Clips May 16, 2003

[Lillie Coney <lillie.coney@xxxxxxx>]

Clips May 16, 2003

ARTICLES

FTC Chases Down Internet Scammers 
Boeing Wins Contract for Army Modernization 
Open-Source Crowd Irked by SCO  
WIT names Washington area?s top women execs 
Study: Governments like outsourcing 
White House defends importance of homeland cyber official 
Officials escalate spam crackdown
Kaiser exporting privacy 
Deutsche Bank E-Mail Probe Widened
FCC Updates Universal Service Fund for Schools 

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Washington Post
FTC Chases Down Internet Scammers 
By David McGuire
Thursday, May 15, 2003; 6:26 PM 

Federal and state authorities have filed 45 criminal and civil actions against Internet scam artists and bulk e-mailers, the Federal Trade Commission (FTC) announced today.

The sweep, which was conducted over the past 10 days, is part of an ongoing federal effort to crack down on Internet fraud and deceptive bulk e-mail, popularly known as "spam." The FTC, Securities and Exchange Commission, United States Postal Inspection Service and the Justice Department joined state authorities to track down the suspected hucksters.

The FTC also said it will work with 21 U.S. and international agencies to close down "open relays" -- unsecured e-mail servers that spammers use to conceal their identities, a deception that often prevents computer users from removing themselves from spammers' lists.

Law enforcement officials hope that regular Internet scam crackdowns will scare e-mail fraudsters into stopping their operations.

"We think that by doing it in batches we get more attention and therefore get more deterrence value for people who might be watching," said Howard Beales, director of the FTC's Bureau of Consumer Protection. "There's a lot of fraud we can't go after."

The scammers targeted in the crackdown announced today allegedly offered fake credit card accounts, college loans and get-rich-quick schemes, the commission said.

The FTC's focus on open relays is part of an international effort to stop the flood of spam glutting computer networks. Spammers scan the Internet for these unsecured e-mail servers, many of which are run by businesses with inadequate security protection, and then use them to send all manner of bulk e-mail from Viagra samples to debt consolidation and loan offers.

What makes it difficult for law enforcement and spam fighters to eliminate this problem is that many businesses do not realize their systems are unsecured.

Mail Abuse Prevention System (MAPS) Director of Operations Margie Arbon said that more than half of the spam she tracks comes from unsecured computers.

The anti-spam enforcement actions announced today come less than a month after the FTC released a report that found that more than two-thirds of all spam e-mail contains falsified information. The FTC held a three-day forum earlier this month to address the spam problem. According to the agency, authorities have documented $122 million in consumer losses stemming from Internet fraud in 2002.

About 30 states have laws restricting bulk e-mail. Virginia Gov. Mark Warner (D) recently passed what is considered the toughest spam bill in the nation, treating unsolicited mail with a falsified return address as a felony.

In separate anti-spam news, New York authorities on Wednesday announced the arrest of Buffalo resident Howard Carmack, 36, charging him with sending 825 million spam messages. Known as the Buffalo Spammer, Carmack was released on $20,000 bail after being the first person to be charged under New York's identity theft law.

There is no federal law against spam, but several bills have been introduced in Congress this year. The Senate is considering one proposal that also prohibits the falsification of a spammer's address, a practice known as "spoofing." Reps. W.J. "Billy" Tauzin (R-La.) and John Dingell (D-Mich.) soon will introduce an anti-spam bill that was drafted with help from direct marketers, who worry that tough anti-spam legislation will damage their business.
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Washington Post
Boeing Wins Contract for Army Modernization 
By Renae Merle
Friday, May 16, 2003; Page E01 

Boeing Co. has won a $14.92 billion contract to design and test the tanks and weapons of a futuristic armed force as part of the Pentagon's modernization of the Army, sources said yesterday.

While some have expressed concern about the technical complexity of the project, the Defense Acquisition Board headed by Undersecretary of Defense Edward C. "Pete" Aldridge approved moving into the second phase of the Future Combat System late Wednesday, according to a source close to the program. 

"Boeing and the Army must be breathing much easier today," said Loren Thompson, a defense analyst with the Lexington Institute. "This is by far the most complicated development program that the Army has ever" tackled. 

