NSO Group Facing Even More Money Problems As Debt Manager Says Sayonara And State Of Oregon Seeks To Terminate Its Investment

from the [extremely-Seinfeld-gif-voice]-that's-a-shame dept

NSO Group spent years supplying some of the world's most untrustworthy governments with powerful spyware capable of completely compromising targeted devices. It managed to weather a few years of reports tying its malware to surveillance of journalists and activists, but all hell broke loose earlier this year, resulting in a steady stream of reports linking its tools to surveillance of government officials, journalists, dissidents, government critics, religious leaders, and, in one incredible case, the ex-wife of the king of Dubai.

It couldn't have come at a worse time for NSO. It has racked up an impressive amount of debt, something it likely assumed it would be able to manage as it continued to grow its market. That growth has stalled but the payments must still be made. NSO was downgraded by ratings firm Moodys, which warned that NSO was in danger of defaulting on its debts.

That, combined with Israel drastically reducing NSO's customer base and the blacklisting by the US Commerce Department, has resulted in the company considering shutting down its offensive spyware division (the one responsible for developing Pegasus) and putting its remaining assets up for sale.

It might not be that easy to divest, nor find a way back to solvency. Bloomberg reports that one of NSO's debt managers has decided it's no longer interested in providing these services to this particularly toxic asset.

Jefferies Financial Group Inc., one of Wall Street’s closest allies of spyware firm NSO Group, is resigning from a key administrative role for the Israeli company’s debt, according to a person with knowledge of the matter.

The investment bank privately notified the company’s lenders on Friday of its intention to step down as administrative agent, a role in which Jefferies handles debt payments for the company and other clerical tasks, said the person, who asked not to be identified because the information is private.

That seems like a pretty strong "no confidence" vote on NSO Group. Whether it's because Jefferies thinks NSO can't repay its debt or because of its reputation as the enabler of oppression all over the world was left unsaid.

But that's not the only demonstration of a lack of confidence. Keeping the malware purveyor at a minimum of arms length appears to be a popular move. A state government a couple of steps removed from NSO is looking to divest itself of its holdings.

Oregon's treasurer is exploring legal options with the state attorney general in the state's large investment in a smartphone spyware company — a firm that has been denounced by human rights groups, the U.S. government and tech giants.

In 2017, the Oregon Investment Council unanimously committed $233 million in the state employee retirement fund to a new private equity fund called Novalpina Capital, which later acquired a majority share of NSO Group, an Israeli company that produces smartphone spyware.

This move might be due to NSO's public image, which currently requires the use of a periscope to peer out of the gutter. But it also might be due to the equity fund's internal problems, which has led investors -- including the state of Oregon -- to strip the company of its control of the fund and hand it over to another company entirely.

But this statement from a state official indicates it has more to do with NSO's current PR problems than Novalpina's apparent inability to properly manage an equity fund.

Oregon State Treasurer Tobias Read “supports sanctioning global technology companies that facilitate human rights violations and the oppression of journalists by selling technology to authoritarian regimes," Read's spokeswoman, Amy Bates, said in a statement Thursday to The Associated Press.

It's currently unclear whether the state can get out of this without getting sued for breach of contract. But that's the direction the state would like to go. As for NSO, it continues to claim it's being unfairly punished for the actions of its customers, stating that it values "ethics over revenues" and only sells malware for the purpose of preventing terrorism and serious crime. But the facts say otherwise. And NSO has long since run out of excuses for its willingness to sell powerful spyware to countries with long histories of human rights violations and abuses of surveillance powers.

Filed Under: debt, malware, oregon, spyware
Companies: jefferies financial group, nso group

Michigan Supreme Court: Selling A $24,000 House (And Keeping The Proceeds) Over An $8.41 Debt Is Unlawful

from the please-stop-defending-the-indefensible,-government-legal-reps dept

This seems like the sort of thing a court shouldn't need to sort out, but here we are. More specifically, here are two plaintiffs suing over Oakland County, Michigan's forfeiture policy. This isn't civil asset forfeiture -- where property is treated as guilty until proven innocent. This isn't even criminal asset forfeiture -- the seizure of property by the government following a conviction.

