distance education. But there is no law, in our opinion, that
authorizes formation of these schools," said Thomas J. Gentzel, executive
director of the Pennsylvania School Boards Association, which is leading the
legal assault. "In a sense, cyber schools have been shoehorned into our charter
school law and we don't think they belong there."

The same technology that gives cyber schools their remarkable versatility adds
new complexity to the debate already surrounding the nation's 2,400 traditional
charter schools. Like other charter schools, cyber schools operate under the
auspices of the local public school district that charters them and are funded
by tax dollars. Cyber students are required to take state accountability exams,
though the schools are free to set their own curricula and other priorities.

But critics of cyber charters say the schools raise a number of difficult
questions. How do educators know when students are actually working on their
lessons? Since cyber charters typically have smaller overheads, should they
receive the same funding as bricks-and-mortarcharter schools? How much profit
should private firms be able to earn from these enterprises?

The problems promise to multiply as the nation's newest school choice option
gains popularity. There are at least 30 virtual charter schools operating in 12
states, including eight in Pennsylvania, the nation's virtual charter school
leader, according to the Washington, D.C.-based Center for Education Reform.
Six new cyber charters opened in Pennsylvania during the current school year
alone. There are none in Virginia, Maryland or the District.

In September, an audit of one of Pennsylvania's cyber charter schools
questioned its ability to document student enrollment accurately and to ensure
that students receive the required amount of instruction.

The vast majority of Pennsylvania's school districts are refusing to pay the
schools, saying they should not be required to support the education of
students who attend schools that the districts believe are illegal and that
they cannot oversee.

That stance has outraged school choice proponents, who accuse public school
officials of simply misunderstanding the relationship between tax dollars and
public education.

"The cash is for the kids," said Jeanne Allen, president of the Center for
Education Reform. "Money is intended to follow children. The school districts
have become so accustomed to operating as if it is their money that it clouds
the issue."

Still, local school districts in Pennsylvania, which have an average enrollment
of only 3,200 students each, argue that online charters are a financial drain.
Also, they said, the schools' heavy reliance on parental supervision makes them
no more than a dressed-up version of home schools -- with the huge difference
that school districts must pay for students who attend cyber charters. One
study found that 60 percent of the cyber school students in Pennsylvania are
former home schoolers.

Moreover, the local school districts have argued that there is no relationship
between the operating costs of cyber schools and the sum that school districts
must pay for each student who enrolls. A cyber charter school's true operating
costs are nearly impossible to determine, they say.

The law "dictates a per-pupil payment amount that is unrelated to the charter
school's cost of operation," according to a position paper published last fall
by the Pennsylvania School Boards Association. "By the admission of the cyber
school operators themselves, that figure is many times larger than the cyber
schools' actual costs."

School districts pay about 75 percent of their average per-pupil costs for
students who attend cyber charters. As a result, the money paid to cyber
schools for each student varies widely, with large sums from wealthy school
districts, smaller sums from poor ones. A state study of cyber schools has
recommended that the state set a flat tuition rate -- a recommendation that is
still pending.

While the charter schools are required to be nonprofit operations, they
typically contract with for-profit companies, which provide the educational
content the schools send over the Internet. A number of firms have entered what
promises to be a fast-growing field; among them is K12, a for-profit online
learning firm launched by former education secretary William Bennett.

In some cases, opponents charge, the nonprofit entities are no more than fronts
for profit-making content providers. For instance, the founder of Einstein
Academy Charter School -- the state's largest cyber charter, with 2,400
students -- is married to the owner of Tutorbots, an online education company
that this year was slated to receive nearly $5 million to manage Einstein's
operations.

Mimi Rothschild, Einstein's founder, said there is nothing wrong with the
arrangement. "We have a budget that is a public document that accounts for
every penny we spend," Rothschild said, adding that any surplus must be
invested in the schools or returned to local school districts.

