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March 23 2013

March 25, 2013

23March2013

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Telegram for the FCC: Time to Retire the Telephone Network

Forbes.com

Larry Downes, Contributor

3/18/2013 @ 3:00AM

Today, the FCC convenes the first meeting of its “Technology Transitions Policy Task Force,” a new intra-agency group announced in December by FCC Chairman Julius Genachowski.

The bland name belies a radical charter for the Task Force. Its goal is nothing less than to review thousands of pages of yellowing FCC rules and regulations and recommend how to adapt or eliminate them to reflect the utter transformation of 20th
century telephone, radio, television and data networks—all of which are in the final stages of conversion and upgrade to native Internet technologies.

Monday’s agenda is simply to orient the group to existing technologies, usage patterns, and the on-going evolution of what I call the “Internet Everywhere“–the dynamic ecosystem of network operators, device manufacturers, app developers and consumers that is creating new businesses and new value every day.

But here’s what the Task Force should do as its first official act: pick a date, right now, to permanently retire our obsolete wireline telephone network. And make it soon.

The old telephone network is just the latest victim of the Internet revolution, which began slowly but which has accelerated in the last decade. As better and cheaper voice services have appeared from cable, fiber, and dozens of over-the-top Internet providers including Skype, Google, and Vonage, fewer customers rely on the old wireline network every day. The residual value of its assets—switches, copper wiring, and other equipment—is falling fast. Maintenance costs are soaring.

We should put it out of its misery.

The engineering beauty of broadband IP networks, which are well on their way to replacing the circuit-switched networks, is that they don’t care what kind of communications flow over their ever-faster networks. We’re already well on our way to Internet Everywhere, where voice, video, and data packets move seamlessly over a single IP infrastructure, regardless of whether their ultimate destination is a television, a tablet or a home sensor. As Nicholas Negroponte so succinctly explained it almost twenty years ago, “bits are bits.”

For most consumers, the transition to Internet Everywhere has proven easy–even obvious. But for the affected industries and the regulators who oversee them, the transition is traumatic.

Driven by the counter-intuitive economics of the Internet and computing technology, the spread of Internet Everywhere is deconstructing the supply chains in a wide range of once-mature industries, including broadcasting, telecommunications, mass media, computing and consumer electronics, to name just a few.

It may be the best example yet of what Paul F. Nunes and I call “big bang disruption”: an innovation that is simultaneously faster, cheaper, and more customized than the existing services it’s replacing. (Watch for our new Fobes.com column on BBD, launching soon.)

Permission to Withdraw

To their credit, the incumbent providers of circuit-switched networks have recognized the need to retire quickly what had been, until recently, their most valuable assets. Both Verizon and AT&T have spent billions accelerating the replacement of copper with fiber, and circuit-switched with packet-switched equipment. In November, AT&T announced an additional $14 billion in capital expenditures over the next few years, making its IP-based U-verse (wired) and LTE (wireless) available to millions more consumers.

But turning off the old network isn’t as simple as it sounds. That’s because regulators at the federal and state level still treat switched telephony as if it were not only the dominant voice service, but in many cases as if it were the only choice—as it was back in the 1930’s, when communications industry regulation began in earnest.

The maintenance, usage and pricing of legacy infrastructure, for example, are still subject to often-minute oversight by an alphabet soup of federal and state regulators. Leftover rules from the early 20th century days of monopoly carriers and equipment providers even make it difficult for wireline providers to terminate services without permission, even if they are replacing those services with something better and cheaper.

It’s urgent that we break that logjam and wind down the old network as soon as possible. A swift and speedy transition would make it easier for consumers and network providers alike to accelerate the build-out of new, native IP networks, which are faster, more efficient, and cheaper to maintain. It will also speed the process of getting the roughly 30% of Americans not already part of the broadband revolution to join it–the top priority for the FCC since the 2010 publication of its visionary National Broadband Plan.

The FCC has an unavoidable role to play in the process. As communications markets are being simultaneously destroyed and recreated, regulations designed to dull the sharper edges of once-static and siloed technologies are now, as the agency recognizes, posing the very real danger of unintentionally holding back the progress of innovation. The agency must unravel itself from its complicated relationships with the affected industries.

As FCC Chairman Genachowski said in announcing the Task Force,

Technological transitions don’t change the basic mission of the FCC. But technology changes can drive changes in markets and competition. And many of the Commission’s existing rules draw technology-based distinctions. So the ongoing changes in our nation’s communications networks require a hard look at many rules that were written for a different technological and market landscape.

That’s putting it mildly. This is in fact the moment of truth for the eighty-year old federal agency. Right now, the FCC is teetering precariously between a productive role coordinating and accelerating the retirement of circuit-switched networks and a dangerously reactionary response that would instead bootstrap the old rules to the networks of the future.

But why does the outcome of an ideological battle for the agency’s soul even matter? After all, consumers and providers are already making the transition to IP on their own. More than 40% of U.S. homes have already abandoned their landline in favor of cable, Voice over IP, and mobile alternatives. By the end of 2013, according to industry trade group USTelecom, less than 30% of American homes will rely on a wired connection as their primary telephone.

But those are the easy consumers to switch. Getting older and rural families off the circuit-switched network will be much more difficult. Meanwhile, carriers must by law continue to maintain obsolete equipment even as they invest in its replacement. With fewer customers relying on the old system, maintenance costs are soaring on a pro rata basis, skewing investment decisions.

And so long as the legacy networks are still in the picture for voice as well as mobile backhaul, IP networks have to dumb down their traffic to remain backward compatible. While most cable companies have already completed their IP transition, for example, VoIP phone traffic that interconnects with circuit-switched networks must be, as Cablevision puts it, “downconverted.”

Lessons from the Digital Television Transition

If this story is starting to sound familiar, it should. Circuit-switched telephone networks are experiencing the same kind of regulatory undertow that fatally wounded over-the-air television broadcasting, which today accounts for less than 10% of the TV audience.

At its height in the 1970’s, 93% of all American homes relied on antennas. But analog broadcast couldn’t compete with either the quality or the quantity of cable channels, a fact Congress recognized as early as 1996, when it first set a 2006 deadline to mandate for conversion from analog to digital broadcast, a transition that was coordinated by the FCC.

A coordinated switch to Digital Television was intended to make the highly-regulated broadcasters more competitive with relatively unregulated cable.

How? Digital TV lowered costs and created new opportunities for broadcasters, already losing ground rapidly to cable, satellite, and soon, fiber. As part of the transition, broadcasters traded their analog radio spectrum allocations in the 700 MHz. band for a new 6 MHz. block in the 600 MHz. band. (Some of the freed-up 700 MHz. spectrum was auctioned for mobile broadband, bringing in billions for the U.S. Treasury.)

Because digital signals are more compressed, each 6 MHz. block could be split and used for multiple channels, all of them capable of high-definition broadcast, as well as new mobile business opportunities for the broadcasters.

So far, however, few station operators have been able to make use of that capacity to offer extra channels or to repurpose underutilized spectrum for mobile or other premium services. That’s largely because, in the end, the DTV transition didn’t occur until 2009. By then, over-the-air television had already entered an unrecoverable dive in viewership and revenue. According to research from the Consumer Electronics Association, the decline in over-the-air audience became irreversible between 2005, when the transition should have happened, and 2009, when it finally did. An earlier switch may have saved them

In theory, the IP transition should be easier. Unlike digital television, consumers will not need to replace equipment already in their homes, nor will they need to install adapters for existing telephones. In some cases, fiber optic cable will replace copper wiring in the heart of the network; in other cases, fiber will be run directly to the home. But inside wiring will not be affected, and existing telephones (far cheaper to replace, in any case, than old analog televisions) will continue to operate, just as they do now in homes that have already switched to Internet voice services.

It is true that some rural users may need to switch from landline to mobile service, especially in remote areas where the cost of installing wired IP networks is prohibitive. But the FCC can subsidize the cost of that switch—as indeed it already does through the recently-reformed Universal Service Fund. AT&T has already committed to an “economic path” for customers who will need to switch from slow wired connections to mobile broadband. Which is, in any case, better.

The transition to Internet Everywhere will also be unfortunately complicated by the fact that the FCC shares regulatory authority over wired providers with state public utility commissions. And state regulators are already resisting the transition, based on objections that seem to emphasize retaining their own authority relative to the FCC over the interests of their own citizens.

A taste of these and other counter-productive objections were voiced as part of an FCC proceeding initiated at the request of AT&T, which has proposed to conduct limited trials of IP transition in test markets, in part to unearth regulatory, technical, or logistical issues associated with a nationwide switchover. The Commission is considering that petition now, and last month received dozens of comments. (I submitted comments, in conjunction with the think-tank TechFreedom, urging approval of the petition.)

Many of the comments filed reveal an odd coalition of self-interested parties who are pushing the FCC in precisely the wrong direction. This includes state regulators worried over their own relevance, asset-less local phone companies who rely on the incumbents’ equipment and rates overseen by the FCC, and self-proclaimed consumer advocates, who fear any relaxation of existing FCC regulations will lead to the satanic resurrection of the early 20th century telephone monopoly.