But this form of forfeiture can be just as abusive as regular civil asset forfeiture. There's no criminal act involved -- real or conjectured. It's the result of a civil violation: the nonpayment of property taxes. And Oakland County, the plaintiffs argue, is performing unconstitutional takings to unjustly enrich itself.

It's not that these sorts of things are uncommon. Tax liens are often put on property when tax payments are delinquent. It's that one of these seizures -- and subsequent auction -- was triggered by a delinquent amount that would have required the county to make change from a $10 bill. (via Volokh Conspiracy)

This is from the opening of the state Supreme Court's decision [PDF], which shows just how much the county government can profit from these forfeitures.

Plaintiff Rafaeli, LLC, owed $8.41 in unpaid property taxes from 2011, which grew to $285.81 after interest, penalties, and fees. Oakland County and its treasurer, Andrew Meisner (collectively, defendants), foreclosed on Rafaeli’s property for the delinquency, sold the property at public auction for $24,500, and retained all the sale proceeds in excess of the taxes, interest, penalties, and fees.

That's right. It only took $8.41 to initiate these proceedings. Even after accounting for the additional fees, the county turned less than $300 in delinquencies into a $24,200 profit.

Rafaeli, LLC isn't the only plaintiff. Another property owner, Andre Ohanessian, saw $6000 in taxes, fines, and fees turn into a $76,000 net gain for the county when it auctioned his property for $82,000 and kept everything above what it was owed.

The lower court said there was nothing wrong with the government keeping thousands of dollars property owners didn't owe it.

The circuit court granted summary disposition to defendants, finding that defendants did not “take” plaintiffs’ properties because plaintiffs forfeited all interests they held in their properties when they failed to pay the taxes due on the properties. The court determined that property properly forfeited under the GPTA [General Property Tax Act] and in accordance with due process is not a “taking” barred by either the United States or Michigan Constitution. Because the GPTA properly divested plaintiffs of all interests they had in their properties, the court concluded that plaintiffs did not have a property interest in the surplus proceeds generated from the tax-foreclosure sale of their properties.

The appeals court felt the same way about the issue, resulting in this final appeal to the state's top court. The Michigan Supreme Court says this isn't proper, going all the way back to English common law that had been adopted by the new nation more than two hundred years ago.

At the same time that it was common for any surplus proceeds to be returned to the former property owner, it was also generally understood that the government could only collect those taxes actually owed and nothing more.

[...]

This Court recognized a similar principle in 1867, stating that “[n]o law of the land authorizes the sale of property for any amount in excess of the tax it is legally called upon to bear.” Indeed, any sale of property for unpaid taxes that was in excess of the taxes owed was often rendered voidable at the option of the landowner. Rather than selling all of a person’s land and risk the sale being voided, officers charged with selling land for unpaid taxes often only sold that portion of the land that was needed to satisfy the tax debt. That is, early in Michigan’s statehood, it was commonly understood that the government could not collect more in taxes than what was owed, nor could it sell more land than necessary to collect unpaid taxes.

That all changed with the General Property Tax Act. The current version of the GPTA unilaterally declares all ownership rights "extinguished" the moment the government begins proceedings against the property, well before the foreclosure sale occurs.

This law -- as exercised in these forfeitures and auctions -- is unlawful, the Supreme Court says.

We conclude that our state’s common law recognizes a former property owner’s property right to collect the surplus proceeds that are realized from the tax-foreclosure sale of property. Having originated as far back as the Magna Carta, having ingratiated itself into English common law, and having been recognized both early in our state’s jurisprudence and as late as our decision in Dean in 1976, a property owner’s right to collect the surplus proceeds from the tax-foreclosure sale of his or her property has deep roots in Michigan common law. We also recognize this right to be “vested” such that the right is to remain free from unlawful governmental interference.

The government argued that without being able to take everything (even when less is owed), it does not have a stick of sufficient size to wield against delinquent taxpayers. Nonsense, says the state's top court. The state can still collect what is owed. What it can't do is take more than that.

