Tuesday, September 25, 2018
Until recently, I thought I was a pretty private person who minded my own business and foolishly believed that no one was really interested in my private life. To paraphrase Bob Dylan, you learn that privacy is something you can sell or give away, but you cannot buy back or retrieve. Today’s world seems not to take privacy very seriously. Loss of privacy worries me. The level of intrusiveness that loss of privacy can lead to was brought to light recently in case I was handling. But before I get to the case, I want to provide a bit of background.
In 1974, Congress passed the Privacy Act (5 USC S552 a). In summary, it provides some protections for citizen privacy when the government obtains personal data. It also created 12 exceptions to the meagre protections it offered. Since then, there have been additional exceptions added, most notably for the Homeland Security agency in the form of Passenger Name Records (PNR) and the Arrival and Departure Information System (AIDS). There are other examples too numerous to review. The government threat of abuse is real and as Ben Franklin said: “They who give up essential liberty to obtain a little temporary safety deserve neither liberty nor safety.” Recall, if you will, the breach of privacy of thousands of Government employees that occurred in 2017.
In addition to the risk of loss of privacy by the government is the risk posed by the private sector. In light of the Equifax breach one year ago, 145,000,000 people’s data history was put in jeopardy. The news cycle was hot for about a week; the Senate said it had to do something (although nothing has been done). The consumer protection board has also done nothing. A year later, the public at risk seems to be in a coma about breaches of privacy. Some writers call this “breach Fatigue” due to the frequency of incidences. Even the recent US Census Bureau survey indicates that fewer people are concerned about loss of privacy today than 3 years ago.
The European Union and the states of Colorado and California amongst other have enacted privacy laws to protect individuals from not only government but also from predatory businesses trying to capitalize on “Big Data” or, more pertinently your personal data. In general, personal data is any data that can be used to identify you. The state enacted privacy laws are a step in the right direction but fall way short of the goal of actual protection of personal data.
Part of my concern stems from the indiscriminate use of social media, like Twitter and Facebook, which leaves trails of information back to the individual. Posting pictures on Facebook is the groundwork for digital facial recognition that may have all kinds of consequences. Or think about your use of LinkedIn where you provide your resume of life details including your employment record. It is not only social media that is concerning. Credit card companies now have data on where you are, where you are traveling to, your buying preferences and how much you spend on a monthly basis.
As a result of the various recently enacted state statutes, business must now adopt policies and procedures that “safeguard” the personal information they collect intentionally or unintentionally. They must also report leaks or breaches of security in a timely manner. As an example of this new requirement for business, a multinational heavy equipment manufacturer has, over the years, collected personally identifiable information about the maintenance people who would maintain their equipment for their customers. The manufacturer did so to align their warranty programs with the proper persons on the customer’s side. The manufacturer had no real interest in who these people were, but they must now adopt robust policies and procedures to protect the privacy of those people.
In the case I previously mentioned, I was retained to collect an overdue account. I went to my standard sources and found the incorporators of the business, its standing with the Secretary of State and the address of the business. I checked the business Facebook and LinkedIn pages where I found a bit more information on the owners. The icing on the cake, however, was a search service. For $29.95 and in less than one hour, I was able to do a criminal records search, a property ownership search including liens, which led to a form of credit search, nearest relatives and their addresses, litigation history, judgments and outstanding warrants. The debtor is a small mom and pop business and what I have learned, all derives from public record. These poor people, I suspect, would be aghast at what is of record, their record, in advance of any litigation without their knowledge or consent.
I am also appalled at the false sense of security peddled by companies that claim that they can protect your credit card and bank account, or at least notify you when there is a breach. They essential do what I did and check some internet traffic on the web for a lot more than $29.95.
So much for privacy.
Do you have a data privacy story?
Tuesday, June 12, 2018
Attendance at a series of recent funerals, jump started my thinking on a variety of subjects, from estate planning to business planning and finally to concerns over seniors.
Before I dive into these thoughts, a quote attributed to Yogi Berra. “Always go to other people’s funerals, otherwise they won’t come to yours.”
