I've Been Mugged Blog

The New Target That Enables Ransomware Hackers to Paralyze Dozens of Towns and Businesses at Once

[Editor's note: today's guest post, by reporters at ProPublica, is part of a series which discusses trends in cyberattacks and data breaches. It is reprinted with permission.]

By Renee Dudley, ProPublica

On July 3, employees at Arbor Dental in Longview, Washington, noticed glitches in their computers and couldn’t view X-rays. Arbor was one of dozens of dental clinics in Oregon and Washington stymied by a ransomware attack that disrupted their business and blocked access to patients’ records.

But the hackers didn’t target the clinics directly. Instead, they infiltrated them by exploiting vulnerable cybersecurity at Portland-based PM Consultants Inc., which handled the dentists’ software updates, firewalls and data backups. Arbor’s frantic calls to PM went to voicemail, said Whitney Joy, the clinic’s office coordinator.

“The second it happened, they ghosted everybody,” she said. “They didn’t give us a heads up.”

A week later, PM sent an email to clients. “Due to the size and scale of the attack, we are not optimistic about the chances for a full or timely recovery,” it wrote. “At this time we must recommend you seek outside technical assistance with the recovery of your data.”

On July 22, PM notified clients in an email that it was shutting down, “in part due to this devastating event.” The contact phone number listed on PM's website is disconnected, and the couple that managed the firm did not respond to messages left on their cellphones.

The attack on the dental clinics illustrates a new and worrisome frontier in ransomware — the targeting of managed service providers, or MSPs, to which local governments, medical clinics, and other small- and medium-sized businesses outsource their IT needs. While many MSPs offer reliable support and data storage, others have proven inexperienced or understaffed, unable to defend their own computer systems or help clients salvage files. As a result, cybercriminals profit by infiltrating dozens of businesses or public agencies with a single attack, while the beleaguered MSPs and their incapacitated clients squabble over who should pay the ransom or recovery costs.

Cost savings are the chief appeal of MSPs. It’s often cheaper and more convenient for towns and small businesses with limited technical needs to rely on an MSP rather than hire full-time IT employees. But those benefits are sometimes illusory. This year, attacks on MSPs have paralyzed thousands of small businesses and public agencies. Huntress Labs, a Maryland-based cybersecurity and software firm, has worked with about three dozen MSPs struck by ransomware this year, its executives said. In one incident, 4,200 computers were infected by ransomware through a single MSP.

Last month, hackers infiltrated MSPs in Texas and Wisconsin. An attack on TSM Consulting Services Inc. of Rockwall, Texas, crippled 22 cities and towns, while one on PerCSoft of West Allis, Wisconsin, deprived 400 dental practices around the country of access to electronic files, the Wisconsin Dental Association said in a letter to members. PerCSoft, which hackers penetrated through its cloud remote management software, said in a letter to victims that it had obtained a key to decrypt the ransomware, indicating that it likely paid a ransom. PerCSoft did not return a message seeking comment.

TSM referred questions about the Texas attack to the state’s Department of Information Resources, which referred questions to the FBI, which confirmed that the ransomware struck the towns through TSM. One of the 22 Texas municipalities has been hit by ransomware twice in the past year while using TSM’s services.

FBI spokeswoman Melinda Urbina acknowledged that MSPs are profitable targets for hackers. “Those are the targets they’re going after because they know that those individuals would be more apt to pay because they want to get those services back online for the public,” she said.

Beyond the individual victims, the MSPs’ shortcomings have a larger consequence. They foster the spread of ransomware, one of the world’s most common cybercrimes. By failing to provide clients with reliable backups or to maintain their own cybersecurity, and in some cases paying ransoms when alternatives are available, they may in effect reward criminals and give them an incentive to strike again. This year, ProPublica has reported on other industries in the ransomware economy, such as data recovery and insurance, which also have enriched ransomware hackers.

To get inside MSPs, attackers have capitalized on security lapses such as weak passwords and failure to use two-factor authentication. In Wisconsin and elsewhere, they also have exploited vulnerabilities in “remote monitoring and management” software that the firms use to install computer updates and handle clients’ other IT needs. Even when patches for such vulnerabilities are available, MSPs sometimes haven’t installed them.

The remote management tools are like “golden keys to immediately distribute ransomware,” said Huntress CEO Kyle Hanslovan. “Just like how you’d want to push a patch at lightning speed, it turns out you can push out ransomware at lightning speed as well.”

Otherwise, the hacker may spread the ransomware manually, infecting computers one at a time using software that normally allows MSP technicians to remotely view and click around on a client’s screen to resolve an IT problem, Hanslovan said. One Huntress client had the “record session” feature of this software automatically enabled. By watching those recordings following the attack, Huntress was able to view exactly how the hacker installed and tracked ransomware on the machines.

In some cases, Hanslovan said, MSPs have failed to save and store backup files properly for clients who paid specifically for that service so that systems would be restored in the event of an attack. Instead, the MSPs may have relied on low-cost and insufficient backup solutions, he said. Last month, he said, Huntress worked with an MSP whose clients’ computers and backup files were encrypted in a ransomware attack. The only way to restore the files was to pay the ransom, Hanslovan said.

Even when backups are available, MSPs sometimes prefer to pay the ransom. Hackers have leverage in negotiations because the MSP — usually a small business itself — can’t handle the volume of work for dozens of affected clients who simultaneously demand attention, said Chris Bisnett, chief architect at Huntress.

“It increases the likelihood that someone will pay rather than just try to fix it themselves,” Bisnett said. “It’s one thing if I have 50 computers that are ransomed and encrypted and I can fix them. There’s no way I have time to go and do thousands of computers all at the same time when I’ve got all these customers calling and saying: ‘Hey, we can’t do any business, we’re losing money. We need to be back right now.’ So the likelihood of the MSP just saying, ‘Oh I can’t deal with this, let me just pay,’ goes up.”

Because there are so many victims, the hacker can make a larger ransom demand with greater confidence that it will be paid, Hanslovan said. Attacking the MSP “gives you hundreds or even thousands more computers for the same cost of infection,” he said. The “support cost of negotiating the ransom is low” since the attacker typically corresponds with the MSP rather than its individual clients.

Before this year’s ransomware spree, MSPs were susceptible to other kinds of cybercrime. Last October, the U.S. Department of Homeland Security warned in an alert about attacks on MSPs for “purposes of cyber espionage and intellectual property theft.” It added that “MSPs generally have direct and unfettered access to their customers’ networks,” and that “a compromise in one part of an MSP’s network can spread globally, affecting other customers and introducing risk.”

The first spate of ransomware attacks on MSPs, early this year, deployed what is called the GandCrab strain. Then, in an online hacking forum, the hackers behind GandCrab announced their retirement in May. After that, another strain of ransomware known as Sodinokibi ransomware sprung up and began targeting MSPs.

Sodinokibi ransom amounts are “scaled to the size of the organization and the perceived capacity to pay,” according to Connecticut-based Coveware, which negotiates ransoms for clients hit by ransomware. Sodinokibi will not run on systems that use languages including Russian, Romanian and Ukrainian, according to security firm Cylance, possibly because those are native languages for hackers who don’t want to draw the attention of local law enforcement.

Sodinokibi was the strain used in the attack on TSM Consulting Services that encrypted the computers of 22 Texas municipalities, leaving them unable to fulfill tasks such as accepting online payments for water bills, providing copies of birth and death certificates and responding to emails. Most of the towns have not been publicly identified. More than half have returned to normal operations, the Texas Information Resources Department said in an update posted on its website. The hackers sought millions of dollars. The department is "unaware of any ransom being paid in this event," according to the update.

TSM began operations in 1997, and it provides equipment and support to more than 300 law enforcement agencies in Texas, according to its website. It is unclear why the 22 municipalities, and not TSM’s other clients, were affected by the August attack.

One of the 22 Texas municipalities hit last month was Kaufman, a city about 30 miles southeast of Dallas. An attack last November on Kaufman, which forced its police department to cease normal operations, was mentioned in a ProPublica article about two data recovery firms that purported to use proprietary technology to disable ransomware but in reality often just paid the attackers. TSM had enlisted one of the firms, Florida-based MonsterCloud, to help Kaufman recover from the November intrusion.

MonsterCloud waived its fee in exchange for a video testimonial featuring the Kaufman police chief, the president of TSM and the TSM technician who worked with Kaufman. In the testimonial, TSM technician Robby Pleasant said that the attackers had “reset everyone’s password, including the administrator,” and that the data “was locked up and not functioning.” Pleasant said in the video that MonsterCloud was able to “recover all the data” and “saved the day.”

“They can come in and recover even if someone does find a hole in our armor,” Pleasant said in the video.

Last month, attackers again found a hole in TSM’s armor. Using a third-party software vendor, rather than TSM, Kaufman had strengthened its backup system since the first attack, so it was able to restore much of the lost data, City Manager Michael Slye said. Kaufman’s computer systems were down for 24 hours, and the city handled municipal business such as writing tickets and taking payments on paper during that time, Slye said.

But backup safeguards were less effective for Kaufman’s police department, which uses a different type of software than other city offices, Slye said. The department’s dashcam video storage lost months of footage, and it still isn’t working, he said.

“It was not a fun experience to get this twice,” he said.

A TSM employee who declined to be named said the November attack may have been caused by “someone clicking on a bad email. We don’t have definitive information on that. We went into recovery mode immediately.”

PM Consultants, the Oregon provider of IT services to dental clinics, was run by a husband and wife, Charles Gosta Miller and Ava Piekarski, out of their home, according to state records. The firm didn’t employ enough technicians, said Cameron Willis, general manager of Dentech LLC in Eugene, Oregon, which took on many of PM’s former clients. Some former PM clients have complained to Willis that it was unresponsive to their requests for help, he said.

“A lot of dental office facilities don’t want to spend the money on IT infrastructure the way they should,” and they lack the technical know-how to vet providers, Willis said. They “don’t know any better. They don’t have the time to research. If you have someone who does provide some service, it’s very, very easy to see how some of the fly-by-nights would attract such a large clientele. ... When one office finds something that works, they scream it to the hills.”

In the July 22 email announcing its closure, PM said it had been “inundated with calls” on the morning of the ransomware attack, “and we immediately started investigating and trying to restore data. Throughout the next several days and into the weekend, we worked around the clock on recovery efforts. ... However, it was soon apparent the number of PC’s that needed restoration was too large for our small team to complete in any reasonable time frame.” The company was also “receiving hundreds of calls, emails and texts to which we were unable to respond.”

PM said that it had retained counsel to “assist with recovery of any available insurance, payment and billing proceeds,” and that it would be “sending out final invoices in the next two weeks.” Its formal dissolution, it continued, “will include an option to submit a claim” against the company.

Austin Covington, director of Lower Columbia Oral Health, a Longview, Washington, clinic affected by the attack, said it plans to take legal action against PM and declined to comment further. Other victims have not been publicly identified.

Some dentists “did not lose any data” because they had good backup files, Willis said. “Some clients lost some. Some lost a lot.” He doesn’t know whether clients paid ransoms, he said.

Dentech takes a different approach than PM did, Willis said. To prevent ransomware and other breaches, even its own staff has limited access to the remote management software favored by hackers, he said. It has 14 technicians, who often handle services such as software updates in person, he said. Dentech requires clients to use best practices, Willis said. If they decline, the firm requires them to sign a waiver releasing Dentech of liability in case of ransomware or other data loss.

Without such explicit terms, it’s often unclear whether the MSP or its clients are responsible for paying ransoms or recovery costs associated with an attack. Chris Loehr, executive vice president of Texas-based Solis Security, which helps victims negotiate ransom payments, was called in when GandCrab ransomware struck an MSP and encrypted some of its clients’ backup files several months ago. The MSP paid the ransom only for those that used its data backup service, which had failed, Loehr said. Clients who did not buy the backup service had to decide themselves whether to pay the ransom.

This summer, in a separate incident, Loehr negotiated with hackers on behalf of a New York-based MSP that was hit by Sodinokibi ransomware. The MSP didn’t want to pay the total ransom of about $2 million in bitcoin to unlock the files of all its clients, who were primarily architectural and engineering firms. Instead, each of the 200 affected clients was left to decide whether to pay about $10,000 in bitcoin. The MSP’s owner refused for legal reasons; he was worried that, if he was sued over the attack, a payment might be construed as an admission of fault, Loehr said.

The preponderance of low-quality MSPs has fostered the current ransomware onslaught, Loehr said. He noted that little experience or funding is needed to open an MSP; the barriers to entry are few.

“The startup costs are low,” Loehr said. “It doesn’t take much. The way the MSP world works, it’s not like you have to go out and buy $1 million of software. You can operate out of your house. These guys charge their clients up front. There is little cash flow to get this stuff off the ground.”

“Every IT guy thinks he can do this,” Loehr said. “‘Hey, I’m a technology guy.’

“No.”

ProPublica is a Pulitzer Prize-winning investigative newsroom. Sign up for The Big Story newsletter to receive stories like this one in your inbox.

 

Millions of Americans’ Medical Images and Data Are Available on the Internet. Anyone Can Take a Peek.

[Editor's note: today's guest blog post, by reporters at ProPublica, explores data security issues within the healthcare industry and its outsourcing vendors. It is reprinted with permission.]

By Jack Gillum, Jeff Kao and Jeff Larson - ProPublica

Medical images and health data belonging to millions of Americans, including X-rays, MRIs and CT scans, are sitting unprotected on the internet and available to anyone with basic computer expertise.

