U.S. appeals court revives workplace cybertheft lawsuit

 In a decision that could make it easier for businesses to police cybertheft in the workplace, a U.S. appeals court revived a chemical company's lawsuit accusing a former Toronto-area employee of using her home computer to steal trade secrets from its Connecticut server.
Reversing a lower court ruling, the 2nd U.S. Circuit Court of Appeals in New York said U.S.-based MacDermid Inc may pursue civil damages claims against a former account manager under Connecticut state law, even though she conducted her alleged improper activity from her home in Fort Erie, Ontario.
Wednesday's decision may make it easier for U.S. companies to crack down on alleged computer theft that occurs in remote locations, including outside the country. In recent years, U.S. courts increasingly have dealt with cases involving downloads of corporate information by employees, both in criminal cases brought by prosecutors and civil cases filed by companies.
Jackie Deiter, the MacDermid account manager, had worked for the Waterbury, Connecticut-based company's MacDermid Chemicals unit in Mississauga, Ontario, from May 2008 until her termination in April 2011 for reasons unrelated to the lawsuit.
The company accused her of violating Connecticut laws on unauthorized computer access and misappropriating trade secrets by emailing customer data, laboratory reports, and pricing lists drawn from its Waterbury server. It said this occurred soon after Deiter had learned she was about to be fired.
Deiter admitted to emailing materials, but said in court papers that she did so for her job, and because she could not print at home from her employer-issued laptop.
U.S. District Judge Warren Eginton in New Haven, Connecticut said in November 2011 that he had no jurisdiction over MacDermid's lawsuit because Deiter had merely emailed information "from one computer in Canada to another computer in Canada."
But a unanimous three-judge panel of the 2nd Circuit said MacDermid's server was a computer under Connecticut law, and that it did not matter that Deiter had accessed it from outside the state, which she had never visited.
"Most Internet users, perhaps, have no idea of the location of the servers through which they send their emails," Circuit Judge Barrington Parker wrote for the panel.
"Here, however, MacDermid has alleged that Deiter knew that the email servers she used and the confidential files she misappropriated were both located in Connecticut," he added.
Parker also said "efficiency and social policies against computer-based theft are generally best served" by handling lawsuits in the states where computer files are misappropriated.
William Charamut, a lawyer for Deiter, declined to comment. Lawyers for MacDermid did not immediately respond to requests for comment. No criminal charges have been filed against Deiter.
In February, the 2nd Circuit threw out a federal criminal case against a former Goldman Sachs Group Inc computer programmer, saying his alleged theft of high-frequency trading code was not a crime under federal law.
Six months later, Manhattan District Attorney Cyrus Vance brought New York state criminal charges against the programmer, Sergey Aleynikov, over the same activity. Aleynikov has pleaded not guilty.
The 2nd Circuit has jurisdiction in Connecticut, New York and Vermont. It is among the more influential federal appeals courts, and other circuits often follow its reasoning.
The case is MacDermid Inc v. Deiter, 2nd U.S. Circuit Court of Appeals, No. 11-5388.

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Samsung finds new enemy in U.S. patent war

Samsung (005930) has filed a complaint with the United States International Trade Commission requesting an import and sales ban on a variety of Ericsson (ERIC) products. The company’s move comes after Ericsson filed a similar request with the agency last week. Samsung previously accused Ericsson of asking for “prohibitively higher royalty rates to renew the same patent portfolio” and that it will defend itself against a lawsuit.
[More from BGR: Microsoft Surface trampled at the bottom of the tablet pile this Christmas]
Samsung said in a statement to Reuters that it attempted to “negotiate with Ericsson in good faith, however Ericsson has proven unwilling to continue such negotiations by making unreasonable claims, which it is now trying to enforce in court.”
[More from BGR: Mark Cuban: Nokia Lumia 920 ‘crushes’ the iPhone 5]
Samsung is now accusing Ericsson of infringing upon seven of its patents concerning telecommunications networking equipment. Ericsson’s networking unit has seen a significant drop in sales, down 17% in the third quarter, and like many other companies in the mobile space is turning to the courts to boost its bottom line.

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Google extends free Gmail voice calling through 2013

Google (GOOG) announced on Monday on the Official Gmail Blog that its free Gmail voice calling service will be extended through 2013 in the U.S. and Canada. The company has provided free domestic calling within the U.S. and Canada for the last two years, further extending the complimentary service repeatedly just before the new year. Google product manager Mayur Kamat didn’t detail why the company is extending the service in his post on the company’s blog. It’s still unclear why Google is keeping free Gmail voice calls separate from its Google Voice service bit either way, free is free and we’re not complaining.

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U.S. charges analyst in IBM insider trading case

WASHINGTON (Reuters) - U.S. authorities on Wednesday announced charges against a research analyst for trading and tipping others ahead of a 2009 acquisition by computer giant IBM, expanding a related insider trading case filed last month.
Federal prosecutors charged Trent Martin, who worked at a Connecticut brokerage firm, for purchasing shares of SPSS before IBM agreed to the $1.2 billion deal. He was also charged with passing the information to others, including his roommate.
On November 29 the Justice Department and the Securities and Exchange Commission charged two former stockbrokers, including Martin's roommate, for their roles in the alleged insider trading scheme.
The three and others made more than $1 million by trading ahead of the acquisition, prosecutors said.
Martin was specifically named as the source of the information in instant messages between the two brokers, Thomas Conradt and David Weishaus, authorities said.
In a July 2009 message, referring to Martin by name, Conradt wrote: "holy f*** . . . god trent told me not to tell anyone . . . big mistake," according to the indictment unsealed on Wednesday.
Weishaus responded, "eh, we'll get rich."
Martin, an Australian citizen, was arrested on December 22 in Hong Kong, the Justice Department said. Martin could not immediately be reached for comment.
The Securities and Exchange Commission, which filed related civil charges against Martin on Wednesday, said he fled the United States to Australia soon after learning about the SEC's investigation.
IBM agreed to pay $50 per share for SPSS, a 42 percent premium to SPSS' closing price on the day before the purchase was announced.

