Asset Protection BLOG - Mark Nestmann

Yahoo, Verizon: Our Spy Capabilities Would Shock You

Every now and then, ordinary citizens can glimpse the breadth and depth of the surveillance infrastructure erect to monitor us. In the last few days, Americans have had such an opportunity, thanks to privacy researcher Christopher Soghoian, a doctoral student at Indiana University.

On December 1, Soghoian published an audio recording of a presentation to a law enforcement industry conference on surveillance.  The speech was from Paul Taylor, manager of Sprint's electronic surveillance team.  According to Taylor, Sprint provided law enforcement agencies with its customers' (GPS) location information over 8 million times between September 2008 and October 2009.  (Soghoian has now removed the recordings at the insistence of the conference organizers, who claimed he had violated copyright laws by posting them.)

Sprint says the 8 million represents the number of individual "pings" for specific location information, not the number of targeted customers.  According to Sprint, "Each investigation may generate thousands of individual pings to the network as the law enforcement or public safety agency attempts to track or locate an individual."

That may be the case.  But it underscores how pervasive surveillance technology has become.  And also the phenomenon of "surveillance creep:" how technology or law intended for a humanitarian purpose winds up being used to enhance surveillance capabilities.

For instance, the technology that makes possible it possible for police to track you from your cell phone arrived pursuant to the so-called E-911 initiative.  Back in 2003, the Federal Communications Commission justified E-911 as making it easier for emergency crews to respond to 911 calls.  After all, help could arrive more quickly if emergency crews knew where to find the caller, if the caller couldn't provide this information.  Thanks to E-911, you can be tracked whenever your cell phone is on, sometimes within a few feet of your actual location. But it's plain to see from the Sprint admissions how surveillance creep has occurred.

U.S. courts are divided on whether locational surveillance requires a warrant.  And it's just one type of data routinely made available to police.  The government can also obtain customer records from ISPs and telecom providers revealing telephone numbers dialed; text messages, emails and instant messages sent; web pages browsed; and the queries submitted to search engines.  Very few of these inquiries require a warrant. 

But Soghoian was just getting started.  A few months ago, he filed Freedom of Information Act requests with the Department of Justice to find out how much telecom companies and ISPs charge law enforcement agencies to conduct surveillance.  And he definitely struck a nerve.  In letters also posted December 1, the attorney representing Yahoo wrote that should this data be disclosed, it "would be used to 'shame' Yahoo and other companies" and would "shock" their customers. 

Verizon made a different argument.  It claimed that if it made public its law enforcement surveillance pricelist, it would be overrun with requests from ordinary customers to conduct surveillance on their behalf.  "Such calls would stretch limited resources, especially those that are reserved only for law enforcement emergencies” according to Verizon.

But other companies allowed the Justice Department to release at least some of the data Soghoian requested.  Cox Communications, for instance, charges the government US$2,500 to record digits dialed to or from a particular phone, and US$2,000 for each additional 60-day-interval.  Wiretaps cost more: US$3,500 for the first 30 days and $2,500 for each additional 30 days. To get a month's worth of your call detail records costs US$40.

So just how many requests for records do telecoms and ISPs receive each year from police?  Yahoo won't say, but Verizon admits it receives “tens of thousands” of requests annually for customer records and information from law enforcement agencies.  According to Soghoian, only Facebook and AOL have publicly disclosed how many requests they receive for police assistance.  Facebook acknowledges 10-20 daily requests.  AOL says it receives about 1,000 requests monthly.

So, how can you avoid this type of surveillance?  For telephones, your best bet is to use prepaid cell phones purchased anonymously, over the counter, with cash. 

For the Internet, a technology called virtual private networking acts as a middleman between your ISP and the Web sites you surf.  A VPN can also encrypt the data stream between its servers and your PC.  With these countermeasures in place, the only thing your ISP can monitor is the fact that you're online and that you're connected to a VPN. 

There are many VPN services available.  I prefer services that don’t have networks installed in the United States to avoid possible compromise under legislation such as the USA PATRIOT Act.  The service that I use is http://www.cryptohippie.com.  Its only U.S. presence is to authenticate connections to Cryptohippie servers in other countries.  None of Cryptohippie’s servers are in the United States.

Copyright © 2009 by Mark Nestmann

Heaven Forbid…a GOOD Lawsuit?

