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Investigating Internet Crimes

Written by experts on the frontlines, Investigating Internet Crimes provides seasoned and new investigators with the background and tools they need to investigate crime occurring in the online world. This invaluable guide provides step-by-step instructions for investigating Internet crimes, including locating, interpreting, understanding, collecting, and documenting online electronic evidence to benefit investigations.

investigating_internet_crimesThis year I served as technical editor for this excellent book by Todd Shipley and Art Bowker. Cybercrime is the fastest growing area of crime as more criminals seek to exploit the speed, convenience and anonymity that the Internet provides to commit a diverse range of criminal activities. Today’s online crime includes attacks against computer data and systems, identity theft, distribution of child pornography, penetration of online financial services, using social networks to commit crimes, and the deployment of viruses, botnets, and email scams such as phishing. Symantec’s 2012 Norton Cybercrime Report stated that the world spent an estimated $110 billion to combat cybercrime, an average of nearly $200 per victim.

Law enforcement agencies and corporate security officers around the world with the responsibility for enforcing, investigating and prosecuting cybercrime are overwhelmed, not only by the sheer number of crimes being committed but by a lack of adequate training material. This book provides that fundamental knowledge, including how to properly collect and document online evidence, trace IP addresses, and work undercover.

  • Provides step-by-step instructions on how to investigate crimes online
  • Covers how new software tools can assist in online investigations
  • Discusses how to track down, interpret, and understand online electronic evidence to benefit investigations
  • Details guidelines for collecting and documenting online evidence that can be presented in court

Blackhatonomics: An Inside Look at the Economics of Cybercrime

blackhatonomicsBlackhatonomics: An Inside Look at the Economics of Cybercrime explains the basic economic truths of the underworld of hacking, and why people around the world devote tremendous resources to developing and implementing malware.

The book provides an economic view of the evolving business of cybercrime, showing the methods and motivations behind organized cybercrime attacks, and the changing tendencies towards cyber-warfare.

Written by an exceptional author team of Will Gragido, Daniel J Molina, John Pirc and Nick Selby,  Blackhatonomics takes practical academic principles and backs them up with use cases and extensive interviews, placing you right into the mindset of the cyber criminal.

The Russian Software Pirates

Every day here and in dozens of other Russian cities, pirate dealers sell copies of the world’s most popular software titles at $5 per CD-ROM.

Despite fears about the economy, small and medium-sized businesses are flourishing in this elegant northwestern Russian city – and pirated software is installed on almost all of their computers.

Nearly all high-end computer games, Encyclopaedia Britannicas and other educational and reference CDs are distributed through illegal sources.Bootlegged software use is certainly not limited to Russia. Industry analysts say that 27 percent of the software running on American computers is pirated.

And the Business Software Alliance, which monitors business software piracy, says 43 percent of PC business applications installed in Western Europe are illegal copies.

In Russia, however, the piracy rates are a stunning 91 percent for business applications and 93 percent for entertainment software, according to Eric Schwartz, counsel to the International Intellectual Property Association, a Washington, D.C.-based organization that lobbies internationally on behalf of the copyright industry.

Schwartz said that piracy in Russia costs American entertainment software manufacturers $223 million a year and business software makers almost $300 million. The Business Software Alliance estimates worldwide revenue losses to the software industry from piracy at $11.4 billion.

Under the 1992 agreement with the United States that guaranteed Most Favored Nation trading status, Russia is required to effectively enforce anti-piracy laws, but actual enforcement is virtually nonexistent.

Meeting the Dealers
The dealers, who operate in stalls and kiosks around major transportation hubs or in full-scale markets usually 15 minutes from the city center, offer an enormous range of titles, usually bundled in a form their manufacturers would never dream of.

“That’s Windows 98, Front Page 98, Outlook 98, MS Office 97 SR1 and, uh, yeah, Adobe 5.0,” said Pyotr R., a student at St. Petersburg Technical University, of a single CD-ROM. “On the disk there are files, like ‘crack’or ‘serial’ or something, and that’s where you’ll find the CD keys,” he said, referring to the codes that unlock CD-ROMs and allow users to install the programs.

Pyotr (who spoke, as did all others interviewed for this article, on condition of anonymity) sold that disk, plus a second one containing Lotus Organizer 97, several anti-virus programs and some DOS utilities, for 60 rubles or about $10.

Another dealer was offering Windows NT 4.0 for $5, and Back Office for $10. According to Microsoft, the recommended retail prices for these products are $1,609 and $5,599.

Many Russians, who during the days of the Soviet Union bought most necessities through black market sources, think nothing of buying their software this way. They even defend the markets as providing a commodity that had been long-denied them.

After the collapse of the Soviet Union, inexpensive computers began to flood into the country from Taiwan, Germany and the United States, increasing the importance of these illegal software markets. Spending at least $800 on a computer was an enormous investment for Russians, even relatively well-paid St Petersburgians who earn an average salary of around $350 a month. Those who did buy one were in no position to consider purchasing software legitimately, even if it were readily available, which it often wasn’t.

These days, though, legitimate outlets for hardware and software are popping up everywhere in Russia; computer magazines offer licensed versions of everything available in the United States and Western Europe, and software makers advertise in the city’s well-established English-language media.