The Pentagon declined to comment, saying an acquisition decision memorandum would be issued next week. Boeing is developing the system with Science Applications International Corp. A spokesman for the team also declined to comment. The Pentagon panel's decision ends the $154 million concept development phase. 

Now Boeing begins the complicated task of turning its ideas, most of which have been confined to charts and issue papers, into reality. At the center of the Future Combat System will be the creation of a networked system in which every piece of equipment on the battlefield, from tank to drone, is connected by about 33 million lines of software code. 

Even the tank, the most recognizable component of an Army unit, is getting a makeover. While the M1 Abrams tank weighs 80 tons, the new armored vehicle will weigh only 20 tons. Some traditional tanks will be replaced with "unmanned ground vehicles" that will do the grunt work now assigned to soldiers -- carrying supplies, venturing into caves and searching for minefields. The plan also calls for unmanned tanks capable of firing on the enemy, but there is still some debate about that, an industry source close to the program said. "How do we develop rules of engagement" for an unmanned vehicle? the source wondered. 

Boeing must also avoid the pitfalls that have bedeviled other complicated weapons program. The Air Force has faced software problems with one of its key projects, the F/A-22, the next-generation fighter jet. Before the panel meeting, Secretary of the Air Force James G. Roche raised concerns about the software integration challenges of the Boeing program, according to an industry source. Already, the Army has delayed deployment of the first brigade of FCS to 2012 from 2010, citing cost concerns. 

"The Army has had difficulties in major programs of far less complexity," the House Armed Services Committee noted in a report released this week related to the 2004 defense authorization bill. 

The committee also questioned whether the program is too broad and difficult for Congress to monitor, the report said. "The committee has numerous concerns about the current structure of the FCS program," the report said. "The Army needs to provide additional detail and descriptive material to justify its $1.7 billion" fiscal 2004 budget request for the program.

The program could face additional challenges after the Pentagon completes an analysis of the performance of the Army in Operation Iraqi Freedom, said Robbin Laird, a defense industry analyst. Some have argued that the war illustrated the importance of "heavy" tanks, compared with the light-armored vehicles that will make up the Future Combat System, he said. "There will be an FCS, but the configuration could change dramatically," Laird said.

A source close to the program dismissed such concerns, saying new technology would make the light armored vehicles more likely than the current fleet to survive in combat. 

The total value of the contract could eventually exceed $100 billion, though Boeing and SAIC will share that with hundreds of subcontractors, including Falls Church-based General Dynamics Corp., which will help design the armored vehicles, industry officials said.

The Future Combat System is part of the overall effort to modernize the Army under a plan called Objective Force. Another facet of the plan is a "Warrior" program that would overhaul a soldier's uniform, adding lightweight body armor and a helmet with a camera capable of sending streaming video of the battlefield back to command centers. 
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Government Computer News
05/15/03 

OMB details procedure for obtaining e-gov funding 

By Jason Miller 
GCN Staff

Agencies looking to get a portion of the Office of Management and Budget?s e-government fund will need to submit a proposal that includes a description of the initiative, a justification for the funding and a spending plan. 

Mark Forman, OMB?s administrator of the E-Government and IT, earlier this week issued a memo to CIOs outlining the process to obtain a piece of the $5 million e-government fund Congress allocated for fiscal 2003. 

Agencies will have a slightly smaller pot to compete for after OMB last week allotted $470,000 of the fund for a contract to Touchstone Consulting Group of Washington. Touchstone will assess cross-agency collaboration and consolidation opportunities in six lines of business: financial management, human resources, data and statistical development, public health information, criminal investigations and public-health monitoring. 

Forman also asked CIOs to follow the procedures outlined in the E-Government Act of 2002. 

OMB will review the proposals, and its director will grant final approval. 

