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Tuesday, February 09, 2010 |
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From the Desk of
Juval Aviv
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January 2010
TSA Security
There was a recent situation at Newark airport which served to highlight air travel security issues that are being ignored. The incident involved a still unidentified person entering a secure area of the airport without passing through security. The incident caused the entire terminal to be evacuated during the busy holiday season and every traveler had to exit and go back through security, creating a mob of thousands of people packed tightly together, not moving for hours.
There is very little security at airports, if any, prior to going through the body and hand luggage scans. If a bombed plane could kill hundreds of people, so could a bomb in a busy airport terminal where sometimes hundreds of people are waiting in line to check their bags or to go through security. If a bomb had gone off in the Newark airport, it could have killed far more people than would have been on most planes. And now terrorists know this. They’ve seen the photos and news footage of the stranded people packed like sardines in the terminal waiting for the secured area of the terminal to be cleared. All it would take would be a similar ruse, one man to rush up the exit hall and then chaos. A second person or persons could easily bring explosives into the front of the terminal because there would be no one there to stop them.
I always compare our security here in the U.S. with Israel, but it bears repeating. In Israel there are multiple lines of security, starting with a roadside check on the road to the terminal where officers stop and question people, asking them benign questions like: “Where are you from?” and “Where are you going?” The answers aren’t important; it is how the people act when they are answering. The officers are looking for signs of distress or nervousness–in other words, behavioral profiling. Outside the terminal there are both armed guards and plain clothed security looking for signs of odd behavior. There is another layer of security at the door, where random travelers are taken aside and they and their luggage are run through a magnometer. Even the ticket agents are trained to ask certain questions and to be on the lookout for suspicious behaviors like someone who won’t look them in the eyes when they are speaking.
While waiting in line for tickets and baggage check-in, people are not allowed to queue up in large enough numbers to be a target. Bags are immediately scanned at check-in in a screening area surrounded by blast proof glass. If the screeners spot anything that looks suspicious they place the bag in a blast proof box and call the bomb squad who take the package away. The final step is the screening of hand luggage and the body scan, which is the first and only security check in U.S. airports. In Israel, travelers will have passed through a gauntlet of 5 layers of security before they ever reach this point.
Rather than tossing our shampoos, scanning our shoes, or newer reactive measures put in place to respond to very specific threat scenarios, we should be looking at the bigger picture and taking a much more comprehensive look at how we secure air travel. For example, we are now in the process of installing expensive new body scanners in our airports which will render us nude to security screeners because of the recent attempting bombing of a Northwest Airlines flight. Such scanners may have picked up the powder that the suspect had strapped to his thigh, but the fact that the suspect was traveling without luggage on a one-way ticket paid with cash should have been enough of an alert to have stopped him from boarding a plane without being thoroughly searched. What we really need—what will really make us all safer–would be better trained and more comprehensive human security, not expensive gadgets and more silly rules.
December 2009
Madoff Anniversary
Friday, December 11th , is the one year anniversary of the arrest of Bernard Madoff. While many other Ponzi schemes have been uncovered in the past year, none made such a mark on the public conscious as that one. Consequently, people have become much more careful about whom they invest with. And well they should. Greed is a big motivator and there will always be corrupt financial advisers and fraudsters who are thinking up new and inventive schemes to swindle people out of their money.
As we mark this grim anniversary, we should remind ourselves of some of the steps that every investor should take to protect themselves.
If it sounds to go to be true, it probably is. The unraveling of the Madoff Ponzi taught many investors the harsh lesson that if a fund has improbably high returns year after year, it should probably raise a red flag. Every fund, every business, is going to have good and bad years.
Personal relationships are no substitute for due diligence. Knowing someone who runs a fund or company or knowing people that have invested in that fund or company means nothing. Do your due diligence prior to investing and periodically check to see what is being done with your money.
Is your advisor properly registered with all professional and regulatory agencies (i.e., FINRA, SEC, the FPA, NAPFA)? These organizations have publically accessible websites where you can check for registration and complaints, violations, suspensions etc.
Do a media search. Doing a simple Google search for news articles about a person or company can turn up a wealth of information about lawsuits, arrests, and investigations.
Do you understand how the money manager or fund makes its money? If the investment scheme is too obscure, mysterious or complicated for you to understand or if the there is a reluctance to explain the investment scheme in a way that you can understand it, then you should probably move on.
Separate your money from your money manager—is there a custodian holding your account assets? A custodian is a third party firm that holds your investment. When depositing money to an investment account you should always write the check to the custodian, never directly to your money manager.
Are your monthly financial statements consistent? Always review your account statements when they arrive, look particularly closely to any money that is leaving your account. If you don’t understand something, then call or go by your money manager’s office and ask questions until you do.
Review Your Account Online. In addition to your statements, you should also be able to access your account online and view what is happening on a day-to-day basis. Check your accounts periodically and see what trades are being carried out.
Who acts as a check on your investment?
-do you know the accounting firm or auditor?
-are they licensed in your state?
Have you done a nationwide check for criminal and civil litigation records involving the fund and its principals? There are many services that offer this search on the internet, but some states, including New York don’t provide their records to these databases and must be searched on a state by state or even county by county basis. Hiring a firm that specializes in due diligence investigations is probably the best way to go here.
What are other people saying about the fund and its principals? Like the preceding tip, this is difficult to investigate on your own, but it can save you from making a huge mistake. Unless there is an arrest, issues like drug dependency or other erratic behaviors can often be swept under the rug and might not come up in even the most thorough check of criminal or civil records. Doing a reputation check with former employees, co-workers and associates can uncover damaging information for which there is no public record.
There is no way to take the risk out of investing, but by doing your homework and by regularly reviewing your investments, you can mitigate that risk and perhaps protect yourself from losing money to fraud or negligence.
October 2009
Hedge Fund Misinformation
Research from the NYU Stern School of Business based on confidential due diligence reports indicates that hedge fund managers often lie about the amount of money in their funds, how well they performed and regulatory and legal history. According to the recent study, nearly 20% of the information contained in the due diligence reports conflicted with what the hedge fund managers were saying about their funds. Assets could not be verified by alternative sources, performance couldn’t be verified and managers that were interviewed had difficulty recalling basic information about their level of assets and performance.
To be fair, most hedge funds have difficult-to-value investments, which makes the valuation process challenging. However, the valuations are being set by people who are paid based on a percentage of profits, so a grain of salt is necessary when reviewing a fund’s statements about their performance. This is particularly true in light of the number of funds that have been revealed to be Ponzi schemes over the last year.
Whether you are an individual investor or a fund of fund manager, it is vital to execute proper due diligence prior to investing in a fund. In addition to the necessity of vetting the information provided by a potential fund, you also need to look at other aspects of a fund like their back office functions and service providers and the fund’s relationship with their prime broker. For example, funds that were using Lehman as their sole prime broker were cut off from their money when Lehman went under, even if their investments were performing well. Additionally, there will surely be new government regulations regarding the due diligence that must be done prior to investing. There will be more responsibility placed upon money managers, banks and investment funds to make sure that they are not investing with fraudsters and stiffer penalties for not doing so.
Now more than ever, it is essential that you mitigate your risk by finding out as much about the companies that you are doing business with and investing in as possible. As investors struggle to recover from the recession and losses from poorly performing investments, any additional losses could be catastrophic.
Online Banking Fraud
On Wednesday of this week, the FBI arrested 53 people conducting a vast financial fraud based on phishing, which involves contacting people online via email or instant message and tricking them into giving away personal information. In this case, the victims, mainly customers of Bank of American and Wells Fargo, received emails which were made to look as if they were an urgent correspondence from their bank. The emails then directed them to a fake website, identical in appearance to the actual bank website. Once on the website the victims were asked for their bank account numbers, online banking passwords, Social Security Numbers and driver’s license numbers. This information was then used to access their banking accounts online and transfer money out of it.
Online banking fraud is on the rise in the UK as well. According to a study that was released this week, online banking fraud in the UK has risen 55% in the first six months of 2009 compared to the same time period last year. This rapid increase was due in large part to malicious software programs that affect vulnerable home computers and the more than 26,000 fraudulent phishing websites that trick people into divulging their passwords.
