Warning: count(): Parameter must be an array or an object that implements Countable in /home/tbrnew5/public_html/wp-includes/post-template.php on line 284

Warning: count(): Parameter must be an array or an object that implements Countable in /home/tbrnew5/public_html/wp-includes/post-template.php on line 284

Warning: count(): Parameter must be an array or an object that implements Countable in /home/tbrnew5/public_html/wp-includes/post-template.php on line 284

Warning: count(): Parameter must be an array or an object that implements Countable in /home/tbrnew5/public_html/wp-includes/post-template.php on line 284

TBR News October 11, 2016

Oct 11 2016

The Voice of the White House  

 

Washington, D.C.  October 11, 2016:”The obvious ability of Vladimir Putin to second guess Washington’s every move is not a secret. Is he psychic? No, but Russian intelligence has performer miracles in that it has the capacity to unlock any computer system, even those believed by their users as being “absolutely secure.” The present presidential election is a case in point. A good part of Europe and certainly Russia does not want to see Hillary Clinton in the White House. She is viewed as a warmonger, greedy beyond belief, a sick person who loses physical control and very pro-Israel. The releasing of highly embarrassing emails is by no means an accident and the public should look for more and more revelations before the election.”

SECRECY NEWS

From the FAS Project on Government Secrecy

Volume 2016, Issue No. 83

October 11, 2016

AMOUNT OF CLASSIFICATION IS HIGHLY UNCERTAIN

One of the more encouraging changes in classification policy over the past decade has been the sharp reduction in the number of decisions to classify information reported each year by executive branch agencies.

In 2005 there were a total of 258,633 original classification actions, or new secrets, reported; in 2015, there were said to be 53,425 such actions. (See Number of New Secrets in 2015 Near Historic Low, Secrecy News, July 29, 2016).

Despite the misleading precision with which they are reported, these numbers — which are derived from agency reports to the Information Security Oversight Office and published in ISOO annual reports — were understood to be estimates, not precise tabulations.

Now, however, a new report from the State Department Inspector General suggests that State’s reporting of its classification activity to ISOO may not only be imprecise, but actually inaccurate and incorrect.

The Inspector General “found shortcomings with the count of classification decisions” reported to ISOO. The estimates that were generated were not validated, and they did not reflect the full scope of State Department classification activity.

So, “For example, classified documents created within the Office of the Secretary were not included” in the survey, the IG said. See Compliance Follow-up Review of the Department of State’s Implementation of Executive Order 13526, Classified National Security Information, Office of Inspector General, Department of State, September 2016.

The bottom line, the IG said, is that reported classification totals “will not accurately represent all of the Department’s classification decisions because not all decisions are being identified or sampled as part of the Department’s self-inspection program.”

William Cira, the acting director of the Information Security Oversight Office, said he was not surprised by the Inspector General findings, and not especially troubled.

He recalled that ISOO itself stated in its 2009 report that “the data reported has not truly reflected the changing ways agencies have generated and used classified information in the electronic environment.”

“It has been recognized, even long before we asked the agencies to include the electronic environment, that an actual count is not feasible,” Mr. Cira added. “The sampling and extrapolation technique described in that report has been in widespread use for a long time.”

“It is actually one of the suggested methods that we impart to the agencies when we send out our data collection request each year. Since FY 2009, ISOO has asked agencies to do their best to estimate the volume of all classified products in the electronic environment.”

“We have always acknowledged that this would not be easy.  We do ask them [agencies] to estimate, we do suggest that they sample and extrapolate, and we acknowledge that in almost all cases they will not have the resources to conduct a scientific survey as that is defined by professional statisticians.”

“This method may seem crude but we recognize that almost none of agency data collectors have trained statisticians to call upon, and there is no expectation that they hire one.” Still, “If the Dept. of State OIG believes that the Office of the Secretary should be included that is a welcome suggestion.”

“The one thing for certain is that this method has been consistently applied across many agencies for a very long time,” Mr. Cira said.

In other words, if the collection method is crude, at least it is consistent in its crudeness, and so perhaps some rough trend information may still be discerned within the noise.

But without real quantitative and qualitative clarity, effective management of agency classification activity will be beyond reach.

