J. G. Sandom ~ Author

404 — CIA's Brennan finally admits agency hacked Senate servers and spied on Senate panel

I find Senator Feinstein's outrage highly problematical. Where was her outrage when the IC was spying on the rest of America? And folks wonder why we should not trust the IC when it comes to online spying generally! If it weren't so tragic, it would be funny. Check out this piece from The New York Times.

John O. Brennan, the C.I.A. director, apologized to two senators in connection with the penetration of a computer network.

Inquiry by C.I.A. Affirms It Spied on Senate Panel

By MARK MAZZETTI and CARL HULSE

WASHINGTON — An internal investigation by the C.I.A. has found that its officers penetrated a computer network used by the Senate Intelligence Committee in preparing its damning report on the C.I.A.’s detention and interrogation program.

The report by the agency’s inspector general also found that C.I.A. officers read the emails of the Senate investigators and sent a criminal referral to the Justice Department based on false information, according to a summary of findings made public on Thursday. One official with knowledge of the report’s conclusions said the investigation also discovered that the officers created a false online identity to gain access on more than one occasion to computers used by the committee staff.

The inspector general’s account of how the C.I.A. secretly monitored a congressional committee charged with supervising its activities touched off angry criticism from members of the Senate and amounted to vindication for Senator Dianne Feinstein of California, the committee’s Democratic chairwoman, who excoriated the C.I.A. in March when the agency’s monitoring of committee investigators became public.

A statement issued Thursday morning by a C.I.A. spokesman said that John O. Brennan, the agency’s director, had apologized to Ms. Feinstein and the committee’s ranking Republican, Senator Saxby Chambliss of Georgia, and would set up an internal accountability board to review the issue. The statement said that the board, which will be led by a former Democratic senator, Evan Bayh of Indiana, could recommend “potential disciplinary measures” and “steps to address systemic issues.”

But anger among lawmakers grew throughout the day. Leaving a nearly three-hour briefing about the report in a Senate conference room, members of both parties called for the C.I.A. officers to be held accountable, and some said they had lost confidence in Mr. Brennan’s leadership. “This is a serious situation and there are serious violations,” said Mr. Chambliss, generally a staunch ally of the intelligence community. He called for the C.I.A. employees to be “dealt with very harshly.”

Senator Mark Udall, Democrat of Colorado and another member of the Intelligence Committee, demanded Mr. Brennan’s resignation. “The C.I.A. unconstitutionally spied on Congress by hacking into the Senate Intelligence Committee computers,” he said in a written statement. “This grave misconduct not only is illegal but it violates the U.S. Constitution’s requirement of separation of powers.

“These offenses, along with other errors in judgment by some at the C.I.A., demonstrate a tremendous failure of leadership, and there must be consequences,” he added.

Committee Democrats have spent more than five years working on a report about the C.I.A.’s detention and interrogation program during the Bush administration, which employed brutal interrogation methods like waterboarding. Parts of that report, which concluded that the techniques yielded little valuable information and that C.I.A. officials consistently misled the White House and Congress about the efficacy of the techniques, are expected to be made public some time this month. Committee Republicans withdrew from the investigation, saying that it was a partisan smear and without credibility because it was based solely on documents and that there were no plans to interview C.I.A. officers who ran the program.

According to David B. Buckley, the C.I.A. inspector general, three of the agency’s information technology officers and two of its lawyers “improperly accessed or caused access” to a computer network designated for members of the committee’s staff working on the report to sift through millions of documents at a C.I.A. site in Northern Virginia. The names of those involved are unavailable because the full report has not yet been made public.

The C.I.A. officials penetrated the computer network when they came to suspect that the committee’s staff had gained unauthorized access to an internal C.I.A. review of the detention program that the spy agency never intended to give to Congress. A C.I.A. lawyer then referred the agency’s suspicions to the Justice Department to determine whether the committee staff broke the law when it obtained that document. The inspector general report said that there was no “factual basis” for this referral, which the Justice Department has declined to investigate, because the lawyer had been provided inaccurate information. The report said that the three information technology officers “demonstrated a lack of candor about their activities” during interviews with the inspector general.

The dispute brought relations between the spy agency and lawmakers to a new low, as the two sides traded a host of accusations — from computer hacking to violating constitutional principles of separation of powers.

At a tense meeting earlier this week in which Ms. Feinstein and Mr. Chambliss were briefed by Mr. Brennan on the report, Ms. Feinstein confronted Mr. Brennan over his past public statements on the issue, in which he defended the agency’s actions, and his implicit criticism of her.

When the C.I.A.’s monitoring of the committee became public in March, after months of private meetings and growing bitterness, Ms. Feinstein took to the Senate floor to deliver a blistering speech accusing the agency of infringing on the committee’s role as overseer.

Calling it a “defining moment” in the committee’s history, Ms. Feinstein said that how the matter was resolved “will show whether the Intelligence Committee can be effective in monitoring and investigating our nation’s intelligence activities, or whether our work can be thwarted by those we oversee.”

Hours later, Mr. Brennan was publicly questioned about the dispute and said that “when the facts come out on this, I think a lot of people who are claiming that there has been this tremendous sort of spying and monitoring and hacking will be proved wrong.”

Mr. Brennan said at the time that he had referred the matter to the agency’s inspector general “to make sure that he was able to look honestly and objectively at what the C.I.A. did.”

The White House publicly defended Mr. Brennan on Thursday, saying he had taken “responsible steps” to address the behavior of C.I.A. employees, which he said included suggesting an investigation, accepting its results and appointing an accountability board.

Asked whether the results of the investigation presented a credibility issue for Mr. Brennan, Josh Earnest, the White House press secretary, said, “Not at all.”

Crediting Mr. Brennan with playing an “instrumental role” in helping the United States government destroy Al Qaeda’s leadership in Afghanistan and Pakistan, Mr. Earnest said, “He is somebody who has a very difficult job, who does that job extraordinarily well.”

Ms. Feinstein called Mr. Brennan’s apology and decision to set up an accountability board “positive first steps,” and said the inspector general report “corrects the record.” A separate investigation, led by the Senate’s sergeant-at-arms, has yet to be completed.

But others took a much harder line. Senator Harry Reid of Nevada, the majority leader, called the C.I.A.’s actions “appalling.” Senator Angus King of Maine, an independent, said that the spy agency’s actions violated both the spirit and the letter of the constitutional separation of powers.

As he put it: “How do we do our oversight if we can’t believe what is being represented to us in our committee?” [NOTE: Exactly! ED]

404 — Anonymous 'Take Down Mossad Website' Over Gaza Conflict

Anonymous takes down Mossad website, and continues its support of the Palestinian people and their right to a homeland. Check out this story from Newsweek. Anonymous plays a significant role in both the novel I'm working on now, dEATH in dAVOS as well as my latest thriller, 4o4 - A John Decker Thriller, just out from Cornucopia Press.

A Palestinian Fatah supporter wearing a Guy Fawkes mask flashes a victory sign during a rally in January 2014.

