Crime Doesn’t Pay – Does it?

 Over the years I have written a number of posts in this space about the scourge that robocalls have become over the years, rising from the relatively minor nuisance in my childhood to the present conditions where just answering the telephone can result in becoming the victim of any number of fraud methods. Efforts to eliminate these calls and their associated crimes by legislation have largely failed because it can be extremely difficult to catch the parties involved, many of whom are based outside of the United States, and because motivation for pursuing such cases is inconsistent. A story being reported in USA Today this week may have the answer to one or both problems, however…

According to the article by Mark Snider in USA Today last Wednesday, the FCC had succeeded in tracking down a telemarketing company based in Texas that had been responsible for over a billion such calls, mostly made by “spoofing” real telephone numbers from other area codes. In this case, the calls purported to offer low-cost health insurance from well-known providers, but actually routed anyone who responded to the calls to a call center not affiliated with any of those companies. It was a highly lucrative and significantly destructive scam, and there is nothing to suggest that the companies involved would have stopped committing it, until FCC fined the telemarketers a record $225 million USD…

I’m not primarily a crime writer, but a brief study of the subject will reveal dozens of cases where a specific crime died out when it was no longer profitable to commit. A familiar example might be that when it was no longer possible to make any significant money selling stolen car radios, the number of those crimes decreased from incredibly common in the early 1990s to almost unknown today. Increased penalties by themselves are generally ineffective in deterring crime, since the penalty involved will be irrelevant if there is no chance of being caught, but there are numerous historical examples where fines levied against specific criminals became an important source of revenue for law enforcement officers, or the communities employing them…

Now, I’m not suggesting that municipalities and states engaging in self-funding through the application of excessive fines is necessarily a good idea. History also records a vast number of cases where the enforcement of such laws led directly to major cases of corruption, either by the law enforcement agencies of their employers. But, by the same token, $225 million is enough money to run government agencies of significant size, and the motivation to make arrests that could yield that much revenue is going to be powerful. Combining those factors would make the crime of illegal robocalls much less attractive while at the same time offering a real chance at balancing the budget for many cities and counties…

Realistically, of course, these prosecutions will not eliminate any crime. If fraud committed by telephone auto dialer becomes cost-prohibitive the criminals involved will simply move on to some other form of fraud on some other platform, and the cities involved will have to find some other way to fund their operations. But, speaking as someone who gets between five and ten of these fraudulent calls a day, I can honestly say that I wouldn’t mind seeing more of these companies being driven out of business, even nobody figures out how to fund our town’s government operations into the bargain…

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…

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…

Pork in Space! Rides Again

I’ve written in this space any number of times about “pork-barrel” spending by the Federal government; mostly stories about expenditures of tax dollars that make no sense from any operational standpoint but are good for companies that donate money to the politicians who vote for those expenditures. It’s important to note that this behavior is not limited to any one political party, geographic region, or level of government; the projects vary a bit depending on who is controlling the budget at the time, but whether the government is spending money on airplanes that the military is sending directly to the Boneyard or entitlement programs that don’t help anyone, the principle is the same. That said, the current Administration’s new “Space Force” initiative is a particularly silly example of the process…

If you missed it, back in March the President announced that he had just come up with the idea of a new (sixth) branch of the U.S. military, which he called the “Space Force.” This isn’t really a new idea, of course; several previous attempts have been made to establish a permanent armed service in space, most recently in 2016 with the ill-fated “Space Corps” proposal. These have generally failed, either because there was no clear mission for the space service to perform, the proposed technology was either unavailable or economically unfeasible, or because the proposed installations contravened the Outer Space Treaty of 1967 (which prohibits the placement of weapons of mass destruction in orbit, on the Moon, or on any other celestial body). None of this has kept various administrations from shoveling money into those projects, however…

What is remarkable about the current incarnation of the program is how little effort the government is making to convince anyone that it isn’t just a giant boondoggle, almost exactly the same concept as the 2016 “Space Corps” proposal only with additional pork-barrel funding for satellites, launch vehicles, and gold-plated bonuses for the extremely wealthy people who own the aerospace companies. It would be nice to think that this had anything to do with forward-thinking defense or security planning, or at the very least, that it was an intelligent effort to stimulate economic growth in a high-tech sector in which the U.S. still has a fairly strong position relative to the rest of the world. Unfortunately, it appears to be the result of significant lobbying efforts by the aerospace industry – and the extraordinary receptiveness of the current administration to anything that gives away public money to its political backers…

You can check out the excellent story about all of this from the Los Angeles Times if you’d like more details on the political aspects. On the business side, the question isn’t so much why our government wants to spend more money on flying pork (every U.S. administration wants to spend more money on every kind of pork), but why this proposal includes a massive duplication of personnel (particularly management levels), headquarters facilities, equipment, and spacecraft, when the Air Force, Army and Navy all have space-oriented units currently operating. One might quite reasonably suggest that an increased focus on (non-nuclear) space-based weapons could be important to national security, given the equivalent programs appearing in both the Russian and the Chinese militaries. What baffles me is why anyone, even aerospace industry lobbyists, would want to do so in the least financially responsible way possible…