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Apple still can’t build enough iPad minis

A common issue often presents itself when Apple (AAPL) launches new products: it can’t build them fast enough. We’ve seen it time and time again, most recently when Apple launched the iPhone 5 and 150,000 dedicated factory workers still couldn’t keep up with demand. Now, a report has surfaced claiming that Apple’s manufacturing partners in the Far East can’t build units fast enough to keep pace with Apple’s iPad mini orders.
[More from BGR: Microsoft Surface trampled at the bottom of the tablet pile this Christmas]
According to Digitimes’ supply chain sources, Apple’s parts suppliers have prepared enough components to build between 10 million and 12 million iPad mini tablets in the fourth quarter to accomodate heavy demand. Apple’s manufacturing partners are only expected to ship 8 million assembled units, however.
[More from BGR: Mark Cuban: Nokia Lumia 920 ‘crushes’ the iPhone 5]
The report states that yield rates are improving though, and Apple is expected to ship 13 million iPad mini tablets in the first quarter of 2013.

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Amgen pagará 762 millones por vender un medicamento para usos no autorizados

Nueva York, 19 dic (EFE).- El gigante estadounidense de la biotecnología Amgen pagará una sanción de 762 millones de dólares tras declararse culpable de introducir en el mercado un medicamento para usos no permitidos por las autoridades federales.
La compañía aceptó hoy en un tribunal federal de Brooklyn (Nueva York) un acuerdo para declararse culpable, clausurar el caso y pagar 150 millones en sanciones criminales y 612 millones para cubrir las solicitudes de compensación a programas públicos de seguro médico, como Medicare o Medicaid.
El caso se refiere al "Aranesp", un medicamento aprobado por la Administración de Fármacos y Alimentos (FDA, por sus siglas en inglés) para favorecer la formación de glóbulos rojos en los tratamientos de anemias.
"A fin de incrementar las ventas de Aranesp y lograr más beneficios, Amgen ilegalmente vendió el medicamento con la intención de que se usara con dosis que la FDA había estudiado y rechazado, y para tratamientos que la FDA nunca aprobó", señaló el tribunal federal en un comunicado.
El acuerdo supone la mayor sanción por fraude a una compañía de biotecnología en la historia de Estados Unidos.
El fiscal federal Marshall Miller señaló que "en lugar de trabajar para alargar y mejorar la vida humana, Amgen buscó ilegalmente los beneficios empresariales mientras ponía en peligro la seguridad de consumidores vulnerables que sufrían enfermedades". EFE

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"Fiscal cliff" talks turn sour, Obama threatens veto

 Talks to avoid a fiscal crisis appeared to stall on Wednesday as President Barack Obama accused Republicans of digging in their heels due to a personal grudge against him, while a top Republican called the president "irrational."
As the clock ticks toward a year-end deadline, Obama and House of Representatives Speaker John Boehner, the top Republican in Congress, are trying to reach a deal to avert harsh tax hikes and spending cuts that could trigger a recession.
Obama said he was puzzled over what was holding up the talks and told Republicans to stop worrying about scoring "a point against the president" or forcing him into concessions "just for the heck of it."
"It is very hard for them to say yes to me," he told a news conference in the White House. "At some point, you know, they've got to take me out of it."
The rise in tensions threatens to unravel significant progress made over the last week in the so-called fiscal cliff talks.
Boehner and Obama have each offered substantial concessions that have made a deal look within reach. Obama has agreed to cuts in benefits for seniors, while Boehner has conceded to Obama's demand that taxes rise for the richest Americans.
However, the climate of goodwill has evaporated since Republicans announced plans on Tuesday to put an alternative tax plan to a vote in the House this week that would largely disregard the progress made so far in negotiations.
Obama threatened to veto the Republican measure, known as "Plan B," if Congress approved it.
Boehner's office slammed Obama for opposing their plan, which would raise taxes on households making more than $1 million a year and is a concession from longstanding Republican opposition to increasing any tax rates.
"The White House's opposition to a backup plan ... is growing more bizarre and irrational by the day," Boehner said through his spokesman, Brendan Buck.
Boehner expressed confidence the House would pass the legislation, known as "Plan B," on Thursday. He urged Obama to "get serious" about a balanced deficit reduction plan.
Global investors are on edge over the talks, and U.S. stocks fell on Wednesday following Boehner's comments.
An acrimonious presidential campaign that culminated in Obama's re-election on November 6 has added to the bad blood in Washington between Obama and congressional Republicans.
The two sides also clashed bitterly last year over the government's limit on borrowing - known as the debt ceiling - an episode that nearly led the nation to default on its debt.
On Wednesday, Obama said the fiscal cliff must not get bogged down with negotiations over the debt ceiling, an issue that must be dealt with again early next year.
LITMUS TEST
Voting on Plan B will be a litmus test for Republicans on Boehner's concession to raise tax rates. In a sign conservatives are coming around to Boehner's position, anti-tax activist Grover Norquist gave his blessing to the bill.
Obama and Boehner appear to have bridged their biggest ideological difference but remain hung up on the mix of tax hikes and spending cuts meant to narrow the budget gap.
"What separates us is probably a few hundred billion dollars," Obama said.
The White House wants taxes to rise on incomes above $400,000 a year, a concession from Obama's opening proposal for a $250,000 income threshold.
If a deal is not reached soon, some $600 billion in tax hikes and spending cuts are set to begin next month.
Senior administration officials described negotiations as at a standstill and Obama warned he would ask everyone involved in the talks, "what it is that's holding it up?"
Still, the top Republican in the Senate said resolution could come by the end of the week.
"There's still enough time for us to finish all of our work before this weekend, if we're all willing to stay late and work hard," said Senate Republican leader Mitch McConnell.
Any deal by Obama and the Republican leadership would need the support of their parties' rank and file.
Many Democrats dislike the president's offer to reduce benefits to seniors, although some political allies of Obama have given signs they feel they could swallow this concession.
"I don't like these particular changes," said Democratic Representative Chris Van Hollen, a member of the House leadership from Maryland. But he added: "What people are seeing is the president willing to compromise in order to get things done.