Some lawsuits are frivolous, but most are not.  If industry practices, the government, or some other combination of factors makes it impossible for you to avoid some kind of loss, your only recourse may be to file a lawsuit.

I was reminded of this principal recently when I learned a couple in Illinois recently sued their bank for failing to secure their account from identity thieves.  The bank tried to quash the lawsuit, but an Illinois district court judge recently issued a ruling allowing it to proceed.  And for once, I agree.  The lawsuit is definitely not frivolous.

Here's what happened, according to the allegations in the lawsuit:

In February 2007, an intruder obtained online access to the wife's Citizens Financial banking account using her user name and password.   The intruder authorized an electronic transfer of US$26,500 from the couple's line of credit to the wife's business account.  Next, the intruder initiated a transfer of the funds to an Austrian bank.

When the couple realized what had happened, they contacted Citizens Financial and requested the money be returned.  The bank refused and suggested that they contact the bank in Austria.  But, the Austrian bank also refused to return the money.

Shortly thereafter, Citizens Financial began billing the couple pay off the line of credit.  When they failed to pay, the bank reported them as delinquent to national credit reporting agencies.  The bank also threatened foreclosure proceedings against their home.  These threats stopped once the couple began making monthly payments to the bank for the stolen funds.

Under the circumstances, the couple felt they had no option except to file a lawsuit against the bank.  Among other claims, the lawsuit alleges negligence under Illinois law.  According to the lawsuit, the bank didn't use the best available technology to protect its depositors, leaving the account vulnerable to identity fraud.

This is a situation in which a legitimate account holder really can't control.  It's remarkably easy for an identity thief to plant a "backdoor" program on your computer.   From that point, the program records every keystroke on your PC.  Periodically, it sends a report to the thief.  In the couple's case, the program apparently recorded the log on information to their bank account.  Once the thief had this information, initiating the US$26,500 theft was easy.

The only solution to the problem is for banks that offer online access to make it impractical for identity thieves to impersonate legitimate account holders.  There are numerous technologies available to make this possible.  However, unless banks are held legally accountable for these types of losses, they have little incentive to introduce this technology. 

This is the model the credit card industry uses, and it works.  Under federal law, if someone steals your credit card number, you're only responsible for paying the first $50 of any fraudulent purchases made on it.  Credit card fraud is a problem, but the cost is borne by credit card companies—and even more, by merchants.

This illustrates an important security principle.  The person or entity most able to reduce a security risk should be responsible for dealing with it.  In this case, the couple had no practical way to ensure the security of their account.  Only the bank had the ability to do so, and they apparently failed in this obligation.

This lawsuit has a long way to go before the situation is resolved, and the banking industry is certain to resist taking responsibility for the online services they offer.  But they must do so, if only because they are the only possible solution to this type of identity theft. 

(For background on this incident, click here.)

Copyright © 2009 by Mark Nestmann

Stupid Facebook Tricks

It's amazing to me what people (particularly Americans) tell complete strangers.  How much money they make.  Where they keep it.  And even what criminal offenses they've committed (or are still committing). 

Social networking sites like Facebook make it even easier to boast about your crimes, or whether you've perjured yourself.  For instance, a few months ago, a woman sued the driver of a vehicle who caused an accident for damages for pain, suffering and loss of enjoyment, along with the driver's insurance company.  In response, the defendants presented photos from the woman's Facebook profile showing her engaged in vigorous outdoor activities, after the accident.  Not surprisingly, the judge threw the case out.

But the stupidest Facebook trick I've heard of came from a 26-year-old fugitive named Maxi Sopo.  A native of Cameroon, Maxi moved to Seattle in 2003.  When selling flowers to bar patrons wouldn't finance his desired lifestyle, he turned to bank fraud.  Federal prosecutors accuse him of obtaining more than US$200,000 in credit from banks and credit unions under false pretenses.

Once Maxi learned the feds were after him, he moved to Cancun, Mexico.  He apparently was having a great time, because according to one Facebook post, he was "JUST HERE TO HAVE FUN PARTEEEEEEE."  Then, Maxi added a former Justice Department official to his list of friends.  The "friend" learned where Maxi lived and passed that information to Mexican police.  In September, police in Cancun arrested Maxi.  Last I heard, he was awaiting extradition back to the United States.