Get Out the List

I can’t really say that finding yet another situation in which American business interests have been running amok during this administration really came as a shock to me, although I have to admit that this one is even more despicable than usual. We’ve already seen companies getting the government to let them start dumping mine tailings (poison) into rivers and lakes, pushing to repeal even common-sense regulations on air pollution, trying to gain increasing support for failing industries like coal mining (which even our former coal customers don’t want anymore), and advocating for additional import tariffs that are now threatening several previously solid manufacturing sectors. But allowing the US-led infant formula lobby to interfere with U.N. World Health Assembly’s efforts to promote breast feeding is still a new low…

You can pick up the New York Times article here, if you really want to see things hit their worst, but don’t say I didn’t warn you. All the assembly was trying to do was pass a resolution saying that “mother’s milk is healthiest for children and countries should strive to limit the inaccurate or misleading marketing of breast milk substitutes.” This isn’t exactly a controversial statement; there are quite literally decades of evidence, from hundreds of studies, which support this position. On the other hand, it’s easy to see how the $70 billion formula industry, led by Abbot Labs here in the US, would consider such a resolution to be against their interests…

It’s hard to imagine how, exactly, the industry leadership would justify promoting their business interests over the health and welfare of millions of infants, and the HHS statement that this move was to prevent “stigmatizing” women who want/need to use formula isn’t particularly convincing. It’s even less convincing when you consider that American representatives at this same Assembly meeting were also threatening to withdraw international aide and military support from various small nations if they chose to support the resolution – starting with Ecuador, which was originally going to propose it. American delegates apparently also threatened to slash US funding for the World Health Organization…

Now, I wouldn’t want you to place all of the blame for the United States delegation behaving more like organized criminals than advocates for public health on the shoulders of a single, albeit gigantic, industry. During these same meetings, the Americans were also noted as advocating to limit the ability of countries with rising rates of obesity and diabetes to put warnings labels on sugary beverages, and opposing changes to patent laws that would make it easier for poor countries to gain access to potentially life-saving medications. It might be possible to argue that intellectual property rights and free trade without regulatory interference are good for business in every country, and therefore these other efforts are still slightly into the grey area, but those claims don’t hold up well when accompanied by threats of extortion…

There are times when it really does seem as though the people who are running this place have a checklist of completely disgusting things they want to accomplish, just to make sure that they don’t miss anything. I feel constrained to point out, however, that even if these mainly political moves made sense in a purely business-friendly context – and they really don’t – the degree of international resentment this kind of behavior is generating has potential long-term consequences that dwarf whatever immediate gratification these companies may be receiving. When things get to the point where the Russians have to step in and propose the resolution in support of breast-feeding because the Americans have been threatening everybody else you really know that the regular order of things has been upended…

In the simplest possible terms, we’re still going to have to live on this planet, and do business here, once the current administration finishes lining their own pockets and leaves office. That’s going to be really difficult to do if all of the residual goodwill we might still have had with the rest of the world gets flushed in order to sell more infant formual…

What Color Are Your Skies?

There are times when I will read an article online and wonder about the tone of surprise and wonder the author is taking. I don’t mean the “product reviews” that say nice things about products made by companies that advertise heavily on that channel, or travel articles that encourage people to spend money on services provided by companies that do (or might someday) advertise on that channel. Both of those are common (if sleazy) practices that go back to the time of 1970s sitcoms, and it would actually be much more alarming if they didn’t happen. As American humorist Dave Barry points out, what travel site is going to publish an article titled “Uruguay: Don’t Bother” in the first place?

On the other side of the issue, you have people who write in breathless tones about people being rude to servers in restaurants, or flight attendants, as if no one is ever rude, arrogant, or snotty in public just because they are horrible excuses for human beings and the service workers can’t fire back. When that happens, I have to wonder if these writers have ever been to a public venue, let alone worked in a service occupation. I had a similar reaction to the Business Insider article about the top complaints that workers at Trader Joe’s markets have about the customers who patronize their locations. Have they ever been to a supermarket?

Granted that I have spent time in retail, but I’d imagine that everyone has discovered trash left on a shelf or in a shopping cart at least once, and most likely everybody has seen some really gross examples from time to time. A pet peeve of mine was finding frozen products dumped in non-refrigerated parts of the store – it’s generally disgusting, and always a cause of “shrink” (product stolen or destroyed by the public). Mercifully, I never worked in a store with a meat section; finding an ice cream bar that had been left out and was now a bulging wrapper full of rancid liquid was revolting enough. We also didn’t do product samples, but the idea that people would abuse such offers and attempt to graze on them for lunch can’t be that surprising, either…

Anyone who honestly thinks that members of the public aren’t going to be randomly horrible to service and retail employees, however, is either living in a dream world or has no idea how much their local service and retail workers would like to bury them head-first in a dumpster full of cat droppings. Let me recommend, once again, the compilation site of funny and stupid customer behaviors known as Not Always Right.com, where you can find thousands of specific examples of this principle in action. Although I must say that, after having worked in Academia for the last ten years, their affiliate site Not Always Learning.com is just as on-the-money, and possibly even more distressing…

Why does he tell us this? I hear some of you thinking. I don’t imagine that any of my readers (assuming I have readers) are planning careers in retail or service companies and are naïve enough to be unaware of these conditions. And while anyone can have an off day (and do things they would normally find repugnant), anyone who makes a habit of behaving that way is unlikely to recognize themselves in any of these stories or care if they do. I’m calling out writers who have never worked down at the sharp end for a day in their lives for their naivety, for assuming that these stories from the retail and service sectors are somehow alien or exotic. We can’t sentence everyone to work one of these jobs sometime in their lives, nor would I wish that on anyone. But with the service economy growing more important every year I think it may be time for everyone to start thinking of life in retail as being more than the question “Paper or plastic?”

