Wednesday, September 13, 2017

Too Big to Care: Why Equifax hasn't been credit worthy

It should not come as a shock that Equifax, one of the three big agencies that track credit status, has failed to protect the data it has on 143 million people. Nor should it be surprising that the company didn't inform its affected customers for six weeks after discovering that hackers had gained access to their private information. Collecting, selling and sometimes misusing mountains of sensitive data for decades, Equifax has evidently become too big to care.

Instead, three executives sold $1.8 million of their company shares days after the company discovered the problem, more than a month before it was made public. "If that happened, somebody needs to go to jail," threatened Sen. Heidi Heitkamp, a Democrat on the Senate Banking Committee. In the days following the breach announcement Equifax shares dropped 20 percent. 

At first, the company wanted customers to pay for a freeze to their accounts. That would protect their personal data. But after a deluge of complaints, the offer changed, with Equifax opting instead to waive fees for customers who want to freeze their credit files -- but only until November 21. Going forward, it could face the largest class action lawsuit in history, with the potential to bankrupt the company. 
1978 investigative feature
Original Publication PDF Here 

When I first looked into Equifax in 1978, it was already a corporate force, with 1,800 offices, 14,000 employees, and a nationwide investigative system maintaining dossiers on 46 million people. The oldest of the three largest US credit agencies, it had revenues of $275 million a year. Equifax's services at the time ranged from credit reporting, insurance investigations and underwriting to motor vehicle data tracking and assorted "management system services" - aka private investigations. 

Today Equifax holds information on more than 800 million consumers and almost 90 million businesses. Operating in 14 countries it produces annual revenues of more than $3 billion. On the other hand, the employee roster is down to about 9,000. 

Founded in 1899, Equifax had not fully committed to computers by the late 1970s. But an industry transition was underway. In Vermont, the Credit Bureau of Burlington had taken an early lead, working with Trans-Union Systems, a national computer network used by retailers and credit card companies. Data flowed in multiple directions, with stores seeking information on potential customers and other clients using the data those businesses amassed.  

Before the digital age, collecting information and creating a customer profile -- to establish what was known as "creditworthiness" -- involved a larger staff and considerable legwork. For Equifax "field investigators" it meant conducting interviews, with the subject as well as friends and neighbors. From courts and police departments they gathered any criminal information, while desk-bound staffers clipped newspapers and gathered reports. To complete a dossier, an investigator might talk to your employers, hunt down old government records, or even strike up conversations with local shop keepers. 

But mass producing customer dossiers (investigators worked on up to 40 a day), particularly profiles that included not just hard data but also tidbits of gossip, could lead to mistakes and abuses. Creditworthiness was a slippery concept, an imprecise composite of job patterns, credit and bank accounts, character, habits, family status and morals. As a result, Equifax was hit with a batch of lawsuits during the 1970s, losing some and quietly settling others. 

One Michigan woman collected $321,000 when the company falsely reported that she was an excessive drinker. Another woman from South Dakota won a settlement when Equifax said that the money for her new Chevy had come from prostitution -- also proven false.

There was also the California insurance broker who won $250,000 when Equifax investigators alleged she was dishonest. In New Jersey there was trouble when State Farm refused coverage to a Princeton faculty member after Equifax reported (accurately but irrelevantly) that she was living with a man "without the benefit of wedlock."
When I called up Ralph Bushey at the Equifax office in Burlington, the first thing he asked was how I spelled my name. Frankly, the same thing happened every time I interviewed someone in the industry. But Bushey was more cautious than most and said he had to check with higher ups. After he didn't call back, I decided to make a personal visit. 

Equifax had outposts in Burlington, Rutland and Bennington, all reporting to a branch office in Albany, New York. A Barre office, along with the rest of eastern Vermont, reported to Manchester, New Hampshire. The regional office was in Boston. 

The Burlington station was small and didn't maintain files, in contrast with Burlington Credit's relatively high tech layout. But the modest appearance was deceptive. Bushey explained coyly that Equifax  handled "all the major insurance groups," specifically mentioning Prudential and National Life. "We've gotten away from the credit line of work, and have picked up more types of business."

At times, Equifax operated like a private detective agency. In at least one case, it was caught helping a corporation to obtain gossip about a critic. An executive at American Home Products, a major drug manufacturer, had hired the company to dig into the personal affairs of Jay Constantine, a congressional staffer who was helping to write legislation opposed by Big Pharma.

This was before the Retail Credit Company of Atlanta, Georgia changed its name to Equifax. After 77 years in business, the 1976 rebranding was prompted by all the bad press, including a Federal Trade Commission lawsuit filed in 1975. The charges, as outlined for me by an FTC staffer, included illicit use of consumer information, failure to disclosure terms, and false and misleading advertising. 

The technology of data gathering has changed since then, but the shabby tactics have survived.  In 2000, Equifax, along with Experian and TransUnion, was fined $2.5 million for blocking and delaying phone calls from consumers trying to obtain information about their credit. In 2013, a federal jury in Oregon awarded $18.6 million to Julie Miller against Equifax for violations of the Fair Credit Reporting Act. 