Emotionally-charged rhetoric from some groups even claim that millions of Americans will be left without any telephone service, and that 911 and other public safety uses of the circuit-switched network will come to a deadly halt. The AARP, for example, called the IP transition a “sledgehammer” that “would result in the demolition of the foundation” on which decades of successful communications policy has been built. They see conspiracies everywhere, including a secret agenda to force senior citizens to give up their cherished landlines in favor of confounding smartphones.

The short answer is that no one is even asking for—nor could anyone expect the government to approve—a plan to turn off the obsolete legacy network, let alone one that doesn’t protect the dwindling number of consumers who still rely on it for basic telephone service. When the circuit-switched network is ultimately allowed to sunset, every American will have one if not several IP-based alternatives. As in the case of digital TV, each will be a better alternative, on every relevant dimension.

The naysayers could, however, gum up the works in ways that actually make things worse for broadband holdouts. Similar hyperbole, after all, slowed the DTV transition, dooming the broadcasters and, ironically, unnecessary limiting the future choices of the very consumers whom the delays were meant to protect.

A 2006 article in Fortune, for example, got nearly everything wrong, warning breathlessly that the DTV transition would “render about 70 million TV sets obsolete,” and that “for consumers with one of those 70 million sets — many of whom are likely to be poor, elderly or uneducated, being forcibly switched from one technology to another will be a nightmare.”

A nightmare? Hardly. Consumers who weren’t already cable or satellite subscribers and whose energy-inefficient tube television sets were too old to receive digital signals were barely inconvenienced, let alone “forcibly switched.” All they had to do was to buy and attach small digital converter boxes to their old TVs. Under a plan implemented by the Department of Commerce, consumers could even apply for up to two $40 coupons with which to purchase the converters, funded by proceeds from the 700 MHz. spectrum auctions.


On the fateful day, June 12, 2009, according to Nielsen, almost no one was left behind. Nearly all “unready homes” had successfully made the transition by using the converter box, or by switching to digital cable or satellite. No television was rendered “obsolete,” let alone 70 million.

The only victims were the broadcasters, who were set free too late to make use of their new competitive technologies and who now are limping into extinction.

If we don’t get the IP transition right, the same fate could be unnecessarily visited on incumbent wireline phone companies.

What to do? Start with the lessons of the past. While the DTV transition was clearly flawed, it still sets a useful precedent for the FCC’s role in retiring the circuit-switched telephone network and the regulations that have unintentionally rendered it uncompetitive.

And, one hopes, lessons learned from the earlier effort will improve an eventual plan for a similar transition for the telephone network. To start with, the switch to native IP voice networks needs to happen faster, with fewer starts, stops, and delays. The FCC must set a date certain for the switchover, and stick to it. And overblown and hypothetical concerns from self-interested parties should not be used as the basis for onerous conditions and unrelated new regulations.

We need to set a date now. And we need to set it aggressively, while there’s still time to salvage the value of a hundred years of investment in our circuit-switched infrastructure.

Let’s hope the FCC’s Technology Transitions Policy Task Force gets itself quickly oriented, and moves on to its essential task: clearing away the regulatory rubble that will otherwise delay the speedy transition to Internet Everywhere.

If not for the sake of the industries being transformed, than for U.S. consumers–who only stand to gain.

 

Cyberattack on Florida election is first known case in US, experts say

 

By Gil Aegerter Staff Writer, NBC News

March 18, 2013, 7:37 am

 

 

An attempt to illegally obtain absentee ballots in Florida last year is the first known case in the U.S. of a cyberattack against an online election system, according to computer scientists and lawyers working to safeguard voting security.

The case involved more than 2,500 “phantom requests” for absentee ballots, apparently sent to the Miami-Dade County elections website using a computer program, according to a grand jury report on problems in the Aug. 14 primary election. It is not clear whether the bogus requests were an attempt to influence a specific race, test the system or simply interfere with the voting. Because of the enormous number of requests – and the fact that most were sent from a small number of computer IP addresses in Ireland, England, India and other overseas locations – software used by the county flagged them and elections workers rejected them.

Computer experts say the case exposes the danger of putting states’ voting systems online – whether that’s allowing voters to register or actually vote.

“It’s the first documented attack I know of on an online U.S. election-related system that’s not (involving) a mock election,” said David Jefferson, a computer scientist at Lawrence Livermore National Laboratory who is on the board of directors of the Verified Voting Foundation and the California Voter Foundation.

Other experts contacted by NBC News agreed that the attempt to obtain the ballots is the first known case of a cyberattack on voting, though they noted that there are so many local elections systems in use that it’s possible that a similar attempt has gone unnoticed.

There have been allegations of election system hacking before in the U.S., but investigations of irregularities have found only software glitches, voting machine failures, voter error or inconclusive evidence. Where there has been evidence of a computer security breach — such as a 2006 incident in Sarasota, Fla., in which a computer worm that had been around for years raised havoc with the county elections voter database — it was unclear whether the worm’s appearance was timed to interfere with the election.

In any case, experts say they’ve been warning about this sort of attack for years.

“This has been in the cards, it’s been foreseeable,” said law Professor Candice Hoke, founding director of the Center for Election Integrity at Cleveland State University.

The primary election in Miami-Dade County in August 2012 involved state and local races along with U.S. Senate and congressional contests (see a sample ballot here). The Miami Herald, which first reported the irregularities, said the fraudulent requests for ballots targeted Democratic voters in the 26th Congressional District and Republicans in Florida House districts 103 and 112. None of the races’ outcomes could have been altered by that number of phantom ballots, the Herald said.

Overseas “anonymizers” — proxy servers that make Internet activity untraceable — kept the originating computers’ location secret and prevented law enforcement from figuring out who was responsible, according to the grand jury report, issued in December. The state attorney’s office closed the case in January without identifying a suspect.

Read the Miami-Dade County grand jury report (PDF)

Then came the Herald report, which said that three IP addresses in the United States had been identified among those sending the requests and that there had been a delay in getting that information to investigators, which a Miami-Dade elections official confirmed to NBC News. Terry Chavez, spokeswoman for the state attorney’s office for Miami-Dade County, also confirmed to NBC News that the investigation was reopened to look into those IP addresses. Chavez said she could release no details on the investigation.

Rep. Joe Garcia won the Democratic primary in the 26th District and went on to win the general election. Jeff Garcia, his chief of staff and no relation, said last week that no state or federal investigators had contacted the congressman’s office about the case.

State Rep. Jose Javier Rodriguez, a Democrat who won the District 112 seat, said Thursday that his office had not heard from investigators about the case either. A message left at the legislative office of state Rep. Manny Diaz Jr., the Republican who won the primary and the general election in District 103, was not immediately returned.

The Herald report said that as the requests began coming in, elections officials figured out that they were improper and started blocking the IP addresses. “I guess they finally gave up,” the newspaper quoted Bob Vinock, an assistant deputy elections supervisor for information systems, as saying.

People who study election security say the fact that this attempt did not succeed should be of little comfort to election officials. They warn that attempts to attack voting systems are likely to increase.

“In this case the attack was not as sophisticated as it could have been, and it was easy for elections officials to spot and turn back,” said J. Alex Halderman, an assistant professor of computer science and engineering at the University of Michigan who studies the security of electronic voting. “An attack somewhat more sophisticated than the one in Florida, completely within the norm for computer fraud these days, would likely be able to circumvent the checks.”

Fraudulently obtaining absentee ballots is just one way elections might be subverted by digital means, experts say. Among the other methods and attack points:

  • Malware. Rogue software infects millions of home computers across the country. Jefferson said hackers could use malware to change votes or prevent them from being cast in an online election.
  • Denial of service attacks. Jefferson said that hackers could use botnets to prevent election-system servers from working for hours, or perhaps longer. In fact, during an election in June 2012, a DOS attack hit the San Diego County Registrar of Voters’ website, preventing voters from tracking the results.
  • “Spoofing” of election websites. For example, Hoke said, legitimate requests for absentee ballots could be misdirected to another site. The data then could be misused, or the requests could hit a dead end, and voters would be left wondering where their ballots were.
  • Exploiting software flaws in digital voting machines, known as DREs. The flaws could allow insertion of viruses or alteration of programming code that would change votes or delete them. (Read one description of hacking a voting machine.)
  • Tampering with email return of marked ballots. Experts say email return is troublesome because of the multiple points for attack along the ballots’ electronic path. “The overwhelming consensus of the computer science community is don’t do it, it’s a bad idea,” said Jeremy Epstein, a senior computer scientist at SRI International. But in about half the states, email absentee ballot return is an option for members of the military and their families, along with some other U.S. citizens living overseas.
  • Wholesale hijacking of an online voting system. In 2010, the District of Columbia Board of Elections and Ethics tested an Internet-based voting system for a week, asking computer experts to probe it for flaws. It took only 48 hours for a team led by Halderman to break in and take control of the site – even altering it so that the University of Michigan fight song played after a vote was cast.

Read the University of Michigan researchers’ report on the DC hack (PDF)

In terms of illegally getting access to absentee ballots, Epstein said, the attacker or attackers who failed in Florida might have had an easier time with Washington state and Maryland.