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…

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…

Keep the Contract

The other day I was reading an article about why people steal office supplies from work and reflecting that the author was either missing or deliberately avoiding half of the picture. I’m not disputing that the majority of people make personal use of company equipment or supplies; I’m not even disputing that entirely too many people take supplies home or even sell them. And I’m not in a position to dispute that “shrink” of this type accounts for an average loss of 1.4% of a company’s revenue, although I’d want to take a look at those numbers before I committed to anything. But I’m not sure I agree with the corrective actions the author is recommending…

Writing for the website The Conversation, Professor Yannick Griep of the University of Calgary suggests that people consider (usually minor) benefits and potential (often severe) risks of stealing office supplies, at least for the purpose of “getting even” with their employer for wrongs real or imagined, and instead try to take a more constructive approach to solving the underlying problems. I can’t argue with any of that; even very extensive theft of officer supplies is unlikely to compensate you for any major wrongdoing on the part of your employer, and even very trivial theft may cost you your job, your career, or jail time. What I feel that Professor Griep is avoiding here is the company’s side of the situation…

As the Professor correctly notes in the original article, many employees have some amount of grievance stemming from violation of the implied psychological contract between management and their workers. If representatives of the company promised an applicant that there would be flexible working hours, regular raises, or opportunity for advancement, and what the employee ends up with is a dead-end job with no chance for promotion this side of retirement and a 1% cost-of-living adjustment every other year, then the company has broken that implied contract, and many people will feel that they are no longer obligated to keep up their end of the bargain – e.g. showing up on time, doing the work assigned to them, and not walking off with anything that isn’t bolted to the floor. What I think is unrealistic here is expecting the employees to be the ones to take corrective action…

While it would be facile to suggest that all managers are essentially the villains in a 19^th Century melodrama, it is difficult to deny that most companies do want to get as much work done for as little salary as possible – that’s how expenses work in a free-market economy. The problem occurs when the employees have a different idea of what the implied contract includes than the one from which management is working. Even if you are adhering to the letter of everything you have ever promised an employee, if they feel that they are being treated unfairly they are going to act accordingly – and that may not mean appropriately…

This is not to suggest that a manager couldn’t just wait and see what the employees want to bring to their attention regarding promises they feel you haven’t kept but what I’m getting at here is that they shouldn’t have to. Management is an active process, and a key part of any supervising manager’s job is to know his or her people and their expectations of the job and the company. If your people are underperforming, or if the atmosphere around the office appears to be hostile, or if individuals appear to be disaffected or unsatisfied, it is your job to find out why, and to see what you can do to improve the situation. Or, failing that, explain to your employees why you can’t…

I also don’t want to suggest that thieves aren’t a thing, because they most definitely are. Sooner or later you are going to encounter an employee who has been treated well and given everything you promised them who is stealing from the company because of greed, need, or any of the other common motivations for theft. But given that estimates of the percentage of employees who routinely take office supplies without permission runs from 75% to nearly 100% depending on whom you ask, it is probably worth considering what might be motivating your people to take some petty revenge on your company before you start implementing measures to stop them…

Not Even Trying Anymore

When I realized that I wasn’t even freaking out about the most recent crony capitalism scheme from the current administration I’ll admit I was a bit disturbed. Generally, when government leaders implement a scheme that will harm the people they nominally govern, the country where those people live, or the world in general they will make some effort to explain or rationalize the move; when the scheme enriches their political supporters at the expense of everyone else in the affected industries they will go to much greater lengths to bury their tracks in order to avoid a very real risk of lawsuits. But in the case of the Federal intervention to keep obsolete coal, oil, and nuclear power plants operating for at least another two years which was announced on Friday, the administration doesn’t even seem to be trying to hide the corruption…

If you have an unusually strong stomach you can pick up the ABC News story about this action, but don’t say I didn’t warn you. As announced, the initiative will keep these elements of our national power grid active, regardless of local need or cost-effectiveness, as a matter of National Security. Why, exactly, power generation units that can’t be operated at a profit are critical to the security of the United States isn’t explained in the memo that turned up on Friday. The Department of Energy merely claims that nuclear, coal, and oil-fired power plants are a “critical” part of the national grid, and without them we might be vulnerable to… Well, to something; they didn’t specify what. You’d have to be a real cynic to suggest that this action is being taken solely to curry support from the people who own obsolescent power plants and coal mines – and the people who work in those industries, of course…

Regrettably, the people at ABC News are apparently that cynical, as are industry watchdog groups, government accountability groups, environmentalist groups, and the Energy Information Administration, all of whom have criticized the announcement as nothing more than a political move intended to make good on a campaign promise from the last Presidential election. The truth is that use of coal for electrical generation has been dropping every year for over a decade, decreasing by over 20% in just the last year, and it would be redundant to specify the costs of using oil for power, or the environmental consequences of nuclear power and nuclear waste. Requiring companies to keep those plants open, and (effectively) requiring utility companies to keep purchasing the output from those plants, will result in higher costs to consumers and benefit no one except the coal companies and whoever owns the obsolete power plants…