Anonymous 'Take Down Mossad Website' Over Gaza Conflict

BY DAMIEN SHARKOV

The hacktivist group Anonymous have claimed responsibility for disabling a series of Israeli government websites, including that of its national intelligence agency, Mossad, as a show of solidarity for the Palestinian cause in Gaza.

Global access to mossad.gov.il  ceased at 00:40 GMT this morning, Russia Today reported. However, a Twitter account associated with the Anonymous hashtag called @AnonymousGlobo reported the Mossad site as “down” much earlier, at 09:50 GMT on 27 July.

The website was still offline at 11:42 GMT today.

The tweet was preceded by a brief statement on @AnonymousGlobo which reads “Standing in solidarity with the people of world struggling peacefully for their basic rights. Never forget. Never forgive. Expect us.”

The official website of the Israeli Army was also inaccessible at 11:48 today, with Twitter accounts using the Anonymous hashtag reporting it as “Tango Down” as early as 6:40am GMT yesterday. The Israeli government has made no comment on the status of the websites.

The Ma’an News Agency reported an Anonymous member had been killed by Israeli Defence Forces (IDF) fire last Friday. A 22-year-old man, Tayeb Abu Shehada, wearing an iconic Guy Fawkes mask - closely associated with the group - was shot dead while protesting in Huwara near Nablus, shortly before Israeli government websites began to go down.

Anonymous previously targeted Israeli websites during the 2010 hostilities between IDF and Palestinian militants.

@AnonymousGlobo has tweeted links several other Israeli government services, including the Ministries of Justice and Health on July 27, alleging they too were knocked down. Both appear to be functioning at the time of publication.

Anonymous issued a rallying call for its members  to further target the Israeli government’s online presence in a Youtube video last Friday.

 

 

“We are calling upon the Anonymous collective, and the elite hacker groups to join our crusade, and to wage cyber war against the state of Israel once more,” a voiceover in the video says.

“Palestine will be liberated, and Israel will suffer the same fate Palestine has been suffering for decades under their brutal and savaging regime.”

Another account, @Anon2World, said: “It is now up to every one of us to stop this genocide since our governments choose to ignore it and fund it,” in a tweet retweeted by several other Anonymous accounts.

Anonymous are a loose collective of hackers and online activists who often take direct action online, bringing down the websites of governments, groups and companies of which they disapprove.

404 — Patrick Leahy’s popular bill contains stricter privacy measures than the USA Freedom Act

Introduced by Senator Patrick Leahy, the bill is a counterpart to the USA Freedom Act, which the House of Representatives passed in May, but contains some stricter privacy measures and broader transparency requirements – the absence of which caused civil libertarians, privacy groups and technology firms to abandon their support for the House version. Many of them are backing Leahy’s bill. Check out this piece from The Guardian.

Leahy said he wants to take the bill directly to the Senate floor.

Obama-backed surveillance reform bill introduced in US Senate

Patrick Leahy’s popular bill contains stricter privacy measures than the USA Freedom Act, which the House passed in May

Spencer Ackerman in New York

A surveillance reform bill backed by the Obama administration was introduced in the Senate on Tuesday, raising the possibility that Congress could this year take the National Security Agency out of the business of collecting and storing all US phone data. 

Introduced by Senator Patrick Leahy, the bill is a counterpart to the USA Freedom Act, which the House of Representatives passed in May, but contains some stricter privacy measures and broader transparency requirements – the absence of which caused civil libertarians, privacy groups and technology firms to abandon their support for the House version. Many of them are backing Leahy’s bill.

The question underlying the legislation is “whether we are in control of our own government or the other way around,” Leahy, the chairman of the Senate judiciary committee, said on the Senate floor.

Warning that the legislative calendar will make passing reform this year difficult, Leahy said he wants to take the bill directly to the Senate floor. His 13 co-sponsors include Republicans Ted Cruz, Dean Heller and Mike Lee, who on the floor said the “broad-based bipartisan” bill “is absolutely necessary.”

Leahy’s bill, like the House’s, would still provide the NSA with access to enormous amounts of American phone data. Though it would require a judge to issue an order to telecos for “call detail records” based on a “reasonable, articulable suspicion” of association with terrorism or a foreign power, the NSA will be able to use that single order to obtain the “call detail records” of a suspicious entity, as well as those of entities in “direct connection” with it and entities in connection with those.

While that would permit the NSA to yield thousands of records off of a single court order, on a daily basis for six months, the NSA and the bill’s architects contend that it bans “bulk collection.”

Leahy’s bill would go further than the House version in narrowing the critical definition of “specific selection term,” a foundational aspect of the bill defining what the government can collect. The House definition is a “term specifically identifying a person, entity, account, address, or device,” which privacy groups have lambasted as unreasonably broad.

Seeking to plug that loophole, Leahy would prevent the NSA or the FBI from accessing a service provider’s entire clientele or a wholesale “city, state, zip code, or area code.”

Although the Leahy bill has the support of several civil libertarian groups and major tech firms like Facebook and Google, it does not revive some privacy proposals that those organizations considered crucial but the intelligence agencies and their advocates in Congress stripped from the House measure.

Leahy’s bill would not ban the NSA from warrantlessly accessing Americans’ communications information collected in its ostensibly foreign-focused dragnets, something civil libertarians call the “backdoor search loophole.” The NSA considers its ability to conduct those searches more important than collecting all US phone data.

Instead, the Leahy bill’s disclosure requirements instruct the director of national intelligence to annually reveal “the number of search terms that included information concerning a United States person that were used to query any database of the contents of electronic communications or wire communications” as well as the total number of searches. But the bill, as first noted by journalist Marcy Wheeler, continues a practice ofexempting the FBI from even noting that it has performed such searches.

The NSA recently disclosed that it searched for 198 “identifiers” of Americans’ data within the troves in 2013, something the CIA and FBI can also access. In June, the House voted to forbid the warrantless searches.

Relatedly, the Senate version of the USA Freedom Act bans the government from using in court communications data collected warrantlessly, something the Justice Department has begun informing defendants it is doing.

Democratic senators Ron Wyden and Mark Udall, the intelligence committee’s leading civil libertarians, praised Leahy’s bill but said it needed to go further to protect Americans from the warrantless searches.

“Congress needs to close this loophole, and we look forward to working with Chairman Leahy and our colleagues to address this issue when the bill comes before the full U.S. Senate,” the two senators said in a joint statement.

The Senate version of the Freedom Act would also create a stronger privacy advocate for the secret Fisa Court, which currently only hears the government’s perspective before issuing the records orders. The House voted for an ad hoc advocate for cases involving “a novel or significant interpretation of the law,” although Fisa judges could determine its presence is unnecessary in a specific case.

Leahy’s bill instead would create a standing panel of special advocates before the court – one which will not necessarily participate in each case the court hears – and allow the Privacy and Civil Liberties Oversight Board, the government’s official privacy watchdog, to aid in its empanelment.