The markets continue to thrive with an alarming degree of perceived legitimacy. Outside the Sennaya Square metro station in St. Petersburg, a police officer approached a pirate dealer (who offered, among other things, Adobe Font Folio and QuarkXPress) and angrily chastised him for not prominently displaying his license to operate the stall. When the dealer complied, the policeman moved on.

Customers feel secure that the pirated copies will work and that belief appears well-founded. Bootlegged titles come with a written guarantee – good for 15 days from the date of purchase – that they’re virus-free and fully functional.

And files on the CDs themselves boast of high-quality, code-cracking techniques: “When so many groups bring you non-working fakes, X-FORCE always gets you the Best of the Best. ACCEPT NO IMITATION!” boasts one.

“There’s a lot of viruses around in Russia,” said Dima V., a system administrator who runs several small company networks in St. Petersburg using bootlegged copies of Windows NT 4.0, “but most of the disks you buy in the markets are clean. The guys are there every day and if they give you a virus you’ll come back – it’s just easier to sell you the real thing.”

Foreigners get in on the action
Russians are not by any means the only people installing the pirated programs. While employees of multinational companies or representatives of American companies would never dream of risking their job by violating copyright laws, self-employed Westerners, or ones who have established small Russian companies have no qualms about doing so.

They also pose a question software manufacturers find difficult to answer: Who would buy a network operating system package for $5,000 when it’s available for $5?

“Nobody,” said Todd M., an American business owner in St. Petersburg, whose 24-PC network runs a host of Microsoft applications that were all bootlegged.

“There’s just no financial incentive for me to pay the kind of prices that legitimate software costs,” he said. “I mean, it would be nice to get customer service right from the source, but we have really excellent computer technicians and programmers in Russia and they can fix all the little problems that we have.”

Customer support and upgrades are just what the manufacturers point to as advantages of licensed software, even in markets like Russia.

“There are enormous incentives,” said Microsoft’s Mark Thomas, “to buying legitimate software, and they start with excellent customer support and service and upgrades. We spend $3 billion a year on research and development and the money that we make goes right back into making products better and better products. The pirates don’t make any investment in the industry.”

And local industry, Thomas pointed out, suffers disproportionately in the face of piracy.

“A huge amount of our resources are put into making sure local industry builds on our platform,” he said. “When a local company creates packages for, say, accounting firms, and somebody can come along and buy it for $5, these local companies can lose their shirts.”

Piracy getting worse
Despite heavy lobbying by industry representatives and government agencies, piracy has worsened. As CD copying technology becomes cheaper, large factories in Russia and other countries, including Bulgaria, churn out copies of software copied by increasingly sophisticated groups in countries around the world, especially in Asia.

Encyclopaedia Britannica wrote off Malaysia as a market effectively destroyed by pirates, who sold 98 out of every 100 copies of its flagship Encyclopaedia three-CD set for a fraction of its recommended retail price of $125. The same disks, which have not officially even been offered for sale in Russia, are readily available in the St. Petersburg markets for $10.

“For Encyclopaedia Britannica, the cost of piracy is millions a year,” said James Strachan, EB’s international product manager. “One hundred percent of the value of our product is an investment in the authority and depth of our content,” he said. “Piracy causes us extreme concern and we do everything we can to root it out and prosecute.”

Todd M., the businessman with the 24-PC network, offers little hope that the situation will soon change in favor of manufacturers.

“With all the problems I have running my business here in Russia, from armed tax police to Byzantine procedures and customs duties, software piracy just doesn’t register with me,” he said.

“It’s the one thing about doing business here that’s somebody else’s problem.”

Startups To Benefit From UMTS Spending

Imagine you’re a telecom, and you wake up this sunny Friday to realize it’s not a dream, you really did just pay £8 billion for two German third-generation mobile license blocks. Yes, you paid much more than you wanted for fewer license blocks than you’d hoped. And when your friends ask you what, specifically, you will do with this license, you can’t answer.

If you think you hear laughing, it’s probably coming from Denmark.

“We were all laughing about this just yesterday,” said Soren Jessen Nielsen, head of strategic business development in Europe for BlueKite, which just closed a $36 million round of funding from a VC group headed by Texas Pacific Group and including Credit Suisse First Boston. The investors purchased a 21 percent stake in BlueKite, which develops proprietary bandwidth optimizing technologies and a software platform aimed at increasing network capacity and Internet access speeds for fixed and mobile networks.

“Bandwidth is finite; it’s absolute,” said Nielson, who scoffs at UMTS hype. “A 2MB line into a PDA? Please. When UMTS comes, no one has any idea what they’re going to do with it. But I’ll tell you, whatever they (the telcos) do, they’re going to run into the same bandwidth problems and capacity issues that you have with GSM and Edge. You ain’t gonna have multimedia while traveling on a train, forget that one – that’s marketing hype.”

But whether BlueKite believes the UMTS dream or not, it’s hoping to profit from it. The San Francisco-based company, with roots in Copenhagen, may be one example of how startups in Europe can benefit from the trucks full of money being thrown at UMTS. Whether you believe UMTS is the Great White Hope or a Big Fat Joke, one thing European VCs seem to agree on is that companies developing applications for next-generation mobile networks are worth funding. With telcos around Europe set to pay up to $200 billion for licenses, they may have little money left to develop their own applications to run on these networks. Enter wireless communications, software and technology startups.