In 2002, OMB awarded funds to the General Services Administration?s E-Authentication project and FirstGov portal, the Labor Department?s GovBenefits portal and the Small Business Administration?s Business Compliance One-Stop initiative.
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Associated Press
FCC's Powell Refuses to Delay Media Rules Vote
Thu May 15, 6:57 PM ET
By Jeremy Pelofsky 

WASHINGTON (Reuters) - Federal Communications Commission (news - web sites) Chairman Michael Powell (news) on Thursday rejected a request to delay by a month a June 2 vote at which the agency is expected to ease limits on media ownership. 

FCC (news - web sites) Commissioners Jonathan Adelstein and Michael Copps, the two Democrats on the panel who are skeptical about relaxing the rules, had asked Powell on Tuesday to delay the vote so they can examine the proposed new rules, evaluate their impact, and then try to negotiate changes. 

They also requested that the five-member panel make public the proposals for revising the regulations. 

"There is precedent for granting such a request, but it is not customary to do so over the strong objections of a majority of commissioners who are prepared to proceed," Powell said in a letter to the two Democrats. 

It is rare for the chairman to reject such a request. But Republican FCC Commissioners Kathleen Abernathy and Kevin Martin both opposed a delay and Powell has said he would only allow a delay if it were for a substantive reason. 


Under the likely rule changes, the FCC is poised to allow companies to own more television stations in a market as well as own both a newspaper and a television or radio station in most markets, sources familiar with the situation have said. 


The FCC is also considering allowing networks to own television stations that reach 45 percent of the national audience, up from the 35 percent cap that is presently law, sources have said. 


"This rush to judgment means that we will not fully understand the impact of the specific proposals on our media landscape before we are forced to vote," Copps said in a statement. He has warned that easing the rules could hurt diversity of voices and localism. 


But a federal appeals court has said the FCC has failed to sufficiently justify the rules and Powell has said adjusting the regulations is necessary to reflect the proliferation of news and information outlets. 


Separately, nine Democrats on the Senate Commerce Committee asked the panel's Republican Chairman Sen. John McCain to call the five FCC commissioners to a hearing before the June 2 vote to discuss the proposed changes. 


"It is our fear that such action will be taken without meaningful public debate over the effects these changes may have on local and national media markets," the Democrats said in their letter. 


McCain said at a hearing on Tuesday that he planned to have the five commissioners testify on the new media ownership rules after the June 2 vote, which prompted some on the committee to ask for a hearing before the decision day. 


A spokeswoman for McCain was not immediately available for comment. Legislation has been introduced in both the Senate and U.S. House of Representatives to preserve the national television limit at 35 percent but it was not clear whether it would advance.
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Wired News
Open-Source Crowd Irked by SCO  
02:00 AM May. 16, 2003 PT

If the Linux community presented a Miss Congeniality award, SCO would certainly not be wearing the crown. 

Linux developers and distributors are infuriated and perplexed by recent legal action and threats aimed at the entire development community by the SCO Group, formerly known as Caldera International.

SCO claims its intellectual property has been illegally included in all distributions of the Linux operating system. In a press release issued late Wednesday and in letters sent to "1,500 top international businesses" SCO (SCOX) issued a warning that all commercial users and distributors of Linux could be held liable for breach of copyright for using Linux. 

"Similar to analogous efforts underway in the music industry, we are prepared to take all actions necessary to stop the ongoing violation of our intellectual property or other rights," SCO's letter read in part. "? SCO?s actions may prove unpopular with those who wish to advance or otherwise benefit from Linux as a free software system for use in enterprise applications?." 

"Unpopular" is an understatement. 

Developers were not too thrilled when SCO, a longtime distributor of Linux-based applications, filed a billion-dollar lawsuit in March, accusing IBM of "extracting and using the confidential and proprietary information it acquired from Unix and dumping that information into the open-source community." 

And they adamantly continue to dismiss SCO's broadening lawsuit as completely without merit. 

"I'm intimately familiar with the history of the 'intellectual property' SCO is talking about," said open-source advocate Eric Raymond. "I was there for a lot of the history, as far back as 1982. The fundamental claims in SCO's complaint are a colossal, brazen pack of lies." 

"What's mystifying is that they are stupid lies, easily falsified by facts in the public record and SCO's own behavior?. I hope IBM calls me as a witness, so I can eviscerate these clowns." 