SECURITY CLEARANCE REFORM GETS “RE-BASELINED”

The executive branch is reconfiguring its approach to vetting individuals for access to sensitive information and granting them security clearances in an attempt to modernize and improve its procedures, according to a new quarterly report.

“The Insider Threat and Security Clearance Reform (ITSCR) Cross Agency Priority (CAP) Goals have been re-baselined so that they are aligned with the new enterprise-wide focus . . . and its four work streams (Trusted Workforce, Modern Vetting, Secure and Modern Mission-Capable IT, and Continuous Performance Improvement) for modernizing the SSC [security, suitability/fitness, and credentialing] mission over the next five years.” See the Quarterly Progress Update on Insider Threat and Security Clearance Reform, FY2016 Quarter 3, September 2016.

Translated out of bureaucratic jargon, this statement… still remains obscure and hard to understand. But at the least, it implies a determination that existing arrangements are unsatisfactory and that they require adjustment.

Among other steps, the latest Quarterly Update says that by December of this year, the Office of the Director of National Intelligence will “Establish a policy that requires the national security population to report information of security concern to the proper authorities in a timely manner.” The exact nature of such a requirement and its likely effect on “the national security population” remain to be seen.

Though security clearance “reform” of some kind has been underway for many years, the recent arrest of former NSA contractor Harold T. Martin III on suspicion of theft and retention of classified information suggests that room for improvement still exists. (“NSA case highlights growing concerns over insider threats” by Christian Davenport, Washington Post, October 6).

A VACANCY ON THE PRESIDENTIAL TICKET, & MORE FROM CRS

A new report from the Congressional Research Service considers: “What would happen in 2016 if a candidate for President or Vice President were to die or leave the ticket any time between the national party conventions and the November 8 election day? What would happen if this occurred during presidential transition, either between election day and the December 19, 2016, meeting of the electoral college; or between December 19 and the inauguration of the President and Vice President on January 20, 2017?”

See Presidential Elections: Vacancies in Major-Party Candidacies and the Position of President-Elect, October 6, 2016.

It was a pleasant surprise to read in the Food section of the Washington Post last week that a new breed of perennial wheat called Kernza has now become commercially available. (“Perennial wheat is an ecologist’s dream. Soon it may be what’s for dinner” by Jane Black, October 2).

Perennial food grains have been pursued for decades by researchers at The Land Institute in Salina, Kansas because, unlike crops that must be annually resown, perennial grains can help to strengthen soil over time rather than depleting it.

But this kind of research into sustainable agriculture is not on the research agenda of the U.S. Department of Agriculture.

According to the Congressional Research Service, some critics “have argued that some of USDA’s agricultural research portfolio duplicates private sector activities on major crops, including corn, soybeans, wheat, and cotton. They argue that funding should be reallocated to basic, noncommercial research to benefit the public good that is not addressed through private efforts.” See Agricultural Research: Background and Issues, October 6, 2016.

Other new and updated reports from the Congressional Research Service include the following.

Presidential Transition Act: Provisions and Funding, updated October 5, 2016

Paris Climate Change Agreement to Enter into Force November 4, CRS Insight, October 5, 2016

Should the U.S. Relinquish Its Authority Over the Internet Domain Name System?, CRS Insight, October 5, 2016

Social Security Administration (SSA): FY2017 Appropriations and Recent Trends, October 5, 2016

Medicare: Insolvency Projections, updated October 5, 2016

State, Foreign Operations and Related Programs: FY2017 Budget and Appropriations, updated October 5, 2016

U.S. Foreign Assistance to Latin America and the Caribbean: Trends and FY2017 Appropriations, October 6, 2016

U.S. Invokes Visa Sanctions under Section 243(d) of the INA for the First Time in 15 Years, CRS Legal Sidebar, October 5, 2016

 

Crash: how computers are setting us up for disaster

We increasingly let computers fly planes and carry out security checks. Driverless cars are next. But is our reliance on automation setting us up for disaster?

October 11, 2016

by Tim Harford

The Guardian

When a sleepy Marc Dubois walked into the cockpit of his own aeroplane, he was confronted with a scene of confusion. The plane was shaking so violently that it was hard to read the instruments. An alarm was alternating between a chirruping trill and an automated voice: “STALL STALL STALL.” His junior co-pilots were at the controls. In a calm tone, Captain Dubois asked: “What’s happening?”