The records cover more than 5 million patients in the U.S. and millions more around the world. In some cases, a snoop could use free software programs — or just a typical web browser — to view the images and private data, an investigation by ProPublica and the German broadcaster Bayerischer Rundfunk found.

We identified 187 servers — computers that are used to store and retrieve medical data — in the U.S. that were unprotected by passwords or basic security precautions. The computer systems, from Florida to California, are used in doctors’ offices, medical-imaging centers and mobile X-ray services.

The insecure servers we uncovered add to a growing list of medical records systems that have been compromised in recent years. Unlike some of the more infamous recent security breaches, in which hackers circumvented a company’s cyber defenses, these records were often stored on servers that lacked the security precautions that long ago became standard for businesses and government agencies.

"It’s not even hacking. It’s walking into an open door," said Jackie Singh, a cybersecurity researcher and chief executive of the consulting firm Spyglass Security. Some medical providers started locking down their systems after we told them of what we had found.

Our review found that the extent of the exposure varies, depending on the health provider and what software they use. For instance, the server of U.S. company MobilexUSA displayed the names of more than a million patients — all by typing in a simple data query. Their dates of birth, doctors and procedures were also included.

Alerted by ProPublica, MobilexUSA tightened its security earlier this month. The company takes mobile X-rays and provides imaging services to nursing homes, rehabilitation hospitals, hospice agencies and prisons. "We promptly mitigated the potential vulnerabilities identified by ProPublica and immediately began an ongoing, thorough investigation," MobilexUSA’s parent company said in a statement.

Another imaging system, tied to a physician in Los Angeles, allowed anyone on the internet to see his patients’ echocardiograms. (The doctor did not respond to inquiries from ProPublica.) All told, medical data from more than 16 million scans worldwide was available online, including names, birthdates and, in some cases, Social Security numbers.

Experts say it’s hard to pinpoint who’s to blame for the failure to protect the privacy of medical images. Under U.S. law, health care providers and their business associates are legally accountable for securing the privacy of patient data. Several experts said such exposure of patient data could violate the Health Insurance Portability and Accountability Act, or HIPAA, the 1996 law that requires health care providers to keep Americans’ health data confidential and secure.

Although ProPublica found no evidence that patient data was copied from these systems and published elsewhere, the consequences of unauthorized access to such information could be devastating. "Medical records are one of the most important areas for privacy because they’re so sensitive. Medical knowledge can be used against you in malicious ways: to shame people, to blackmail people," said Cooper Quintin, a security researcher and senior staff technologist with the Electronic Frontier Foundation, a digital-rights group.

"This is so utterly irresponsible," he said.

The issue should not be a surprise to medical providers. For years, one expert has tried to warn about the casual handling of personal health data. Oleg Pianykh, the director of medical analytics at Massachusetts General Hospital’s radiology department, said medical imaging software has traditionally been written with the assumption that patients’ data would be secured by the customer’s computer security systems.

But as those networks at hospitals and medical centers became more complex and connected to the internet, the responsibility for security shifted to network administrators who assumed safeguards were in place. "Suddenly, medical security has become a do-it-yourself project," Pianykh wrote in a 2016 research paper he published in a medical journal.

ProPublica’s investigation built upon findings from Greenbone Networks, a security firm based in Germany that identified problems in at least 52 countries on every inhabited continent. Greenbone’s Dirk Schrader first shared his research with Bayerischer Rundfunk after discovering some patients’ health records were at risk. The German journalists then approached ProPublica to explore the extent of the exposure in the U.S.

Schrader found five servers in Germany and 187 in the U.S. that made patients’ records available without a password. ProPublica and Bayerischer Rundfunk also scanned Internet Protocol addresses and identified, when possible, which medical provider they belonged to.

ProPublica independently determined how many patients could be affected in America, and found some servers ran outdated operating systems with known security vulnerabilities. Schrader said that data from more than 13.7 million medical tests in the U.S. were available online, including more than 400,000 in which X-rays and other images could be downloaded.

The privacy problem traces back to the medical profession’s shift from analog to digital technology. Long gone are the days when film X-rays were displayed on fluorescent light boards. Today, imaging studies can be instantly uploaded to servers and viewed over the internet by doctors in their offices.

In the early days of this technology, as with much of the internet, little thought was given to security. The passage of HIPAA required patient information to be protected from unauthorized access. Three years later, the medical imaging industry published its first security standards.

Our reporting indicated that large hospital chains and academic medical centers did put security protections in place. Most of the cases of unprotected data we found involved independent radiologists, medical imaging centers or archiving services.

One German patient, Katharina Gaspari, got an MRI three years ago and said she normally trusts her doctors. But after Bayerischer Rundfunk showed Gaspari her images available online, she said: "Now, I am not sure if I still can." The German system that stored her records was locked down last week.

We found that some systems used to archive medical images also lacked security precautions. Denver-based Offsite Image left open the names and other details of more than 340,000 human and veterinary records, including those of a large cat named "Marshmellow," ProPublica found. An Offsite Image executive told ProPublica the company charges clients $50 for access to the site and then $1 per study. "Your data is safe and secure with us," Offsite Image’s website says.

The company referred ProPublica to its tech consultant, who at first defended Offsite Image’s security practices and insisted that a password was needed to access patient records. The consultant, Matthew Nelms, then called a ProPublica reporter a day later and acknowledged Offsite Image’s servers had been accessible but were now fixed.

"We were just never even aware that there was a possibility that could even happen," Nelms said.

In 1985, an industry group that included radiologists and makers of imaging equipment created a standard for medical imaging software. The standard, which is now called DICOM, spelled out how medical imaging devices talk to each other and share information.

We shared our findings with officials from the Medical Imaging & Technology Alliance, the group that oversees the standard. They acknowledged that there were hundreds of servers with an open connection on the internet, but suggested the blame lay with the people who were running them.

"Even though it is a comparatively small number," the organization said in a statement, "it may be possible that some of those systems may contain patient records. Those likely represent bad configuration choices on the part of those operating those systems."

Meeting minutes from 2017 show that a working group on security learned of Pianykh’s findings and suggested meeting with him to discuss them further. That “action item” was listed for several months, but Pianykh said he never was contacted. The medical imaging alliance told ProPublica last week that the group did not meet with Pianykh because the concerns that they had were sufficiently addressed in his article. They said the committee concluded its security standards were not flawed.

Pianykh said that misses the point. It’s not a lack of standards; it’s that medical device makers don’t follow them. “Medical-data security has never been soundly built into the clinical data or devices, and is still largely theoretical and does not exist in practice,” Pianykh wrote in 2016.

ProPublica’s latest findings follow several other major breaches. In 2015, U.S. health insurer Anthem Inc. revealed that private data belonging to more than 78 million people was exposed in a hack. In the last two years, U.S. officials have reported that more than 40 million people have had their medical data compromised, according to an analysis of records from the U.S. Department of Health and Human Services.

Joy Pritts, a former HHS privacy official, said the government isn’t tough enough in policing patient privacy breaches. She cited an April announcement from HHS that lowered the maximum annual fine, from $1.5 million to $250,000, for what’s known as “corrected willful neglect” — the result of conscious failures or reckless indifference that a company tries to fix. She said that large firms would not only consider those fines as just the cost of doing business, but that they could also negotiate with the government to get them reduced. A ProPublica examination in 2015 found few consequences for repeat HIPAA offenders.

A spokeswoman for HHS’ Office for Civil Rights, which enforces HIPAA violations, said it wouldn’t comment on open or potential investigations.

"What we typically see in the health care industry is that there is Band-Aid upon Band-Aid applied" to legacy computer systems, said Singh, the cybersecurity expert. She said it’s a “shared responsibility” among manufacturers, standards makers and hospitals to ensure computer servers are secured.

"It’s 2019," she said. "There’s no reason for this."

How Do I Know if My Medical Imaging Data is Secure?

If you are a patient:

If you have had a medical imaging scan (e.g., X-ray, CT scan, MRI, ultrasound, etc.) ask the health care provider that did the scan — or your doctor — if access to your images requires a login and password. Ask your doctor if their office or the medical imaging provider to which they refer patients conducts a regular security assessment as required by HIPAA.

If you are a medical imaging provider or doctor’s office:

Researchers have found that picture archiving and communication systems (PACS) servers implementing the DICOM standard may be at risk if they are connected directly to the internet without a VPN or firewall, or if access to them does not require a secure password. You or your IT staff should make sure that your PACS server cannot be accessed via the internet without a VPN connection and password. If you know the IP address of your PACS server but are not sure whether it is (or has been) accessible via the internet, please reach out to us at medicalimaging@propublica.org.

ProPublica is a Pulitzer Prize-winning investigative newsroom. Sign up for The Big Story newsletter to receive stories like this one in your inbox.

Operating Issues Continue To Affect The Integrity Of Products Sold On Amazon Site

News reports last week described in detail the operating issues that affect the integrity and reliability of products sold on the Amazon site. The Verge reported that some sellers:

"... hop onto fast-selling listings with counterfeit goods, or frame their competitors with fake reviews. One common tactic is to find a once popular, but now abandoned product and hijack its listing, using the page’s old reviews to make whatever you’re selling appear trustworthy. Amazon’s marketplace is so chaotic that not even Amazon itself is safe from getting hijacked. In addition to being a retail platform, Amazon sells its own house-brand goods under names like AmazonBasics, Rivet furniture, Happy Belly food, and hundreds of other labels."

The hijacked product pages include photos, descriptions, reviews, and/or comments from other products -- a confusing mix of content. You probably assumed that it isn't possible for this to happen, but it does. The Verge report explained:

"There are now more than 2 million sellers on the platform, and Amazon has struggled to maintain order. A recent Wall Street Journal investigation found thousands of items for sale on the site that were deceptively labeled or declared unsafe by federal regulators... A former Amazon employee who now works as a consultant for Amazon sellers, she’s worked with clients who have undergone similar hijackings. She says these listings were likely seized by a seller who contacted Amazon’s Seller Support team and asked them to push through a file containing the changes. The team is based mostly overseas, experiences high turnover, and is expected to work quickly, Greer says, and if you find the right person they won’t check what changes the file contains."

This directly affects online shoppers. The article also included this tip for shoppers:

"... the easiest way to detect a hijacking is to check that the reviews refer to the product being sold..."

What a mess! The burden should not fall upon shoppers. Amazon needs to clean up its mess -- quickly. What are your opinions.

Cloud Services Security Vendor Disclosed a 'Security Incident'

Imperva, a cloud-services security company, announced on Tuesday a data breach involving its Cloud Web Application Firewall (WAF) product, formerly known as Incapsula. The August 27th announcement stated:

"... this data exposure is limited to our Cloud WAF product. Here is what we know about the situation today: 1) On August 20, 2019, we learned from a third party of a data exposure that impacts a subset of customers of our Cloud WAF product who had accounts through September 15, 2017; 2) Elements of our Incapsula customer database through September 15, 2017 were exposed. These included: email addresses, hashed and salted passwords; 3) And for a subset of the Incapsula customers through September 15, 2017: API keys and customer-provided SSL certificates..."

Imperva provides firewall and security services to block cyberattacks by bad actors. These security services protect the information its clients (and clients' customers) store in cloud-storage databases. The home page of Imperva's site promotes the following clients: AARP, General Electric, Siemens, Xoom (A PayPal service), and Zillow. Many consumers use these clients' sites and service to store sensitive personal and payment information.

Imperva has informed the appropriate global regulatory agencies, hired forensic experts to help with the breach investigation, reset affected clients' passwords, and is informing affected clients. Security experts quickly weighed in about the data breach. The Krebs On Security blog reported:

"Rich Mogull, founder and vice president of product at Kansas City-based cloud security firm DisruptOps, said Imperva is among the top three Web-based firewall providers... an attacker in possession of a customer’s API keys and SSL certificates could use that access to significantly undermine the security of traffic flowing to and from a customer’s various Web sites. At a minimum, he said, an attacker in possession of these key assets could reduce the security of the WAF settings... A worst-case scenario could allow an attacker to intercept, view or modify traffic destined for an Incapsula client Web site, and even to divert all traffic for that site to or through a site owned by the attacker."

So, this breach and the data elements accessed by hackers were serious. It is another example indicating that hackers are persistent and attack where the money is.

Security experts said the cause of the breach is not yet known. Imperva is based in Redwood Shores, California.

Digital Jail: How Electronic Monitoring Drives Defendants Into Debt

[Editor's note: today's guest post, by reporters at ProPublica, discusses the convergence of law enforcement, outsourcing, smart devices, surveillance, "offender funded" programs, and "e-gentrification." It is reprinted with permission.]

By Ava Kofman, ProPublica

On Oct. 12, 2018, Daehaun White walked free, or so he thought. A guard handed him shoelaces and the $19 that had been in his pocket at the time of his booking, along with a letter from his public defender. The lanky 19-year-old had been sitting for almost a month in St. Louis’ Medium Security Institution, a city jail known as the Workhouse, after being pulled over for driving some friends around in a stolen Chevy Cavalier. When the police charged him with tampering with a motor vehicle — driving a car without its owner’s consent — and held him overnight, he assumed he would be released by morning. He told the police that he hadn’t known that the Chevy, which a friend had lent him a few hours earlier, was stolen. He had no previous convictions. But the $1,500 he needed for the bond was far beyond what he or his family could afford. It wasn’t until his public defender, Erika Wurst, persuaded the judge to lower the amount to $500 cash, and a nonprofit fund, the Bail Project, paid it for him, that he was able to leave the notoriously grim jail. “Once they said I was getting released, I was so excited I stopped listening,” he told me recently. He would no longer have to drink water blackened with mold or share a cell with rats, mice and cockroaches. He did a round of victory pushups and gave away all of the snack cakes he had been saving from the cafeteria.