The history Raymond is referring to is this: AT&T's Unix Systems Laboratories began development of Unix in the 1960s. AT&T sold its Unix intellectual property to Novell Networks in 1993, and Caldera International (now SCO) acquired the rights to it from Novell in 1995. Over the years, SCO also picked up other related patents. 

To many other Linux distributors, it is unclear why SCO opted to bring forward these legal actions now, after being actively involved in Linux distribution for a number of years. Speculation abounds that SCO initially hoped that IBM would buy SCO, rather than handle the legal issues. SCO representatives have denied those charges. 

Open-source advocate Bruce Perens said that "SCO's handful of patents aren't significant. Nobody's ever won a trade-secret case like this one." 

Trade secrets are assumed not to be open knowledge and the inner workings of Unix are far from mysterious. 

A full specification of Unix has been distributed by the U.S. government as part of its POSIX standards. The Unix source code has been licensed to universities for the past 30 years and it?s typical for college computer science departments have a copy. 

Students have routinely had access to that source code and are expected to use what they've learned during their entire careers. And computer-science textbooks have documented every aspect of operating-system internals for a long time, Perens said. 

"The open-source community has been careful about other people's code for years," Perens said.

Licensing issues could cause SCO problems if it pursues legal action. SCO, like many Linux developers, releases software under the General Public License, or GPL, which carefully outlines the rights and responsibilities of distributors and programmers. 

"When SCO shipped what it now claims as its property under GPL, it voluntarily ceded the right to recover for these alleged misappropriations," Raymond said. Read the license and see for yourself."

"Until the attendant risks with Linux are better understood and properly resolved, the company will suspend all of its future sales of the Linux operating system," SCO stated in Wednesday's press release. 

"That's an impotent action since their behavior had already destroyed their Linux business," Perens said, adding that the company has already sold Linux applications in the past under the same licensing terms it now finds objectionable. 

"They have already distributed the Linux kernel and other critical components under the GPL license. The GPL does not terminate, and promises royalty-free use of the code to all comers in perpetuity. 

"They can hardly claim that they hadn't been given the chance to see that they'd owned the code in question. So, their potential to collect royalties from this code is essentially nil." 

SCO's actions have also confused its partners in United Linux, an industry group formed by Conectiva, SuSE Linux, Turbolinux and SCO, to distribute a unified version of Linux. 

"SCO's actions are again indeed curious," SuSE said in its statement, released on Thursday. "We have asked SCO for clarification of their public statements, SCO has declined," SuSE's statement read. 

"We are not aware, nor has SCO made any attempt to make us aware, of any specific unauthorized code in any SuSE Linux product. As a matter of policy, we have diligent processes for ensuring that appropriate licensing arrangements (open source or otherwise) are in place for all code used in our products." 

The Olliance Group, an open-source-strategy consulting firm, said in a statement that Olliance "finds it unfortunate that SCO chose this path to resolve its apparent dispute with IBM." 

In an interview with Linux Journal published on Thursday, Chris Sontag, senior vice president and general manager of the SCO Group's SCOsource licensing operation, said that within two weeks SCO will show "independent experts, under a non-disclosure agreement, the evidence behind SCO's allegations that the Linux kernel source contains code copied from SCO UnixWare illegally and without credit." 

"This whole thing strikes me as utter insanity but there's really no way of knowing what's going on here until SCO shows exactly what bits of the kernel code is at issue," said Linux developer Ken Camern. "Until then, weird rumors will continue to fly, which is no surprise. 

"What does surprise me is the deeply nasty nature of the comments from SCO directed towards the Linux development community." 

SCO has posted a page on its website, entitled Quotations from Linux Leaders, which doesn't present a pretty picture of open-source developers' ethics. 

Perens was quoted as saying that he breaks the law every year "in the name of free speech" and that "Linux is a follow-on to Unix. It's not just a Unix clone. It's actually a Unix successor." 

Perens' said that both of his quotes were taken "completely out of context." 

Richard Stallman, of the Free Software Foundation, is quoted as saying that "Linux is a copy of Unix. There is very little new stuff in Linux." In full context, however, Stallman was actually quoting another developer's comments, in his reply to that developer posted on the Linux Kernel list. 