Co-pilot David Robert’s answer was less calm. “We completely lost control of the aeroplane, and we don’t understand anything! We tried everything!”

The crew were, in fact, in control of the aeroplane. One simple course of action could have ended the crisis they were facing, and they had not tried it. But David Robert was right on one count: he didn’t understand what was happening.

As William Langewiesche, a writer and professional pilot, described in an article for Vanity Fair in October 2014, Air France Flight 447 had begun straightforwardly enough – an on-time take-off from Rio de Janeiro at 7.29pm on 31 May 2009, bound for Paris. With hindsight, the three pilots had their vulnerabilities. Pierre-Cédric Bonin, 32, was young and inexperienced. David Robert, 37, had more experience but he had recently become an Air France manager and no longer flew full-time. Captain Marc Dubois, 58, had experience aplenty but he had been touring Rio with an off-duty flight attendant. It was later reported that he had only had an hour’s sleep.

Fortunately, given these potential fragilities, the crew were in charge of one of the most advanced planes in the world, an Airbus 330, legendarily smooth and easy to fly. Like any other modern aircraft, the A330 has an autopilot to keep the plane flying on a programmed route, but it also has a much more sophisticated automation system called fly-by-wire. A traditional aeroplane gives the pilot direct control of the flaps on the plane – its rudder, elevators and ailerons. This means the pilot has plenty of latitude to make mistakes. Fly-by-wire is smoother and safer. It inserts itself between the pilot, with all his or her faults, and the plane’s mechanics. A tactful translator between human and machine, it observes the pilot tugging on the controls, figures out how the pilot wanted the plane to move and executes that manoeuvre perfectly. It will turn a clumsy movement into a graceful one.

This makes it very hard to crash an A330, and the plane had a superb safety record: there had been no crashes in commercial service in the first 15 years after it was introduced in 1994. But, paradoxically, there is a risk to building a plane that protects pilots so assiduously from even the tiniest error. It means that when something challenging does occur, the pilots will have very little experience to draw on as they try to meet that challenge.

The complication facing Flight 447 did not seem especially daunting: thunderstorms over the Atlantic Ocean, just north of the equator. These were not a major problem, although perhaps Captain Dubois was too relaxed when at 11.02pm, Rio time, he departed the cockpit for a nap, leaving the inexperienced Bonin in charge of the controls.

Bonin seemed nervous. The slightest hint of trouble produced an outburst of swearing: “Putain la vache. Putain!” – the French equivalent of “Fucking hell. Fuck!” More than once he expressed a desire to fly at “3-6” – 36,000 feet – and lamented the fact that Air France procedures recommended flying a little lower. While it is possible to avoid trouble by flying over a storm, there is a limit to how high a plane can go. The atmosphere becomes so thin that it can barely support the aircraft. Margins for error become tight. The plane will be at risk of stalling. An aircraft stall occurs when the plane tries to climb too steeply. At this angle the wings no longer function as wings and the aircraft no longer behaves like an aircraft. It loses airspeed and falls gracelessly in a nose-up position.

Fortunately, a high altitude provides plenty of time and space to correct the stall. This is a manoeuvre fundamental to learning how to fly a plane: the pilot pushes the nose of the plane down and into a dive. The diving plane regains airspeed and the wings once more work as wings. The pilot then gently pulls out of the dive and into level flight once more.

As the plane approached the storm, ice crystals began to form on the wings. Bonin and Robert switched on the anti-icing system to prevent too much ice building up and slowing the plane down. Robert nudged Bonin a couple of times to pull left, avoiding the worst of the weather.

the plane began rocking right and left, and Bonin overcorrected with sharp jerks on the stick. And then Bonin made a simple mistake: he pulled back on his control stick and the plane started to climb steeply.

As the nose of the aircraft rose and it started to lose speed, the automated voice barked out in English: “STALL STALL STALL.” Despite the warning, Bonin kept pulling back on the stick, and in the black skies above the Atlantic the plane climbed at an astonishing rate of 7,000 feet a minute. But the plane’s air speed was evaporating; it would soon begin to slide down through the storm and towards the water, 37,500 feet below. Had either Bonin or Robert realised what was happening, they could have fixed the problem, at least in its early stages. But they did not. Why?