What makes this particular story so remarkably nauseating is that no one in the Administration has denied any of this, or offered any support for the contention that maintaining these facilities has some strategic or defense purpose. It’s not exactly surprising, given the other abuses of power for personal enrichment that we have seen from this Administration, or given the fact that our current Secretary of Energy does not believe that we need a Department of Energy, or given the fact that our current head of the EPA is openly an industry flak who (apparently) believes that air and water pollution are good for you. It’s just exceptionally brazen, even for American politics, and exceptionally lazy for anyone in this 21^st Century…

I normally stay away from political issues in this blog because, as previously noted, it’s not my area of expertise and I feel there are already more than enough blogs offering political opinions written by someone without any particular qualifications. I’ve also stated for the record that I believe that cronyism, corruption, and pork-barrel politics are an unavoidable part of any representative democracy, and as long as we can keep them down to no more than a slightly regrettable level we will still be doing far better than any other system of government enacted to date. But when the party that is nominally in favor of small government, free-market capitalism, and responsible fiscal policy starts doing things this blatantly self-serving I think we are all justified in complaining about the incompetence, if not the actual policy. Face it, folks, these people aren’t even trying anymore…

The Ethics of Gun Sales

Here’s another hypothetical for you: Suppose for a moment that you own a retail business, and the child of one of your customers uses something that his/her parent purchased from you to commit a heinous crime. Let us also suppose that the product you sold in entirely legal in your city, county, and state, that ownership of such articles is (debatably) protected by Federal law, and that you have complied with or exceeded the requirements of every law and ordinance that regulates these purchases and your class of business. Let us further suppose that your customer took all measures required by law and all of the measures that a reasonably prudent person would take to secure the article he/she purchased from you, and that their child defeated those measures and precautions in order to get access to the article. What degree of responsibility do you still have for the resulting heinous crime?

Before you answer that, consider what your opinion would be if you owned the company that had manufactured the article used in the aforementioned heinous crime. Suppose that your product was legal to produce in the United States, that you were in full compliance with all state and Federal laws regarding the production, distribution, and sale of your products, and that the heinous crime in question was committed by a person unknown to you in a location hundreds or thousands of miles from any facility that you own. What degree of responsibility would you and/or your company have for the heinous crime mentioned above?

As you’ve probably guessed, there is such a case currently before the courts following the Santa Fe Texas School shooting, as the families of some of the victims have brought suit against the gun store that sold the guns used in the shootings, and the companies that manufactured them. People who identify as pro-gun and/or libertarian are calling these actions absurd, and are comparing them to the lawsuits filed against food companies for making the plaintiffs obese. People who identify as in favor of gun control and/or victim’s rights have responded by saying that if you’re going to manufacture and/or sell devices that make it remarkably easy for a single deranged individual to injure or kill a great many other people in a short period of time, you’re going to have to expect to be held responsible when exactly that happens…

As an amateur historian I actually do have some knowledge of both the inclusion of the Second Amendment in the Bill of Rights and the ways it has been interpreted in modern times, but I’m not going to offer opinions about Constitutional Law without a license. The legal exposure (or lack of it) that these companies might have in this case is up to the court system, not scruffy business bloggers. For now let’s stick to the issue at hand: what ethical responsibility do the people who make and sell guns have for atrocities committed by their customers?

On the one hand, one could argue that any customer could conceivably use any tangible object to commit a crime, regardless of whether or not that object is normally considered to be a weapon. Nothing else appearing, a customer could use the objects you have sold them to stab, bludgeon, or smother their victim, and the number of things that can be used to poison an adult human being are appalling once you start to enumerate them. On the other hand, guns generally have no practical function other than launching small quantities of lead into targets at extremely high velocities. Guns do not, in fact, kill people. They do, however, make it far too easy for people who have one to kill other people. And while there are some people who do have a legitimate need for a gun, decades of historical data covering millions of incidents very clearly establishes that the odds of being killed in a gun mishap (or a gun-related suicide) are several hundred times more likely than the odds of defending one’s self or one’s family with a personal weapon…

All of which brings me to the question: Do we, as business people, have an ethical responsibility to prevent customers from purchasing consumer products that could be used to injure or kill another person, either by them or by someone who has stolen the products? Alternately, do we have the right to tell anyone what kinds of products they should or should not be allowed to purchase, let alone prevent them from doing so by refusing to make and/or sell those products? Even granting that the current gun laws in this country are clearly not sufficient to prevent multiple school shootings every month in America, do we want to have private citizens deciding which Constitutional rights their neighbors should or should not be allowed to exercise? Or should we just make products that people want to buy, offer them for sale at competitive prices, comply with all Federal, state and local laws, and let the people decide for themselves?

