Tag: Fraud

Tweet of the Day

While I am generally opposed to bitcoin, I make an exception for South Florida. Miami is the rightful home of everything fraudulent, weird, and sleazy. And I say this with love. https://t.co/7erEwDjSDK

— Matt Stoller (@matthewstoller) February 12, 2021

This succinctly sums up both the current cryptocurrency craze and south Florida.

As Zathras would say, “But at least there is symmetry.”

I Am Amused

A few days back, I offered a thoroughly insincere Thoughts and Prayers to the National Rifle Association over the revelations of fraud and self dealing, and their hypocritical attempts to dodge accountability via bankruptcy and relocating their incorporation location.

Now,  a major NRA donor will be filing a lawsuit to prevent the discharge of the debts, because debts incurred by criminal action (in this case fraud) are not subject to relief:

A major donor to the National Rifle Association is poised to challenge key aspects of the gun group’s bankruptcy filing, in an attempt to hold executives accountable for allegedly having defrauded their members of millions of dollars to support their own lavish lifestyles.

Dave Dell’Aquila, a former tech company boss who has donated more than $100,000 to the NRA, told the Guardian on Saturday he was preparing to lodge a complaint in US bankruptcy court in Dallas, Texas. If successful, it could stop top NRA executives discharging a substantial portion of the organisation’s debts.

It could also stop Wayne LaPierre, the NRA’s controversial longtime chief executive, avoiding ongoing lawsuits that allege he defrauded the pro-gun group’s members to pay for luxury travel to the Bahamas and Europe and high-end Zegna suits.

………

Dell’Aquila’s complaint, likely to be brought within the next few weeks, would use a provision of the bankruptcy code to prevent the NRA from sidestepping more than $60m of debt on grounds it was improperly incurred. The law stipulates that debts acquired through malfeasance can be deemed by the court to be an exception to bankruptcy arrangements.

Speaking from his home in Nashville, Tennessee, Dell’Aquila said: “We intend to invoke this provision. We are going to ask the judge to determine that our claim was incurred as a result of fraud and should be deemed non-dischargeable.”

The NRA declared bankruptcy in the Dallas court on Friday. The organization also said it would be relocating from New York, where it was founded in 1871, to Texas.

I’m hoping that LaPierre gets reduced to penury over this.

In addition to being an extremist who foments violence, he’s a crook.

Not a Good Look

It turns out that Theranos has systematically destroyed incriminating evidence.

This appears to be deliberate obstruction of the investigation:

Failed blood-testing unicorn Theranos trashed vital incriminating evidence of its fraud, prosecutors said on Monday.

The imploded startup’s extensive testing data over three years, including its accuracy and failure rate, was “stored on a specially-developed SQL database called the Laboratory Information System (LIS),” according to a filing [PDF] in the fraud case against Theranos’s one-time CEO Elizabeth Holmes and COO Sunny Balwani.

………

The reality, however, was that for one set of tests, the failure rate was 51.3 per cent. What does that mean? Prosecutors explain: “In other words, Theranos’s TT3 blood test results were so inaccurate, it was essentially a coin toss whether the patient was getting the right result. The data was devastating.”

………

From the filing: “On or about August 31, 2018 – three months after a federal grand jury issued a subpoena requesting a working copy of this database – the LIS was destroyed. The government has never been provided with the complete records contained in the LIS, nor been given the tools, which were available within the database, to search for such critical evidence as all Theranos blood tests with validation errors. The data disappeared.”

………

When a grand jury issued a subpoena for the database, Theranos’s lawyer came up with a strategy to supply the info without exposing the company’s appalling test results: hand over a backup of the database to the government and fail to provide the necessary materials to reconstruct it.

How do we know this? Because prosecutors said they have the internal emails showing staff discussing exactly that: how the backup wouldn’t come with the “layers of applications and data.” Its VP of Operations emailed an internal lawyer: “If we are just handing over a database, I’m not sure it will meet the needs.”

If that wasn’t enough, all three versions of the backup provided to the US government came with a password that was necessary to open it up. And no one was able to remember it, at least according to the various internal emails flying around. After some discussion, it was agreed that Theranos’s former head of IT, Antti Korhonen, was the only one with the password. But then Korhonen wasn’t able to find it either.

Unable to get at the database, Uncle Sam put an expert on the case: “The government retained a computer forensic expert to assist in retrieving this data, who found that the ‘key’ file on the hard drive, required to reconfigure the SQL database, is itself encrypted by a distinct password (not the one provided with the transmittal letter to open the hard drive), and cannot be opened.”

While all this was going on, Theranos decided to shut down the facility that housed the database in Newark, New Jersey. Execs were warned that if the hardware and servers were taken apart “it would be almost impossible to recreate the database” by Theranos IT contractor Michael Chung. But they shut it down anyway, and any access to the database from that point was lost – both for Theranos and government investigators.
Oops?

Uncle Sam’s legal eagles are not convinced this was an innocent mistake. Referring to the IncRev’s CEO, they note: “Even though Chandrasekaran knew the LIS hardware would be coming apart on Friday, August 31, 2018, and even though he was on an email chain in which the ‘all clear’ was given to take apart the hardware, he waited until two days later, September 2, 2018, to email a senior Theranos official with a list of items he would need from the database in order to reconstruct the LIS.

………

Its conclusion? “It does not appear from the timing of Chandrasekaran’s requests that he, in fact, intended to successfully copy the database before it shutdown.”

There is plenty of other evidence that, despite Theranos’s repeat claims, its machines were so inaccurate that they were fundamentally worthless. But the database would have provided clear proof that the company had to be aware that its entire testing system was fundamentally flawed, which itself supports the argument that the startup knowingly misled investors. While lying in press releases and interviews is reprehensible, it’s not necessarily a crime. However, lying in presentations to people in order to pull in investment is.

The failure to retain a working copy of a database that the company had paid millions to build and maintain, and which contained critically important information for the functioning of the business, is, let’s say, suspicious. Sufficiently suspicious that prosecutors wrote an entire filing about it.

………

Other filings reveal that Holmes would often personally handle complaints about how inaccurate its tests appeared to be, something that prosecutors says is evidence that the CEO knew that its testing machines didn’t work while at the same time continuing to claim the opposite in public. Holmes and Balwani face a dozen criminal wire fraud charges apiece, and up to 20 years in prison if found guilty.