The source of the problem was the system that had done so much to keep A330s safe for 15 years, across millions of miles of flying: the fly-by-wire. Or more precisely, the problem was not fly-by-wire, but the fact that the pilots had grown to rely on it. Bonin was suffering from a problem called mode confusion. Perhaps he did not realise that the plane had switched to the alternate mode that would provide him with far less assistance. Perhaps he knew the plane had switched modes, but did not fully understand the implication: that his plane would now let him stall. That is the most plausible reason Bonin and Robert ignored the alarm – they assumed this was the plane’s way of telling them that it was intervening to prevent a stall. In short, Bonin stalled the aircraft because in his gut he felt it was impossible to stall the aircraft.

Aggravating this confusion was Bonin’s lack of experience in flying a plane without computer assistance. While he had spent many hours in the cockpit of the A330, most of those hours had been spent monitoring and adjusting the plane’s computers rather than directly flying the aircraft. And of the tiny number of hours spent manually flying the plane, almost all would have been spent taking off or landing. No wonder he felt so helpless at the controls.

The Air France pilots “were hideously incompetent”, wrote William Langewiesche, in his Vanity Fair article. And he thinks he knows why. Langewiesche argued that the pilots simply were not used to flying their own aeroplane at altitude without the help of the computer. Even the experienced Captain Dubois was rusty: of the 346 hours he had been at the controls of a plane during the past six months, only four were in manual control, and even then he had had the help of the full fly-by-wire system. All three pilots had been denied the ability to practise their skills, because the plane was usually the one doing the flying.

This problem has a name: the paradox of automation. It applies in a wide variety of contexts, from the operators of nuclear power stations to the crew of cruise ships, from the simple fact that we can no longer remember phone numbers because we have them all stored in our mobile phones, to the way we now struggle with mental arithmetic because we are surrounded by electronic calculators. The better the automatic systems, the more out-of-practice human operators will be, and the more extreme the situations they will have to face. The psychologist James Reason, author of Human Error, wrote: “Manual control is a highly skilled activity, and skills need to be practised continuously in order to maintain them. Yet an automatic control system that fails only rarely denies operators the opportunity for practising these basic control skills … when manual takeover is necessary something has usually gone wrong; this means that operators need to be more rather than less skilled in order to cope with these atypical conditions.”

The paradox of automation, then, has three strands to it. First, automatic systems accommodate incompetence by being easy to operate and by automatically correcting mistakes. Because of this, an inexpert operator can function for a long time before his lack of skill becomes apparent – his incompetence is a hidden weakness that can persist almost indefinitely. Second, even if operators are expert, automatic systems erode their skills by removing the need for practice. Third, automatic systems tend to fail either in unusual situations or in ways that produce unusual situations, requiring a particularly skilful response. A more capable and reliable automatic system makes the situation worse.

There are plenty of situations in which automation creates no such paradox. A customer service webpage may be able to handle routine complaints and requests, so that staff are spared repetitive work and may do a better job for customers with more complex questions. Not so with an aeroplane. Autopilots and the more subtle assistance of fly-by-wire do not free up the crew to concentrate on the interesting stuff. Instead, they free up the crew to fall asleep at the controls, figuratively or even literally. One notorious incident occurred late in 2009, when two pilots let their autopilot overshoot Minneapolis airport by more than 100 miles. They had been looking at their laptops.

When something goes wrong in such situations, it is hard to snap to attention and deal with a situation that is very likely to be bewildering.

His nap abruptly interrupted, Captain Dubois arrived in the cockpit 1min 38secs after the airspeed indicator had failed. The plane was still above 35,000 feet, although it was falling at more than 150 feet a second. The de-icers had done their job and the airspeed sensor was operating again, but the co-pilots no longer trusted any of their instruments. The plane – which was now in perfect working order – was telling them that they were barely moving forward at all and were slicing through the air down towards the water, tens of thousands of feet below. But rather than realising the faulty instrument was fixed, they appear to have assumed that yet more of their instruments had broken. Dubois was silent for 23 seconds – a long time, if you count them off. Long enough for the plane to fall 4,000 feet.

