Why Do People Rob Banks?

The title of this post isn’t facetious, and it isn’t really sarcastic, either. If you’ve ever read a story about bank robbery, or looked it up online, you already know that most bank branches rarely have more than five figures worth of cash on hand, and never more than low six figures. They are also loaded with countermeasures, cameras, silent alarms, dye packs, and even armed guards. Even worse, from any potential criminal’s point of view, bank robbery is automatically considered a Federal offense, and will bring the FBI down on you faster than you would believe. There is an excellent chance of being killed outright, and an even better chance of being sent to prison, and even if you succeed in getting away with it, you’re probably going to end up with less than $100,000 for your trouble…

As an alternative, consider the case of Jessica Metivier, of Acton, Massachusetts, who was sentenced this week for her part in defrauding the United States Treasury Department of more than $50,000,000 USD. According to the story on the US Department of Justice website, Metivier and her partner, Christopher N. Condron, submitted grant applications for tax free energy grants as part of the American Recovery and Reinvestment Act of 2009, including wind, biofuels, and gasification projects, totaling more than $88 million dollars. As a former grant writer, I can tell you that such grant applications are incredibly detailed, and rigorously vetted by the granting agency. Getting one at all is intended to be as difficult as possible, specifically to avoid fiascos like this one…

It seems worth noting that this wasn’t a case where the defendants were immediately caught, either. The fraudulent applications first appeared in May of 2009, and Metivier and Condron weren’t charged with anything until August of 2017. One might have hoped that it would take less than eight years to detect such an offense, either by periodic audits, progress reports (that are required on all Federal grants, usually quarterly), or simply because somebody drove by the alleged site of the project and failed to see any of the large wind farms, gasification plants, or development facilities that should have been present…

I could absolutely understand if any or all of my readers (assuming I have readers) were outraged by the fact that some clown was able to defraud the Federal government for upwards of $50 million of your tax dollars and remain undetected (or at least unindicted) for more than eight years. But if that upsets you, you’re really going to be furious when you find out what Metivier’s sentence was: one year of probation. Condron’s case hasn’t been resolved yet, but since he’s being charged for stealing a smaller amount of the money, it seems unlikely that he will end up doing any worse than his partner…

Now, I have to admit that I haven’t had the chance to read any of the court documents, and I’m not suggesting that I would understand any of the legal aspects anyway. I don’t have a law degree, and my one semester of Business Law in business school probably wouldn’t be any help even if I had taken it more recently than 1991. But from a strategy standpoint, if you had to choose between a venture that would net you less than $50,000 and could easily result in 10 years in prison (or death), and one that would yield literally a thousand times more money and only result in one year of probation if you were caught at all, why on Earth would anyone select the first option?

All kidding aside, as one of the aforementioned taxpayers, I can’t help feeling that just having to spend one year in which you do not commit any crimes is rather a light sentence for stealing $50 million of our money. Even more to the point, though, is the question of just how many other teams of fraudsters are pulling off operations like this one – and of  how many of them, if any, have been caught in the first place…

We Can Get Them For You Wholesale

 Have you ever been shopping online and found yourself wondering about the user reviews? There are some that seem natural enough – if you ordered a child’s wading pool, and it turned out to be the size of a soup bowl, you’d probably be peeved enough to leave a negative review. By the same token, if you ordered a bottle of floor polish and discovered that it also cured athlete’s foot, waterproofed your boots, recovered lost data from your hard drive, killed mildew in your shower, healed minor cuts and bruises, and make a satisfying mid-morning snack – all at once – you might be moved to write in and extol the virtues of this wonderful product. But if you spend any time reading such reviews, you will also find huge numbers of them that go on for far too many words about products no one could possibly care about…

If you’ve ever wondered how such reviews get posted in the first place, or, for that matter, how some truly appalling products manage to accumulate dozens (or hundreds) of five-star reviews full of superlative praise, it’s possible that you’re dealing with the owner and/or manufacturer writing fake reviews in an attempt to boost sales. There have also been cases of people buying up a product and then attempting to inflate its reputation before unloading it at a profit. But it is also possible that somebody, somewhere, has just bought and paid for those reviews – wholesale…

You can find the story on the BBC website if you want to, but the basic idea is that the consumer group that publishes the “Which?” magazine – somewhat like Consumer Reports in the US – went looking for firms offering fake product reviews, and found some that hire large numbers of free-lancers to generate unique reviews of the product. Unlike random reviews generated by expert systems, or bots, or those created by cutting and pasting pre-written passages repeatedly, reviews of this type are almost impossible to distinguish from the real thing – precisely because they are written by real users, without a script to follow. What makes these fake reviews so problematic, though, is that they are available in large numbers at a discount…

Consider, for example, one offer that the folks at “Which?” turned up, with a bulk order of 1,000 fake reviews for just £8,000 (about $11,400 USD as of this writing). That might be beyond the means of a small start-up company, but it’s cheaper than most television ads cost to make, and competitive with what having your ad run on a local television station. Moreover, the fake reviews can remain up indefinitely, while a broadcast channel or streaming service will charge you for every time you ad is viewed. If your fake reviews are believable, they could go on generating new sales for years into the future, and even if nobody actually reads them, the positive impact of a thousand 5-out-of-5 reviews will dramatically improve your aggregate product rating. Best of all, it will be almost impossible to sue you for false advertising or prosecute you for fraud…

Now, I will admit that I have no idea how many people out there still believe everything they read on the Internet – although, if the events of the last year are any indicator, there do appear to be a lot of them. And I suppose that it could be argued that if the worst thing that ever happens to you in e-commerce is that the combination floor polish, water seal, data-recovery, mildew-killer, antiseptic, and snack food product that you bought because of all of the glowing reviews turns out to be useless in any of those functions, you are still a very fortunate person. Just remember that no matter how legitimate someone’s user reviews look, there is somebody out there who is offering to get them for you wholesale – and plan accordingly…

Pull the Other One

There has been a lot of uproar over the last week over some of the current Administration’s more fantastical anti-immigrant policies in the Southwestern United States, with the Federal government going so far as to dispute whether people born in this country were actually born in this country, revoking passports from U.S. citizens without trial or evidence of wrong-doing, and demanding obscure documents – some of which have never been required to obtain any government license or permission before – in order to prove the bearer is actually a citizen. There are even cases where people born in this country have been rounded up and sent to deportation centers, again without benefit of a hearing. It’s difficult to see what, if anything, our current “Leadership” (and I use that term loosely) expects to gain from these activities. What, exactly, a bank would gain from copying them is anybody’s guess…

Regrettably, it would appear that this is exactly what Bank of American has been doing over the last year, however. You can pick up the original story from the Sacramento Bee website, or take a look at the American Banker magazine article about the backlash if you’d like to. The really bizarre aspect of these actions, at least from where I’m sitting, is that the Bank has been claiming that there have been no changes to any of its policies regarding consumer accounts, and they have been requiring exactly the same documentation for decades now. That is, the claims are bizarre because some of the affected customers have been doing business with B of A for decades, and there has never been any problem with their accounts until now…

We should probably note that there is no legal requirement that you must be a U.S. citizen to open or maintain a bank account in this country. You could understand why the bank might be having problems with someone who was using one of their accounts to commit a crime, or even using the funds in one of their accounts to finance criminal activities, but the only “crime” being alleged here is that the account holders may not be U.S. citizens. Moreover, given that banks make most of their money through commercial loans, in which they are using their depositors’ funds to earn interest from other parties, any action that annoys and offends people enough to make them close their accounts and change banks would make no financial sense even if those people were committing a crime…