When he finally read Wurst’s letter, however, he realized there was a catch. Even though Wurst had argued against it, the judge, Nicole Colbert-Botchway, had ordered him to wear an ankle monitor that would track his location at every moment using GPS. For as long as he would wear it, he would be required to pay $10 a day to a private company, Eastern Missouri Alternative Sentencing Services, or EMASS. Just to get the monitor attached, he would have to report to EMASS and pay $300 up front — enough to cover the first 25 days, plus a $50 installation fee.

White didn’t know how to find that kind of money. Before his arrest, he was earning minimum wage as a temp, wrapping up boxes of shampoo. His father was largely absent, and his mother, Lakisha Thompson, had recently lost her job as the housekeeping manager at a Holiday Inn. Raising Daehaun and his four siblings, she had struggled to keep up with the bills. The family bounced between houses and apartments in northern St. Louis County, where, as a result of Jim Crow redlining, most of the area’s black population lives. In 2014, they were living on Canfield Drive in Ferguson when Michael Brown was shot and killed there by a police officer. During the ensuing turmoil, Thompson moved the family to Green Bay, Wisconsin. White felt out of place. He was looked down on for his sagging pants, called the N-word when riding his bike. After six months, he moved back to St. Louis County on his own to live with three of his siblings and stepsiblings in a gray house with vinyl siding.

When White got home on the night of his release, he was so overwhelmed to see his family again that he forgot about the letter. He spent the next few days hanging out with his siblings, his mother, who had returned to Missouri earlier that year, and his girlfriend, Demetria, who was seven months pregnant. He didn’t report to EMASS.

What he didn’t realize was that he had failed to meet a deadline. Typically, defendants assigned to monitors must pay EMASS in person and have the device installed within 24 hours of their release from jail. Otherwise, they have to return to court to explain why they’ve violated the judge’s orders. White, however, wasn’t called back for a hearing. Instead, a week after he left the Workhouse, Colbert-Botchway issued a warrant for his arrest.

Three days later, a large group of police officers knocked on Thompson’s door, looking for information about an unrelated case, a robbery. White and his brother had been making dinner with their mother, and the officers asked them for identification. White’s name matched the warrant issued by Colbert-Botchway. “They didn’t tell me what the warrant was for,” he said. “Just that it was for a violation of my release.” He was taken downtown and held for transfer back to the Workhouse. “I kept saying to myself, ’Why am I locked up?’” he recalled.

The next morning, Thompson called the courthouse to find the answer. She learned that her son had been jailed over his failure to acquire and pay for his GPS monitor. To get him out, she needed to pay EMASS on his behalf.

This seemed absurd to her. When Daehaun was 13, she had worn an ankle monitor after violating probation for a minor theft, but the state hadn’t required her to cover the cost of her own supervision. “This is a 19-year-old coming out of the Workhouse,” she told me recently. “There’s no way he has $300 saved.” Thompson felt that the court was forcing her to choose between getting White out of jail and supporting the rest of her family.

Over the past half-century, the number of people behind bars in the United States jumped by more than 500%, to 2.2 million. This extraordinary rise, often attributed to decades of “tough on crime” policies and harsh sentencing laws, has ensured that even as crime rates have dropped since the 1990s, the number of people locked up and the average length of their stay have increased. According to the Bureau of Justice Statistics, the cost of keeping people in jails and prisons soared to $87 billion in 2015 from $19 billion in 1980, in current dollars.

In recent years, politicians on both sides of the aisle have joined criminal-justice reformers in recognizing mass incarceration as both a moral outrage and a fiscal sinkhole. As ankle bracelets have become compact and cost-effective, legislators have embraced them as an enlightened alternative. More than 125,000 people in the criminal-justice system were supervised with monitors in 2015, compared with just 53,000 people in 2005, according to the Pew Charitable Trusts. Although no current national tally is available, data from several cities — Austin, Texas; Indianapolis; Chicago; and San Francisco — show that this number continues to rise. Last December, the First Step Act, which includes provisions for home detention, was signed into law by President Donald Trump with support from the private prison giants GEO Group and CoreCivic. These corporations dominate the so-called community-corrections market — services such as day-reporting and electronic monitoring — that represents one of the fastest-growing revenue sectors of their industry.

By far the most decisive factor promoting the expansion of monitors is the financial one. The United States government pays for monitors for some of those in the federal criminal-justice system and for tens of thousands of immigrants supervised by Immigration and Customs Enforcement. But states and cities, which incur around 90% of the expenditures for jails and prisons, are increasingly passing the financial burden of the devices onto those who wear them. It costs St. Louis roughly $90 a day to detain a person awaiting trial in the Workhouse, where in 2017 the average stay was 291 days. When individuals pay EMASS $10 a day for their own supervision, it costs the city nothing. A 2014 study by NPR and the Brennan Center found that, with the exception of Hawaii, every state required people to pay at least part of the costs associated with GPS monitoring. Some probation offices and sheriffs run their own monitoring programs — renting the equipment from manufacturers, hiring staff and collecting fees directly from participants. Others have outsourced the supervision of defendants, parolees and probationers to private companies.

“There are a lot of judges who reflexively put people on monitors, without making much of a pretense of seriously weighing it at all,” said Chris Albin-Lackey, a senior legal adviser with Human Rights Watch who has researched private-supervision companies. “The limiting factor is the cost it might impose on the public, but when that expense is sourced out, even that minimal brake on judicial discretion goes out the window.”

Nowhere is the pressure to adopt monitors more pronounced than in places like St. Louis: cash-strapped municipalities with large populations of people awaiting trial. Nationwide on any given day, half a million people sit in crowded and expensive jails because, like Daehaun White, they cannot purchase their freedom.

As the movement to overhaul cash bail has challenged the constitutionality of jailing these defendants, judges and sheriffs have turned to monitors as an appealing substitute. In San Francisco, the number of people released from jail onto electronic monitors tripled after a 2018 ruling forced courts to release more defendants without bail. In Marion County, Indiana, where jail overcrowding is routine, roughly 5,000 defendants were put on monitors last year. “You would be hard-pressed to find bail-reform legislation in any state that does not include the possibility of electronic monitoring,” said Robin Steinberg, the chief executive of the Bail Project.

Yet like the system of wealth-based detention they are meant to help reform, ankle monitors often place poor people in special jeopardy. Across the country, defendants who have not been convicted of a crime are put on “offender funded” payment plans for monitors that sometimes cost more than their bail. And unlike bail, they don’t get the payment back, even if they’re found innocent. Although a federal survey shows that nearly 40% of Americans would have trouble finding $400 to cover an emergency, companies and courts routinely threaten to lock up defendants if they fall behind on payment. In Greenville, South Carolina, pretrial defendants can be sent back to jail when they fall three weeks behind on fees. (An officer for the Greenville County Detention Center defended this practice on the grounds that participants agree to the costs in advance.) In Mohave County, Arizona, pretrial defendants charged with sex offenses have faced rearrest if they fail to pay for their monitors, even if they prove that they can’t afford them. “We risk replacing an unjust cash-bail system,” Steinberg said, “with one just as unfair, inhumane and unnecessary.”

Many local judges, including in St. Louis, do not conduct hearings on a defendant’s ability to pay for private supervision before assigning them to it; those who do often overestimate poor people’s financial means. Without judicial oversight, defendants are vulnerable to private-supervision companies that set their own rates and charge interest when someone can’t pay up front. Some companies even give their employees bonuses for hitting collection targets.

It’s not only debt that can send defendants back to jail. People who may not otherwise be candidates for incarceration can be punished for breaking the lifestyle rules that come with the devices. A survey in California found that juveniles awaiting trial or on probation face especially difficult rules; in one county, juveniles on monitors were asked to follow more than 50 restrictions, including not participating “in any social activity.” For this reason, many advocates describe electronic monitoring as a “net-widener": Far from serving as an alternative to incarceration, it ends up sweeping more people into the system.

Dressed in a baggy yellow City of St. Louis Corrections shirt, White was walking to the van that would take him back to the Workhouse after his rearrest, when a guard called his name and handed him a bus ticket home. A few hours earlier, his mom had persuaded her sister to lend her the $300 that White owed EMASS. Wurst, his public defender, brought the receipt to court.

The next afternoon, White hitched a ride downtown to the EMASS office, where one of the company’s bond-compliance officers, Nick Buss, clipped a black box around his left ankle. Based in the majority white city of St. Charles, west of St. Louis, EMASS has several field offices throughout eastern Missouri. A former probation and parole officer, Michael Smith, founded the company in 1991 after Missouri became one of the first states to allow private companies to supervise some probationers. (Smith and other EMASS officials declined to comment for this story.)

The St. Louis area has made national headlines for its “offender funded” model of policing and punishment. Stricken by postindustrial decline and the 2008 financial crisis, its municipalities turned to their police departments and courts to make up for shortfalls in revenue. In 2015, the Ferguson Report by the United States Department of Justice put hard numbers to what black residents had long suspected: The police were targeting them with disproportionate arrests, traffic tickets and excessive fines.

EMASS may have saved the city some money, but it also created an extraordinary and arbitrary-seeming new expense for poor defendants. When cities cover the cost of monitoring, they often pay private contractors $2 to $3 a day for the same equipment and services for which EMASS charges defendants $10 a day. To come up with the money, EMASS clients told me, they had to find second jobs, take their children out of day care and cut into disability checks. Others hurried to plead guilty for no better reason than that being on probation was cheaper than paying for a monitor.

At the downtown office, White signed a contract stating that he would charge his monitor for an hour and a half each day and “report” to EMASS with $70 each week. He could shower, but was not to bathe or swim (the monitor is water-resistant, not waterproof). Interfering with the monitor’s functioning was a felony.

White assumed that GPS supervision would prove a minor annoyance. Instead, it was a constant burden. The box was bulky and the size of a fist, so he couldn’t hide it under his jeans. Whenever he left the house, people stared. There were snide comments ("nice bracelet") and cutting jokes. His brothers teased him about having a babysitter. “I’m nobody to watch,” he insisted.

The biggest problem was finding work. Confident and outgoing, White had never struggled to land jobs; after dropping out of high school in his junior year, he flipped burgers at McDonald’s and Steak ’n Shake. To pay for the monitor, he applied to be a custodian at Julia Davis Library, a cashier at Home Depot, a clerk at Menards. The conversation at Home Depot had gone especially well, White thought, until the interviewer casually asked what was on his leg.

To help improve his chances, he enrolled in Mission: St. Louis, a job-training center for people reentering society. One afternoon in January, he and a classmate role-played how to talk to potential employers about criminal charges. White didn’t know how much detail to go into. Should he tell interviewers that he was bringing his pregnant girlfriend some snacks when he was pulled over? He still isn’t sure, because a police officer came looking for him midway through the class. The battery on his monitor had died. The officer sent him home, and White missed the rest of the lesson.

With all of the restrictions and rules, keeping a job on a monitor can be as difficult as finding one. The hours for weekly check-ins at the downtown EMASS office — 1 p.m. to 6 p.m. on Tuesdays and Wednesdays, and 1 p.m. until 5 p.m. on Mondays — are inconvenient for those who work. In 2011, the National Institute of Justice surveyed 5,000 people on electronic monitors and found that 22% said they had been fired or asked to leave a job because of the device. Juawanna Caves, a young St. Louis native and mother of two, was placed on a monitor in December after being charged with unlawful use of a weapon. She said she stopped showing up to work as a housekeeper when her co-workers made her uncomfortable by asking questions and later lost a job at a nursing home because too many exceptions had to be made for her court dates and EMASS check-ins.

Perpetual surveillance also takes a mental toll. Nearly everyone I spoke to who wore a monitor described feeling trapped, as though they were serving a sentence before they had even gone to trial. White was never really sure about what he could or couldn’t do under supervision. In January, when his girlfriend had their daughter, Rylan, White left the hospital shortly after the birth, under the impression that he had a midnight curfew. Later that night, he let his monitor die so that he could sneak back before sunrise to see the baby again.

EMASS makes its money from defendants. But it gets its power over them from judges. It was in 2012 that the judges of the St. Louis court started to use the company’s services — which previously involved people on probation for misdemeanors — for defendants awaiting trial. Last year, the company supervised 239 defendants in the city of St. Louis on GPS monitors, according to numbers provided by EMASS to the court. The alliance with the courts gives the company not just a steady stream of business but a reliable means of recouping debts: Unlike, say, a credit-card company, which must file a civil suit to collect from overdue customers, EMASS can initiate criminal-court proceedings, threatening defendants with another stay in the Workhouse.

In early April, I visited Judge Rex Burlison in his chambers on the 10th floor of the St. Louis civil courts building. A few months earlier, Burlison, who has short gray hair and light blue eyes, had been elected by his peers as presiding judge, overseeing the city’s docket, budget and operations, including the contract with EMASS. It was one of the first warm days of the year, and from the office window I could see sunlight glimmering on the silver Gateway Arch.

I asked Burlison about the court’s philosophy for using pretrial GPS. He stressed that while each case was unique and subject to the judge’s discretion, monitoring was most commonly used for defendants who posed a flight risk, endangered public safety or had an alleged victim. Judges vary in how often they order defendants to wear monitors, and critics have attacked the inconsistency. Colbert-Botchway, the judge who put White on a monitor, regularly made pretrial GPS a condition of release, according to public defenders. (Colbert-Botchway declined to comment.) But another St. Louis city judge, David Roither, told me, “I really don’t use it very often because people here are too poor to pay for it.”

