ABAG's insurance could cover $1.3 million embezzlement

Feb 2, 2015, 2:48pm PST UPDATED: Feb 2, 2015, 6:12pm PST

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Spencer A Brown

Roland Li

Reporter-San Francisco Business Times

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The Association of Bay Area Governments will meet Tuesday morning to determine options for reimbursing its stolen $1.3 million in bond money. The agency's insurance could potentially cover the loss.

ABAG will also disclose which law enforcement agency will investigate the case, according to a person close toABAG.

Clarke Howatt, the former director of financial services at ABAG, has been linked to the disappearance of $1.3 million meant for public improvements in South of Market. Howattresigned from the agency and has retained a defense attorney, Mary McNamara.

Howatt will likely be charged with wire fraud, so a federal enforcement agency will likely be involved, said the person. ABAG also plans a “full forensic audit" of Howatt's work, said the person.

A 20-year veteran of ABAG, Howatt gained "trusted" status and familiarity with the allocation of bond funding, which enabled him to allegedly steal the funds. It wasn't clear how sophisticated his methods were from reports, said A. Christine Davis, director and practice leader of forensic accounting and litigation support at DZH Phillips LLP, a San Francisco accounting firm.

“Most fraud can be attributed to a circumvention of existing controls by someone in a position to override controls, or the absence of strong controls," said Davis. “Weak controls provide an opening — the opportunity — for fraud to occur."

Potential defenses against future fraud would be splitting the duties of requesting, processing and approving wire transfers of money, said Davis. Another control would be carefully reviewing and scrutinizing documents tied to wire transfers.

Patrick Kennedy, CEO of developer Panoramic Interests, said he worked with Howatt on seven projects in Berkeley. Kennedy recalled nothing unusual about him.

“He's really the quintessential bureaucrat," said Kennedy.

The Oakland-based agency over the weekend issued a lengthy statement regarding itsongoing probe into the alleged theft. The funds, earmarked for street and public-park improvements in San Francisco's SoMa neighborhood, were under the control of ABAG's Finance Authority for Nonprofits, or FAN.

Last month, a routine audit of the South of Market Community Stabilization Fund revealed that funds had gone missing. The fund is a pool where city and developer money is directed to be used for public improvements. When city staff members contacted ABAG, which acted as trustee for the fund, they were told that $1.3 million had been wired to a bank account in San Diego controlled by an entity called Urban West for Rincon Developers, the San Francisco Chronicle first reported.

That entity requested a refund for streetscape improvements associated with the One Rincon Hill luxury highrise project, sources told the Chronicle. With many large projects, developers will make public infrastructure improvements and then be reimbursed for those costs. But in this case, the actual One Rincon Hill developer, Urban West Associates, never made such improvements and said it never requested or received a refund.

Howatt "executed a sophisticated scheme to defraud the agency by creating illegitimate documents, creating false identities, and deceiving the FAN board and bank trustees to wire these funds," ABAG said in a statement sent to the San Francisco Business Times. "ABAGand FAN continue to work collaboratively with law enforcement and other municipal agencies in an effort to resolve the apparent embezzlement."

Howatt has resigned, ABAG said. "I'll try my best to get the money replaced as soon as I can," he reportedly said in his resignation letter to the agency.

The agency said Howatt acted alone and had no access to any other funds within the ABAGorganization.

Requests for comment from Howatt and his lawyer on Monday weren't immediately returned.

Also on Monday, it was reported that Howatt bought a five-bedroom home in Pacific City on the Oregon coast for $1.53 million in 2014, according to the San Francisco Chronicle, renaming it "Rincon Hill." As of Feb. 1, a Craigslist ad listed its availability for rent at nearly $800 a night starting on April 1.

Samsung's warning: Our Smart TVs record your living room chatter

Technically Incorrect: Samsung's small print says that its Smart TV's voice recognition system will not only capture your private conversations, but also pass them onto third parties.

• by Chris Matyszczyk 
   @ChrisMatyszczyk
• February 8, 2015 2:10 PM PST

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Technically Incorrect offers a slightly twisted take on the tech that's taken over our lives.

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You see, this is progress in intelligence. Because you need an intelligent TV.Screenshot by Chris Matyszczyk/CNET

Why worry about Big Brother?

It's your big Samsung TV that's watching you. Oh, and listening to you.

That seems to be the conclusion from reading the privacy small print offered by the company. (Samsung's motto: TV has never been this smart.)

It concerns the voice-recognition feature, vital for everyone who finds pressing a few buttons on their remote far too tiresome.

The wording, first spotted by the Daily Beast, first informs you that the company may "capture voice commands and associated texts so that we can provide you with Voice Recognition features and evaluate and improve the features."