It was still not too late to save the plane – if Dubois had been able to recognise what was happening to it. The nose was now so high that the stall warning had stopped – it, like the pilots, simply rejected the information it was getting as anomalous. A couple of times, Bonin did push the nose of the aircraft down a little and the stall warning started up again STALL STALL STALL – which no doubt confused him further. At one stage he tried to engage the speed brakes, worried that they were going too fast – the opposite of the truth: the plane was clawing its way forwards through the air at less than 60 knots, about 70 miles per hour – far too slow. It was falling twice as fast. Utterly confused, the pilots argued briefly about whether the plane was climbing or descending.

Bonin and Robert were shouting at each other, each trying to control the plane. All three men were talking at cross-purposes. The plane was still nose up, but losing altitude rapidly.

Robert: “Your speed! You’re climbing! Descend! Descend, descend, descend!”

Bonin: “I am descending!”

Dubois: “No, you’re climbing.”

Bonin: “I’m climbing? OK, so we’re going down.”

Nobody said: “We’re stalling. Put the nose down and dive out of the stall.”

At 11.13pm and 40 seconds, less than 12 minutes after Dubois first left the cockpit for a nap, and two minutes after the autopilot switched itself off, Robert yelled at Bonin:“Climb … climb … climb … climb …” Bonin replied that he had had his stick back the entire time – the information that might have helped Dubois diagnose the stall, had he known.

Finally the penny seemed to drop for Dubois, who was standing behind the two co-pilots. “No, no, no … Don’t climb … no, no.”

Robert announced that he was taking control and pushed the nose of the plane down. The plane began to accelerate at last. But he was about one minute too late – that’s 11,000 feet of altitude. There was not enough room between the plummeting plane and the black water of the Atlantic to regain speed and then pull out of the dive.

In any case, Bonin silently retook control of the plane and tried to climb again. It was an act of pure panic. Robert and Dubois had, perhaps, realised that the plane had stalled – but they never said so. They may not have realised that Bonin was the one in control of the plane. And Bonin never grasped what he had done. His last words were: “But what’s happening?”

Four seconds later the aircraft hit the Atlantic at about 125 miles an hour. Everyone on board, 228 passengers and crew, died instantly.

Earl Wiener, a cult figure in aviation safety, coined what is known as Wiener’s Laws of aviation and human error. One of them was:“Digital devices tune out small errors while creating opportunities for large errors.” We might rephrase it as: “Automation will routinely tidy up ordinary messes, but occasionally create an extraordinary mess.” It is an insight that applies far beyond aviation.

Victor Hankins, a British citizen, received an unwelcome gift for Christmas: a parking fine. The first Hankins knew of the penalty was when a letter from the local council dropped on to his doormat. At 14 seconds after 8.08pm on 20 December 2013, his car had been blocking a bus stop in Bradford, Yorkshire, and had been photographed by a camera mounted in a passing traffic enforcement van. A computer had identified the number plate, looked it up in a database and found Mr Hankins’s address. An “evidence pack” was automatically generated, including video of the scene, a time stamp and location. The letter from Bradford city council demanding that Hankins pay a fine or face court action was composed, printed and mailed by an automatic process.

There was just one problem: Hankins had not been illegally parked at all. He had been stuck in traffic.

In principle, such technology should not fall victim to the paradox of automation. It should free up humans to do more interesting and varied work – checking the anomalous cases, such as the complaint Hankins immediately registered, which are likely to be more intriguing than simply writing down yet another licence plate and issuing yet another ticket.

But the tendency to assume that the technology knows what it is doing applies just as much to bureaucracy as it does to pilots. Bradford city council initially dismissed Hankins’s complaint, admitting its error only when he threatened them with the inconvenience of a court case.

The rarer the exception gets, as with fly-by-wire, the less gracefully we are likely to deal with it. We assume that the computer is always right, and when someone says the computer made a mistake, we assume they are wrong or lying. What happens when private security guards throw you out of your local shopping centre because a computer has mistaken your face for that of a known shoplifter? (This technology is now being modified to allow retailers to single out particular customers for special offers the moment they walk into the store.) When your face, or name, is on a “criminal” list, how easy is it to get it taken off?

We are now on more lists than ever before, and computers have turned filing cabinets full of paper into instantly searchable, instantly actionable banks of data. Increasingly, computers are managing these databases, with no need for humans to get involved or even to understand what is happening. And the computers are often unaccountable: an algorithm that rates teachers and schools, Uber drivers or businesses on Google’s search, will typically be commercially confidential. Whatever errors or preconceptions have been programmed into the algorithm from the start, it is safe from scrutiny: those errors and preconceptions will be hard to challenge.

