Explosive Disclosures Still Yield Fallout


Fallout from the U.S. government’s surveillance excesses continues to waft down upon the American tech industry, though that hasn’t stopped the Obama administration from setting off even more bombs.

In its zeal to force Apple to break the security on its own devices – matched only by its zeal to avoid testing that demand in court – the FBI and Justice Department lawyers simply blew off concerns voiced by Apple Inc. (AAPL) and many others in the industry that, if Washington forced it to undermine security and privacy measures, nothing would stop other governments from doing the same. While the FBI dropped the demand regarding the phone in the San Bernardino investigation when it found another way around the phone’s security measures, agency director James Comey expects more legal fights over encryption in the near future. And while government agents hope to use the same workaround on other devices, meaning they won’t need to secure the reluctant help of private companies, Comey has said about 12 percent of seized phones remain inaccessible without corporate assistance.

While a few other countries, including France and the United Kingdom, are considering legislation to limit or ban end-to-end encryption, no other government has publicly tried to force Apple and other device makers to crack their hardware-based encryption for law enforcement ends. Some other governments are busy trying to expose private data through other means, however.

Chief among these is a growing effort to force U.S. tech firms to store their data overseas. Thanks to Edward Snowden’s revelations, foreign governments can plausibly defend these actions as a way of protecting their citizens’ data from the prying eyes of U.S. intelligence. This reasoning, for instance, is the stated impetus for the European Union’s efforts in this direction. As I have written before, Europeans do not care to be spied upon, and their governments wish to protect citizens from American agencies’ snooping. But, of course, such demands are also a way of exposing user information to local authorities, whose appetite for data is just as ravenous as that of the U.S. authorities and whose intentions in using it can be much less honorable.

Does anyone think Iran, for example, is trying to protect its citizens by demanding that Facebook and other social media platforms put their servers in the Islamic Republic? Or is it more likely that Iran wants to make sure that it knows what its citizens are up to? Incidentally, eight people were recently arrested for posting Instagram images featuring women without headscarves. Iran’s government also doubtless wants to track its citizens’ foreign contacts for potential spying – or worse. Since the current regime took power in 1979, it has been accused of more than 160 assassinations of political dissidents abroad. Government access to citizens’ private data could have deadly consequences.

China, too, has pursued a hard line in demanding that companies store data on Chinese users in places where Chinese authorities can access it. This insistence has most recently been on display in negotiations with Facebook, whose founder, Mark Zuckerberg, has long demonstrated ambitions to crack the country’s giant market. Currently, Facebook is mostly inaccessible in China, thanks to the country’s “Great Firewall.” Zuckerberg has launched a charm offensive to try to get the People’s Republic to let its people make friends with the existing Facebook Inc. (FB) world. Whether Facebook likes it or not, the likely price of any such access will be, at a minimum, the storage of data on Chinese citizens inside China, if not an outright partnership with an existing Chinese company. This is not a point on which China seems likely to compromise. It is worth noting that China, too, has been known to pursue dissidents abroad.

For citizens of countries like Iran and China, data encryption on smartphones and other devices can literally be a matter of life and death. Yet as soon as a backdoor is developed and provided to U.S. government agencies, it will be vulnerable to foreign pressure aimed at manufacturers and to espionage aimed at our government – which has a less-than-stellar record of protecting its own data, even as it tries to vacuum up everyone else’s.

None of this seems to matter to Comey and his equally myopic cronies in the administration’s security apparatus. But it should matter a great deal to the rest of us.

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About Larry M. Elkin 564 Articles

Affiliation: Palisades Hudson Financial Group

Larry M. Elkin, CPA, CFP®, has provided personal financial and tax counseling to a sophisticated client base since 1986. After six years with Arthur Andersen, where he was a senior manager for personal financial planning and family wealth planning, he founded his own firm in Hastings on Hudson, New York in 1992. That firm grew steadily and became the Palisades Hudson organization, which moved to Scarsdale, New York in 2002. The firm expanded to Fort Lauderdale, Florida, in 2005, and to Atlanta, Georgia, in 2008.

Larry received his B.A. in journalism from the University of Montana in 1978, and his M.B.A. in accounting from New York University in 1986. Larry was a reporter and editor for The Associated Press from 1978 to 1986. He covered government, business and legal affairs for the wire service, with assignments in Helena, Montana; Albany, New York; Washington, D.C.; and New York City’s federal courts in Brooklyn and Manhattan.

Larry established the organization’s investment advisory business, which now manages more than $800 million, in 1997. As president of Palisades Hudson, Larry maintains individual professional relationships with many of the firm’s clients, who reside in more than 25 states from Maine to California as well as in several foreign countries. He is the author of Financial Self-Defense for Unmarried Couples (Currency Doubleday, 1995), which was the first comprehensive financial planning guide for unmarried couples. He also is the editor and publisher of Sentinel, a quarterly newsletter on personal financial planning.

Larry has written many Sentinel articles, including several that anticipated future events. In “The Economic Case Against Tobacco Stocks” (February 1995), he forecast that litigation losses would eventually undermine cigarette manufacturers’ financial position. He concluded in “Is This the Beginning Of The End?” (May 1998) that there was a better-than-even chance that estate taxes would be repealed by 2010, three years before Congress enacted legislation to repeal the tax in 2010. In “IRS Takes A Shot At Split-Dollar Life” (June 1996), Larry predicted that the IRS would be able to treat split dollar arrangements as below-market loans, which came to pass with new rules issued by the Service in 2001 and 2002.

More recently, Larry has addressed the causes and consequences of the “Panic of 2008″ in his Sentinel articles. In “Have We Learned Our Lending Lesson At Last” (October 2007) and “Mortgage Lending Lessons Remain Unlearned” (October 2008), Larry questioned whether or not America has learned any lessons from the savings and loan crisis of the 1980s. In addition, he offered some practical changes that should have been made to amend the situation. In “Take Advantage Of The Panic Of 2008” (January 2009), Larry offered ways to capitalize on the wealth of opportunity that the panic presented.

Larry served as president of the Estate Planning Council of New York City, Inc., in 2005-2006. In 2009 the Council presented Larry with its first-ever Lifetime Achievement Award, citing his service to the organization and “his tireless efforts in promoting our industry by word and by personal example as a consummate estate planning professional.” He is regularly interviewed by national and regional publications, and has made nearly 100 radio and television appearances.

Visit: Palisades Hudson

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