He said that last summer he demonstrated to the FBI a method of changing individual voters’ addresses and other information online in those two states by predicting their driver’s license numbers.

First he used publicly available information to gain a voter’s full name and address. Then, he predicted the individual’s driver’s license number – which is based on a combination of the person’s name and numbers and letters — and used the information to access their voter registration online. From there, he said, he could have changed their addresses and had absentee ballots sent out.

“Imagine if (attackers) changed the address for 2,500 votes. It could be completely automated, and they have the ballots sent to a post office box or whatever,” Epstein said. “Then the registered voters would have no idea until they tried to vote.”

In October, Halderman and other researchers sent letters warning elections officials in both states of the danger of staking system security on driver’s license numbers.

The letter to Washington officials (read it here in PDF) also said that other security features in the state’s MyVote system would be only a speed bump to a dedicated hacker.

“Although the MyVote system uses a CAPTCHA, an image of distorted text intended to deter simple automated attacks, this provides only minimal defense,” the letter says. “Attackers can use commercial services to defeat the CAPTCHA at a cost of less than $0.001 per voter.”

Shane Hamlin, assistant director of elections in the Washington Secretary of State’s Office, told NBC News that state election officials have acted on the recommendations in the October letter and will require additional information to register to vote or change registration online.

Maryland election officials did not immediately return a call from NBC News seeking comment, but the Washington Post reported last month that Ross K. Goldstein, deputy administrator of the Maryland State Board of Elections, acknowledged the security hole and said the online voter registration system was being updated to address the issue.

“I believe technology can solve problems, and there are steps that we definitely can, and plan to, take to mitigate the risks,” the newspaper quoted him as saying.

While elections officials are attracted to the savings that online voting and registration systems promise, the cost of guarding online registration and voting systems is large, Hoke said. And that might negate the financial advantage of online balloting touted by some elections officials and vendors who want to sell electronic voting products.

“It’s cheap, if you don’t care whether elections are stolen,” she said.

That possibility — of an election being stolen through digital means — haunts researchers. For Jefferson, it’s a matter of national security.

“The legitimacy of government depends on it being impossible for single parties to change the results of elections,” he said.

 

Solar Power Soars in United States; Top 10 Solar Projects Under Construction

Forbes

William Pentland, Contributor

3/15/2013 @ 5:10PM |9,011 views

 

The United States added a staggering 3.3 gigawatts of solar power capacity in 2012, according to a new report by GTM Research and the Solar Energy Industries Association.

To put the scale of solar power’s rapid and relentless expansion in perspective, the solar power capacity added in 2012 was greater than all of the solar power capacity added for the three previous years combined. If you’re not impressed yet, consider the swell of super-sized solar energy projects scheduled to come online in the US over the next few years.

 

Top 10 Largest Solar Projects Under Construction

Indeed, nine of the top 10 largest solar power projects currently under development are located in the US, according to SolarPlaza.

First Solar, the Tempe, AZ-based solar manufacturing giant, is developing three of the largest solar power farms in the world currently under construction – the Topaz Solar Farm in San Luis Obispo County, CA, the Desert Sunlight Solar Farm in Riverside County, CA, and the Agua Caliente Solar Project in Yuma County, AZ. These three projects alone will have a combined capacity of nearly one and a half gigawatts of electric power when they are completed.

 

Like First Solar, Sempra Generation and SunPower also have mega scale solar projects in the pipeline in California and Arizona.

The surge in solar power capacity deployed in 2012 is not surprising given the history of global investments in solar energy over the past decade. From 2004 to 2007, global private sector investment in solar energy increased nearly twenty-fold, according to the National Renewable Energy Laboratory. This investment trajectory and the resulting market expansion has driven down costs across the solar supply chain and made it considerably cheaper to generate electricity with solar technologies than it was previously.

http://www.forbes.com/sites/williampentland/2013/03/15/solar-power-soars-in-united-states-top-10-solar-projects-under-construction/

 

 

3G and 4G USB modems are a security threat, researcher says

Researchers showed how to attack 3G and 4G USB modems at Black Hat Europe

Lucian Constantin

March 15, 2013 (IDG News Service)

 

The vast majority of 3G and 4G USB modems handed out by mobile operators to their customers are manufactured by a handful of companies and run insecure software, according to two security researchers from Russia.

Researchers Nikita Tarakanov and Oleg Kupreev analyzed the security of 3G/4G USB modems obtained from Russian operators for the past several months. Their findings were presented Thursday at the Black Hat Europe 2013 security conference in Amsterdam.

Most 3G/4G modems used in Russia, Europe, and probably elsewhere in the world, are made by Chinese hardware manufacturers Huawei and ZTE, and are branded with the mobile operators’ logos and trademarks, Tarakanov said. Because of this, even if the research was done primarily on Huawei modems from Russian operators, the results should be relevant in other parts of the world as well, he said.

Tarakanov said that they weren’t able to test baseband attacks against the Qualcomm chips found inside the modems because it’s illegal in Russia to operate your own GSM base station if you’re not an intelligence agency or a telecom operator. “We’ll probably have to move to another country for a few months to do it,” he said.

There’s still a lot to investigate in terms of the hardware’s security. For example, the SoC (system on a chip) used in many modems has Bluetooth capability that is disabled from the firmware, but it might be possible to enable it, the researcher said.

For now, the researchers tested the software preloaded on the modems and found multiple ways to attack it or to use it in attacks.

For one, it’s easy to make an image of the USB modem’s file system, modify it and write it on the modem again. There’s a tool available from Huawei to do modem backup and restore, but there are also free tools that support modems from other manufacturers, Tarakanov said.

Malware running on the computer could detect the model and version of the active 3G modem and could write an image with malicious customizations to it using such tools. That modem would then compromise any computer it’s used on.

 

The modem contains the installer for an application that gets installed on the computer, as well as the necessary drivers for different OSes. The application allows the user to stop, start and manage the Internet connection established through the modem.

The configuration files for the installed application, as well as those of the application installer stored on the modem, are in plain text and can be easily modified. One setting in the configuration files defines what DNS servers the modem should use for the Internet connection.

An attacker could change those entries to servers controlled by the attacker, Tarakanov said. This would give the attacker the ability to direct users to rogue websites when they’re trying to visit legitimate ones using the modem connection.

While the application installer itself cannot be directly modified to load malware because it’s a signed executable, there are some entries in its configuration file that can be used for this purpose.

For example, many configuration files had paths to antivirus installers and an option of whether to install those programs or not, Tarakanov said. The researcher said that he never found an antivirus installer shipped with the USB modems he tested, but the feature was there.

An attacker could create a custom image with a modified configuration file that enables this feature and installs a malicious file stored on the modem instead of an antivirus program. If the image is written on a USB modem, every time the user would install the modem application, the malware would also be installed, Tarakanov said.

The researchers also found a possible mass attack vector. Once installed on a computer, the modem application — at least the one from Huawei — checks periodically for updates from a single server, Tarakanov said. Software branded for a specific operator searchers for updates in a server directory specific to that operator.

An attacker who manages to compromise this update server, can launch mass attacks against users from many operators, Tarakanov said. Huawei 3G modems from several different Russian operators used the same server, but there might be other update servers for other countries, he said.

Tarakanov said that he didn’t look for vulnerabilities in the actual modem drivers installed in the OS, but he expects them to have vulnerabilities. The vast majority of third-party drivers in general have vulnerabilities, he said.

Tarakanov specializes in exploit writing and finding vulnerabilities in the Windows kernel mode drivers. However, Oleg Kupreev was the leader for this particular research project concerning 3G/4G modems.

Research in this area is just at the beginning and there’s more to investigate, Tarakanov said. Someone has to do it because many new laptops come with 3G/4G modems directly built in and people should know if they’re a security threat.

 

 

Huntsville vying to be one of six sites selected for FAA drone testing center

AL.com

By Leada Gore | lgore@al.com

on March 13, 2013 at 10:53 AM, updated March 13, 2013 at 11:00 AM

 

Huntsville is vying to be one of six sites selected by the Federal Aviation Administration for the testing of unmanned aerial vehicles, commonly known as drones, a move that could bring thousands of jobs to the area.

Huntsville Mayor Tommy Battle said existing capabilities at Redstone Arsenal make the city a natural fit for testing of future commercial-use UAVs. Redstone Arsenal is home to the Army’s Program Executive Office for Aviation, which manage helicopters, fixed-wing aircraft, unmanned aerial vehicles and more.

“We’re already developing technology with the UAV center that is here (at Redstone Arsenal),” Battle said. “Now it’s on to how that technology is used in the commercial world.”

The test sites, Battle said, would help the FAA determine how the drones would co-exist with commercial planes already in the sky.

“The UAV’s have a multitude of commercial uses,” he said. “We’ve done the technology here, if we’re going to do the testing, too, then the next step would be production and ultimately, that’s going to mean jobs.”

The establishment of the testing sites was part of the FAA Modernization and Reform Act signed in to law by President Barack Obama in February 2012. It established that U.S. airspace will be open for commercial drones by 2015. Advocates say the drones will have a range of uses, including assisting farmers and emergency responders.

