The Discreet Science
Data Security Experts in Despair Over Network Breaches
The Wall Street Journal interviewed Shawn Henry, the departing head of the FBI’s cybersecurity efforts, who expressed profound pessimism about the private sector’s ability to protect the nation’s infrastructure on its own without greater intervention. “We’re not winning,” Henry told the WSJ.
Others were even more pessimistic. James A. Lewis, a senior fellow on cybersecurity at the Center for Strategic and International Studies, said “I think we’ve lost the opening battle [with hackers].” Mr. Lewis said he didn’t believe there was a single secure, unclassified computer network in the U.S.
“In many cases, the skills of the adversaries are so substantial that they just leap right over the fence, and you don’t ever hear an alarm go off,” [Henry] said. Companies “need to be hunting inside the perimeter of their network,” he added. [...] Mr. Henry said FBI agents are increasingly coming across data stolen from companies whose executives had no idea their systems had been accessed.
“We have found their data in the middle of other investigations,” he said. “They are shocked and, in many cases, they’ve been breached for many months, in some cases years, which means that an adversary had full visibility into everything occurring on that network, potentially.”
Mr. Henry said that while many company executives recognize the severity of the problem, many others do not, and that has frustrated him. But even when companies build up their defenses, their systems are still penetrated, he said. [...] He said their most valuable data should be kept off the network altogether. He cited the recent case of a hack on an unidentified company in which he said 10 years worth of research and development, valued at more than $1 billion, was stolen by hackers.
U.S. Outgunned in Hacker War (Wall Street Journal)
Chinese Power Struggle Reveals Mysterious Death of Briton
China’s ruling elites have been forced into a difficult situation over the actions of Politburo member Bo Xilai who was recently implicated in the death of a British citizen who lived in China and had been associated with Bo. Neil Heywood died in Chongqing last year of “excessive drinking”—even though friends say he did not drink—and his body was quickly cremated. The Wall Street Journal has broken several stories in the last few days on the matter:
Mr. Heywood’s death is one of the events in the drama surrounding the fall of the Communist Party chief in Chongqing, Bo Xilai, whose dismissal this month has thrown Chinese politics into turmoil.
Suspicions about Mr. Heywood’s death were raised by Wang Lijun, the former Chongqing police chief who triggered the political drama, The Wall Street Journal reported Sunday. Mr. Wang, who sought refuge from Mr. Bo in the U.S. Consulate in Chengdu on Feb. 6, claimed to have fallen out with Mr. Bo after discussing with him his belief that Mr. Heywood was poisoned, according to people familiar with the matter. He also claimed Mr. Heywood had been involved in a business dispute involving Mr. Bo’s wife, Gu Kailai, according to one of those people.
US officials denied Wang asylum because they were unwilling to provoke an international incident over the matter but they did persuade Wang to turn himself over to representatives of the central government. Wang has been taken to Beijing for questioning. The incident caused the British government to demand a new investigation into Heywood’s death on Sunday.
On Monday, a spokesman for China’s Foreign Ministry and local Chongqing officials said they were unaware of the situation regarding Mr. Heywood. The lack of a clear, consistent line from official media and spokespeople in China usually indicates lower-level officials are waiting for the party leadership to make a collective decision about how to handle a given situation, according to political analysts.
The Wall Street Journal offers some further background on Wang and Bo, specifically the allegations against Bo that seem to be unravelling his position of power:
Mr. Wang directed a crackdown on organized crime in Chongqing that Chinese legal experts criticized for playing fast and loose with the law. Other commentators accused Mr. Bo of using the sweep as a cover to put in place mafia leaders loyal to himself. Business people have alleged that they were accused of being gangsters so that their assets could be expropriated.
A few of these tycoons have considerable political clout themselves. For instance, Zhang Mingyu is a delegate to the National People’s Congress, but that didn’t stop the Chongqing police from detaining him in Beijing during the legislature’s session earlier this month. Mr. Zhang says he has information to prove Police Chief Wang’s collusion with the head of organized crime in the city, who also runs the largest financial firm. Li Jun, a businessman who lost his $700 million company and now lives abroad, says he was tortured by the police and military for three months for a false confession.