As well, Leahy’s version would provide for greater transparency by companies subjected to national-security records orders, another priority for civil libertarians.

Yet Leahy’s bill, like its House counterpart, grants legal immunity and financial compensation to service providers complying with surveillance orders. Like the House bill, it does not provide any additional privacy protections to non-Americans.

The bill faces an uncertain future in the Senate. The intelligence committee in June showed itself to be an outpost of opposition even to the House version of the Freedom Act that lacked Leahy’s privacy provisions. The calendar is also an obstacle: the Senate leaves on Friday for its August recess, only to reconvene in the height of the midterm election season.

Without action ahead of the expiration of the legislative session in December, NSA reformers would have to go back to square one in the next Congress, leaving the NSA with practically all of its pre-Snowden powers, absent some restrictions President Obama ordered in January. 

“We’re running short on time in this Congress,” Leahy said.

The introduction of Leahy’s bill was greeted warmly but measuredly by privacy advocates and tech firms disappointed by the House version.

Mozilla’s privacy chief, Alex Fowler, said: “We’re pleased to see the Senate propose limits on mass surveillance but more reform is needed to repair the damage inflicted on Internet users and the Web economy. We hope the Senate will hold firm to the bill’s language and forgo loopholes that would further undermine trust, such as allowing bulk collection through broad ‘selector terms’ that sidestep the problem.”

Microsoft’s top lawyer said the bill “strengthens our privacy rights and our civil liberties.”

Amie Stepanovich, a lawyer with the digital rights group Access, which is supporting the bill, urged Congress to “immediately turn to Section 702” after the Leahy bill, a reference to the 2008 amendments to the Foreign Intelligence Surveillance Act – the wellspring of NSA’s foreign digital dragnets, the collection of Americans’ international communications and the backdoor-search loophole.

Congress should “pass comprehensive reform which limits [section 702’s] scope and ensures that the US government isn’t sweeping up the communications of millions of innocent users. In addition, the administration needs to focus on ending massive surveillance programs under Executive Order 12333, which the intelligence community unilaterally executes without any court or congressional oversight,” Stepanovich said.

404 — Few Americans see adequate limits on NSA surveillance programs

A majority of Americans says courts fail to provide adequate limits on government phone and Internet data collecting, and a full 70% believe government uses this data for purposes other than investigating terrorism. Check out this report from Pew Research.

Few See Adequate Limits on NSA Surveillance Program

But More Approve than Disapprove

Overview

A majority of Americans – 56% – say that federal courts fail to provide adequate limits on the telephone and internet data the government is collecting as part of its anti-terrorism efforts. An even larger percentage (70%) believes that the government uses this data for purposes other than investigating terrorism.

And despite the insistence by the president and other senior officials that only “metadata,” such as phone numbers and email addresses, is being collected, 63% think the government is also gathering information about the content of communications – with 27% believing the government has listened to or read their phone calls and emails.

Nonetheless, the public’s bottom line on government anti-terrorism surveillance is narrowly positive. The national survey by the Pew Research Center, conducted July 17-21 among 1,480 adults, finds that 50% approve of the government’s collection of telephone and internet data as part of anti-terrorism efforts, while 44% disapprove. These views are little changed from a month ago, when 48% approved and 47% disapproved.

The divisions in public opinion about the government’s data-collection program were mirrored in a congressional vote this week on the issue. On July 24, the House of Representatives narrowly defeated an amendment to scale back the NSA’s telephone data collection.

Nationwide, there is more support for the government’s data-collection program among Democrats (57% approve) than among Republicans (44%), but both parties face significant internal divisions: 36% of Democrats disapprove of the program as do 50% of Republicans.

While views of the program itself are mixed, the debate has raised public concern about whether anti-terror programs are restricting civil liberties.

Overall, 47% say their greater concern about government anti-terrorism policies is that they have gone too far in restricting the average person’s civil liberties, while 35% say they are more concerned that policies have not gone far enough to protect the country. This is the first time in Pew Research polling that more have expressed concern over civil liberties than protection from terrorism since the question was first asked in 2004.

As concern about civil liberties has grown, the issue now divides members of both parties. Roughly four-in-ten Republicans (43%) and Democrats (42%) say their greater concern over anti-terror policies is that they have gone too far in restricting civil liberties, up sharply from three years ago (25% and 33% in 2010, respectively).

Republicans and Democrats also express similar opinions about news coverage of secret government anti-terrorism programs: Nearly identical percentages in both parties (45% of Democrats, 43% of Republicans) say that the news media should report information it obtains about the secret methods the government uses to fight terrorism, while 51% in each party say it should not.

This marks a change in opinion among both parties since 2006, when Bush administration anti-terror surveillance programs faced scrutiny. In May 2006, a Gallup/USA Today poll found that most Democrats supported news reporting on secret anti-terror programs, while most Republicans said the press should not divulge this information.

Many Who Think Gov’t Has Accessed Their Data Support the Program

The public’s views of the government’s anti-terrorism efforts are complex, and many who believe the reach of the government’s data collection program is expansive still approve of the effort overall. In every case, however, those who view the government’s data collection as far-reaching are less likely to approve of the program than those who do not.

People who believe the government is collecting what is actually being said in emails and phone calls are divided over the overall program: About as many approve (47%) as disapprove (50%) of the government’s collection of phone and internet data as part of anti-terrorism efforts despite the impression that it is not limited to metadata.

Even among those who believe their owncommunications have been read or listened to, 40% approve of the program, while 58% disapprove.

Of those who say the government is using data for purposes other than to investigate terrorism, 43% approve of the government’s data collection; 53% disapprove. Among the small minority (22% of the public) that says the data is only being used to investigate terrorism, 71% approve while just 23% disapprove.

And those who say federal courts do not place adequate limits on the information the government can collect disapprove of the program by a 62%-36% margin. Conversely, those who say there are adequate limits approve of it, 75%-21%.

Some Suspect Political Motives in Use of Data

A broad majority of the public (70%) believes that the government also is using the data it collects through the NSA program for purposes other than to investigate terrorism. When those who express this view are asked an open-ended question about what other purposes the data is being used for, a range of responses are given, with many focusing on general concerns about government monitoring and spying.

About two-in-ten (19%) say the government is using this data to spy or “be nosy,” and another 14% say it is being used for general purposes or monitoring.

But some say the government is collecting this data for political purposes: 13% say the government has a political agenda, while another 5% say it is being used for general profiling or targeting, to target interest and religious groups or for tax purposes.

Rising Concern over Civil Liberties

Nearly half of Americans (47%) say their greater concern about government anti-terrorism policies is that they have gone too far in restricting the average person’s civil liberties; 35% say their greater concern is that they have not gone far enough to adequately protect the country. There has been a 15-point rise in the percentage saying their greater concern is civil liberties since Pew Research last asked the question in October 2010. This is the first time a plurality has expressed greater concern about civil liberties than security since the question was first asked in 2004.

