Over the summer, you may have seen the video that got passed around quite a bit of a NYC police officer going out of his way to slam a Critical Mass cyclist to the ground. As you may have heard, the officer wrote up a report claiming that the cyclist ignored his commands to stop and tried to steer his bike into the him. From the video, that's obviously false, though the cyclist ended up having to spend a day in jail based on the report:
The good news is that the officer, Patrick Pogan, has now been indicted and charged both with a misdemeanor assault and felony counts for falsifying his report. Obviously, none of this would have transpired if it weren't for the tourist filming what happened and then putting the video up on YouTube. We talk about abuses of power via technology quite often, but it's good to see an abuse of power stopped thanks to technology as well.
We've talked in the past about how one of the causes of the financial crisis was that many banks on Wall Street stopped acting like banks and started acting like hedge funds -- despite not really knowing how to do that. That is, they took on much greater risks and higher leverage, without having much of an understanding of how to really hedge that risk. That was fine when all was going well, but when the bubble burst, it started impacting everyone.
Now, in a combined effort between NPR's Planet Money (I know I've said this, but I'll say it again: if you're not listening to this every day, you're missing out, big time) and the NY Times, reports are coming out about how it went well beyond banks turning into hedge funds, to all sorts of other organizations as well. The scary example being described in the first article in this series is how a Wisconsin school board and the NYC subway system, both effectively became hedge funds, lending money out to various banks in exchange for CDOs (collateralized debt obligations). What a CDO is, effectively, is the mashing together of a variety of different debt instruments (loans) that pay out some sort of return. So, you could basically buy some of the return on a whole mess of loans, packaged in all different ways (some amazingly creatively).
If all of those debt instruments that you're buying into keep on paying, you're in good shape. If, however, there are defaults, you can be in an awful lot of trouble. However, while everything was going great, defaults weren't an issue and the folks sold on these CDOs often had no idea how risky they really were. In the article above, for example, the guy who sold the Wisconsin school district on investing $200 million of its pension money in CDOs had only taken a two hour course on them, and greatly downplayed the risks.
And, of course, to make matters even worse, in many cases, the actual risks of such CDOs were hidden through some games, and made worse by either clueless or complicit ratings agencies which rated seriously high risk CDOs as being extremely safe bets. To see a rather graphic (and easily understandable) example of this, I recommend the following Paddy Hirsch video comparing CDOs to pyramids of champagne glasses:
The really scary part was that, effectively, you had numerous less than fully sophisticated investors, dumping hundreds of millions, if not billions, of dollars into incredibly complex investment vehicles that they were being falsely told were extremely safe, when the facts are that they were highly risky. Many pension funds and the like allocate a certain small percentage of their investments into high risk vehicles -- but the financial crisis is being caused in part by the realization that a much, much, much larger percentage of their investments actually turned out to be in seriously high risk vehicles, many of which have now defaulted.
Earlier this year, we wrote about how NY state had passed a highly questionable law designed to force e-commerce retailers to collect sales tax in the state. As you hopefully know, retailers are only supposed to collect sales tax in states where they have a physical presence. The reasoning for this is pretty straightforward. The taxes are designed to help provide core infrastructure services for those retailers (roads, water, etc.). Without a physical presence in the state, the retailers aren't making use of those services, so it doesn't seem right to tax them for it. The NY state law was sneaky in that it changed the definition needed to establish a "physical presence" to include anyone who acted as an affiliate of the retailer. Most e-commerce sites have affiliate programs that allow others to get a kickback on sales for driving those sales. Affiliates are effectively advertisers, driving traffic to an e-commerce site. It's quite a stretch to suggest they represent a physical presence for the company. But, NY politicians did it because they wanted to get more cash out of Amazon.
Different online retailers have reacted in different ways. Both Amazon and Overstock sued over the law -- and Overstock even banned NY affiliates while this law is in place. Online tech retailer NewEgg started collecting the tax, but has changed its mind. It sent a letter to customers saying that it's decided not to collect the tax. There isn't much more of an explanation, but it sounds like it's asking New York to sue it if it wants to get the tax at all:
As a result of recent changes in New York State tax law requiring certain out-of-state retailers to collect and remit sales taxes to the State of New York, we began collecting applicable sales tax for all orders shipped to New York addresses starting June 1, 2008.