Despite all the ugliness, open-source advocates believe that SCO's actions will have little to no effect on Linux use by businesses. 

"Your typical businessperson is much more likely to be impressed by IBM's support of Linux than by SCO's claims," Raymond said. 
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Government Computer News
05/16/03 
WIT names Washington area?s top women execs 
By Thomas R. Temin 

The Coast Guard?s first woman admiral, Rear Adm. Vivien Crea, received the lifetime achievement award from Women In Technology at its annual dinner last night in McLean, Va. Crea, the Guard?s former CIO, recently has been working on its enterprise architecture and E-Coast Guard initiatives. 

Crea currently commands the First Coast Guard District and Maritime Defense Command One, but her career spans decades. She was the Guard?s first woman helicopter pilot and first woman station commander. During the Reagan administration, she became the first female military aide to a president. 

Emcee Maureen Bunyan of Washington?s WJLA-TV told how, as commander of the Coast Guard?s Detroit district, Crea baked and personally ?coptered dozens of cookies on New Year?s Day to an ice-breaker crew that had been working around the clock for three weeks. 

WIT gave its government leadership award to Deborah Loudon, deputy CIO of the National Reconnaissance Office. Loudon received a Hammer Award during the Clinton administration for her work as program manager of the Defense Department?s purchase card program. 

Other award winners: 


Marguerete Luter, a vice president in Unisys Corp.?s Global Infrastructure Services unit, who won WIT?s Champion Award 


Vonya McCann, senior vice president for federal external affairs at Sprint Corp., who received the Corporate Leadership Award 


Kimberly McCabe, president and CEO of Advanced Performance Consulting Group Inc. of Washington, who received WIT?s Entrepreneur Award.
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Government Computer News
05/16/03 
Study: Governments like outsourcing 
By Gail Repsher Emery 
Post Newsweek Tech Media

Governments worldwide are increasingly bullish about outsourcing, according to a new study of 22 nations by a private sector consulting firm. 

Seventy-seven percent of high-ranking government officials said their government?s position on outsourcing was either ?encouraging? or ?actively encouraging,? according to the study, Outsourcing in Government: Pathways to Value, by management consulting and technology services firm Accenture Ltd. 

Likewise, the same percentage of officials said their governments will outsource more functions and processes over the next five years, the study found. 

The study, which included more than 130 government executives, defined outsourcing as ?contracting with a private-sector firm to take responsibility for a function or process for which the government remains accountable.? The definition excludes short-term project work and privatization, where the government is no longer accountable for the function. 

While much government outsourcing is centered on technology infrastructure, the study found increasing efforts to outsource business applications and business processes. 

Seventy-four respondents said their governments are outsourcing IT applications; 66 said they are outsourcing IT infrastructure. More than 100 respondents said their governments are outsourcing various business processes, such as Web site design and maintenance and customer relationship management. 

Moreover, the executives cited improved speed or quality of services as the most important reason to outsource, followed by gaining access to expertise and new technology. 

Saving money ranked seventh on a list of 13 reasons to outsource. Five years ago, the top reason to outsource would have been saving money, said Thomas Healy, managing partner of Accenture?s Global Government Outsourcing Services and leader of the study. 

The switch shows governments are under pressure to improve services, and ?shows government buyers are becoming more sophisticated in understanding what outsourcing can achieve,? that outsourcing can improve service, and lower costs at the same time, said Steve Rohleder, group chief executive of Accenture's global government practice. 

?To a certain extent, government has just looked at technology as an expense,? Rohleder said. ?When they take a business process and say this is our problem and the outcomes we want, integrators, tell us how you are going to fix that, their results are much more positive. The outsourcer of the future will have strong business process acumen to supplement IT.? 

In addition, 89 percent of executives said their outsourced processes were either important or absolutely critical to the government?s mission, a departure from conventional wisdom that says mission-critical functions are not outsourced. 

Rohleder said the top reasons for outsourcing include: 


Lower revenue and higher spending, creating pressure to do more with less; 


Growing citizen expectations that government should be available around the clock; 
Looming, large-scale government employee retirements. 