It’s worth thinking about…

Lounge in a Box

Once in a while I will come upon a story in the online news sites that sounds good at first look, but which demonstrates a more hopeful world view or greater faith in humanity than I have left at this point. Despite what my critics might imply, I don’t believe that all people are terrible, or that if it is possible for members of the general public to steal and/or destroy something for their own fun and profit that everyone will do so. The problem is that in many cases it only takes one bad actor to ruin everything for everyone else. I’ve often summed up businesses that failed because of the work of a limited number of bad actors with the expression “Another beautiful idea – ruined by people.” This was my first reaction to the CNN story about small, private rooms that can be rented by the hour being installed in airports…

The company behind this, which calls itself Jabbrrbox, claims that these cubicle-sized rooms can be used to provide a quiet space in which to place phone calls, get some work done, or speak with others in privacy, much like a very small, private airport lounge. The company also claims that these are more cost-effective than executive clubs offered by airlines, although at $10 for 15 minutes and $30 for a whole hour this is only the case if you are planning to use the Jabbrrbox unit for fewer than 15 hours per year (American Airlines’ “Admiral’s Club” is $450 per person per year, for example) or fewer than 2 hours in a visit (a one-day pass for the Admiral’s Club is $59). It also lacks the concierge service, refreshments, business services and other amenities one would find in a conventional executive club. It does, however, offer greater privacy – which I can’t help thinking is going to be the biggest problem…

At the moment, the Jabbrrbox units have a clear door panel, but the company is talking about equipping future units with a privacy screen, and even if they don’t, anybody could block the panel with a handful of printer paper and a spool of scotch tape. I’m not suggesting that people are going to start using the cubicles for drugs, sex, or contraband, just because they can. I’m saying that people will already use any relatively secure or temporarily private space for all of those purposes, and I can’t see anything that would keep people from doing the same with the Jabbrrbox compartments. Again, I don’t expect everyone to turn one of these cubicles into a drug den or a brothel, but it wouldn’t take more than one such bad actor to put an entire bank of them out of service…

That seems unfortunate, since this is a potentially useful service, and they’ve already got to deal with more common criminal activities like vandalism, credit card fraud, and a significant chance of squatters, including customers who will refuse to leave when their time is up and drunks passing out on the floor. I’ve written extensively in this space about how difficult it can be for an entrepreneurial start-up business to survive, let alone flourish, but in this case the company is going to have a lot more to deal with than the capitalization, cash flow, and customer development/marketing issues that will destroy more conventional businesses…

Now, I would be the first to admit that I don’t have any hard data on how much crime still goes on in American airports, any more than I know what percentage of air travelers are destructive nihilists or ugly drunks. I also have no idea what measures (if any) Jabbrrbox has in place to deal with the objections I’ve pointed out in this post. It’s entirely possible that I’m just being too conservative, pessimistic, or traditional in my assessment of this company’s long-term prospects for success; it’s also quite possible that the company has already got all of this figured out and are just waiting for clearance to start installing these private lounge units in airports all over the world. I’m just saying that whoever came up with this idea has a higher opinion of the general public, or even of air travelers, than I do…

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…

Mine

It’s a truism in the Service Sector – at least among management personnel – that it’s always the nice customers with whom you have to be the most careful. Bad customers, whether absurdly entitled, short-tempered, fault-finding, easily offended, bigoted, smug, condescending, mind-numbingly cheap, exceptionally rude, chronically late for everything, out of touch with current pricing, oblivious to health and safety regulations, unafraid of the law, or simply whacked out of their tiny little minds are not going to alter their behavior not matter what we do, and that includes boycotting our business. In fact, some of these oddballs will actually refuse to do business with any company that does not give them things to complain about. In many cases, it is doubtful if you could actually lose these customers if you tried, and there would be little to worry about if you did. They’re not really the problem…

The real problem are those customers who will arrive without fuss, behave politely, follow any clear signage or instructions, pay the appropriate price for the product or service – and leave, never to return, if treated badly by the customer service personnel. In fact, if your company’s customer service personnel are sufficiently incompetent, or if your company’s customer service policies are sufficiently horrendous, you may be quietly hemorrhaging these customers and never know it until the firm starts to go bankrupt…

Now, I’m not suggesting that the customer service function is easy, or that managing personnel who perform that function isn’t a challenge. The truth is that while inventory loss due to customer actions – shoplifting as well as vandalism – does not approach the losses most businesses experience due to employee theft and damage, those actions are much more exasperating to the front-line personnel who have to clean up the resulting mess, and front-line managers who have to deal with both the horrible customers (and outright thieves) and the corrosive effect they have on the employees. It does not take many episodes of being lied to, cheated, insulted, abused, or grossly inconvenienced before the average person will realize that any given visitor may turn out to be completely monstrous and start treating everyone as a potential criminal…

In many cases the “nice” customers are the counterpart of our “loyal” employees – the people who adhere to company policy, do their best to perform their job duties correctly despite the miserable conditions and insulting salaries, and would never dream of stealing. Treating these people as potential thieves and embezzlers makes no more sense than treating all customers as potential shoplifters and vandals. Where this becomes a critical problem is when a loyal employee is trying to adhere to the company policies and rules (standards to which the company is holding them) but in doing so outrages a customer, either because the customer really is a thief or a scam artist, or because they’re a nice customer who resents this treatment. This can, and frequently does, result in a situation where the employees know that if they deviate from company policy they will be fired, but if they comply with company policy and a customer complains about them (either because they’ve been thwarted from taking criminal actions or because they’re honest people who would never resort to criminal actions – the behavior is generally the same) they will be fired anyway…

Faced with this kind of Catch-22 situation, many employees will attempt to balance the need to conform to absolute, arbitrary rules written by people who may be completely out of touch with the realities of front-line customer service and the need to placate difficult, dishonest, or completely sociopathic customers. However, some employees will become disillusioned, engage in counterproductive work behaviors (from loafing to outright theft), or just quit, resulting in many of the problems described in the previous post. After all, being threatened with termination (or actually being terminated) so that a thieving “customer” can successful steal from the company is completely unjust, and utterly violates the implied social contract between the employee and his or her supervisor…