The increase in concern about civil liberties has taken place across the board, with double-digit shifts in opinion among nearly all partisan and demographic groups. Republicans prioritized security over civil liberties by a 58%-25% margin in 2010. Today, Republicans are as likely to say their bigger concern is civil liberties (43%) as security (38%), a balance of opinion nearly identical to that among Democrats (42% civil liberties, 38% security).

While this change has been broad-based, the transformation among Tea Party Republicans stands out. Today, most Republican and Republican-leaning independent voters who agree with the Tea Party are more concerned that government programs are going too far in restricting civil liberties (55%). In October 2010, Tea Party Republican voters by about three-to-one (63% to 20%) said the programs did not go far enough in protecting the country.

Among Democrats and independents, increasing percentages also say their greater concern is that anti-terror policies have curbed civil liberties. About four-in-ten Democrats (42%) express this view, up from 33% three years ago. And the share of independents expressing greater concern over civil liberties has risen 17 points since 2010.

Those under the age of 30 stand out for their broad concern over civil liberties. By about two-to-one (60%-29%) young people say their bigger concern about the government’s anti-terrorism policies is that they have gone too far in restricting the average person’s civil liberties rather than not going far enough to protect the country.

There is also a substantial gender gap: by a 51% to 29% margin men are more concerned that government policies have gone too far in restricting civil liberties. Women are divided, with 42% more worried about civil liberties and 40% more concerned that government policies haven’t gone far enough to protect the country.

Modest Partisan Differences in Perceptions of Data Collection

Overall, Democrats approve of the government’s data collection program by a 57%-36% margin, while Republicans (44% approve, 50% disapprove) and independents (47% approve, 48% disapprove) are more divided.

Republicans and independents also perceive the program as more far-reaching in scope and less limited. For example, 64% of Republicans and 67% of independents believe the government is collecting not only metadata but also what is being said in phone calls and emails; slightly fewer (58%) Democrats share this view.

However, these gaps in opinion are relatively modest, as half or more Democrats believe the program is not sufficiently limited by courts (51%), collects the content of communications (58%) and uses the data for purposes other than terrorism investigations (60%).

Republicans and Republican-leaning independents who agree with the Tea Party strongly disapprove of the NSA program. Overall, 62% of Tea Party Republicans disapprove of the government’s data collection program, while just 34% approve. By contrast, Republicans and Republican leaners who do not agree with the Tea Party are divided in their views of the program (51% approve, 45% disapprove).

Tea Party Republicans also express far more concern about the scope of the program. For example, fully 87% of Tea Party Republicans believe the government uses the data it collects for purposes other than terrorism investigations. When asked what other purposes the data is used for, the top answer among Tea Party Republicans – volunteered by 32% – is that the data is used to pursue political objectives or to target political opponents.

Should the Media Report on Government Anti-Terror Methods?

The public is divided over whether the news media should report on information it obtains about the secret methods the government is using to fight terrorism. About half (47%) say that the media should report on the government’s secret methods, while the same percentage says they should not; overall opinion on this question is little changed from May 2006.

Both Republicans and Democrats are split on this issue – 43% of Republicans and 45% of Democrats say the media should report on secret methods to fight terrorism, while 51% of both parties say that they should not.

In 2006, there were large partisan differences on this question. At that time, Democrats thought the media should report this information by a 59%-38% margin. Most Republicans (68%) thought the news media should not report on government anti-terrorism methods, while just 26% thought that they should.

On Terrorism, Concerns about Both Government and Media

The public’s division of opinion on whether or not the media should report the government’s anti-terror methods is informed by the fact that majorities agree both with two separate statements: that the government is too secretive and that media reports can harm anti-terror programs.

When asked if the media reports too much information that can harm the government’s anti-terrorism programs, 53% of the public agrees with this statement, while 43% disagree. At the same time, most (56%) also agree that the government keeps too much information about its anti-terrorism programs secret from the public.

Comparable majorities of both Republicans and Democrats express concerns that the media reports too much information that can harm government anti-terrorism programs and that the government keeps too much information about anti-terrorism programs secret from the public.

Overall, 28% of respondents agree with both statements. Among this group slightly more (55%) say the media should not report on the government’s secret anti-terrorism methods, while 41% say that they should.

Age and Views of Civil Liberties, Gov’t Surveillance

As noted, young people are more likely than older people to express concern that the government’s anti-terrorism policies go too far in restricting civil liberties.

And majorities of those under 30 (55%), as well those 30 to 49 (53%), say the news media should report on secret methods the government uses to fight terrorism. Older Americans are more opposed to the media covering secret anti-terror tactics.

Yet the large age differences about civil liberties, security and secrecy don’t translate into an equally sizeable divide over the NSA surveillance program itself. About as many young people approve (46%) as disapprove (49%) of the government’s data collection program. The age differences in overall opinions about the program are modest, with about half in older age groups approving of the program.

About the Survey

The analysis in this report is based on telephone interviews conducted July 17-21, 2013 among a national sample of 1,480 adults, 18 years of age or older, living in all 50 U.S. states and the District of Columbia (750 respondents were interviewed on a landline telephone, and 730 were interviewed on a cell phone, including 382 who had no landline telephone). The survey was conducted by interviewers at Princeton Data Source under the direction of Princeton Survey Research Associates International. A combination of landline and cell phone random digit dial samples were used; both samples were provided by Survey Sampling International. Interviews were conducted in English and Spanish. Respondents in the landline sample were selected by randomly asking for the youngest adult male or female who is now at home. Interviews in the cell sample were conducted with the person who answered the phone, if that person was an adult 18 years of age or older. For detailed information about our survey methodology, see http://people-press.org/methodology/

The combined landline and cell phone sample are weighted using an iterative technique that matches gender, age, education, race, Hispanic origin and nativity and region to parameters from the 2011 Census Bureau’s American Community Survey and population density to parameters from the Decennial Census. The sample also is weighted to match current patterns of telephone status and relative usage of landline and cell phones (for those with both), based on extrapolations from the 2012 National Health Interview Survey. The weighting procedure also accounts for the fact that respondents with both landline and cell phones have a greater probability of being included in the combined sample and adjusts for household size among respondents with a landline phone. Sampling errors and statistical tests of significance take into account the effect of weighting. The following table shows the unweighted sample sizes and the error attributable to sampling that would be expected at the 95% level of confidence for different groups in the survey:

404 — 4 senators raise alarm about NSA collection of Americans’ e-mails, phone calls

Four Democratic senators have sent a letter to the director of national intelligence expressing concerns about the scope of the collection of Americans’ e-mails and phone calls under a National Security Agency program that targets foreigners overseas. Check out this story in The Washington Post.

Jon Tester (D-Mont.)

4 senators raise alarm about NSA collection of Americans’ e-mails, phone calls

By Ellen Nakashima  

Four Democratic senators have sent a letter to the director of national intelligence expressing concerns about the scope of the collection of Americans’ e-mails and phone calls under a National Security Agency program that targets foreigners overseas.