Whenever a defendant on a monitor violates a condition of release, whether related to payment or a curfew or something else, EMASS sends a letter to the court. Last year, Burlison said, the court received two to three letters a week from EMASS about violations. In response, the judge usually calls the defendant in for a hearing. As far as he knew, Burlison said, judges did not incarcerate people simply for failing to pay EMASS debts. “Why would you?” he asked me. When people were put back in jail, he said, there were always other factors at play, like the defendant’s missing a hearing, for instance. (Issuing a warrant for White’s arrest without a hearing, he acknowledged after looking at the docket, was not the court’s standard practice.)

The contract with EMASS allows the court to assign indigent defendants to the company to oversee “at no cost.” Yet neither Burlison nor any of the other current or former judges I spoke with recalled waiving fees when ordering someone to wear an ankle monitor. When I asked Burlison why he didn’t, he said that he was concerned that if he started to make exceptions on the basis of income, the company might stop providing ankle-monitoring services in St. Louis.

“People get arrested because of life choices,” Burlison said. “Whether they’re good for the charge or not, they’re still arrested and have to deal with it, and part of dealing with it is the finances.” To release defendants without monitors simply because they can’t afford the fee, he said, would be to disregard the safety of their victims or the community. “We can’t just release everybody because they’re poor,” he continued.

But many people in the Workhouse awaiting trial are poor. In January, civil rights groups filed suit against the city and the court, claiming that the St. Louis bail system violated the Constitution, in part by discriminating against those who can’t afford to post bail. That same month, the Missouri Supreme Court announced new rules that urged local courts to consider releasing defendants without monetary conditions and to waive fees for poor people placed on monitors. Shortly before the rules went into effect, on July 1, Burlison said that the city intends to shift the way ankle monitors are distributed and plans to establish a fund to help indigent defendants pay for their ankle bracelets. But he said he didn’t know how much money would be in the fund or whether it was temporary or permanent. The need for funding could grow quickly. The pending bail lawsuit has temporarily spurred the release of more defendants from custody, and as a result, public defenders say, the demand for monitors has increased.

Judges are anxious about what people released without posting bail might do once they get out. Several told me that monitors may ensure that the defendants return to court. Not unlike doctors who order a battery of tests for a mildly ill patient to avoid a potential malpractice suit, judges seem to view monitors as a precaution against their faces appearing on the front page of the newspaper. “Every judge’s fear is to let somebody out on recognizance and he commits murder, and then everyone asks, ’How in the hell was this person let out?’” said Robert Dierker, who served as a judge in St. Louis from 1986 to 2017 and now represents the city in the bail lawsuit. “But with GPS, you can say, ’Well, I have him on GPS, what else can I do?’”

Critics of monitors contend that their public-safety appeal is illusory: If defendants are intent on harming someone or skipping town, the bracelet, which can be easily removed with a pair of scissors, would not stop them. Studies showing that people tracked by GPS appear in court more reliably are scarce, and research about its effectiveness as a deterrent is inconclusive.

“The fundamental question is, What purpose is electronic monitoring serving?” said Blake Strode, the executive director of ArchCity Defenders, a nonprofit civil rights law firm in St. Louis that is one of several firms representing the plaintiffs in the bail lawsuit. “If the only purpose it’s serving is to make judges feel better because they don’t want to be on the hook if something goes wrong, then that’s not a sensible approach. We should not simply be monitoring for monitoring’s sake.”

Electronic monitoring was first conceived in the early 1960s by Ralph and Robert Gable, identical twins studying at Harvard under the psychologists Timothy Leary and B.F. Skinner, respectively. Influenced in part by Skinner’s theories of positive reinforcement, the Gables rigged up some surplus missile-tracking equipment to monitor teenagers on probation; those who showed up at the right places at the right times were rewarded with movie tickets, limo rides and other prizes.

Although this round-the-clock monitoring was intended as a tool for rehabilitation, observers and participants alike soon recognized its potential to enhance surveillance. All but two of the 16 volunteers in their initial study dropped out, finding the two bulky radio transmitters oppressive. “They felt like it was a prosthetic conscience, and who would want Mother all the time along with you?” Robert Gable told me. Psychology Today labeled the invention a “belt from Big Brother.”

The reality of electronic monitoring today is that Big Brother is watching some groups more than others. No national statistics are available on the racial breakdown of Americans wearing ankle monitors, but all indications suggest that mass supervision, like mass incarceration, disproportionately affects black people. In Cook County, Illinois, for instance, black people make up 24% of the population, and 67% of those on monitors. The sociologist Simone Browne has connected contemporary surveillance technologies like GPS monitors to America’s long history of controlling where black people live, move and work. In her 2015 book, “Dark Matters,” she traces the ways in which “surveillance is nothing new to black folks,” from the branding of enslaved people and the shackling of convict laborers to Jim Crow segregation and the home visits of welfare agencies. These historical inequities, Browne notes, influence where and on whom new tools like ankle monitors are imposed.

For some black families, including White’s, monitoring stretches across generations. Annette Taylor, the director of Ripple Effect, an advocacy group for prisoners and their families based in Champaign, Illinois, has seen her ex-husband, brother, son, nephew and sister’s husband wear ankle monitors over the years. She had to wear one herself, about a decade ago, she said, for driving with a suspended license. “You’re making people a prisoner of their home,” she told me. When her son was paroled and placed on house arrest, he couldn’t live with her, because he was forbidden to associate with people convicted of felonies, including his stepfather, who was also on house arrest.

Some people on monitors are further constrained by geographic restrictions — areas in the city or neighborhood that they can’t go without triggering an alarm. James Kilgore, a research scholar at the University of Illinois at Champaign-Urbana, has cautioned that these exclusionary zones could lead to “e-gentrification,” effectively keeping people out of more-prosperous neighborhoods. In 2016, after serving four years in prison for drug conspiracy, Bryan Otero wore a monitor as a condition of parole. He commuted from the Bronx to jobs at a restaurant and a department store in Manhattan, but he couldn’t visit his family or doctor because he was forbidden to enter a swath of Manhattan between 117th Street and 131st Street. “All my family and childhood friends live in that area,” he said. “I grew up there.”

Michelle Alexander, a legal scholar and columnist for The Times, has argued that monitoring engenders a new form of oppression under the guise of progress. In her 2010 book, “The New Jim Crow,” she wrote that the term “mass incarceration” should refer to the “system that locks people not only behind actual bars in actual prisons, but also behind virtual bars and virtual walls — walls that are invisible to the naked eye but function nearly as effectively as Jim Crow laws once did at locking people of color into a permanent second-class citizenship.”

As the cost of monitoring continues to fall, those who are required to submit to it may worry less about the expense and more about the intrusive surveillance. The devices, some of which are equipped with two-way microphones, can give corrections officials unprecedented access to the private lives not just of those monitored but also of their families and friends. GPS location data appeals to the police, who can use it to investigate crimes. Already the goal is both to track what individuals are doing and to anticipate what they might do next. BI Incorporated, an electronic-monitoring subsidiary of GEO Group, has the ability to assign risk scores to the behavioral patterns of those monitored, so that law enforcement can “address potential problems before they happen.” Judges leery of recidivism have begun to embrace risk-assessment tools. As a result, defendants who have yet to be convicted of an offense in court may be categorized by their future chances of reoffending.

The combination of GPS location data with other tracking technologies such as automatic license-plate readers represents an uncharted frontier for finer-grained surveillance. In some cities, police have concentrated these tools in neighborhoods of color. A CityLab investigation found that Baltimore police were more likely to deploy the Stingray — the controversial and secretive cellphone tracking technology — where African Americans lived. In the aftermath of Freddie Gray’s death in 2015, the police spied on Black Lives Matter protesters with face recognition technology. Given this pattern, the term “electronic monitoring” may soon refer not just to a specific piece of equipment but to an all-encompassing strategy.

If the evolution of the criminal-justice system is any guide, it is very likely that the ankle bracelet will go out of fashion. Some GPS monitoring vendors have already started to offer smartphone applications that verify someone’s location through voice and face recognition. These apps, with names like Smart-LINK and Shadowtrack, promise to be cheaper and more convenient than a boxy bracelet. They’re also less visible, mitigating the stigma and normalizing surveillance. While reducing the number of people in physical prison, these seductive applications could, paradoxically, increase its reach. For the nearly 4.5 million Americans on probation or parole, it is not difficult to imagine a virtual prison system as ubiquitous — and invasive — as Instagram or Facebook.

On January 24, exactly three months after White had his monitor installed, his public defender successfully argued in court for its removal. His phone service had been shut off because he had fallen behind on the bill, so his mother told him the good news over video chat.

When White showed up to EMASS a few days later to have the ankle bracelet removed, he said, one of the company’s employees told him that he couldn’t take off his monitor until he paid his debt. White offered him the $35 in his wallet — all the money he had. It wasn’t enough. The employee explained that he needed to pay at least half of the $700 he owed. Somewhere in the contract he had signed months earlier, White had agreed to pay his full balance “at the time of removal.” But as White saw it, the court that had ordered the monitor’s installation was now ordering its removal. Didn’t that count?

“That’s the only thing that’s killing me,” White told me a few weeks later, in early March. “Why are you all not taking it off?” We were in his brother’s room, which, unlike White’s down the hall, had space for a wobbly chair. White sat on the bed, his head resting against the frame, while his brother sat on the other end by the TV, mumbling commands into a headset for the fantasy video game Fortnite. By then, the prosecutor had offered White two to three years of probation in exchange for a plea. (White is waiting to hear if he has been accepted into the city’s diversion program for “youthful offenders,” which would allow him to avoid pleading and wipe the charges from his record in a year.)

White was wearing a loosefitting Nike track jacket and red sweats that bunched up over the top of his monitor. He had recently stopped charging it, and so far, the police hadn’t come knocking. “I don’t even have to have it on,” he said, looking down at his ankle. “But without a job, I can’t get it taken off.” In the last few weeks, he had sold his laptop, his phone and his TV. That cash went to rent, food and his daughter, and what was left barely made a dent in what he owed EMASS.

It was a Monday — a check-in day — but he hadn’t been reporting for the past couple of weeks. He didn’t see the point; he didn’t have the money to get the monitor removed and the office was an hour away by bus. I offered him a ride.

EMASS check-ins take place in a three-story brick building with a low-slung facade draped in ivy. The office doesn’t take cash payments, and a Western Union is conveniently located next door. The other men in the waiting room were also wearing monitors. When it was White’s turn to check-in, Buss, the bond-compliance officer, unclipped the band from his ankle and threw the device into a bin, White said. He wasn’t sure why EMASS had now softened its approach, but his debts nonetheless remained.

Buss calculated the money White owed going back to November: $755, plus 10% annual interest. Over the next nine months, EMASS expected him to make monthly payments that would add up to $850 — more than the court had required for his bond. White looked at the receipt and shook his head. “I get in trouble for living,” he said as he walked out of the office. “For being me.”

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Medical Collections Vendor Files For Bankruptcy Protection

Things have become complicated regarding American Medical Collection Agency (AMCA), a collections firm used by several medical testing firms. After breach announcements by Quest Diagnostics and LabCorp earlier this month, more healthcare firms announced breach notices.

So, more than 20 million persons have been affected. ZD Net reported the patient totals by healthcare firm:

"Quest Diagnostics (11.9 million patients), LabCorp (7.7 million patients), BioReference Laboratories (Opko Health subsidiary, 422,600 patients), Carecentrix (500,000 patients), and Sunrise Laboratories (undisclosed number of patients)."

Now, we learn that AMCA has filed for bankruptcy protection:

"According to the Chapter 11 declaration (.PDF), filed with the court for the Southern District of New York, AMCA first became aware of a potential security incident when a disproportionate number of credit cards that interacted with the company's web portal were linked to fraudulent transactions... Cybersecurity forensics bills of roughly $400,000, IT support costs, severe restrictions that were put in place to protect AMCA's network from further intrusion, looming court cases, and the loss of valuable business partners have all taken their toll."

A "Chapter 11" bankruptcy means a reorganization, compared to a total liquidation under "Chapter 7." So, AMCA executives expect their company to survive.

ZD Net also reported that AMCA has paid more than:

"... $3.8 million to inform over seven million people who have potentially been impacted via mail. This figure alone is more than the company had to hand, forcing AMCA to take out a loan from the CEO and founder, Russell Fuchs, just to meet this expense. By filing for bankruptcy protection, the business will continue on as usual as AMCA seeks to pay off its creditors."

The costs highlight the consequences when companies fail to protect consumers' sensitive personal and payment data. The bankruptcy filing begs the next question: continue operating how effectively? Reportedly, AMCA has already cut its workforce from 155 to 25 employees. Usually under bankruptcy protection, a court decides which creditors get paid and whether they are paid in full -- including employees.

This scenario makes one wonder if AMCA can afford the ongoing expenses and resources necessary to harden its computer systems against intrusions, pay its employees, fully support data breach victims, and pay any post-breach fines. If AMCA can't pay its employees, it is probably already dead.