Detractors say a drone’s surveillance capabilities raise privacy concerns. To answer those questions, the FAA is developing a set of privacy standards that will have to be followed by every test site.

Battle said the University of Alabama in Huntsville is leading the city’s efforts to land the drone testing location.

The news of the city’s interest in becoming a test site comes as the Association for Unmanned Vehicle Systems International’s Pathfinder Chapter in Huntsville is hosting its 24th annual meeting today and tomorrow at the Von Braun Center. More than 400 people are expected to attend the event. It also comes as a new AUVSI study shows the unmanned aircraft industry could create as many as 70,000 new jobs in the coming years.

The study shows the new jobs will be created in the first three years following the integration of unmanned aircraft systems, known as UAS, into the country’s airspace. The drone industry could create as many as 100,000 new jobs by 2025, according to the study.

“This is an incredibly exciting time for an industry developing technology that will benefit society, as well as the economy,” said Michael Toscano, president and CEO of AUVSI. “In recent years, unmanned aircraft technology has grown remarkably and is already proving useful in a range of domestic applications. Integrating UAS into the national airspace will lead to new and expanded uses, which means the creation of quality, high-paying American jobs.”

The study shows the integration project will have an economic impact of some $13.6 billion in the first three years, growing to a projected $82.1 billion in impact between 2015-2025. AUVSI estimates states involved in the drone testing will share in $482 million in tax revenues in the first 10 years of site operations.

 

House Won’t Pass Tax Bill Without Code Overhaul: Beeman

By Richard Rubin

http://go.bloomberg.com/political-capital/2013-03-18/house-wont-pass-tax-bill-without-code-overhaul-beeman/

March 18, 2013 10:25 AM EDT |

 

Senate Democrats’ attempts to raise taxes this year will run into a problem: a House determined to starve it of revenue bills.

Under the Constitution, revenue measures must start in the House, limiting the Senate’s ability to raise or lower taxes if the House doesn’t send it a tax bill. That’s exactly what the House is planning to do.

The House doesn’t intend to advance any tax bills to the Senate until it passes a comprehensive overhaul of the entire code, said Ray Beeman, an aide to Rep. Dave Camp, chairman of the House Ways and Means Committee.

The House typically passes tax bills each year, either small-bore simplification measures designed for popular appeal around the tax filing deadline or broader bills, such as the repeal of the health care law, that include revenue items and can be stripped and replaced in the Senate.

Beeman, who is drafting the overhaul bill that Camp plans to push through his committee this year, spoke on a panel today at the Tax Executives Institute conference in Washington.

If the Senate wants to raise taxes, “they’re not going to have a vehicle with

which to do it,” said Nick Giordano, a Democratic tax lobbyist who also spoke

on the panel.

 

Is China after More than IP?

Study: Most Attacks against Industrial Systems Start in China

By Eric Chabrow, March 18, 2013.

Follow Eric @GovInfoSecurity

Think about the cyberthreat from China. Its main goal is to attack information systems to steal government and military secrets as well as intellectual property from Western corporations.

Conventional thinking goes that China isn’t interested in disabling industrial control systems, say, to bring down a power plant in the United States. After all, being so heavily invested in America’s and other Western economies, such acts would go against China’s own economic interests.

Chinese hackers often come back to try additional exploitations if the prior attempts failed.

That’s why a finding from a Trend Micro study can give one pause: The information security provider finds that China by far leads all other nations as the place where attacks originate against industrial control and SCADA (supervisory control and data acquisition) systems.

When American governmental leaders speak about the consequences of cyberattacks originating from China, they generally refer to intellectual-property theft, not disruptions to the nation’s critical infrastructure. Just last week, in a phone conversation with China’s new President Xi Jinping, President Obama raised concerns about the pilfering of U.S. intellectual property through cyberattacks

Honeypot Traps Employed

Nothing in the Trend Micro study says China seeks to disrupt the American economy through attacking industrial control systems. What Trend Micro threat researcher Kyle Wilhoit did was to create honeypot traps that mimic vulnerabilities found on industrial control systems and SCADA devices. And, as he reveals in a blog, 35 percent of the attacks he recorded originated in China; the U.S. was a distant second at 19 percent, followed by Laos at 12 percent [see chart below].


Except for Laos, China had the most repeat offenders, often returning not only to exploit the same vulnerabilities, but to try additional exploitations if the prior attempts failed. Wilhoit explains that the repeated acts show that these particular actors were likely interested in gaining access to the devices or causing further damage or exploitation, adding that he expects these types of attacks to increase “with possible far reaching consequences.”

In its report, Trend Micro contends industrial systems can be defended from such attacks, and offers 20 recommendations. The No. 1 recommendation: “Disable Internet access to your trusted resources, where possible.”

True, removing key systems from the Internet could prevent the attacks Wilhoit describes, but creating an island of such systems is not necessarily easy to accomplish. Besides, as the Iranians learned when their nuclear centrifuges were disabled by the computer worm Stuxnet, not being connected to the Internet doesn’t mean one is safe from outside exploits.

Follow Eric Chabrow on Twitter: @GovInfoSecurity

http://www.bankinfosecurity.com/blogs/china-after-more-than-ip-p-1441

 

DoD Reviewing Strategy in Wake of Budget Cuts

http://www.defensenews.com

By MARCUS WEISGERBER

 

WASHINGTON — The Pentagon has launched a new military strategy review that will examine how planned U.S. defense spending reductions will impact future Defense Department operations.

Defense Secretary Chuck Hagel put Deputy Defense Secretary Ashton Carter and Army Gen. Martin Dempsey, chairman of the Joint Chiefs of Staff, in charge of the review, which will “examine the choices that underlie the Department of Defense’s strategy, force posture, investments, and institutional management — including all past assumptions, systems, and practices,” Pentagon Press Secretary George Little said in a statement.

The announcement of the new strategy review comes a little more than a year after the Obama administration unveiled a sweeping military strategy that called for placing a greater emphasis on the Asia-Pacific region.

Unveiled by President Barack Obama himself during an unprecedented briefing at the Pentagon in January 2012, the so-called strategic guidance was supposed to be DoD’s foundation for the next decade.

But since then DoD has been hit with sweeping budget cuts, most recently a $46 billion in 2013 that kicked in on March 1. A total of $500 billion in defense spending reductions are looming if current law is not modified by Congress.

Defense officials have warned that any significant spending cuts would impact DoD’s ability to carry our its existing strategy.

“As I stand here today, I don’t yet know whether, or if, or how much our defense strategy will change, but I predict it will” Dempsey said at a Monday event at the Center for Strategic and International Studies think tank.

“We’ll need to re-look at our assumptions and we’ll need to adjust our ambitions to match our abilities,” he said. “That means doing less, but not doing less-well.”

The new review will look at how that strategy will be impacted.

“This Strategic Choices and Management Review will define the major decisions that must be made in the decade ahead to preserve and adapt our defense strategy, our force, and our institutions under a range of future budgetary scenarios,” Little said on Monday. “The review will take the 2011 Defense Strategic Guidance as the point of departure, and it will examine whether the assumptions made in that strategy are still applicable.”

The review’s findings — expected by May 31 — will “frame the Secretary’s guidance for the Fiscal Year 2015 budget and will ultimately be the foundation for the Quadrennial Defense Review due to Congress in February 2014,” Little said.

 

 

Cyberwar manual lays down rules for online attacks

USA Today

RAPHAEL SATTER, Associated Press12:42p.m. EDT March 19, 2013

 

A handbook due to be published later this week applies the venerable practice of international law to the world of electronic warfare in an effort to show how hospitals, civilians, and neutral nations can be protected in an information age fight.

“Everyone was seeing the Internet as the ‘Wild, Wild, West,'” U.S. Naval War College Professor Michael Schmidt, the manual’s editor, said in an interview ahead of its official release. “What they had forgotten is that international law applies to cyberweapons like it applies to any other weapons.”

The Tallinn Manual — named for the Estonian capital where it was compiled — was created at the behest of the NATO Cooperative Cyber Defense Center of Excellence, a NATO think tank. It takes existing rules on battlefield behavior — such as the 1949 Geneva Convention — to the Internet, occasionally in creative or unexpected ways.

The manual’s central premise is that war doesn’t stop being war just because it happens online. Hacking a dam’s controls to release its reservoir into a river valley can have the same effect as breaching it with explosives, its authors argue. Legally speaking, a cyberattack which sparks a fire at a military base is indistinguishable from an attack that uses an incendiary shell.

The humanitarian protections don’t disappear online either. Medical computers get the same protection that brick-and-mortar hospitals do. The personal data related to prisoners of war have to be kept safe in the same way that the prisoners themselves are — for example by having the information stored separately from military servers which might be subject to attack.

Cyberwar can lead to cyberwar crimes, the manual warned. Launching an attack from a neutral nation’s computer network is forbidden in much the same way that hostile armies aren’t allowed to march through a neutral country’s territory. Shutting down the Internet in an occupied area in retaliation against a rebel cyberattack could fall afoul of international prohibitions on collective punishment.

Marco Roscini, who teaches international law at London’s University of Westminster, described the 282-page manual as well-drafted and comprehensive, predicting that it would play an important role as military lawyers across the world grapple with issues of online warfare.