Online banking is particularly vulnerable in the U.S. as most banks only require a username and password to gain access to accounts. In the U.K. banks have taken more rigorous measures. For example, NatWest requires customers to enter their birth date plus a unique four digit code that is not the same as their ATM PIN number. Then the website asks for a password, but only certain letters. The combination of letters changes each time the account is accessed via the website. If you fail to enter the code and password correctly, you cannot access your account. Even this measure is vulnerable to phishing scams if people unwittingly send their information to a fraudster.
Following are some tips to protect yourself from online banking fraud:
1. Choose complex passwords for your online accounts that are a combination of at least seven numerals and letters. Change the passwords at least every 90 days. A recent phishing scam which netted the login and password information from 10,000 users of the email website Hotmail, revealed that the most commonly used password was 123456. While it may be easier for you to remember a simple password, it is much easier for fraudsters to guess them if you use simple number combinations or other common passwords like your birthday month.
2. It is best not to store personal information like tax records or documents containing login and password information on your computer. If you do, make sure that you store sensitive information in password protected files.
3. If your only computer is a laptop that you carry around with you, use the Clear Private Data option under the Tools menu on the toolbar of your internet search engine on a frequent basis. This will clear out your browsing history which could direct a thief to your online banking accounts, as well as any passwords that you may have inadvertently automatically saved.
4. Be careful of visiting unfamiliar websites, especially if you are introduced to them by pop-up ads, banners or by a link in a spam email. Accessing these websites, or downloading anything from them, can introduce your computer to malicious software programs that can permanently damage your computer or scan your computer for information that can be used to access your banking and credit accounts.
5. Never download an email attachment if you are not familiar with the sender. These attachments can also be portals for malicious software.
6. If you use a wireless internet connection in your home, make sure that it is password protected. If not, anyone within range of your internet signal could easily access your computer when you are online. Also…pay attention when doing anything involving sensitive information like social security numbers or online banking information that you are actually still on your wireless server. If there is another strong, unencrypted wireless signal nearby, your computer might have slipped onto the other network.
7. Do not bank online from your laptop at wireless hotspots like coffee shops. There are lots of other people using the same server and your information is not secure.
8. Make sure that the antivirus software on your computer is up to date. Sometimes the frequent requests to perform updates from your antivirus and computer software providers can be annoying and time consuming, but it is important that your computer is protected from the latest threats.
9. Be careful of the information that you share on social networking websites. Often people inadvertently give away enough information on these websites for fraudsters to correctly guess your login and password information, especially if you are using common passwords like the names of pets or children. This sort of information can also be used by identity thieves.
10. Never give out online login and password information of your bank accounts or any other personal information like your social security number via a website questionnaire or email. If your bank wants to contact you about an issue with your account, they will call you or send you a letter. They would never conduct urgent business regarding your account via email. There is no legitimate reason why you would ever need to give out personal information in such an anonymous fashion.
11. If you suspect that your banking account has been tampered with by a fraudster, via online access or other means, contact your bank immediately and have them shut off access to the account.
September 2009
Oil Ties In Lockerbie Case
Kenny MacAskill, the Scottish Justice Secretary responsible for the release of Abdel Baset al-Megrahi, the man convicted of the bombing of Pan Am Flight 103 of Lockerbie, Scotland, has a brother who is an energy industry executive who has been involved in pitching for oil business in Libya.
According the Wall Street Journal, Allan MacAskill has worked for several companies that sought oil business in Libya. He is currently the business development director at SeaEnergy Renewals, a firm that develops offshore wind farms.
Allan MacAskill is quoted stating, “[Kenny MacAskill’s] my brother and he is a minister of the Scottish government, anything to do with Megrahi is nothing to do with me.”
A spokesman, for the Scottish government desribed any attempt to link Kenny MacAskill’s brother to the Lockerbie decision as “ridiculous”. Conservatives, however, are enraged that this information was not disclosed prior to the decision.
Kenny MacAskill’s Scottish National Party’s leader, Alex Salmon, recently opened new offices for SeaEnergy in Aberdeen, Scotland. Allan MacAskill’s recent projects at SeaEnergy included a wind farm for his former company, Talisman Energy, an oil company that has sought contracts in Libya.
Asset Recovery for Victims of Fraud
In the wake of the recession, huge financial frauds are being uncovered on a daily basis. Some of these cases have already gone to trial, including the case involving financial advisor, Bernard Madoff. Madoff was recently sentenced to 150 years in prison for his Ponzi scheme which defrauded his investors out of billions of dollars.
What happens now to the victims of these frauds? There will be judgments and restitution orders, but they rarely help victims to recover their losses and the funds that are recovered may take years to distribute. According to some veteran receivers, it may take as much as 15 years to distribute any funds recovered from Madoff.
There are steps that can be taken to recapture any remaining funds from these frauds, however, which were most likely secreted abroad. In English common law countries, for example, there are pre-action discovery vehicles that can be used to gather information to help identify wrong-doers and ways to freeze assets prior to obtaining a judgment. Being able to freeze assets prior to a judgment is critical, as obtaining a judgment without freezing the assets merely tips the fraudster off and allows time to move the funds again.
Other countries that are used as havens for fraudsters are also starting to reform their laws and judicial processes to make it easier to track down and recover ill-gotten assets. One such country is Indonesia, which is currently working on a bill which would allow immediate confiscation of assets obtained illegally. Indonesia is being supported by the international community in this effort and is a member of the International Organization of Supreme Audit Institutions along with the U.S. and the U.K.
With help from experienced investigative and legal counsel, asset recovery is a real possibility. And while it takes time, it may be a much better option than waiting for years for funds from restitution orders to arrive.
August 2009
Ponzi Schemes
Two days ago, the Associated Press reported on a federal civil fraud case against two suburban financial firms and their managers in Detroit. Federal regulators say a $53 million Ponzi scheme was being run at BBC Equities and Bravata Financial Group in Southfield, Michigan. U.S. District Judge David Lawson is being asked to appoint a receiver to look at the books. The Securities and Exchange Commission claims John Bravata of Brighton recycled investors’ money to pay other investors who were promised 8% returns, although he denies wrongdoing. The SEC says millions were spent on homes, boats, cars and opulent lifestyles.
Here we have yet another Ponzi scheme being brought to light by the recession and we will certainly see more. Cases like this one underscore the need for individual investors to do adequate due diligence before placing their money with a financial firm. Simply googling the firm and its principals, or asking for recommendations or studying the financials provided by the firm is not enough. A thorough background investigation of all principals should be done prior to investing which should include a nationwide screening of civil and criminal courts, regulatory agencies, and a check for liens or judgments against the subjects. The background investigation should also include a media survey, a reputation check with sources not provided by the subject and a look into the subject’s financial situation. Deep background investigations can turn up red flags like lawsuits, criminal charges in other states or evidence that the subject is living beyond their means which can help you avoid being taken in by a fraudster.
Homegrown Terrorist
Recently a North Carolina native, Daniel Boyd of Willow Spring, was arrested along with six other men, including his two young sons on charges that they were plotting attacks on foreign soil. According to the FBI, Mr. Boyd, who converted to Islam as a young man, spent time in Pakistan battling Soviet troops two decades ago and was angered over the presence of U.S. troops near Muslim holy sites. He and his small group were planning trips to the Middle East to wage violent jihad, and had apparently already made several such trips to Jordan, Kosovo, Pakistan and Israel. While some of his neighbors expressed shock over his arrest and worry that the authorities are rushing to judgment, over 27,000 rounds of ammunition were found on Mr. Boyd’s property and he can be heard on recordings expressing his love for jihad. Whatever the outcome of Mr. Boyd’s trial; this story is yet another example of the dangers that we face from homegrown terrorists. According to some sources, there are nearly 1,000 active hate groups operating in the U.S. These groups span the religious and political spectrums and have a wide range of goals. They also have the ability to reach a wide audience of people who share their beliefs over the internet. While an attack from foreign terrorists remains a danger, an attack from homegrown terrorists is far more likely and much harder to guard against, given the range of people and their lack of organization or common goals. It is extremely important for law enforcement officers on a local level, in small cities and towns, be given proper counterterrorism training because it may very well be that the next big attack originates from such a place instead of the large urban centers that most people expect.
July 2009
ID Theft Ring
On July 26th, the LA Times reported on the arrest of a Pakistani native, Shamsha Laiwalla, in Los Angeles. Ms. Laiwalla, the owner of a vehicle registration company, is accused of being the architect of an extensive fraud ring involving DMV employees in at least three states. Ms. Laiwalla, when approached by an undercover LAPD officer posing as an illegal immigrant, allegedly claimed that she could get a valid driver’s license, a forged birth certificate and a Social Security card, bearing the name Francisco Gonzales Rios for $3500.