In contrast, Equifax has had no problem sharing files and data with the FBI and other government agencies, according to George O'Toole, a former CIA agent. While reporting on Vermont's private intelligence industry, I was told that Equifax tended to hire ex-State Police officers, possibly because they might have access to government information that was off limits to the public.

Another ex-CIA operative, Harry Murphy, claimed that Equifax was especially useful to federal agencies. The draw was its enormous files of auto and life insurance applicants. Even back in the 1970s, however, big data transfers between public and private entities were difficult to control, and law enforcement and intelligence officers often moved into the private sector after retirement, or for the paycheck. 

The emerging private dossier industry was run largely by law enforcement and intelligence alumni, an Old Boy Network that closely linked it with government operations. The data moved freely, but the potential for mischief was not widely recognized.

During my research into the activities of Equifax and other big data agencies, I also heard about an odd encounter with Earl Hanson, a Barre resident who applied for insurance with Colonial Penn Mutual. In return he received a letter from Equifax asking for more information about an auto accident he had forgotten to report. Hanson was cooperative, explaining all about hitting a deer. But the exchange made him curious to know what else they had discovered about him, from the Motor Vehicles Department or anywhere else. 

After writing to the company's Dataflo center and to the New Hampshire branch office, however, Hanson was told that Equifax actually had no file on him. Unsatisfied with that response, he filed a complaint with the Attorney General's office. But the State lost interest, eventually closing the case, and Equifax didn't share any further information. As usual, it was too big to care. 

Tuesday, September 5, 2017

Hollywood Whitewashes History into Action Adventure

The latest Tom Cruise movie, American Made, manages the incredible -- to sympathize with an amoral drug smuggler and government informer whose lies sparked a deadly, early example of fake news. The target of the disinformation was Nicaragua, the authors were the President and his men, and the Big Lie was that Sandinista leaders had struck a deal with the Medellin cartel to smuggle drugs into America. 

While director Doug Limon's thrill ride version of Barry Seal's story does acknowledge his questionable role in the Contra war, the film is really about an exuberant flyboy -- Maverick is back as an anti-hero -- who stumbles into high adventures and government conspiracies. The twist (spoiler) is that this time Cruise dies. 

Think Air America meets Mission Impossible and The Parallax View. We've seen this movie before, only this time it's a whitewash of some relevant history.

Bay of Pigs veterans Rene Corvo and Felipe Vidal were "lieutenants"
 for John Hull and provided a link between Contras and Cuban exiles.
From Iran-Contra Scandal Trading Cards by Salim Yaqub.
Let's begin with a televised speech by President Ronald Reagan on March 16, 1986. During this appearance Reagan displayed a photograph taken in Nicaragua, reportedly proving that top Nicaraguan officials were involved in cocaine trafficking. As it turned out, this was a lie. There was no real evidence, and the Drug Enforcement Agency (DEA) was later forced to issue a low-key "clarification." 

Still, the smear proved effective as a narrative changer. Like a series of Trump tweets, it distracted attention from an ongoing investigation of Contra involvement in the drug trade. And Barry Seal, apparently the only person who knew the truth about the grainy picture of men loading a plane near Managua, was already dead.

A DEA informant and pilot, Seal was murdered in Baton Rouge on February 19, 1986 -- a month before Reagan's fake news address -- reportedly on orders from the Columbian cocaine boss who had arranged the shipments in association with the Contra network. Although the assassins were captured and convicted, some believe that the CIA was also complicit in Seal's death. 

His activities, and their Contra-cocaine connections, were the subject of several in-depth investigations at the time. But Cruise sought the role because of his interest in Seal as a character. “I don’t agree with what he was doing, but you can’t help but be utterly fascinated by it,” he told People Magazine. “One of my favorite authors is Mark Twain, and Seal reminds me of one of his characters. It’s not every day you get to play a character who is a devoted husband and father and a drug runner, a CIA operative working for the DEA.”

That's one way to see it. Another appeared in a report by the International Center for Development Policy, which was directed by former UN Ambassador to El Salvador Robert White. For them, Seal was a dangerous pawn who knew too much. For example, he knew that Columbia's Medellin cartel was using a ranch owned by John Hull as a shipping point. Hull was a US citizen with CIA and National Security Council connections, and his ranch was also a Contra base for weapons shipments and recruits.
John Hull owned the ranch used by Contras and drug smugglers. 
More to the point, Seal knew that the famous photo shown on TV by Reagan was actually taken on US government orders. He had flown into a Nicaraguan airstrip with CIA cameras installed on his plane, snapping pictures that purportedly showed Pablo Escobar and other members of the Medellin cartel loading kilos of cocaine onto a plane. Seal claimed they were being assisted Sandinista soldiers. He even alleged that one of those present was a close associate of Tomas Borge, Nicaragua's Minister of the Interior. In short, he was circulating disinformation. 