The lawmakers, led by Jon Tester (D-Mont.), told Director of National Intelligence James R. Clapper Jr. that they were concerned by recent reports by The Washington Post and an independent executive branch panel about the surveillance.

The Post examined 160,000 communications intercepted under the program, which was authorized by Section 702 of the Foreign Intelligence Surveillance Act as amended in 2008. The law does not require individualized warrants.

The Post found that “nearly half of the surveillance files . . . contained names, e-mail addresses or other details that the NSA marked as belonging to U.S. citizens or residents.”

“This revelation raises significant doubts about whether we are striking the right balance between securing our nation and upholding the privacy and civil liberties of our citizens,” the senators wrote in the letter, which was dated Thursday.

The independent panel, known as the Privacy and Civil Liberties Oversight Board, found that Section 702 surveillance is legal and has made “a substantial contribution” to U.S. efforts to prevent terrorist acts. It also found no indication of abuse.

But the board also said that certain aspects of the program push it “close to the line” of being unconstitutional. Such aspects, it said, include “the unknown and potentially large scope of the incidental collection of U.S. persons’ communications.”

The board also noted that the program’s rules “potentially allow a great deal of private information about U.S. persons to be acquired by the government.”

Tester and his colleagues wrote that while incidental collection of Americans’ data “may be unavoidable at the time of collection, we remain concerned that this personal data is being obtained and queried without a warrant, and stored for an unknown and possibly indefinite period of time.”

Intelligence officials have noted that a federal court in Oregon recently upheld the program’s constitutionality. They say that the program is subject to multiple layers of oversight, including from Congress, a surveillance court, the Justice Department, the Office of the Director of National Intelligence and the NSA inspector general.

“We’re not just randomly looking to collect communications of U.S. persons or non-U.S. persons,” Robert S. Litt , general counsel for the ODNI, said at a security forum in Aspen, Colo., this week. “It all has to be driven by valid foreign intelligence needs.”

The senators urged Clapper to erase all Americans’ communications records that have been collected “incidentally” and that contain no foreign intelligence. They asked him to provide answers to a series of questions about incidental collection and other aspects of Section 702. President Obama’s review board on surveillance policy, a separate group from the privacy board, made the same recommendation in December.

The senators sought information on how many Americans have had their information collected under Section 702.

In a recent blog post, the privacy board’s chairman, David Medine, said the panel investigated this question and confirmed “that the government does not know the answer.”

It is difficult to determine whether even a single e-mail address is used by a U.S. person, and to do so in a way that does not invade people’s privacy, he said.

The Post said in its story: “It is not obvious why the NSA could not offer at least a partial count given that its analysts routinely pick out ‘U.S. persons’ and mask their identities, in most cases, before distributing intelligence reports.”

404 — Senator Patrick Leahy's bill is stricter on N.S.A. than House’s

Though they won't vote until September, it's great to see Senator Patrick Leahy giving it the good fight ... once again. He is a stalwart supporter or our freedoms and deserves a lot of praise for standing up against the Intelligence State. Check out this piece from The New York Times.

Patrick J. Leahy

Senator’s Bill Is Stricter on N.S.A. Than House’s

By CHARLIE SAVAGE

WASHINGTON — Senator Patrick J. Leahy said Thursday that next week he would file a new version of a bill aimed at ending the National Security Agency’s bulk phone records collection program after extensive negotiations with the Obama administration and privacy groups.

Mr. Leahy, a Vermont Democrat who is chairman of the Senate Judiciary Committee, has been leading the negotiations, and several officials familiar with the deliberations said a deal had been reached. Because the Senate leaves for its August recess at the end of next week, it is unlikely to vote on the bill before September.

Mr. Leahy’s draft bill is said to make over a dozen changes to a version of the legislation, called the U.S.A. Freedom Act, that the House passed in May. Some privacy advocates who had denounced the House bill as too watered-down said they backed Mr. Leahy’s draft.

“The Center for Democracy and Technology supports the draft language we’ve seen,” said Harley Geiger, a senior counsel for the advocacy group. “It is, in every instance, a step forward and an improvement on what the House enacted.”

Under both the House bill and Mr. Leahy’s draft, the N.S.A. would no longer systematically collect records of Americans’ phone calls, which would instead stay with the phone companies unless the government made requests for specific sets of them linked to a terrorism suspect.

But Mr. Leahy’s version — described by several people who read it — tightens the language in the House version intended to prevent the bulk collection of business records about Americans. The House bill said such record demands must be limited by a “specific selection term.” Privacy groups contended that was too vague and could still allow the government to gather huge amounts of records with one order.

Mr. Leahy’s draft says that such a selection term must “narrowly limit the scope of the tangible things sought to the greatest extent reasonably practical” and says it cannot be a term that is “based on a broad geographic region, including a city, state, ZIP code or area code.”

His bill makes several changes to provisions allowing for more public reporting about surveillance. Among other things, it would require companies to wait just one year — rather than two in the House bill — before reporting that they had received a Foreign Intelligence Surveillance Act order for the first time.

The bill also modifies several changes the House version made to the procedures of the Foreign Intelligence Surveillance Court, which hears only the government’s point of view without any opposing counsel to argue the other side or to file appeals if the government wins, and issues classified opinions interpreting surveillance laws.

The House bill says the government must make public unclassified summaries of significant rulings by the court. Mr. Leahy’s draft adds that those summaries must have enough information for people to understand the rulings’ impact on civil liberties.

Critics of the court have called for a public advocate who would have the power to intervene in particular cases and file appeals. The House bill stopped far short of that, instead essentially codifying the court’s ability to appoint a “friend of the court” to make additional arguments if judges were dealing with novel issues.

Under Mr. Leahy’s version, those special advocates would be given a specific mandate to advocate “in support of legal interpretations that advance individual privacy and civil liberties.” But it would not give the advocates the power to intervene on their own in a case, or to file appeals if the government prevailed in a request for new surveillance powers.

In a column published by the newspaper The Hill on Thursday, Judge James G. Carr of United States District Court for the Northern District of Ohio, who served on the surveillance court from 2002 to 2008, argued that Congress should say the special advocates represent surveillance targets, giving them standing to file appeals.

Mr. Leahy also does not address a controversy over the government’s practice of searching for Americans’ communications in databases of phone calls and emails that were intercepted without a warrant because the surveillance was directed at noncitizens abroad.

Several senators, including Ron Wyden of Oregon and Mark Udall of Colorado, both Democrats, have called for requiring the court’s permission to search for a specific American’s communications, and last month the House separately approved an amendment to a spending bill that would bar the use of funds for such searches. But the Obama administration opposes that change, and Mr. Leahy’s draft does not include it.

Mr. Leahy said in a statement that he expected his bill to have “broad support from the privacy community, the technology industry, and across the political spectrum.”

Edward Price, a White House spokesman, said the recent negotiations “have yielded significant progress” toward “meaningful reform that both increases transparency and enhances privacy protections while maintaining national security.”