Throw the book at them.

There are way too many unicorns out there who are little more than fraud, and we need to start throwing their founders in jail.

Good Point

Matt Stoller makes a very good point, that the penetration of “premier” cybersecurity firm SolarWinds by hackers,* was a direct consequence of the private equity looting ethos.

They did not play close attention to security (Passwords from movies, seriously), our-sourced work into Eastern Europe, where the FSB could recruit operatives in a day trip.

Security, you see, is not profitable, even if you are a cyber security firm:

Roughly a month ago, the premier cybersecurity firm FireEye warned authorities that it had been penetrated by Russian hackers, who made off with critical tools it used to secure the facilities of corporations and governments around the world.

The victims are the most important institutional power centers in America, from the FBI to the Department of Treasury to the Department of Commerce, as well as private sector giants Cisco Systems, Intel, Nvidia, accounting giant Deloitte, California hospitals, and thousands of others. As more information comes out about what happened, the situation looks worse and worse. Russians got access to Microsoft’s source code and into the Federal agency overseeing America’s nuclear stockpile. They may have inserted code into the American electrical grid, or acquired sensitive tax information or important technical and political secrets.

………

And that makes this hack quite scary, even if we don’t see the effect right now. Mark Warner, one of the smarter Democratic Senators and the top Democrat on the Intelligence Committee, said “This is looking much, much worse than I first feared,” also noting “The size of it keeps expanding.” Political leaders are considering reprisals against Russia, though it’s likely they will not engage in much retaliation we can see on the surface. It’s the biggest hack since 2016, when an unidentified group stole the National Security Agency’s “crown jewels” spy tools. It is, as Wired put it, a “historic mess.”

……….

The most interesting part of the cybersecurity problem is that it isn’t purely about government capacity at all; private sector corporations maintain critical infrastructure that is in the “battle space.” Private firms like Microsoft are being heavily scrutinized; I had one guest-post from last January on why the firm doesn’t manage its security problems particularly well, and another on how it is using its market power to monopolize the cybersecurity market with subpar products. And yet these companies have no actual public obligations, or at least, nothing formal. They are for-profit entities with little liability for the choices they make that might impose costs onto others.

………

All of which brings me to what I think is the most compelling part of this story. The point of entry for this major hack was not Microsoft, but a private equity-owned IT software firm called SolarWinds. This company’s products are dominant in their niche; 425 out of the Fortune 500 use SolarWinds. As Reuters reported about the last investor call in October, the CEO told analysts that “there was not a database or an IT deployment model out there to which [they] did not provide some level of monitoring or management.” While there is competition in this market, SolarWinds does have market power. IT systems are hard to migrate from, and this lock-in effect means that customers will tolerate price hikes or quality degradation rather than change providers. And it does have a large market share; as the CEO put it, “We manage everyone’s network gear.”

SolarWinds sells a network management package called Orion, and it was through Orion that the Russians invaded these systems, putting malware into updates that the company sent to clients. Now, Russian hackers are extremely sophisticated sleuths, but it didn’t take a genius to hack this company. It’s not just that criminals traded information about how to hack SolarWinds systems; one security researcher alerted the company last year that “anyone could access SolarWinds’ update server by using the password “solarwinds123.’”

Using passwords ripped form the movie Spaceballs is one thing, but it appears that lax security practice at the company was common, systemic, and longstanding. The company puts its engineering in the hands of cheaper Eastern Europe coders, where it’s easier for Russian engineers to penetrate their product development. SolarWinds didn’t bother to hire a senior official to focus on security until 2017, and then only after it was forced to do so by European regulations. Even then, SolarWinds CEO, Kevin Thompson, ignored the risk. As the New York Times noted, one security “adviser at SolarWinds, said he warned management that year that unless it took a more proactive approach to its internal security, a cybersecurity episode would be “catastrophic.” The executive in charge of security quit in frustration. Even after the hack, the company continued screwing up; SolarWinds didn’t even stop offering compromised software for several days after it was discovered.

………

And yet, not every software firm operates like SolarWinds. Most seek to make money, but few do so with such a combination of malevolence, greed, and idiocy. What makes SolarWinds different? The answer is the specific financial model that has invaded the software industry over the last fifteen years, a particularly virulent strain of recklessness typically called private equity.

………

In October, the Wall Street Journal profiled the man who owns SolarWinds, a Puerto Rican-born billionaire named Orlando Bravo of Thoma Bravo partners. Bravo’s PR game is solid; he was photographed beautifully, a slightly greying fit man with a blue shirt and off-white rugged pants in front of modern art, a giant vase and fireplace in the background of what is obviously a fantastically expensive apartment. Though it was mostly a puff piece of a silver fox billionaire, the article did describe Bravo’s business model.

………

As I put it at the time, Bravo’s business model is to buy niche software companies, combine them with competitors, offshore work, cut any cost he can, and raise prices. The investment thesis is clear: power. Software companies have immense pricing power over their customers, which means they can raise prices to locked-in customers, or degrade quality (which is the same thing in terms of the economics of the firm). As Robert Smith, one of his competitors in the software PE game, put it, “Software contracts are better than first-lien debt. You realize a company will not pay the interest payment on their first lien until after they pay their software maintenance or subscription fee. We get paid our money first. Who has the better credit? He can’t run his business without our software.”

………

Did this acquisition spree and corporate strategy work? Well that depends on your point of view; it certainly increased accounting profits. From a different perspective, however, the answer is no. Accounting profits masked that the corporate strategy was shifting risk such that the firm enabled a hack of the FBI and U.S. nuclear facilities. And from the user and employee perspective, the strategy was also problematic. It’s a little hard to tell, but if you look at software feedback comment forums, you’ll find a good number of IT pros dislike SolarWinds, seeing the firm as a financial project based on cobbling together random products from an endless set of acquisitions. (If you are at SolarWinds or another Thoma Bravo company, or use their products, send me a note on your experiences.)

………

It’s not clear to me that Bravo is liable for any of the damage that he caused, but he did make one mistake. Bravo got caught engaging in what very much looks like insider trading surrounding the hack. Here’s the Financial Times on what happened:

Private equity investors sold a $315m stake in SolarWinds to one of their own longstanding financial backers shortly before the US issued an emergency warning over a “nation-state” hack of one of the software company’s products.