There have been a number of attempts to change this situation, or at least contain the most damaging parts, to both the employees and the customers who would actually be worth having. But that will bring us to Part Three of the story…

The Other Bernie

In the movies, and in most other narrative art forms, once the bad guy is convicted and sent to jail that’s usually the end of the story. Occasionally there will be a follow-up or a coda that talks about the character’s experiences in prison, but for the most part there isn’t a lot to say about sitting in a small room with bars on the windows for fifty years without the possibility of parole. But sometimes the conviction and jail sentence is the beginning of the story, or more correctly the end of one story and the start of a new adventure. As such, I really wasn’t all that surprised to find our old friend Bernie Madoff back in the news…

You can take a look at the Quartz Media page if you want to, but it’s a fairly simple tale. Apparently, while in Federal prison in North Carolina (at Butner Prison, one of the infamous “Club Fed” facilities), Madoff managed to buy up all of the instant hot coca packages available in the commissary and started reselling them at a profit in the prison yard. According to this report, things have gotten to the point where if you want to purchase any of the stuff you have to “go through Bernie”. Since he’s already considered a prison-house celebrity – other prisoners come to him for financial advice and stock market tips – no one seems to mind, and given some of the things that a criminal mastermind can get up to while in prison, I doubt the prison officials are worried about it, either. What struck me as funny was that this actually makes the previous Madoff story somewhat more credible…

Back in 2011 I brought you the story about Madoff claiming to be working with Harvard Business School to develop content for a new course offering in investments – and how to detect fraudulent ones, I would assume. You can look up my original post here, if you want to, but at the time I used this as an example of not believing everything you read on the Internet, a topic which has now become all too common on business blogs and related sources. But if this story is true – and so far it appears to check out – then it would appear that Madoff has, once again, proven himself to be sharper and more ruthless than the majority of the people living in his environment, which suggests that he really might have some lessons worth listening to. What struck me as most unfortunate was that he didn’t figure all of this out ten or twenty years earlier…

You see, none of the activities described in the Quartz article are illegal, or even against prison regulations, apparently. Yet, despite the obvious handicaps of operating inside a Federal prison with limited funds while surrounded by thieves, fraudsters, and con artists, he still managed to pull off a financial (commodities trading) coup like this one. That, combined with some of his earlier success before he turned to running a Ponzi scheme, makes me wonder what Madoff might have accomplished if he’d actually stayed on the straight and narrow. Granted, it probably wouldn’t have been anything as lucrative as stealing $50 billion, but it probably wouldn’t have involved a 50-year prison sentence, either…

Please understand me when I say that I’m not trying to excuse any of Madoff’s behavior; quite the contrary. I consider this story to be the final evidence, if any was actually needed, that Bernie could have achieved almost any conceivable level of success without ever committing a crime, which leaves arrogance and narcissism as the only possible motivations for his offenses. And while it doesn’t seem likely that anyone will risk letting him loose on the public again, particularly in light of his most recent activities, I would still advise my readers (assuming I have readers) not to bet against hearing from Bernie Madoff again in the future…

The Robots Strike Back!

Oddly enough, I have history with the much-reviled automatic dialer machines that goes back well before the appearance of the “Do Not Call” list that was supposed to have killed them off. Back on my first management job out of college, before the invention of the MP3 protocol or predictive dialing, my boss issued me one of the then-current generation machines (it used a cassette tape I had to record myself) and told me to use it to canvass the people in my district. I can still recall telling him it wouldn’t work for a service business that most people weren’t even aware was a thing, and some of the threatening messages I got from people who hated robo-calls back before that was popular. I can’t remember that we actually got a single client from the automatic dialer before I managed to convince the boss that the whole thing was a waste of time…

Over the years since, people have come up with a number of measures to fight these robotic sales calls, not all of them legislative in nature. A friend of mine once developed a gizmo that played the three-tone signal you hear when you call a phone number that is out of service just when he picked up the phone – causing the automatic dialers to think his line was out of order and disconnect. I’ve also known people who kept an air horn by the phone and would just blast the sound down the phone line until the thing disconnected, and people who made a hobby of tracking down the companies that were calling and pranking them in various fashions…

Over the years I’ve worked a number of cold-call jobs, mostly for non-profit organizations (which are exempt from the “Do Not Call” registry), during which I found out that the idiosyncratic pause you here before a modern automatic dialer starts playing its recording isn’t so much the machine waiting to see if the line is out of order as it is a side-effect of the dialing software. When one of these systems is working, each of its outgoing call nodes will be placing a dozen or so calls at once, and as soon as one that isn’t connected picks up it will select that one and start playing. This is how my old friend was able to spoof them into hanging up; it’s also the point at which I usually just hang up the telephone. But those tactics may no longer be enough…

Last week my phone rang, and when I answered it there was a short pause, and then a woman’s voice said “Hello? Oh, I’m so sorry; I was having a problem with my headset.” The voice then went into a pitch I’ve heard many times before, both from automatic dialers and from live telemarketers, telling me that because I had stayed at one of their “resorts” in the past, I had won a “free” four-night stay. This is the point at which I usually just say “Sorry, not interested,” and hang up the phone. If you actually go through with this scam “prize” you will generally end up having to buy something (typically transportation or more nights at the “resort”), assuming it’s not just an old-style phishing scheme in the first place. I did this and didn’t think any more of it until yesterday…