404 & Death in Davos — EU Central bank hacked

Check out this story from The Guardian which highlights the ongoing cyberattacks against national banks. But are these attacks designed to steal data for personal gain or are they political acts? This is the kind of hacking that my character — Robin Beauvais, in the book I'm working on now, Death in Davos — would conduct.

The ECB headquarters in Frankfurt, Germany.

Hack attack on European Central Bank jeopardises personal information

The bank was the victim of a hacking attack which compromised some unencrypted data, including email and street addresses

by Alex Hern

The European Central Bank (ECB) has been hacked, with attackers stealing email addresses and contact data from the organisation's public website.

In a statement, the bank said that no internal systems or market sensitive data were compromised. "The database serves parts of the ECB website that gather registrations for events such as ECB conferences and visits. It is physically separate from any internal ECB systems."

The bank says that "most" of the stolen data was encrypted, but that parts of the databases including email addresses, some street addresses and phone numbers were stored in plaintext. Also stolen, in encrypted form, was "data on downloads from the ECB website".

The break-in was only discovered when the thief emailed the bank to ask for financial compensation for the data. The bank is contacting all people whose email addresses or other data may have been compromised.

In March 2014, Russia's central bank fell prey to a different hacking attack, with a denial of service attack causing the site to stumble under the weight of traffic. That attack came in the run up to its quarterly interest rate decision.

A separate denial of service attack took down China's central bank in December 2013. The attack was widely pinned on bitcoin advocates, angry at the country's attempts to clamp down on the cryptocurrency.

404 — Former State Dept. official says surveillance reform hinges on change to Reagan executive order 12333

John Napier Tye, a former State Department official, says Americans' data remains vulnerable until executive order that provides NSA with a path to collect data is reformed. In my view, Zaid — Tye's attorney and a critic of Ed Snowden — is wrong. A high school dropout is not the same as a former Rhodes Scholar, Yale Law School graduate and New York University Professor. Duh. And when Snowden did try and go through channels, nothing came of it. He's a hero . . . and so is John Tye. Check out this story from The Guardian.

John Napier Tye has raised a Snowden-like alarm about the vulnerability of Americans' communications data. Photo: Miguel Juarez Lugo/Zuma/Corbis

US warned: surveillance reform hinges on change to Reagan executive order

Spencer Ackerman in New York

John Napier Tye is not Edward Snowden. He says he has no surveillance documents to disclose to journalists. He takes a nuanced position on Snowden's disclosures.

Yet the 38-year old former State Department official has raised a Snowden-like alarm that Americans' communication data remains highly vulnerable to surreptitious collection by the National Security Agency – and will remain vulnerable despite the legislative fixes wending through Congress to redress the bulk domestic phone data collection Snowden revealed.

Like Snowden, Tye means to spark a debate on the proper boundaries of NSA authorities. His focus is on an obscure, Reagan-era executive order that serves as a foundational set of rules for the intelligence apparatus. The order, known as Executive Order 12333, renders the current surveillance debate hollow, he said, even as it shows signs of traction in the Senate.

"Without reform of activities under 12333, changes to the 215 program won't address the major challenges to Americans' privacy from the NSA," Tye, who until April worked on promoting internet freedom issues at Foggy Bottom, told the Guardian, using legal shorthand for the domestic phone data collection.

Without recourse to the trove of documentation Snowden disclosed to journalists – and speaking somewhat obliquely to underscore his stated refusal to discuss classified information – Tye said that 12333 provides NSA with a pathway to collect and retain Americans' data without a warrant, routing around laws intend to restrict and control both.

The only real restrictions, according to Tye and the text of the order, are that the collection must occur outside the borders of the United States; and the data – communications content as well as the records of those communications – must be, as the text reads, "obtained in the course of a lawful foreign intelligence, counterintelligence, international narcotics or international terrorism investigation."

Tye said he would not talk about actual intelligence operations, but said: “To the extent US person information is either stored outside the United States, routed outside the United States, in transit outside the United States, it's possible for it to be incidentally collected under 12333."

Various NSA and intelligence officials told the Guardian in the fall that they cannot use 12333 to conduct surveillance prohibited by laws such as the Foreign Intelligence Surveillance Act. Yet based on Snowden's leaks, the Washington Post revealed in October that 12333 was the wellspring of NSA's collection of information in transition between Google and Yahoo data centers outside the US.

In an op-ed for the Washington Post last weekend, Tye obliquely urged that "Americans dig deeper" into 12333.

"Current US practices under 12333 violate the fourth amendment," said Tye, a Yale Law School graduate, said.

Tye's op-ed came as the government's privacy watchdog, the Privacy and Civil Liberties Oversight Board, was already considering an investigation into 12333 – which would represent the first outside inquest into the executive order in its 33-year history. On Wednesday, during a hearing in which Tye spoke, the board announced it will launch such an inquest, though it has yet to decide on the scope of investigating 12333.

Executive order 12333 is not a law. Within the intelligence agencies, however, "it is the Bible," a former CIA and Senate intelligence committee lawyer observed last year to the Guardian.

Written in 1981 to delineate intelligence practices in the wake of a bout of congressional restrictions on intelligence, activities undertaken under 12333 are not subject to even the secret congressional and judicial oversight that NSA actions under Fisa require. The claim of authority for 12333 is the president of the United States' constitutional powers for the conduct of foreign policy.

"The power to conduct foreign affairs cannot override Americans' rights to be free from unreasonable searches and seizures," Tye argued.

Tye said "basically the last thing I did" at the State Department was to take his concerns about the privacy threat represented by 12333 to the inspector general of the State Department and the congressional committees overseeing intelligence. Weeks after formally leaving government service, he met with the NSA inspector general as well.

His actions amount effectively to a dare to the oversight mechanisms, long criticized for their toothlessness on intelligence whistleblowers, to demonstrate their robustness. The NSA initially claimed it could not find any record of Snowden electing to notify officials about his concerns on bulk surveillance after "extensive investigation" but in May released an email Snowden sent to the NSA general counsel's office inquiring about the legal hierarchy undergirding of surveillance practices.

"It seems to imply executive orders have the same precedence as law," Snowden emailed in April 2013.

"Many officials in the US government have said that he [Snowden] should have gone through these legal channels, he should have filed these complaints, and the complaint that I've filed is a chance for the government to show that these are meaningful channels," Tye said.

His lawyer, Mark Zaid, represents intelligence whistleblowers and has been a fervent critic of Snowden.

"Tye serves as a shining example of how a national security whistleblower should raise his concerns lawfully and give the system and public time to debate the concerns, rather than decide unilaterally as Snowden did, and without even trying, that the only available avenue is to act criminally and risk harm to our country by leaking classified information," Zaid said.

Tye, a Massachusetts native, took a circuitous route to the State Department. After attending Duke, and Oxford as a Rhodes scholar, he never joined the foreign service. He instead worked at the Southern Poverty Law Center "writing about hate groups, neo-Nazis" and practicing housing and civil rights law in New Orleans. Tye came to the State Department in 2011 after a former Yale law teacher turned assistant secretary of state, Michael Posner, recruited him.