The transaction reduced the exposure of Silver Lake and Thoma Bravo to the stricken software company days before its share price fell as vulnerabilities were discovered in a product that is used by multiple federal agencies and almost all Fortune 500 companies.

But the trade could prove embarrassing for Menlo Park-based Silver Lake and its rival Thoma Bravo, which rank among the biggest technology-focused private equity firms in the world.

………

In this case, however, possible insider trading really isn’t the problem. Though I hate the phrase, the real scandal isn’t what’s illegal, it’s what is legal. Bravo degraded the quality of software, which usually just means that people have to deal with stuff that doesn’t work very well, but in this case enabled a weird increase in geopolitical tensions and an espionage victory for a foreign adversary. It’s yet another example of what national security specialist Lucas Kunce notes is the mass transformation of other people’s risk into profit, all to the detriment of American society.

………

There are many ways to see this massive hack. It’s a geopolitical problem, a question of cybersecurity policy, and a legally ambiguous aggressive act by a foreign power. But in some ways it’s not that complex; the problem isn’t that Russians are good at hacking and U.S. defenses are weak, it’s that financiers in America make more money by sabotaging key infrastructure than by building it.

And they are celebrated for it. If Western nations had coherent political systems, the men responsible for this mess would be dragged in front of legislative committees and grilled over the business practices putting all of us at risk. Instead, five days ago, Pitchbook just gave out their Private Equity Awards, and named their “dealmaker of the year.”

Yes, it was Orlando Bravo.

We need to change the laws to hold these guys accountable.

As it currently stands, they borrow money, and then loot the companies, and then retreat behind the bulwark of the bankruptcy courts to avoid any responsibility for what they have done.

*According to “Knowledgeable Sources”, Russia, but no one is willing to go on the record, so YMMV.
Again, no one is willing to go on the record as to whether this was the FSB, or the GRU, or maybe it was the fault of those damn Eskimos.
The line is from Judgement at Nuremberg. It’s a great movie. Spencer Tracy, Marlene Dietrich, Burt Lancaster, Richard Widmark, Maximilian Schell, Judy Garland, Montgomery Clift, and a very young William Shatner. (Widmark says the line about the Eskimos.)

The Lincoln Project in One Tweet

The Lincoln Project raised $4.8 million between November 24th and December 16th hyping the Georgia Senate runoff elections.

Since then, it has spent $1.1 million on independent expenditures in those races and paid Steve Schmidt $1.5 million. https://t.co/BT5roJBmCt pic.twitter.com/mCS1B7wsxF

— Rob Pyers (@rpyers) December 30, 2020

The Lincoln Project was always a scam. 

It’s purpose is to extract money from gullible liberals by showing them sparkly things on MSNBC, not to fix the Republican Party or our politics.

Mr. Pyers is calling them out after they called out Ted Cruz for taking donations for SC Republican Senate candidates, and keeping most of the money.

Remember When I Said that Facebook Engaged in Systematic Fraud?*

In advertising, there are two philosophies behind advertising, contextual advertising, where you base you ads on what the user is doing, or looking at, or looking for, when you serve the ad, and behavioral advertising, where the advertiser tracks the user across the internet by creating a dossier of everything that they do.

They are called tracking-based and contextual advertising respectively. 

The claim of the trackers has always been that they create more effective ads as versus contextual advertising, though the best evidence seems to show the exact opposite.

To me, the “advantage” of tracking based advertising is that it creates tremendously high barriers for new market entrants, because they have to replicate the massive databases of user information of the incumbents.

It appears that Facebook’s managers on their advertising side are similarly dubious of the claims of tracking-based ads, alleging that Facebook’s claims are fraudulent.

Get the cuffs, Ponch:

Facebook is currently waging a PR campaign purporting to show that Apple is seriously injuring American small businesses through its iOS privacy features. But at the same time, according to allegations in recently unsealed court documents, Facebook has been selling them ad targeting that is unreliable to the point of being fraudulent.

The documents feature internal Facebook communications in which managers appear to admit to major flaws in ad targeting capabilities, including that ads reached the intended audience less than half of the time and that data behind a targeting criterion was “all crap.” Facebook says the material is presented out of context.

………

The documents emerged from a suit currently seeking class-action certification in federal court. The suit was filed by the owner of Investor Village, a small business that operates a message board on financial topics. Investor Village said in court filings that it decided to buy narrowly targeted Facebook ads because it hoped to reach “highly compensated and educated investors” but “had limited resources to spend on advertising.” But nearly 40 percent of the people who saw Investor Village’s ad either lacked a college degree, did not make $250,000 per year, or both, the company claims. In fact, not a single Facebook user it surveyed met all the targeting criteria it had set for Facebook ads, it says.

………

The lawsuit goes on to quote unnamed “employees on Facebook’s ad team” discussing their targeting capabilities circa June 2016:

One engineer celebrated that detailed targeting accounted for “18% of total ads revenue,” and $14.8 million on June 17th alone. Using a smiley emoticon, an engineering manager responded, “Love this chart! Although if the most popular option is to combine interest and behavior, and we know for a fact our behavior is almost all crap, does this mean we are misleading advertiser [sic] a bit? :)” That manager proceeded to suggest further examination of top targeting criteria to “see if we are giving advertiser [sic] false hope.”

………

The complaint also cites unspecified internal communications in which “[p]rivately, Facebook managers described important targeting data as ‘crap’ and admitted accuracy was ‘abysmal.’”

I would argue that Facebook’s whole advertising model is fraudulent.

*See here for earlier posts.

Today in Dysfunctional Ecological Policies

We have The Nature Conservancy selling carbon offsets.

This is why cap and trade and carbon offsets are a bad idea.

Our society is simply too corrupt for this.

We need the heavy hand of taxes, and the blunt force of the state without ANY opportunity for profit:

At first glance, big corporations appear to be protecting great swaths of U.S. forests in the fight against climate change.

JPMorgan Chase & Co. has paid almost $1 million to preserve forestland in eastern Pennsylvania.

Forty miles away, Walt Disney Co. has spent hundreds of thousands to keep the city of Bethlehem, Pa., from aggressively harvesting a forest that surrounds its reservoirs.