Moreover, she said, the school is subject to multiple layers of accountability
-- most importantly, from parents and students. "In a competitive, free-market
enterprise we have to compete and be better than anyone else if we want them to
choose us," she said.

Students at the cyber charters are required to take the Pennsylvania System of
School Assessment, the state's main standardized test. Students in the two
cyber schools operating during the 2000-01 school year scored at about the
statewide average, according to a state Department of Education spokeswoman.

While the litigation makes its way through the Pennsylvania courts, Einstein,
which once enrolled more than half the state's cyber charter students, is being
starved for money by the refusal of school districts to pay its
bills,Rothschild said. State education officials have begun diverting state aid
earmarked for the recalcitrant districts to Einstein, but that process is
moving too slowly for the school's operator.

Einstein has missed payrolls and was among the schools that were late sending
books and computers to students and paying for Internet service. Einstein
started the current school year with 3,300 students, but has since lost 900,
largely because of its financial problems, its officials said.

"Our plan was to be a school that was very interactive and responsive to the
individual, but we've been unable to do that," Rothschild said, adding that the
school might be forced to close if its cash flow does not improve quickly.

The school's problems have prompted a flood of complaints to state education
officials,who this week asked a Pennsylvania judge to decide whether they must
continue diverting money to the school. Before going to court, the state
secretary of education asked Morrisville, the suburban Philadelphia school
system that granted Einstein's charter, to investigate the school's operation.

All of this uncertainty has left families of cyber charter students in a
precarious place. Kathy Shelley, a part-time music teacher, enrolled her two
oldest sons in Einstein after her children began struggling in Lancaster's
public schools.

Last year, she home-schooled them -- a task she found overwhelming. So when a
friend told Shelley about the cyber charter school, she thought it would be the
ideal mix. While her children could learn at their own pace, the cyber school
also made them "answer to someone other than myself," she said.

And besides online classes, Einstein's educational plans included hands-on
learning during the school day, parent organization meetings, regular chats and
other activities that Shelley felt made the school more of a community.

But the computers and some textbooks arrived nearly a month late, forcing
Shelley's sons to use the family's computers for classes and requiring teachers
to plan new activities. Then the school had to alter its science curriculum
because of a dispute with a publisher.

Although classes are run by online teachers, monitoring her children's
schooling has been more burdensome than Shelley had imagined. She finds that
while her children have lessons on their screens, they simultaneously send
online messages to friends or play solitaire. "If I'm not constantly on them,
they will play," she said.

The problems have prompted Shelley to consider pulling her sons out of
Einstein. But most of the time she vows to stick it out.

One recent morning, Shelley was busy watching her 5-year-old son Jordan play
with his racing cars, trying to keep him from interrupting his older brothers'
work.

For the moment, the virtual school seemed to be fulfilling its potential. "For
every flaw I can think of, I can think of five in our public schools," Shelley
said. "I am willing to put up with what's going on because I don't think any of
the problems are the school's fault."
*********************
Computer World
Truste, AT&T move to bring privacy protections to wireless

By Linda Rosencrance 

(Feb. 25, 2002) AT&T Wireless Services Inc. has become the first wireless
carrier to display the Truste privacy seal on its Web site. 

That means AT&T Wireless customers managing their accounts through the
company's Web site should now be able to more easily understand what personal
data AT&T collects about them and how it uses that information, the companies
said in a statement. 

Redmond, Wash.-based AT&T Wireless has also become a sponsor of Truste's
efforts to expand privacy protections to new wireless devices. Truste is a San
Jose-based nonprofit privacy seal group. 

AT&T Wireless, which split from AT&T Corp. last spring, recently obtained its
certification allowing it to display the Truste seal. 

"Consumer education about privacy issues is critical to establishing consumer
confidence," said J. Walter Hyer, chief privacy officer at AT&T Wireless. "As
our customers begin using their wireless phones to communicate in new ways ...
they must also be informed and in control of how their personal information is
treated." 