Wall Street Journal reporter Jonathan Kwitny effectively debunked the accusations, establishing that there was no evidence tying any Nicaraguan officials to the drug shipment. But someone in the White House wasn't satisfied, and leaked a story about Sandinista links with the Medellin cartel, along with the photo, to The Washington Times.  Among other revelations, Edmond Jacoby's report discussed Seal’s role and appeared to out him as a government agent. As a result, noted Ambassador White, the Columbian cartel put a $2 million price on his head.

After Seal's death, Louisiana attorney general William Guste protested the government’s failure to protect their "extremely valuable witness and informant in the country’s fight against illegal drugs.” For him, Seal's murder warranted a serious inquiry, one that explained why "an important witness was not given protection whether he wanted it or not?”

American Made, which is slated for US release in late September, doesn't settle this question. But there is an obvious answer: Seal was a loose end and his shipments were just a small part of a much larger, ongoing operation to transport cocaine in exchange for funds to purchase arms. Hull and anti-Castro Cubans had begun to work together in 1983, providing refueling and packaging services on his Costa Rican ranch in exchange for up to $25,000 per shipment from the Columbians.

According to Dan Sheehan, whose interfaith law and policy center dug deeply into the private network that fueled the Contras, the same team continued to smuggle a ton of cocaine into the US each week for several more years. Its street value was $25 million per shipment. Sheehan also claimed that some of the profits were deposited in Miami and Central American banks, then later withdrawn to purchase weapons.

Similar charges were leveled in a civil complaint filed by journalists Tony Avirgan and Martha Honey. They charged that the network was responsible for a bombing in Costa Rica in which Contra leader Eden Pastora and several others were injured or killed. 

Honey and Avirgan discovered that a deal was struck between Hull, the Cuban-Americans and Contra leaders to get rid of Pastora, who had refused to merge his operations with other anti-Sandinista forces. From their Costa Rica base on Hull's ranch drugs flowed to several distribution points in the US. The profits paid for weapons from Florida, Israel and South Korea, according to the White report. When Pastora declined to cooperate, the network hired a professional assassin to eliminate him. Avirgan was one of those injured in the attack.

Now that would make a great political action thriller, one in which the heroes are independent journalists on the trail of an international conspiracy rather than a smuggler/snitch who facilitated it and got himself killed. 

On January 20, 1987, the New York Times revealed that the DEA had known for months that US flight crews transporting arms to the Contras were also smuggling cocaine on their return trips to the US. When told about the investigation, however, one crew member reportedly warned a reporter that he was under the protection of a White House official, Lt. Col. Oliver North.

Predictably, the State Department denied all knowledge of Contra involvement in cocaine deals. And the US Customs Service claimed to know nothing about any arms shipments leaving Florida without official clearance. Nevertheless, both the weapons and drugs reached their destinations, and the same network -- in which Barry Seal was one cog -- conducted both operations.
Oliver North defended the "enterprise" in Congressional Testimony. 
Over time, various elements of this covert network, which became known as the Secret Team, were exposed. For example, we learned -- and subsequently overlooked -- that as Vice President George H.W. Bush and his national security advisers had close ties with the covert air supply operation. Elliott Abrams, then in the State Department and still a foreign policy player, was directly involved in coordinating Contra activities, bringing together State, the NSC and CIA. The Department of Defense organized air drops over Nicaragua and helped to build the Contra infrastructure. The entire inter-agency program was initially under the control of CIA Director William Casey.

The private network that emerged from all these connections used the money obtained from Iran arms sales and other sources to buy weapons and ship them to Central America, South Africa, and Angola. They also worked with operations in both El Salvador and Costa Rica, moving drugs and guns back and forth. But this bigger picture doesn't feature in Limon's Catch Me If You Can take on covert war in Central America. 

After elements of the Contra-cocaine conspiracy were exposed, Seal was not the only key witness to die under mysterious circumstances. Still others were threatened, while groups attempting to bring those responsible to justice were burglarized and harassed. It sounded like high-pitched rhetoric at the time, but Christic Institute lawyer Dan Sheehan charged that ultra-right elements were responsible for a pattern of intimidation. In its Central American embassies, he claimed, the US had embedded "a series of fascist and Hitlerite cells." It's not as hard to believe thirty years later.

Of course, not everything can be tracked back to the White House, or even to the Intelligence community. But covert operations like those chronicled in American Made did become almost standard operation procedure during the 1980s. And although they were sometimes clearly illegal, they were also widely rationalized as acceptable "initiatives" in defense of democracy. 

One powerful excuse, made by President Reagan himself, was that any laws restricting military intervention did not apply to him or his national security staff. It was a bold assertion of unilateral executive power. He and his aides even claimed that, by extension, any attempts to "protect the initiative" -- and that included covering it up -- are part of the authority flowing from the sovereign president. We may soon hear the same argument again, as more damaging details emerge about Russia, Trump and today's Secret Team.

Greg Guma is the Vermont-based author of “Dons of Time,” “Uneasy Empire,” “Spirits of Desire,” "Big Lies," and “The People’s Republic: Vermont and the Sanders Revolution.” His latest book is “Green Mountain Politics: Restless Spirits, Popular Movements.”