CBP Breach Disclosed Images Of Travelers' Faces And Vehicle License Plates. Many Unanswered Questions

A security breach at a vendor used by U.S. Customs & Border Patrol (CBP) has disclosed the images of both travelers and vehicles license plates. The Washington Post reported:

"Customs officials said in a statement Monday that the images, which included photos of people’s faces and license plates, had been compromised as part of an attack on a federal subcontractor. CBP makes extensive use of cameras and video recordings at airports and land border crossings, where images of vehicles are captured. Those images are used as part of a growing agency facial-recognition program designed to track the identity of people entering and exiting the United States. Fewer than 100,000 people were impacted, said CBP... Officials said the stolen information did not include other identifying information, and no passport or other travel document photos were compromised..."

Reportedly, CBP learned about the breach on May 31. The newspaper also reported:

"CBP said copies of “license plate images and traveler images collected by CBP” had been transferred to the subcontractor’s company network, violating the agency’s security and privacy rules. The subcontractor’s network was then attacked and breached. No CBP systems were compromised, the agency said."

A reporter posted on Twitter the brief statement by CBP, which was sent to selected news organizations:

"On May 31, 2009, CBP learned that a subcontractor, in violation of CBP policies and without CBP's authorization or knowledge, had transferred copies of license plate images and traveler images collected by CBP to the subcontractor's company network. The subcontractor's network was subsequently compromised by a malicious cyber-attack. No CBP systems were compromised.

Initial information indicates that the subcontractor violated mandatory security and privacy controls outlined in their contract. As of today, none of the image data has been identified on the Dark Web or internet. CBP has alerted Members of Congress and is working closely with other law enforcement agencies and cybersecurity entities, and its own Office of Professional Responsibility to actively investigate the incident. CBP will unwaveringly work with all partners to determine the extent of the breach and the appropriate response. CBP has removed from service all equipment related to the breach and is closely monitoring all CBP work by the contractor..."

Well, that brief statement is a start... a small start. This security breach is very troubling for several reasons.

First, it seems that CBP was unaware of the contractual violation (e.g., downloaded images) until it was informed of the data breach. That suggests an inadequate contractual agreement between the vendor and CBP; or failures by CBP to monitor and enforce its contracts. That also raises more questions:

• When and which executives at the vendor will be reprimanded for this violation?
• Why did CBP fail to identify the download violation?
• What changes are underway to prevent future violations?
• Why is CBP continuing to use a vendor known to have severely violated its contractual agreement?
• What other vendors have violated CBP contracts?

Second, CBP refused to disclose the name of the vendor. Why? What would this accomplish? Its statement described the breach as a "malicious cyberattack." That seems to warrant disclosure. Were CBP executives caught unprepared?

Thankfully, reporters at the Washington Post continued investigating:

"... a Microsoft Word document of CBP’s public statement, sent Monday to Washington Post reporters, included the name “Perceptics” in the title: “CBP Perceptics Public Statement.” Perceptics representatives did not immediately respond to requests for comment... reporters at The Register, a British technology news site, reported late last month that a large haul of breached data from the firm Perceptics was being offered as a free download on the dark web."

So, we don't know for sure if Perceptics was the CBP vendor. However, the May 23rd article in The Register indicates that Perceptics executives were already aware of the breach. CBP executives should have known about the breach on May 23, too, since the article mentioned both entities. Then, why did the CBP statement say it learned of the breach on May 31st? Something here smells -- arrogance, incompetence, or both.

Third, a check at press time of the CBP website and newsroom failed to find any mentions of the security breach. CBP executives have had since May 31st (or since May 23rd), so why send a statement only to select news organizations? Why not publish that statement on its website, too? Were CBP executives caught unprepared and then rushed a haphazard response? When will the breach investigation report be released?

This is troubling. It suggests either arrogance or unpreparedness. As a taxpayer, my money funds CBP activities. I want to know that my money is being spent effectively.

Fourth, the lack of a detailed breach announcement means many related questions remain unanswered:

• When will CBP notify affected persons? If the vendor will notify affected persons, then CBP must disclose the vendor's name in advance.
• What assistance (e.g., free credit monitoring) will CBP provide affected persons?
• What is the status of the post-breach investigation? It helps to know how attackers broke in so effective fixes can be implemented.
• What other data elements were accessed/stolen? Metadata (e.g., image date and timestamp, border crossing GPS location, entering or exiting USA, vehicle brand and model, number and ages of any passengers in vehicles, etc.) attached to the images can be just as damaging.
• Were any data elements encrypted? If not, why not?
• Can facial images be matched to vehicle plate images, and/or to other data elements? If so, this creates more problems for impacted persons.
• When will fixes be implemented so this doesn't happen again?
• Exactly how many persons were affected, and in what states? Local states' breach notification laws may apply.
• How many of the affected persons are U.S. citizens? If the 100,000 estimate applies to only affected U.S. citizens, then we need to know the true total number of persons impacted by the breach.
• Does the 100,000 estimate refer to facial images only? If so, then exactly how many vehicle license plate images were disclosed?

The statement of "fewer than 100,000 persons impacted" seems vague. A breach investigation should determine two fairly precise items: the number of facial images accessed/stolen, and the number of license plate images accessed/stolen.

Plus, it seems wise to assume more data was stolen during the breach. Why? Consider this report by The Atlantic:

"I would be cautious about assuming this data breach contains only photo data," said Chad Loder, the CEO of Habitu8, a cybersecurity firm that trains other companies on security awareness. The full scope of the breach may be much larger than what CBP revealed in its original statement, he said. In recent years, CBP has asked travelers for fingerprints, facial data, and, recently, even social-media accounts. "If CBP’s contractor was targeted specifically, it’s unlikely that the attacker would have stopped with just photo data..."

If social media passwords were stolen, then affected persons need to know so they can change online passwords. And, elected officials are also asking questions. The Hill reported:

"House Homeland Security Committee Chairman Bennie Thompson (D-Miss.) announced on Monday that his committee would hold hearings next month to examine the collection of biometric information by the Department of Homeland Security (DHS), which includes CBP... Homeland Security Committee ranking member Mike Rogers (R-Ala.), used the breach to criticize DHS’s handling of cybersecurity challenges, saying in a statement to The Hill that "the agency is ill-equipped to handle emerging cyberthreats"... Representative Cedric Richmond (D-La.), the chairman of the House Homeland Security subcommittee on cybersecurity, also called for more answers about the breach, which he said would inform Congress's next steps... Senator Brian Schatz (D-Hawaii), the ranking member of the Senate Commerce Subcommittee on Communications, Technology, Innovation and the Internet, said he thinks the breach merits an investigation by the Office of the Inspector General."

Good suggestion by Senator Schatz. Clearly, there's plenty more news to come. Plenty.

Two Data Breaches At Collections Vendor Used By Healthcare Testing Firms Affect About 19 Million Persons

Two healthcare data breaches have affected about 19 million persons, so far.

First, a data breach at a third-party collections firm has affected about 11.9 million patients at Quest Diagnostics, a medical testing firm. Quest announced in a June 3rd news release that American Medical Collection Agency (AMCA) notified it of data breach affecting Quest patients:

"... an unauthorized user had access to AMCA’s system...AMCA provides billing collections services to Optum360, which in turn is a Quest contractor. Quest and Optum360 are working with forensic experts to investigate the matter. AMCA first notified Quest and Optum360 on May 14, 2019 of potential unauthorized activity on AMCA’s web payment page. On May 31, 2019, AMCA notified Quest and Optum360 that the data on AMCA’s affected system included information regarding approximately 11.9 million Quest patients. AMCA believes this information includes personal information, including certain financial data, Social Security numbers, and medical information, but not laboratory test results."

Quest said that AMCA hasn't yet provided it with details about the data breach. The news release did not state when AMCA or Quest would directly notify affected patients. Hopefully, future news releases will provide dates when the breach occurred, how the attackers broke in, and the fixes underway so this doesn't happen again.

Second, a data breach at the same third-party collections firm has also affected about 7.7 million customers of LabCorp, another medical testing firm. LabCorp disclosed in a filing with the U.S. Securities and Exchange Commission that AMCA notified it of data breach which occurred between August 1, 2018 and March 30, 2019. The filing did not state the date when AMCA notified LabCorp. The filing did state:

"AMCA is an external collection agency used by LabCorp and other healthcare companies. LabCorp has referred approximately 7.7 million consumers to AMCA... AMCA’s affected system included information provided by LabCorp. That information could include first and last name, date of birth, address, phone, date of service, provider, and balance information. AMCA’s affected system also included credit card or bank account information that was provided by the consumer to AMCA... AMCA has advised LabCorp that Social Security Numbers and insurance identification information are not stored or maintained for LabCorp consumers."

LabCorp said in the filing that it didn't provide patients' ordered tests, laboratory results, or diagnostic information to AMCA. AMCA is currently notifying about 200,000 LabCorp consumers whose credit card or bank account information may have been accessed. Also:

"AMCA has not yet provided LabCorp a list of the affected LabCorp consumers or more specific information about them. AMCA has indicated that it is continuing to investigate this incident and has taken steps to increase the security of its systems, processes, and data. LabCorp takes data security very seriously, including the security of data handled by vendors. AMCA has informed LabCorp that it intends to provide the approximately 200,000 affected LabCorp consumers with more specific information about the AMCA Incident, in addition to offering them identity protection and credit monitoring services for 24 months."

Given the ongoing investigation and breach notification, more news seems likely. Both breaches suggest other AMCA clients may have been affected. A check of the AMCA website at press time failed to find any news releases or mentions of both data breaches. C/Net reported:

"LabCorp also said that as a result of the breach, it's stopped sending new collection requests to the AMCA and suspended the AMCA's work on any pending requests related to LabCorp customers... LabCorp declined to comment beyond its SEC filing. AMCA said it conducted an internal audit after being notified of the breach by an outside security compliance firm and took down its web payments page. The company has also hired a third-party forensics firm to investigate the breach and has notified law enforcement."

The Krebs On Security blog reported:

"... AMCA also does business under the name “Retrieval-Masters Credit Bureau,” a company that has been in business since 1977. Retrieval-Masters also has an atrocious reputation for allegedly harassing consumers for debts they never owed. A search on the company’s name at the complaints page of the Consumer Financial Protection Bureau (CFPB) turns up almost 700 complaints for Retrieval-Masters. The company has an abysmal “F” rating from the Better Business Bureau, with 60 complaints closed against it in the last three years. Reviewing a number of those complaints reveals some of the AMCA’s other current and/or previous clients, including New Jersey’s EZPass system.

Both data breaches reminder patients that when companies outsource collections activities, patients' sensitive healthcare and payment information are often shared with outsource vendors. The lack of breach details makes one wonder if AMCA executives were caught unprepared with both inadequate data security on its payments website, and post-breach responses. Hopefully, future news reports will clarify things.

Dirty Tricks By Some Sellers At Amazon To Eliminate Competitors. Is Its Resolution System The Best Amazon Can Do?

Many consumers like shopping at Amazon.com. What you may not realize are the dirty tricks and scams among some sellers -- the individuals and firms who provide the products you purchase at the site. The Verge reported:

"When you buy something on Amazon, the odds are, you aren’t buying it from Amazon at all... They are largely hidden from customers, but behind any item for sale, there could be dozens of sellers, all competing for your click. This year, Marketplace sales were almost double those of Amazon retail itself, according to Marketplace Pulse, making the seller platform alone the largest e-commerce business in the US... "

Reportedly, there are 6 million sellers in Amazon Marketplace. So, there's plenty of competition. The Verge article described one dirty track where a seller posted posted bogus 5-star reviews on a competitor's page within the site. When the bogus reviews were removed, the targeted seller was accused of falsely manipulating buyers' reviews -- a violation of the site's rules -- and suspended. The Verge described several attacks by scammers. Here's another:

"Scammers have effectively weaponized Amazon’s anti-counterfeiting program. Attacks have become so widespread that they’ve even pulled in the US Patent and Trademark Office... Scammers had begun swapping out the email addresses on their rival’s trademark files, which can be done without a password, and using the new email to register their competitor’s brand with Amazon, gaining control of their listings... Amazon appears not to check whether a listing belongs to a brand already enrolled in brand registry..."

No online shopper wants to buy products from a seller who has fraudulently taken over a valid seller's trademarks.

Punishment is harsh for violators within Amazon Marketplace: suspension, monies frozen, de-listed from the site, and unable to sell products online. If the suspension lasts long enough or if reinstatement doesn't happen fast enough, bankruptcy can result. And all of this happens behind the scenes unbeknownst to customers:

"For sellers, Amazon is a quasi-state. They rely on its infrastructure — its warehouses, shipping network, financial systems, and portal to millions of customers — and pay taxes in the form of fees. They also live in terror of its rules, which often change and are harshly enforced... Sellers are more worried about a case being opened on Amazon than in actual court, says Dave Bryant, an Amazon seller and blogger. Amazon’s judgment is swifter and less predictable, and now that the company controls nearly half of the online retail market in the US, its rulings can instantly determine the success or failure of your business, he says... Amazon already has something like a judicial system — one that is secretive, volatile, and often terrifying. Amazon’s judgments are so severe that its own rules have become the ultimate weapon in the constant warfare of Marketplace. Sellers devise all manner of intricate schemes to frame their rivals... They impersonate, copy, deceive, threaten, sabotage, and even bribe Amazon employees for information on their competitors."

So, rather than using the established, well-documented public courts and legal system, this happens secretly within a corporation's processes with some unintended consequences:

"... what’s a seller to do when they end up in Amazon court? They can turn to someone like Cynthia Stine, who is part of a growing industry of consultants who help sellers navigate the ruthless world of Marketplace and the byzantine rules by which Amazon governs it. They are like lawyers, only their legal code is the Amazon Terms of Service, their court is a secretive and semi-automated corporate bureaucracy..."