I don't have an account on Facebook or any other social networking service.  I see no reason to build a network of hundreds of even thousands of "friends" that I hardly know.  But I also have no desire to share details of my personal life with anyone online.  And while police can obtain a warrant to examine your Facebook profile, more typically, they simply create a false profile and then invite you to become a friend.  A prospective employer or private investigator can do the same thing to learn more about you.

If you use Facebook or other social networking sites, at the very least take some basic precautions to protect yourself.  Don't post anything even remotely incriminating, and set the privacy levels at the highest settings possible to restrict information sharing.  In addition, follow the suggestions I made a few months ago in an earlier blog posting here.

The bottom line: before you hit the "post" button, be absolutely certain that whatever you're about to send onto a social networking site belongs there.

Copyright © 2009 by Mark Nestmann

Yes, You ARE a Criminal…You Just Don't Know it Yet

How many felonies have you committed today?  If you're like most Americans, you probably violate federal or state law several times each day, without even knowing it.

Just ask Sally Harpold.  A resident of Clinton, Indiana, Sally purchased some cold medicine for her husband back in March.  A few days later, she purchased some additional cold medicine for her daughter.

Four months later, police showed up at Sally's door with an arrest warrant.  Her crime?  She had purchased more than 3.0 grams of pseudoephedrine, a common and legally available decongestant for runny noses.  Deputies led Sally away in handcuffs, and the local newspaper ran her mug shot on the front page.  The headline read, "17 Arrested in Drug Sweep."

Sally didn't realize—and no one at the drug store told her—that pseudoephedrine is also an ingredient used in the manufacture of crystal meth, a highly addictive drug.  Many states, including Indiana, now restrict sales of pseudoephedrine.

You might think that the authorities would have backed down when they realized that Sally had no intention of manufacturing crystal meth.  But you'd be wrong.  "The law does not make this distinction," said Vermillion County Prosecutor Nina Alexander. "I'm simply enforcing the law as it was written."  She now faces up to 60 days in jail and a US$500 fine, along with a criminal record.

Unfortunately, this isn't an isolated incident.  Consider the sad case of entrepreneur and clean energy researcher Krister Evertson, who was recently released after serving two years in federal prison.  Until 2004, Krister had never been arrested.  But that changed on May 27, 2004, when federal agents driving black SUVs ran him off the road, pointed automatic weapons at him, and placed him under arrest.

Krister's crime was forgetting to put a federally mandated sticker on a UPS package he mailed from Alaska.  The package contained sodium (an ingredient in fuel cell research he was conducting).  Since federal environmental laws classify sodium as a dangerous material, it's illegal to ship it by air.  Krister knew that, so he packaged the material according to published federal guidelines, and even checked "ground transportation" on the UPS shipping form.

Unfortunately for Krister, he didn't realize that there is no ground transportation via UPS from Alaska.  All shipments, even those marked "ground transportation," go by air.  Federal prosecutors could simply have fined Krister for the mistake, but after ransacking his mother's home in Alaska, decided to indict him on felony charges.  Krister refused to plead guilty and in 2006, he was acquitted on all charges.

But that was just the beginning of Krister's ordeal.  Most of his fuel cell experiments took place in Idaho, and he stored a large quantity of sodium there in an industrial storage facility.  To make certain the sodium would be safe, he kept it in a reinforced stainless steel container with 3/8-inch thick walls. 

In the mind of federal prosecutors, however, Krister had "abandoned" the sodium.  So not long after his acquittal, the feds brought new charges against him based on a provision in federal law making it a crime to abandon "hazardous waste."  The fact that Krister had clearly intended to reclaim the sodium, and use it in future experiments, was immaterial.  This time, the jury convicted Krister and he spent the next two years locked up in a federal prison.

Once up a time, you had to knowingly violate a law in order to be found guilty of violating it.  However, in the last 50 years, legislators have largely eliminated the requirement for "criminal intent" to exist to be found guilty of a criminal offense.  It's no wonder that the United States has the highest per-capita incarceration rate of any country in the world.

Could what happened to Sally Harpold and Krister Evertson happen to you?  It could.  The only thing that's keeping you out of a jail cell is the fact that prosecutors haven't yet targeted you.  Just hope that they don't, because it's almost impossible to go through life without inadvertently committing numerous felonies on a daily basis. Here are a few examples.

Do you have a maid clean your home?  If you don't go through the time-consuming and expensive process of completing IRS and immigration forms, you're committing numerous crimes. 