We recognize that municipalities rely heavily on their citizens to timely pay real-property taxes so that local governments have a source of revenue for their operating costs. Nothing in this opinion impedes defendants’ right to hold citizens accountable for failing to pay property taxes by taking citizens’ properties in satisfaction of their tax debts. What defendants may not do under the guise of tax collection is seize property valued far in excess of the amount owed in unpaid taxes, penalties, interest, and fees and convert that surplus into a public benefit. The purpose of taxation is to assess and collect taxes owed, not appropriate property in excess of what is owed.

If the county wants its eight dollars, it can take its eight dollars. Everything above that still belongs to the original property owner. This should seem obvious, but it isn't. It took the state's top court 49 pages to arrive at this conclusion. What seems obvious to citizens is far too often deliberately unclear to government agencies. Legislation is rarely written in plain language. And it's crafted by people who have a vested interest in ensuring their employer's financial stability. The end result -- years down the road -- is the government turning a $285 foreclosure into a $24,000 surplus. The final insult is taxpayers paid for county officials to argue against the taxpayers' best interests. But, from now on, the government will have to share its takings with the people it's taking property from.

Filed Under: civil asset forfeiture, debt, michigan, oakland county, punishment, takings

Copyright Takes Down High-Profile Translation Of Thomas Piketty's Comments On Germany & Greek Debt

from the because-copyright dept

Here we go again with copyright taking content away from the public, rather than the other way around. You've probably heard about everything going on in Greece these days, with the big vote and the fight over Greek debt and how it will deal with it. Leading up to it, my social media stream suddenly filled up with people linking to a story at Medium with an English translation by Gavin Schalliol of an interview famed economist Thomas Piketty gave to the German publication DIE ZEIT. Whether you like/agree with Piketty or not (and I'm in the camp that thinks he's overrated), the interview itself was pretty interesting, making a key point that has gotten lost in much of the debate: that for all the pressure that Germany has been putting on Greece to repay its debts, Germany itself didn't repay its debts after World War II (or earlier wars). Lots of people have been talking about it, and tons of English-language news reports wrote up the story, with nearly all of them linking to Schalliol's translation. Just for example, here's the Washington Post, the Huffington Post, Quartz, Slate, Business Insider, Fortune, Marketwatch, and Vox, all of whom link to Schalliol's translation on Medium.

But, if you visit it now, you will not see the translation. Instead, you see this: If you can't read it, it says:

I am currently in touch with DIE ZEIT to ensure my compliance with German copyright law. Updates will follow very soon. The original German interview with Thomas Piketty can be found here.

To be fair, it's quite likely that Schalliol's translation violated the copyright in the original. While some may debate whether or not a translation should ever really be subject to copyright (nothing is actually copied), it is pretty widely set in stone that translations are derivative works, and as such are subject to copyright. However, the simple fact is that DIE ZEIT did not choose to publish an English translation, and even if it now chooses to do so, it will happen after the big vote happened, rather than before, when Schalliol initially published his translation.

It's that translation that spread the interview far and wide and made it a big part of the public discussion over how Greece should deal with the German-led EU proposal, which it eventually voted down. I'm sure the copyright system supporters among you will leap to the defense of DIE ZEIT and the fact that, by law, its "rights" were violated. But, if you take a step back and look at the overall situation, it's difficult to see how the world is better off under such a result. If Schalliol had never been able to publish his translation, it's likely that Piketty's comments would have had a much smaller and more limited audience, limiting the role it played in the overall discussion. It wouldn't likely have had much of an impact on the end result, but at the very least, it helped provide a lot of context to people around the globe.

And, it's difficult to argue DIE ZEIT was somehow worse off. First, most of the articles actually linked back to the original as well, likely driving some amount of traffic. But, more importantly, it's difficult to argue that Schalliol's translation was a substitute for the original, given that even considering the small population that speaks both languages, it's likely that Schalliol's translation was almost entirely read by an audience that did not see the original and could not read it even if they wanted to.

If the intention of copyright is to better encourage the dissemination of ideas and knowledge, as we're often told, then shouldn't that kind of thing be encouraged, rather than discouraged? Instead, we get yet another story of copyright stepping in to stifle a public discussion of ideas.