I don’t believe that Bank of America has done anything quite as spectacularly stupid in recent years as, say, United Airlines having a passenger violently dragged off of an airplane because they had decided to give the seat he was already sitting in to a deadheading crew member, or Wells Fargo opening millions of fraudulent customer accounts. But stunts like trying to foreclose on people who never had a mortgage with them in the first place, ignoring court orders to compensate people for idiotic illegal foreclosures, and playing fast and loose with Federal fair lending laws have not given B of A the best public reputation. In fact, the only thing I can think of off the top of my head that would be worse would be implementing a blatantly racist and apparently opportunistic policy that wouldn’t net them any additional money even if it was successful…

There’s a great tradition in this country known as “voting with one’s feet,” where people will stop doing business with a company that they feel is behaving in a way so stupid, greedy, bigoted, and fraudulent that it isn’t safe to maintain that business relationship – or just maintaining business practices that annoy them more than changing banks would. Bank of America may believe that they are “too big to fail,” but considering what happened the last time someone started implementing criminal business practices based on that belief, now might be a good time to sell off any stock you have in the company – and move your accounts to another financial institution, before this one goes under or just freezes your funds…

Too Easy

I’ve made a few snarky comments in this space about Gwyenth Paltrow’s “lifestyle” brand company “GOOP” – it’s hard not to, actually. When you can find online ads for stickers that are purported to enhance some aspect of your health despite having the exact medicinal properties of postage stamps, it’s really hard not to wax sarcastic about any company that would attempt to sell such a product, or about consumers who would shell out money for that product. It gets even sillier when you can find other electronic snake-oil salespersons selling almost exactly the same products but offering entirely different explanations about how they supposedly work. But despite the commonly-held belief that the people behind the “GOOP” brand are delusional, it appears there may be an even simpler explanation…

An article this week on the AV Club site reports that not only does the company make no particular effort to check or support any of the health or wellness claims made about its products, it has actively avoided any efforts to let anyone else check them. The Goop magazine was originally going to be a collaboration with Conde Nast, but the kind of unsubstantiated question and answer babbling they wanted to print did not meet the Conde Nast print standards. Goop wound up producing their own “magazine” and forgoing the boost that they could have realized by working with an established publisher just because they didn’t want anyone else to fact-check their claims either…

Now, if the Goop enterprise was just an extended, online version of the Gwyenth Paltrow Fan Club, I don’t suppose anyone would have noticed, or cared if they did. There’s a tradition going back nearly a century at this point of celebrities of various types offering their fans “lifestyle” information about lives that they (the celebrities) may or may not actually live, along with pictures, newsletters, or whatever helps to increase their popularity. If Paltrow wanted to tell her fans that she wears bits of paper with adhesive backing stuck to her skin for the health benefits they supposedly offer, that wouldn’t have any more impact on anyone else’s health than, say, bizarre and otherworldly claims about living on absurdly tiny amounts of food money each month. Unfortunately, that isn’t the case…

I could go on for hundreds of additional words here – and in the past I have – about the ethics or morals of selling worthless, high-priced crap to people who should know better, or about how if making money off of the gullible, credulous, or stupid became illegal our economy would probably collapse. The problem is, at this point in American history, it’s just too easy to do that. Like it or not, we are living in a society where the President of the United States is going on national television and telling you that the things you are seeing and hearing aren’t real, and the nasty anti-intellectual streak in our society is getting out of hand…

The real take-away from this story, and the dozens of others like it that we’ve been seeing lately, is that just as A-list celebrities can afford personal trainers, wardrobe consultants, nutritionists, publicists, and agents, they can also afford to stick their heads in the sand and just ignore fact-checking activities that might mean actually having to think about the truth (or lack thereof) in what they are saying – but the rest of us can’t. We’ve reached the point where you can either do your own due diligence, check all of the things people tell you are facts, or accept the risks involved with spending hundreds of dollars on “health stickers” and looking like an idiot…

The Ethics of Expectations Revisited

In my July 2014 post “The Ethics of Expectations” I was writing about the rash of people complaining about, and ultimately suing over, for-profit programs in the culinary arts that ended up costing them tens of thousands of dollars to take, but would only qualify them for $8 to $10 per hour starting jobs. At the time I wasn’t really aware of for-profit schools offering law degrees; it’s not a part of the field to which I pay a lot of attention, and there are already a huge number of law programs available through traditional institutions anyway. Last week’s article about the fallout from the Charlotte School of Law fiasco (and my post on the subject) seem to have re-opened the issue, and I thought a follow-up might be in order…

There is a common perception in some of the States, particularly those with a particularly difficult Bar exam, that provided you can pass the Bar no one will care where you got your law degree. In California, for example, where fewer than half of the people who sit for the exam each year will pass it (and stories about people taking five or six tries to pass are common), it’s difficult to imagine that anyone who did pass would have trouble finding work. Maybe it won’t be the most glamourous (or high-paying) job, but surely there will be something you can do with your new credentials. Unfortunately, this wasn’t true even before the market became glutted with lawyers in the 1990s, and it is even less so now…

Despite the old joke about the person who graduates last in his or her class from medical school still being called “Doctor,” unless you plan to hang out a single and go into practice by yourself the school from which you received your degree will still matter. In a field where there will generally be more applicants than available jobs, such as in legal practice, you will very rapidly encounter situations where a managing partner has a choice between multiple candidates with identical credentials except for the quality of the school that conferred their degrees. At that point priority will probably go to the candidate from the best school, or at least from one that does not have a “horrible” reputation…

At that point, we have to question whether allowing anyone who wants to enter your law program, regardless of their odds of passing the Bar or getting a job afterwards, is any less fraudulent than promising people that they can become a celebrity chef with nothing more than a few months of school and a significant amount of debt. I’m not going to address the shenanigans the Charlotte School of Law (and others) have been pulling with fake scholarships and gaming the student loan system, because that absolutely is fraud, but the question of how bad a student can be before you have an ethical responsibility to tell them to do something else with their money and ambitions is still valid…

The problem becomes even murkier because there really are people who don’t do well on standardized exams like the LSAT, or even in regular classes, who really can excel when actually doing the job. When we include possibilities such as regulatory agencies and corporate positions that require law degrees but do not actually involve legal practice, things become even more convoluted, and when you consider that there are also people who have completed fully accredited law school programs and passed their state Bar who are still failures in practice, the question becomes hard to resolve even in the abstract. So I have to ask:

Do we, as business people or as teachers, have an ethical responsibility to exclude students from educational programs in which we sincerely believe they have no realistic chance of achieving any eventual success? Granted that as decent, caring human beings we don’t want to strand anyone with a huge debt that they can’t repay and no viable job opportunities, do we have any right to tell someone that their commitment and hard work will get them nowhere? Does our answer change if our own employment (and survival) depend on keeping students in school, or at least not driving away paying customers? I’m not suggesting that we have an obligation to keep anyone in a program that we know is beyond their abilities just so that our employers can continue to collect their tuition, but things are rarely that cut-and-dried in the classroom. How do we decide when it would be kinder to cut someone loose than string them along, and where do we draw the line?

It’s worth thinking about…

Are You Kidding Me?