This is almost understandable. It's a little like every single customer service call, supposedly recorded to make your next customer service call far, far more enjoyable.

However, the following words border on the numbing: "Please be aware that if your spoken words include personal or other sensitive information, that information will be among the data captured and transmitted to a third party through your use of Voice Recognition."

We are NOT having your mother here this weekend, next weekend or ANY weekend!

I'm pregnant and it's not yours.

The possibilities curdle in the mind. So much so that I have contacted Samsung to ask how broad this policy might be and what third parties might be informed of your personal conversations. (I would have just shouted at my SmartTV to get comment, but it isn't a Samsung.)

A Samsung spokeswoman told me: "Samsung takes consumer privacy very seriously. In all of our Smart TVs we employ industry-standard security safeguards and practices, including data encryption, to secure consumers' personal information and prevent unauthorized collection or use."

But what might be authorized and by whom?

Samsung's spokeswoman continued: " Should consumers enable the voice recognition capability, the voice data consists of TV commands, or search sentences, only. Users can easily recognize if the voice recognition feature is activated because a microphone icon appears on the screen."

Yes, we must now look for little microphone icons to check whether we're being listened to.

As for the third parties mentioned in the privacy policy, Samsung explained it to me like this: "Samsung does not retain voice data or sell it to third parties. If a consumer consents and uses the voice recognition feature, voice data is provided to a third party during a requested voice command search. At that time, the voice data is sent to a server, which searches for the requested content then returns the desired content to the TV."

One imagines this is simply one more small step for mankind toward ultimate electronic envelopment, which some see as a very good thing.

Your Nest and other devices will, of course, capture so many of your domestic predilections too. This is about making the Internet of Things merely one more thing in making your life easier, lazier and seemingly less private.

Clearly, this isn't the only option for those intent on a SmartTV. You can disable the full panoply and stick to a series of already-defined voice commands. However, this still brings with it stipulations such as "While Samsung will not collect your spoken word, Samsung may still collect associated texts and other usage data so that we can evaluate the performance of the feature and improve it."

Alright, you cry, I'll switch voice-recognition data off altogether. This will result in "You may disable Voice Recognition data collection at any time by visiting the 'settings' menu. However, this may prevent you from using all of the Voice Recognition features."

As Samsung's spokesperson explained to me: "Voice recognition, which allows the user to control the TV using voice commands, is a Samsung Smart TV feature, which can be activated or deactivated by the user. The TV owner can also disconnect the TV from the Wi-Fi network."

You might imagine that other SmartTV manufacturers would have similar controls and stipulations. If a product can listen and record something, it's likely it will.

So I went to Philips SmartTVs and could only find a general privacy notice, with no specific information relating to SmartTVs. LG's privacy policy again is general, with no apparent specific information relating to SmartTVs and their potential.

I have contacted both companies to ask whether there is a more detailed supplement that makes their TVs capabilities clear.

LG was, however, embroiled in a privacy controversy in 2013, when its SmartTVs were accused of knowing too much. The company promised to change its policies.

MORE TECHNICALLY INCORRECT

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At the heart of all this is, of course, trust. The best and only defense against intrusion from the likes of Google to Samsung is this: "We don't really care about your private life. We just want your data, so that we can make money from it."

It's inevitable that the more data that we put out, the more will be recorded and the more will be known about us by machines which are in the charge of people.

We have all agreed to this. We click on "I agree" with no thought of consequences, only of our convenience.

It isn't just your TV that will listen and record. Soon, it'll be everything that has a digital connection.

This is our digital bed. We lie in it willingly.

What Everyone Gets Wrong in the Debate Over Net Neutrality

• BY ROBERT MCMILLAN  
 
• 06.23.14  |  
 
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Even Sunday night HBO watchers are worried the Federal Communications Commission will soon put an end to net neutrality.

Earlier this month, on the HBO comedy news show “Last Week Tonight,” host John Oliver went on a 13-minute rant against the new set of internet rules proposed by the FCC. He warned that the rules would lead to a world where internet service providers like Comcast and Verizon can sell special treatment to web companies like Google and Netflix, charging extra fees to deliver their online videos and other content at fast speeds, and he urged viewers to bombard the FCC website with protests, saying the rules would end up hurting smaller web outfits that can’t afford to pay the fees. The next day, the FCC site buckled under the traffic and went offline.

It was just part of a sweeping effort to squash the proposed rules. When the rules first leaked out in May, protesters camped out in front of the FCC’s Washington offices. Big tech companies such as Google, Amazon, and Netflix signed a letterasking the government communications agency to bar internet providers from discriminating “both technically and financially against internet companies.” And last week, two big name Democrats on Capitol Hill unveiled a bill that seeks to undermine the new rules. Nearly everyone, it seems, wants to prevent the FCC from allowing some companies to have internet “fast lanes” while others toil at slower speeds.