“There is a ton of work to be done to create these UMTS-based applications, and this is an area where small companies are really needed, and where they can do a good job,” said Peter Dietz, managing director of TakeOff VC Management. He believes the UMTS bidding war will cause larger companies to leave to small companies the work of making the applications that will make UMTS sexy. “I can’t name names at the moment, but we have already been discussing this with two of the German companies in our portfolio; one is something of a cross between an IT service and a multimedia agency, and the other is a pure software development company.”

Kim Bach, vice president at 2m Invest in Copenhagen added: “This is a perfect example of the “Tornado effect.’ There’s so much money being spent in this area that it’s impossible to imagine it won’t have a positive effect on the small suppliers.”

Bach has seen this market development coming for a long while. 2m has been sinking money into the organization that is now BlueKite since 1993, when it was called RadioMail, and it had teamed up with Motorola to make Newton-like handheld devices.

“We really knew the idea of wireless computers was the way to go in the future, but we were out,well, let’s say a bit too early,” Bach said. “But we were sure this technology would have to have a breakthrough sometime, so we kept feeding what would become BlueKite until a couple of years ago when they really took off.”

BlueKite’s reincarnation about two-and-a-half years ago, headed up by CEO David Cox, was funded by $1 million in seed money from 2m, which owns 41.6 percent of the company. BlueKite started with offices in Silicon Valley, but fleeing high prices and labor costs, it moved it kept its administration in San Francisco, but moved research and development to Los Angeles. In the last year, the company has grown from 10 employees to more than 70, and has offices in Copenhagen, London, Frankfurt, Amsterdam and Paris.

2m invested an additional $3 million last year. BlueKite’s aim is to develop technologies that better manage bandwidth and compress data, but still utilize existing infrastructure. For example, on a standard ISDN line, BlueKite technology can determine, on an ongoing basis, whether a given user needs two or three channels, or just to keep one open on an idle mode.

In fact, BlueKite already offers a technology that allows ISDN-speed data transfer rates over existing wireless networks for companies including British Telecom, Swisscom and Telecell Portugal, as well as Connect Austria.

“We looked at everyone offering solutions to bring high-speed mobile data transfer,” said Lars Reichelt, currently COO of Connect Austria and soon to be director of wireless for Europe at Yahoo. “When we finished, BlueKite came up by far the best,” even with competitors including Nokia and Ericsson offering similar products. “This is a great tool, and it makes the workplace truly mobile. You don’t have to worry about fumbling around looking for a proper phone plug – in Austria there are seven approved types of phone plugs. It costs 3 shillings ($0.20) a minute, and you can work while others watch in wonder.”

BlueKite may well be poised for growth during the development of the so-called mobile future, but it won’t be alone for long. Software companies are desperately needed to build the very applications that will make UMTS profitable, and most startups aren’t clueless to the trend. Some industry estimates put the number of WAP development companies at over 600 in Europe alone, and VCs are desperately trying to plunk their cash into the right wireless companies. Yesterday, every VC wanted a dot.com in its portfolio, now they want wireless startups.

“This (the development of UMTS) creates opportunities for smaller companies,” said Stephan Uhlmann at Deutsche Venture Capital Gesellschaft. “There’s a great opportunity here for developers of applications that will bring products to end users via UMTS.”

Eaten By Snakes: Virus Hoaxes & How To Spot Them

Every year businesses worldwide spend more money soothing the nerves of employees who’ve received hoax virus warnings than they do on actual viruses. So before you pass on the note your friend Ned sent you about a new virus that will make snakes eat your hard drive, give it a little thought.

If you didn’t receive an email from a friend a while back warning you about the deadly SULFNBK virus, you probably haven’t gotten out much on the net yet. SULFNBK, the email warned, can hide in your computer and exact terror on a certain date, and it helpfully goes on to tell you how to delete the renegade file.

SULFNK was another hoax. SULFNBK.exe is a standard Windows operating system file, allowing Windows to handle large file names like “memo to dad.doc”. (Read Mcafee Associates warning about Sulfnbk)

At the U.S. Department of Energy, a group called the Computer Incident Advisory Capability monitors and debunks phony virus alerts and chain letters as an integral part of its overall security program – check their site at <href=‘http://ciac.llnl.gov/ciac/CIACHoaxes.html’ target=‘_blank’>http://ciac.llnl.gov/.

Rule Number 1:
If you see request in an email warning to “Pass it on,” you should immediately be highly suspicious of the message. The fastest way to prove a virus warning is to look it up in Symantec’s online <href=‘http://www.symantec.com/avcenter/vinfodb.html’ target=‘_blank’>hoax and virus encyclopedia.

Another excellent resource is from <href=‘http://www.stiller.com/hoaxes.htm’ target=‘_blank’>Stiller Research, which lists the top five hoaxes of the month including, in April 2000, a hoax regarding asbestos being used in tampon production.

Spotting a Hoax
Hoaxes usually include sentences in ALL CAPITAL LETTERS in the subject line and lots of exclamation points!!!!!! They also have, almost universally, this syntax:

“If you receive an email with a file called ‘Such-and-such’, do not open it. It contains the email virus E’This and that’ which will ‘do this or that’ your hard drive.”

Tosh.

Another type of hoax involves having you forward chain letters on the theory that if you send the email to 1,400 of your closest email buddies you’ll win a free phone, Microsoft stock, Disney tickets, yadda yadda yadda. No one gives you something to email someone. No one. Not even Nokia. What to send someone who sends you a “Forward this message and get a free cigar” message? An excellent sample is up at www.netsquirrel.com

Not All Are Hoaxes, Of course…
As the “I Love You” virus which struck at the beginning of May 2000 showed once again, the threat of a virus in the form of an attachment to an email is very real, and a big pain in the kiester. However, note that it ismost often clicking on the attachment that creates the problem, not the email itself.