Back in 2015 I brought you the story of what came out after the Ashley Madison data breach – a relatively small event, compared with the outrages at Target or Equifax, to take only two examples. What was really amazing about the Ashley Madison story wasn’t the data breach itself, but rather the revelation that nearly all of the active accounts on the site were owned by men, and many of the allegedly “female” members were members of the Ashley Madison staff, ‘bots being used to simulate active accounts, scammers pretending to be women, or (in a few cases) all of the above. At the time, I remarked that this was the perfect crime, in the sense that the men who had been effectively defrauded by the site would be extremely unlikely to complain to the authorities, since that would involve admitting to looking for an extramarital affair (if not actually having one)…

I doubted this would be the end of the company, or the story, however. The “Post-Truth” era was, mercifully, still years in the future, but it was already hard to imagine that anyone who was really desperate enough for illicit sex to risk offering their credit card information to an online company for that purpose would be deterred by the fact that somewhere between 70% and 95% of the “women” on the site didn’t really exist. While the data breach might scare off some of the saner or less desperate prospects, thus interfering with future sales, the company’s losses in the affair were only a $1.6 million fine and possibly the loss of a handful of men whose partners genuinely didn’t realize they were looking for something on the side. That would, however, still level tens of millions, if not hundreds of millions, of sleazy men who are bad at math thinking that despite the 35-to-one odds of actually finding a real women on Ashley Madison, they might be the one to get lucky…

This week brought a new wrinkle in the case, however. The USA Today site published a story about a report issued by Ashley Madison, listing the cities in which the largest number of new accounts have been started over the last year. The first thing that caught my eye was the lack of raw data; there are twenty cities listed in the linked article, but no indication of what size the client base in each of them might be. Does this mean that Dallas has 10,000 more cheaters than Chicago, or only 10? Or are there really only a dozen or so active accounts in each one, and is the company trying to convince people in those cities that someone will/might actually be available to sleep with them if they sign up? But then it gets worse…

The article goes on to say that Ashley Madison now has over 54 million accounts, up from the 36 million or so they had three years ago, and that the accounting firm of Ernst & Young now reviews their accounts list to verify that all of the accounts are for real. This isn’t impossible, of course; E&Y does perform that kind of audit, and some of their customers do have account lists of that size or even larger. The problem here is, even if they can verify that the accounts are active, how can they verify the existence of 54 million distinct customers – or, indeed, any particular number of customers – without completely violating the privacy of all of those people? And, one assumes, whatever confidentiality agreement Ashley Madison has with its customers…

More to the point, perhaps, how does any auditor, no matter how discrete, manage to determine how many people are actually using their Ashley Madison accounts, even if those people really do exist and are actually paying for their accounts? Assuming, of course, that anyone out there is going to believe a word the company says after the revelations of 2015. It would be nice to believe that there aren’t 54 million people out there who are capable of affording the cost of their Ashley Madison accounts and computer-literate enough to sign up for one who are also gullible enough to believe that this time the company is telling the whole truth – in effect, that the company is once again lying through its teeth…

But then I look at some of the other things that people in this country have been claiming to believe this week, and I have to wonder…

Once Bitten

I’ve been avoiding the whole cryptocurrency issue for a while now, partly because I think there’s already enough chatter about it flying around, and partly because I’ll admit I don’t completely understand the stuff. The basic idea is simple enough – you buy something in the hope that its perceived value will rise and you will be able to resell the thing for more than what you paid for it. It’s the principle behind the (mostly apocryphal) story of the Dutch Tulip Bulb crisis, or the Beany Baby fiasco in our own time. As long as the price of whatever it is keeps rising it will remain possible for each dealer in turn to resell the things at progressively higher prices, regardless of what actual value (if any) the thing might have. The problem is, these conditions won’t continue forever…

If cryptocurrencies have any intrinsic value, no one has been able to explain to me what it might be so far, not that it really matters in cases like these. Certainly, the Beany Babies were never worth more than a few cents worth of fabric and filling, plus the labor to design them, name them, make them, ship them, inventory them, and sell them. Every time one of these artificial markets finally pops – generally because somebody finally asks “Why are we paying $10,000 for a stuffed animal worth $9.99 retail?” – the people who end up losing the most were the last ones to buy whatever commodities were involved. It is understandable that anyone with items still in their possession would want to keep the market going, at least until they could unload whatever they had left; where the situation becomes completely revolting is when someone is manipulating the market to drive the spot price higher…

Unfortunately, it seems as though that is exactly what happened during 2017’s Bitcoin boom. According to a CNBC story posted yesterday, Dr. John Griffin at the University of Texas investigated the rise of Bitcoin and discovered that some party or parties (currently unidentified) were using other cryptocurrencies to stabilize the Bitcoin market during the boom, in much the same way that fraudsters have artificially inflated stock prices by placing artificial buy orders – the classic “pump and dump” scheme. The difference in this case is that since cryptocurrencies are not connected to any real-world property, there’s no way to prove that they are over-valued the way there would be with a stock issue – and since they aren’t regulated by anybody, there is no authority you could complain to if somebody was manipulating the market…

The CNBC article goes on to say that the price of Bitcoin has been plummeting over the last few months, losing around three-quarters of the value it had at the peak – which means that someone who bought a Bitcoin at $20,000 has now lost close to $14,000 on the deal, assuming they can sell it now. Of course, the more people dump these things onto the market the more the price will drop, and the cycle will continue. We’ve all seen cases of stocks dropping from hundreds of dollars per share to a few cents per share, and people who held onto them for just a few hours too long and lost everything; this is the same idea, except that in this case there is no SEC you can complain to. Or, more accurately, there is – but they can’t do anything about it…

The lack of regulation and oversight was one of the original selling points behind cryptocurrencies – the government can’t tell you what to do with them, the Federal Reserve can’t interfere with their interest rates, and there were no issues with national economies imploding or currency conversion rates. But even if cryptocurrencies themselves really are foolproof and incorruptible (which still remains to be seen), the market for them would of necessity respond to the laws of supply and demand, just like any other free market – and that means it is susceptible to manipulation, just like any other commodity, equity, debt or currency…

I’m not saying that any of the people you may know who made money on Bitcoin during its rise and fall are crooks, even if they made very large amounts of money, and even if they aren’t able to explain to you how the whole thing works or how they did it. I’m just pointing out that, unless evidence to the contrary surfaces, it would appear that this latest form of get-rich-quick scheme has turned out the way most of them do…

Something's Fishy

I probably shouldn’t have found the story out of New York regarding a seafood company’s claims of using “local” fish failing to pass the “sniff test” as amusing as I did. After all, mislabeling any food product is a crime, and misrepresenting the source of seafood products is a Federal offense. That doesn’t even consider the fact that telling people you purchase your fish from “traditional fishing communities” in their area, when you actually outsource the fishing to providers on the other side of the world, is considered fraud in most jurisdictions in the United States. It’s just that in this case, in addition to the usual schadenfreude of someone using purple prose to describe something they don’t (and can’t) actually supply, there’s something funny about a company insisting that they have “locally” sourced species of fish that are not found within 3,000 miles of where you live…

You can pick up the New York Post story if you’d like to see more of the company’s rather florid marketing language, but the basic idea is that a company calling itself “Sea to Table” has been claiming to have caught fish that are native to the Central Pacific and Indian Oceans in Long Island Sound, to have harvested Red Abalone (which have been a protected species for decades now) on the wrong coast of North America, and to have just had boats arrive with a new catch when satellite imagery demonstrates that they didn’t have anybody at sea that day. To me the question isn’t even whether the “farm to table” movement has finally jumped the shark (so to speak) as how it took them this long to get caught…

Now, I want to emphasize that this story isn’t about an atrocity; no one is claiming that the company sold anything that was past its sell-by date or otherwise unsafe to eat. I’m also not saying that there is anything with importing fish from where the species your customers want to purchase actually live, or that there is anything wrong with farm-raised shellfish or crustaceans. I do believe that basing your business model on the concept of offering a higher-quality product than you can actually provide is not a particularly smart or ethical idea, and doing so in flowery language playing up what good and responsible people you are is just asking for trouble…

I’m also not willing to state that anyone who cooks, processes, or re-sells seafood should also be required to hold credentials as an ichthyologist; if I’m paying someone to make my dinner I’m really more concerned with the dish tasting good (and being safe to eat, of course) than I am in knowing the exact species names of the fishes involved. And frankly, I think blaming the company for the working conditions and pay scales of the companies from whom they have been buying the outsourced fish, as the Post article also does, isn’t really fair. A small company operating in Brooklyn does not have the resources of a firm like Nike or Apple, and can’t very well travel the world assuring that both the fish and the fishermen involved with their products are being ethically treated. Although, again, it would probably be better not to brag about how much you love and respect fishing communities and fishermen, just in case…

Enough Already!