Ms. Laiwalla’s illegal service had been in operation for years and it is unknown how many thousands of people she obtained false documents for. It is also feared that her operation may have ties to terrorist groups in her native Pakistan.
This is not the first story of its kind. It is a problem faced by any company whose employees have access to sensitive information or intellectual property and underscores the need to do proper due diligence when hiring people for such positions. Many companies do background checks that amount to little more than an internet search, a criminal record search of the state in which the candidate currently lives and calling the references offered by the candidate who is being screened. This type of search is not likely to turn up the kind of information which could tip you off that a person has bad credit and is deeply in debt and vulnerable to exploitation or the temptation to steal or embezzle, or that the person has a bad reputation with former co-workers or landlords who can legally tell you things that a former employer can not, or that the person has a criminal record in states where they don’t currently live. Spending the time and money to do an extensive background check, complete with a reputation check and a full criminal and civil court record screening in all states, prior to hiring an employee can save a company a lot of money, embarrassment and loss of reputation in the long run.
Staying Safe—Hotel Security
Last week two popular American chain hotels in Jakarta hotels were bombed by terrorists. The attacks on the JW Marriot, which had been bombed before in 2004, and the Ritz-Carlton, also a subsidiary of the Marriot hotel chain, were carried out by terrorists who had registered as guests at the hotels two days before. The bombs went off simultaneously.
Protecting a large hotel from a terrorist attack is particularly difficult. In large cities, such hotels are often very close to the street, so that attackers do not even have to enter the hotel. There are also usually numerous entrances and exits, being utilized by hundreds of hotel guests and employees. It is very easy to slip into such an establishment unnoticed, and if a terrorist were to take the extra step of actually registering as a guest, as the terrorists in Jakarta did, it would be even easier.
There are steps that can be taken however. One such step, that many hotels would be loathe to take, is baggage screening. Instituting a baggage screening policy would be very costly, but for hotels that are attractive terrorist targets like the big American hotels in Jakarta, it is necessary.
As we have for years, Interfor recommends that our clients traveling abroad in that region stay in mid-level European chain hotels. They attract less attention than American chain hotels and luxury landmark hotels which are prime targets for terrorists, thieves and kidnappers. We also recommend staying on a lower floor in a room facing away from the street as bombs often go off right at the front entrance. Higher floors are safer from street level bombs, but making an emergency exit from a high floor may take time that you do not have and fire trucks in some countries may not have ladders capable of reaching those floors. And as always, be aware of the location of exits and stairwells and know exactly how you would exit the hotel in the event of an emergency.
June 2009
Homeland Security: It is Up To All of Us
In January and May of this year the Department of Homeland Security issued reports stating that hate crimes were on the rise, and that there was increased danger from extremists, fueled in part by anger over the election of a black president and the failing economy. While the reports raised a great deal of controversy, their findings have proven to be accurate. Across the country we have seen increased instances of hate inspired crime, from symbols like spray painted swastikas and burning crosses to murder; most notably the shootings of a young army private at an Army recruitment center in Arkansas by a Muslim extremist; the murder of Dr. George Tiller, an abortion provider, by a Christian extremist; the recent foiled attack on a Bronx synagogue and now the shooting at the U.S. Holocaust Memorial Museum in Washington, D.C.
While our national attention has remained focused on the threat from foreign terrorists since the events of 9/11, there are nearly 1000 active hate groups located here within our own borders according to the Southern Poverty Law Center. Beyond their actual members, these groups are also reaching and inspiring countless like-minded people through the internet. Add to this the faltering economy which has left millions of people unemployed, unmoored, frustrated and looking for an outlet for their anger, the events that we have seen over the past few months should not have come as a surprise. We have seen violence and extremism rise time and time again under the same circumstances, from Germany before World War II, to the rise in hate crimes in the U.S. during a previous recession in the early 1990’s.
While our government has dedicated resources and man power to tracking extremist groups and their activities, it is extremely hard to predict when their members will turn from expressing their hate in speeches and on internet forums, a freedom protected by our Constitution, to actually committing violent acts. This is particularly true in cases of “lone wolves” like James von Brumm, the suspect charged with the shooting at the Holocaust Museum in Washington, DC. Many times terrorist groups are foiled when their plans are discovered during the organizational phase as they are communicating with each other via email, instant message, phone or in internet chat rooms. If they are being monitored, police and government agents have the opportunity to learn of their plans in time to stop them. These opportunities do not often present themselves when someone operating alone. Even with a known extremist like Mr. Brumm who had committed violent acts in the past, it is virtually impossible to predict when someone like this will snap and decide to take action.
In the wake of Wednesday’s shooting in Washington, President Obama today urged us to “remain vigilant against anti-Semitism and prejudice in all its forms.” But vigilant how exactly? We are often told to be wary of an increased threat level, but rarely are we told what to do about it, if anything. One thing that we could do would be to engage our citizenry, training them to aid in their own security, much like Israel has done, which would provide an untapped resource for our law enforcement and intelligence agencies which are already stretched too thin. These types of programs already exist on a local level from the Neighborhood Watch groups in the U.S. to programs like C.S.T. in the U.K., an organization of volunteers who provide security for Jewish organizations and events. These programs teach volunteers how to identify potential threats and how to describe and report what they are seeing. For example, a potential threat could be an unfamiliar car that is seen driving up and down the same block or suddenly parked outside a home or church for several days. The volunteer is trained to notice that car and then to describe the car and driver in detail from make and model to the license plate number and how to report this information to the appropriate authorities. Volunteers are not encouraged to take vigilante action or personal risks or to spy on their neighbors like in the former Soviet Union, but to be aware of potential threats, to know what these threats look like and to be observant. Information provided by volunteers in programs like these, which have been around for decades, often leads to arrests and the programs have been proven to reduce crime and violence in the communities that they serve.
At the end of the day, our government simply does not have the resources to protect us from every crackpot who might decide to pick up a gun or a bomb and kill someone, nor do most of us want to live in the militarized police state that that level of security would require. What we can do is take individual responsibility for the safety of ourselves, our families and our communities, not by taking up arms, but by simply being observant of what is going on around us. In New York City, for example, there are 38,000 policemen charged with protecting 11 million people. The police cannot be everywhere at once, stopping every crime before it takes place. But, the 11 million people who live and work here could be their eyes and ears, reporting suspicious behavior, abandoned packages and the like. By educating its citizens about how to identify potential threats and how to record and report their observations, our government could effectively and inexpensively tap into a resource that could provide increased security for us all and perhaps stop the next James von Brumm before he strikes.
April 2009
Madoff Proof Your Money
Could your investment manager be another Bernard Madoff? As this scandal unfolds with more disturbing revelations each week, its time to consider how to avoid becoming the next victim of another stunning fraud.
As we found with many of our other major fraud investigations (i.e., Pamalat, Conseco and Enron), there were uncomplicated, telltale signs that a fraud was ongoing with Madoff's bogus fund.
Unfortunately, this scandal is merely the tip of the iceberg---throughout 2009, similar financial frauds, scams and Ponzi schemes will be revealed as cash strapped investors try to withdraw money from bogus investment funds.
Now, more than ever, you must protect your money and your investments. Before you invest, consider the following;
Remember the old axiom---any financial arrangement that sounds too good to be true, probably is too good to be true
Do you understand how the money manager or fund makes its money?
Be wary of obscure, mysterious or complicated investment schemes
Separate your money from your money manager—is there a custodian holding your account assets?
Is your advisor properly registered with all professional and regulatory agencies (i.e., FINRA, SEC, the FPA, NAPFA)?
Are your monthly financial statements consistent?
Who acts as a check on your investment—
--do you know the accounting firm or auditor?
--are they licensed in your state?
In today’s financial landscape, there is NO substitute for a thorough, comprehensive due diligence on your money manager and their financial firm. When it comes to your hard-earned money, an ounce of prevention is worth a pound of cure.
February 2009
War on Terror: It’s Time to Change Course
Our country’s “War on Terror” began with the Bush administration’s response to the attacks on September 11, 2001. The term encompasses the military, political, legal and ideological struggle against Islamic terrorism and Muslim militants. There have been successes. Airport security has tightened somewhat and there has been success foiling subsequent attacks. However, there are many areas in which we are still vulnerable and with a new administration, there is a chance to take a fresh look at the ways by which we combat terrorism.