Across the state line in New York, investment giant BlackRock Inc. has paid thousands to the city of Albany to refrain from cutting trees around its reservoirs.

JPMorgan, Disney, and BlackRock tout these projects as an important mechanism for slashing their own large carbon footprints. By funding the preservation of carbon-absorbing forests, the companies say, they’re offsetting the carbon-producing impact of their global operations. But in all of those cases, the land was never threatened; the trees were already part of well-preserved forests.

………

The Nature Conservancy recruits landowners and enrolls its own well-protected properties in carbon-offset projects, which generate credits that give big companies an inexpensive way to claim large emissions reductions. In these transactions, each metric ton of reduced emissions is represented by a financial instrument known as a carbon offset. The corporations buy the offsets, with the money flowing to the landowners and the Conservancy. The corporate buyers then use those credits to subtract an equivalent amount of emissions from their own ledgers.

………

Few have jumped into this growing market with as much zeal as the Nature Conservancy, which was founded 69 years ago by a small group of ecologists seeking to preserve the last unspoiled lands in the U.S. In the seven decades since, the nonprofit in Arlington, Va., has grown into an environmental juggernaut, protecting more than 125 million acres. Last year its revenue was $932 million, which eclipsed the combined budgets of the country’s next three largest environmental nonprofits.

Now, with an increasing number of companies looking for creative ways to cut emissions, the nonprofit has accelerated its work on carbon projects. But a review of hundreds of pages of documents underpinning those projects and interviews with a half-dozen participating landowners indicate that the Conservancy is often preserving forested lands that don’t need defending.

You see something similar in China, where they have built hydroelectric dams in remote regions, where they will never deliver power, so that offsets could be purchased by European companies for cap and trade.

We need real change, and financializing strategies for anthropogenic climate change is criminogenic.

We will not survive the fraud.

Definitely Getting a Pardon

It turns out that Jared Kushner skimmed campaign funds which went to insiders.

I rather expect to see Trump pardon him, and Ivanka, and Don, Jr., and Eric, on his way out of the door.

In fact, my guess is that Melania and Baron will be the only ones not getting pardons:

President Donald Trump’s most powerful advisor, Jared Kushner, approved the creation of a campaign shell company that secretly paid the president’s family members and spent almost half of the campaign’s $1.26 billion war chest, a person familiar with the operation told Insider.

The operation acted almost like a campaign within a campaign. It paid some of Trump’s top advisors and family members, while shielding financial and operational details from public scrutiny.

When Kushner and others created the company in April 2018, they picked Trump’s daughter-in-law Lara Trump to become its president, Vice President Mike Pence’s nephew John Pence as its vice president, and Trump campaign Chief Financial Officer Sean Dollman as its treasurer and secretary, said the person, who spoke on the condition of anonymity to discuss private conversations about the shell company.

………

The shell company — incorporated as American Made Media Consultants Corp. and American Made Media Consultants LLC — allowed Trump’s campaign to skirt federally mandated disclosures. The tactic could attract scrutiny from federal election regulators.

Campaign-finance records showed Trump’s reelection effort and its affiliated committee with the Republican National Committee spent more than $600 million through American Made Consultants since its formation.

………

From January 2019 through the middle of November, the Trump campaign and an affiliated political committee together spent $617 million through American Made Media Consultants.

It was almost half of everything they spent in the failed effort to reelect Trump, according to an Insider review of Federal Election Commission records and analysis provided by the nonpartisan Center for Responsive Politics. 

………

Campaign-law experts have long accused the Trump team of using a corporate pass-through to hide payments.

………

If the federal government suspects a “knowing and willful” violation of election law has occurred, the Department of Justice has the power to open a criminal investigation into a political actor.

While such investigations are relatively uncommon, several former Justice Department and FEC officials previously told Insider that Justice Department officials may already be discreetly investigating Trump’s reelection activity.

Some of Trump’s campaign leaders even seemed stumped by the AMMC arrangement. Generally, they knew that AMMC was being used to buy pro-Trump TV, radio, and digital advertising and pay for other media.

But they couldn’t discern precisely how much each AMMC vendor was keeping for itself.

The person familiar with AMMC said the rates its vendors charged the Trump campaign were often cheaper than what an outside political firm would have demanded. Using the shell company also allowed Parscale to keep Lara Trump and Kimberly Guilfoyle [As an interesting aside, Guilfoyle is the ex-wife of California Governor Gavin Newsom, and got fired from Fox for sexual harassment] — the girlfriend of Donald Trump Jr. — on his payroll, the person familiar said.

………

Nothing was done without Jared’s approval,” the former Trump campaign advisor said. “What [Trump campaign manager Stephen] Stepien doesn’t know is because Jared doesn’t want him to know.”

Something clearly corrupt was going on here, but Trump cheating his investors/campaign/contractors/wives/etc is pretty much par for the course.

That being said, I would expect an investigation, which is why I also expect a very broadly worded pardon before January 20.

I’ve Called This Out for a While

A study has shown that The Lincoln Project’s ads actually had a negative impact, something which I noted on my blog a month ago and at least 6 months ago on the Stellar Parthenon BBS.

As long as I’ve known of the Lincoln Project, I have maintained that it has two purposes:

  • Enriching its principals.
  • To embrace and extend the Neoliberal capture of the Democratic Party.

It comes as no surprise then that this enterprise actually had negative utility on the matter of delivering votes to the Democratic Party.  That was never its purpose:

At various junctures during the 2020 campaign an attack ad would pop online that had observers on Twitter buzzing about how devastating for Donald Trump it would be. Except, more often than not, the ads weren’t effective, at least not for the nominal point of the election: persuading on-the-fence voters to back Joe Biden.

That’s the conclusion the Democratic Party’s top super PAC reached after doing analytical research into a handful of spots that went viral on Twitter.

The PAC, Priorities USA, spent a good chunk of the cycle testing the effectiveness of ads, some 500 in all. And, along the way, they decided to conduct an experiment that could have potentially saved them tons of money. They took five ads produced by a fellow occupant in the Super PAC domain—the Lincoln Project—and attempted to measure their persuasiveness among persuadable swing state voters; i.e. the ability of an ad to move Trump voters towards Joe Biden. A control group saw no ad at all. Five different treatment groups, each made up of 683 respondents, saw one of the five ads. Afterwards they were asked the same post-treatment questions measuring the likelihood that they would vote and who they would vote for.