If I ever decide to relaunch my blog about non-business topics that I still feel are deplorable enough to reflect a possible end of our civilization as we know it, which I called “Racing to the Bottom,” I think I could do an entire series on the state of education in American, and in particular about how the for-profit schools really aren’t helping. To be fair, I could also do posts about the way the nasty anti-intellectual streak that has be present in the United States since the beginning is eroding both the quality of education and the importance placed on improving it, on grade inflation, on entitlement and cheating, and on the ways in which appointing someone Secretary of Education on the basis of how much money they contribute to your party’s candidate is almost as idiotic as confirming someone as Secretary of Education for the same reason. But even in the present context, I still think the situation at the Charlotte School of Law is unusually loathsome…

You can pick up the Washington Post article if you want to, but when you start reading into the details of the case things just get worse and worse. The Charlotte School of Law, despite the name, is a private institution operated by a for-profit company that chose to open a facility in Charlotte, NC, mostly because it was the largest city in the US that did not have a functional law school. They then started admitting students with no realistic chance of passing law school classes, even less chance of passing the Bar exam, and no possibly way of paying for the program except for massive student loans – although we should probably acknowledge that some real law schools have also been guilty of that last point…

Some of the tactic described in the Post article are unusually disgusting even in the for-profit college industry, such as offering students “scholarships” that they would only get to keep if they maintained a grade point average higher than they would be allowed to get on the curve. The Charlotte School of Law also had some more common frauds in its arsenal, such as hiring unqualified instructors, providing substandard (or completely useless) course content, and spending more money paying administrative salaries and management fees (not to mention dividends for their ownership body) than they did on instruction. All of which was made that much worse by the nature of their curriculum – and the requirements needed to practice law…

If a for-profit school offers you substandard training in the Humanities, or even in some of the less-regulated skilled trades, there isn’t going to be much impact. As I noted in a previous post some years ago, line cooks aren’t going to make executive chef money to start regardless of what school they attended, and not really understanding George Elliot’s Middlemarch might not even be a problem to you if you did pursue a career in English Literature. Unfortunately, in most jurisdictions in the US, if you want to practice law you are going to have to pass the Bar exam for that state (or district), and if you can’t it won’t matter where you got your law degree. Even worse, in some ways, is that even if you do pass the Bar, getting a job when your law degree is from a school with a horrible reputation may not be possible anyway…

What really takes the prize in the Charlotte School of Law story, in my opinion, is that once their academic failure rate and the failure rate their graduates experienced in trying to pass the Bar came out, and their accrediting body began investigating the school, the leadership made no effort to warn their students of the possibility that their program might lose its accreditation, the Department of Education might cancel their student loans, and that they might all be out on the street with tens (or hundreds) of thousands of dollars in student loan debt and no law degrees. Which is, of course, exactly what happened to them. The school’s leadership claims that they were under no legal obligation to warn the students until they actually lost their accreditation, and the Department of Education moves were beyond their control anyway – all of which is true, of course, but doesn’t make those lies of omission any less despicable…

I could make some comments about how the students attending the Charlotte School of Law should have known better, and maybe I will in a later post. Certainly, if being told that you have what it takes to be a lawyer, despite not having any existing academic credentials and not being able to pass the LSAT, doesn’t send up any red flags you are definitely far too trusting. If people telling you that you can complete a law degree program provided that you give them very large amounts of money and stop worrying about ever paying it back doesn’t clue you in, you’re probably not paranoid enough to be a lawyer in the first place. But just because someone is naïve, trusting, or gullible is no reason for the rest of us to allow something like this to happen to them…

This is Free Speech?

I’ll be the first to admit that I don’t like Yelp very much, as you may have noticed from previous posts in this space about the company. It’s not that there’s anything wrong with providing an online location for people to record their frustrations about various companies with whom they have done business, but the company’s occasional attempts to strong-arm small business owners for money (in order to avoid negative reviews) annoy me, and the fact that they have become a haven for trolls, enemies, hysterics, and blackmailers has eroded both my respect for the company and my patience with the people who post there. But as outrageous as I find fake reviews made for the purpose of damaging persons or organizations, whether for extortion or just for the fun of random destruction, I have to admit that suing people over truthful reviews because you don’t like what was said may be even worse…

Consider, if you will, a case appearing in the New York Post this week about a woman who had an experience with a doctor’s practice that was so bad she felt compelled to leave negative reviews on Yelp and two more specialized review sites telling other potential patients to steer clear. No one on either side has claimed that she did so in order to extort money (or anything else) from the doctor or the practice, but they are claiming that the reviews are a baseless attempt to make the doctor and/or the practice look bad. In suing the woman who left the reviews, the plaintiff’s attorneys have stated that the doctor is a highly qualified practitioner with the best possible training and therefore couldn’t possibly have committed the annoying and possibly fraudulent acts the defendant’s reviews describe…

Now, we should probably acknowledge that neither you nor I were present during these events, so we couldn’t really draw any conclusions about the case even if we both had law degrees. It is entirely possible that, as the doctor’s attorneys are claiming, there is no truth to these allegations, and the reviews were made entirely by the defendant out of personal animus. It is equally possible, however, that all of the things in the reviews are accurate, and the plaintiff in this case is using his greater financial resources to attempt to silence a disgruntled former patient. What is not in dispute by either party is that the defendant has already had to scrape together in excess of $20,000 in legal fees to defend herself against a suit that has not even gone to court yet…

If it turns out that the defendant was telling the truth all along it is possible that the court will rule in her favor, but that won’t be much comfort if she ends up losing the start-up business she has been developing and going bankrupt trying to pay her legal fees. On the other hand, if the claims made in the reviews were baseless, the doctor is entirely within his rights to sue to recover the damages those reviews have cost his business, although I am skeptical as to whether those are really in the million-dollar range. What seems obvious to me is that, regardless of the merits of this case, there is almost certainly a non-zero percentage of the negative reviews on Yelp that do have a factual basis – and in such cases, even if the person leaving the negative reviews has hard evidence that supports their comments, there is a real chance of their life being ruined by a punitive lawsuit…

One could also argue that I’m being unfair in blaming the people at Yelp for any of this, I suppose. The truth is that in an increasingly interconnected age, everyone needs to be more careful about what they say in public, and that includes things they post on a public website. Blaming Yelp for cases like this one could be compared to blaming the owners of a bar for the damage done in a fight that breaks out there. But I would also point out that there is a reason why bars have bouncers, why bartenders are allowed to cut belligerent drunks off before they get too obstreperous, why troublemakers can be (politely) asked to leave before anyone gets hurt…

And there is also a reason why you should be careful who you pick a fight with in a bar, no matter how good an idea it might have seemed at the time…