In preparation for its split from AT&T, AT&T Wireless realized it needed its
own stand-alone privacy policy, Hyer said, and eventually, it decided to seek
third-party validation of that policy. 

Truste spokesman Dave Steer said his group and AT&T Wireless were working
together to build a coalition of other industry players -- including other
carriers as well as wireless equipment makers -- to expand online privacy
protections to cell phones, digital assistants and other devices that collect
personal information. 

"But that's not as easy as sticking a seal on a cell phone screen," Steer said.
"One of the things we have to do is figure out how to take a long privacy
policy from a Web site and bring it to a wireless [device]." 

Steer said the coalition of industry groups, government and other privacy
organizations would work to establish a set of standard privacy symbols --
first proposed by Truste last summer -- that would define online privacy
policies for Web sites and wireless devices. 
**********************

ZDNET
IBM neutral on Passport vs. Liberty
By ZDNet News Staff 
ZDNet (UK)
February 25, 2002, 12:00 PM PT
URL: http://zdnet.com.com/2100-1104-844610.html 

IBM is not going to choose between Sun and Microsoft's authentication
technologies, says the company's e-business director. While the two companies
wrangle, Big Blue's increasing alliances with Microsoft in the area of Web
services are not a final decision, according to Bob Sutor, IBM's e-business
director. 

"We're still neutral re: Passport and Liberty," Sutor told ZDNet UK. The
Liberty Alliance is a group initially set up by Sun to encourage a standard
method for computer users to identify themselves on the Internet, through
passwords or authentication technology. Liberty, which has not yet chosen a
specific technology, is a response to Microsoft's Passport, included with
Windows XP. 

IBM supports Passport, but is currently not a member of Liberty. IBM and
Microsoft are also members of the WS-I (Web Services Interoperability
Organization) formed in early February. This is not a standards organization
but a group that aims to "promote Web services interoperability across
platforms, operating systems, and programming languages." Sun is not a member
of this group as yet. 

Extolling the virtues of Web services, IBM's Sutor said, "We have to work with
Microsoft, Oracle, Sun, etc. Web services are simply a good idea, but it is a
lofty goal." The plan for the complete vision should be in place by the end of
the year. 

************************
Home Piracy Sends Music Business Into Funk 
Mon Feb 25, 7:33 PM ET 

LOS ANGELES (Reuters) - The music industry's worst nightmare may be coming
true: Tech-savvy music fans using CD burners to pirate songs by their favorite
artists rather than pay up to $20 for a new CD at their local record store. 
Data released on Monday by the Recording Industry Association of America (news -
web sites) (RIAA) showed U.S. shipments by record companies slid 10.3 percent to
968.6 million units in 2001 from 1.1 billion in 2000. The dollar value of all
music product shipments slipped by 4.1 percent to $13.7 billion from $14.3
billion over the same period, with the more expensive CDs and music DVDs
accounting for an increasing proportion of shipments. 

The data cover shipments -- as opposed to sales to consumers -- to retailers,
record clubs and mail order firms. Coming on the heels of similarly downbeat
retail sales, the numbers confirm that the music industry is in its worst slump
in at least a decade. 

The RIAA, a trade group that represents the major U.S. record labels, said
there was no simple explanation for the malaise. It cited the slow economy and
the Sept. 11-related disruption of release schedules during the lucrative
fourth quarter. But it reserved special opprobrium for online piracy and CD
burning. 

"When 23 percent of surveyed music consumers say they are not buying more music
because they are downloading or copying their music for free, we cannot ignore
the impact on the marketplace," RIAA president Hilary Rosen said in a
statement. 

The study she cited also found that 50 percent of the respondents who have
downloaded music for free have made copies of it. Just two years ago, only 13
percent copied it onto a portable device or a CD burner. Additionally, the
study showed that ownership of CD burners has nearly tripled since 1999: in
2001, 40 percent of music consumers owned a CD burner compared to 14 percent
who owned one in 1999. 