I personally have no clue why it is that people just go ahead and click on something called ILOVEYOU in an email from an editor – a position uniformly filled by people with a demonstrated inability to love anyone. I would indeed find the idea of an editor telling me to “click here to see how much I love you” menacing enough to shut down my computer and proceed to the nearest bar.

But even if the file had been attached to a message from my sainted sister I would have viewed it with suspicion and virus checked it before opening.

As a colleague, Ed Hasbrouck, points out: “Most security attacks and viruses are directed at – and depend on interactions between – the most common combinations of software; Windows 9X OS, MSIE 4 or 5 browser, MS Outlook or Eudora e-mail, and MS Office word processing, spreadsheet, etc. applications.

“The fewer components of this bundle you use, the less vulnerable to the most common attacks and viruses there are. Viruses that propagate by getting MS-Outlook to launch an MS-Word macro can thrive. No one writes viruses that depend on using Pegasus Mail to launch a WordPerfect macro, since too small a percentage of recipients would have that combination, and they wouldn’t succeed in spreading.”

Note, though, that viruses don’t spread through an email message. You can’t “destroy your hard drive” or have your hard drive eaten by monsters just because you open a message that came with an infected attachment (I myself opened the message saying “I love you”, saw the file and immediately deleted the attachment – easy peasy). Some simple steps can prevent your getting infected by a virus.

1. Use a non-standard mail program. Ed and I use Pegasus Mail, a free program that makes Eudora’s new 4.3 release look positively clunky. It’s free on the web at <href=‘http://www.pegasus.usa.com’ target=‘_blank’>www.pegasus.usa.com.

2. Be suspicious of any attachments, even from people you trust.

3. Be highly suspicious of attachments that are an executable program (that is, the document ends in “.exe”).

4. Be suspicious of and never fail to virus-scan attachments of Microsoft Office documents (Word, Excel, Power Point, etc) for macro viruses.

5. Be highly suspicious of any attachments that have an unfamiliar extension (the last three characters of the file name). “I Love You” was attached to a file with a “.vbs” extension. If you’ve never seen a file extension before, do one of two things:

    a) If it’s from someone you know and trust, virus check it using the latest version of your favorite virus scanning software – and update the virus scanner monthly from the company’s website.

    b) If it’s from someone you don’t know or someone you know casually, delete the sucker. Send a message to the sender saying you did, and if it was something important, ask them to send it again, then repeat step A.

6. Use Macintosh or Linux machines instead of Windows. Okay, okay, that’s asking a bit much. But because so relatively few people use those platforms, virus scares for them are far fewer.

Lessons of the HBGary Hack

“My father was in the secret service, Mr Manfredjin St. John, and I know that you don’t ‘keep the public informed’ when you are debriefing KGB defectors in a safe house.”
– Wendy, A Fish Called Wanda

I’ve been speaking quite a bit lately about how information security professionals can work with law enforcement – in fact, I’m speaking about it next week at BSides San Francisco. The attacks by Anonymous against HBGary, and the accompanying defecation-hitting-the-ventilation raises some important rules of the road for this.

Private-public sector cooperation is at the heart of nearly all successful initiatives. The public sector relies on private-sector innovation and expertise – indeed, organizations like In-Q-Tel and the Chesapeake Innovation Center count on it to make crucial advances in security. There’s great satisfaction in working for the greater good – which can come in a warm, fuzzy feeling of accomplishment, or even in the warmth of some “non-recurring engineering funds” from some grinning, creepy guys in “Maryland”. Trying to get the specifics of your good deeds into the limelight, though, for personal or company public-relations gain is just bad business.

When speaking with journalists and analysts, executives at information security companies – especially venture-funded, non-profitable, non-cash-flow-positive ones – have long used implication, hints, wink-wink gestures and other sometimes adorable intimations that they ‘work with’ ‘three-letter agencies’* or law enforcement in darkly secret and very important ways. They do this because they are trying to build their brand credibility.

They often end up sounding like a tool.

Now, often-times, they actually are using their technologies and their skills to support the work of law enforcement, but they’re not supposed to talk about it. Nor should they want to, necessarily. If I sound snarky, let me be clear that public service is not to be mocked, it is absolutely to be lauded, and anyone helping a law enforcement agency fight crime, whether for money or service, is to be encouraged.

But don’t forget that, as you help out, it is just that: public service. You can’t publicize the specifics of your assistance without jeopardizing its very value. This is the line, apparently, that HBGary employees inadvertently crossed, and the results were terrible.

[Let me say that, while I am using this as a cautionary tale, everything I know about the HBGary folks is that they are good, innovative and really smart people who care, who are passionate about technology and security. They’re good people who made a tactical marketing blunder.]

In the Financial Times last Saturday, in an article entitled, “Cyberactivists warned of arrest,” Joseph Menn quoted HBGary researcher Aaron Barr as saying that, “he had collected information on the core leaders, including many of their real names, and that they could be arrested if law enforcement had the same data.”

They could be arrested if? What hubris! Now, I don’t know much about law enforcement, but I do think that, if you’re planning, say, to serve a felony warrant, it’s a bad idea to phone ahead and let the guy know you’ll be by in 15 minutes. If?