Lonely Hearts Clubs

I was a bit surprised to read a Gizmodo article earlier this week about the appearance of a specialized dating cite launched for supporters of our current President, and the launch of a competing cite (for people who oppose the current President) to compete with it. It’s not so much that people might want to seek out potential dating partners who share their political and social positions, or even that the political climate in the United States has gotten to be so toxic that anything with the President’s name on it will generate an immediate opposition and/or parody. It’s more the fact that there are apparently people out there in cyberspace who are creating specialized niche dating sites and expecting to make money in the process…

You can pick up the original Gizmodo article here if you don’t believe me, and I would completely understand if you didn’t. It turns out that there are dozens, or perhaps thousands, of sites specifically oriented to promote connections between people of all descriptions, including Trump voters, anti-Trump voters, conservatives, liberals, centrists, tall people, short people, runners, swimmers, bikers, people who support gun ownership, people who support gun control, people with allergies, people with bad haircuts, people who give haircuts but aren’t very good at it, and a bewildering array of business owners, managers, supervisors, hourly workers and academics – all of which apparently utilize the same database…

Researching the article, the author apparently discovered dozens of stolen profile pictures, and a few outright stolen identities, some of which appear on every niche dating site they had time to audit. A little digging turned up a company that will sell you all of the back-end code and data you would need to start your own dating site, including a massive (and apparently completely compromised) database of members. All you have to do is customize the front page to suit the demographic you are attempting to attract, promote your new site across the Internet, and split the $25 membership fees you will be collecting from each new member 50/50 with the company that is providing you with the code…

This isn’t a new idea, of course. The folks at Gizmodo compare it to WordPress, but to me it recalled the instant web pages on Geo Cities twenty years ago. There’s a supposedly “nominal” start-up fee (they won’t tell you how much it is unless you sign up for it first), plus optional charges to help you design your part of the state, develop a concept, put together a logo, and so on. You then get to keep between 42% and 50% of every subscription and renewal you sell. What I found the most amazing, though, was the answer on their FAQ about referrals. If you refer a “quality partner” to the provider, you will then get 10% of their commissions for life. Whether or not you get 10% of their 10% of the people they recruit is unclear, although it is certainly implied that you do. If that’s true, we’ve definitely heard this story before…

Why exactly no one (not even the Gizmodo reporter who blew the lid off this story) seems to have recognized this as an online adaptation of the classic multi-level marketing (MLM) scheme is beyond me. Of course, why anyone in 2018 would still want to pay money to be involved in anything as sketchy as an MLM is also beyond me, but that’s really not the point. Even if the idea of making money off a dating site in a world that already has the Tinder, OkCupid , and Match sites, plus dozens of social media channels that don’t cost anything to use doesn’t make you want to call shenanigans on the whole concept, you’d still expect anyone who encounters it to ask if anyone has ever made money on this or any other MLM scheme…

I’m not going to post a link to the actual dating site provider because I don’t want to encourage this sort of crap; I’m not going to mention them by name, either, because I don’t really enjoy being sued by people who make their living by taking money from the greedy, the gullible, and the occasional credulous idiot. I will just suggest that if you have your heart set on diving into some get-rich-quick scheme there are better ways to go about that…

Words Fail Me, Again

There are some stories you encounter on the Internet that will make you wonder if somebody is trolling you, or possibly whoever wrote the article. There are others that will make you want to trace back the source of the information and verify that the article isn’t just made-up misinformation. Earlier today I was trying to authenticate the claim that former Vice President Dick Cheney had joined filmmaker Michael Moore and the Pope in opposing the Muslim immigration ban (which turned out to be true, by the way) when I stumbled onto a notice about a California-based homeopathic company that was being investigated by the FDA for including an unsafe (possibly toxic) level of deadly nightshade in a teething tablet product. Unable to believe my eyes, I went looking for the origin of the story…

Unfortunately, it would appear that this one is a true story. You can find the press release on the FDA website if you don’t believe me, and I can’t say I would blame you if you didn’t. The idea that a company could willfully endanger the lives of teething infants by using an ingredient whose effects the Food and Drug Administration calls “unpredictable” in children under two years old, and has denounced as an unacceptable risk is almost literally unbelievable – unless you are already familiar with homeopathic remedies. Most of these products involve trace amounts (they’re sometimes called “memories”) of various substances, which are supposed to work by triggering the body’s defenses without actually containing enough of the toxin to be dangerous. At least, that’s the idea…

As I’m sure I’ve mentioned before, I have no training in either biology or chemistry, but the people who do research these subjects, including the top people at the Food and Drug Administration, have been almost unanimous in debunking homeopathic products as “pseudoscience” – later-day descendants of the “snake oil” products of the Wild West era. An MD of my acquaintance once described a homeopathic iron supplement as containing roughly the same amount of iron you would ingest if you drank tap water in a building with iron pipes – which is to say, less than you would get from food that was cooked in an iron skillet. Fortunately, these miniscule concentrations usually keep homeopathic remedies from having any harmful effects on the user, since even if you are taking a product made with belladonna (deadly nightshade) there won’t be enough of it in an entire package to actually harm you. Unless, of course, you are under the age of two, with organs and systems that are still developing…

Now, we should probably acknowledge that, for the most part, homeopathic products aren’t illegal. As long as everything in the package is clearly labeled, and the appropriate disclaimers about the contents not being approved for treatment of anything by the FDA are in place, there’s generally no law against ingesting a “mineral supplement” that has less of that specific mineral in it than is normally found in the air you breathe. The problem in this case is that the amounts of belladonna found in the product are not consistent, and neither is effect of this ingredient on young children. The FDA is announcing that at this time they are not aware of any proven health benefit offered by these products, but there have been cases of serious negative reactions, possibly including death, among users in the affected age groups…

I’m not sure how this story will eventually shake out. At the moment, the FDA doesn’t even have enough evidence of wrongdoing to force the manufacturing company to recall the product, and so far the company has not agreed to a voluntary recall. Given the current administration in Washington, it does not seem likely that we will be seeing any more restrictions on highly lucrative products that may possibly have extremely bad side effects, either. For the moment, the best solution I can suggest is to research all unsupported product claims, consult with actual biomedical scientists, and don’t believe everything you read about the magical curative properties of very tiny amounts of deadly poison…

Five Hundred Channels, but Nothing’s On

I was scrolling through the program guide on our television recently, looking for something that I’d actually be interested in wasting a few minutes on until it was time for the baseball game, when I noticed an infomercial channel with an unusual program offering listed on it. There, on the “Mall” channel, just between the Night Court re-runs and the Secrets to a Better Golf Game was the interrogatory tittle: “Are You Pooping Enough?” Now, I’ve been watching cable television for a long time, and at odd times of the night on obscure channels I’ve seen the so-called “Sponsored Programming” selling everything from the legendary Bamboo Steamer to what is essentially hair-colored spray-on Christmas tree flocking to cover your bald spot. But this was the first time I’ve ever seen a group of otherwise functioning adults asking the world about a possible deficiency in their bowel movements…

Intrigued by this strange offering, I wandered out onto the Internet and ran a couple of searches looking for other oddball infomercial products. Within moments, however, I realized that the problem wasn’t going to be finding enough information here to write a 600-word blog post; the problem was going to be which of the completely insane offerings available to include. Because lurking out there among the perfectly normal “as-seen-on-TV” products were a few items so bizarre that even after finding their company’s home page I’m still not sure if these are real offerings or some elaborate online hoax…