‘MOST OF THE POINTS OF THE DEBATE ARE ARTIFICIAL, DISTRACTING, AND BASED ON AN INCORRECT MENTAL MODEL ON HOW THE INTERNET WORKS.’

The only trouble is that, here in the year 2014, complaints about a fast-lane don’t make much sense. Today, privileged companies—including Google, Facebook, and Netflix—already benefit from what are essentially internet fast lanes, and this has been the case for years. Such web giants—and others—now have direct connections to big ISPs like Comcast and Verizon, and they run dedicated computer servers deep inside these ISPs. In technical lingo, these are known as “peering connections” and “content delivery servers,” and they’re a vital part of the way the internet works.

“Fast lane is how the internet is built today,” says Craig Labovitz, who, as the CEO of DeepField Networks, an outfit whose sole mission is to track how companies build internet infrastructure, probably knows more about the design of the modern internet than anyone else. And many other internet experts agree with him. “The net neutrality debate has got many facets to it, and most of the points of the debate are artificial, distracting, and based on an incorrect mental model on how the internet works,” says Dave Taht, a developer of open-source networking software.

The concepts driving today’s net neutrality debate caught on because the internet used to operate differently—and because they were easy for consumers to understand. In many respects, these concepts were vitally important to the evolution of the internet over the past decades. But in today’s world, they don’t address the real issue with the country’s ISPs, and if we spend too much time worried about fast lanes, we could hurt the net’s progress rather than help it.

Even Tim Wu, the man who coined the term net neutrality, will tell you that the fast lane idea isn’t what it seems. “The fast lane is not a literal truth,” he says. “But it’s a sense that you should have a fair shot.” On the modern internet, as Wu indicates, the real issue is that such a small number of internet service providers now control the pipes that reach out to U.S. consumers—and that number is getting even smaller, with Comcast looking to acquire Time Warner, one of its biggest rivals. The real issue is that the Comcasts and Verizons are becoming too big and too powerful. Because every web company has no choice but to go through these ISPs, the Comcasts and the Verizons may eventually have too much freedom to decide how much companies must pay for fast speeds.

Click image to enlarge.  WIRED

We shouldn’t waste so much breath on the idea of keeping the network completely neutral. It isn’t neutral now. What we should really be doing is looking for ways we can increase competition among ISPs—ways we can prevent the Comcasts and the AT&Ts from gaining so much power that they can completely control the market for internet bandwidth. Sure, we don’t want ISPs blocking certain types of traffic. And we don’t want them delivering their own stuff at 10 gigabits per second and everyone else’s stuff at 1 gigabit. But competition is also the best way to stop these types of extreme behavior.

Though the network will never be neutral, we can find ways of promoting a vibrant market for fast internet speeds that’s open to everyone. At the end of his rant, John Oliver actually comes pretty close to the real issue. Advocates, he says, “should not be talking about protecting net neutrality. They shouldn’t even use that phrase. They should call it preventing cable company f***ery, because that is what it is.”

The Great Rewiring

The net neutrality debate is based on a mental model of the internet that hasn’t been accurate for more than a decade. We tend to think of the internet as a massive public network that everyone connects to in exactly the same way. We envision data traveling from Google and Yahoo and Uber and every other online company into a massive internet backbone, before moving to a vast array of ISPs that then shuttle it into our homes. That could be a neutral network, but it’s not today’s internet. It couldn’t be. Too much of the traffic is now coming from just a handful of companies.

Craig Labowitz made this point last month, when he testified before a Congressional committee on the proposed Comcast-Time Warner merger. Ten years ago, internet traffic was “broadly distributed across thousands of companies,” Labovitz said in his prepared statement to the committee. But by 2009, half of all internet traffic originated in less than 150 large content and content-distribution companies, and today, half of the internet’s traffic comes fromjust 30 outfits, including Google, Facebook, and Netflix.

INTERNET TERMINOLOGY CHEAT SHEET

Internet Backbone: The collection of cables and data centers that make up the core of the internet. This is operated not by a single operation but by many independent companies spread across the globe.

Internet Service Provider, or ISP: A company, such as Comcast or Verizon or Time Warner, that plugs into the backbone and then provides internet connections to homes and businesses.

Content Provider: Companies such as Google, Facebook, and Netflix that provide the webpages, videos, and other content that moves across the internet.

Peering: Where one internet operation connects directly to another, so that they can trade traffic. This could be a connection between an ISP such as Comcast and an internet