The battle against terrorism is not one that can be waged solely militarily. As we know, terrorists do not have a country or a capital. They are spread throughout the world, in every country and belong to many different unconnected and unorganized groups. They do not all have the same goals or share the same religion. There is not a place where we can strike at them that will cripple them. If one group is destroyed there, are hundreds of others with new recruits every day.
Because of this, the term “war on terror” is a bit of a misnomer, because it implies that the battle against terrorism is one that can ultimately be won. Unfortunately, there is never going to be a point in our future where the terrorists will have been completely defeated, where no terrorists will exist--because frankly, terrorism is very effective. It’s cheap, it works and it’s a method that is available to anyone with an axe to grind. What we can do is fight a more effective battle that minimizes the ability of terrorists to accomplish their goals.
Part of fighting a more effective battle is to fight proactively rather than reactively. Up to this point, most of the counterterrorism measures that have been taken by our government have been in reaction to specific events. The tightened security in airports is a good example. Security tightened after September 11th and then again after the “Shoe Bomber” incident which is why we now have to take off our shoes in the security line. This is all well and good, however it is unlikely that a similar attack will take place because the effectiveness of this type of attack was dependent upon the terrorists’ ability to subdue the passengers with small weapons. Now airplane passengers will fight back if they are faced with a similar threat as they know that they face a more certain death if they do nothing. Terrorists know this as well as we do, so they are unlikely to try something similar.
Terrorists are now more likely to strike by suicide bombers at mass transit hubs, sports arenas or shopping malls in major cities, quite possibly a timed attack in multiple cities at once. These targets are very porous and it would be extremely easy to slip in with a bomb in a backpack or underneath a jacket. Our ports are another vulnerable target that have not been sufficiently protected in the years since 2001, even though, in addition to being potential terrorist targets, they are gateways for illegal aliens, human trafficking, counterfeit drugs, narcotics and black market weapons.
We don’t need to wait for another major terrorist attack on one of these fronts to start thinking about ways to upgrade security whether it is by increasing the inspection of ships and containers entering our ports or by increasing security and video monitoring of mass transportation.
One major asset the government has neglected to use in its battle on terrorism is its own citizenry. Every day there are millions of pairs of eyes that traverse our subways, and buses and work at our ports that could be trained to report suspicious behavior or abandoned suitcases or packages that could contain bombs. Currently there is no concerted effort at educating the populace and no organization in charge of receiving or processing tips. You can call 911, but that service was meant for emergencies, not processing a high volume of tips that will most likely lead to nothing.
With a new President, it is time for a realistic, less reactionary look at how we combat terrorism and the best way to prepare for a future in which we will continue to be vulnerable to terrorist acts. It is also time for the government to stop coddling us, to be honest about the dangers we all face every day and encourage each of us to do our part to help keep us safe.
October 2008
Global Financial Crisis
Dear Friends:
These are extraordinary times in the financial markets where the unthinkable seems to happen on a weekly basis. Given this uncertainty, the need for actionable intelligence in the business, financial and governmental arena is critical for decisive, informed decision making.
We are strongly positioned to protect you and your clients in today's challenging environment with the hallmark of our service: diligence, discretion and thoroughness.
As you evaluate your options going forward, Interfor remains ready to assist you in your endeavors throughout the world.
We trust that we will all persevere through these tumultuous times.
With warm regards,
Juval Aviv
President & CEO
Interfor, Inc.
June 2008
WORKFORCE AT RISK
A conversation with Juval Aviv from the Spring 2008 issue of INsight Magazine.
INsight spoke with Juval Aviv, President & CEO of Interfor, Inc., an international corporate intelligence and investigations firm, as well as the author of Staying Safe:The Complete Guide to Protecting Yourself, Your Family, & Your Business. A former Israeli counterterrorism intelligence officer before founding Interfor,Mr. Aviv has more than 30 years of experience working with corporations and other entities, both domestically and internationally,on security measures for the protection of assets and personnel.
INsight: You have said, “In an open society, the greatest risk is not knowing that you are at risk.” For corporations, what are the greatest risks they may not know about and for which they are ill-prepared?
Juval Aviv: Open societies are necessarily more forgiving and lax when it comes to security and safety vulnerabilities. Unfortunately, corporations that are based in such societies exhibit many of the same qualities. Security is usually designed to be non-intrusive and hidden from employees. Unfortunately, this concept is counterproductive and dangerous in today’s global economy. Due to this stance, many corporations are not positioned to confront existing and potential risks. For example, most people are familiar with the concept of IT vulnerabilities. However, most people do not realize that the greatest IT vulnerability is not a system or technology; it is the mechanism in which employees interact with those systems. A corporation can have the best IT security in the world; however, if an employee loses his laptop at an airport or accesses his corporation’s network from an unprotected wifi interface at home, the vulnerabilities are not contained or mitigated. This risk becomes even more significant when you consider the increasing number of home-offices that corporations are shifting towards. A “clean-desk” policy or password protection system may be enforceable at a corporate office, but what happens when an employee works from home? Many people don’t even lock their doors during the day let alone worry about securing proprietary information. Travel also exposes companies and their employees to increased risk, particularly in terms of securing proprietary information. Any time documents or information are taken away from a company’s secured facilities, there will be increased risk, both to the safety of their employees and the information that they are taking with them. Often this is overlooked and travel coordination is left completely up to the individual employee. Overall, I consider the greatest vulnerabilities facing industries today to stem from what we call “human risk variables.” Specifically, I am referring to all the risks posed to a corporation by current or former employees, whether malicious or not. It is difficult to find a balance between providing adequate security for your company and clamping down so hard that your security measures hamper productivity or make your employees feel like they work in a prison. By giving employees the freedom that they need to feel comfortable and do their jobs efficiently, companies are unfortunately putting themselves in a position where a vital part of their security plan is in the hands of potentially thousands of employees.
INsight: In your experience, which of these risks is the most misunderstood or overlooked?
Juval Aviv: Again the human factor comes into play. People tend to forget that there may be fraudsters, identity thieves or maybe even terrorists who are actively trying to penetrate the security of their company. They become complacent and casual and the idea of personal risk seems remote. That is when mistakes are made. The most costly and complex security measures in the world can be foiled by a lax employee.
INsight: Are some industries more vulnerable to these risks than others?
Juval Aviv: While no industry is invulnerable, some clearly face greater risks than others. For example, industries that have attracted the attention of activists, like high profile companies that have a reputation for polluting the environment or biotech companies, would be more vulnerable to risk. The pharmaceutical industry, obviously, would be at a very high risk from both counterfeiters and terrorists. Defense contractors, financial companies, food suppliers, all are at a greater risk. Any industry that makes a product for mass consumption, or which if disrupted would have a great economic impact on the country or the world, is more vulnerable. Vulnerability, though, really depends on the effectiveness of the individual company’s security measures and the control they have over proprietary information and ingress to their facilities.
INsight: What steps can corporations take to effectively address these potential threats?
Juval Aviv: Addressing the problem of human risk variables is really just a matter of consistent and frequent training and testing. Employees need to be reminded to dispose of their trash properly, shut off power to their computers at night, lock up sensitive documents, and report lost I.D. and entry cards immediately. Employees too, out of an ingrained habit of being polite, will often open doors to strangers who don’t have entry cards or fail to question unauthorized people in sensitive areas. They need to know that simple things like this can expose their company and their fellow employees to great risk. They need to be reminded of security practices and measures on a regular basis to keep them top of mind. Ultimately, by taking responsibility for travel safety, a company is not only protecting a valuable employee but their proprietary information as well. In terms of threats coming from outside the company, obviously IT security is paramount. However, without a well-trained staff and good physical security measures, IT security is worthless. For smaller companies that may not have a top notch security director on staff, it might be a good idea to hire a consultant who can help assess and coordinate their security plans. If you have a security staff on site, it is vital that all aspects of security, including IT and physical security, be coordinated among the various departments.
INsight: What are the travel safety risks that often are overlooked by a corporation and its executives, consultants and other frequent flyers? Would you share some examples of problems that business travelers encounter? What are some solutions?