Consider, for example, the Potty Putter ™ - not a golf club that you can use as a chamber pot (that’s the UroClub, which is from a different infomercial altogether), but rather a practice putting green and putter designed to use while sitting on the toilet. The question of why you couldn’t make such a thing yourself out of a dollar’s worth of outdoor carpeting pales before the question of why on Earth you would want one in the first place. Or if that’s not strange enough, how about the Better Marriage Blanket – basically a cotton blanket on one side and an activated-charcoal filter on the other side, which the inventor claims will eliminate the effects of flatulence in the bedroom…

Now, we should probably acknowledge right at the top that not all late-night infomercial products are sleazy or fraudulent. The oft-parodied “Ginsu” knives work exactly as advertised, and the ones we can still find around the house are as functional as ever after three decades or so. I also have it on good authority that the bamboo steamers actually worked like a charm, and the handy device that can scramble an egg while it’s still inside its shell operates perfectly, assuming that you can think of a use for one in the first place. And while the various dial-a-psychic services may be complete nonsense, there’s a limit to both their humor potential and how much harm they can actually do to the unwary. Gastrointestinal Quackery, on the other hand, has its own page on the Quackwatch website…

“Why does he tell us this?” I hear some of you asking. After all, infomercials and “sponsored programs” were a fact of life long before the dawn of the Internet age, and it is far easier to debunk the value of any of these products today than it has ever been before. The thing is, people are just as likely to use Internet research to confirm a mistaken belief as they are to debunk one; the need to do your homework and remain skeptical of any information source is getting larger, not smaller, as we plummet further and further into the new century. And with well over 500 cable channels already, and more coming all the time, not to mention an almost unlimited volume of snake oil ™ vendors on line, I don’t see the situation getting better any time soon…

I May Not Know Much About Art…

After our last post I was mourning the superseding of our beloved Orbital Banana – in a healthy, “The King is dead, long live the King!” kind of way – when I came across a story about an “art” project that is, in its own way, even more outrageous. It’s not publicly funded in the usual sense, so it doesn’t really compare to the Orbital Banana, but in a very real sense it was crowdsourced – that sense being that the “artist” in question is using images and likenesses belonging to dozens of other people without bothering to pay for any of them…

If you missed it the first time around you can find the Washington Post story about it here. What I think is the really outrageous part of the whole story isn’t so much the theoretical copyright violations – although the author tells us that previous attempts to stop similar projects through the courts have failed – as it is the fact that people are apparently buying enlarged photos of Instagram pictures harvested on line. And even that pales compared to the fact that somebody is apparently willing to pay $90,000 USD apiece for photographs of images available online with just enough alteration to be considered “transformative” rather than stolen…

The legal defense in this case is apparently that if you take a picture and alter it in some way (presumably in some way that makes it artistic, if it wasn’t already) that is constitutes a new work and is therefore not a copyright violation of the original. That might be difficult to argue in this case, since the only changes the “artist” has made is to remove the original captions and then add some apparently random comments of his own. But if the people whose pictures he’s using want him to desist they will need to take legal action of their own, and that’s not going to be easy considering that the artist has just made $90,000 a pop selling large photographic prints of other people’s photos (you could hire a lot of legal talent with only a few of those sales), and also considering that Instagram itself will not help them…

When asked about this project, and its legality, Instagram basically announced that they will help you if someone is displaying pictures stolen from your account on the Instagram site itself, but other than that you’re on your own. It’s difficult to blame the company for that, either, since they are neither a law-enforcement agency nor a court; short of creating a large legal department of their own and then providing legal services to their users there isn’t much the company could do about events that happen outside of its domain, even if it wanted to. But it does mean that anyone whose pictures were stolen who decides to take action is going to have to go it alone against a guy who routinely makes millions of dollars selling “transformed” images for which he does not pay…

Now, I don’t need really to tell you that anything you let loose on the Internet is probably going to be stolen, or at least used without permission, at some point in the future – or that there is no outer limit to how long things might remain kicking around somewhere in cyberspace. For years it has been a truism that you shouldn’t post anything online that you wouldn’t want printed on the front page of every newspaper in the world that is still printing, and I’ve brought you any number of stories about people who suffered various misfortunes because they forgot that. There was even a new case this week, when a Spirit Airlines flight attendant posted a picture of herself standing inside the engine pod of an airplane, resulting in yet another career-threating online incident. But this time none of the people being used did anything wrong beyond not having a very esoteric understanding of how copyright laws work…

I’m not sure where all of this is going to end, either. But as someone who creates content and offers to share it with anyone who comes by to take a look, without even monetizing the site with display ads, I’ll admit that I don’t like where this trend is going – or what it could potentially do to the online community…

The Private Sector Catches Up

Some years ago I wrote in this space about what I felt was the ultimate in Public Sector funding nonsense: an art project, funded by the Canada Council for the Arts (the Canadian equivalent of our National Endowment for the Arts), in which a performance artist received a $55,000 grant for explaining his plans to build a giant inflatable yellow banana and place it in orbit of the Earth, but not actually doing anything. According to the story, upon receiving the grant the artist realized that it would actually take at least ten times more funding to actually complete the project, and elected not to proceed until he was able to raise the additional funds. But, due to the nature of the grant program, he was not required to pay back any of the money; hence my contention that he had received five figures worth of money to do absolutely nothing…

At the time I acknowledge that there have always been private sector fiascos that were just as bad, but in terms of sheer flamboyant lunacy, it’s hard to beat paying someone to create an orbital banana that never happens. This, however, was before the era of crowdfunding, and specifically sites like Kickstarter that allow people to solicit all manner of art projects, public performances and product developments that they have no intention of actually doing. Including, apparently, a company that raised over $1 million USD for the creating of a watch that they will never actually make…

You can pick up the original story off of the New York Observer website, but if you’d rather not wade through it what they’re talking about is a company called Central Standard Time, which issued a Kickstarter project requesting $200,000 in January of 2013. It was to be the thinnest wristwatch ever built, and even though it wasn’t a smartwatch product, the Internet when crazy over the idea, eventually raising over $1 million USD for the project. At the time, the company claimed that they had already designed, prototyped and tested the product, and were ready to begin production, needing just the upfront money to start everything in motion. But as things turned out, the product wasn’t ready, there was no production contract in the works, and the watches turned out to cost about three times what the company originally projected…

Originally, the company had promised to ship its first production run in about three months; this lengthened to six months, then to twelve, and then they stopped announcing dates altogether. Finally, over two years after they were supposed to have product in stores (and rewards to the participants of the Kickstarter) the company announced that they were out of funds and would not be able to continue with the production. Normally this would mean that they had to return the money to their backers, but since the company has never actually declared an end to the project – as of this writing they are still “investigating alternatives” – legal action against them isn’t yet possible. Even if you wanted to sue them, there would still be some question of whether the company has anything you could use to recover your funds…

Now, we should probably note that the majority of crowd-funding sources are entirely legitimate, and a surprising number of them have ended up creating wildly successful products and services. Writing on the Forbes site, Goncalo de Vasconcelos notes that crowdfunded companies start out with a large base of potentially fanatical customers (the people who liked the product or concept enough to bankroll the project in the first place) who will often promote the product or service to everyone they know. Whether or not this makes such projects superior to the ones generated by professional venture capital firms is debatable (de Vasconcelos makes his own argument in the article), but it’s hard to deny that the concept can be extremely powerful when it works. Unfortunately, it can be difficult to tell the difference between a can’t-miss project and an embarrassing boondoggle even for the professionals, let alone for a crowd of Internet supporters – and that doesn’t even consider the possibility of outright malfeasance…

For the record, I have no reason to believe that anyone associated with the Central Standard Time company or its Kickstarter project are anything other than well-meaning, naïve and possibly credulous entrepreneurs. I think we can safely assume, however, that there are crowdfunding projects out there in cyberspace that are being run for nefarious purposes – and if there weren’t any before, there almost certainly are now. From where I’m sitting it looks like the private sector has caught up with our beloved Orbital Banana and is currently breaking away…