For all the power and the genuine usefulness of data, perhaps we have not yet acknowledged how imperfectly a tidy database maps on to a messy world. We fail to see that a computer that is a hundred times more accurate than a human, and a million times faster, will make 10,000 times as many mistakes. This is not to say that we should call for death to the databases and algorithms. There is at least some legitimate role for computerised attempts to investigate criminal suspects, and keep traffic flowing. But the database and the algorithm, like the autopilot, should be there to support human decision-making. If we rely on computers completely, disaster awaits.

Gary Klein, a psychologist who specialises in the study of expert and intuitive decision-making, summarises the problem: “When the algorithms are making the decisions, people often stop working to get better. The algorithms can make it hard to diagnose reasons for failures. As people become more dependent on algorithms, their judgment may erode, making them depend even more on the algorithms. That process sets up a vicious cycle. People get passive and less vigilant when algorithms make the decisions.”

Decision experts such as Klein complain that many software engineers make the problem worse by deliberately designing systems to supplant human expertise by default; if we wish instead to use them to support human expertise, we need to wrestle with the system. GPS devices, for example, could provide all sorts of decision support, allowing a human driver to explore options, view maps and alter a route. But these functions tend to be buried deeper in the app. They take effort, whereas it is very easy to hit “Start navigation” and trust the computer to do the rest.

It is possible to resist the siren call of the algorithms. Rebecca Pliske, a psychologist, found that veteran meteorologists would make weather forecasts first by looking at the data and forming an expert judgment; only then would they look at the computerised forecast to see if the computer had spotted anything that they had missed. (Typically, the answer was no.) By making their manual forecast first, these veterans kept their skills sharp, unlike the pilots on the Airbus 330. However, the younger generation of meteorologists are happier to trust the computers. Once the veterans retire, the human expertise to intuit when the computer has screwed up could be lost.

Many of us have experienced problems with GPS systems, and we have seen the trouble with autopilot. Put the two ideas together and you get the self-driving car. Chris Urmson, who runs Google’s self-driving car programme, hopes that the cars will soon be so widely available that his sons will never need to have a driving licence. There is a revealing implication in the target: that unlike a plane’s autopilot, a self-driving car will never need to cede control to a human being.

Raj Rajkumar, an autonomous driving expert at Carnegie Mellon University, thinks completely autonomous vehicles are 10 to 20 years away. Until then, we can look forward to a more gradual process of letting the car drive itself in easier conditions, while humans take over at more challenging moments.

“The number of scenarios that are automatable will increase over time, and one fine day, the vehicle is able to control itself completely, but that last step will be a minor, incremental step and one will barely notice this actually happened,” Rajkumar told the 99% Invisible podcast. Even then, he says, “There will always be some edge cases where things do go beyond anybody’s control.”

If this sounds ominous, perhaps it should. At first glance, it sounds reasonable that the car will hand over to the human driver when things are difficult. But that raises two immediate problems. If we expect the car to know when to cede control, then we are expecting the car to know the limits of its own competence – to understand when it is capable and when it is not. That is a hard thing to ask even of a human, let alone a computer.

Also, if we expect the human to leap in and take over, how will the human know how to react appropriately? Given what we know about the difficulty that highly trained pilots can have figuring out an unusual situation when the autopilot switches off, surely we should be sceptical about the capacity of humans to notice when the computer is about to make a mistake.

“Human beings are not used to driving automated vehicles, so we really don’t know how drivers are going to react when the driving is taken over by the car,” says Anuj K Pradhan of the University of Michigan. It seems likely that we’ll react by playing a computer game or chatting on a video phone, rather than watching like a hawk how the computer is driving – maybe not on our first trip in an autonomous car, but certainly on our hundredth.

And when the computer gives control back to the driver, it may well do so in the most extreme and challenging situations. The three Air France pilots had two or three minutes to work out what to do when their autopilot asked them to take over an A330 – what chance would you or I have when the computer in our car says, “Automatic mode disengaged” and we look up from our smartphone screen to see a bus careening towards us?