After careful review and consideration, we are pleased to inform you that we have stopped collecting New York sales tax, effective August 21, 2008. This decision was driven by your direct and candid feedback and our continued commitment to you as our valued customers.
About a dozen states have passed laws either requiring video games be labeled for content or banning the sale of certain video games to children. Every single time this has happened, the law has been struck down as unconstitutional. And, every single time, the same arguments are shown to politicians, explaining how such a ban is a clear violation of the First Amendment. Politicians know this. But they can't resist passing such laws, because it gets them headlines about how they're "protecting the children," even if the only real result is having to waste taxpayer money defending the law in court, where they always lose.
The latest to join the fray? New York State. NY has been working on such a bill for a while, and Gov. Patterson has signed it into law. Lawsuits are already being filed against it, and New York will almost certainly lose. Once again, we can't resist repeating the quote from Judge Richard Posner in striking down one of these laws:
"Violence has always been and remains a central interest of humankind and a recurrent, even obsessive theme of culture both high and low ... It engages the interest of children from an early age, as anyone familiar with the classic fairy tales collected by Grimm, Andersen, and Perrault are aware. To shield children right up to the age of 18 from exposure to violent descriptions and images would not only be quixotic, but deforming; it would leave them unequipped to cope with the world as we know it."
Yeah, but it does get politicians in the headlines, and who cares about deforming children when the headlines will claim they're protecting them?
Paul Alan Levy the lawyer from Public Citizen who defended the bloggers in this case was kind enough to write in alerting us to another job well done by Public Citizen. In this case, a NYC political blog site called Room 8 had some posts by an anonymous blogger criticizing some actions in the Bronx DA's office and the Bronx Republican Party. Not long after the posts, Room 8 received a subpoena from the DA's office not just demanding the IP address of the anonymous blogger and various anonymous commenters, but also warned them that even disclosing the subpoena could get the folks behind Room 8 in serious trouble. Luckily, Room 8 chose to fight this request, signing up the help of Levy, who convinced the DA's office to drop the subpoena and after Room 8 had to threaten the DA's office with a lawsuit of its own, it dropped the demand that the supboena be kept secret. Room 8 has a full account as well. Public Citizen also has posted links to a bunch of documents from the case.
What's still not clear is what was the purpose of the original subpoena. From the facts presented, it's easier to jump to the conclusion that it was purely political. Someone in the DA's office didn't like being criticized, and used the power of the office to try to squelch that voice (and, in fact, well before this came out, the anonymous blogger in question erased all his posts and disappeared). The folks who run Room 8 tried to determine what the actual issue was, and never received any answers. The whole thing is a bit scary, as it does show how a DA could abuse power to get info on anonymous critics simply by claiming it was a criminal investigation, without disclosing any details, and without letting the bloggers subpoenaed speak about it. Hopefully if other sites are getting bullied in this manner, they'll learn to fight back as well.
The next time US officials complain about other countries blocking websites and censoring the internet, just point them to the actions of various publicity-seeking US states' Attorneys General. We've already mentioned NY AG Andrew Cuomo's incredibly misguided plan to force ISPs to block certain websites and newsgroups. While officially in the name of stopping child porn (an excellent goal), the plan is open to widespread abuse. First, it targets the ISPs, rather than the actual perpetrators of child porn. Second, it involves a secret list that won't be available for review to make sure it doesn't include perfectly legitimate content. Third, ISPs are already "over-blocking" additional content to avoid getting in trouble -- meaning that plenty of legitimate content is also being blocked. Fourth, those who really want child porn will simply use other methods to find it -- and it will be harder for authorities to track those new sources down.
With all that going against the plan, wouldn't you know that California's AG is claiming that the NY agreement doesn't go far enough. While the NY agreement only covers Verizon, Time Warner and Sprint -- California Attorney General Jerry Brown is saying all ISPs should have to do the same, as well. Unfortunately, it seems like this type of "non-solution" is appealing to politicians who don't understand the actual issues. It makes them look like they're sweeping child porn off the internet, when all they're really doing is blocking legitimate content while making it more difficult to find those actually engaged in child pornography.