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Sanofi to pay $109 million to settle U.S. kickback charges

French drugmaker Sanofi has agreed to pay $109 million to settle charges that it violated the False Claims Act by providing free drugs as a form of kickbacks to physicians, the U.S. Justice Department announced on Wednesday.
The settlement resolves allegations that Sanofi submitted false average sales price reports for the drug Hyalgan, a knee injection to treat arthritis, that did not account for free units distributed contingent on future purchases.
Average sales prices are used to determine reimbursement rates by government health programs, such as Medicare. The Justice Dept said the practice caused government programs to pay inflated amounts for Hyalgan and a competing product.
Sanofi sales representatives were given thousands of free "sample" Hyalgan syringes and used the free drug as kickbacks with a promise to provide negotiated numbers of the syringes in order to lower Hyalgan's effective price, the government claimed.
The drugmaker said it had taken "strong, proactive and effective steps" to address the issue and voluntarily halted the Hyalgan sampling program in 2009.
The settlement with the U.S. Attorney's Office, District of Massachusetts, the U.S. Department of Justice and several states resolves all claims arising out of the investigation into sampling of Hyalgan, Sanofi said.
In addition to the $109 million payment, Sanofi said it expects to enter into a Corporate Integrity Agreement with the Office of the Inspector General of the United States Department of Health and Human Services that will place its operations under enhanced scrutiny.
There are no criminal charges against the company related to the Hyalgan allegations.

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Colorado Woman Billed Medicaid for Dead Father

A Colorado woman was convicted this week for felony forgery for submitting fraudulent documents to Medicaid regarding personal health care services provided to her father after he died. It was the second announcement of Medicaid fraud-related convictions made by the Colorado Attorney General's office in less than a week. Here are the details.
* According to the office of Colorado Attorney General John Suthers, 52-year-old Viola Kwong pleaded guilty to felony forgery in Denver District Court on Tuesday. She was sentenced to pay $16,000 in criminal restitution and perform 50 hours of public service. The restitution reflects all of the money illegally received by Kwong.
* Kwong will also be placed on supervised probation for four years, is responsible for all court costs and probation supervision fees associated with her case, and will pay a civil penalty of more than $37,000 to the Colorado Medicaid program, the Attorney General's Office stated.
* The Attorney General's Office stated that Kwong had requested services for her elderly father through a Medicaid program that allows the Medicaid client to direct his or her own home-based medical care.
* Because Kwong's father was too ill to manage his care, Kwong was authorized by the program as his personal representative, in charge of obtaining those services for her father.
* Kwong's father died on July 23, 2010, but Kwong continued to submit documents about personal health care services that were being provided to her father until Nov. 8, 2010.
* Suthers stated that the restitution ordered was "another significant recovery for Colorado's Medicaid program."
* Colorado Department of Health Care Policy and Financing initially referred the case to the Attorney General's Medicaid Fraud Control Unit.
* Last week, the Attorney General's Office announced the conviction of occupational therapist Cheryl Moss, 47, for felony theft and felony forgery. Moss pleaded guilty to forging treatment records and fraudulently billing the Colorado Medicaid program for services she did not perform.
* Moss agreed to repay the program $54,332, serve 60 days home detention and perform 300 hours of community service. She was also ordered to pay an additional $46,000 to resolve any potential civil issues and to report her conviction to the agency charged with licensing occupational therapists in Colorado.
* According to the Attorney General, Medicaid is health insurance for qualifying low-income, disabled individuals, and children and families. Covered services include hospital care, skilled nursing home care, residential adult family care services, hospice, mental health, dental and eyeglass services. Each state administers its own Medicaid program.

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U.S. teen smoking declines to record low in 2012: study

 Cigarette smoking among American teenagers dropped to a record low in 2012, a decline that may have been partly driven by a sharp hike in the federal tobacco tax, researchers said on Wednesday.
An annual survey of about 45,000 students in the eighth, 10th and 12th grades found that the overall proportion of those saying they had smoked in the prior 30 days fell by just over a percentage point to 10.6 percent.
"A one percentage point decline may not sound like a lot, but it represents about a 9 percent reduction in a single year in the number of teens currently smoking," Lloyd Johnston, the principal investigator in the study, said in a statement.
He said reductions on that scale can translate into the prevention of thousands of premature deaths and tens of thousands of cases of cancer and other serious disease.
More than 400,000 Americans are estimated to die prematurely each year as a result of cigarette smoking - the No. 1 cause of preventable U.S. deaths - and most smokers begin their habit as adolescents, experts say.
Healthcare advocates hailed Wednesday's findings as evidence that higher cigarette taxes were paying off, combined with federal curbs on youth-oriented tobacco marketing and sales and a sweeping anti-smoking media campaign.
The researchers also cited the increase in federal cigarette taxes, raised by 62 cents a pack in 2009, as a likely contributing factor. The findings were part of an annual survey by University of Michigan researchers released by the National Institute on Drug Abuse.
Smoking rates fell for each of the individual age groups surveyed, most notably among eighth graders - from 6.1 percent in 2011 to 4.9 percent in 2012, the survey found.
Longer-term trends showed teen smoking rates dropping by about three-fourths among eighth graders, two-thirds among 10th graders and by half among 12th graders since a peak in the mid-1990s, researchers said.
One reason cited by experts is that the proportion of students who have ever tried smoking has declined sharply. Whereas nearly half of all eighth graders had tried cigarettes in 1996, just 16 percent had done so this year.
Teen attitudes toward smoking also continued to become more negative. For example, 80 percent of teens said they preferred to date nonsmokers in 2012.
But anti-tobacco advocates said their battle to stamp out teen smoking was far from over, noting that 17 percent of high school seniors still graduate as smokers.
Researchers singled out concerns over new forms of smokeless tobacco, including dissolvable products like Camel-branded "Orbs" and "Strips," and a fine, moist form of snuff called snus (rhymes with "loose"), which users place under their upper lip.
They said a significant portion of older teens have experimented with small cigars and water pipes called hookahs, which are becoming popular among young adults.
"We cannot let our guard down when the tobacco industry still spends $8.5 billion a year - nearly $1 million ever hour - to market its deadly and addictive products and is pushing new products ... that entice youth," said Susan Liss, executive director for the Campaign for Tobacco-Free Kids.