Have you ever taken a vacation and written it off as a business expense?  If so, add tax fraud to your list of crimes.

Have you ever thrown anything away?  Better retrieve it!  Because under the Sarbanes-Oxley Act, you face criminal penalties if you destroy "evidence" relating to any actual or contemplated federal investigation, matter or official proceeding.  On the other hand, laws targeting identity theft in many states require you to securely dispose of many types of personal records.  So guess what?  By complying with a state law, you may have violated a federal law. 

Welcome to America!

Copyright © 2009 by Mark Nestmann

Big Brother Visits the Tattoo Parlor

Thinking about getting a tattoo?  If you are, better not pay cash!  If you do, the FBI has informed tattoo parlors in Los Angeles, and perhaps other cities, that you might be a terrorist. 

Yes, I'm serious.  You can read the FBI notice yourself by clicking here.  

Of course, paying cash at the tattoo parlor isn't the only thing that's suspicious.  The FBI helpfully warns that people who emit strange odors or who have missing hands or fingers might be suspicious.  So make sure to take a shower, and to wear your prosthesis, when you get your tattoo.

Another indicator of terrorism, apparently, are comments directed against the U.S. government.  So be sure to say nice things about Obama.  And for that matter, about George W. Bush as well.  That covers both political parties.  Also, be sure not to say anything about the blasting caps you recently procured, or about your plans to assassinate local politicians. 

It's also suspicious if a group of people all want the same tattoo.  God forbid you're a member of a fraternity or sorority in which pledges are encouraged to get "inked." 

So what's a tattoo parlor that wants to help the FBI fight terrorism to do?  If you show up with cash, smelling bad, missing limbs, or making vague threats against Obamacare, the tattoo parlor is encouraged to contact the City of Los Angeles Joint Regional Intelligence Center.  Also, it should
require valid identification from all customers and keep records of all purchases.  But my very favorite recommendations are straight out of the Stasi domestic spy manual:

• Talk to customers, ask questions, and listen to and observe their responses
• Watch for people and actions that are out of place
• Make note of suspicious statements, people, and vehicles.

I don't have any tattoos, and I've never spent any time in a tattoo parlor.  However, until it closed a few years ago, one of my favorite hangouts in Scottsdale was a little coffee shop next door to a tattoo parlor.  And every time I visited the coffee shop, I would briefly see some of the tattoo parlor's patrons, and even overhear snatches of conversation.

If anyone would be out of place visiting that parlor, it would be me.  After all, I don't have any tattoos, at least not yet.  Nor do I have piercings in my ears, nose, lips, tongue, or anywhere else, for that matter.  I don't have blue spiky hair, or any knowledge of "World of Warcraft." And, to the best of my knowledge, none of my clothes display Satanic symbols.

So I can just imagine what might transpire if I actually went in the door to inquire about a tattoo.  The patriotic proprietor would excuse himself, go to a back room, and pick up the telephone.

"There's a middle-aged guy carrying a briefcase who just came in to inquire about a tattoo.  He's 30 years older than most of our customers and he's babbling about something called 'limited government," whatever that is. He wants to pay cash, won't give us his Social Security number, and I don't think he took a shower today.  Can you send someone over to pick him up?"

Copyright © by Mark Nestmann

TSA Airport Security Personnel no Longer to Act as "Cash Police"

It's not often that I can report news that's actually favorable to financial privacy.  Today is a happy exception.  I'm pleased to report that the Transportation Security Administration has modified its rules regarding detaining and questioning airline passengers carrying large quantities of cash.

In March 2009, TSA officials in St. Louis detained Steven Bierfeldt after discovering US$4,700 in cash in his carry-on bag.  Bierfeldt, the Director of Development for the Campaign for Liberty (an offshoot of Congressman Ron Paul's presidential campaign), was about to board a domestic flight. 

TSA agents placed Bierfeldt in a small room and began to interrogate him.  Bierfeldt refused to answer the questions.  Instead, he repeatedly asked the agents to explain the scope of their authority to detain and interrogate him.  Not only did the agents refuse to do so, they also told Bierfeldt he was being arrested. 