The idea wasn’t to be petty or adversarial towards the Lincoln Project, which drew both fans and detractors for the scorched-earth spots it ran imploring fellow Republicans to abandon Trump. It was, instead, to see if Twitter virality could be used as a substitute for actual ad testing, which took funds and time. If it turned out that what the Lincoln Project was doing was proving persuasive, the thinking went, then Priorities USA could use Twitter as a quasi-barometer for seeing how strong their own ads were.

But that didn’t turn out to be the case. According to Nick Ahamed, Priorities’ analytics director, the correlation of Twitter metrics—likes and retweets—and persuasion was -0.3, “meaning that the better the ad did on Twitter, the less it persuaded battleground state voters.” The most viral of the Lincoln Project’s ads—a spot called Bounty, which was RTed 116,000 times and liked more than 210,000 times—turned out to be the least persuasive of those Priorities tested.

The  Democratic Party establishment (There is no Democratic Party establishment) and the useful idiots at MSNBC who were so enamored of of these ad campaigns were suckers for a group of con men.

The lesson to be learned here is beware of Republicans bearing gifts.

Privatizing Profits and Socializing Losses

The World Bank has now come out in favor of a program that would make taxpayers responsible for guaranteed profits of private business all around the world.

This is an obscenity:

The World Bank has been leading other multilateral development banks (MDBs) and international financial institutions to press developing country governments to ‘de-risk’ infrastructure and other private, especially foreign investments.

They promote public-private partnerships (PPPs) supposedly to mobilize more private finance to achieve the Sustainable Development Goals. PPP advocacy has been stepped up after developing countries’ pleas for better international tax cooperation were blocked at the third United Nations’ Financing for Development conference (FfD3) in Addis Ababa in mid-2015.

………

De-risking?

The World Bank’s latest Guidance on PPP Contractual Provisions measures progress in terms of “successfully procured PPP transactions”. The Bank explicitly recommends ‘de-risking’ PPPs, effectively involving ‘socializing’ risks and privatizing profits.

But the term ‘de-risking’ is misleading as some risk is inherent in all project investments. After all, projects may encounter problems due to planning mistakes, poor implementation or unexpected developments. Hence, Bank advice does not really seek to reduce, let alone eliminate risk, but simply to make governments bear and absorb it.

………

Off the books, out of sight

Both World Bank and International Monetary Fund (IMF) research has found many governments using PPPs and other similar arrangements to keep such projects ‘off the books’ of official central government accounts, effectively reducing transparency and accountability, while compromising governance.

Such project financing typically involves government-guaranteed – rather than direct government – liabilities. Not booked as government development or capital expenditure, it is also not counted as part of sovereign or government debt, e.g., for parliamentary reporting and accountability.

………

Shifting responsibility

PPP financing is typically booked as government-guaranteed liabilities, rather than as sovereign debt per se. Being ‘off the books’, governments face fewer constraints to taking on ever more debt and risk. With such commitments, they also become much more vulnerable to ‘unforeseen’ costs.

Such contractual arrangements, typically set by private partners in most PPPs, do little to improve governance and accountability. To be sure, normal government budgetary accounting and audit procedures for PPPs may not meaningfully improve transparency and accountability.

………

Moral hazard

World Bank guidance is clear that even a private partner who fails to deliver as contracted must be compensated for work done before a government can terminate a contract. Whether private partners actually deliver as promised does not seem to matter to the Bank which provides no guidance for addressing their failures to meet contractual obligations.

The Bank thus contributes to ‘moral hazard’ in PPPs: the less likely the private partner stands to lose from poor performance, the less incentive it has to meet contractual obligations. Guaranteeing cost recovery, revenue and profit erodes the motive to deliver as promised and to consider project risks.

Enthusiastic PPP promotion – by the Bank, other MDBs and donors urging developing country governments to bear more risk – is not only encouraging ‘moral hazard’, but also creating more opportunities for the corruption and abuse they profess to lament.

Instead, private partners have greater incentives to try gouging rents from government partners, e.g., by renegotiating existing contracts to their advantage. Conversely, governments have to choose between bearing the costs of failed projects, and paying even more to save problematic ones in the hope of cutting losses.

………

Ignoring evidence

Many governments can undertake large infrastructure projects themselves, or alternatively, make much better procurement arrangements. IMF research has also found, “In many countries, PPPs have not always performed better than public procurement”.

Ironically, Bank research has shown that “well-run public firms tend to match the performance of private firms in regulated sectors”, concluding, “There is no ‘killer’ rationale for public-private partnerships”.

Even the Bank’s Research Observer has published a summary of “some of the most compelling examples of this kind of emerging critique” of infrastructure PPPs in telecoms, transport, water and sanitation, waste management and electricity.

Yet, the Bank continues to promote PPPs as the preferred mode of infrastructure financing, trying to shift more risk to governments, ostensibly to attract more private investment. Meanwhile, Bank guidance typically fails to warn governments of the risks involved and their implications.

Prejudiced guidance

Bank and other PPP advocates dismiss criticisms as ‘ideological’ despite growing empirical evidence. Such damning findings have had little impact on their PPP advocacy. Instead, the new fad is for more ‘blended finance’ to PPPs, using official concessional finance to subsidise and attract more private investment.

………

Unsurprisingly, despite Bank, donor and other efforts, PPPs have only generated 15~20% of developing countries’ infrastructure investments, according to the Bank’s Independent Evaluation Group, while remaining negligible in the poorest countries.

PPPs, and related institutions are little more than looting by private actors.

They Will Collapse in a Major Accounting Scandal Scandal

A Kazakh “Fintech” company just debuted on the London Stock Exchange with a $6.5 billion valuation

The people hawking this company are touting it as the future of personal finance and E-Commerce of Kazakhstan.

It’s Wirecard all over again, or the third film in the Borat Sagdiyev movie trilogy, but this sets off my scam warning something fierce:

With most staff working from home, the headquarters of Kazakhstan’s fintech hero Kaspi.kz exudes a sleepiness ill-fitting for a company whose rapid rise has been accelerated by the coronavirus pandemic.