Juval Aviv: The best thing anyone can do when traveling, especially overseas, is to research and plan ahead. Check out government websites for travel warnings. Go online and read local news in the area in which you will be traveling to check for political unrest or violence. Get recommendations for good hotels in safe neighborhoods, preferably an American or European chain hotel as they will have modern hygiene standards and will have the best security. Often, business travelers will choose hotels in business districts so that they will be near their clients or the locations of their meetings. Business districts in many cities, however, tend to be rather deserted at night and may not be the safest place to be after hours. It is preferable to stay in neighborhoods with restaurants and nightlife, where there will be more street traffic and probably more of a police presence. Alternately, crowded streets and squares are more likely places to harbor pickpockets. In volatile countries, crowds are likely targets for kidnappers or terrorists. These areas should be avoided. If you are going to a third-world country, cabs may not always be safe and are often unregulated and unmarked. Get a recommendation for a reliable car service. It requires a bit of extra coordination but could save you a lot of trouble in the end.
INsight: What steps can a corporation take to help ensure safe travel for its employees?
Juval Aviv: If a company wants to ensure travel safety for its employees, it is best that they take responsibility for the travel planning and hire a travel expert or a reliable firm with global experience and connections. Leaving preparations up to a harried executive or an inexperienced assistant is more likely to end up in last minute arrangements and poor preparation. Employees need to be reminded of security practices and measures on a regular basis to keep them top of mind. If your employees are traveling outside the country, it would be a good idea to provide them with a mobile phone that works internationally and encourage them to check in on a regular basis. Your company should also keep scanned copies of visas, passports and tickets that can be emailed to an embassy or consulate in the event of an emergency or if the originals are lost. There are also companies that specialize in executive travel safety. They will know the safest hotels, areas to avoid and in less stable countries, they can provide executive protection services such as bodyguards or what we call “secure drivers.” Medical evacuation companies like MedJet Assist provide medically-equipped planes staffed with trained medical personnel that will fly a client from wherever they are to a hospital of their choice in the event of a medical emergency. These services can be established for a relatively inexpensive annual subscription. Such services do differ from coverage that is provided by major credit cards in a number of important ways. Ultimately, by taking responsibility for travel safety, a company is not only protecting a valuable employee but their proprietary information as well.
INsight: What are the employee’s responsibilities in traveling safely?
Juval Aviv: Employees must take the brunt of responsibility for their own safety. Any amount of advance planning and preparation can fall apart if a situation changes, so ultimately it will be up to the individual. Employees should be familiar with their travel plans and schedule before they leave. They should
know how to contact the nearest embassy or consulate if there is trouble. They should leave contact information at home and at work and while it seems obvious, if they are new to international travel, they should know how to dial their home or office for assistance from a foreign phone. They should also keep extra copies of all of their travel documents and identification in a secure place, like a hotel safe. They should dress appropriately for the region that they are visiting. For example, business attire may not be the best idea when traveling in an impoverished area as it conveys the idea that they have money. This is a particularly sensitive issue with Western women traveling in third-world countries where social and religious mores, especially in relation to women, are very different. Clothing that would seem conservative in the United States may be scandalous or offensive in another country and could attract negative attention. It is also a good idea to keep a certain amount of cash concealed somewhere on their person in case they are pick pocketed or mugged. Travelers should be inconspicuous with laptops, expensive cell phones and PDAs. Not only do these items attract petty thieves, but they contain valuable information that could cost their company large sums of money or expose them to risk. The most important thing for anyone to remember when traveling in an unfamiliar place is to keep your eyes open and obey your instincts. If a hotel does not feel safe, then move. If a driver makes you uncomfortable, take another car, etc. It may feel silly in the moment, but often our instincts are a real signal that we are in danger and it is best to just go with it. What risks do you see on the horizon that will affect corporations in the next few years? How can corporations best prepare today for future threats? As companies continue to move away from the traditional 9 to 5 scenario where their employees work in a central location and leave that work behind when they go home, we will continue to see more opportunities for corporate fraudsters and thieves to attack. It is becoming more and more difficult to keep a lid on proprietary information as the workplace is decentralized and increasingly varied tasks are subcontracted out to foreign companies. The best thing any company can do to protect themselves against future threats is to go on the offense and plan, prepare, drill and plan some more. Travelers should be inconspicuous with laptops, expensive cell phones and PDAs. Not only do these items attract petty thieves, but they contain valuable information that could cost their company large sums of money or expose them to risk.
For more information on Juval Aviv’s recommendations on corporate security and travel safety, his book, “Staying Safe”, is available on Amazon.com. For physical security consultations or executive travel coordination please contact Don Aviv at Interfor, Inc. • 212-605-0375 or don.aviv@interforinc.com.
INsight_Americas 2008_Volume 2
Reprinted with permission from the April 2008 edition of INsight_Americas, an XL Insurance publication. “XL Insurance" is a registered trademark of XL Capital Ltd and is the global brand used by member insurers of the XL Capital Ltd (NYSE: XL) group of companies. More information about XL Insurance and its property, casualty, professional, and specialty products is available at www.xlinsurance.com or 800-609 2518. Through its operating subsidiaries, XL Capital is a leading provider of global insurance and reinsurance coverage and services to industrial, commercial and professional service firms, insurance companies, and other enterprises on a worldwide basis. More information about XL Capital Ltd is available at www.xlcapital.com.
Copyright 2008. All rights reserved.
December 2007
Interfor and IBM Deliver Physical and IT Security Services to Help Financial Firms Minimize Risk
Industry’s First Integrated Assessment Identifies Vulnerabilities, Reduces Fraud and Operational Risk Exposure
New York, NY, December 19, 2007… Interfor, Inc., a leading international investigation and security consulting firm, today announced it is working with IBM, the leading provider of information technology and services for the financial services industry, to introduce new integrated physical and IT security services to help banks, financial markets firms, and insurance companies better protect their assets, mitigate operational and reputation risk, and ensure business continuity.
Financial services firms operate under constant internal and external threats including unauthorized access to data and IT assets, loss of availability, physical and intellectual property theft, natural disaster, malicious attack, fraud schemes and safety risks to personnel. As a result, companies that don’t prepare for these risk events and the disruptions they bring are subject to potential financial losses and reputation problems that can impact growth and profitability.
Interfor and IBM Physical and IT Security Services address these issues by helping financial services firms identify vulnerabilities and prepare for threats and disruptions to their business through a unique set of industry-proven offerings including:
• Crisis Management and Threat Mitigation – Helps establish or test current corporate crisis response and provides investigative resources to protect companies from internal sabotage and other potential threats.
• Physical Security Vulnerability Assessments - Uses a multi-step process to observe and analyze areas of potential and/or actual vulnerability to define causes and recommend means to reduce or eliminate exposure.
• Business Resilience Consulting – Addresses risk to the business resulting from a range of threats to IT and infrastructure. Business Resilience solutions are provided to assess risks and the potential impact against business objectives, diagnose root cause, and design a blueprint to improve resilience and implement solutions.
• Information Technology Security Consulting – Includes comprehensive internal and external IT security options to protect data and networks from unauthorized access. Includes both detective and preventive controls for data security, internal/external fraud, identity and relationship resolution and compliance reporting solutions that can be easily implemented without undue disruption to normal business activities.
• Executive Protection Consulting – In the global marketplace, the security needs of companies, executives and high profile individuals have become much more complex. IBM and Interfor provide clients with strategic protection options in order to secure meetings, events, public appearances and international travel.
• Electronic Surveillance Countermeasures & Detection – Services include detecting possible electronic surveillance devices and design countermeasures to eliminate future threats. Includes a comprehensive physical and electronic sweep of any corporate facility or executive home and recommendations for appropriate security controls and measures to mitigate identified risks.
“IBM and Interfor have helped clients restore the integrity of their operations following incidents of fraud or other corporate malfeasance,” said Juval Aviv, CEO, Interfor Inc. “Our two companies are bringing together our respective leadership and strengths in the physical and IT security industry to better prepare financial services firms against global threats and to protect them from reputational risk and financial harm.”
Industry First: Comprehensive Physical and IT Security Vulnerability Assessment
Banks, financial markets firms, and insurance companies can now take advantage of the industry’s first combined security vulnerability assessment to determine non-obvious vulnerabilities across physical and IT environments and define causes to reduce threats exposure and help businesses become more resilient.