How byzantine? Consider:

"Many sellers can’t even figure out what Amazon is accusing them of. A suspension message will typically list an item along with a broad and tangentially related category of an infraction, like "used sold as new." Understandably, sellers respond by sending invoices that show that the items are, in fact, new. Actually, Stine says, the suspension usually has nothing to do with the item being used, but with something like a peeling label on the box. “The thing Amazon wants you to fix is the buyer perception,” Stine says... JC Hewitt, whose law firm frequently works with Amazon sellers, calls the system’s mandatory guilty pleas, arbitrary verdicts, and obscure language "a Kafkaesque bureaucracy with bad writing." Inscrutable rulings emerge as if from a black box. The Performance team, which handles suspensions, has no phone number; there’s no one to ask for clarification. The only way to interact with them is by filing an appeal, and when it’s rejected, sellers often have no idea why... The secrecy can be so frustrating that sellers have traveled to Seattle or Amazon’s London office to try to find a human, to no avail..."

Huh? What? I'll bet many Amazon customers don't know this. And the system seems to use a poor balance of automation and humans:

"... there were likely humans reading [a seller's] appeal, but they’re part of a highly automated bureaucracy, according to former Amazon employees. An algorithm flags sellers based on a range of metrics — customer complaints, number of returns, certain keywords used in reviews, and other, more mysterious variables — and passes them to Performance workers based in India, Costa Rica, and other locations. These workers choose between several prewritten blurbs to send to sellers. They may see what the actual problem is or the key item missing from an appeal, but they can’t be more specific than the forms allow... The Performance workers’ incentives favor rejection. They must process approximately one claim every four minutes, and reinstating someone who later gets suspended again counts against them..."

Is this the best system possible? Probably not. I hope not. My guess is many Amazon Prime customers would prefer a better system to resolve disputes between sellers. My guess is that most shoppers would want to avoid using sellers who abuse or frame other sellers. And no shoppers want to buy from a seller who has fraudulently taken over another seller's trademarks.

The situation raises several issues:

• A private court system prevents amazon customers from knowing about and avoiding shopping at sellers who abuse or frame other sellers
• A private court system prevents external reviews and/or oversight by independent parties
• An algorithm-based system may save money, but a poor balance of humans and automation causes problems. Is this the best system possible?
• Amazon determines what's in its customers' best interests (versus disclosure and then feedback from customers)
• There seem to be few penalties for sellers who frame or setup other sellers. What fix is underway?
• The current system smells like a bloated monopoly. With some transparency and input, a better system seems possible... preferred.

What are your opinions? What issues do you see? Is a private court system a good thing?

ABA Updates Guidance For Attorneys' Data Security And Data Breach Obligations. What Their Clients Can Expect

To provide the best representation, attorneys often process and archive sensitive information about their clients. Consumers hire attorneys to complete a variety of transactions: buy (or sell) a home, start (or operate) a business, file a complaint against a company, insurer, or website for unsatisfactory service, file a complaint against a former employer, and more. What are attorneys' obligations regarding data security to protect their clients' sensitive information, intellectual property, and proprietary business methods?

What can consumers expect when the attorney or law firm they've hired experienced a data breach? Yes, law firms experience data breaches. The National Law Review reported last year:

"2016 was the year that law firm data breaches landed and stayed squarely in both the national and international headlines. There have been numerous law firm data breaches involving incidents ranging from lost or stolen laptops and other portable media to deep intrusions... In March, the FBI issued a warning that a cybercrime insider-trading scheme was targeting international law firms to gain non-public information to be used for financial gain. In April, perhaps the largest volume data breach of all time involved law firm Mossack Fonesca in Panama... Finally, Chicago law firm, Johnson & Bell Ltd., was in the news in December when a proposed class action accusing them of failing to protect client data was unsealed."

So, what can clients expect regarding data security and data breaches? A post in the Lexology site reported:

"Lawyers don’t get a free pass when it comes to data security... In a significant ethics opinion issued last month, Formal Opinion 483, Lawyers’ Obligations After an Electronic Data Breach or Cyberattack, the American Bar Association’s Standing Committee on Ethics and Professional Responsibility provides a detailed roadmap to a lawyer’s obligations to current and former clients when they learn that they – or their firm – have been the subject of a data breach... a lawyer’s compliance with state or federal data security laws does "not necessarily achieve compliance with ethics obligations," and identifies six ABA Model Rules that might be implicated in the breach of client information."

Readers of this blog are familiar with the common definition of a data breach: unauthorized persons have accessed, stolen, altered, and/or destroyed information they shouldn't have. Attorneys have an obligation to use technology competently. The post by Patterson Belknap Webb & Tyler LLP also stated:

"... lawyers have an obligation to take “reasonable steps” to monitor for data breaches... When a breach is detected, a lawyer must act “reasonably and promptly” to stop the breach and mitigate damages resulting from the breach... A lawyer must make reasonable efforts to assess whether any electronic files were, in fact, accessed and, if so, identify them. This requires a post-breach investigation... Lawyers must then provide notice to their affected clients of the breach..."

I read the ABA Formal Opinion 483. (A copy of the opinion is also available here.) A follow-up post this week by the National Law Review listed 10 best practices to stop cyberattacks and breaches. Since many law firms outsource some back-office functions, this might be the most important best-practice item:

"4. Evaluate Your Vendors’ Security: Ask to see your vendor’s security certificate. Review the vendor’s security system as you would your own, making sure they exercise the same or stronger security systems than your own law firm..."

Billions Of Data Points About Consumers Exposed During Data Breach At Data Aggregator

It's not only social media companies and credit reporting agencies that experience data breaches where massive amounts of sensitive, personal information about millions of consumers are exposed and/or stolen. Data aggregators and analytics firms also have data breaches. Wired Magazine reported:

"The sales intelligence firm Apollo sent a notice to its customers disclosing a data breach it suffered over the summer... Apollo is a data aggregator and analytics service aimed at helping sales teams know who to contact, when, and with what message to make the most deals... Apollo also claims in its marketing materials to have 200 million contacts and information from over 10 million companies in its vast reservoir of data. That's apparently not just spin. Night Lion Security founder Vinny Troia, who routinely scans the internet for unprotected, freely accessible databases, discovered Apollo's trove containing 212 million contact listings as well as nine billion data points related to companies and organizations. All of which was readily available online, for anyone to access. Troia disclosed the exposure to the company in mid-August."

This is especially problematic for several reasons. First, data aggregators like Apollo (and social media companies and credit reporting agencies) are high-value targets: plenty of data is stored in one location. That's both convenient and risky. It also places a premium upon data security.

When data like this is exposed or stolen, it makes it easy for fraudsters, scammers, and spammers to create sophisticated and more effective phishing (and vishing) attacks to trick consumers and employees into revealing sensitive payment and financial information.

Second, data breaches like this make it easier for governments' intelligence agencies to compile data about persons and targets. Third, Apollo's database reportedly also contained sensitive data about clients. That's proprietary information. Wired explained:

"Some client-imported data was also accessed without authorization... Customers access Apollo's data and predictive features through a main dashboard. They also have the option to connect other data tools they might use, for example authorizing their Salesforce accounts to port data into Apollo..."

Salesforce, a customer relationship management (CRM) platform, uses cloud services and other online technologies to help its clients, companies with sales representatives, to manage their sales, service, and marketing activities. This breach also suggests that some employee training is needed about what to, and what not to upload, to outsourcing vendor sites. What do you think?

Equifax Operates A Secondary Credit Reporting Agency, And Its Website Appears Haphazard

More news about Equifax, the credit reporting agency with multiple data security failures resulting in a massive data breach affecting half of the United States population. It appears that Equifax also operates a secondary credit bureau: the National Consumer Telecommunications and Utilities Exchange (NCTUE). The Krebs On Security blog explained Equifax's role:

"The NCTUE is a consumer reporting agency founded by AT&T in 1997 that maintains data such as payment and account history, reported by telecommunication, pay TV and utility service providers that are members of NCTUE... there are four "exchanges" that feed into the NCTUE’s system: the NCTUE itself, something called "Centralized Credit Check Systems," the New York Data Exchange (NYDE), and the California Utility Exchange. According to a partner solutions page at Verizon, the NYDE is a not-for-profit entity created in 1996 that provides participating exchange carriers with access to local telecommunications service arrears (accounts that are unpaid) and final account information on residential end user accounts. The NYDE is operated by Equifax Credit Information Services Inc. (yes, that Equifax)... The California Utility Exchange collects customer payment data from dozens of local utilities in the state, and also is operated by Equifax (Equifax Information Services LLC)."

This surfaced after consumers with security freezes on their credit reports at the three major credit reporting agencies (e.g., Experian, Equifax, TransUnion) found fraudulent mobile phone accounts opened in their names. This shouldn't have been possible since security freezes prevent credit reporting agencies from selling consumers' credit reports to telecommunications companies, who typically perform credit checks before opening new accounts. So, the credit information must have come from somewhere else. It turns out, the source was the NCTUE.

Credit reporting agencies make money by selling consumers' credit reports to potential lenders. And credit reports from the NCTUE are easy for anyone to order:

"... the NCTUE makes it fairly easy to obtain any records they may have on Americans. Simply phone them up (1-866-349-5185) and provide your Social Security number and the numeric portion of your registered street address."

The Krebs on Security blog also explain the expired SSL certificate used by Equifax which prevents serving web pages in a secure manner. That was simply inexcusable, poor data security.

A quick check of the NCTUE page on the Better Business Bureau site found 2 negative reviews and 70 complaints -- mostly about negative credit inquiries, and unresolved issues. A quick check of the NCTUE Terms Of Use page found very thin usage and privacy policies lacking details, such as mentions about data sharing, cookies, tracking, and more. The lack of data-sharing mentions could indicate NCTUE will share or sell data to anyone: entities, companies, and government agencies. It also means there is no way to verify whether the NCTUE complies with its own policies. Not good.

The policy contains enough language which indicates that it is not liable for anything:

"... THE NCTUE IS NOT RESPONSIBLE FOR, AND EXPRESSLY DISCLAIM, ALL LIABILITY FOR, DAMAGES OF ANY KIND ARISING OUT OF USE, REFERENCE TO, OR RELIANCE ON ANY INFORMATION CONTAINED WITHIN THE SITE. All content located at or available from the NCTUE website is provided “as is,” and NCTUE makes no representations or warranties, express or implied, including but not limited to warranties of merchantability, fitness for a particular purpose, title or non-infringement of proprietary rights. Without limiting the foregoing, NCTUE makes no representation or warranty that content located on the NCTUE website is free from error or suitable for any purpose; nor that the use of such content will not infringe any third party copyrights, trademarks or other intellectual property rights.

Links to Third Party Websites: Although the NCTUE website may include links providing direct access to other Internet resources, including websites, NCTUE is not responsible for the accuracy or content of information contained in these sites.."

Huh?! As is? The data NCTUE collected is being used for credit decisions. Reliability and accuracy matters. And, there are more concerns.

While at the NCTUE site, I briefly browsed the credit freeze information, which is hosted on an outsourced site, the Exchange Service Center (ESC). What's up with that? Why a separate site, and not a cohesive single site with a unified customer experience? This design gives the impression that the security freeze process was an afterthought.

Plus, the NCTUE and ESC sites present different policies (e.g., terms of use, privacy). Really? Why the complexity? Which policies rule? You'd think that the policies in both sites would be consistent and would mention each other, since consumers must use the two sites complete security freezes. That design seems haphazard. Not good.

There's more. Rather than use state-of-the-art, traditional web pages, the ESC site presents its policies in static Adobe PDF documents making it difficult for users to follow links for more information. (Contrast those thin policies with the more comprehensive Privacy and Terms of Use policies by TransUnion.) Plus, one policy was old -- dated 2011. It seems the site hasn't been updated in seven years. What fresh hell is this? More haphazard design. Why the confusing user experience? Not good.

There's more. When placing a security freeze, the ESC site includes a drop-down menu asking consumers to pick an exchange (e.g., NCTUE, Centralized Credit Check System, California Utility Exchange, NYDE). The confusing drop-down menu appears in the image on the right. Which menu option is the global security freeze? Is there a global option? The form page doesn't say, and it should. Why would a consumer select one of the exchanges? Perhaps, is this another slick attempt to limit the effectiveness of security freezes placed by consumers. Not good.

What can consumers make of this? First, the NCTUE site seems to be a slick way for Equifax to skirt the security freezes which consumers have placed upon their credit reports. Sounds like a definite end-run to me. Surprised? I'll bet. Angry? I'll bet, too. We consumers paid good money for security freezes on our credit reports.

Second, the combo NCTUE/ESC site seems like some legal, outsourcing ju-jitsu to avoid all liability, while still enjoying the revenues from credit-report sales. The site left me with the impression that its design, which hasn't kept pace during the years with internet best practices, was by a committee of attorneys focused upon serving their corporate clients' data collection and sharing needs while doing the absolute minimum required legally -- rather than a site focused upon the security needs of consumers. I can best describe the site using an old film-review phrase: a million monkeys with a million crayons would be hard pressed in a million years to create something this bad.

Third, credit reporting agencies get their data from a variety of sources. So, their business model is based upon data sharing. NCTUE seems designed to effectively do just that, regardless of consumers' security needs and wishes.

Fourth, this situation offers several reminders: a) just about anyone can set up and operate a credit reporting agency. No special skills nor expertise required; b) there are both national and regional credit reporting agencies; c) credit reports often contain errors; and d) credit reporting agencies historically have outsourced work, sometimes internationally -- for better or worse data security.