A good rule of thumb is that you don’t tip your hand about the specifics of your work on any case for any reason. And drumming up business through publicizing your specific public service is as bad a reason as any.

Reasons for this fall into two categories. The first is that fighting crime is, you know, dangerous. Criminals generally engage in criminal enterprises for the money (few people have a driving passion to establish, say, an industry-leading counterfeiting ring for the societal benefit), and those who stand between criminals and their goal risk the ire of the criminals. This is not fair or just, but it is so.

Now, stating in a newspaper that you possess the secret identity of a criminal? This falls squarely into the category of “standing between a criminal and his goal.” That’s a tip, kids. Write it down. To paraphrase Wendy in A Fish Called Wanda, one only briefs the public on an upcoming law enforcement action if one is congenitally insane or irretrievably stupid.

Second, law enforcement officers, agents and agencies fight crime for a living. It’s dangerous and often thankless; it’s a calling, and these folks work hard under difficult conditions that require dedication, passion and purpose. Implying that they’re somehow not up to the task by stating that you have the X-factor that can be the secret of their success alienates those you seek to help.

Security firms and security professionals who want to help law enforcement should recognize a few things:

  1. Helping law enforcement is rarely a straightforward task. Sure, in movies, “we need your help” is followed by specific tasks that lead to the capture of the bad guys, the breaking up of the crime syndicate and windsurfing at Disneyland.
  2. Relationships in law enforcement must be carefully cultivated. Sworn officers and agents need to learn that you are trustworthy. You must learn the extents of their capabilities and authority. This takes time.
  3. Your help can’t be more trouble than it’s worth. In the movies, the brilliant but eccentric mathematician/hacker/systems expert can be un-bathed, wild-eyed and unpredictable. When you’re working with the fuzz, one press release costs you any and all good-will you’ve developed to date.
  4. The time to talk about arrests is a year later. The people to talk about arrests are cops. You’re helping law enforcement as part of your civic duty. While the cops will often be happy to mention your help in a press release at some point down the road, your primary driver for helping is public service, not self-promotion. If you’re in it for the publicity, get a cooking show.
  5. Criminals are dangerous. Criminals seek profit, and seek through illegal means to thwart those who would prevent these profits from being realized. Fighting criminals can absolutely be a cooperative exercise between public and private sector, but private sector people should keep the details of their cooperation as secret as the “sauce” they love to say makes their product work.

In short, companies wishing to help out might consider following the advice of Chris Rock, as he described some of the best ways Not to Get your Ass Kicked by the Police.

  • Obey the law;
  • Use common sense;
  • Be polite; and
  • Shut the #!@k up.

Nick Selby is CEO of a stealth-mode technology start-up. He is a sworn law enforcement officer in Texas, and will speak at BSIdes San Francisco on February 14th about ways in which information security professionals can work with law enforcement.

*a phrase which itself provides proof that they do not

A Pornographer Plumbs the Depths of What is ‘Reasonable’

A decision in the US Court of Appeals, Ninth District in the case of United States V Borowy1, addresses the issue of the expectation of privacy in communications. I’m so not a lawyer, but as a security consultant I am someone with a vested interest in understanding privacy, so I find some of the language the court used to be very interesting. And when I consulted a good friend, a lawyer (who IS a lawyer), he said, “If it comes from the Ninth Circuit, it’s solid.”

Background
Mr Charles Borowy is a child pornographer who installed the file-sharing program LimeWire on his computer. As a feature, LimeWire made his hard drive available to anyone with LimeWire. On May 3, 2007, and one such person was FBI Special Agent Byron Mitchell, who logged onto LimeWire to monitor trafficking in child pornography. According to the opinion, Agent Mitchell searched LimeWire for the term “Lolitaguy,” a term known to be associated with child pornography. After getting hits on that phrase from Borowy’s computer, using LimeWire’s “View-files-on-this-host” feature, Agent Mitchell saw about 240 files that his FBI software identified as being known child pornography.

Using that as probable cause, Agent Mitchell, still using LimeWire’s out-of-the-box functions, downloaded copies of files from Borowy’s computer, confirmed that they were child pornography and Borowy was arrested. Later it was discovered that Borowy had more than 600 images and 75 videos of child pornography.

Privacy
Did the FBI violate Borowy’s privacy? Do people have a reasonable expectation of privacy on their computer when they connect it to the Internet?

I say that not only didn’t the FBI violate Borowy’s privacy, but also that Borowy was a) literally and figuratively publishing his files for the world to see and b) an idiot2.

In a passage of the decision upholding the actions of the FBI and affirming that it acted properly and not in violation of Borowy’s fourth amendment rights, the court says that the earlier decision in US v Ganoe was spot on:

“Under Katz v. United States, 389 U.S. 347 (1967), government conduct qualifies as a search only if it violates a reasonable expectation of privacy. Whether Agent Mitchell engaged in an unconstitutional search and seizure is largely controlled by United States v. Ganoe, 538 F.3d 1117, 1127 (9th Cir. 2008), cert. denied, 129 S.Ct. 2037 (2009), which held that the defendant92s expectation of privacy in his personal computer could not “survive [his] decision to install and use file-sharing software, thereby opening his computer to anyone else with the same freely available program.”(US Court of Appeals, 2010)

Analysis
The last sentence of that passage is absolutely crucial in inferring the attitude of the court towards privacy in the Internet era. It says that the moment I install software that opens my computer to anyone else with the same freely available program, I give up my expectation of privacy. Later the Borowy ruling raises “Cf. California v. Ciraolo, 476 U.S. 207, 213-14 (1986) (finding the use of an aircraft to observe marijuana plants was not a Fourth Amendment search as it only revealed information accessible to any member of the public flying in the airspace).”