Posner, now a professor at New York University, called Tye "conscientious, diligent and honest. A very dedicated public servant".

Posner declined to give his own perspective on 12333 or Tye's op-ed, but commented: "I am broadly concerned that there needs to be a broader public debate about the scope of US surveillance, the consequences for privacy, and the way information is both collected and used."

Any such broader public debate appears to be outpaced by Congress and the administration. Months after the House passed a weakened bill to divest NSA of its domestic phone records database – a bill that would still permit NSA to obtain and analyze massive volumes of Americans' call records on a single court order - Senator Patrick Leahy, a Vermont Democrat, said this week that he is close to a deal with the White Houseto move a counterpart bill in the Senate.

Such a deal would allow the bill to pass and Obama to sign it into law before the congressional session expires. It would also jump ahead of the debate Tye means to spark about the breadth of the government's tools to access data about the emails, calls, texts and internet habits of Americans.

"I'm actually not a pessimist that these policies can't change," Tye said.

"I am relatively speaking an optimist, because what we've seen is that once there was some democratic accountability on the section 215 program, the president felt like it was unsustainable and he felt like he had to propose changes to it. Congress is now considering changes to that program and in my mind, this shows that if we actually have a public debate about some of these programs, it is possible to change them. And that debate needs to happen for 12333."

And his views on Snowden?

"Reasonable people can come to different conclusions about how Snowden did what he did. Some people say that it was really important and he's a hero. Some people say he's a criminal and should be prosecuted. I took a different path from him in coming forward with my concerns.

"I filed complaints with the inspectors general of the State Department and the NSA, I went to the intelligence committees in Congress, I cleared my op-ed before it was published. At the same, even President Obama has acknowledged that the issues raised since those disclosures have been important for our democracy."

404 — iPhone 'backdoors' can be used for surveillance, warns iOS expert

According to iOS exploitation expert Jonathan Zdziarski, the most worrying feature of the previously undocumented “forensic services” and “surveillance mechanisms” is the "file relay", which includes a mechanism to copy all metadata stored on an iPhone, while picking up GPS location data, the user calendar and contacts book, photos and recent messages typed on the screen. This is "data that should simply not be allowed to come off the device without knowledge of the user’s backup password", Zdziarski said. Yep! Check out this story from The Guardian.

Apple says the newly discovered "backdoor" tools are standard "diagnostic features" which allow administrators to manage iPhones.

iPhone 'backdoors' can be used for surveillance, warns researcher

Expert says 'forensic services' could allow access to personal data, but there is no proof these have been used for surveillance

Tom Brewster

A researcher has revealed what he claims to be previously undiscovered ways that users can be surveilled through their iPhone.

Research released by iOS exploitation expert Jonathan Zdziarski at the Hackers On Planet Earth conference in New York last week showed there were a number of previously undocumented “forensic services” and “surveillance mechanisms” within iOS.

These tools, Zdziarski claims, would allow anyone with a decent level of technical skill and determination to get hold of plenty of sensitive data of a target, including photos, contacts and location.

Zdziarski suggested the National Security Agency (NSA) might have used such methods for accessing targets’ information, but said he had no proof.

Apple has explained these services as genuine “diagnostic” features to allow IT departments and store assistants to manage iPhones.

But Zdziarski said these functions break Apple promises in that they “bypass backup encryption while copying more of your personal data than ever should come off the phone for the average consumer”.

“I understand that every OS [operating system] has diagnostic functions, however these services break the promise that Apple makes with the consumer when they enter a backup password; that the data on their device will only come off the phone encrypted,” he said in a blog post in response to Apple’s explanation for the tools’ existence.

What Zdziarski’s paper noted, however, was that any exploitation of these features would require the phone to be paired with a compromised computer, something the user would have to agree to.

Pairing requires the iPhone to be unlocked and then connected to a PC via USB, representing another barrier to exploitation. Apple has beenkeen to point all this out.

Yet some risks remain. When this pairing takes place, a pairing file is created and stored on both the PC and the iPhone. Anyone who retrieved that file could siphon off all kinds of data from an iPhone, according to the researcher. Data from the phone could even be accessed over Wi-Fi if the paired devices were on the same network, Zdziarski said.

“That tiny little pairing record file is the key to downloading, installing and even manipulating data and applications on the target device,” the paper explained.

“This is good news for the ‘good’ cops, who do crazy things like get warrants; it’s very bad for anyone who is targeted by spy agencies or malicious hackers looking to snoop on their data.”

Once a law enforcement official, intelligence agent or malicious attacker has that file, either by hooking up a phone to their own desktop and initiating the pairing process or hacking a pre-paired PC, they could access all kinds of data that would reveal much about the victim.

Via a feature called “lockdownd”, the “com.apple.mobile.installation_proxy” service allows for anyone with an Apple enterprise licence to download malware without having to have the software vetted.

The “com.apple.mobile.house_arrest” tool could be used to access databases and personal data from third-party apps. There’s also an option to turn on a packet sniffer, which records all online activities carried out on the device.

But the most worrying feature, according to Zdziarski, is a “file relay”, which includes a mechanism to copy all metadata stored on an iPhone, while picking up GPS location data, the user calendar and contacts book, photos and recent messages typed on the screen. This is “data that should simply not be allowed to come off the device without knowledge of the user’s backup password”, Zdziarski said.

The feature allowed access to information that should have been encrypted, he added, and this data is “far too personal to ever be used by Apple”. It would only be useful for intelligence agencies and police, Zdziarski said.

Though many want more information from Apple on these previously undisclosed services and security bypasses, the company can continue to point out that an attacker would need to be in control of that pairing file and in proximity of a target iPhone to retrieve data.

The company had not responded to a request for comment at the time of publication. [NOTE: And they probably never will. This is so typical of Apple. It reminds me of what Jobs said when folks complained about poor phone reception on the original iPhone: "You're holding the phone wrong." Blaming the victim is no solution. Nor is corporate silence when busted. Just say: "No product is perfect. But, now that we know about this, we're doing everything in our power to fix it. Thanks for letting us know. It's smart users like you that have made the iPhone the #1 phone in its class." See? Not that hard. ED]

Death in Davos — Jefferies & Co. bond trader Litvak could face nine years in prison in rare criminal prosecution

Well, this is a step in the right direction: A bond trader could face nine years in prison in a rare criminal prosecution. Litvak, an employee of Jefferies, used our tax dollars (TARP funds) to buy bonds, which he then sold to a customer at an inflated price that was way above the real cost . . . and earned $650,000 in unwarranted commissions. Check out this story from Al-Jazeera.

Bond trader could face nine years in prison in rare criminal prosecution

Criticized for failing to hold Wall Street accountable for financial crisis, government prosecutors win fraud case

by Matt Birkbeck

Jesse Litvak was ecstatic.

It was March 31, 2010, and the mortgage bond trader at Jefferies & Co. had just persuaded Michael Canter, head of securitized assets at from giant asset manager Alliance Bernstein, to bite on the purchase of millions of dollars in mortgage bonds.