Some Call It Justice

You may have heard the term “schadenfreude” before – it comes up in popular culture every so often, as in the case of the Avenue Q song by that title – but if you’re not familiar with it, the definition is “pleasure at the misfortune of others.” In this increasingly cynical world we’re seeing more and more cases of it, probably best demonstrated by things like the homeowners who had been wrongfully foreclosed on by Bank of America (they didn’t have a mortgage with B of A or anyone else) getting a court order to seize all of the company property from their local branch. Call it karma, cosmic retribution, or evildoers finally getting their comeuppance, these reports have become seen as feel-good happy-ending stories to lighten up our news. And in the case of the debt collection agency that just got nailed for $83 million in punitive damages it’s hard not to agree…

You can find the original story on the New York Daily News site if you want to, but what it comes down to is an outfit called Portfolio Recovery went after a woman in Kansas City for a debt that they knew was not her own – it was owed by somebody with a similar name. The jury in the case ruled that the company knew perfectly well what it was doing, but figured to make an easy buck off the victim, and decided to slap the firm with these amazing damages for violating the Fair Debt and Collection Practices Act. Apparently, the fact that the company knew it was in the wrong and continued to pursue the fraudulent claim for over a year annoyed members of the jury…

Interestingly, the company’s statement about the case (also available on the Daily News site if you want it) calls the amount outrageous and says that Portfolio Recovery is going to appeal the award based on its size – but does not protest that the company did nothing wrong, as you would probably expect. Apparently, the court case established not only that they actually did the things of which they were accused, but also that they knew the collection attempts were fraudulent and continued with them anyway – which would seem to be an even more spectacular failure than the original ill-advised collections effort…

Now, no one is really saying that a year of the plaintiff’s time was actually worth $83 million, or even that the emotional distress caused by the proceedings is worth whatever portion of the award she gets to keep after paying her legal fees. The jury’s point is clearly that unless the company is slapped down good and hard, with an award of damages that is just too massive to ignore, they will probably do the same things again next time. And I’m sure that everyone involved expects the company to appeal the award and try to spend years or decades tying the whole thing up in court, until the plaintiff either gives up or dies. In this case, however, that’s probably a really bad idea…

From a strategic standpoint, what the company needs to do is settle the case as quickly as possible, and with as little fanfare as possible. It’s not unheard of to have settlement agreements that include all parties involved not speaking about the case ever again, and Portfolio Recovery can probably get such an agreement into the deal if they make a large enough offer. Once they settle the case the whole story will drop out of the news cycle, and the company can quickly audit its books to eliminate any similar cases (ones it knows are bogus) and make good-faith efforts to resolve any similar cases before the next lawsuit comes up…

Because every day this story stays in the headlines it will come to the attention of more people, and eventually one of them is going to decide that he or she can win an identical lawsuit, even if they were not wronged by the company. And if that happens, schadenfreude is going to be the least of their problems…

Predators on Parade

Over the years I have written in this space a number of times on the subject of predatory lending, and the occasional feedback I’ve gotten about it usually ranges from confused to skeptical. People in general are reluctant to believe that a financial company would simply ignore state and Federal banking laws in order to offer loans with unscrupulous terms to the desperate; people in the Internet age find it hard to believe that anyone would accept a loan at four or eight (or 20) times credit card interest when they could almost certainly obtain something better online. Unfortunately, neither of these beliefs is necessarily true – as an article on the Detroit Free Press website last week makes all too clear…

According to the story by Susan Tompor, Michigan’s Attorney General has just announced a settlement following legal action against two out-of-state lenders who had been offering short-term loans at rates ranging from 89% to 169% interest, or between 12 and 24 times the State limit for unlicensed lenders of 7%. The story notes that under such a loan a consumer who borrowed $1,000 for a two year period would end up paying over four times what they borrowed. Even worse, however, was a much shorter (six-month) loan program with an effective APR of over 350% - effectively, paying $1.75 for each dollar you borrowed in addition to repaying the full amount…

It’s not always clear why people agree to loan terms like these. In some cases it really is desperation – the need to pay off some expense that can’t be financed any other way, and for which default (or foreclosure) isn’t an option. In other cases it’s a matter of speculation – the belief that the customer can take the money, buy something, sell it quickly for more money, and pay back the original loan before the interest has a chance to add up. You will see this kind of thing happen any time there’s an investment bubble in play – we saw it in 2005-2008 in the Real Estate Bubble, around the turn of the Century with the Dot-Com Crash, even during the Beany Baby craze in the late 1990s. But the sad truth is that many of these loans result from the fact that most people don’t really understand how finance actually works…

Now, we should probably acknowledge that loans of this type do represent a large risk for the lender. Generally unsecured by anything, and frequently take out by people who lack either the assets or the income that would make it worth taking them to court, a disproportionately large number of these loans will end up in default, and the company will never recover any of the money. Consequently, the interest rate on these loans has to be high enough to make up for the increased risk, or no one would ever offer them in the first place. Unfortunately, that’s also where and why the whole topic moves into the grey area…

If the state imposes a hard limit on the interest that can be charged for unsecured loans (in Michigan that limit is currently 7%) then there is also a hard limit on how risky the individual loans can be. If the lender can only make 7% on its money, and more than 7% of its funds are never repaid at all, it will quickly go out of business. Such a policy will prevent people from being charged 169% interest on a loan, but it will also keep someone with an 8% chance of defaulting from getting a loan. Predatory lending appears in the first place because there are people with a (real or perceived) desperate need for funds who can’t qualify for an ordinary loan – and as long as that need exists, there will always be unscrupulous companies who will be willing to risk state and Federal sanctions to make a fast buck…

Unless we can manage to educate the public about how finance works, or at least about how consumer loans do, this situation is probably going to continue. Alternately, I suppose, we could try teaching people about saving money, living on a budget, and not blowing money on get-rich-quick schemes or inappropriate purchases. In either case, however, I would not recommend holding your breath…

Do Not Meddle in the Affairs of Amazon…

I have written in this space before on a number of occasions about the issue of fake online reviews and the potential for abuse, including outright extortion, that they entail. The common factors in nearly all of these cases has been that it is generally quite difficult to combat fake reviews, either positive or negative, because it is difficult to catch the people doing it, and also because even if the offenders can be identified, most small businesses and solo practitioners do not have the money available to pursue legal action. Of course, we should probably note that the majority of the people doing this have the good sense not to call attention to themselves and to stay away from major businesses. After all, if they attempted to post fake reviews on a site belonging to a company with wealth and resources neither of those factors would protect them. A company like Amazon, for example…

According to a story in the SeattleTimes, later picked up by the BBC News page, Amazon is bringing suit against three different companies that had been selling a service that provides positive reviews on Amazon for the client’s products. Initially most of these companies were attempting to claim that nothing they did was wrong, let alone illegal, but I have trouble believing that this will go over in court well, either, given that the companies are called things like “buyamazonreviews.com.” Neither will the fact that the various review providers have been advertising that they can get the customer all of the 5-star reviews they want at the very reasonable price of $18 to $22 per (fake) review…