Fortunately, Bierfeldt had the presence of mind to make an audio recording of the incident on his cellular telephone.  The recording reveals a series of threatening and expletive-laden questions relating to why Bierfeldt was carrying cash.  When he was finally released, Bierfeldt turned the recording over to the American Civil Liberties Union.  Shortly thereafter, the ACLU sued the Department of Homeland Security, which has authority over the TSA, on his behalf.   

TSA officials are authorized to conduct safety-related searches for weapons and explosives. They have no right to interrogate passengers about matters unrelated to passenger safety.  Carrying cash aboard a flight obviously poses no safety risk.  And it's perfectly legal to carry as much cash aboard an airplane as you want.  Unless you're transporting more than US$10,000 in cash across a U.S. border, no reporting is required. 

I anticipated a long and drawn-out lawsuit in this case.   Indeed, I thought the TSA might press for new rules providing explicit authority for agents to confiscate "suspicious" quantities of cash.  However, I was happily surprised to learn last week that the TSA has instead issued new rules that prohibit agents from interrogating passengers on matters unrelated to aircraft safety.  Transporting US$4,700 in your carry-on bag, or US$470,000, for that matter, doesn't qualify. 

However, I still don't recommend that you transport a large quantity of cash on an airplane departing and/or or arriving in a U.S. airport.  The reason is that at some airports, TSA screening may be supplemented by a separate inspection for narcotics.  Most U.S. and foreign currency contains minute traces of narcotics residues.  A drug-sniffing dog is likely to "alert" to any large quantity of cash you're carrying.  That alert may provide probable cause for police to then seize the cash under federal or state civil forfeiture laws.  You may or may not get the cash back, and you'll face an expensive and protracted court battle to prove it came from a legitimate source.

Copyright © 2009 by Mark Nestmann

Yes, Dorothy… Taxes DO Matter

Both congressional leaders and President Obama have suggested that raising tax rates on wealthy Americans will result in a corresponding increase in tax revenues. 

If people were robots, that might work.  However, people subject to sharply higher taxes don't like having to pay them.  And they will act accordingly.

This phenomenon has been known for, well, centuries.  But its most famous exponent is probably economist Arthur Laffer.  In the 1980s, Laffer once again demonstrated with his famous "Laffer Curve" analysis that both a 0% income tax rate and a 100% tax rate would generate zero revenue.  The optimal tax rate—the rate that will generate the greatest revenue for the government—must therefore lie somewhere in between.  And, as tax rates rise beyond a certain threshold—whatever that may be—revenues will actually decrease.

Another, more colorful way of putting the same concept came from Jean Baptiste Colbert, the Minister of Finance under King Louis XIV of France in the 17th century.  Colbert wrote: “The art of taxation consists in so plucking the goose as to obtain the largest possible amount of feathers with the smallest possible amount of hissing.”

But neither Laffer, nor Colbert, were the first economists to recognize the decreasing utility of increasing tax rates.  In 1377, the Islamic scholar Ibn Khaldun wrote:

"In the early stages of the state, taxes are light in their incidence, but fetch in a large revenue...As time passes and kings succeed each other, they lose their tribal habits in favor of more civilized ones. Their needs and exigencies grow...owing to the luxury in which they have been brought up. Hence they impose fresh taxes on their subjects...and sharply raise the rate of old taxes to increase their yield...But the effects on business of this rise in taxation make themselves felt. For businessmen are soon discouraged by the comparison of their profits with the burden of their taxes...Consequently production falls off, and with it the yield of taxation."

What's more, real world experience has demonstrated time and again the truth of the Khaldun's analysis.  Tax cuts in the 1920 and again during the Kennedy administration led to sharply increased revenues for the U.S. government.  The same phenomenon occurred in Eastern Europe when several countries in this region instituted a flat tax in the 1990s and early 2000s.

The opposite effect—that increasing tax rates too high lead to decreasing revenues—has also been repeatedly proven.  A recent example comes from the United Kingdom, where the government recently announced it would tax individuals earning more than £150,000 (about $250,000) annually at a 51% rate.  The unsurprising result?  Highly compensated U.K. residents are leaving the country in droves.  For instance, hedge funds managing an estimated $15 billion have already fled in response to the impending tax.  U.K. tax lawyers say that a large portion of their work is now devoted to counseling wealthy residents on how to leave the country.