New York's Attorney General, Andrew Cuomo, has a history of using his position to threaten big companies into agreeing to take responsibility for something that isn't their responsibility. He did it when he got advertisers to pay fines because their ads showed up in adware -- without ever explaining what was actually illegal. And, now he's done it again in getting a bunch of ISPs (Verizon, Sprint and Time Warner) to agree to block a list of websites and newsgroups that are listed as being purveyors of child porn. The ISPs are also giving Cuomo's office over a million dollars, ostensibly to help wipe child porn off the internet. If that's Cuomo's goal, this isn't the best way to do it -- though, it will get him plenty of press coverage for bullying companies into doing something they aren't required to do under law.
In fact, the state of Pennsylvania tried to do pretty much the same thing, back in 2002, but focused on actually passing a law (unlike Cuomo, who just bullied the companies into "agreeing.") And, of course, a federal court tossed out the law as unconstitutional. The goal is certainly noble. Getting rid of child porn would be great -- but having ISPs block access to an assigned list isn't going to do a damn thing towards that goal. The blocked sites will reappear elsewhere. Those who want access, even to the blocked sites, will simply find encrypted tunnels to hide their paths. Basically, this won't do much of anything, other than increase costs for ISPs.
Even worse, it runs a huge risk of starting ISPs down a very slippery slope of being willing to ban access to online content. No one's against that when it's child porn, but who's reviewing the list to make sure it's really child porn? How hard is it to slip a site that someone just doesn't like into the list? Furthermore, once these ISPs have shown that they're willing to block certain sites, then politicians will quickly look to increase that list beyond just child porn to other types of sites that they find objectionable. It sets a dangerous precedent.
Putting the responsibility on the ISPs is the wrong solution (and, honestly, the folks who are pro-net neutrality should be seriously worried about this -- as it's a clear violation of what they say net neutrality is all about). If the content itself is illegal, go after those actually responsible for the content. Not the service providers. Sure they make for easy targets and big headlines (backed up with that hefty cash "settlement" right to Cuomo's office), but they're not the ones responsible.
Back in April, New York state signed into law a very questionable bill that effectively made any affiliates of your service (i.e., anyone advertising your services) considered as representing a "local presence" for your company for tax purposes. The law had no reason for existing other than to try to squeeze extra tax money out of online retailers. Amazon quickly sued over the law and Overstock has now followed suit, filing a lawsuit against the tax law. Overstock, of course, has taken its reaction even further, banning all New York affiliates as long as this law is in place. The effective result of the law, then, is that it actually ends up harming residents of the state while not doing very much to actually increase tax revenue. It seems quite likely that this law will get tossed out, as it seems to go entirely against earlier rulings on what constitutes a physical presence in the state.
Chris writes in to let us know about a new law passed in NY State that requires any sex offender to register any email addresses and screennames with the government. Any time a sex offender registers a new name or email address, he needs to alert the state within 10 days. While you can understand the grandstanding reasoning behind this ("protect the children!"), this really does seem fairly pointless. It's similar to a federal proposal, and all it really does is create a huge bureaucracy. Despite what the mainstream media has portrayed, the vast majority of sex offenders are not online stalking people. Most involve people known to the offender (all too often family members). In fact, recent research has shown that the whole "internet threat" thing is totally overblown. This isn't to absolve sex offenders of their crimes -- but to question the reasoning behind this sort of law. Those who are really out to stalk kids online will simply ignore this law -- and all NY State gets is a big bureaucratic mess tracking usernames and emails.
Last month we wrote about how New York was changing a law to try to force Amazon to collect and pay sales tax in New York by defining any affiliate in the state as being an Amazon point of presence. This is a clear perversion of the intention of the law that only requires collecting sales tax if the company has a physical presence in the state. While Amazon is now fighting this law in court, others are taking more drastic measures. E-commerce site Overstock.com has declared that it will no longer allow New York affiliates in order to avoid having the state consider it to have a "physical presence" there. This would be an unintended consequence of such a law. In an effort to get e-commerce providers to cough up more in taxes, not only will Overstock not be paying those taxes, it just made life a lot more difficult for thousands of Overstock affiliates in New York.