One of the less certain aspects of the case is whether it will remain a purely civil affair, or if there were also be criminal charges involved. Normally, Amazon will not post reviews from anyone who isn’t a verified purchaser of the product – that is, if they don’t have any record of your buying the product, they won’t let you post a comment about that product. In the lawsuit against “buyamazonreviews.com” Amazon is also claiming that the defendants have been using fake purchases and fake shipments – buying product from their clients through a series of dummy accounts and then receiving “shipments” containing only empty boxes. The allegedly faked reviews are already dodgy, from a legal standpoint, but the companies responsible for them can (and apparently do) claim that they are just finding satisfied customers and getting them to post positive reviews of the product. If Amazon can prove that the same companies are actively circumventing their verification system using faked purchases and fake shipments, it is going to be much harder to convince anyone that this isn’t fraudulent…

By themselves, a large number of five-star reviews aren’t likely to hurt anyone; Amazon will benefit from its share of additional sales, the company selling the products will benefit from the sales, and the review generation firm will make money on the deal. As a method to convince online shoppers that a given product is far more popular than its sales would indicate this strategy is far more problematic. And if the company making the product is able to secure extra sales using this method, but is then able to avoid demands for refunds when the product turns out to be less desirable than the fake reviews made it appear, then they have effectively defrauded the purchaser as well as discrediting the entire Amazon online review system…

Amazon contends that confidence in their review system helps to create confidence in their customers, which in turn makes it much more likely that electronic shoppers will chose to purchase goods from Amazon. If someone is allowed to make a mockery of the Amazon review system, the company claims, these result will be much lower consumer confidence, much lower sales of everything, and a significant cost to the company. If the court concurs this could be a very costly mistake for the review generation firms. If the Washington State Attorney General or the relevant U.S. Attorney’s office take notice and end up prosecuting this as a criminal case, things could get significantly worse than that…

I find it interesting that since this litigation began, two of the four companies named in the suit have shut down their websites and disappeared completely, one is refusing to respond to requests for comment by the media (and may also be in the process of shutting down and going away), and the fourth is trying to claim that they haven’t done anything wrong, including not breaking any laws. But I suppose we will have to wait and see what the jury (or juries) decide on this one…

Start Paying

People my age who are reluctant to dive into new technologies and new products are frequently accused of getting more conservative and/or cautious with age, but the truth is that I wasn’t a particularly early adopter of new products or technologies when I was young. Today, after witnessing any number of new ideas that looked wonderful right out of the box but took years to fully mature, it has become second nature to me to wait and see what happens to a product before I consider buying one. The first few generations of mp3 player had issues, for example; it wasn’t until three or four years later that an iPod version appeared that was actually reliable, and the same could be said for most types of smart phone, tablet, or even laptop computer. So when Apple Pay came out, offering to provide you with a revolutionary new way to buy things (“Store all of your credit cards in your phone!”) I was immediately skeptical of the idea. Now it appears that Bank of America, Citigroup, Capital One, American Express, Chase, and several of the other “Launch Partners” who got in on the ground floor with Apple’s new service are wishing they’d been a little more skeptical, too…

You can find the New York Times article here, if you want to, but it appears that thieves have been stealing credit card numbers and using Apple Pay to charge things on the linked accounts at an amazing new rate – estimates go as high as 6% of all Apple Pay transactions, compared to 0.1% for traditional credit cards. Or, to look at it another way, $6 out of every $100 on Apple Pay versus ten cents per $100 on traditional credit accounts; more than sixty times the “usual” rate for identity theft. One might reasonably expect all of the affected banks to be screaming bloody murder at Apple, or at least demanding that the company do something about the situation. But the really interesting thing about this case is that not only are the various financial institutions bending over backwards to avoid angering Apple, but it might not be Apple’s fault this fiasco is occurring…

As near as I can tell, all of the financial institutions in this story were so worried about being left out in the cold under Apple Pay that they failed to require anything more than basic credit card information (the kind that identity thieves steal every day in job lots) before allowing a user to upload credit card information onto their phone. Even the sort of security questions, billing address and telephone information, or passwords normally used for online transactions would have made a difference, but none of those measures were used. Even worse, when the issues with Apple Pay began to emerge, several of the banks detailed general customer service call centers – rather than actual fraud prevention teams – to deal with the situation. As a result, there have been numerous reports of thieves actually calling in themselves to tell the banks not to flag an account that is being used in another state or country (the old “we’re on vacation this week” scam repurposed for a new generation)…

Now, I don’t mean to suggest that the original oversight wasn’t completely understandable; new technologies and methods for separating consumers from their money that actually work don’t come along every day, and if Apple Pay ends up being as pervasive as some of their other products and services then any financial institution would have to be crazy not to try to get in on the ground floor. What is less excusable is failing to implement industry standard security measures at the same time, or at least devote appropriate anti-theft and anti-fraud support, although both would have been better. It seems highly unlikely that Apple would have objected to greater security, given that they also have a vested interest in getting as many people to use Apple Pay as possible. And, in fact, now that this story has gotten out and people are having second thoughts about the whole concept, Apple has started working with the banks to provide more account information and security measures…

Maybe once the technology companies and financial institutions get all of the bugs worked out, I’ll look into Version 3.1 or 4.3 of Apple Pay, or however many iterations it takes before the risks involved are no higher than any other form of credit card account. In the meanwhile, I may still be coming off as a grumpy and conservative old man, but at least I’m not having to call my credit card provider and demand to know why I am being billed for $12,000 worth of kumquats purchased in a country into which I have never set foot…

Already on the Street

In an amusing follow up to my Apple Watch post from earlier this week, CNN Money is reporting that cheap knock-off versions of the Apple Watch are already on the street in several major Chinese cities. Literally cheap, in this case; some of the knock-offs have been observed selling for as little as $40 US compared to a starting price of $349 for the cheapest model from Apple. The fakes aren’t that sophisticated yet; they’re mostly Android-based devices that don’t look anything like an Apple product or come anywhere near the performance level the Apple Watch is supposed to have. It’s hard to believe that these products are fooling anybody, especially considering that the real Apple Watch isn’t available for sale yet, but it does illustrate just how much of a problem knock-offs are becoming…

Traditionally, when you mention knock-offs, people will assume that you are talking about clothing or fashion accessories that have been made to look like a designer label but are actually just cheap copies made using inferior materials and/or workmanship. Depending on the complexity and quality of the original, it can take months or even years before the knock-off products achieve a fully convincing copy, but eventually many of these items will reach a point at which only an expert will be able to tell the real thing from a sophisticated copy. Knock-offs of electric or electronic products can work the same way, with black-market companies churning out cheap versions intended to fool the customer into believing they are getting the real thing, but there are also cases in which a competitor in the same industry will purchase the original product, take it apart, and then develop their own version of the same technology under their own brand…

How often this happens, and to what extent one product is an unauthorized copy of another, are legal questions that have kept battalions of lawyers busy over the years, and complicated international trade between countries that have strict laws against theft of patents and intellectual properties and nations that do not. What I find remarkable about the story linked above is the speed with which this seems to have happened, and the related factor of how easily the counterfeiters (called “shanzhai” in Chinese) have managed to produce a fake version of an Apple product. Even granted that the counterfeit products don’t begin to have the functionality or style of the real thing, it can no longer be denied that they have gone to market over a month before Apple will be ready to do the same…

Any time a large and powerful company takes forceful action to protect its designs, inventions, or brand image, there always seems to be some amount of push-back, as people assume that the company is being greedy and using its legal power (and money) to destroy potential competitors. And while, at least to some extent, that is probably true, it seems worth pointing out that sometimes the company really is being ripped off by small-time operators who know full well that they are stealing somebody else’s property. I don’t know what Apple is going to do about this rising trend in counterfeiting, or how it is likely to affect their sales in the future – but it does seem as though they should consider getting their products to market a little faster, or at least leaving less time between the introduction and the date the product is made available for sale…