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Muni tax break under threat from bipartisan scrutiny in congress

 The tax break that U.S. states, cities and counties get on the bonds they issue is in growing jeopardy now that Republicans, in addition to Democrats, are considering limits on the exemption.
As part of the "fiscal cliff" negotiations to raise more federal government tax revenue, Republican lawmakers have joined Democrats in reevaluating the costly tax break, said Republican congressional aides and lobbyists.
Municipal bonds issued by states and localities are a $3.7 trillion U.S. market underpinned by a law that exempts their interest income from taxation. This allows states and localities to tap capital markets more cheaply than private-sector borrowers such as banks and corporations.
"The muni bond exemption is on the table, not only during tax reform, but also during the 'fiscal cliff,'" said Mike Nicholas of the Bond Dealers of America, a lobbying group for fixed-income securities dealers and banks.
That the tax break - deeply embedded in the economy and vital to state and local governments - would draw the interest of Republicans shows how far Washington has come in a short time in considering potentially dramatic tax-and-spending changes.
As the United States grapples with a huge budget deficit and a complex tax code that has not been revamped in 26 years, even once politically untouchable tax breaks are being questioned.
The "fiscal cliff" refers to sharp tax increases and spending cuts that take effect in 18 days unless Congress intervenes soon.
Some lawmakers from both parties are calling for a comprehensive tax code overhaul in 2013 and groups concerned with the muni bond exemption are worried.
"We have not felt this threat level being this real in a long time," said David Parkhurst, legislative director with the National Governors Association, which represents the leaders of U.S. states that rely heavily on the muni bond tax exemption.
SUBSIDIZING STATES, LOCALITIES
The exemption benefits bond investors on one side of the market and state and local governments on the other. Effectively a subsidy for states and localities, the muni exemption cost U.S. taxpayers about $26.2 billion in 2011.
President Barack Obama in 2011 included the exemption among items subject to his proposed 28-percent cap on deductions and other tax breaks for individuals earning more than $200,000.
That proposal alarmed muni bond issuers and investors, who were already on edge because of a proposal to kill the exemption entirely in 2010's Simpson-Bowles deficit reduction plan.
Now, Republicans are rethinking their traditional reluctance to tinker with muni bonds, largely because they want to find ways to increase federal revenues without raising tax rates.
Phasing out the muni bond tax break for individual taxpayers earning more than $200,000 could raise about $10 billion a year - or about $100 billion over a decade - Republican aides said.
In the fight over the "fiscal cliff," Republicans hope to refute Obama's argument that real deficit reduction cannot be achieved without raising tax rates on high-income Americans.
Senator Orrin Hatch, the top Republican on the Senate Finance Committee, said tax breaks of all sorts need to be weighed in the effort to raise revenue and cut the deficit, but that "they are not easy to get rid of."
FROM STATES TO SCHOOLS
New issuance of tax-exempt bonds is expected to hit about $400 billion in 2013, up from about $370 billion this year, according to investment bank Loop Capital Markets LLC.
Jurisdictions that issue tax-exempt bonds range from states to cities, counties and school districts. They defend the bonds as vital to transportation, infrastructure and other public projects, which would be threatened by an exemption roll-back.
"It certainly couldn't come at a worse time," New York State Comptroller Thomas DiNapoli told Reuters last week, referring to the devastation the region suffered during Hurricane Sandy.
"Even before the storm, we had tremendous infrastructure needs that localities were trying to address and now we're going to have even more."
It is unclear exactly what sort of limitations Republicans have in mind. The Obama proposal would apply to all bond issues.
Citigroup Inc muni bond strategist George Friedlander has estimated that Obama's cap, if enacted, would raise state and local government borrowing costs.
The "fiscal cliff" talks and a possible tax code overhaul next year pose "a clear and present danger" for muni bond issuers and investors, Friedlander said in a recent research report.

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Boehner plan would bring top U.S. income tax rate to 39.6 percent: source

 House of Representatives Speaker John Boehner's latest "fiscal cliff" proposal to President Barack Obama would see the top income tax rates rise to 39.6 percent from 35 percent for those with net incomes above $1 million a year, according to a source familiar with the talks.
The source, who asked not to be identified, emphasized that the income tax rate increase would be in exchange for "significant entitlement reforms/spending cuts." Entitlement programs include Medicare and Medicaid healthcare for the elderly and poor and Social Security retirement benefits.
The White House has not accepted Boehner's proposal, according to another source. Under current law, the top tax rate is scheduled to rise to 39.6 percent on January 1, unless Congress extends the current 35 percent, as Republicans had been urging.

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House Republicans eye limited fiscal cliff bill

With time running short before a Dec. 31 deadline, House of Representatives Speaker John Boehner will begin work on legislation that simply would extend current low income tax rates for all families with incomes below $1 million a year, according to an aide.
Negotiations will continue with the White House on a broader tax and spending deal, the Boehner aide said.
Boehner is presenting the plan to rank-and-file Republicans in a closed-door session.
On January 1, income tax increases for most Americans will begin unless Congress acts.
Last July, the Democratic-controlled Senate passed a bill to extend the current low rates for all families with net incomes below $250,000 a year. The House Republican proposal, if passed by the House, would require agreement by the Senate or force a round of negotiations on a compromise between the two chambers.
In excerpts of remarks Boehner was delivering to his Republican members Tuesday morning, the speaker complained that "the White House just can't seem to bring itself to agree to a 'balanced' approach" to deficit-reduction in negotiations. At the same time, Boehner said Republicans were "leaving the door wide open for something better" than just the limited extension of current low tax rates for most Americans.
"Current law has tax rates going up on everyone January 1. The question for us is real simple: How do we stop as many of those rate hikes as possible?" Boehner said.
For months, Democrats have been urging House Republicans to pass a bill protecting middle-class taxpayers from a January 1 rate increase.