The issue appears to have come to light because Bo Xilai was removed as Party Secretary for Chongqing on Friday, according to the Los Angeles Times and his strongest supporter on the Politburo was notably absent from an order recalling 3300 security personnel to Beijing for retraining:
State media reported this week that 3,300 party cadres from the security apparatus would be sent to Beijing for ideological retraining. The order was unusual enough, but even more so was the fact that the report omitted mention of internal security czar Zhou Yongkang, who heads the Political and Legislative Affairs Committee that is recalling the cadres.
Zhou, a member of the Politburo Standing Committee and until now one of the most powerful men in China, had been the committee’s strongest backer of Bo Xilai, the Communist Party secretary of Chongqing who was removed from his post last week. Some overseas Chinese-language Internet sites carried wild (and unsubstantiated) rumors that Zhou and Bo, a popular figure among Maoist traditionalists, had tried to stage a coup.
A level of edginess was apparent this week in the unusually large security presence in central Beijing, complete with armed SWAT teams in some subway stations.
Mystery Deepens in Death of Briton in China (Wall Street Journal)
China’s Local Tyrants (Wall Street Journal)
China Coup Rumors May Be Wild, But Tension is Real (Los Angeles Times)
Dodd-Frank Introduces Supply Chain Risk
A recent New York Times article revealed a little known but far-reaching provision in the Dodd-Frank financial overhaul law that covers the use of materials mined in the Democratic Republic of Congo. According to the law, which are still subject to a great deal of lobbying and contention between companies and regulators, any publicly traded company using columbite-tantalite, cassiterite, wolframite, or gold in a way that is “necessary to the function or production of a product” must report whether those minerals come from the DCG.
As Edward Wyatt points out in the story, corporations with a wide array of product lines and extended or complicated supply chains will incur substantial costs vetting for these materials and their sources:
There is little agreement on what it will cost companies to comply. The agency estimates companies will have to spend $71 million to comply with its regulations.
The National Association of Manufacturers estimates the regulations will cost $9 billion to $16 billion. Whatever the answer, part of the burden would fall on a given company’s supply chain — companies, that is, that are very likely not to be covered by the regulation’s reporting requirements, which cover only publicly traded companies.
Irma Villarreal, chief securities counsel for Kraft Foods, said during the S.E.C. roundtable that Kraft produced 40,000 distinct products and used 100,000 suppliers, creating a Herculean task of auditing supply chains for conflict minerals.
Use of ‘Conflict Minerals’ Gets More Scrutiny From U.S. (New York Times)
Jules Kroll Donates to John Jay College
Dow Jones covers the announcement of Jules B. Kroll’s gift to John Jay College in New York:
The 70-year-old chairman and co-founder of New York-based K2 Global Consulting LLC and chairman and chief executive of Kroll Bond Ratings, Inc., is giving $2 million in support of the college. The atrium of John Jay’s new building on 59th Street, which opened last fall, will be named for Mr. Kroll and his wife, Lynn. The donation is scheduled to be announced Friday. [...]
Though he isn’t an alumnus of John Jay, a school of the City University of New York, Mr. Kroll been involved with the college for six years and presently serves as chairman of the John Jay Foundation board of directors. He says he initially became involved because of the leadership of John Jay’s president, Jeremy Travis.
One of Mr. Kroll’s primary motivations for giving to the school was an interest in supporting the minority population of John Jay.
“I didn’t feel that I had ever done enough for the minority community in my other work,” he says. John Jay serves some 15,000 students, of which 40% are Latino and 25% African-American. [...]
The donation from the Krolls is a lead gift in a $50 million capital campaign that coincides with John Jay’s 50th anniversary in 2014. So far, $30.8 million has been raised.
A Solid Shot at Success (DowJones/Wall Street Journal)
Jeremy Kroll on CNBC’s Fast Money’s Halftime Report.