Millions of fans fell out of the habit of paying for music with the emergence
of services, such as Napster (news - web sites), that allowed them to swap music
files online for free. Even though Napster has been hobbled by legal action,
plenty of more powerful successors such as Morpheus, Kazaa and Grokster have
filled the void. The music industry's own belated attempts to allow fans to
swap files, Pressplay and MusicNet, are not nearly as user-friendly as the
other services. 

With sales sliding, the record labels are also buffeted by soaring marketing
costs, waning interest in the teen pop phenomenon that has underpinned the
industry in recent years, and a perceived lack of new star power. 

According to tracking firm SoundScan, retail sales of CDs -- the most popular
music format -- are off 5.8 percent in the year-to-date ended Feb. 17 from the
year-ago period. 
****************
Comcast to Open High-Speed Internet Network to Rival ISP 
By Christopher Stern
Washington Post Staff Writer
Tuesday, February 26, 2002; Page E04 

Comcast Corp. plans to announce today that it has signed a deal to open its
high-speed Internet network to a competing online service -- United Online
Inc., the nation's third-largest Internet service provider.

California-based United will offer service under its Juno and NetZero brands,
which collectively provide Web access to 5.6 million people over dial-up
connections. The accord will allow the company to offer its customers
high-speed access in areas where Comcast provides Internet service.
The companies did not disclose terms of the deal.

The agreement comes as Comcast seeks regulatory approval for its $72 billion
merger with AT&T Corp.'s cable unit. If the merger closes, Comcast will be the
nation's largest provider of cable television and broadband Internet service.

Consumer advocates are urging federal regulators to require Comcast to open its
network to other ISPs as a condition for approving the merger. The Federal
Trade Commission imposed such a requirement on America Online Inc. and Time
Warner Inc. when they merged last year.

Regulators demanded the concession from AOL and Time Warner after competitors
warned that the companies could use their partnership to discriminate against
rivals that offer competing music, movies and other online content.

Comcast's agreement with United is the first of what the cable company hopes
will be a series of deals with competing ISPs, possibly including AOL, MSN and
EarthLink.

"Our goal is to have multiple providers," said an executive familiar with the
deal. But the company still opposes any federally imposed requirement that it
open its system to other providers.

Comcast plans to offer customers a choice of Internet providers in phases,
beginning within 90 days in Nashville and Indianapolis. A nationwide rollout,
including the Washington area, is expected to be completed by the end of the
year.

Comcast's merger with AT&T Broadband, the long-distance giant's cable unit, is
now being reviewed by the Justice Department's antitrust division -- a process
likely to continue for at least nine months.

But according to the executive, the agreement with United is an effort to take
advantage of the company's marketing savvy, not to appease regulators.

United has a total of 5.6 million active subscribers -- people who have used
the service within the last 31 days. But only 1.5 million of those are paying
customers, making it the ninth-largest service in paid subscribers.

NetZero and Juno are expected to focus their marketing efforts on converting
existing customers to the high-speed service. Juno and NetZero customers will
be able to keep their e-mail addresses and will be greeted by a Juno or NetZero
Web page whenever they log on to the Internet.

Comcast is in the middle of converting its approximately 1 million Internet
customers from At Home Corp.'s high-speed network. At Home, which declared
bankruptcy last year, plans to turn its network off at midnight Thursday.

It is only because of the demise of At Home that Comcast is able to reach the
deal with Juno. Under the terms of its agreement with At Home, Comcast made it
the exclusive Internet provider on its cable systems. But because of At Home's
decision to go out of business, Comcast is now free to negotiate with other
ISPs.
********************

Lillie Coney
Public Policy Coordinator
U.S. Association for Computing Machinery
Suite 507
1100 Seventeenth Street, NW
Washington, D.C. 20036-4632
202-659-9711