 

“I’m sure it will be quite influential,” he said.

Read manual online at

http://issuu.com/nato_ccd_coe/docs/tallinnmanual?mode=embed&layout=http%3A%2F%2Fskin.issuu.com%2Fv%2Flight%2Flayout.xml&showFlipBtn=true

 

Drones will require new privacy laws, Senate told

Kansas City Star

Posted on Wed, Mar. 20, 2013

By JOAN LOWY

Associated Press

Privacy laws urgently need to be updated to protect the public from information-gathering by the thousands of civilian drones expected to be flying in U.S. skies in the next decade or so, legal experts told a Senate panel Wednesday.

A budding commercial drone industry is poised to put mostly small, unmanned aircraft to countless uses, from monitoring crops to acting as lookouts for police SWAT teams, but federal and state privacy laws have been outpaced by advances in drone technology, experts said at a Senate hearing.

Current privacy protections from aerial surveillance are based on court decisions from the 1980s, the Judiciary Committee was told, before the widespread drone use was anticipated. In general, manned helicopters and planes already have the potential to do the same kinds of surveillance and intrusive information gathering as drones, but drones can be flown more cheaply, for longer periods of time and at less risk to human life. That makes it likely that surveillance and information-gathering will become much more widespread, legal experts said.

 

The Federal Aviation Administration recently predicted about 7,500 civilian drones will be in use within five years after the agency grants them greater access to U.S. skies. Congress has directed the FAA to provide drones with widespread access to domestic airspace by 2015, but the agency is behind in its development of safety regulations and isn’t expected to meet that deadline.

If Americans’ privacy concerns aren’t addressed first, the benefits of potentially “transformative” drone technology may not be realized, Ryan Calo, a University of Washington law professor, told the Judiciary Committee.

It’s in “everyone’s interest to update the law even if only to provide the industry with the kind of bright lines its need to develop this technology,” said Amie Stepanovich of the Electronic Privacy Information Center, a privacy advocacy group.

 

But Calo and Stepanovich were divided on whether Congress should update federal privacy laws to set a national standard, or whether the responsibility should be left to state lawmakers to craft their own solutions. Several bills have been introduced in Congress that would, among other things, require warrants before drones could be used for surveillance.

 

Calo said he is concerned that some of the congressional legislation isn’t written broadly enough to cover other types of technology, like robots that can walk up walls.

 

There is also virtue in allowing states to experiment with their own laws, he said. A variety of drone-related bills have been introduced this year in more than 30 state legislatures.

 

But Stepanovich urged Congress to pass legislation requiring police to obtain warrants for drone surveillance, with exceptions for emergency situations or when necessary to protect human life.

 

There is already limited civilian drone use. The FAA has granted more than two hundred permits to state and local governments, police departments, universities and others to experiment with using small drones.

 

Initially, most civilian drones are expected to be around the size of backpack or smaller, weighing less than 55 pounds and unable to fly higher than most birds. The U.S. military, on the other hand, uses everything from unarmed, hand-launched drones like the 2.9-pound Wasp to systems like the MQ-9 Reaper that flies at an altitude up to 50,000 feet, has a 66-foot wingspan, weighs up to 10,500 pounds and can fire Hellfire missiles and guided bombs.

 

“I am convinced that the domestic use of drones to conduct surveillance and collect other information will have a broad and significant impact on the everyday lives of millions of Americans going forward,” said the committee’s chairman, Sen. Patrick Leahy, D-Vt.

 

“Small, quiet unmanned aircraft can easily be built or purchased online for only a few hundred dollars and equipped with high-definition video cameras while flying in areas impossible for manned aircraft to operate without being detected,” Leahy said. “It is not hard to imagine the serious privacy problems that this type of technology could cause.”

 

Earlier this year, the FAA solicited proposals to create six drone test sites around the country. With a nod to privacy concerns, the FAA said test site applicants will be required to follow federal and state privacy laws and to make a privacy policy publicly available.

 

The test sites are supposed to evaluate what requirements are needed to ensure the drones don’t collide with planes or endanger people or property on the ground. Remotely controlled drones don’t have a pilot who can see other aircraft the way an onboard plane or helicopter pilot can.

 

The agency has received 50 applications to create test sites in 37 states. Eventually, every state may have a test site, said Michael Toscano, president and CEO of the Association for Unmanned Vehicle Systems International, a trade association for the domestic drone industry.

 

 

Is the CIA Getting Out of the Drone Business?

By Dashiell Bennett

March 20, 2013

http://www.nextgov.com/defense/2013/03/cia-getting-out-drone-business/61981/

 

Daniel Klaidman of The Daily Beast reports that the White House will soon take the power to launch lethal drone strikes away from the CIA and make the program the exclusive domain of the Defense Department. Because the military and intelligence services operate under a different set of rules, the move would consolidate all drone operations under a single command and a single set of procedure. It could also (potentially) add new layers of transparency and accountability to what has become one of the government’s most controversial operations.

The shift may not change much in the real world of missile strikes and terrorist hunting, as drones will continue to be a major tool in the U.S. arsenal. However, it could signal a major shift in the legal and diplomatic basis for the program. For example, one of the most important distinctions between CIA operations and military ones is the difference between “covert” and “clandestine.” The military can keep its “clandestine” activities classified or secret—like say a SEAL team raid to kill a wanted terrorist. But if Congress or a judge asks, they can’t pretend they didn’t happen. The CIA, on the other hand, is allowed to declare certain missions to be “covert.” (Like say, sneaking American citizens out of a hostile country.) That means that, legally, they can deny that program even exists, shielding those responsible from accountability and hiding them from the public.

Read more at The Atlantic Wire.

 

New WH Plan Would Cut $100B From Defense

http://www.defensenews.com

By MARCUS WEISGERBER

March 20, 2013

 

WASHINGTON — The White House is preparing to submit a fiscal 2014 federal budget that would partially offset across-the-board sequestration cuts by reducing the Pentagon budget by $100 billion, but not until later this decade, according to a senior defense official and budget documents.

Obama administration officials are pushing these Defense Department spending cuts, along with an additional $100 billion in nondefense discretionary spending — for a total of $200 billion in cuts — as part of a $4 trillion deficit reduction plan that has been offered to House Republican leadership.

The $100 billion in defense cuts would not begin until 2019, according to Frank Kendall, the Pentagon acquisition chief.

“The president’s budget … does deal with the deficit, it does do the things that need to be done, if it were passed, to avoid sequestration,” he said Wednesday at a National Defense Industrial Association conference in Springfield, Va.

The White House is planning to submit its fiscal 2014 spending plan to Congress on April 8, according to sources.

“The way the president did it was he took $100 billion out of defense, but he took it out [from] the second five years,” Kendall said.

Each year the Pentagon submits a budget to Congress that includes five-year spending estimates. That five-year period is called the future years defense program (FYDP).

“So essentially you have a FYDP that remains intact and we take another $100 billion out beyond the FYDP,” Kendall said. “The same thing more or less [will] be done on the domestic discretionary part; there’s $100 billion that’s taken out.”

http://www.whitehouse.gov/issues/sequester/the-presidents-plan”>A deficit-reduction plan posted on the White House’s website forecasts $600 billion in savings through taxes “from [the] wealthiest [as part of the] fiscal cliff deal” struck in January.

DoD is facing a $500 billion cut over the next decade — about $50 billion per year — as part of sequestration. Those cuts were triggered March 1. The White House proposal does not appear to address the sequestration cuts for the remainder of fiscal 2013, which total about $46 billion.

For months the Pentagon has said it prepared a 2014 budget proposal that did not include sequestration cuts. On Wednesday, a defense official confirmed that the White House Office of Management and Budget has not asked DoD to submit a new spending plan that includes sequestration.

“The President has put forward a specific plan that will avoid sequestration’s harmful budget cuts and reduce the deficit in a balanced way — by cutting spending, finding savings in entitlement programs and closing tax loopholes,” according to a statement on the White House website.

On Capitol Hill, the immediate reaction from pro-defense Republicans was mixed.

Senate Armed Services Committee Ranking Member Sen. James Inhofe, R-Okla., told Defense News on Wednesday he would be open to $100 billion in outyear defense cuts as a way to avoid the final nine years of the $500 billion sequester cut.

“If you isolate the $100 [billion], obviously I would support that,” Inhofe said. “But I doubt it’s going to be quite that easy. “I anticipate [White House officials] are using that as a carrot to get tax increases,” Inhofe said. “But that sure has my attention.”

Asked about the $580 billion in new revenues the White House plan proposes — something which congressional Republicans have long opposed — Inhofe signaled his opposition.

“I want to see those first, but I seriously doubt I’d support those,” Inhofe said.

While Inhofe signaled a willingness to at least consider parts of the White House plan, especially the lessened defense cuts, one senior House Armed Services Committee aide rejected it.

“What strategic analysis did they do to come up with the $100 billion figure?” the senior HASC aide told Defense News on Wednesday. “[Joint Chiefs Chairman Gen. Martin] Dempsey testified to us last month that he can’t keep doing what we are doing around the world with additional cuts, so what is the White House proposing they stop doing?”