Kaspi, Kazakhstan’s payment systems and e-commerce leader, became the Central Asian country’s most valuable firm after it was valued at $6.5 billion on the London stock exchange in October in what was the United Kingdom’s second largest float of this year.

The listing took commentators by surprise, coming after a failed attempt — falling short of a $4 billon market cap valuation — the year before.

But Kaspi’s Georgia-born CEO Mikheil Lomtadze, told AFP that the company and its investors, including Goldman Sachs and CIS-focused Baring Vostok — were not fazed by the false start.

“We believe that we have a lot of space for further growth, and we were not in any hurry to do our IPO,” said Lomtadze in the company’s head offices in Almaty.

Lomtadze, sporting an open-necked shirt and jeans, told AFP that beyond China, where online payment systems Alipay and WeChat have become ubiquitous, there are few markets that have seen user behaviour so utterly transformed by mobile payments as Kazakhstan.

“We are frontrunners in digitising the country,” Lomtadze said.

I don’t know about you, but I just filled up my bullsh%$ bingo card.

So Not a Surprise

It turns out that the Lincoln Project, much beloved by the MSNBC crowd, appears to have been little more than a scam to separate money from limousine liberals:

A group of longtime Republican operatives depicting themselves as anti-Trump stalwarts convinced liberals to give them more money for ineffective television ads and stunts than was raised by the Democratic Party’s national campaign to win state legislatures.

The result: Donald Trump won more Republican votes than he did in 2016 as Democrats again lost state legislatures in advance of redistricting that could determine control of Congress for the next decade.

Meanwhile, the GOP operatives are reportedly positioned to go from lighting liberals’ money on fire during the 2020 election to now using liberals’ money to launch a media empire that could push a new Biden administration to the right.

………

While the Lincoln Project’s YouTube videos lampooning Trump received millions of views and endless promotion on MSNBC, the ads proved ineffective in the group’s stated goal: As the Daily Poster first reported, Trump actually increased his share of the Republican vote in 2020 as compared to 2016, when the Lincoln Project did not exist.

………

As Lincoln Project burned liberals’ money on unpersuasive videos and expensive stunts — including a Times Square billboard in the uncontested locale of Manhattan — the Democratic Legislative Campaign Committee raised far less money in its battle for control of legislatures.

The Cook Political Report’s David Wasserman noted last month that “direct messaging against Trump (@ProjectLincoln ads, etc.) is ineffective in swing states. Dem messages that actually move votes: talking about education & majoritarian economic policies.”

………

While the Lincoln Project failed to generate significant Republican defections, the effort has been a financial windfall for GOP operatives.

Earlier this year, the group was lampooned by Stephen Colbert’s cartoon show for spending so much money on overhead rather than on ads. By the end of September, the group had funneled $4.5 million through Summit Strategic Communications, run by the group’s cofounder Reed Galen. The group also reported paying $3.9 million to Tusk Digital, led by another Lincoln Project cofounder, Ron Steslow.

Never-Trump Republicans are still Republicans, which means that they cannot be trusted.  Ever.

Chutzpah Redefined

Facebook is threatening academics doing a study on political advertisements breaking its rules, claiming ……… wait for it ……… that allowing users to voluntarily report what ads that they see is a violation of user privacy.

This is truly beyond satire:

Facebook has ordered the end to an academic monitoring project that has repeatedly exposed failures by the internet giant to clearly label political advertising on its platform.

The social media goliath informed New York University (NYU) that research by its Tandon School of Engineering’s Online Transparency Project’s Ad Observatory violates Facebook’s terms of service on bulk data collection and demanded it end the program immediately.

………

“We launched the Online Transparency Project two years ago to make it easier to see who was purchasing political ads on Facebook,” said co-founder Laura Edelson, of the project.

………

Facebook didn’t like this one bit, and responded with a warning letter on October 16, the Wall Street Journal first reported. The Silicon Valley titan wants the academic project shut down and all data deleted by November 30.

………

“We understand the intent behind your tool. However, the browser plugin scrapes information in violation of our terms, which are designed to protect people’s privacy.”

It seems the researchers aren’t backing down. On October 22, they published the latest research showing 12 political ads that had slipped under the radar as non-political on Facebook, some of which are still running.

………

Rather than rely on Facebook’s carefully controlled library, the NYU researchers built their own external approach and quickly discovered widespread disclosure violations which it says have helped facilitate the spread of election disinformation.

This is not a surprise.  After all, Facebook has been aggressively engaging in ad fraud, click thru fraud, and user fraud for years. 

This is not about protecting user privacy, since, after all the users in this case know what they are doing, this is about their concerns that their fraudulent behavior will be identified and traced.

We Have Lost a Giant

Skeptic, magician, and exposer of frauds James Randi, aka “The Amazing Randi”, has died at age 92.

He was central to the skeptic community, which debunked phony claims about ghosts, ESP, and aliens.

One of his most important accomplishment was that he showed that the skill set of scientists was inadequate to exposing deliberate fraud, because the frauds use the techniques of stage magic:

James Randi, a famed magician known as “The Amazing Randi” and a scientific investigator who debunked sensational claims of paranormal and occult occurences — has died. He was 92.

The James Randi Foundation announced his passing in a tweet, saying he died of “age-related causes” on Tuesday.

Randi was remembered on Wednesday by magician Penn Jillette in a pair of tweets as an “inspiration, mentor and dear friend.”

………

By age 60, Randi had retired from magic and was one of the co-founders of the Committee for Skeptical Inquiry, or CSI. The committee responded to a rise of interest in the paranormal in the ’70s and promoted scientific inquiry and critical thinking in the investigation of extraordinary or controversial claims.

Among one of Randi’s more famous instances as a debunker — a word he said he disliked in favor of “investigator” — was of the religious televangelist Peter Popoff, who became famous in the mid-’80s for televised healing sermons in which he seemed to know intimate details of random attendees. Randi discovered that Popoff was using an electronic transmitter to get information about his subjects broadcast to him by his wife behind the scenes, and he then exposed the preacher on “The Tonight Show.”