The assessment includes a review of access control systems and procedures; ingress/egress procedures; intrusion detection systems; application of electronic control and digital video systems; employee and visitor identification procedures; IT processes and procedures; employee/vendor background investigations; and general personnel policies and procedures.
“Financial services firms are looking for new ways to stay three steps ahead of the bad guys,” said June Yee Felix, general manager of banking solutions and strategy, IBM. “The combination of IBM and Interfor’s expertise will help our joint clients identify current and emerging threats and better mitigate operational and reputation risk with minimal disruption to their business.”
Votenet Solutions Achieves Independent Security Certification from Interfor, Inc.
Rigorous assessment by expert 3rd party ensures security protocols, procedures, and systems protect all corporate, client and partner physical and electronic properties
Washington, D.C., December 20, 2007 – Continually enhancing its industry-leading security capabilities, Votenet™ Solutions, Inc., the leading provider of secure online voting and nomination solutions for associations, corporations, law firms, non-profits, universities and organizations, announced today that the company has achieved an independent 3rd party Physical Security Certification from Interfor, Inc., an international investigation and security consulting firm offering comprehensive domestic and foreign intelligence services to the legal, corporate, and financial communities. Due to the importance Votenet Solutions places on securing sensitive corporate and client information contained within their office locations, offsite data facility, and IT systems, the company proactively completed Interfor’s highly rigorous Physical Security Vulnerability Assessment in order to achieve certification. The assessment included thorough review of:
the convergence of Votenet Solutions’ physical security capabilities and IT network security, including application of the highest levels of Internet security protocols and email and data encryption
application of electronic control systems
protection measures for paper-based and electronically stored corporate, client, and partner proprietary information
corporate-wide disaster recovery and crisis management procedures
access control, intrusion detection, and video protection systems
employee, vendor, and visitor identification procedures
“Votenet Solutions has achieved a robust, comprehensive security program comparable to our Fortune 500 corporation clients, in which all of their protocols, procedures, and systems converge to ensure protection of all physical and electronic properties. Preventing a security intrusion is extremely advantageous in itself, but the complete confidence this Physical Security Certification provides to Votenet Solutions and their clients and partners is invaluable,” stated Don Aviv, Chief Operating Officer, CPP, PSP, PCI, Interfor, Inc.
Protecting proprietary corporate and client information was a particularly high priority throughout the security assessment. Among the security measures in place, strong email, server, and network encryption ensures that Votenet Solutions’ online voting solutions and information such as credit card payment transactions and client election materials including ballots, membership rosters, and voting results are safe from intrusion.
“Although we have built a solid reputation for software and corporate security over the past eight years, this independent security certification from Interfor ensures that our security protocols meet the highest standards today and in the future, as Interfor will regularly re-evaluate our security program. The trust and confidence of our clients and partners in our ability to secure our Web-based voting solutions and services is of utmost importance to us, and we will continue to actively pursue opportunities to enhance our capabilities,” said Michael Tuteur, CEO, Votenet Solutions, Inc.
For more information on Votenet Solutions’ best-in-class security processes, please visit http://eballot30.votenet.com/dynamiccontent/subsection.cfm?navid=105&type=child
July 2007
Background Checks are a Must in the Fight Against Terrorism
In the past few weeks, 8 people employed by the British National Health Service, have been arrested as suspects in failed bombing attempts in London and Glasgow. Two of them, both doctors, had taken preliminary steps to work in the U.S. These arrests have raised a potentially thorny issue that hasn’t received a lot of attention until now. That is; how far do companies and government agencies need to go when doing background checks prior to hiring a new employee to check for ties to terrorist organizations or criminal backgrounds?
One big difference between the recent incident in the U.K. and most previous incidents involving terrorism is that the alleged perpetrators are highly educated, middle class and employed. Prior to this incident, the majority of people involved in terrorist organizations have been the opposite: poor, uneducated, unemployed and disenfranchised. It was thought that these frustrating conditions make people more likely to fall under the influence of fringe religious and political groups and cults and easier to radicalize. It was assumed that people, like the doctors accused in this case, wouldn’t be so likely to be attracted to these groups because they are financially secure, they are fully functioning, fully engaged members of their societies and, at the end of the day, they have a lot to lose if they were jailed or killed.
Times are changing, however. The war in Iraq rages on and consequently, according to the NIE report issued this week, Al Qaeda and the Taliban are regaining strength and anti-American and anti-Western sentiment is growing. At the same time other countries like Lebanon and Palestine, and some in Africa and Indonesia, are growing more chaotic every day. Millions are left with no jobs, no food and no hope and are forced to flee their homes for foreign countries, sometimes bringing people of highly conservative or extreme religious and political beliefs into confrontation with societies with more secular humanist belief systems. All of these factors are contributing to a sense of frustration, alienation and desperation in a growing number of people in Europe and even in the United States who are susceptible to radicalization.
Now we have a situation where 8 very educated people employed in highly responsible positions are accused of attempting to murder hundreds of their fellow citizens. That was followed, just this week, with news that a low-level worker at the Oak Ridge National Laboratory, the birthplace of the atomic bomb, was caught trying to sell information on how to make enriched uranium to a person who he thought was representing another country. That person, fortunately, was an undercover F.B.I. agent, but this serves to further illustrate the point that the possibility of a terrorist infiltrating a company through a legitimate position is becoming a reality that we all have to face.
The British government is currently reviewing their hiring procedures and the background checks that were done on the accused doctors. This review will necessarily focus on the practice of fast-tracking the immigration process on foreign-born skilled workers and the thoroughness of the background checks done on all employees. Many companies and governments will be faced with similar situations in the coming years. Industries ranging from finance to pharmaceuticals face very real threats from infiltration and the potential damage to companies, the economy and the public at large is enormous.
What do we do? It is clear that thorough background checks are now a necessity for skilled workers. Calling a few references and a credit check will not be enough to protect your company. Checks on where a prospective employee has traveled in the past few years, or where they have studied can raise flags. Affiliations with activist groups or extremist political organizations need to be looked into for ties to illegal or violent activities. A thorough check of the court systems everywhere the person has lived, including outside the U.S., for criminal records is a must. In short, the kind of background checks normally reserved for high level executives should be considered for any employee with a degree of responsibility and access to sensitive information or secured areas.
The government can not do enough to keep us completely safe. Terrorism is here to stay and it is no longer in someone else’s back yard. Terrorists and those who are susceptible to radicalization are here in our towns and communities. They could be our doctors, our bankers, our pharmacists and without igniting a single bomb, they could inflict catastrophic damage. We have to accept that fact and act accordingly.
Counterfeiting and Terrorism
Counterfeiting is a huge and growing problem that affects almost every industry. Whether handbags or airline parts, counterfeiters are finding a way to replicate nearly any product sold on the market. Financial losses are in the billions, but a more ominous threat is that sales of counterfeit goods, including pharmaceuticals, are often financing organized crime or terrorist groups, such as al-Qaeda and Hezbollah. Profit margins are bigger, shipping is easier and the risks of prosecution are much lower than with illegal narcotics or guns. From t-shirts to headache medications, sales of counterfeit products are now a major source of revenue for terrorists. So not only are legitimate companies losing money, they are losing money to groups that use the money to do further harm. Also the potential that such a group could purposely introduce poisoned counterfeit medicines and other products into the marketplace is terrifyingly real.
It is often incorrectly assumed that counterfeit pharmaceuticals and health and beauty products are mainly a problem for developing countries. However, the problem is reaching countries with developed drug policies and import regulations, including the United States and the United Kingdom. Internet sales are a particular problem as unauthorized secondary wholesalers are selling products from counterfeiting hot spots such as Mexico, China, Russia and India without oversight.
According to the Wall Street Journal Online, in a 2003 study, the World Health Organization determined global sales of counterfeit drugs alone to be $32 billion or 10% of all medicines sold worldwide. The same year the value of seized, counterfeit and diverted drugs in the U.S. was almost $200 million.
Counterfeiters are also becoming more sophisticated. Some counterfeit products are manufacturer rejects or expired medications that have been repackaged and remarketed. Some are just look-alike products with no active ingredient. But, the quality of an ever increasing amount of counterfeit products is so good now that even the producers of the real products have a difficult time recognizing them. Armed with digital technology, counterfeiters can turn out perfect packaging that is indistinguishable from the real thing. Sometimes it takes a forensic scientist to distinguish the difference between the legitimate product and the fake.