In the United States, outsourcing focuses on technology infrastructure, but is moving toward business process outsourcing. 

In particular, the Department of Homeland Security and some of its component agencies are moving aggressively toward outsourcing some functions, Rohleder said. At the state level, Florida is an aggressive outsourcer. Gov. Jeb Bush has said he wants to outsource as many functions as he can to reduce costs and improve services, Rohleder said. 

The United Kingdom has done the most extensive outsourcing out of the 22 nations surveyed, and has been a pioneer of public-private partnerships, Rohleder said. 

The study can be found at the following e-location:
http://accenture.com/xd/xd.asp?it=enweb&xd=newsroom\epresskit\outsourcing\epresskit_outsourcing.xml
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Government Executive
May 15, 2003 
White House defends importance of homeland cyber official 
By William New, National Journal's Technology Daily 

A senior White House official on Thursday sought to dispel weeks of industry criticism about the Bush administration's lack of a high-level official dedicated to cybersecurity. But he acknowledged that many questions remain. 

"What is clearly important is that [the person overseeing the new center] has the ability to bring resources together," said Paul Kurtz, special assistant to the president and senior director for critical infrastructure protection. 


The person in charge of it will be a "sort of director," but will not be considered the federal government's sole person in charge of cyber security. For instance, Mark Forman of the Office of Management and Budget will continue to be responsible for information security at federal agencies, he said. 


Nevertheless, the center is "going to be focusing and maximizing resources in one place," Kurtz said. He said the center should be announced in the next few weeks, after organizational issues are resolved. Kurtz made the remarks in a brief interview after speaking on a panel at a McGraw-Hill homeland security conference. 


In his panel presentation, Kurtz said "cybersecurity has no lead agency outside the Department of Homeland Security," which is why it is so important to set up the cyber center. The center will draw together existing cybersecurity resources, many of which were moved into the new department. 


He stressed that cybersecurity should be made a high priority as it underlies all other infrastructure. "Cybersecurity needs a good deal of attention," Kurtz said. 


Kurtz also said Homeland Security is "not solely responsible" for critical infrastructure protection. Other agencies take the lead with their constituents, such as Treasury with banks. He also mentioned the Transportation and Defense departments.

Kurtz leads the critical infrastructure protection directorate under the Homeland Security Council, which functions like the National Security Council, working "across the seams with agencies to bring folks together to work on common problems." 


Key priorities of his office are to "enable the Department of Homeland Security to succeed," work on initiatives in the national strategies for physical assets and cyberspace. His office also works with the private sector, helping to boost the industry advisory committees. And it works on communications links between states and localities. 


Kurtz said the government should establish the "metrics for success in the cyber sphere." With the creation of the new department, there is a "far better chance to establish those metrics." 


Peter Verga, principal deputy assistant secretary of Defense for homeland defense, described his office's responsibility. 


There are limits on military operation on U.S. soil, he said. "We don't want to be the national police force of the United States," Verga said. "You don't want us to be the police force of the United States." 


The military can only take the lead in the United States in the extraordinary instance of combat within the territory. When an incident occurs, it is up the president to decide who has the lead, either Homeland Security or Defense. "It can't be both," Verga said. 
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USA Today
Officials escalate spam crackdown
May 16, 2003
By Paul Davidson

In a sweeping crackdown on Internet fraud, state and federal authorities Thursday announced that they have brought 45 cases against Internet scam artists and deceptive spammers. 
The campaign marks the fourth in a series of regional sweeps over the past 13 months that teamed an armada of agencies filing more than 150 cases. 

Authorities also said they have launched an effort to torpedo one of spammers' most critical tools  "open relays." These are unprotected e-mail servers through which marketers route their messages to conceal their identity and evade junk e-mail filters. 

Investigators from 17 agencies identified 1,000 potential open relays in 16 countries and sent letters asking authorities there to shut them down. 

In a warning to scammers, Jane Boyle, U.S. attorney for the Northern District of Texas, said at a news conference, "We have the expertise, funding and motivation to go after you. You're not smart enough, and you cannot hide from us." 