I would say that unencrypted Internet email will, in the next five years, be found to be analagous to the marijuana nursery, and outside the scope of fourth amendment protection or indeed any reasonable expectation of privacy. When users sign up for Gmail or Hotmail they understand (or should) that Google and Microsoft are mining the contents of their messages for a range of things, including what they say (for the purpose of placing ads within the messages, etc) and with whom they communicate (for the purpose of determining networks of people to whom they will eventually target ads, etc) and myriad other reasons. Users expect no privacy from Google or Microsoft, but they somehow cling to the concept that, once they hit, “send”, the message is protectively wrapped on the way to the intended recipient. Without getting into too many technical details, this is to say the least a charmingly naive concept. Email sent in plan text can be monitored, viewed, copied and is stored all along its multitudinous pathways from sender to recipient.

I’ll make a statement as a published and widely quoted information security person: it is a trivial matter to intercept and read unencrypted email using freely available programs. If I did so, I would expect that a court would find, as did the Ninth Circuit, that someone who sued me for doing so had given up their expectation of privacy when they decided to use software that opened their communications to anyone using freely available tools to intercept it.

Should this understanding signal a change of attitude? Bruce Schneier seems to think so – last March he wrote on his blog:

Between the NSA’s massive internet eavesdropping program and Gmail’s content-dependent advertising, does anyone actually expect their e-mail to be private? Between calls for ISPs to retain user data and companies serving content-dependent web ads, does anyone expect their web browsing to be private? Between the various computer-infecting malware, and world governments increasingly demanding to see laptop data at borders, hard drives are barely private. I certainly don’t believe that my SMSes, any of my telephone data, or anything I say on LiveJournal or Facebook – regardless of the privacy settings – is private.

I would say that with this opinion, the court is further clarifying the judicial attitude towards what is reasonable of a contemporary person to expect in the way of privacy when he lives a life enriched by Internet-based communication between computers. I don’t think that this means that the US system of government as we know it is at risk of collapse – but I do think that it further strengthens the argument that an unencrypted communication across the public Internet is analogous to a conversation on a crowded street corner. And as such, there should be no expectation of privacy.

[1] (United States. Court of Appeals, Ninth Circuit. 2010. [Online] United States v Charles A Borowy. [Available: here])

[2] Within the case, see below, Borowy claims to have tried and failed to make private his hard drive in a number of dumb ways. He tried to claim that because he tried to make it private it should have remained private. The court found that as funny as I did.

The Consolidating Fiber Industry

The proposed $100 billion merger between Corning and Canadian network provider Nortel Networks would create a fiber optics company with a market cap of $170 billion. Analysts say that this is just one of a series of upcoming mergers and acquisitions that will transform and consolidate the lucrative fiber optics industry. [1999]

The European high-tech investor must be aware of two recurring scenarios in consolidating industries. On the one hand, small- to mid-size companies developing fiber optic technology are certain to be takeover targets and will therefore skyrocket in value while the acquiring companies’ share prices will suffer for perceived overpayment. On the other hand, regulators are watching the sector’s mergers like hawks, to ensure that buyouts don’t create an anti-competitive climate.

However, though regulators sometimes slow things down, they won’t stop the consolidation.

The Consolidating Fiber Optics Industry
“It has to consolidate,” said John Nicholls, CEO of Scotland’s Photonic Materials to Tornado-Investor.com. “Most of these companies are seen as a base to grow the business into some sort of merger with a larger strategic partner which manufactures crystals and other components used in the construction of fiber- optic networks.”

European fiber companies like Photonic, as well as publicly traded firms such as Bookham Technologies, France’s HighWave Optical Technologies, and even to a certain extent Marconi Communications are well positioned to take advantage of the attention. Each makes parts of the fiber optics food chain that is highly valuable to larger international network companies, and each knows it. “There’s such a demand for capacity, and in terms of our company, we’re strategically important,” said Photonic’s Nicholls.

Telecommunications consulting firm RHK has reported more than 20 fiber-related mergers this year, compared to three last year, and that even before the JDS Uniphase takeover of SDL for $41 billion, the average price per acquisition as of June was already seven times that of 1999. Venture capital investment in the sector is five times 1999 levels.

The Initial Stage
The initial stage of the consolidation sees relatively smaller players forging value-adding strategic relationships to carry out specific aspects of the manufacturing process. This week, British Telecommunications announced that it had cut a $3.04 billion deal with Marconi to provide optical network gear. Earlier this month, Marconi announced a deal with Bookham to supply multi-channel DWDM optical components for Marconi’s networking products.

Where are the Best Investments?
Does this mean that fiber optic companies in Europe are particularly positioned technologically or strategically to make them more attractive those in the US? Yes and no.

“If you look at the technology from a market adoption perspective, or in terms of technological development, with the number of wireless equipment and major handset manufacturers, then Europe is ahead of the US,” said Krishna Visvanathan, communications team investment manager for 3I, which has had investments in many European fiber optics companies, including Bookham and Photonic Materials. “But in terms of sheer numbers of optical networking companies, the US is significantly ahead.