Filed Under: copyright, debt, derivative work, gavin schalliol, germany, greece, thomas piketty, translation
Companies: die zeit

European Nations Wish To Ban Negative Thoughts Or Investments On Their Financial Position

from the towards-a-more-patriotic-hedge-fund dept

It seems that no country is immune to the sting of financial opinions. As we saw recently, S&P's decision to strip an "A" off their rating for the U.S. debt resulted in President Obama's dismissal of the rating ("We're still AAA."), Michael Moore's call for something a bit more drastic ("show some guts and arrest the CEO of Standards and Poors") and, finally, the Senate Banking Committee's decision to explore its options, including a possible hearing involving S&P ("We won't arrest them. We'll just take them downtown to answer a few questions.")

Being unable to graciously accept financial criticism isn't just an American problem, however. As several European nations continue their slide into bankruptcy, their respective governments have stepped up to do the only thing that makes sense: ban short sales on government-backed bank shares (following on a similar plan to ban negative ratings). It's yet another case of governments attempting to suppress expression it doesn't like (i.e., "We think failure is the most likely option.") through legislation. And as Matt Levine of Dealbreaker explains, there's a whole lot of unintended consequences to banning "sad thoughts about banks:"

This is hard to believe because all European banks are obviously well capitalized and any suggestion to the contrary is just rumor and speculation. But! Sometimes things go wrong. Sometimes banks need to raise money. When equity investors are staying away from them, sometimes they do this by selling convertible bonds...

The short sale bans are mostly for just 15 days, but repeatedly changing the rules in the financial markets will have effects well beyond the brief share-price gains. If you're a convertible arbitrage investor, it's now pretty clear that you should never buy convertibles issued by a European bank, because you may not be able to hedge when you need to. Which can't be good for the banks' future capital raising needs.

Oddly enough, the protectionist legislation meant to protect the banks from "evil" speculation will also work against their ability to raise funds in the future, which extends the damage from "just right now" to "an indefinitely longer period."

Then there's this bit of extremely broad terminology coming from Spain's entry into the "the only correct position is a positive position" ban-happy sweepstakes:

This preventive ban affects any trade on equities or indices, including cash equities transactions, derivatives in regulated markets or OTC derivatives, that has an effect of creating a net short position or increase a previous one, even if on an intraday basis. A net short position means any position resulting in a positive economic exposure to falls in the price of the stock.

In much simpler words: investors are not allowed to profit when stock prices dip. This also means that investors can't mix in a few shorts with the rest of their investments to insulate themselves against price drops. Or rather, that they can do that, but only if the end result of the investments is that they lose money when stock prices fall. Spain, it would seem, is only going to allow bullish investments despite the realities of the market, and it will be watching this on a day-to-day basis, if the language above is to be believed. Adios, bear market day traders!

France ties things down even further in its extensive AMF document:

3 - Is an investor allowed to create a net short position in one of the securities concerned by using derivatives?
No, investors are not allowed to use derivatives to create a net short position; they may only use derivatives to hedge, create or extend a net long position.

France is also savvy to other devious, speculative moves as well:

6 - Are trades in index derivatives allowed where the basket of securities includes one or more of the securities concerned?
a) Investors exposed to the equity market are allowed to hedge their general market risk by trading in index derivatives. In this context, the AMF accepts the marginal net short positions in the securities concerned that may result from that trading in index derivatives.
b) Trading in index derivatives for any other purpose than hedging general market risk is not allowed unless the resulting net short positions in the securities concerned are offset by long positions.

Again, this overly broad ban against speculators who have the audacity to express their lack of confidence in a financial system via their market activity will also steamroll "legitimate" investors who are just looking to "not lose money," as Levine points out:

We wonder how you would test whether a net short position in an index derivative is for the purposes of "hedging general market risk" or for the purposes of "profiting on spreading false rumors" (or other non-legitimate purposes, like hedging specific market risk). Presumably anyone shorting European indexes does so because they don't want to lose money when the market goes down. Even speculators.

Oh, and one more thing: these bans are still in effect if you're a citizen of these short-sale-banning countries, no matter which country you actually reside and/or do business in:

The Decision applies to any natural or legal person, French or foreign, regardless of whether trading takes place in France or in another country, or on a regulated market or not.