In 1996 he founded the James Randi Educational Foundation, a non-profit group that encouraged and educated the public and media on vetting unverified and outlandish claims, later launching the One Million Dollar Paranormal Challenge for people who could demonstrate paranormal abilities under agreed-upon scientific testing conditions. While over 1000 people have applied, no one has proved their supernatural strength. The New York Times described the trials in detail in an article republished back in 2014.

………

Randi is survived by his husband, Deyvi Peña.

Re wad devastating, and very entertaining, when he exposed frauds.

Pass the Popcorn

 A federal appeals court just called bullsh%$ on Trump’s attempt to use his being President* to prevent investigation of tax evasion and fraud.

The excerpts of the opinion indicate that the judges have no f%$#s left to give with either Trump’s lawyers or the DoJ obfuscations:

A federal appeals court ruled Wednesday that Manhattan’s district attorney can enforce his subpoena for President Trump’s tax returns, rejecting a bid by Trump’s lawyers to kill the request on grounds it’s a malicious political ploy and potentially setting up another high-stakes showdown at the Supreme Court.

………

The unanimous ruling was issued by a three-judge panel of the 2nd U.S. Circuit Court of Appeals, which concluded, “We have considered all of the President’s remaining contentions on appeal and have found in them no basis for reversal.”

(emphasis mine)

That’s law speak for, “Your eyes are brown because you are completely full of sh%$.”

District Attorney Cyrus R. Vance Jr. is seeking eight years of the president’s tax returns and related documents as part of his investigation into alleged hush-money payments made ahead of the 2016 election to two women who said they had affairs with Trump years prior. Trump denies the claims. Investigators want to determine whether efforts were made to conceal the payments on tax documents by labeling them legal expenses.

………

The panel that heard the president’s appeal shot down his claim that the district attorney’s investigation is limited only to the alleged payments made by Michael Cohen, Trump’s former lawyer, to adult-film actress Stormy Daniels and former Playboy model Karen McDougal — saying in their ruling that the “bare assertion . . . amounts to nothing more than implausible speculation.”

………

Vance’s bid for Trump’s tax records has been stalled since last year, when he issued the subpoena to Mazars.

Trump’s lawyers, who have signaled that they would ask the Supreme Court to look at the case again, have already lost at the high court, which in July rejected their initial argument that, as president, Trump is immune from prosecution. The justices said, however, that Trump could try again with a different approach.

I am amused.

Him I Want to Die in Poverty and Struggling to Breath

He’s killed dozens, if not hundreds of minors with out a second thought, so I’m hoping that he gets turned down:

Robert E. Murray, the former CEO and president of the now-bankrupt Murray Energy, has filed an application with the U.S. Department of Labor for black lung benefits. For years, Murray and his company fought against federal mine safety regulations aimed at reducing the debilitating disease.

“I founded the company and created 8,000 jobs there until the move to end coal use. I am still chairman of the board,” he wrote on a Labor Department form that initiated his claim obtained by the Ohio Valley ReSource. “We’re in bankruptcy, and due to my health could not handle the president and CEO job any longer.”

According to sources, Murray’s claim is still in the initial stages and is being evaluated to determine the party potentially responsible for paying out the associated benefits. The Labor Department is required to determine a liable party before an initial ruling can be made on entitlement to benefits. If Murray’s claim were to go before an administrative law judge, some aspects of the claim would become a matter of public record.

………

Reached by phone, Murray declined an on-the-record interview for this story. Murray said he has black lung from working in underground mines and is entitled to benefits. Additionally, he disputed that he ever fought against regulations to quell the disease or fought miners from receiving benefits.

Murray also threatened to file a lawsuit if a story was published that indicated he had fought federal regulations and benefits.

Of course he threatened a lawsuit.  It’s what the Dr. Evil wannabee does, and it’s what led John Oliver to go after him hammer and tongs.

But Murray told NPR in October 2019 that he had a lung disease that was not caused by working underground in mines.

“It’s idiopathic pulmonary fibrosis. IPF, and it is not related to my work in the industry. They’ve checked for that,” Murray told NPR. “And it’s not — has anything to do with working in the coal mines, which I did for 17 years underground every day. And until I was 76, I went underground twice a week.”

I’m thinking of starting a Gofundme to pay for a guy in a squirrel suit to follow Bob Murray around telling him to eat sh%$.

Quote of the Day

It’s really not complicated. Most hedge funds are brilliant vehicles designed to make their managers rich. That doesn’t mean they’re doing anything illegal, or maybe even unethical. It’s capitalism. It just means they’re generally a terrible investment, like a new car or a $30,000 handbag. Only with hedge funds, you don’t even get the car or the bag.

Brett Arends at Marketwatch

This has been in plain sight for decades.  The only mystery us why so many people, and particularly nominally savvy investors, continue to throw their money away.

My theory is that there is corruption involved.

Today in IP Law Abuse

The posted a video of their new “Truck” driving down the road, but it turned out that there was no propulsion system.

They just let it roll down hill and made it look like it was powered with camera angles:

Nikola has issued copyright-takedown notices targeting critics on YouTube who used clips of the promotional video in which a Nikola prototype truck was seen rolling down a hill.

Nikola last month admitted that the promotional video of a supposedly functional Nikola One electric truck moving along a highway actually consisted of the company’s vehicle rolling downhill. This week, Nikola “forced the removal of several critical videos from YouTube, saying they infringed its copyright by using footage from the company,” including the truck-rolling-downhill video, the Financial Times reported yesterday.

Sam Alexander is one of at least two financial commentators who had videos removed by Google subsidiary YouTube at Nikola’s request. He says that four of his videos were taken down.

“The claim is from when I showed 30 seconds of their Nikola One in Motion footage, which is what they put on Twitter and it’s of their Nikola One rolling down the hill,” Alexander said in a YouTube video he posted Wednesday.

………

“Right now my main concern is that Nikola is using copyright strikes to silence their critics,” Alexander told the Financial Times. Another YouTuber named Tom Nash “was required to take down three videos that featured criticism of Nikola,” including one that used footage of the moving truck, and has appealed YouTube’s decision, the Financial Times article said.