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Senator Reid rejects Boehner "fiscal cliff" backup plan

- House Speaker John Boehner's backup plan that would simply extend low income tax rates for households with incomes below $1 million a year "cannot pass both houses of Congress," Senate Majority Leader Harry Reid said on Tuesday.
Reid, a Democrat, said Boehner instead should focus on reaching a broad deficit-reduction deal with President Barack Obama. "Now is the time to show leadership, not kick the can down the road," Reid said.
Last July, Reid's Democrats passed a bill in the Senate that would have continued low tax rates, which are set to expire on December 31, for families with net incomes below $250,000.

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White House defends offer as 'good faith effort'

 The White House is defending President Barack Obama's proposal to set a higher threshold for tax increases than what he vowed to do during his presidential campaign. The White House says Obama has moved halfway to meet House Speaker John Boehner on a "fiscal cliff" deal that raises $1.2 trillion in tax revenue, down from the $1.6 trillion Obama had initially requested.
White House spokesman Jay Carney says that offering to raise taxes on taxpayers earning more than $400,000 rather than the $200,000 he ran on demonstrates, in Carney's words, Obama's good faith effort to reach a compromise.
The new tax proposal is contained in a broader plan that Obama gave Boehner Monday that would cut spending further and lower cost-of-living increases for most Social Security beneficiaries.

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Selling flak jackets in the cyberwars

SAN FRANCISCO (Reuters) - When the Israeli army and Hamas trade virtual blows in cyberspace, or when hacker groups like Anonymous rise from the digital ether, or when WikiLeaks dumps a trove of classified documents, some see a lawless Internet.
But Matthew Prince, chief executive at CloudFlare, a little-known Internet start-up that serves some of the Web's most controversial characters, sees a business opportunity.
Founded in 2010, CloudFlare markets itself as an Internet intermediary that shields websites from distributed denial-of-service, or DDoS, attacks, the crude but effective weapon that hackers use to bludgeon websites until they go dark. The 40-person company claims to route up to 5 percent of all Internet traffic through its global network.
Prince calls his company the "Switzerland" of cyberspace - assiduously neutral and open to all comers. But just as companies like Twitter, YouTube and Facebook have faced profound questions about the balance between free speech and openness on the Internet and national security and law enforcement concerns, CloudFlare's business has posed another thorny question: what kinds of services, if any, should an American company be allowed to offer designated terrorists and cyber criminals?
CloudFlare's unusual position at the heart of this debate came to the fore last month, when the Israel Defense Forces sought help from CloudFlare after its website was struck by attackers based in Gaza. The IDF was turning to the same company that provides those services to Hamas and the al-Quds Brigades, according to publicly searchable domain information. Both Hamas and al-Quds, the military wing of the Palestinian Islamic Jihad, are designated by the United States as terrorist groups.
Under the USA Patriot Act, U.S. firms are forbidden from providing "material support" to groups deemed foreign terrorist organizations. But what constitutes material support - like many other facets of the law itself - has been subject to intense debate.
CloudFlare's dealings have attracted heated criticism in the blogosphere from both Israelis and Palestinians, but Prince defended his company as a champion of free speech.
"Both sides have an absolute right to tell their story," said Prince, a 38-year old former lawyer. "We're not providing material support for anybody. We're not sending money, or helping people arm themselves."
Prince noted that his company only provides defensive capabilities that enable websites to stay online.
"We can't be sitting in a role where we decide what is good or what is bad based on our own personal biases," he said. "That's a huge slippery slope."
Many U.S. agencies are customers, but so is WikiLeaks, the whistle-blowing organization. CloudFlare has consulted for many Wall Street institutions, yet also protects Anonymous, the "hacktivist" group associated with the Occupy movement.
Prince's stance could be tested at a time when some lawmakers in the United States and Europe, armed with evidence that militant groups rely on the Web for critical operations and recruitment purposes, have pressured Internet companies to censor content or cut off customers.
Last month, conservative political lobbies, as well as seven lawmakers led by Ted Poe, a Republican from Texas, urged the FBI to shut down the Hamas Twitter account. The account remains active; Twitter declined to comment.
MATERIAL SUPPORT
Although it has never prosecuted an Internet company under the Patriot Act, the government's use of the material support argument has steadily risen since 2006. Since September 11, 2001, more than 260 cases have been charged under the provision, according to Fordham Law School's Terrorism Trends database.
Catherine Lotrionte, the director of Georgetown University's Institute for Law, Science and Global Security and a former Central Intelligence Agency lawyer, argued that Internet companies should be more closely regulated.
"Material support includes web services," Lotrionte said. "Denying them services makes it more costly for the terrorists. You're cornering them."
But others have warned that an aggressive government approach would have a chilling effect on free speech.
"We're resurrecting the kind of broad-brush approaches we used in the McCarthy era," said David Cole, who represented the Humanitarian Law Project, a non-profit organization that was charged by the Justice Department for teaching law to the Kurdistan Workers' Party, which is designated by the United States as a terrorist group. The group took its case to the Supreme Court but lost in 2010.
The material support law is vague and ill-crafted, to the point where basic telecom providers, for instance, could be found guilty by association if a terrorist logs onto the Web to plot an attack, Cole said.
In that case, he asked, "Do we really think that AT&T or Google should be held accountable?"
CloudFlare said it has not been contacted about its services by the U.S. government. Spokespeople for Hamas and the Palestinian Islamic Jihad, told Reuters they contracted a cyber-security company in Gaza that out-sources work to foreign companies, but declined to comment further. The IDF confirmed it had hired CloudFlare, but declined to discuss "internal security" matters.
CloudFlare offers many of its services for free, but the company says websites seeking advanced protection and features can see their bill rise to more than $3,000 a month. Prince declined to discuss the business arrangements with specific customers.
While not yet profitable, CloudFlare has more than doubled its revenue in the past four months, according to Prince, and is picking up 3,000 new customers a day. The company has raked in more than $22 million from venture capital firms including New Enterprise Associates, Venrock and Pelion Venture Partners.
Prince, a Midwestern native with mussed brown hair who holds a law degree from the University of Chicago, said he has a track record of working on the right side of the law.
A decade ago, Prince provided free legal aid to Spamhaus, an international group that tracked email spammers and identity thieves. He went on to create Project Honey Pot, an open source spam-tracking endeavor that turned over findings to police.
Prince's latest company, CloudFlare, has been hailed by groups such as the Committee to Protect Journalists for protecting speech. Another client, the World Economic Forum, named CloudFlare among its 2012 "technology pioneers" for its work. But it also owes its profile to its most controversial customers.
CloudFlare has served 4Chan, the online messaging community that spawned Anonymous. LulzSec, the hacker group best known for targeting Sony Corp, is another customer. And since last May, the company has propped up WikiLeaks after a vigilante hacker group crashed the document repository.
Last year, members of the hacker collective UgNazi, whose exploits include pilfering user account information from eBay and crashing the CIA.gov website, broke into Prince's cell phone and email accounts.
"It was a personal affront," Prince said. "But we never kicked them off either."
Prince said CloudFlare would comply with a valid court order to remove a customer, but that the Federal Bureau of Investigation has never requested a takedown. The company has agreed to turn over information to authorities on "exceedingly rare" occasions, he acknowledged, declining to elaborate.
"Any company that doesn't do that won't be in business long," Prince said. But in an email, he added: "We have a deep and abiding respect for our users' privacy, disclose to our users whenever possible if we are ordered to turn over information and would fight an order that we believed was not proper."
Juliannne Sohn, an FBI spokeswoman, declined to comment.
Michael Sussmann, a former Justice Department lawyer who prosecuted computer crimes, said U.S. law enforcement agencies may in fact prefer that the Web's most wanted are parked behind CloudFlare rather than a foreign service over which they have no jurisdiction.
Federal investigators "want to gather information from as many sources as they can, and they're happy to get it," Sussmann said.
In an era of rampant cyber warfare, Prince acknowledged he is something of a war profiteer, but with a wrinkle.