All of this ridiculous legislation is due to various governments suddenly developing very thin skin when investors insult them tangentially with their financial decisions and opinions. There's nothing to be gained by banning short sales and plenty of unintended consequences to unleash into an already-disrupted marketplace. Levine sums up their attitude this way:

You take shorting of bank shares as a personal affront, and your goal is not to have functioning markets but just to prove that you’re tough.

While I'm sure most governments would love all of their citizens to believe that their respective nations will overcome all odds and rise to greatness once again, in the meantime, investors are still going to bet on what is likely, rather than just wrapping themselves in the flag and throwing their money into whatever the legislative body deems to be proper, patriotic investments.

Filed Under: debt, economics, europe, markets, opinion, short selling, sovereign

Let's Face It: S&P's Analysis Is A Joke... But It Still Has A Right To An Opinion

from the you-probably-just-shouldn't-believe-it dept

There's been a lot of attention paid to S&P over the past couple weeks, after it was the first of the big three credit rating agencies to "downgrade" US debt. As we pointed out at the time, it's pretty ridiculous to get worked up over the downgrade, because it's just one company's opinion. And, yes, for very ridiculous reasons, the opinions of a few ratings firms are written into the law, and some debt holders are required to hold certain types of debt based solely on the opinions of these companies. The real problem is that such opinions matter. In fact, as many commentators noticed, after the S&P downgrade, people actually rushed to buy up more US debt, driving down the cost, which is the exact opposite of what you would think should happen.

Of course, S&P has other problems. Nate Silver did a brilliant (as per usual) takedown of "Substandard and Pourous," in which he noted that S&P's ratings are pretty dreadful. He goes through the data and shows that listening to S&P will make you poorer. Basically, lots of other information will give you a much better indicator of the likelihood of default on sovereign debt. The specific problem?

S.&P. ratings tend to lag, rather than lead, the market. That is, in cases where the market’s view of default risk is misaligned with S.&P.’s, S.&P. is a good bet to change their rating to catch up to market perception.

And, of course, lots of people have pointed out how poorly S&P did in the housing bubble, rating crap bundles of mortgages as investment grade when it was clearly junk. Then there's other general sleaziness. Pro Publica points out that S&P -- who, it should be mentioned, apparently made a $2 trillion "error" right before downgrading the US debt, is apparently lobbying against a regulation that would require it to report "significant errors."

But does this, as some have suggested, mean that S&P should get into some sort of legal trouble? Michael Moore even made the ridiculous suggestion that the company's CEO should be arrested. Really? You would think that Moore, who has been pretty damn critical of US government policy over the years, would think twice before thinking that someone should be "arrested" for stating an opinion that was critical of the government's ability to repay its debts.

But, of course, we still have some of the First Amendment, and that means you can state an opinion -- even one that turns out to be wrong or useless -- and not be arrested for it. Once again, the real issue is this idea that we need a ratings agency to determine the quality of debt. In the equity world, plenty of investment banks issue "ratings" on the equity (usually some form of "buy, sell, hold") but no one takes them quite as seriously as the debt ratings from S&P, Moody's and Fitch. Again, I'd argue that this is because of the requirements in law about the kinds of debt certain operations can hold, and tying that to just a few opinions. If we had the same rules for equity, we'd see a very different stock market today. Sure, when a big bank downgrades a stock, people sell, but people implicitly recognize it's an opinion. When it comes to debt, something about the ratings system and the requirements about it makes people think that the ratings are more "fact" than opinion.

So, let's get away from that entirely. Let's dump the requirements that any debt holdings should be required of certain levels based solely on the opinions of these ratings agencies with terrible track records. Instead, what's wrong with just letting the market price decide how trustworthy the debt is? You don't have to do away with ratings entirely. Anyone can have an opinion. But without the requirements that make just a few firms integral to the market, you could have a lot more open competition on who really has the best opinion on the viability of certain debt.

So don't arrest the head of S&P. But, stop giving the ratings from these few firms special status that makes people think they're something more than just a random company's opinion.