Fifth, you now you know what criminals and fraudsters already know... how to skirt the security freezes on credit reports and gain access to consumers' sensitive information. The combo NCTUE/ESC site is definitely a high-value target by criminals.

My first impression of the NCTUE site: haphazard design making it difficult for consumers to use and to trust it. What do you think?

San Diego Police Widely Share Data From License Plate Database

Many police departments use automated license plate reader (ALPR or LPR) technology to monitor the movements of drivers and their vehicles. The surveillance has several implications beyond the extensive data collection.

The Voice of San Diego reported that the San Diego Police Departments shares its database of ALPR data with many other agencies:

"SDPD shares that database with the San Diego sector of Border Patrol – and with another 600 agencies across the country, including other agencies within the Department of Homeland Security. The nationwide database is enabled by Vigilant Solutions, a private company that provides data management and software services to agencies across the country for ALPR systems... A memorandum of understanding between SDPD and Vigilant stipulates that each agency retains ownership of its data, and can take steps to determine who sees it. A Vigilant Solutions user manual spells out in detail how agencies can limit access to their data..."

San Diego's ALPR database is fed by a network of cameras which record images plus the date, time and GPS location of the cars that pass by them. So, the associated metadata for each database record probably includes the license plate number, license plate state, vehicle owner, GPS location, travel direction, date and time, road/street/highway name or number, and the LPR device ID number.

Information about San Diego's ALPR activities became public after a data request from the Electronic Frontier Foundation (EFF), a digital privacy organization. ALPRs are a popular tool, and were used in about 38 states in 2014. Typically, the surveillance collects data about both criminals and innocent drivers.

There are several valid applications: find stolen vehicles, find stolen license plates, find wanted vehicles (e.g., abductions), execute search warrants, find parolees, and find wanted parolees. Some ALPR devices are stationary (e.g., mounted on street lights), while others are mounted on (marked and unmarked) patrol cars. Both deployments scan moving vehicles, while the latter also facilitates the scanning of parked vehicles.

Earlier this year, the EFF issued hundreds of similar requests across the country to learn how law enforcement currently uses ALPR technology. The ALPR training manual for the Elk Grove, Illinois PD listed the data archival policies for several states: New Jersey - 5 years, Vermont - 18 months, Utah - 9 months,  Minnesota - 48 hours, Arkansas - 150 days, New Hampshire - not allowed, and California - no set time. The document also stated that more than "50 million captures" are added each month to the Vigilant database. And, the Elk Grove PD seems to broadly share its ALPR data with other police departments and agencies.

The SDPD website includes a "License Plate Recognition: Procedures" document (Adobe PDF), dated May 2015, which describes its ALPR usage and policies:

"The legitimate law enforcement purposes of LPR systems include the following: 1) Locating stolen, wanted, or subject of investigation vehicles; 2) Locating witnesses and victims of a violent crime; 3) Locating missing or abducted children and at risk individuals.

LPR Strategies: 1) LPR equipped vehicles should be deployed as frequently as possible to maximize the utilization of the system; 2) Regular operation of LPR should be considered as a force multiplying extension of an officer’s regular patrol efforts to observe and detect vehicles of interest and specific wanted vehicles; 3) LPR may be legitimately used to collect data that is within public view, but should not be used to gather intelligence of First Amendment activities; 4) Reasonable suspicion or probable cause is not required for the operation of LPR equipment; 5) Use of LPR equipped cars to conduct license plate canvasses and grid searches is encouraged, particularly for major crimes or incidents as well as areas that are experiencing any type of crime series... LPR data will be retained for a period of one year from the time the LPR record was captured by the LPR device..."

The document does not describe its data security methods to protect this sensitive information from breaches, hacks, and unauthorized access. Perhaps most importantly, the 2015 SDPD document describes the data sharing policy:

"Law enforcement officers shall not share LPR data with commercial or private entities or individuals. However, law enforcement officers may disseminate LPR data to government entities with an authorized law enforcement or public safety purpose for access to such data."

However, the Voice of San Diego reported:

"A memorandum of understanding between SDPD and Vigilant stipulates that each agency retains ownership of its data, and can take steps to determine who sees it. A Vigilant Solutions user manual spells out in detail how agencies can limit access to their data... SDPD’s sharing doesn’t stop at Border Patrol. The list of agencies with near immediate access to the travel habits of San Diegans includes law enforcement partners you might expect, like the Carlsbad Police Department – with which SDPD has for years shared license plate reader data, through a countywide arrangement overseen by SANDAG – but also obscure agencies like the police department in Meigs, Georgia, population 1,038, and a private group that is not itself a police department, the Missouri Police Chiefs Association..."

So, the accuracy of the 2015 document is questionable, it it isn't already obsolete. Moreover, what's really critical are the data retention and sharing policies by Vigilant and other agencies.

Mystery Package Scam Operating on Amazon Site. What It Is, The Implications, And Advice For Victims

Last fall, a couple living in a Boston suburb started receiving packages they didn't order from Amazon, the popular online retailer. The Boston Globe reported that the couple living in Acton, Massachusetts:

"... contacted Amazon, only to be told that the merchandise was paid for with a gift card. No sender’s name, no address. While they’ve never been charged for anything, they fear they are being used in a scam... The first package from Amazon landed on Mike and Kelly Gallivan’s front porch in October. And they have continued to arrive, packed with plastic fans, phone chargers, and other cheap stuff, at a rate of one or two a week."

The packages were delivered to the intended recipient. Nobody knows who sent the items: wireless chargers, a high-intensity flashlight, a Bluetooth speaker, a computer vacuum cleaner, LED tent lamps, USB cables, and more. After receiving 25 packages since October, the couple now wants it to stop. What seemed funny at first, is now a nuisance.

The Gallivans are not alone. CBC News reported that students at several universities in Canada have also received mystery packages containing a variety of items they didn't order:

"The items come in Amazon packaging, but there's no indication who's ordering the goods from the online retail giant. "We're definitely confused by it," said Shawn Wiskar, University of Regina Students' Union vice-president of student affairs. His student union has received about 15 anonymous packages from Amazon since late November, many of which contained multiple items. Products sent so far include iPad cases, a kitchen scale and a "fleshlight" — a male sex toy in the shape of a flashlight... Six other university student unions — Dalhousie in Halifax; St. Francis Xavier in Antigonish (Nova Scotia); Ryerson in Toronto; Wilfrid Laurier in Waterloo, Ontario; Royal Roads in Victoria; and the University of Manitoba in Winnipeg — have also confirmed that they've been receiving mysterious Amazon packages since the fall."

Experts speculate that the mystery packages were sent by fraudsters trying to game the retailer's review system. Consumers buy products on Amazon.com either directly from the retailer or from independent sellers listed on the site. The Boston Globe explained:

"Here’s how two experts who used to work for Amazon, James Thomson and Chris McCabe, say it probably works: A seller trying to prop up a product would set up a phony e-mail account that would be used to establish an Amazon account. Then the seller would purchase merchandise with a gift card — no identifying information there — and send it to a random person, in this case the Gallivans. Then, the phantom seller, who controls the “buyer’s” e-mail account, writes glowing reviews of the product, thus boosting the Amazon ranking of the product."

If true, then there probably are a significant number of bogus reviews on the Amazon site. The Boston Globe's news item also suggested that a data breach within a seller's firm might have provided scammers with valid mailing addresses:

"How did Mike, to whom the packages are addressed, get drawn into this? On occasion he’s ordered stuff on Amazon and received it directly from a manufacturer, once from China. That manufacturer or some affiliate may have scooped Mike’s name and address."

If true, then that highlights the downside of offshore outsourcing, where other countries don't mandate data breach disclosures. Earlier in 2017, a resident of Queens in New York City received packages with products she didn't order:

"... All she knows is that the sender is some guy named Kevin who uses Amazon gift cards... And she’s reported the packages to the NYPD, the FBI and the Better Business Bureau since Amazon hasn’t made the deliveries stop."

In that news report, a security expert speculated that criminals were testing stolen debit- and gift-card numbers. Did a seller have a data breach which went unreported? Lots of questions and few answers.

Security experts advise consumers to report packages they didn't order to various law enforcement and agencies, as the Queens resident did. Ultimately, her deliveries stopped, but not for the Gallivans.

Amazon has been unable to identify the perpetrators. At press time, a search of Amazon's Help and Customer Service site section failed to find content helping consumers victimized by this scam.

Perhaps, it is time for law enforcement and the U.S. Federal Trade Commission to step in. Regardless, we consumers will probably hear more news in the future about this scam.

Security Researcher Finds Unprotected Voter Files Online Affecting Up To 1.8 Million Chicagoans

While looking for unprotected data in cloud storage services, a security researcher found unprotected information for as many as 1.8 million voters in Chicago. CBS Chicago reported:

"It was Friday Aug. 11 in Silicon Valley. John Hendren, a marketing representative for IT security firm UpGuard, was looking for insecure data in the cloud. He randomly plugged in "Chicago … db," for “Chicago database,” and hit the jackpot. He found names, addresses, birth dates, driver’s license numbers and the last four digits of Social Security numbers for up to 1.8 million Chicago voters..."

How the breach happened:

"Chicago’s vendor is ES&S, out of Omaha, Nebraska. The company has been paid more than $5 million since 2014 by the Chicago Board of Elections. The company placed the data folder on Amazon Web Services (AWS) with the wrong security settings, Tom Burt, the firm’s CEO, recently told Chicago officials. Burt says managers missed the gaffe, and the database remained online for six months, until UpGuard found it. Company officials say they don’t believe the information ended up on the “dark web” for identity thieves to attain..."

The CBE's breach notice (Adobe PDF) provided a more complete list of the data elements exposed:

"... The personal information contained in the back-up files included voter names, addresses, and dates of birth, and many voters’ driver’s license and State ID numbers and the last four digits of Social Security numbers. Upon discovery of the Incident, ES&S promptly took the AWS server off-line, secured the back-up files, and commenced a forensics investigation. ES&S also hired two specialized third-party vendors to conduct searches to determine whether any personal information stored on the back-up files was available on the Dark Web. The results of ES&S’ investigations have not uncovered any evidence that any voter’s personal information stored on the AWS server was misused..."

This is bad for several reasons. First, the data elements exposed or stolen are enough for cyber criminals to do sufficient damage to breach victims. Second, just because the post-breach investigation didn't find misuse of data doesn't mean there wasn't any. It simply means they didn't find any misuse.

Third, it would be unwise to assume that the breach wasn't that bad because only the last 4 digits of Social Security numbers were exposed. Security researchers have known for a long time that Social Security numbers are easy to guess:

"... a crook need only figure out where and when you were born--information often easily found on social networking sites like Facebook--to guess your number in as few as 1000 tries... Social Security numbers were never meant to be used for widespread identification. They were conceived solely to track taxes and benefits... Every Social Security number starts with three digits known as an "area number." Smaller states might have only one, whereas New York, for example, has 85. The next two digits are "group numbers," which can be anything from 01-99, but don't correspond to anything specific. The last four digits, the "serial number," are assigned sequentially..."

So, it's long past time to stop using the last four digits of Social Security numbers as identification. Fourth, the incident makes one wonder when -- if ever -- the unprotected data folder would have been discovered by ES&S or CBE, if the security researcher hadn't found it. That's unsettling. It calls into question the security methods and managerial oversight at ES&S.

This isn't the first breach at the Chicago Board of Elections (CBE). A CBE breach in 2012 exposed the sensitive personal information of at least 1,000 voters, after initial reports estimated the number of affected voters at 1.7 million. Before that, the CBE faced several lawsuits in 2007 claiming negligence after:

"... it distributed more than 100 computer disks containing Social Security numbers and other personal data on more than 1.3 million voters to alderman and ward committee members."

Reportedly, in 2016 foreign cyber criminals hacked the Illinois Board of Elections' voter registration system. A similar attack happened in Arizona. The main takeaway: voter registration databases are high-value targets.

So, strong data security measures and methods seem wise; if not necessary. The latest incident makes one wonder about: a) the data security language and provisions in CBE's outsourcing contract with ES&S, and b) the agency's vendor oversight.

Will Chicago residents demand better data security? I hope so. What do you think?

Why The IRS Gave Equifax A No-Bid Contract Extension

You've probably heard the news. The Internal Revenue Service (IRS) gave a no-bid contract to Equifax, even after knowing about the credit reporting agency's massive data breach and arguably lackadaisical data security approaches by management.

Why would the IRS do this? The contract's synopsis in the Federal Business Opportunities (FBO) site stated on September 30:

"This action was to establish an order for third party data services from Equifax to verify taxpayer identity and to assist in ongoing identity verification and validations needs of the Service. A sole source order is required to cover the timeframe needed to resolve the protest on contract TIRNO-17-Z-00024. This is considered a critical service that cannot lapse."

C/Net explained the decision and sequence of key events:

"The IRS already had enough trouble dealing with tax fraud, losing $5.8 billion to scammers in 2013... The contract, first reported by Politico,... describes the agreement as a "sole source order," calling Equifax's help a "critical service." When it comes to credit monitoring, there are really only three major names in the US: Equifax, Experian and TransUnion. Experian has also suffered a breach... The IRS actually awarded its authentication service contract to another company in July, Jeffrey Tribiano, the agency's deputy commissioner for operations support told members of Congress. Equifax protested losing the contract to the US Government Accountability Office on July 7, according to documents. The office will decide on the protest by October 16. Until then, the IRS could not move onto its new partner. That meant that when the IRS' old contract with Equifax was supposed to expire on Friday (Sept. 29), Tribiano said, millions of Americans would not have been able to verify their identity with the agency for more than two weeks."