What's the real reason, then, that Congress and Obama want higher tax rates?  To answer that question, you only need to recall Obama's campaign promises.  For instance, Obama promised to raise capital gains taxes, purportedly to lower the budget deficit.  But then, Obama made an incredible admission in response to a comment that increasing tax rates was likely to decrease revenues and make the deficit worse.  In that case, would Obama want to lower the rates? No, Obama answered, the real issue was fairness. Apart from revenue, apart from the deficit, he wanted to raise taxes because doing so would be "fair."

That, dear readers, is what we're dealing with here.  Barack Obama, now President of the United States, has no interest in reducing the budget deficit.  He only wants to do what he believes is "fair." 

And that means the budget deficit won't be reduced, unless investors stop buying Treasury debt.  It also means you can count on a continued erosion in the value of the U.S. dollar, and a corresponding increase in gold and other commodities. 

As an American, it pains me to see our currency devalued because of our reckless politicians.  But, since I can do nothing to stop Obama from increasing taxes in the name of "fairness," at least I can invest accordingly.  And so can you.

Copyright © 2009 by Mark Nestmann

If You Hire an Obese Worker, You May Have to Pay for Their Weight-Loss Surgery

Maybe it's the bad economy.  Or perhaps it's just bad karma.  But for whatever reason, there's been a huge spike recently in what I can only characterize as unbelievable lawsuits.

Let's say you operate a restaurant.  Now, restaurants fail at a high rate in even the best of times, but in an economic downturn, they fail in droves.  And if the following incident happened to your restaurant, I suspect you'd shut it down the next day.

A prospect applies for a job as a cook at your pizza shop.  Sure, he weighs 380 pounds, but since the Americans with Disabilities Act forbids discrimination against the "morbidly obese," you decide to hire him. 

All goes well for a time.  Then one day, a freezer door hits the cook in the back.  Your worker's compensation coverage is adequate to pay for the cook's back surgery.  But what happens next is classic American lawsuit mania. 

Naturally, the cook hires a lawyer.  A few days before the cook's surgery, his lawyer calls.  It seems the cook must undergo weight-loss surgery before the back surgery.  Doctors have advised him the weight-loss surgery is necessary to insure the success of the back operation.  And, the lawyer says, you must pay the $20,000 cost for the weight loss surgery, since it exceeds your worker's compensation insurance limits.

Now, you hire a lawyer.  Your lawyer tells you that you shouldn’t have to pay.  So the cook sues you and your business for $20,000.  You lose the case, but your lawyer tells you that you can appeal.  You appeal the decision, and lose again at the appellate court level.

In a nutshell, that's what's happened to an Indiana pizza shop earlier this year.  On August 6, the Indiana Court of Appeals ruled that a pizza shop must pay the cost of lap-band surgery for an obese cook injured at work.  And this trend isn't just occurring in Indiana.  Only three weeks later, the Oregon Supreme Court issued a similar ruling.

Advocates for the disabled—and especially their lawyers—are thrilled with these rulings.  But, in the real world, the results won't be so rosy.  Given court decisions like these, any rational employer will hesitate to hire any employee with a pre-existing health condition that may be aggravated in the workplace.  Assuming, of course, that the employer hasn't closed up shop already—and let all his employees go.

Copyright © 2009 by Mark Nestmann

You, Too, Can Sue Over Global Warming!

It’s time for another installment in my periodic postings on frivolous lawsuits.

This one comes from the U.S. Fifth Circuit Court of Appeals, which ruled last month that landowners in Mississippi have “standing” to sue oil and coal companies for emitting greenhouse gases.  In their class-action lawsuit, the landowners claim that these emissions contributed to global warming, which caused sea levels to rise.  That in turn, the lawsuit claims, exacerbated the damage caused by Hurricane Katrina.

If you think this is an isolated case—it’s not.  The U.S. Second Circuit Court of Appeals already reinstated a lawsuit against American Electric Power Co. based on similar claims.  That court ruled that since Congress hadn’t enacted legislation restricting greenhouse gas emissions, states, municipalities and certain private organizations can sue to force companies to cap emissions of greenhouse gas.

Two separate federal appeals courts—just one level below the U.S. Supreme Court—have now informed plaintiff’s attorneys throughout the United States that they now have “standing” to sue anyone that emits greenhouse gases.  Indeed, the Supreme Court in 2006 accepted "as plausible the link between greenhouse gas emissions and global warming" and that "rising ocean temperatures may contribute to the ferocity of hurricanes.”