Filed Under: debt, markets, michael moore, opinion, ratings
Companies: s&p

Dear Everyone: Stock Market Problems Are Not Directly Due To S&P Downgrade

from the how-to-read-a-market dept

This morning we posted about the total silliness of people overreacting to S&P downgrading US debt from AAA to AA+. We received a couple of "you clueless idiot" type comments, with people pointing out that this "matters" because some institutions are required by law to hold certain percentages of certain grade investments. Of course, we did mention that in the post, so I'm going to take the blame and admit that I perhaps wasn't clear enough and now will try again: my point is that it's stupid that anyone has to react because one firm (with a rather poor track record) in "rating" debt suddenly makes a slight shift in its opinion, and that such a change in opinion represents no real change in how people view the market.

My point -- which again, was perhaps not clear even though it was the final line of the post is this:

Markets are made based on the interaction of buyers and sellers. Not the (sometimes questionable) opinions of just a few firms.

Now, let's prove it. All of the press reports today are saying that the stock market collapse is due to the S&P's downgrade. And that may be true in a very indirect way (which we'll get to), but there's no way it's a "direct" response. Here's why: the S&P is saying that US debt is just ever so slightly riskier than it was before. If that's true, then the market would likely be dumping treasuries and the interest rate would be going up. Instead, the exact opposite is happening. It looks like buyers are flooding into treasuries and the interest rate is dropping. Even economists, who generally take totally opposing opinions to one another, are trying to point this out. You've got Paul Krugman (self-described liberal) complaining about people missing this point... and you've also got libertarian Arnold Kling making the same point.

Now it could be that the downgrade indirectly triggered the stock sell-off, but it's not because S&P is suddenly afraid of the US debt being less trustworthy. As Kling notes (and I suggested in my original post), the market already can determine how risky US debt is and has priced that into the market. One firm's opinion should not change that. If anything the action in the market suggests that people are rejecting the S&P's change, not freaking out because of it.

So then why is the stock market dropping? There could be a variety of indirect reasons. One might just be that some investors are generally overreacting to the news without understanding it at all, and thinking "bad news means sell." Another theory is that this move jolted some people's attention to larger problems elsewhere (mainly the fear of Italy running into trouble). But I actually tend to think that Krugman's analysis here is actually the most reasonable. He argues that the reaction in the stock market means that US policy makers are about to overreact badly, because of the S&P downgrade, and do something stupid to harm the economy even more:

And maybe, maybe there is an S&P story — but not the one you think. Arguably, that downgrade will bully policy makers into even more deflationary, contractionary policies than they would have undertaken otherwise, which has the perverse effect of making US debt more attractive, since the alternatives are worse.

But, why isn't anyone talking about a very serious problem: the fact that we allow ratings agencies to have so much power in the first place? A ratings agency is just an opinion. What's wrong with letting the market set the opinion of the likelihood of default on debt, rather than suddenly trusting firms that don't have the greatest track record?

Filed Under: debt, markets, ratings agencies
Companies: s&p

Insanity: Getting Worked Up Over One Company's Slight Change Of Opinion In The Creditworthiness Of The US

from the it's-an-opinion dept

You may have heard (or, at least, I hope you heard) that, late Friday, S&P downgraded the US's credit rating from AAA to AA-plus, causing all sorts of hair pulling and worry. Here's the part that makes no sense: S&P's rating of the safety of US debt is simply an opinion. It's certainly a high profile opinion, but it's still an opinion. What I can't figure out is why anyone is making a big deal of one private company making a slight change to its opinion. People are acting as if this change is a change in facts. They're acting as if an S&P downgrade actually makes US debt less trusthworthy. It does not. The US may very well not be that trustworthy on its debt (in fact, I find that argument quite compelling these days), but having one company say that is meaningless.

We've discussed this before. For absolutely no good reason, the US government decided to put the opinion of various rating agencies into law, requiring certain institutions to maintain certain percentages of "highly rated" bonds in order to engage in certain activities. The insanity is that it effectively forced the world to think about ratings from S&P and Moody's as if they were fact, even though they're really just opinions. And to do all of this even if their ratings go against one's own opinion. And, of course, we all know that the ratings agencies are far from perfect, and have an unfortunate history that suggests that, at times, they've succumbed to pressure.