The White House had yet to respond to a reporter’s inquiry about the sequestration-replacement plan and what year the $100 billion defense cut begins.

But the timeline laid out by Kendall suggests Congress and the White House would have several years to replace the proposed $100 billion cut with other deficit-reduction measures.

Not good enough, the senior HASC aide said.

“I would be skeptical of additional $100 billion in defense cuts, even in the out years,” the senior aide said. “Dempsey said he couldn’t absorb that, and we take him at his word. Would love to know what strategic assessment led the White House to believe another $100 billion in defense cuts are workable — answer [equals] none.”

 

NASA Tightens Security In Response To Insider Threat

 

NASA shuts down database and tightens restrictions on remote access following the arrest of a Chinese contractor on suspicion of intellectual property theft.

By Patience Wait, InformationWeek

March 21, 2013

URL: http://www.informationweek.com/security/government/nasa-tightens-security-in-response-to-in/240151412

 

NASA has closed down its technical reports database and imposed tighter restrictions on remote access to its computer systems following the arrest of a Chinese contractor on suspicion of intellectual property theft.

NASA administrator Charles Bolden outlined those and other security measures in March 20 testimony before a congressional subcommittee. Bolden said he had ordered a review of the access that foreign nationals from designated countries — including China, Iran and North Korea — are given to NASA facilities and a moratorium on providing new access to citizens of those countries.

The agency’s actions follow the March 16 arrest of Bo Jiang, a Chinese citizen, at Dulles Airport in Washington, D.C., as he prepared to leave the United States. The FBI, in its application for an arrest warrant, said it was investigating violations of the Arms Export Control Act.

Jiang worked as a contractor with the National Institute of Aerospace, a nonprofit research organization, at NASA’s Langley Research Center. During a border stop at Dulles, Jiang allegedly said that he had in his possession a cellphone, memory stick, external hard drive and new computer. During a subsequent search of Jiang’s possessions, the agents found a second laptop, hard drive and SIM card, according to the arrest warrant.

Jiang was arraigned March 19 in federal district court in Norfolk, Va., on a charge of lying to federal agents. The contents of the confiscated electronic media have not been revealed.

Rep. Frank Wolf (R-Va.), chairman of the House appropriations subcommittee that funds the space agency, said in a press conference that whistleblowers at NASA prompted the investigation. Wolf said Jiang was working on high-tech imaging technology that could be of potential interest to the Chinese military. Citing the arrest warrant, Wolf said Jiang had previously traveled to China with a NASA laptop “that agents believe to have contained sensitive information.”

 

Wolf accused NASA of circumventing restrictions on the hiring of foreign nationals and said he had evidence that the NIA might employ other Chinese nationals under similar arrangements. The congressman called on NASA to audit all of its contractors that employ citizens of countries or organizations considered “entities of concern.”

Wolf, in his seventeenth year in Congress, has been focused on the threat of Chinese cyber espionage. Earlier this month, he warned of security threats and the potential leak of classified information at NASA’s Ames Research Center, and he pointed to the Chinese government’s “systematic and aggressive efforts to steal” sensitive technology.

 

Mismanaged State Pensions Bill Taxpayers for Shortfall

By ERIC PIANIN, DAVID FRANCIS, The Fiscal Times March 22, 2013

For years, state and local governments have been playing imaginative or patently dishonest games with their pension funds, thinking they could get away with it. But now the chickens are coming home to roost, as federal authorities have begun cracking down on corruption and mismanagement.

The modus operandi was much the same in state after state: government officials underfunding or skimming retiree pension funds to meet other more immediate costs; financial officers papering over or hiding the extent of the funding shortfalls; and private financial managers exaggerating the return they could deliver on pension fund investments while often leaving the fund vulnerable to unexpected market swings.

State pensions, still feeling the pain of the Great Recession, are now underfunded to the tune of more than $4 trillion, according to State Budget Solutions, a non-partisan fiscal watchdog.

In the past week alone, government officials and private investment groups with major government contracts have learned hard lessons about the risks of playing fast and loose with the government retirement systems:

The Securities and Exchange Commission charged Illinois with securities fraud following years in which state officials misled investors and shortchanged the state pension system and stuck future generations of taxpayers with the staggering bill. The suit was part of a larger push by the SEC to bring greater transparency and accountability to the municipal bond market, according to the Wall Street Journal.

• A federal grand jury indicted the former CEO and former board member of the $232 billion California Public Employees’ Retirement System on bribery and influence peddling charges. The indictment accuses them of unduly using their influence to defraud a giant equity firm of millions of dollars.
• The nearly bankrupt city of Detroit was placed under a state financial overseer after years of mismanagement, corruption and obfuscation of major obligations – including billions of dollars in retiree health costs. Federal authorities meanwhile charged two former pension officials with bribery and accepting kickbacks.

These are arguably among the worst cases of state and municipal malfeasance in the handling of public employees’ vital pension programs, but experts say they represent the tip of the iceberg. Around the country, state and local governments are cutting corners and taking big chances to meet pension investment goals. Absent reforms or a turnabout in current practices, many state employees will end up with far less than promised when they retire.

“There are a lot of governmental pension plans that have been chronically underfunded, and this is a big problem,” said Chester Spatt, a former chief economist for the SEC and now the director of the Center for Financial Markets at Carnegie Mellon University’s Tepper School of Business.

NO OVERSIGHT
A big part of the problem has been shoddy accounting practices by state and municipal officials who have operated with fewer restraints than financial officers in the private sector, Spatt said. Moreover, many states and local governments have misled investors by exaggerating the projected return on their bonds and securities.

Nowhere is the problem greater than in Illinois, where Democratic Gov. Patrick Quinn is facing the biggest crisis of his administration. Quinn inherited the budget crisis when he took office back in January 2011, at a time when many state governments were struggling to make ends meet.

Quinn and the Democrat controlled state legislature moved swiftly to pass a major tax increase to offset a budget deficit of at least $12 billion, or about 34 percent of the $35 billion general fund budget – plus another $6 billion of debt carried over from the previous year. That debt consisted of unpaid bills to public universities, schools, social service agencies, druggists and vendors.

On top of that, the state employee pension fund was woefully underfunded to the tune of $80 to $90 billion, and the state’s once shining credit rating was dangerously on the skids, which meant paying high interest rates to borrow money. “It’s the enormity of the deficit,” when compared to the overall budget, that sets Illinois apart from many other states, Richard F. Dye, of the University of Illinois’ Institute of Government, said at the time.

Even with the new tax revenue in place, Illinois has struggled to address its long term pension program problems. Standard & Poor’s downgraded Illinois Jan. 25 to A-, six steps below AAA, after lawmakers were unable to whittle down a backlog of $9 billion of unpaid bills or produce a plan to shore up the pensions, which have just 39 percent of assets needed to cover projected obligations, according to Bloomberg. No other U.S. state has a ratio that low.

But the illegal practices that triggered last week’s SEC sanctions date back to 2005 and the administration of disgraced — and now imprisoned — Democratic governor Rod Blagojevich. The SEC charged that the state misled investors from 2005 to 2009 about shortfalls in retirement funds. Illinois failed to disclose how much it was underfunding its plans as it sold $2.2 billion in bonds, according to the SEC. The fifth-most-populous state became the second to settle over such charges. New Jersey resolved a similar case in 2010, as did San Diego in 2006.

Illinois neither admitted nor denied the SEC’s findings in the settlement, which didn’t include fines, according to a statement from Quinn’s Office of Management and Budget. However, the state is paying a steep price for its misdeeds in operating the pension fund. Investors demand 1.3 percentage points of extra yield to own 10-year debt of the state and its localities, almost seven times the average in 2005, when the SEC said the inadequate disclosure began.

“I can tell you it’s troubling because we have made promises we can’t keep in Illinois,” said Sen. Richard J. Durbin, D-Ill, the second-ranking Democrat in the U.S. Senate. “And the people who are affected by those promises have done everything they were asked to do. They’ve made all the payments they were expected to make, and many of them are in a vulnerable position personally.”

 

CalPERS SCANDAL ILLUSTRATED BROADER PROBLEMS

For years, the California Public Employees’ Retirement System (CalPERS) was considered one of the best run in the nation. It was the largest public fund, with nearly $180 billion in assets at the end of 2008. It served 1.6 million workers, and had a reputation for taking a careful, balanced investment approach that provided consistent returns. Also absent were rumors of corruption.

That all changed in 2011, when the Justice Department launched an investigation into how the fund was managed. What followed was a scandal that followed a familiar script: former CalPERS CEO Federico Buenrostro Jr. and former board member Alfred J.R. Villalobos steered money to Wall Street investment houses in exchange for payouts. They also conspired to hide the payments, creating false document trails to mislead investigators.

According to Edward Siedle, a forensic expert who specializes in pension fraud crimes, the crimes committed in the CalPERS scandal are common in cases of pension abuse. He said lack of sufficient regulation allows board members to act without oversight.

“Funds aren’t regulated by any comprehensive federal or state laws. They’re subject to a patchwork or quilt of city, state or county laws that more often than not don’t have the power to oversee fund activities,” he said. “If you want to know if a fund can invest in derivatives, there’s almost certainly no law that requires the board to tell you.”