In many cases counterfeit goods are of such high quality because there is no difference between the counterfeits and the “real” products. Some licensed manufacturers have been known to run extra batches of products to sell themselves, a practice also called “second shifting”, or to continue making a product after the client has moved their manufacturing to another vendor. Manufacturers of generics may also dabble in fake product runs.
A great deal of counterfeiting takes place in India, Mexico, Russia and China. Many companies outsource their manufacturing to these countries because labor is cheap, and often foreign companies are given enormous tax break incentives. This is great for the bottom line, but it exposes a company’s intellectual property to a high degree of risk.
Most vendors are capable of complying with international and FDA regulations. But, fighting overseas vendors who also counterfeit can be extremely difficult because the counterfeit operations are often such an integral part of the economy. In some parts of the world, particularly China, manufacturers of counterfeit goods are a major source of employment and pillars of many regional economies. Local officials are often on the take and it is certainly not in the short term best interests of the community to shut down such a manufacturer.
And while counterfeiters are becoming more sophisticated in their ability to replicate a product, safety remains a huge issue, even when the products are not specifically meant to do harm. We have seen this here in the United States, just in the last couple of weeks, where it is estimated that nearly 900,000 tubes of counterfeit toothpaste, manufactured in China, were sold to prisons and hospitals around the country. The toothpaste was found to contain diethylene glycol, a prime ingredient in antifreeze. Diethylene glycol in high enough concentrations can cause kidney failure and a shutdown of the central nervous system followed by paralysis and death.
Diethylene glycol has been found in many counterfeit products including cough syrup, fever medications and even injectable drugs. It has figured in at least eight mass poisonings in the last two decades.
The motive in these cases, was most likely higher profit margins. Diethylene glycol, is much cheaper than glycerin, the sweetener used in many food products and medications. However, it is a prime example of the ease with which a terrorist could infiltrate the market with a counterfeit product that is intended to cause mass casualties.
What can be done about it? One thing that has to be done on a micro level is that companies have to increase security on their supply chains and do thorough background checks on overseas suppliers and manufacturers.
Consumers should be wary of the danger and pay more attention to the products that they purchase, especially if it is intended for consumption. Where was the product manufactured? Does the packaging look odd or old? Is there foreign language on the packaging that you aren’t used to seeing? Is the product unusually inexpensive? Is the retailer reliable? These are all things that the individual can be on the lookout for that can help prevent them from unwittingly purchasing dangerous counterfeit products.
The larger issue, however, is that the government has to recognize that counterfeit goods pose a real threat to public safety. They must increase security on our ports, provide increased funding for the CDC, FDA, ICE and other government agencies to pursue counterfeiters and counterfeit goods and increase pressure on countries like China to crack down on counterfeiters within their own borders.
June 2007
The discovery on the night of June 29th of an undetonated bomb in an abandoned car parked in a busy London nightclub and theater district is a grim reminder that the threats that we all face from terrorism are not going away. Hatred for Western governments and way of life is at an all time high and fringe groups are often encouraged by the panic that even an unsuccessful attempt like this can cause.
While there is nowhere that you can go to keep yourself completely safe from this threat, there are things that you can do to help. Report abandoned packages or bags to the authorities immediately. If you notice something unusual, like in this case where people saw smoke coming from the car, report it and get away from the area. If you notice unusual behavior in a person in a public place, such as increased agitation or wearing bulky garments that are inappropriate for the weather and look to be concealing something, don’t be afraid to report it. Law enforcement agencies can’t be everywhere at once, so there is only so much they can do to protect us. We must act as their eyes and ears and realize that we must assume some responsibility and be active participants in increasing the safety and security of ourselves and our neighbors
May 2007
Technology Will Not Keep Us Safe
When at war, the United States has always relied on its ability to utilize and unleash its latest high-tech weaponry to turn the tide of battle into a rout of our enemy. But when applied to counter terrorism and on-the-ground basic security, technology has proven to be a false idol. Our blind faith that it will be the key to preventing the next terrorist attack is dangerous, misguided and just plain stupid.
We are all painfully aware of the costs of this mistake. We failed to detect the plots of the 9/11 terrorists, the bombing of the U.S.S Cole, the bombings of U.S. Embassies in Africa, among others. And faulty intelligence may have led us into a bloody war with
Iraq that has no end in sight.
Why are we so ready to relinquish even the most human of tasks to computers when the alternative is so obviously superior? Is it because we view human input as imprecise or unreliable? Whatever the reason, the impulse is misdirected—both in airport security and in the broader effort to combat terrorism.
As a former member of a commando-intelligence unit of the Israeli Defense Force and a counterterrorism consultant to the Israeli airline El Al, I learned a simple truth: People, not technology, are the key to preventing disaster. Spy satellites and high tech gadgets simply cannot peer into the mind of a terrorist, hear the trembling of his voice, or see the disguised rage in his heart. Only individuals with the proper training, knowledge of their subjects, and in some cases, the right relationships, can.
El Al uses numerous layers or “rings” of security—all based on human interaction and intelligence. A key part of the security plan is a team of “spotters.” These agents are given extensive training in identifying the traits associated with potential threats, the subtle behavioral cues and deviations that terrorists and other criminals display. This basic security method has been in place for over 30 years and still remains the core of El Al’s approach, despite advances in airport technology. Since 1969, no Israeli aircraft has been hijacked, despite numerous attempts.
The practices in American and most European airports could not be more diametrically opposed. Travelers are forced to practically disrobe and go through X-Ray machines that are manned by underpaid and unmotivated people with very little training. And computer programs randomly select seat assignments as the basis for bag searches, inevitably targeting elderly women and small children, rather than individuals that represent a more likely threat.
These practices simply don’t work.
There have been numerous high profile lapses in airport security recently including the theft of hundreds of TSA uniforms. In March of last year, federal investigators were able to carry materials for a homemade bomb through security screening at 21 U.S. airports. At the San Francisco International Airport, The Department of Homeland Security discovered that TSA employees were tipping off screeners from a private security firm whenever undercover agents were coming to test them. (The firm was consequently rehired two weeks later with a $315 M, four year contract). And twice in the last year children have been able to board planes without even a ticket. In August 2006, a twelve year old in the UK boarded a plane to Lisbon without a boarding pass, passport or any sort of identification. More recently, a 9 year old boy from Seattle boarded a plane to Texas after hearing an announcement that a passenger had lost his boarding pass. He claimed to be the person, was issued a boarding pass and boarded the plane without question. He made the flight and the layover in Phoenix and was finally caught when he tried to take another flight from San Antonio to Dallas. Clearly there are some holes in our security efforts.
Even our Intelligence agencies have been hamstrung by an over dependence on technology. Since the end of the Cold War, the U.S. has relied less and less on traditional spies and failed to keep up with the “changing of the guard”, so to speak, in terms of where the greatest threats to our country are coming from. Few agents speak Arabic or Asian languages and until recently job applicants who had experience traveling abroad were less likely to be considered for any position.
Satellites were the source of most of our information and agents were actually discouraged from making contacts within terrorist or criminal organizations. There has been a reluctance to get our hands dirty.
To really get good intelligence, though, you have to get close to people, you have to infiltrate their ranks, get to know their cooks, their drivers, their barbers. As with any undercover operation this can be messy and extremely dangerous, but if you try to get all of your knowledge from a safe distance you will never stay ahead of these terrorist groups.
This is why, as a nation, we need to fight our long held beliefs that science will be our savior. We need to not only rediscover our confidence in the human factor, but must demand that our leadership put human intelligence at the center of our antiterrorism efforts.
And beware those who offer bigger budgets for allegedly improved technologies, color-coded warning systems and bureaucratic agency re-alliances that will headline that we are better prepared too fight the war on terrorism. Regrettably, that is not true. Keep it hands on. Keep it simple.
January 2007
Thinking Outside the Box: International Judgement Enforcement
Most US litigators are accustomed to contending with the multitude of legal and procedural issues that arise at the outset of any civil litigation. When the case is closed and the verdict has been rendered, however, many of these same attorneys lack the expertise to actually turn their clients’ judgments into cash. There are few reported cases on issues surrounding the enforcement of judgments in and outside of the US; therefore, in order to effectually enforce an obtained judgment, counsel must be familiar with certain methods and procedures that may be nontraditional or non-domestic – outside a lawyer’s usual problem-solving ‘tool box’. Such methods are especially apropos when enforcement of US judgments may be carried out overseas, where it is often easier for defendants to hide assets and/or make them unavailable through fraudulent conveyances to controlled trusts and nominees.