Shortly after lunchtime yesterday my phone rang from a local number, and when I answered it there was a brief silence, and then a woman’s voice said “Hello? Oh, I’m so sorry; I was having a problem with my headset.” It was the same voice, too. I tried interrupting the message, just to see what it would do, but there was no indication that whatever was reading me the program could hear me, even when I said several unpleasant things about its mother…

I’m not sure how many people are still using disruption devices to foil the automatic dialers, or for that matter how many people just make a practice of hanging up the phone before it starts playing the message. But there’s no question that the computers that run this class of program can store multiple outgoing messages, which means there’s no telling how many times it could make someone hesitate before slamming down the receiver. It’s just their bad luck that it didn’t realize I had heard that specific outgoing message before…

I don’t know what the next phase of this war will be like. But it seems clear to me that no amount of legal or legislative action will ever be able to take out all of the illegal automatic dialers that remain in use – and as of today, the robots seem to be getting smarter than ever…

EDIT: A week or so after I brought you this story, KTLA-TV in Los Angeles broke the news that some versions of this scam are actually recording YOUR voice if you reply to the robot, in attempts to use that recording to con you into believing that you have some verbal contract with the scammer. Which means that, among other things, saying unpleasant things about the robot's mother may not have been a bad response after all. It you get one of these calls you're probably still best off just hanging up, though...
 

The Perfect Crime

When the news first broke about the Ashley Madison data intrusion, I’ll admit that my reaction wasn’t very mature: I regarded it as an amusing example of schadenfreude and watched all of the stories about people threating lawsuits because their lives had been “ruined” with the sort of glee we reserve for other people’s misfortunes. It’s not that I had or have anything against these people – I’m not a prude, and I’m not about to start trying to tell other people how to live their lives – it’s just that the level of naiveté involved was hilarious. All of us have a certain amount of personal information online, and are accepting a corresponding amount of personal risk, but very few people are ever going to share information that could destroy their entire lives with an organization whose business model is based on helping customers betray someone else. A new analysis of the leaked information suggests that the joke may be on the Ashley Madison users in more ways than one, however…

You can pick up Annalee Newitz’s excellent article direct from the Gizmodo website if you’d like to see the actual numbers, but if this report is accurate then less than .03% of the A/M accounts were actually being used by female clients in the first place. The company’s own user data already indicated that male users outnumbered female users by nearly six to one, but the Gizmodo report shows that males outnumber females on the company’s internal chat function by 4,579 to one, while approximately 13,585 men use the company’s message function for every female who does. And those figures don’t even include male users who registered as female when they signed up for the site, which is apparently very common. There is also good evidence that thousands, or possibly tens of thousands, of the nominally female accounts on the site were created in-house by Ashley Madison personnel in order to attract male customers…

If those numbers and accusations seem familiar, it’s probably because we’ve been seeing similar charges leveled at conventional dating sites for almost as long as this category of web businesses has existed. For all of the company’s efforts to market itself as a specialized service for adulterers, it appears to be nothing more than a very expensive dating site. And while criminal prosecution for leaving all of these clients’ personal information vulnerable to data theft seems unlikely, what struck me was that the company’s primary defense against accusations of fraud – and demands for refunds – has just evaporated along with the supposed confidentiality of the users…

Prior to the data breech, the odds of any given Ashley Madison user taking the company to court – or pressing any criminal charges, for that matter – was negligible, not because of the constant disclaimers all over the site, but because any potential disgruntled users would be exposing themselves as adulterers (or would-be adulterers, at least) the moment they publically admitted to joining the site in the first place. The company didn’t even need to create faked accounts, really, other than for marketing purposes (“Look! See how many attractive women there are on our site!”), because who was going to complain?

Now, we should probably acknowledge that running a profitable dating site is a difficult proposition, and doing so without providing a conduit for illicit affairs – or stalkers, predators, thieves, and other criminals for that matter – is going to be impossible given the nature of Internet connections. Maintaining a balance between people of both genders and a variety of other selection factors (e.g. age, income level, location, interests, physical appearance, and other demographics) wasn’t easy even in the pre-Internet days, when a single year of an old-style dating service (face-to-face introductions) cost around $3,600 a year in today’s money. With no personal contact, and therefore no way to tell who was being honest about their identity and who was lying through his or her teeth, there’s no way the company could have prevented a situation where male users outnumbered females 6 to 1 or even 13,000 to one. It seems unfortunate that they should have chosen to obfuscate, rather than just providing the service and letting the cards fall where they might…

I’m not sure how this one is going to end. Will the company go under? Will any of the litigation being filed against them come to anything? Will people learn from their misfortunes, or possibly from the misfortunes of others, and stop putting information online that could cost them everything they have? It is possible that at least some people out there in cyberspace will take this as a wake-up call; it’s even possible that it might make a few people stop and reflect on whether they really want to go through with cheating on their spouse in the first place. Perhaps in the long run people will be more careful, consider the potential consequences of their actions, treat their customers more honestly and deal with each other more openly, and the Internet in general will become a slightly less awful place…