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Samsung Smart TVs: The next frontier for data theft and hacking [video]

Smart TVs, particularly Samsung’s (005930) last few generations of flat screens, can be hacked to give attackers remote access according to a security startup called ReVuln. The company says it discovered a “zero-day exploit” that hackers could potentially use to perform malicious activities that range from stealing accounts linked through apps to using built-in webcams and microphones to spy on unsuspecting couch potatoes. Don’t panic just yet, though. In order for the exploit to be activated, a hacker needs to plug a USB drive loaded with malicious software into the actual TV to bypass the Linux-based OS/firmware on Samsung’s Smart TVs. But, if a hacker were to pull that off, every piece of data stored on a Smart TV could theoretically be retrieved.
[More from BGR: Has the iPhone peaked? Apple’s iPhone 4S seen outselling iPhone 5]
[More from BGR: Dell confirms it will exit smartphone business, drop Android]
As if the possibility of someone stealing your information and spying on you isn’t scary enough, according to ComputerWorld, “it is also possible to copy the configuration of a TV’s remote control, which would allow a hacker to copy the remote control’s settings, and remotely change the channel.”
ReVuln told The Register it hasn’t informed Samsung of the vulnerability and plans to sell the details of in hopes of “speeding up” development of a fix. A video of the exploit as proof from ReVuln follows below.

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92K Missourians affected by insurance data breach

JEFFERSON CITY, Mo. (AP) -- State officials say the personal information of more than 92,000 Missourians was accessed by potential identity thieves who hacked the computer systems of Nationwide Insurance, which also does business as Allied Insurance.
Missouri's insurance department said Friday the Oct. 3 data breach could affect more than 1.1 million people across the country who did business with Nationwide or Allied.
Missouri's insurance director says the breach affected the records of people who got quotes for auto insurance after August 2011. The department says Nationwide believes the hackers accessed names, Social Security numbers, driver's license numbers and birth dates, among other things.
Nationwide is offering free credit monitoring and identity theft protection to people affected by the data breach. The insurer says it's not aware that the information has been misused.

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18 million Android devices could get whacked with malware in 2013

One security firm on Thursday claimed that 2013 will be the year of mobile malware for Android users, however no specific numbers had been given. The team at Lookout Mobile Security has painted a similar picture for Google’s (GOOG) operating system. The firm notes that more than 1.2 billion mobile devices are expected to be purchased in 2013 and in the following year users are forecasted to download over 70 billion mobile apps. Due to Android’s popularity, it is estimated that 18 million devices running the operating system may encounter some form of mobile malware. The likelihood that users will encounter malware or spyware, however, is heavily dependent on geographical location and behavior. Research from the security firm reveals that users in the U.S. have a 0.40% chance of seeing malware, compared those in Russia with a 34.7% chance.

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PUC approves writing rules for smart meter opt-out

EL PASO, Texas (AP) -- The Public Utility Commission has decided to develop a set of rules so consumers can opt out of the smart meters installed in millions of Texas homes and businesses.
Consumers have opposed the new meters, citing possible health hazards and privacy concerns. Some have installed steel cages around their analog meters to prevent utility workers from replacing them with the new digital units and one Houston woman held a gun to impede a utility worker from replacing her meter.
PUC spokesman Terry Hadley said Friday that an opt-out would leave already-installed smart meters in place but disable the devices' radio frequency capabilities.
A draft of the new rules will be written and submitted for public comment, Hadley said. After that, the PUC will vote again on whether to adopt them, which means there's still a chance the opt-out will fail. But, he said, "at this point the Commission is leaning toward an opt-out."
It will take several months until the new proposal is drafted and voted, Hadley said.
Smart meters allow for remote metering via radio frequency and are make the billing process cheaper since there is no need to send utility workers to read them. The meters also provide real-time information on energy consumption and help utilities prevent grid overloads during peak times. They also report to the utility when there is a power outage, making reconnection faster.
In websites and meetings organized by PUC, those against smart meters have spoken of possible government snooping and violations of the Fourth Amendment —unreasonable search and seizure — as well as the chance that hackers could access people's information from the meters.
On a petition template that's posted on www.bantexassmartmeters.com , meters are called "surveillance devices" because they record the household occupants' activities and can be used to "gain a highly invasive and detailed view" of their lives. Smart meters record consumption in 15-minute intervals.
Health hazards from the radio frequencies emitted by the meters have also been cited. The Public Utilities Commission says the meters have a lower impact than cellphones and microwave ovens and are well within Federal Communications Commission's standards for radio frequency devices.
It's likely that consumers who opt out will have to pay to have their meters read. As part of the rule-writing process, the Commission will gather information on how much it costs to send employees to read the meters and what disabling the radio frequency device would cost.
Users in California and Nevada pay between $75 and $107 to have the devices replaced along with monthly fees ranging from $8 to $10 to have the meters read. Meanwhile, Vermont legislators decided in May that utilities cannot charge users that opt out.
About 93 percent of the nearly 7 million smart meters in Texas' competitive markets for electricity, mainly in Houston and the Dallas-Fort Worth area, have been deployed, Hadley said.