A plaintiff with a reasonable expectation of a judgment for damages in the US can take steps in anticipation of enforcement of the judgment by obtaining an attachment of the defendant’s assets, which could include those assets kept in and outside of the United States. Many countries, in Europe and elsewhere, permit separate proceedings for these prejudgment attachments (or the functional equivalent thereof) to be brought in their courts for the purpose of holding the assets as security. Both the English Commonwealth jurisdictions and Switzerland afford creditors opportunities to make use of attachments and obtain information for the enforcement of judgments.
WEAPONS IN THE LITIGANTS ARMORY
A comprehensive investigation is often required to locate assets to be included in a prejudgment attachment or used to satisfy a judgment. Professional investigative firms employ various tactics and resources to conduct such investigations.
The first step toward recovering stolen and/or undisclosed assets begins with research. The quickest and most cost effective way to approach an investigation is to first examine all the information available in the public domain. Researchers should access worldwide databases that allow them to comb the public record for clues and intelligence. All leads should then be followed up with a field investigation.
The next step in the investigative process is to then take a close look at the lifestyle of the subject, including an examination of his or her spending habits, relationships, investments, property, and other financial dealings. To start, investigators examine how well a subject meets his or her monthly financial obligations. If a person is spending money, but appears to have no source of income, chances are the funds are hidden in offshore bank accounts. In addition, investigators search for litigation history involving the subject or his or her businesses. Often times, assets may be found attached to other judgments that would not be listed elsewhere. Assets belonging to a subject’s family, or corporations associated with the subject, are also inspected.
The techniques described above and other investigative tools allow investigators to piece together the whereabouts of undisclosed assets. In order to circumvent any obstacles, investigative firms work simultaneously with attorneys and turn to the legal weapons at their disposal. English Commonwealth courts provide plaintiffs with certain legal remedies which may aid in the investigative process.
Discovery techniques such as search orders and third party disclosure orders can be useful while an investigation is still under way. Search orders (formerly known as ‘Anton Piller’ and ‘Mini-Anton’ orders in England) can be obtained in order to preserve property and determine the location of assets. Third party disclosure orders (formerly know as ‘Norwich Pharmacal/Bankers Trust’ applications) are requests for discovery against persons who are not directly involved in an investigation or litigation, but may have become mixed up in the wrongdoing of another. They may be issued, for example, to require an innocent recipient of assets (i.e. a bank) to disclose where the funds were subsequently transferred.
The English rules for ‘tracing’ of assets may also assist in the judgment collection process. Tracing is the legal process by which the owner of property may identify assets as representing the owner’s original property. It is possible to make a request for the return of fraudulently obtained assets if the claimant has a ‘proprietary claim’ and can establish that the original property has been misappropriated. For example, if jewels are stolen and the thief sells them for cash, which the thief then uses to buy a house, the owner of the stolen jewels may be able to levy on the house as a product of the jewels and, in addition, be entitled to any appreciation on the value of the house as well as the house itself.
Once such investigative and legal tactics have been employed and the assets in connection with the judgment have been located, the next step is to preserve those assets by restraining or freezing the ability to transfer their ownership. Freezing orders (formerly know as ‘Mareva’ injunctions) are available in England and other English-law-based countries to prevent debtors and those who commit fraud from moving or disposing of assets. Recently UK courts have shown a growing willingness to grant these orders. The nature of freezing orders, however, requires the Court to be certain that it would be appropriate and not oppressive to grant the order.
To this end, the Court will need to be satisfied that: (1) the claimant has a legitimate case against the defendant, and (2) there is a real risk that should the assets not be frozen, the defendant will attempt to dissipate them. It is this second element which prevents freezing orders from being sought at the outset of each and every claim. The fear of dissipation may be demonstrated in a number of ways, including: Unreliability in the past; dishonesty or evasiveness in previous proceedings; poor reputation; weak links to the UK; a history of moving assets; or being based in a country where enforcement of UK judgments has proved to be difficult.
Worldwide freezing orders are another available, and farther reaching, remedy. Under these orders a person in an English Commonwealth jurisdiction is prevented from dissipating assets anywhere in the world. Worldwide freezing orders do not attach specific assets, nor do they provide any security interest in the frozen assets in the plaintiff’s favor. Rather, these injunctions make use of legal proceedings and remedies to ensure that assets, wherever they may be located, remain frozen.
In addition, litigators can obtain non-party injunctions that freeze the assets of those persons or businesses that serve as alter egos of those under investigation. Another method for protecting assets is to apply for the appointment of a receiver or a provisional liquidator.
Over the past several years, the aforementioned orders have been introduced to and tested in various courts with great success. One such country that has ruled in favor of UK worldwide freezing orders is Switzerland. In the 2003 case of Motorola Credit Corporation v. Uzan, the Swiss Federal Supreme Court addressed the issue of enforceability of UK worldwide freezing orders in Switzerland. Upholding an earlier decision by the Zürich Court of Appeals, the Court in Motorola found that worldwide freezing orders are enforceable under provisions of the Lugano Convention.
In Motorola, the Swiss Federal Supreme Court explicitly confirmed that UK worldwide freezing orders are ‘decisions’ defined by Article 25 of the Lugano Convention. This is an important development; with these orders now defined within the scope of the Lugano Convention, they can be effectively enforced pursuant to the Convention’s provisions. In particular, once a worldwide freezing order has been declared enforceable by way of a claimant’s application, the order can be enforced according to the provisions of Article 31.
It is important to note that while the enforceability of UK worldwide freezing orders in Switzerland has a bearing on claimants, it also has a significant impact on third parties holding the assets of a defendant. Once a foreign judgment has been declared enforceable, it becomes effective in Switzerland as if it were a judgment by the Swiss court. Thus, when a third party is notified of the worldwide freezing order and that it has been declared enforceable, the party is prohibited from disposing of or transferring any of the defendant’s assets.
While the Swiss courts have ruled that UK worldwide freezing orders are enforceable in Switzerland, generally, it is also possible for a creditor to get a freezing order direct from the Swiss courts to block the assets of a debtor in Switzerland. Due to Switzerland’s extensive asset protection and secrecy laws, however, the rules and restrictions associated with obtaining such an order differ quite significantly from those in the UK
A Swiss freezing order in an attachment procedure qualifies as a preliminary injunction to safeguard the creditor’s rights; however, the attachment procedure is not ruled by the provisions of a civil procedural law but by the provisions of the Federal Law on Debt Enforcement and Bankruptcy. Swiss freezing orders are not available against debtors residing in Switzerland; it is therefore imperative that a debtor in an attachment procedure be domiciled outside of Switzerland.
The target assets of a Swiss freezing order must be assets supposedly owned by the debtor and therefore held in his or her name. Furthermore, an attachment request must be filed with the Swiss court where the debtor’s assets are located. If the assets are located at several places which do not lay within the jurisdiction of the same court (e.g. Deutsche Bank in Zürich and Deutsche Bank in Geneva) two separate attachments requests must be filed.
As in Switzerland, freezing orders are available in Lichtenstein as well. Freezing orders in Lichtenstein secure the execution of an outstanding debt against the impediment of the debtor. In order to obtain such a freezing order, the creditor has to show the existence of a claim between the creditor and debtor and the endangerment of such claim.
Liechtenstein law provides for a so-called ‘justification action’ as validation of an issued freezing order. This action has to be filed with the competent court within four weeks from the date the freezing order is granted, thus commencing an ordinary civil procedure. In this context, the creditor will act as plaintiff. In case the creditor is a foreigner or a foreign company, the court will ask for a security deposit to be paid by the creditor/plaintiff.
There are various means available to creditors, before and after judgments are obtained, to identify, track down, immobilize and levy on monies and debtor’s property located outside the United States. Persons who endeavor to frustrate creditors by hiding their assets in various countries throughout the world can be stopped by using a combination of intelligence concerning the whereabouts of assets and the instruments available through courts outside the United States, diligent and resourceful creditors have realistic prospects for turning their claims and judgments into cash. In order to give their clients the best opportunity to recover money, litigators should ally themselves with the resources of investigative firms. The gradual widespread judicial acceptance of trace, search and freezing orders worldwide enables creditors to more readily and easily recover the assets of a debtor to which they are entitled.
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