Litvak messaged the good news to his boss, William Jennings and wrote that he misrepresented the prices Jefferies had paid for the bonds and could get Canter to pay even more.

“Boom!” replied Jennings.  

With another phone call and a couple of clicks on his computer, Litvak completed the $27 million sale, which earned him and Jefferies a $50,000 commission.

Or at least that’s what Canter thought.

Thanks to Litvak’s lies about the bond prices, which cost Jefferies less than he claimed, the actual commission was a whopping $650,000.

Litvak’s giddiness over that one sale would later came back to haunt him: The money that Alliance Bernstein used to buy the bonds came from U.S. taxpayers, bailout money approved by Congress in 2008 to help spur investment in mortgage bonds after the financial crisis.

After Canter learned of the subterfuge, Litvak, 39, was fired by Jefferies and charged in January 2013 with defrauding the federal government’s Troubled Asset Relief Program (TARP) — by misrepresenting bond prices to six firms using TARP funds to buy bonds — and stealing more than $6 million. He was found guilty of securities fraud on March 7 after a weeklong trial. His sentencing is scheduled for July 23 at the U.S. District Court in New Haven, Connecticut.

Jennings was also forced to resign from the company in February, though no charges have been filed against him.

If prosecutors get their way, Litvak, who denied the charges, could receive up to a nine-year prison sentence and pay a $5 million fine. The Securities and Exchange Commission (SEC) is preparing to smack him with civil penalties, which could include an additional $1 million in fines.

Jefferies & Co. agreed in March to pay $25 million in fines and restitution in a nonprosecution agreement with the U.S. attorney’s office and with the SEC.

Its success with the Litvak case has given the Justice Department a much needed shot in the arm amid criticism that it failed to criminally prosecute any of the high-ranking bank officials blamed for instigating the 2008 fiscal crisis that brought the country to its economic knees.

While Litvak, a managing director on the mortgage bond trading desk at Jefferies, would never be mistaken for any of the investment bankers who created the toxic subprime mortgage bonds that sparked the crisis, prosecutors said he is nevertheless a symbol of Wall Street’s immense greed.

They were quick to point out during his trial, for example, that Litvak earned more than $18 million in commissions during his four years at Jefferies, money that bought him, among other things, a Manhattan apartment and a six-bedroom home in the Hamptons.

“Jesse Litvak lied to his customers to boost profits,” said Assistant U.S. Attorney Jonathan Francis during the trial. “That is fraud, and that is a crime."

The probe has since widened to other brokers and banks, including JPMorgan Chase and the Royal Bank of Scotland, which placed several bond traders on leave while the banks’ leaders anxiously awaited further action by federal prosecutors, the SEC and a relatively new agency born from the fiscal crisis, the Office of Special Inspector General for the Troubled Asset Relief Program (SIGTARP).

Signed into law in October 2008 by then-President George W. Bush, TARP provided billions to prop up ailing firms such as AIG as well as to help banks resume lending and buy mortgage bonds at a time when few were being sold.

SIGTARP was created to police the TARP funds and investigate and prosecute white collar crime associated with the misuse of that money. 

It was to SIGTARP that the U.S. Treasury Department referred Alliance Bernstein’s Canter to after he called to report Litvak’s behavior. Unbeknownst to Litvak, Canter purchased the bonds with TARP money. 

Unlike other federal regulators, SIGTARP is a law enforcement agency that holds the same investigative power as the FBI. Since its creation, SIGTARP has been credited with recovering more than $5 billion in restitution to the government and to victims such as Alliance Bernstein, which received $2.2 million as part of an agreement with Jefferies.

The agency, along with the Department of Justice, has been criticized for failing to prosecute anyone else, something Litvak’s attorneys have questioned.

But SIGTARP has opened windows into the secretive world of mortgage bond trading, in which buyers and sellers are forced to trust the word of hundreds of traders like Jesse Litvak.

“It’s a very opaque business, and the whole market is built on it,” said Christopher Kennedy, a managing director at MountainView Capital.

During the trial, investigators produced transcripts of messages, or chats, that Litvak regularly conducted with other brokers and investors via his Bloomberg desktop terminal that laid bare his lies to his clients, often flattering them as if he were talking with old college buddies. 

While his defense attorneys argued that Litvak was merely playing an established Wall Street game with experienced investment professionals, the electronic trail revealed a culture at Jefferies in which lying about bond prices was accepted and even encouraged.

The same trail led investigators to the other banks, which were subsequently subpoenaed to produce chat and phone transcripts from their brokers. The ongoing investigation has led many Wall Street banks, including Deutsche Bank, Goldman Sachs and JPMorgan, to take action and warn their brokers against using chat rooms or, if they do, to refrain from writing or saying anything during recorded phone calls that could later be construed as a liability.

[NOTE: This tells you more about the culture of Wall Street than anything else. Instead of warning brokers and traders to keep clean in their activities, they warned them to make sure they covered up whatever illegal activities they might be doing. String 'em up (metaphorically). ED]

“It’s a different ballgame,” said Frank Pallotta, a former banker at Morgan Stanley and Goldman Sachs. “Given what happened to the country as a result of the financial crisis, including the loss of millions of homes and jobs, the public has zero tolerance for fraud, especially from Wall Street.”

While prosecutors maintain the Litvak case isn’t over and the investigation into other banks and brokers is continuing, other government agencies are trying to bring the hidden world of mortgage bond sales out into the public.

The Financial Industry Regulatory Authority is working on a plan to publish bond prices on its trade reporting and compliance engine (TRACE), which aside from mortgages, publishes the pricing of most other bond sales. And SEC Chairwoman Mary Jo White is using the Litvak case to ready her a plan to call for more transparency in the bond market.

A former U.S. attorney in New York who gained fame prosecuting organized crime, White said that she wants to bring mortgage bond pricing “out of the shadows” and is proposing the creation of a database that, like TRACE, would require brokers to report their trades. The plan is in its infancy, but her argument is simple: Litvak’s fraud never would have occurred if investors had access to the real bond prices. (Canter discovered he had been duped 18 months after buying the bonds when an associate of Litvak’s inadvertently emailed Canter the actual bond prices.)

As for Litvak, his supporters have sent hundreds of letters in an attempt to lobby U.S. District Judge Janet C. Hall to ignore prosecutor’s calls for a nine-year sentence and agree to the 14-month prison sentence sought by his attorneys. Many cite Litvak’s middle-class Colorado upbringing, his education at Emory University and the fact that he has two young children, one of whom is a special-needs child.

Prosecutors remain unmoved.

“Litvak’s offenses were born of greed, arrogance and a disdain for traditional notions of honesty and fair play,” wrote U.S. Attorney Dierdre M. Daly in her July 8 sentencing memorandum. “[The court] should impose a sentence that reflects the predatory nature, the life of privilege and opportunity that he squandered by committing them and the vital need to deter similar behavior in an industry where, according to the defense, broker-dealers have turned fraud into business as usual.”