Siedle also said that the very make up of pension boards invite the prospect of mismanagement. “Pensions boards are composed of firefighters, kindergarten teachers, and garbage collectors,” he said. “There is no requirement that these boards require any kind of financial expertise.”

But mismanagement does not just exist on the public side, Siedle said. Money managers know they aren’t dealing with the most sophisticated investors when they pitch pension boards. They often oversell projected returns, making promises that they are unlikely to keep.

“It is often said that public pension boards are the dumbest investors in the room. If you want to pitch a billion dollar scam, are you better pitching it to a wealthy person or a bunch of schoolteachers or firefighters?” Siedle asked. The burden falls on taxpayers when money managers fail to deliver.

The Pension Benefit Guarantee Corporation guarantees pensions, and in the wake of the Great Recession, has had to dish out billions. In 2010, it covered $5.6 billion in lost pensions. According to a 2012 Inspector General Report, it does not have “the resources to fully satisfy PBGC’s long-term obligations. These funds are backed by taxpayers,” he said. “If the money’s not there, the taxpayers have to put more money in.”

The financial crisis that led Republican Gov. Rick Snyder to installing bankruptcy attorney Kevyn Orr as emergency czar of Detroit last week was decades in the making and had much to do with an economy buffeted by a declining auto industry, white flight to the suburbs, widespread poverty and crime, and government corruption. But a state-appointed review board also found astounding examples of government mismanagement, particularly in the handling of employee pension and retiree health programs.

These included the hiding of $7.2 billion in retiree health costs until it was discovered by an outside consultant in 2005 and the use of tricks to hold down salary costs in the short term by offering employees inflated pension programs down the road without the resources to make good on them.

Last week, Ronald Zajac, the long-time general counsel of Detroit’s two pension funds, and Paul Stewart, a former trustee of Detroit’s Police and Fire Retirement System, were indicted on federal charges of taking part in a bribery and kickback scheme involving more than $200 million in Detroit pension fund investments.

A distraught Mayor Dave Bing issued a statement saying Detroiters deserved honest government, and that “when the public trust is betrayed, justice must prevail.”

 

Secret Report Warns of Skewed U.S. Intelligence Priorities

http://www.defensenews.com

By AGENCE FRANCE-PRESSE

 

WASHINGTON — White House advisers have warned that U.S. spy agencies are too focused on anti-terror operations and pay inadequate attention to China, the Middle East and other flashpoints, a news report said Thursday.

The Washington Post reported that a panel of White House advisers warned President Barack Obama last year that the work of the Central Intelligence Agency, the National Security Agency and other U.S. spy services had been distorted by more than a decade of counterterror efforts following the Sept. 11, 2001 attacks. The panel, whose members included new U.S. Defense Secretary Chuck Hagel and former senator David Boren, urged greater attention to America’s other intelligence priorities and called for a significant shift in resources to correct the perceived imbalance.

The document issued last year by the President’s Intelligence Advisory Board was distributed to senior national security officials at the White House, the newspaper wrote.

U.S. intelligence officials cautioned that any course corrections are likely to be incremental rather than comprehensive, because of continued concern over the threat by al-Qaida, and because of influence amassed by U.S. counterterror institutions over the past decade, the Post reported.

The daily wrote that the intelligence board, which meets in secret, is made up of 14 experts, many of whom once held top government posts and that they have extensive access to intelligence officials and records.

The Post reported that it contacted several panel members who declined to discuss the contents of the report but expressed misgivings about the increasingly paramilitary missions of U.S. intelligence efforts, including at the Central Intelligence Agency.

 

 

Drone base in Niger gives U.S. a strategic foothold in West Africa

Washington Post

By Craig Whitlock, Published: March 21

NIAMEY, Niger — The newest outpost in the U.S. government’s empire of drone bases sits behind a razor-wire-topped wall outside this West African capital, blasted by 110-degree heat and the occasional sandstorm blowing from the Sahara.

 

The U.S. Air Force began flying a handful of unarmed Predator drones from here last month. The gray, mosquito-shaped aircraft emerge sporadically from a borrowed hangar and soar north in search of al-Qaeda fighters and guerrillas from other groups hiding in the region’s untamed deserts and hills.

The harsh terrain of North and West Africa is rapidly emerging as yet another front in the United States’ long-running war against terrorist networks, a conflict that has fueled a revolution in drone warfare.

Since taking office in 2009, President Obama has relied heavily on drones for operations, both declared and covert, in Afghanistan, Iraq, Pakistan, Yemen, Libya and Somalia. U.S. drones also fly from allied bases in Turkey, Italy, Saudi Arabia, Qatar, the United Arab Emirates and the Philippines.

Now, they are becoming a fixture in Africa. The U.S. military has built a major drone hub in Djibouti, on the Horn of Africa, and flies unarmed Reaper drones from Ethiopia. Until recently, it conducted reconnaissance flights over East Africa from the island nation of the Seychelles.

The Predator drones in Niger, a landlocked and dirt-poor country, give the Pentagon a strategic foothold in West Africa. Niger shares a long border with Mali, where an al-Qaeda affiliate and other Islamist groups have taken root. Niger also borders Libya and Nigeria, which are also struggling to contain armed extremist movements.

Like other U.S. drone bases, the Predator operations in Niger are shrouded in secrecy. The White House announced Feb. 22 that Obama had deployed about 100 military personnel to Niger on an “intelligence collection” mission, but it did not make any explicit reference to drones.

Since then, the Defense Department has publicly acknowledged the presence of drones here but has revealed little else. The Africa Command, which oversees U.S. military missions on the continent, denied requests from a Washington Post reporter to interview American troops in Niger or to tour the military airfield where the drones are based, near Niamey’s international airport.

Government officials in Niger, a former French colony, were slightly more forthcoming. President Issoufou Mahamadou said his government invited Washington to send surveillance drones because he was worried that the country might not be able to defend its borders from Islamist fighters based in Mali, Libya or Nigeria.

“We welcome the drones,” Mahamadou said in an interview at the presidential palace in Niamey. Citing the “feeble capability” of many West African militaries, he said Niger — which is three times the size of California — and its neighbors desperately needed foreign help to track the movements of guerrillas across the Sahara and Sahel, an arid territorial belt that covers much of the region.

“Our countries are like the blind leading the blind,” he said. “We rely on countries like France and the United States. We need cooperation to ensure our security.”

 

Surveillance operations

The Predator drones in Niger are unarmed, U.S. officials said, though they have not ruled out equipping the aircraft with Hellfire missiles in the future. For now, the drones are conducting surveillance over Mali and Niger.

U.S. officials said they share video footage and other intelligence collected by the unmanned aircraft with French forces and African troops — including 670 soldiers from Niger — who are fighting the Islamist insurgency in Mali. Liaison officers from Niger, France and Chad work alongside U.S. Air Force personnel who launch and land the drones from the base in Niamey.

 

Most of the surveillance missions are designed to track broad patterns of human activity and are not aimed at hunting individuals, said a senior U.S. official, who spoke on the condition of anonymity to discuss military operations. Although French and African troops are engaged in combat in Mali, the Obama administration has not given the U.S. military the same authorization.

“The whole issue is lethality,” the senior official said. “We don’t want to abet a lethal action.”

But the rules of engagement are blurry. Intelligence gathered by the Predators could indirectly help the French fix targets for airstrikes or prompt Nigerien security forces to take action on their territory.

Moreover, U.S. officials have acknowledged that they could use lethal force under certain circumstances. Last month, Army Gen. Martin E. Dempsey, the chairman of the Joint Chiefs of Staff, told Congress that the U.S. military had designated “a handful of high-value individuals” in North Africa for their suspected connections to al-Qaeda, making them potential targets for capture or killing.

 

Mission’s duration unclear

The Pentagon declined to say exactly how many Predator aircraft it has sent to Niger or how long it intends to keep them there. But there are signs that the U.S. military wants to establish a long-term presence in West Africa.

After years of negotiations, the Obama administration signed an agreement with Niger in January that provides judicial protection and other safeguards for U.S. troops in the country.

Two U.S. defense officials, speaking on the condition of anonymity to discuss internal planning, said the Pentagon ultimately wants to move the Predators to the Saharan city of Agadez, in northern Niger.

Agadez is closer to parts of southern Algeria and southern Libya where fighters and arms traffickers allied with al-Qaeda have taken refuge. The airfield in Agadez, however, is rudimentary and needs improvements before it can host drones, officials said.
The U.S. military has used Agadez since last year as a refueling stop for U-28 spy planes — small, piloted aircraft flown by private contractors. U.S. officials have hesitated to send those surveillance aircraft across the border into Mali because of fears that the crews could be taken hostage if the planes crash or are shot down.

Government officials in Niger declined to say whether they viewed the U.S. drones as a short-term fix or a permanent addition.

“I can’t tell you how long they will be here,” said Mahamadou, the president. “How long it will take to stabilize Mali is one factor. The stabilization of Libya is another.”

At the same time, he said Niger cannot rely on French and U.S. military forces forever and needs to ensure its own security. To that end, the U.S. government has agreed to give Niger two Cessna Grand Caravan aircraft to transport troops and conduct surveillance.