The latest crackdown involved the Federal Trade Commission, the Securities and Exchange Commission and the states of Louisiana, Texas, Oklahoma and Arkansas, and other authorities. 

Among the cases: 

? Alyon Technologies allegedly used a modem dialing service to disconnect consumers from their own Internet service provider and link them to the scammers' network. By capturing their phone number, the company billed them $4.99 a minute for videotext, or Web video and information services, that they typically didn't receive or authorize. 

? A spam e-mail offer touted work-at-home envelope stuffing. The pitch from Easy Money promised consumers they would earn $1 for each envelope they stuffed, and as much as $1,500 a week. Actually, for a $50 fee, they got instructions to market a deceptive credit-repair manual, the FTC says.

? College Funding Center allegedly told college-bound students and their parents that it would obtain all their college funding for $895. Instead, the Web-based operation supplied them scholarship information they could have gotten free. 

? Another Web work-at-home scheme, Instant Internet Empires, promised buyers they could make $115,000 a year with their product. But for $47.77, they simply got the right to reproduce the company's advertising Web site and try to resell it to others, the FTC says. 

? Click for Mail claimed consumers who coughed up $49.95 were guaranteed a "100% unsecured" Visa or MasterCard credit card with a credit limit up to $5,000. Actually, consumers got access to a Web page with hyperlinks to sites of credit card issuers  a list freely available to Web surfers, the FTC says.
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San Francisco Gate
Kaiser exporting privacy 
David Lazarus  
May 14, 2003

Oakland's Kaiser Permanente reported some mighty impressive numbers the other day -- quarterly profit of $301 million on revenue of $6.2 billion. 

Even so, the health care provider is quietly outsourcing costly computer operations to companies in India, and workers in Northern California are worried that their jobs could be next to go. 

Moreover, Kaiser's 8.3 million members and thousands of other employees may have additional reason for concern. Included in the information being made available to Indian techs-for-hire are: 

-- Patients' medical data, including lab results and drugs being taken. 

-- Members' personal information, including financial records and home addresses. 

-- Payroll information for 135,000 Kaiser employees and 11,000 physicians, including salaries, benefits and Social Security numbers. 

"It's a disaster waiting to happen," said Beth Givens, director of the Privacy Rights Clearinghouse, a San Diego nonprofit. "After all, who regulates these companies in India? People should be extremely wary of the possibility of fraud." 

Kaiser tech workers voiced similar worries. "If I was a patient, I'd be really worried about my information going offshore," one told me. "And employees should be worried about their Social Security numbers. Think of the potential for identity theft." 

To be fair, many U.S. companies out-source high-tech and customer-service operations both at home and abroad. Half the Fortune 500 is said to make use of India's well-educated, English-speaking and significantly lower-paid workforce. 

Within five years, according to a recent study, Indian outsourcing firms will comprise a $21 billion industry, employing 1.2 million people. 

Yet it's one thing for telecom giant SBC, for example, to out-source online tech support for Internet subscribers, and quite another for one of America's largest health care providers to open the door on members' and employees' medical and financial records. 

Garry Hurlbut, Kaiser's vice president of information technology, stressed that the company's data will remain in Kaiser's own computers. But he acknowledged that nearly a half-dozen Indian outsourcing firms will have remote access. 

"A lot of others were doing offshore work before we got interested," Hurlbut said. "We're only working with the most reputable companies." 

He added that overseas technicians are granted only limited access to systems depending on maintenance required. However, access will increase in the future as more of Kaiser's tech operations are transferred abroad. 

"We're trying to move a good part of system maintenance offshore and free up employees for new opportunities," Hurlbut said. 

At least 160 tech workers so far have been reassigned to new gigs within the company as a result of the outsourcing. To date, no one's gotten the ax. 

Still, workers at Kaiser's Walnut Creek computer center are increasingly anxious about their future. "Morale is very low," one worker said. 

Employees' concerns have been exacerbated by the fact that nearly three dozen Indians from one outsourcing firm -- New Delhi's HCL -- are now at the computer center learning the various systems. 

Kaiser workers have been instructed by supervisors to make time over the next few months to train the Indians in nearby conference rooms. The Indians will then go home and train others at their firm. 