“It’s interesting that some specific geography does have more photonics technology than others” Visvanathan said. “The US is hot, and there’s lots of start ups, but there are a fair few in the UK as well. But overall, the geography doesn’t have a major impact. The entire optics network market space is so hot that any company, European, Israeli or American, has fantastic exit prospects, assuming the technology is sound.”

Indeed, the major headlines aside, important deals continue to take place outside Europe: Altitun, a tunable laser company with good technology, but scant revenues, was bought in May by ADC Telecommunications, Inc (ADCT) for $872 million, and Israeli-founded US company Chromatis Networks was bought in June by Lucent Technologies for $4.5 billion in Lucent shares.

But, the European consolidation is keeping apace. “Given today’s climate, we’ll definitely be a takeover target,” said Photonic’s Nicholls. “I’m not building a business to sell it,” he said, but then readily agreed that with so much money being offered by companies increasingly desperate for his products, his position could be far worse.

Linux Gets Easier. Businesses Are Noticing.

A Cannes-based private investigator, Alain Stevens, recently switched computer operating systems from Windows to Linux. “It’s a security issue,” Stevens said. “Viruses which target Windows could send confidential documents from my machines to random people – and that could send me to prison.”

Citing cost savings, open standards and enhanced security, the German government in June reached a Linux deal with International Business Machines Corp. and SuSE Linux AG of Germany for its local, state and federal computer infrastructure.

And as the City Council in Nottingham, England, plans a new software application for 10,000 employee workstations, it is seriously asking the question, “Are we going to run this on Windows or open-source, like Linux?”

Throughout Europe, companies and governments large and small have recently been asking the same thing. Information technology departments are looking at what they have and rethinking what they want.

The resulting groundswell could soon make the Linux-based desktop more prevalent in Europe than anyone could have predicted even a year ago. Dan Kusnetzky, an analyst for International Data Corp., said Linux had a 3.9 percent share of desktops worldwide, outpacing Macintosh’s 3.1 percent.

Richard Heggs, Nottingham’s systems analyst, described the process this way: “We’re looking at Linux as a possible replacement for Windows as council desktop standard. It’s looking favorable. Senior management is saying, ‘We like this, but can it do what people say it can?’”

The stimulus to find out has been manifold. A new generation of user-friendly Linux products spearheaded by SuSE and MandrakeSoft SA of France – both of which are small, as yet unprofitable companies – has eased migration.

Legislative incentives have put open-source on corporate tongue-tips. Countries including Britain, Germany, France, Italy, Norway and Malta have introduced a flurry of initiatives to give open-source software access to a level playing field – and mandate the use of open standards for official communications. And Microsoft Corp.’s unpopular license-fee revamping has contributed to a general re-evaluation of IT purchasing criteria: Some tech managers say their feasibility studies of Linux migration may be justified by reasoning that, at a minimum, the results are ammunition for negotiations with Microsoft.

Microsoft’s Europe office would not comment. Companies still look for big names – like Microsoft’s – behind any new software they might buy. Now, other big names in computing are putting money behind Linux products. Sun Microsystems Inc., which recently announced an Intel-based server pre-loaded with Sun Linux 5.0, contends that the concept of having “one folk to choke” support for an open-source product lends credibility to open-source. “The key value Sun’s bringing to Linux isn’t really ‘on the tin,’” said Simon Tindall, volume products business manager for Sun in London, “but that we will support it directly as a vendor.”

This type of Linux support means that corporate IT departments and purchasing managers, ever wary of getting stuck with something forever, can now say, “Well, Sun’s providing support for it.” For example, BEA Systems Inc., IBM, Oracle Corp., SAP AG and Veritas Software Corp. have all ported their applications to run on Linux systems. All this effort may raise costs (Linux costs typically have nowhere to go but up), but that may not be a deterring factor.

Consider StarOffice, Sun Microsystems’ open-source challenge to Microsoft Office, its word-processing business software suite. Until recently, it cost nothing. Since release of version 6.0, Sun has begun charging up to $79 per license.

[The free product was renamed OpenOffice.org and is still available under that name. The products are identical except in name and the fact that Star Office is released in a boxed set with printed documentation and Sun Microsystems installation support by telephone.]

The price seems to make businesses trust it more, some analysts say – it is a real product with a viable revenue model, which is a lot easier to explain to your boss than a product supported only by eleemosynary efforts by some vaguely hippie-sounding “open-source community.”

James Jarvie, IT manager of the Central Scotland Police, said the £245,000 ($380,000) they saved on licensing fees with StarOffice paid for more police on the streets. Councils in Aberdeen and Penwrith have embraced it, and the British Office of Government Finance has now endorsed it, along with Office and Lotus’s SmartSuite.

“Unless Microsoft makes significant concessions in its new Office licensing policies,” Gartner Inc. said in a research report, “StarOffice will gain at least 10 percent market share at the expense of Microsoft Office by year-end 2004.”

To stand a chance, an operating system must provide applications that allow users to seamlessly edit and exchange documents with others (which often means “with Microsoft Office users”). StarOffice is about 95 percent compatible with Microsoft Office (macros don’t translate, but for everyday files it is more than adequate). It runs on Windows, Linux and Solaris, and since the user interface looks identical on Windows and Linux desktops, a major changeover for users would be easier.