The first subject is the recent passage of the federal tax bill which raises the taxable floor on estates from approximately $5,000, 0000 to $10,000,000 per person. The non-partisan Joint Committee on Taxation estimates the number of taxable estates would drop from 5,000 under current law to 1,800 under the new law. By comparison, 52,000 estates paid the tax in 2000 when the exemption was $675,000. Separately, the annual exclusion amount that an individual can give to any number of individuals without eating into the lifetime gift tax exemption was not changed by the new tax law. It will be $15,000 for 2018, up from $14,000 in 2017, thanks to indexing for inflation.
For decades lawyers have been creative on strategies designed to move assets out of estates, using tools like charitable gifts and trusts. While gifts and trusts are still useful tools in certain situations, I think that as a lawyer doing estate planning I can now get closer to the notion of the “simple will.” We should be able to provide directives for the disposition of assets to survivors in a simpler and cost-effective non-probated manner.
Now I realize that thinking about estates is not the most uplifting of subjects, so I switch gears to think about doing business in today’s economy.
A recent ride through Cherry Creek stimulated some nostalgia and additional thinking on this second topic.
Cherry Creek used to be chock-a-block filled with successful mom and pop stores, now long gone. I am the third generation who benefited from ownership of a small retail operation. Now, those mom and pop stores have all been replaced by national chains and franchises. In fact, my family’s store was put out of business by the big box highway stores. In the days of my family’s operation, store owners were a class of entrepreneurs that took pride in building businesses that involved and supported whole families. Those entrepreneurs did not need MBA from colleges. They often attended schools of hard knocks. They built something to last and were the bedrock of middle class America. They were pillars of communities and succeeded or failed in large part on the trust they built with the communities they served. As businesses, they might have been sole proprietorships or maybe corporations. They paid their taxes with much less hand wringing than what seems to go on today. Those small business existed in a less litigious time, but from memory they always had a trusted lawyer adviser upon whom they could call when needed. Seems that in today’s world of DIY everything, this is less the case. Yet, with today's more complicated business atmosphere of taxation, regulation and litigation, the need for experienced counsel could not be greater.
The recent tax legislation reduced the effective tax rate for corporations from approximately 30% down to 21%. The thinking was that reducing the tax rate would make US corporations more competitive globally (not necessarily locally), would allow corporations to do more for their employees, and it would eventually stimulate the economy. There were also some aspects of the bill which were designed to benefit pass through entities like limited liability companies and partnerships.
SBA data from the last census indicates that small business (500 employees or less) represent 99.7% of US Employer firms with 27.9M small business within this class. Large business with at least 500 or more employees represent 18,500 firms. Over three quarters of small business are non-employers with 73.2 % classified as sole proprietors. In the last two decades, about 60 percent of the private sector’s net new jobs have been created by existing establishments and about 40 percent from the churn of startups minus closures. While firm births account for many new jobs, job losses from firm closures are equally important in accounting for net effects to employment levels. So who really benefits from the recent tax bill?
For decades, lawyers have been creatively designing business structures which can take maximum advantage of the tax code and offer maximum protection against liability. Given my strong interest and experience in representing small businesses and startups, I am not seeing much tax benefit from the recent legislation, nor am I seeing increased liability protection, nor am I seeing an increase in accessible capital, the lifeblood of startups, and the recent failure of the farm bill will also hurt the family and small business farmer. On the other hand, well healed real estate partnerships, REITS and other special entities may well benefit.
The third topic that weighed heavily on my mind relates to seniors and crime. The FBI Internet Crime Complaint Center released its yearly internet crime report, which states that over 300,000 consumers reported cyber-fraud and malware attacks in 2017, costing over $1.4 billion.
The threats that were at the top of the list reported by consumers include phishing, ransomware and whaling, as well as tech support fraud, non-payment scams and extortion.
Sadly, but indicative of reality, senior Americans are the most targeted demographic for cyber fraud. Over 50,000 complaints were lodged by consumers over the age of 60 with an estimated loss to these individuals of almost $350 million. Good data, yet few prosecutions were made for all of this crime.
As a patriot and practicing attorney passionate about upholding the law, I am concerned. My point in reviewing these three topics is that it seems that the current government has gone to great lengths in protecting the 1% of wealthy individuals and large business without commensurate concern for the majority of the population, for core of US businesses or protecting the most vulnerable segments of the population. Whether there will be any trickle-down benefit is yet to be determined. Early indications are not promising.