So, even if you believe that the US government's financial position is a disaster (and, again, a case can be made for that), it's crazy to pretend that one company changing its opinion (just slightly) has any actual meaning. Most of the market can and does make its own decisions on the creditworthiness of US debt, no matter what S&P says. In other words, the (slim) risk of the US actually defaulting is already priced in. The S&P saying what people are already thinking doesn't mean that anything fundamental changed... other than its opinion.

Markets are made based on the interaction of buyers and sellers. Not the (sometimes questionable) opinions of just a few firms.

Filed Under: debt, economy, opinions, ratings, united states
Companies: s&p

Using MySpace Photo Of Debtor's Daughter As An Intimidation Tactic Is A No-No

from the in-case-you-were-wondering dept

Collections agencies are pretty notorious for pulling out all sorts of tricks to get people to pay up, including finding out info about family members. However, apparently one collections agency went too far in two specific ways: first, by spoofing the caller-ID to pretend to be a phone call from the woman's mother in law, but perhaps more seriously is getting a photo on MySpace of the woman's daughter and using it to suggest that something bad might happen to her:

The first bad decision was to use a caller-ID spoofer to make it look like the collection call was coming from plaintiff's mother in law. The next not-smart use of technology was to access plaintiff's MySpace page, learn that plaintiff had a daughter, and to use that fact to intimidate plaintiff. There was evidence in the record to suggest that the collection agency's "investigator" said to plaintiff, after mentioning plaintiff's "beautiful daughter," something to the effect of "wouldn't it be terrible if something happened to your kids while the sheriff's department was taking you away?"

The woman sued the collections agency and won, as the court found that the agency "engaged in conduct the natural consequence of which was to harass, oppress, or abuse in connection with the collection of the debt; used false, deceptive, or misleading representations or means in connection with the collection of the debt; and used unfair or unconscionable means to collect or attempt to collect the debt."

Filed Under: collections agency, debt, intimidation
Companies: myspace

Suggestion For Warner Music: Maybe Look At How Much You're Paying Your Execs

from the might-save-some-money dept

It's no secret that Warner Music has been struggling -- employing a highly questionable strategy of shutting down or suing all sorts of useful services that make its music more valuable, and then demanding ridiculous payment terms or equity in any company that might help them survive... all while the company slowly goes bankrupt. Following what can only be called a disastrous 2008, the company has shown a minor improvement in 2009, but it has all the indications of a dead cat bounce. The company was in desperate need of cash, and was able to get a loan of $1.1 billion last week to ease some of those concerns... but at a staggering 9.5% interest. Meanwhile, the guys over at Hypebot are wondering why WMG's top two executives were given $6.25 million in bonuses last year as the company was collapsing. And with some back of the envelope calculations, they note that the company could save hundreds of millions of dollars by dropping the bonuses and using the money to pay back the debt earlier, saving on some of the massive interest payments that are on the way.

Filed Under: bonuses, debt, edgar bronfman jr.
Companies: warner music group

AT&T Asks You To Pay In Advance To Handle Its Credit Problems

from the and-there-you-go dept

Despite explaining how the financial crisis will impact everyone, beyond just Wall Street, there are many people who still insist that it will have no impact on them. That's simply untrue. While the impacts may seem small and remote, when added up, they'll be noticeable. Richard Ahlquist writes in to show us a perfect example of this. AT&T has discovered that the commercial paper it relies on is now a lot more difficult to get, causing a bit of a cash crunch for the company. So how is it dealing with it? By pushing that cash crunch to you. Rather than its usual habit of billing you for the month that just past, AT&T is telling customers it's now billing them for the month ahead -- meaning that your latest bill may be double (paying for last month and next month). Effectively, AT&T is changing the credit terms on its customers, from net 30 to prepay. Sure, it may not be a huge deal that your telco bill doubles for one month only, but that's still money that's out of your pocket 30 days earlier -- and if other vendors do the same, it could be quite noticeable.

Filed Under: credit problems, debt, economy, financial crisis, lending, small business
Companies: at&t