These decisions are an open invitation to plaintiff’s attorneys to sue anyone who they allege contributed to global warming.  God forbid you own a business that emits greenhouse gases—the courthouse door is now wide open for enterprising attorneys to sue.  Indeed, if you’re wealthy and live in a home that is heated by fossil fuels (or by electricity produced by fossil fuels), or drive a fossil fuel powered vehicle, you just might have to defend yourself in court.  

Whether or not you believe global warming is real, and that if it is real, that it’s caused by human emissions of greenhouse gases, these cases cross an important legal threshold.  From the dawn of the republic to the present day, it’s perfectly legal to emit greenhouse gases.  For the courts to now declare that plaintiffs have standing to sue someone for doing something that is perfectly legal isn’t just unfair.  It could also turn our current economic debacle into the deepest depression in history.  Just wait until the United States completely de-industrializes due to attorneys suing every business in America that emits greenhouse gases. 

It’s possible, of course, that the plaintiffs in the cases before the Second and Fifth Circuit Courts of Appeal won’t be able to prove their case.  They’ve only been given the opportunity to do so.  Still, the defendants will have to spend money, time and effort defending themselves in what to me seems the penultimate of frivolous lawsuits.  And of course, every dollar they spend on legal fees won’t be invested in productive activity. 

I can only imagine that entrepreneurs in China, India and other countries that have so far rejected limits on greenhouse gas emissions are rejoicing over these decisions.  After all, the deindustrialization of America means more profits for them, and more jobs for the workers they employ. 

Is this insane, or what?  Am I missing something here? Please comment below!

Copyright © 2009 by Mark Nestmann

How to Stop Expatriation in its Tracks

My recent blog entry describing how easy it is to expatriate really hit a chord.  Most responses were very positive.  But a few were downright hostile.

“How can you in good conscience encourage someone to revoke all ties to the United States,?” one reader wrote.  “Don’t you have any patriotism?”  Another reader predicted, “I have no doubt that some people who take your advice to expatriate may come to regret it later.”

That may well be true.  But if these readers—or anyone else who thinks that expatriation is unpatriotic, unnecessary, or could lead to “buyer’s remorse"—really want to end expatriation, there’s something Congress to do, immediately, to shut it down.

I’m not talking about more stringent anti-expatriation laws, such as the “exit tax” Congress enacted last year.  Nor am I speaking of enforcement of  the arguably unconstitutional “Reed Amendment,” which purports to exclude persons who renounce their U.S. citizenship for “tax motivated” from ever returning to the United States.  (Fortunately, this law, enacted in 1996, has rarely, if ever, been enforced.)

No, I’m proposing something radically different: for Congress to stop taxing the approximately six million U.S. citizens and green card holders living outside the United States.  And it’s really not that radical, because the United States is one of only two countries that impose tax based on citizenship, rather than residence.  Millions of U.S. citizens, some of whom have never set foot in the United States, are subject to U.S. tax on their worldwide income.  These U.S. citizens not only must pay U.S. taxes, but also comply with U.S. offshore financial disclosure requirements.  If they’re wealthy, they must retain tax experts to avoid paying U.S. estate tax. 

America’s current tax policy also places its non-resident citizens at a disadvantage in the international marketplace.  A Canadian, British, or Japanese passport holder working in, say, Hong Kong, is only subject to Hong Kong tax on local income.  But the U.S. citizen competing for the same job must deal with U.S. tax as well. 

Congress could end this discrimination simply by amending the U.S. Tax Code.  For instance, it could stipulate that any U.S. citizen or green card holder who leaves the United States for at least one full year is no longer subject to tax on their non-U.S. income.  After a longer period—let’s say five years—they would no longer be subject to U.S. tax on capital gains.  And, should they establish a new domicile outside the United States, they would no longer be subject to U.S. gift and estate taxes.

Enacting these common sense reforms would eliminate the tax incentives for U.S. citizens to expatriate.  It would, quite literally, end expatriation overnight.  These reforms would also put U.S. tax policy back in the international mainstream.  Of course, when non-resident Americans returned to the United States under this plan, they’d have to start paying U.S. tax again on their worldwide income. 

President Obama campaigned on the promise of “Hope” and “Change.”  This simple change in U.S. tax policy would give hope to the more than five million Americans who live overseas. 

Obama, do you hear me?

Copyright © 2009 by Mark Nestmann