“Running StarOffice on Windows,” said MandrakeSoft’s chief executive, Jacques Le Marois, “is almost always a strategic migration choice.”

Martijn Dekkers, chief enterprise architect for the prime minister’s office in Malta, agrees.

“The key barrier,” Dekkers said, “is office suites and collaborative tools like e-mail and Web browsers. Interface similarities ease transitions between different operating systems.”

Ten months ago, Malta began investigating the culture and benefits of open-source. Where big software vendors claim that open-source is unreliable, unsupported and untrustworthy, open-sourcers assert that its products are the solutions to the world’s ills. The truth is perhaps neither, but on the issue of support, Dekkers found open-source viable.

“We have found,” Dekkers said, “that one of the major issues put forward – no support and no accountability – is false.

“Small and large open-source vendors offer support which is equal to or better than support from main commercial developers.”

While large organizations typically take a long time to weigh such issues, some smaller businesses in Europe are switching to SuSE and MandrakeSoft for their desktops.

Last year, SuSE implemented its SmartClient architecture on Linux for Debeka-Gruppe, a German insurance and financial services group.

More than 3,000 workstations in 230 German locations are administered from its corporate headquarters in Koblenz. Where governments deal with issues of open-source culture and monopoly-busting, small companies indicate three main reasons for taking the plunge: reliability, security and cost.

“I switched,” said Mervyn Cottenden, an Essex accountant who runs two MandrakeSoft Linux machines, “because Windows is unreliable. I can’t afford to lose a client’s work because a machine goes down in the middle of a job.”

Europe’s Dirty Little Secret: Porn Is Prince

The new report by Forrester Research (NASDAQ: FORR) on broadband usage in Europe claims that technological and hardware issues aside, the main barrier to widespread acceptance of broadband is not cost, but lack of sufficient rich, broadband-specific content to allow consumers to justify the expense.

“Compelling content unavailable over dial-up could attract them, ” said Forrester analyst Lars Godell, the lead author of the report on potential European broadband customers, “but unresolved business issues around who gets paid, how and by whom discourage premium content providers like Carlton and BMG from offering audio, video or interactive games over broadband networks.”

Forrester’s Technographics Europe survey this April showed that the top three reasons why consumers with PCs at home don’t get Net access are “I don’t need to,” “I have no interest,” and “I have no desire to be connected.”

To be sure, companies such as Bertelsmann and Time-Warner, owners of large film libraries, are looking to explore new ways of exploiting their content in a European broadband marketplace.

But analysts differ in their take on where content for broadband will go. While Forrester is bullish on very rich, interactive video-on-demand and other TV-like programming for broadband, UK-based Yes Television and BTOpenworld announced that they will pilot BT Yes Television, to deliver VOD to televisions via ADSL-enhanced phone lines in London. And Filmgroup, a film distribution company competing for the same UK VOD audience via its web portal films2.com, announced its intention to float on the London Stock Exchange in the second quarter of 2000.

But Jupiter Communications research analyst, Noah Yasskin believes all these people may be barking up the wrong tree.

“Primarily, broadband will be an enhancement of existing applications and services, as opposed to some sort of TV-like revolution,” Yasskin said. “There will be some richer media, and more possibilities for advertising and video, but we think that more important than the speed is the “always-on’ aspect–that’s the real change for consumers.”

Industry watchers agree that a constant connection to the web at a fixed price is a crucial aspect of broadband’s success. “Very clearly this type of service will boost e-business,” said Joeri Sels, telecommunications analyst for Julius Bär in Frankfurt. “It doesn’t matter whether it’s “flat rate’ or just a very cheap, reliable fixed-base rate, but the important thing is that the general trend towards “always-on” is certainly in motion.”

Always-on, said Yasskin, will cause fundamental changes in European use patterns, by making it as easy to check the web for basic information like weather and local news as it currently is to check in the newspaper.

“Applications like downloading or renting software and other large digital files will take off with broadband,” said Yasskin, “this will be very different than the dial-up world where this isn’t possible in a reasonable amount of time. If broadband equaled video, it would already be widespread at the workplace–which is, after all, with leased lines a broadband environment. The PPV-movie/broadband scenario is totally wrong. People don’t want to watch feature length movies 18 inches away from their PC.”

Godell agreed that applications are a part of the overall broadband content bundle, and also argued that broadband won’t be limited to PCs. “In 2005, 70% of the UK’s 40 million mobile Internet users will also use the net on PCs or interactive TV,” he said.

Which means it’s time to take a closer look at telcos and cablecos that offer fixed telephone, mobile and cable TV to businesses and consumers in Europe, like KPNQwest, Tele Denmark, Chello, Deutsche Telekom, Bredbandsbolaget AB, Fastweb.it and Telia, as well as optics and box makers, including Lucent, Nokia, Alcatel and Siemens.

Hubba Hubba
One unsurprising–if difficult to discuss–benefactor of broadband access in Europe, of course, will be adult services, which operate some of the most profitable services in the Internet world. That’s nothing new: pornographers have always been on the cutting–and profitable–edge of technology since the invention of the ink quill. Forrester said that in order to shore up businesses that will offer affordable broadband access, telecoms will be forced to drop objections to transmission of adult programming for download.

Which means stay tuned to Tornado-Investor.com for an upcoming profile of high-tech adult offerings from BEATE UHSE AG—Germany’s only publicly listed smut-peddler.