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Cold weather kills 61 people in Poland since Oct.

WARSAW, Poland (AP) — Police in Poland have appealed to residents to dress warmly and look out for elderly and homeless people, after saying that 61 people have died of the cold weather since October.
Another 41 have been killed by carbon monoxide inhalation from coal or other ways of heating their homes since temperatures started falling.
The Interior Ministry said Friday the death toll from sub-freezing temperatures that set in in December was 49 people so far, compared to 19 in the whole of December last year. Another 15 people died of cold in October and five in November.
In most cases the victims are homeless people, or people under the influence of alcohol that fell asleep outside.
Sub-freezing temperatures and snow are usual winter conditions in Poland.

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French leader honors troops home from Afghanistan

PARIS (AP) — President Francois Hollande on Friday declared "mission accomplished" for French combat troops in Afghanistan, hailing their 11-year military commitment even as the fight goes on for France's NATO allies.
After his election in May, Hollande announced a fast-track pullout of French combat troops from NATO's mission in Afghanistan by year-end — a goal now achieved. Increasingly, France has turned its focus to helping rebuild civilian sector institutions and foster diplomatic initiatives, including hosting a secretive meeting of rival Afghan factions north of Paris as the president spoke.
The Socialist leader has argued that France has done its part in Afghanistan and achieved its goals, and reiterated that theme as he hosted at the presidential palace dozens of soldiers who recently returned home.
"I say to you all: 'mission accomplished.' I also say to you: 'exemplary action'. I say to you: 'congratulations,'" he told them.
U.S. President George W. Bush infamously used the term "mission accomplished" in 2003 after U.S.-led forces toppled Saddam Hussein in Iraq, though some of the worst bloodshed in that war was yet to come and U.S. troops remained in Iraq for 8 1/2 more years.
While Hollande was speaking to French troops, NATO forces overall are still very much engaged in combat against the Taliban and other insurgents fighting Afghanistan's government.
France, which has lost 88 soldiers in Afghanistan, still has 1,500 troops there who are repatriating equipment or working in roles like providing medical care or helping operate Kabul's airport. Hollande said the numbers will decline to 500 by mid-2013. France had a peak deployment of some 4,000 troops in Afghanistan under former President Nicolas Sarkozy.
"There are no more French combat troops in Afghanistan — this is an important moment for you, for our country, and for Afghanistan," Hollande said. "We have now a part to play, but a different one." He said France's financial contribution will reach €300 million ($396 million), to help Afghanistan transition from war to peace in the coming years.
Meanwhile, in the town of Chantilly about 50 kilometers (30 miles) north of Paris, representatives of Afghan President Hamid Karzai's government, the Taliban and Hezb-e-Islami Islamic militant groups, as well as the political opposition, were meeting for a second straight day. They are discussing their country's long-term future — well beyond 2014, when the majority of NATO forces, including those of the United States, are set to leave.
Hosted by a French think tank in the presence of some French officials, the 20-odd delegates have been discussing since Thursday three topics to better understand each other's positions: The political balance in Afghanistan into 2020, the nature of Afghan sovereignty and the necessary parameters for long-lasting peace, according to Mahmoud Saikal, a high-level member of opposition leader Abdullah Abdullah's party.
"I doubt there will be a definite resolution of any kind emerging from this gathering," Saikal said. "It will definitely help building up confidence between the armed opposition forces of this country and the political opposition groups."
"The sheer fact that we do have a couple representatives of the Taliban is an achievement," he said.
Among the most significant delegates was Shahabudin Delwar, who served as Afghanistan's ambassador to Saudi Arabia and Pakistan under the Taliban regime that was ousted by the U.S.-led invasion in 2001. French hosts declined to specify the guest list, or provide access to the participants to journalists during the closed-door meeting. Police blocked off access to the luxury hotel where the Afghans were meeting.

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Russian parliament passes anti-US adoption measure