“The intelligence is crucial for us,” said Col. Mamane Souley, director of exterior relations for the Nigerien armed forces. “We have a vast territory, and in that sense aircraft are fundamentally important.”

 

Low profile in Muslim nation

The presence of high-tech Predator drones in Niger’s skies contrasts jarringly with life on the ground. There are only a handful of paved roads in the capital. Many people live in mud-brick shanties. Goats and camels are a common sight in the city center.

 

U.S. and Nigerien officials had worried that the drones might spur a popular backlash in Niger, where about 90 percent of the population is Muslim. Extra security barriers were raised outside the U.S. and French embassies as a precaution. So far, however, reaction has been muted, and many people seem to favor anything that the U.S. and French militaries can do to prevent a spillover of violence from Mali.

“Of course, we might have some narrow-minded Nigeriens,” said Marou Amadou, who serves as Niger’s justice minister and its chief government spokesman. “But people understand that the presence of these drones is very, very helpful. . . . What is happening in Mali could happen in Niger also.”

Nonetheless, U.S. troops have kept a low profile. Americans with short haircuts and a military bearing occasionally surface at a couple of Niamey hotels to eat barbecue or drink beer, but most confine themselves to the base.

The Africa Command did not respond to questions about how many U.S. troops are in Niger, but one U.S. official said the number of Air Force personnel had increased beyond the 100 troops Obama said last month he had deployed.

“We just know there are drones; we don’t know what they are doing exactly,” said Djibril Abarchi, chairman of the Nigerien Association for the Defense of Human Rights, an independent watchdog group. “Nothing is visible. There is no transparency in our country with military questions. No one can tell you what’s going on.”

Most Nigeriens are strongly opposed to al-Qaeda in the Islamic Maghreb, the terrorist network’s affiliate, and recognize that their country is vulnerable without foreign military help, said Boureima Abdou Daouda, an imam in Niamey who leads a regional council of religious leaders that advises governments on countering extremism.

At the same time, as in many African countries, the presence of foreign troops is a sensitive issue given the history of colonialism in Niger. Daouda warned that the government could face trouble if it doesn’t shore up popular support and do a better job of publicly explaining why the American drones are necessary.

“Someone with bad intentions could say, ‘They are here to cause strife with Muslims,’ ” he said. “People might demonstrate. They might riot. Big flames begin with little flames.”

 

Senate Passes $3.7 Trillion Budget, Its First in 4 Years

NYTimes.com

March 23, 2013 5:30 AM EDT

 

After an all-night debate that ended close to 5 a.m., the Senate on Saturday adopted its first budget in four years, a $3.7 trillion blueprint for 2014 that would fast-track passage of tax increases, trim spending gingerly and leave the government deeply in debt a decade from now.

The 50-49 vote sets up contentious — and potentially fruitless — negotiations with the Republican-dominated House to reconcile two different visions for dealing with the nation’s economic and budgetary problems. No Republicans voted for the Senate plan, and four Democrats, Mark Pryor of Arkansas, Kay Hagan of North Carolina, Mark Begich of Alaska, and Max Baucus of Montana, also opposed it. All four are Red State Democrats up for re-election in 2014.

In contrast, the House plan ostensibly brings the government’s taxes and spending into balance by 2023 with cuts to domestic spending even below levels the automatic “sequestration” levels roiling federal programs now, and it orders up significant changes to Medicare and the tax code.

http://www.nytimes.com/2013/03/24/us/politics/senate-passes-3-7-trillion-budget-its-first-in-4-years.html?emc=na

 

 

What They Told Us: Reviewing Last Week’s Key Polls

Rasmussen Reports

March 23, 2013

 

Voters want new thinking in Washington, D.C., but what they get is more of the same.

Consider the deficit-cutting plans rolled out by the two parties in recent days.   Voters don’t care much for either one. Thirty-five percent (35%) favor Republican Congressman Paul Ryan’s plan that calls for a balanced budget in 10 years through spending cuts only. Ryan’s plan includes cuts to Medicare but not the military. Nineteen percent (19%) support Democratic Senator Patty Murray’s plan that doesn’t balance the budget but includes a trillion dollars in tax increases and a trillion dollars in spending cuts over the next decade.

Interestingly, Murray is personally more popular than Ryan, the GOP’s 2012 vice presidential nominee, even though she is much less well-known.   Ryan is now more disliked than former House Speaker Nancy Pelosi who long has reigned as the most unpopular congressional leader.

Voter frustration in highlighted by Washington’s bumbling on the budget. Sixty-three percent (63%) of voters believe it is Very Important to balance the federal budget, although only seven percent (7%) think it is Very Likely to happen in the next 10 years.  

Just 16% of voters think it is possible to balance the federal budget without cutting spending.  But they are evenly divided on whether it is possible to balance the budget without raising taxes.

But The Washington Post’s Ezra Klein and others on the political left argue that the federal deficit is, if anything, too small. Just 20% of voters share Klein’s view, while 59% think the deficit is too big.

Only 36% would rather have a balanced budget with higher levels of taxes and spending than a deficit with lower levels of taxes and spending.  

Scott Rasmussen discusses Washington’s never-ending budget battles with Congresswoman Marsha Blackburn, a Tennessee Republican, on this weekend’s edition of What America Thinks
.   Then he sits down with Caren Bohan from the National Journal and The Hill’s Bob Cusack to talk about what happened to President Obama’s post-election momentum.

What America Thinks is a weekly television show currently available on 61 stations. Find a station near you.

Obama’s job approval ratings have been slipping in the daily Presidential Tracking Poll.   Sixty-nine percent (69%) of voters now consider the president at least somewhat liberal, including 43% who see him as Very Liberal. 

  Voters also disagree with Washington’s continued propping-up of the nation’s megabanks.  A new Senate report reveals that the nation’s largest bank, JP Morgan Chase, manipulated and withheld key information during its record trading losses last year, prompting even stronger belief that the big banks haven’t learned their lesson after receiving government bailouts in 2008. Most Americans want to end government subsidies for these “too big to fail” institutions, and half want to see these megabanks broken up 

“No bank should ever be in a position where it could be deemed too big to fail,” Scott Rasmussen says in his latest weekly newspaper column.   “It’s time to bust up the big banks.”

On Monday, the Supreme Court heard oral arguments in yet another dispute between the federal government and the state of Arizona. This time the fight is over Arizona’s requirement that people must prove their citizenship before being allowed to register to vote. The Obama administration argues that this requirement is discriminatory. However, 71% of voters nationwide side with Arizona and think proof of citizenship should be required before voter registration. By a two-to-one margin, voters reject the argument that this could discriminate against some.

Most voters like finding a way for illegal immigrants to stay in this country but not until the border is secured.   However, they remain skeptical about whether the federal government actually will secure the border if immigration reform legislation is passed.

One thing Americans don’t want the government involved in is the housing market. Just 21% think the government should help those who are struggling with their mortgages. Sixty-five percent (65%) believe that if someone can’t afford to make increased mortgage payments, he or she should sell their home and buy a less expensive one.

Short-term confidence about home values is down from last month’s high, but the number of homeowners who say their home is worth more than what they still owe on it is back over 50%.   More Americans than ever (28%) believe now is a good time to sell a house, although most still disagree.  

At week’s end, 53% of adult consumers said the United States is still in a recession. A plurality (49%) of investors agrees.

Voters again trust Republicans more than Democrats when it comes to handling the economy, but the president’s party continues to be trusted more on most issues tracked regularly by Rasmussen Reports. This includes a whopping 25-point advantage when it comes to the environment.

Democrats lead Republicans again this week on the Generic Congressional Ballot

However, only 17% of all voters nationwide feel Very Connected to a national political party.
That’s a stronger connection than people feel to the federal government (7%) and roughly the same as allegiance to local schools, local sports teams and high school friends.   Family remains far and away the strongest social connection: 76% of Americans feel Very Connected to their family. Also far outpacing the affiliation with a national political party is the 36% who feel Very Connected to their job and the 34% who feel such a connection to a local church or religious organization.

 

In other surveys last week:

— Thirty-one percent (31%) of Likely U.S. Voters say the country is heading in the right direction

— Voters are now evenly divided over whether they want their governor to help make the president’s health care law a reality in their state. 

— By a 46% to 38% margin, voters oppose a single-payer health care system in which the government provides coverage for everyone. 

— The federal government provides deposit insurance for regulated banks up to a limit of $250,000 per account per bank. Nine-out-of-10 Americans (87%) support this federal policy

— Many Americans planned to celebrate St. Patrick’s Day last Sunday by wearing green or having a drink even though they don’t consider it an important holiday. 

— Sixty-five percent (65%) say the arrival of spring puts them in a better mood. 

 

 

General Officer Announcements

March 22, 2013

 

            The chief of staff, Air Force announces the assignment of the following general officers: 

            Maj. Gen. Thomas J. Masiello, director of Special Programs, Office of the Under Secretary of Defense for Acquisition, Technology and Logistics, Pentagon, Washington, D.C., to commander, Air Force Research Laboratory, Air Force Materiel Command, Wright-Patterson Air Force Base, Ohio. 

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