Meanwhile, both Nikola and Youtube are pointing fingers at each other, but my money is on Nikola

………

A Nikola statement sent to Ars and other media outlets tries to portray YouTube as the party that initiated the video-removal process. “YouTube regularly identifies copyright violations of Nikola content and shares the lists of videos with us,” a Nikola spokesperson told Ars. “Based on YouTube’s information, our initial action was to submit takedown requests to remove the content that was used without our permission. We will continue to evaluate flagged videos on a case-by-case basis.”

YouTube offered a different description, saying that Nikola simply took advantage of the Copyright Match Tool that’s available to people in the YouTube Partner Program.

“Nikola has access to our copyright match tool, which does not automatically remove any videos,” YouTube told the FT. “Users must fill out a copyright removal request form, and when doing so we remind them to consider exceptions to copyright law. Anyone who believes their reuse of a video or segment is protected by fair use can file a counter-notice.”

This is why there should be real, and severe, penalties for misuse of the take-down process in law.

The Root of Currency is “Current”, and Cryptocurrency Isn’t

That’s why a court has ruled that a $100 million initial crypto coin offering (ICO) by Kin was an illegal unregistered securities sale.

When all is said and done, currency is supposed to allow one to spend a store of value on goods and services essentially instantly.

Even the most established crypto-currency, Bitcoin, takes hours, if not days, to process a transaction.
It is not a meaningful medium of exchange for even the most basic commercial activities:

The 2017 launch of the Kin cryptocurrency broke federal securities laws, a federal judge has ruled. Federal law requires anyone who offers a new security to the general public to register with the Securities and Exchange Commission. The messaging app maker Kik didn’t do that when it sold $100 million worth of Kin in 2017.

The company argued that Kin was legally a new virtual currency, not a security. In a Wednesday ruling, Judge Alvin Hellerstein rejected that claim. The ruling could have big consequences for the cryptocurrency world.

Since 2016, hundreds of cryptocurrency projects have held Kin-like “initial coin offerings” that raised millions—in a few cases, hundreds of millions—of dollars. Few of these offerings went through the traditional steps required to register a securities offering with the SEC. So Wednesday’s ruling could create legal headaches for existing blockchain projects launched via an ICO. It also limits the options for launching cryptocurrencies in the future.

Judge Hellerstein gave Kik and the SEC three weeks to come up with a joint recommendation on appropriate remedies. Kik says it is considering appealing the ruling.
How a cryptocurrency offering is like an orange grove

A security is an asset that investors purchase in hopes of making a profit. It includes traditional investment vehicles like stocks and bonds, but it also includes a catch-all category called an investment contract. The Supreme Court laid out the legal criteria for investment contracts in a landmark 1946 ruling.

………

In his Wednesday ruling, Hellerstein concluded that similar logic applies to the Kin tokens Kik sold in 2017. Officially, Kin owners are not entitled to any profits generated by the Kin ecosystem. But practically speaking, people bought Kin because they hoped a thriving Kin ecosystem would push up Kin’s value the same way that bitcoins and ether had become more valuable over time.

Hellerstein notes that Kik CEO Ted Livingston repeatedly touted Kin’s potential as an investment opportunity. “If you could grow the demand for it, then the price—the value of that cryptocurrency would go up, such that if you set some aside for yourself at the beginning, you could make a lot of money,” Livingston said.

………

This was a common way to bootstrap a new cryptocurrency during the 2017 ICO boom, and the Kik ruling could slam the door shut on this method for getting a new blockchain project off the ground. Registering as a security comes with a lot of regulations. Complying with those regulations will, at a minimum, require a lot of legal work. And some cryptocurrency projects might not fit into existing SEC rules at all.

This is a good thing.

ICO’s are a recipe for fraud.

Boy, This is Turning into a Sh%$ Show

First, former Trump campaign manager Brad Parscale creates the most convincing shirtless suspect audition tape for an episode of Cops ever, and now serial securities fraudster Jacob Wohl, and his partner in crime Jack Burkman, have been charged with election fraud and face the prospect of decades in prison.

The wheels really do seem to be coming off of Trump’s Evil Minions™ right now:

Conservative operatives Jacob Wohl and Jack Burkman were charged on Thursday for allegedly orchestrating a series of robocalls aimed at suppressing the vote in the November presidential election, Michigan authorities said.

Michigan Attorney General Dana Nessel filed a slew of charges against Burkman, 54, and Wohl, 22, including conspiracy to commit an election law violation and using a computer to commit the crime of election law – intimidating voters. Prosecutors allege the two political operatives were using a robocall system aimed at scaring Detroit voters away from using mail-in voting ballots. The calls, which were made in August, went out to nearly 12,000 Detroit residents.

Both Wohl and Burkman face four felony counts and a maximum sentence of 7 years in prison.

The voice on the call attributed to Wohl and Burkman attempts to trick listeners into not sending in mail-in ballots, falsely warning that the information would be used to track fugitives, collect on credit card debts, and enforce “mandatory vaccines.” The calls also told residents to “beware of vote by mail.”

………

Wohl and Burkman didn’t respond to immediate requests for comment. In August, Burkman denied being behind the robocall, claiming it was suspicious that it was connected to his personal cell phone number.

“No one in their right mind would put their own cell on a robocall,” Burkman told The Daily Beast.

Ummmm ………We’ve seen your other frauds and scams (also here, here, and here

You areally ARE that f%$#ing stupid.

………

The attorney general’s office added that during the investigation into the robocalls, investigators communicated with officials in New York, Pennsylvania, Ohio and Illinois—all of whom reported similar robocalls being made to residents in their states. All the calls, they said, were made to residents in “urban areas with significant minority populations,” the Michigan attorney general’s office said.

………

The Michigan charges aren’t the only legal charges facing the pair. Wohl has been charged with two felonies over alleged violations of California securities law. On Saturday, The Daily Beast reported on a secret FBI investigation into Wohl and Burkman over the leak of confidential juror questionnaires and grand jury testimony in the trial of Trump associate Roger Stone.

Wohl and Burkman became notorious online in 2018, after a failed attempt to manufacture a sexual assault allegation against Robert Mueller collapsed in spectacular fashion. Since then, they have tried to create hoaxes against other Trump opponents, but the schemes always fail almost immediately, often due to Wohl and Burkman’s own errors.

Seriously, these folks are flipping out. 

My deepest wish is that the inevitable shrapnel that results from their flying to pieces so spectacularly only injures their fellow travelers.