MOSCOW (AP) — The lower house of the Russian parliament on Friday overwhelmingly passed a bill that would ban adoption of Russian children by Americans, sending the controversial legislation a step closer to President Vladimir Putin's desk.
Putin hasn't said whether he will sign the measure into law if it passes its next stage of being approved by the upper house.
Some top government officials including the foreign minister and the education minister have spoken flatly against the bill, one part of a larger measure by angry lawmakers retaliating against a recently signed U.S. law that calls for sanctions against Russians deemed to be human rights violators.
It nonetheless received strong approval in Friday's third reading in the State Duma, passing by a vote of 420-7-1. The upper house, the Federation Council, is likely to consider the measure on Wednesday, vice-speaker Alexander Torshin was quoted as saying by the Interfax news agency.
Torshin said there is "serious basis for supposing the draft bill will be supported by the Federation Council."
Originally the bill was more or less a tit-for-tat response, providing for travel sanctions and the seizure of financial assets in Russia of Americans determined to have violated the rights of Russians.
But it was expanded to include the adoption measure and call for the banning of any organizations that are engaged in political activities if they receive funding from U.S. citizens or are determined to be a threat to Russia's interests. In addition, it calls for anyone with dual Russian-U.S. citizenship to be banned as members of political organizations.
The U.S. said the adoption law would needlessly stop hundreds of Russian children from finding families.
"The welfare of children is simply too important to be linked to other issues in our bilateral relationship," U.S. Ambassador Michael McFaul said in a statement.
The bill is a dramatic demonstration of two strains of animosity toward the United States. The Russian political establishment resents the United States for allegedly meddling in the country's internal affairs; Putin has charged that opposition protests over the past year were the work of U.S.-funded troublemakers. Many Russians are angered by cases of adopted children abused in America and by the alleged lenience of courts in these cases.
The Duma bill is named in honor of Dima Yakovlev, a Russian toddler who was adopted by Americans and then died in 2008 after his father left him in a car in broiling heat for hours. The father was found not guilty of involuntary manslaughter.
Anger over abuse peaked in 2010 when an American woman sent her 7-year-old adopted Russian son back to Moscow on a plane alone, saying he had emotional problems and she could no longer care for him.
Despite abuse cases, Russian critics of the bill say it would ultimately victimize orphans by depriving them of an opportunity to escape often-dismal Russian orphanages. There are about 740,000 children without parental custody in Russia, according to UNICEF. Russians historically have been less inclined to adopt children than in many other cultures.
More than 60,000 Russian children have been adopted in the United States in the past 20 years, McFaul said.
But Russia's children's ombudsman Pavel Astakhov, one of the strongest critics of U.S. abuse cases, says the solution is for Russia to adopt a national program to improve orphans' prospects.
"It's necessary to strictly hold to the principle of priority for Russian adopters," he told Interfax after the Duma vote.

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UK doctor stripped of license over death of Iraqi

LONDON (AP) — A British doctor was stripped of his medical license Friday for misconduct and dishonesty over the death of an Iraqi man who was beaten and killed while in the custody of British troops.
The latest fallout from Britain's troubled occupation of Iraq came as defense officials confirmed they have paid 14 million pounds ($23 million) to settle claims of abuse from more than 200 Iraqis.
Dr. Derek Keilloh treated Baha Mousa, a hotel clerk who died at a British base after being detained in Basra in September 2003 during a sweep for insurgents. Keilloh, then a 28-year-old captain in the Queen's Lancashire Regiment, tried unsuccessfully to revive Mousa, but denied knowledge of the scale of the man's injuries.
A public inquiry found that Mousa had sustained 93 injuries, including fractured ribs and a broken nose, in an "appalling episode of serious gratuitous violence" by British troops.
Dr. Jim Rodger of the Medical and Dental Defense Union of Scotland — which supported Keilloh — said the doctor was "extremely disappointed" by the ruling and was considering what to do next. He has 28 days to submit an appeal.
Last week, the Medical Practitioners Tribunal Service ruled that Keilloh knew of the injuries and failed to adequately examine Mousa's body. It said he also failed to inform senior officers of what was going on and protect other detainees from further mistreatment.
The tribunal also ruled that Keilloh engaged in "misleading and dishonest conduct" by maintaining under oath that he had seen no injuries to Mousa's body.
On Friday, the tribunal said that even though Keilloh had not harmed Mousa — and had tried his best to save him in a "highly charged, chaotic, tense and stressful" situation — the doctor should be barred from practicing medicine for at least five years.
"The panel has identified serious breaches of good medical practice and, given the gravity and nature of the extent and context of your dishonesty, it considers that your misconduct is fundamentally incompatible with continued registration," said Dr. Brian Alderman, a member of the tribunal.
Baha Mousa's father, Daoud Mousa, said he wished the doctor had been banned for life.
"He did not have humanity in his heart when he was supposed to be caring for my son," Daoud Mousa said. "He did not do his job properly."
The death of Mousa and mistreatment of other detainees blighted Britain's six-year deployment in southern Iraq, which ended in 2009.
Britain's defense authorities eventually apologized for the mistreatment of Mousa and nine other Iraqis and paid a 3-million-pound ($4.9-million) settlement. Six soldiers were cleared of wrongdoing at a court martial, while another pleaded guilty and served a year in jail.
The defense ministry said Friday that Britain has paid 14 million pounds to settle 205 damages claims since 2008, including 162 this year. A further 196 claims are being negotiated.
It said most of the 120,000 British troops who served in Iraq "conducted themselves with the highest standards of integrity and professionalism."

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NATO: Syria using Scud-type rockets again

BRUSSELS (AP) — The Syrian military has continued to fire Scud-type missiles, NATO's top official said Friday, describing the move as an act of desperation of a regime nearing its end.
Although none of the Syrian rockets hit Turkish territory, Secretary-General Anders Fogh Rasmusen said the use of the medium-range ballistic rockets showed that NATO was justified in deploying six batteries of Patriot anti-missile systems in neighboring Turkey.
The United States, Germany and the Netherlands will each provide two batteries of the U.S.-built air defense systems to Turkey. More than 1,000 American, German and Dutch troops will man the batteries, likely from sites well inland in Turkey.
Syria's use of missiles are "acts of a desperate regime approaching collapse," Fogh Rasmussen told reporters at NATO headquarters in Brussels.
A week ago, U.S. and NATO officials said the Syrians had used the ground-to-ground rockets for the first time in the nearly two-year conflict. Damascus immediately denied the claims.
Syria is reported to have an array of artillery rockets, as well as medium-range missiles — some capable of carrying chemical warheads. These include Soviet-built SS-21 Scarabs and Scud-B missiles, originally designed to deliver nuclear warheads.
On Thursday, NATO's supreme commander U.S. Adm. James Stavridis said the Patriot batteries will be shipped to Turkey within the next few days. He said he expected them to achieve initial operational capability next month.
Stavridis said the chain of command starts with himself as the operational commander, through NATO's air component command in Ramstein, Germany, and down to the commanders of the Patriot batteries at their locations in southern Turkey.
The operation will be closely coordinated with the Turkish air defense system, he said.

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