"They're very quiet, very polite," one worker said. "But they're not dumb. They know what's going on." 

I'm not suggesting that Indian techies are less reliable or trustworthy than their American counterparts. Dell Computer, for one, is so pleased with its Indian partners that the company has moved the bulk of its tech support to the subcontinent. 

What I do take issue with, though, is the growing trend of American companies shipping jobs overseas for the sake of saving a few bucks. The U.S. unemployment rate climbed to 6 percent last month. 

Customer-service representatives at call centers in the United States make as much as $12 an hour. Their Indian counterparts, who frequently are told by employers to conceal their whereabouts from callers, make about a third of that amount. 

According to an internal memo distributed to Kaiser tech workers, an American contractor might charge the company up to $85 an hour, while an Indian outsourcing firm can do the same work for as little as $20 an hour. 

"We must operate as a business as well as a caring organization," the memo says. "By gaining access to highly trained professionals at a greatly reduced rate, Kaiser Permanente can become better stewards of our members' dollars and get a better return on our investment in technology." 

It adds: "Although there are no long-term guarantees, (Kaiser) is not planning to eliminate employee positions due to our use of offshore resources." 

Claire Holmes, a Kaiser spokeswoman, said that affected workers are given 90 days in which to find a new position within Kaiser. If no such position opens up, she said workers will be offered severance packages based on the amount of time they've been with the company. 

"Everyone feels trapped," one worker told me. "We have to cooperate with what management is doing because there's no other IT work out there. But we know our jobs are on the line." 

Holmes was more upbeat about the situation. 

"Nobody likes to be forced into change," she said. "But we're pretty happy with the results at this time."
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Los Angeles Times
Deutsche Bank E-Mail Probe Widened
By E. Scott Reckard
Times Staff Writer
May 16, 2003

California regulators, continuing an investigation of alleged Wall Street abuses, said Thursday that they had hired a data-recovery firm to find out whether missing e-mails requested from Deutsche Bank resulted from carelessness or intentional acts.

If it's the latter, the Department of Corporations may refer the case to California Atty. Gen. Bill Lockyer for prosecution, a department official said. 

An obstruction-of-justice case "is a possibility," Deputy Corporations Commissioner Andre Pineda said. "There are e-mails that Deutsche Bank is characterizing as unrecoverable. So we have sent those [tapes that held the e-mails] to an outside firm, not only to find out whether restoration is possible but whether they were systematically erased, whether it was more than just sloppiness."

Deutsche Bank Securities, the investment banking arm of the German bank, is among a dozen Wall Street firms investigated by federal and state regulators for possible conflicts of interest involving stock analysts. But it was not one of the 10 firms that recently paid $1.4 billion to settle the case, because of California's probe after the firm disclosed last month that nearly a third of the e-mails sought by regulators had been lost. 

Deutsche Bank has said the erasures were inadvertent. 

Pineda said his agency wasn't satisfied with explanations by Deutsche Bank information technology specialists of how the erasures went undetected for months. He said the firm acknowledged that the e-mails were missing only after regulators repeatedly raised that possibility.

The department has hired Zantaz Inc. of Pleasanton, Calif., to examine Deutsche Bank's backup tapes and is scheduling interviews with attorneys at Fried Frank Harris Shriver & Jacobson, the law firm that Deutsche Bank used in passing along evidence to regulators, Pineda added. 

"We definitely did not get a satisfactory explanation from the IT folks, so we're looking to depose the outside counsel," he said.
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Broadband News
FCC Updates Universal Service Fund for Schools 

The FCC adopted new rules to streamline the operation of the schools and libraries program of the universal service fund (USF), which enables qualified applicants to receive discounts for eligible telecommunications services, Internet access, and internal connections. The USF has provided over $9.8 billion in funding to public schools and libraries since the program was launched in 1997. The USF is capped at $2.25 billion annually to provide eligible schools and libraries with discounts - ranging from 20% to 90% - for authorized services. The FCC estimates that 87% of U.S. public school classrooms are now connected to the Internet, compared with 14% in 1997.
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