Wow! So, the IRS was caught between a rock and a hard place... or "caught between a rock and a hacked place" as C/Net described. Apparently, consumers taxpayers are also caught.

Once again, another mess involving Equifax gives consumers that "I've been mugged" feeling.

Data Breach Exposes Information Of Millions Of Verizon Customers

A data breach at Verizon has exposed the sensitive information of millions of customers. ZD Net reported:

"As many as 14 million records of subscribers who called the phone giant's customer services in the past six months were found on an unprotected Amazon S3 storage server controlled by an employee of NICE Systems, a Ra'anana, Israel-based company. The data was downloadable by anyone with the easy-to-guess web address."

Many businesses use cloud services vendors  -- Amazon Web Services and other vendors -- to outsource the storage of customers' information in online databases. While the practice isn't new, a problem is that customers aren't always informed of the business practice using their sensitive information.

Founded in 1986, NICE Systems has 3,500 employees, serves about 25,000 customers in 150 countries, and provides services to 85 percent of Fortune 100 companies. The exact number of affected Verizon customers is disputed.

The security firm Upguard found the unprotected cloud-based storage server:

"Upguard's Cyber Risk Team can now report that a mis-configured cloud-based file repository exposed the names, addresses, account details, and account personal identification numbers (PINs) of as many as 14 million US customers of telecommunications carrier Verizon, per analysis of the average number of accounts exposed per day in the sample that was downloaded. The cloud server was owned and operated by telephonic software and data firm NICE Systems, a third-party vendor for Verizon. (UPDATE: July 12, 3 PM PST - Both NICE Systems and Verizon have since confirmed the veracity of the exposure, while a Verizon spokesperson has claimed that only 6 million customers had data exposed)."

Whether the total number of breach victims is 6 or 14 million customers, neither is good. The phrase "account details" is troubling. That could mean anything from e-mail addresses to payment information to residential addresses, or more.

Upguard's announcement added:

"Beyond the risks of exposed names, addresses, and account information being made accessible via the S3 bucket’s URL, the exposure of Verizon account PIN codes used to verify customers, listed alongside their associated phone numbers, is particularly concerning. Possession of these account PIN codes could allow scammers to successfully pose as customers in calls to Verizon, enabling them to gain access to accounts—an especially threatening prospect, given the increasing reliance upon mobile communications for purposes of two-factor authentication.

Finally, this exposure is a potent example of the risks of third-party vendors handling sensitive data... Third-party vendor risk is business risk; sharing access to sensitive business data does not offload this risk, but merely extends it to the contracted partner, enabling cloud leaks to stretch across several continents and involve multiple enterprises."

Agreed. This outsourcing business practice may be profitable for all companies involved, but the outsourcing practice does not decrease the risks. Not good. Mis-configured cloud servers should not happen. Not good. The event raises the question: when has this happened before, but went undetected?

Verizon released a statement about the incident:

"... an employee of one of our vendors put information into a cloud storage area and incorrectly set the storage to allow external access. We have been able to confirm that the only access to the cloud storage area by a person other than Verizon or its vendor was a researcher who brought this issue to our attention. In other words, there has been no loss or theft of Verizon or Verizon customer information.

By way of background, the vendor was supporting an approved initiative to help us improve a residential and small business wireline self-service call center portal and required certain data for the project. The overwhelming majority of information in the data set had no external value, although there was a limited amount of personal information included, and in particular, there were no Social Security numbers or Verizon voice recordings in the cloud storage area.

To further clarify, the data supports a wireline portal and only includes a limited number of cell phone numbers for customer contact purposes. In addition, to the extent PINs were included in the data set, the PINs are used to authenticate a customer calling our wireline call center, but do not provide online access to customer accounts..."

Typically, after a breach companies hire independent security experts to investigate breaches and the contributing causes. Verizon's announcement did not state who, if anyone, it hired to perform a post-breach investigation nor when. So, according to Verizon: no big deal. No problem. Hmmmmm.

Reportedly, Upguard notified Verizon about the breach on June 13, and the breach was fixed on June 22. Upguard added:

"The long duration of time between the initial June 13th notification to Verizon by UpGuard of this data exposure, and the ultimate closure of the breach on June 22nd, is troubling."

Troubling, indeed. What took Verizon (and/or Nice Systems) so long? Verizon's statement didn't say. And what is Verizon (and/or NICE Systems) doing so this type of breach doesn't happen again? I look forward to upcoming explanations by both companies.

Readers: what are your opinions of this data breach? Of how long it took Verizon to fix things? Of the outsourcing practice? Verizon customers:

• Is Verizon doing enough to protect your sensitive data?
• Should affected customers be notified directly?
• Have you received a breach notice from Verizon? If so, share some of its details.

Dozens Of Uber Employees Fired Or Investigated For Harassment. Uber And Lyft Drivers Unaware of Safety Recalls

Ride-sharing companies are in the news again and probably not for the reasons their management executives would prefer. First, TechCrunch reported on Thursday:

"... at a staff meeting in San Francisco, Uber executives revealed to the company’s 12,000 employees that 20 of their colleagues had been fired and that 57 are still being probed over harassment, discrimination and inappropriate behavior, following a string of accusations that Uber had created a toxic workplace and allowed complaints to go unaddressed for years. Those complaints had pushed Uber into crisis mode earlier this year. But the calamity may be just beginning... Uber fired senior executive Eric Alexander after it was leaked to Recode that Alexander had obtained the medical records of an Uber passenger in India who was raped in 2014 by her driver."

"Recode also reported that Alexander had shared the woman’s file with Kalanick and his senior vice president, Emil Michael, and that the three men suspected the woman of working with Uber’s regional competitor in India, Ola, to hamper its chances of success there. Uber eventually settled a lawsuit brought by the woman against the company..."

News broke in March, 2017 about both the Recode article and the Grayball activity at Uber to thwart local government code inspections. In February, a former Uber employee shared a disturbing story with allegations of sexual harassment.

Second, the investigative team at WBZ-TV, the local CBS afiliate in Boston, reported that many Uber and Lyft drivers are unaware of safety recalls affecting their vehicles. This could make rides in these cars unsafe for passengers:

"Using an app from Carfax, we quickly checked the license plates of 167 Uber and Lyft cars picking up passengers at Logan Airport over a two day period. Twenty-seven of those had open safety recalls or about 16%. Recalls are issued when a manufacturer identifies a mechanical problem that needs to be fixed for safety reasons. A recent example is the millions of cars that were recalled when it was determined the airbags made by Takata could release shrapnel when deployed in a crash."

Both ride-sharing companies treat drivers as independent contractors. WBZ-TV reported:

"Uber told the [WBZ-TV investigative] Team that drivers are contractors and not employees of the company. A spokesperson said they provide resources to drivers and encourage them to check for recalls and to perform routine maintenance. Drivers are also reminded quarterly to check with NHTSA for recall information."

According to the president of the Massachusetts Bar Association Jeffrey Catalano, the responsibility to make sure the car is safe for passengers lies mainly with the driver. But because Uber and Lyft both advertise their commitment to safety on their websites, they too could be held responsible."

Federal Reserve Survey of Experiences of Younger Workers

The Federal Reserve Board (FRB) recently released the results of its survey of younger workers ages 18 to 30 with data through 2015. The survey found that younger workers overall:

"... experienced higher rates of unemployment and lower rates of labor force participation than the general population for at least two decades, and the Great Recession exacerbated this phenomenon. Despite a substantial labor market recovery from 2009 through 2014, vulnerable populations—including the nation’s young adults—continue to experience higher rates of unemployment. Changes in labor market conditions, including globalization and automation, have reduced the availability of well-paid, secure jobs for less-educated persons, particularly those jobs that provide opportunity for advancement. Furthermore, data suggest that young workers entering the labor market are affected by a long-running increase in the use of “contingent” or “alternative” work arrangements, characterized by contracted, part-time, temporary, and seasonal work."

Specific findings about younger workers' attitudes:

"In 2015, the majority of young adults (61 percent) are optimistic about their future job opportunities, showing an increase in optimism from 2013 (45 percent)... the likelihood that a young adult is optimistic about future job opportunities increases with higher levels of education... young adults continue to have a strong preference for steady employment (62 percent) over higher pay (36 percent)... Among respondents who prefer steady employment, 80 percent would rather have one steady job than a stream of steady jobs for the next five years...

Most young adults are not sure how their standard of living will compare with their parents’ standard of living. Young adults with at least one parent with a bachelor’s degree (or higher) are more likely to believe their standard of living will be lower than their parents (4 percent) when compared with young adults whose parents have a high school education or less (1 percent)...

Specific findings about younger workers' experiences:

"28 percent of respondents are currently enrolled as students in a certificate or degree program. Most students are enrolled in degree programs... most undergraduate students are identified “nontraditional” because they are over age 23, enrolled in school part time, working full time, and/or financially independent. 10 percent of respondents are “non-completers,” meaning they are not currently enrolled in a certificate or degree program they started... 62 percent of respondents with post-secondary education worked while in school to finance all or part of their most recent education. 52 percent of respondents with post-secondary educational experience have parents that contributed financially to their education. 46 percent of respondents incurred debt to pay for some portion of their education or training...

41 percent of respondents believe they have the level of education and training needed for the type of job that they would like to hold in the next five years... 66 percent of young adults received information about jobs and careers during high school. And, 69 percent of young adults received such information in college...

Less than half (45 percent) of employees work in a career field that is closely related to their educational and training background... Many young adults gained early work experience during high school, college, or both. 53 percent of young adults had a paid job during high school, and 77 percent of young adults had a paid job during college..."

A key takeaway: about 30 percent of young adults did not receive information about jobs and careers in high school nor college. That seems to be an area the educational sector must improve upon.

4,135 potential respondents were contacted for the 2015 survey, and 2,035 completed surveys (49 percent response rate). FRB staff designed the survey, which was administered by GfK, an online consumer research company.

More notable statistics from the survey: about 69 percent of survey respondents have some form of paid employment, up from 60 percent in 2013. 63 percent of employees held a single full-time job during the past year, and 18 percent of employees held multiple full-time jobs during the past year. Profile information about employed younger workers:

"78 percent of employees have a permanent/long-term job... 75 percent of employees in the survey have a full-time job... Among part-time employees surveyed, 49 percent were identified as underemployed, as they are working part time because of economic conditions. Meanwhile, 42 percent of part-time employees prefer part-time work... The percent of young workers who have health insurance increased from 2013 (70 percent) to 2015 (82 percent). Likewise, the percent of young workers who received paid time off for sick leave, holidays, or both from any of their paid jobs increased from 2013 (59 percent) to 2015 (62 percent)...

As adults, 43 percent of employees have formed a new household with their immediate family (i.e., spouse/partner), and 20 percent have formed a new household alone or with a roommate..."

Self-sufficiency is important. The report found:

"... 73 percent of employees are able to cover their monthly household expenses with their household income. Meanwhile, 22 percent of employees report that they are sometimes able to cover their monthly household expenses, and 4 percent are not able to cover their monthly household expenses at all... Among employees who are not able to cover their household expenses some or all of the time, 64 percent reduce their monthly expenses to meet the challenge, 56 percent do not pay some bills, 54 percent borrow money from family, 46 percent use their credit cards, 41 percent use savings, and 16 percent borrow from friends.

A key consideration regarding self-sufficiency is the ability of a household to withstand financial disruptions. Among young workers, the ability to go without a paycheck temporarily improved between 2013 and 2015. The percent of young workers who can pay their living expenses if out of work for four weeks improved from 38 percent in 2013 to 45 percent in 2015..."

The report cited 4 policy implications to address the findings:

1. Improve Alignment between Education and the Labor Market
2. Increase Opportunities for Non-degree Education
3. Provide Assistance and Protections for Workers with Alternative Work Arrangements
4. Seek Opportunities to Improve Job Growth

There is plenty of information in the 120-page report, which is available at the FRB site and here (Adobe PDF; 1,190.2K bytes).

Big Data Brokers: Failing With Privacy

You may not know that hedge funds, in both the United Kingdom and in the United States, buy and sell a variety of information from data brokers: mobile app purchases, credit card purchases, posts at social networking sites, and lots more. You can bet that a lot of that mobile information includes geo-location data. The problem: consumers' privacy isn't protected consistently.

The industry claims the information sold is anonymous (e.g., doesn't identify specific persons), but researchers have it easy to de-anonymize the information. The Financial Times reported:

"The “alternative data” industry, which sells information such as app downloads and credit card purchases to investment groups, is failing to adequately erase personal details before sharing the material... big data is seen as an increasingly attractive source of information for asset managers seeking a vital investment edge, with data providers selling everything from social media chatter and emailed receipts to federal lobbying data and even satellite images from space..."

One part of the privacy problem:

“The vendors claim to strip out all the personal information, but we occasionally find phone numbers, zip codes and so on,” said Matthew Granade, chief market intelligence officer at Steven Cohen’s Point72. “It’s a big enough deal that we have a couple of full-time tech people wash the data ourselves.” The head of another major hedge fund said that even when personal information had been scrubbed from a data set, it was far too easy to restore..."

A second part of the privacy problem:

“... there is no overarching US privacy law to protect consumers, with standards set individually by different states, industries and even companies, according to Albert Gidari, director of privacy at the Stanford Center for Internet and Society..."

The third part of the privacy problem: consumers are too willing to trade personal information for convenience.