Just between you and me, though, I would not put money on it…

The Umpire Strikes Back

A rather unusual follow-up to our post of May 28 of this year appeared online this week; something which may provide a temporary answer to the question of whether anything can be done about fraudulent crowdfunding projects. My last post on this subject mentioned a company that had completed its crowdfunding offering, taken the money, at (at least so far) failed to produce any actual product. Unfortunately, the company insists that it is still working on the project, and will (eventually) make good on its commitments – as soon as it figures out how to do so, presumably. Most crowdfunding projects to date don’t have any specific deadlines by which the funded company has to pay off, since in many cases the company is trying to make a product that has never existed before, so until now the “we’re still working on it!” defense has worked well enough. That may be changing, however…

According to a story on the Gizmag website, the FTC has taken action against the entrepreneur behind a failed board game project that began with an offering on Kickstarter. You can also pick up the details from the Federal Trade Commission site if you’d like, but the basic facts of the case are that the man running the project, Erik Chevalier, got the $123,000 he was asking for to create a Monopoly-style board game and then failed to spend any of it on actually producing the game. Instead, the FTC claims that he spent the money on personal expenses and put some of the residue into an unrelated business project. Even the designer and artist who actually did the work on the prototype were never paid for their work…

For the moment the sanctions against Chevalier are limited to a civil judgement and an injunction against any misrepresentation of anything involving crowdfunding, since it still isn’t clear what criminal charge (if any) would apply to misappropriation of funds from a crowdfunding project. It’s not embezzlement in the usual sense, and I don’t think you could make fraud stick unless you could somehow prove that the defendant never intended to make or sell any products in the first place. It’s possible that this will result in some of the contributors getting at least some of their money back, assuming that Chevalier ever manages to pay off the judgement, but in the long run I think the more important aspect of this story may be the precedent it’s going to set…

Up until this point there really hasn’t been much anyone could do about shady crowdfunding projects. Leaving aside the aforementioned legal gray area, there’s also the issue that it really isn’t possible to pass a law against being an incompetent businessperson. When you invest money in any entrepreneurial project there is always some degree of risk, and that doesn’t change if the investment is spread among hundreds or thousands of participants instead of a single funding source. Every so often an idea just won’t fly – there’s actually an online database of examples, and it’s only a matter of time before Kickstarter and the other major sites start cross-referencing the failures to provide context for their offerings. Although I suppose somebody might start a service to do that, if they can arrange the funding…

How much impact the FTC and/or the Justice Department will be able to have on actual scammers hiding on crowdfunding sites remains to be seen, of course. Some people will gamble money on anything, and there is only so much that our government can do about criminals from outside the US who might be capitalizing on a still-evolving industry. But up until now it has generally seemed as though no one was keeping score, or even paying attention, to people online who might be taking advantage of the naïve, generous and gullible. If this story is any indication, however, things may be about to change…

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…

Coming Home to Roost

I was reading with great interest the sentencing phase of the trial of the “revenge porn” site operator in San Diego, California – said Internet entrepreneur has now been given 18 years in jail for identity theft and extortion – and reflecting that this represent a change from the usual results of Internet crime. For the most part, people who commit crimes like these online remain free, and frequently remain anonymous, because their activities are concealed online or because their actual physical location places them beyond the reach of US law. In this case, however, not only was the operator living in the US, he was extorting money from people using PayPal…

You can catch the original store from the San Diego Union-Tribune site if you’d like, but the details are pretty basic. The defendant in the case, Kevin Bollaert, started a website where anybody who wanted to could post embarrassing pictures of ex-partners or anyone else they wanted to publically humiliate. Initially he simply refused to acknowledge demands to take the offending pictures down, but eventually he began charging the victims for the privilege of no longer being exposed online, with prices starting at $250 and rising (presumably) based on what the market would bear; e.g., how embarrassing the pictures were and how badly a specific victim wanted them taken down. This eventually amounted to over $30,000 – at least, that’s what was left on the site’s PayPal account when the law finally caught up with him…

What struck me about the case, apart from the absurd victim blaming you see whenever any compromising documents or pictures are released online, was just how divorced from reality the site operator and all of his colleagues and their apologists actually are. Identity theft and extortion to prevent it are actual felonies, not some sophomoric self-amusement, and the punishment for doing them could be decades in jail, not just a strongly-worded reprimand. Just because criminals on the other side of the world are safe from prosecution under US law doesn’t mean that some idiot in San Diego is untouchable, either. And, by the same token, no matter how safe you believe your files, data or identity might be, having any of it stolen is always going to be a hazard – even if it doesn’t involve compromising pictures…

From a business standpoint, I find this case more than a little alarming for at least two reasons. First, there’s the issue of keeping our own personnel from doing something this bone-headed while at work, and unintentionally bankrupting the company. Until recently I would have said that this was a distant concern, but apparently there are people who will assume that a crime isn’t a crime if you commit it online – and there’s no way to be sure that one or more of those people don’t work for us. Just as important, though, is the fact that any compromising information that the company has ever allowed to move over the Internet is also out there, even if it wasn’t compromising of anything in particular when it was recorded or sent. Which means that even if industrial espionage or extortion directed at an entire company using former Internet documents haven’t happened already, they eventually will…

We’re already living in a world where any bad choices or stupid remarks you have ever made can be preserved electronically and come back to haunt you forever. Now, it appears, we are also facing the possibility of having every embarrassing thing anyone in our entire company has ever said or done coming back to bite us at any moment – and the prospect of serial criminals who would apparently commit such outrages for their personal entertainment and relatively tiny amounts of money…