Anuj Pradhan has floated the idea that humans should have to acquire several years of manual experience before they are allowed to supervise an autonomous car. But it is hard to see how this solves the problem. No matter how many years of experience a driver has, his or her skills will slowly erode if he or she lets the computer take over. Pradhan’s proposal gives us the worst of both worlds: we let teenage drivers loose in manual cars, when they are most likely to have accidents. And even when they have learned some road craft, it will not take long being a passenger in a usually reliable autonomous car before their skills begin to fade.

It is precisely because the digital devices tidily tune out small errors that they create the opportunities for large ones. Deprived of any awkward feedback, any modest challenges that might allow us to maintain our skills, when the crisis arrives we find ourselves lamentably unprepared.

Some senior pilots urge their juniors to turn off the autopilots from time to time, in order to maintain their skills. That sounds like good advice. But if the junior pilots only turn off the autopilot when it is absolutely safe to do so, they are not practising their skills in a challenging situation. And if they turn off the autopilot in a challenging situation, they may provoke the very accident they are practising to avoid.

An alternative solution is to reverse the role of computer and human. Rather than letting the computer fly the plane with the human poised to take over when the computer cannot cope, perhaps it would be better to have the human fly the plane with the computer monitoring the situation, ready to intervene. Computers, after all, are tireless, patient and do not need practice. Why, then, do we ask people to monitor machines and not the other way round?

When humans are asked to babysit computers, for example, in the operation of drones, the computers themselves should be programmed to serve up occasional brief diversions. Even better might be an automated system that demanded more input, more often, from the human – even when that input is not strictly needed. If you occasionally need human skill at short notice to navigate a hugely messy situation, it may make sense to artificially create smaller messes, just to keep people on their toes.

In the mid-1980s, a Dutch traffic engineer named Hans Monderman was sent to the village of Oudehaske. Two children had been killed by cars, and Monderman’s radar gun showed right away that drivers were going too fast through the village. He pondered the traditional solutions – traffic lights, speed bumps, additional signs pestering drivers to slow down. They were expensive and often ineffective. Control measures such as traffic lights and speed bumps frustrated drivers, who would often speed dangerously between one measure and another.

And so Monderman tried something revolutionary. He suggested that the road through Oudehaske be made to look more like what it was: a road through a village. First, the existing traffic signs were removed. (Signs always irritated Monderman: driving through his home country of the Netherlands with the writer Tom Vanderbilt, he once railed against their patronising redundancy. “Do you really think that no one would perceive there is a bridge over there?” he would ask, waving at a sign that stood next to a bridge, notifying people of the bridge.) The signs might ostensibly be asking drivers to slow down. However, argued Monderman, because signs are the universal language of roads everywhere, on a deeper level the effect of their presence is simply to reassure drivers that they were on a road – a road like any other road, where cars rule. Monderman wanted to remind them that they were also in a village, where children might play.

So, next, he replaced the asphalt with red brick paving, and the raised kerb with a flush pavement and gently curved guttering. Where once drivers had, figuratively speaking, sped through the village on autopilot – not really attending to what they were doing – now they were faced with a messy situation and had to engage their brains. It was hard to know quite what to do or where to drive – or which space belonged to the cars and which to the village children. As Tom Vanderbilt describes Monderman’s strategy in his book Traffic, “Rather than clarity and segregation, he had created confusion and ambiguity.”

Perplexed, drivers took the cautious way forward: they drove so slowly through Oudehaske that Monderman could no longer capture their speed on his radar gun. By forcing drivers to confront the possibility of small errors, the chance of them making larger ones was greatly reduced.

Monderman, who died in 2008, was the most famous of a small group of traffic planners around the world who have been pushing against the trend towards an ever-tidier strategy for making traffic flow smoothly and safely. The usual approach is to give drivers the clearest possible guidance as to what they should do and where they should go: traffic lights, bus lanes, cycle lanes, left- and right-filtering traffic signals, railings to confine pedestrians, and of course signs attached to every available surface, forbidding or permitting different manoeuvres.

Laweiplein in the Dutch town of Drachten was a typical such junction, and accidents were common. Frustrated by waiting in jams, drivers would sometimes try to beat the traffic lights by blasting across the junction at speed – or they would be impatiently watching the lights, rather than watching for other road users. (In urban environments, about half of all accidents happen at traffic lights.) With a shopping centre on one side of the junction and a theatre on the other, pedestrians often got in the way, too.

Monderman wove his messy magic and created the “squareabout”. He threw away all the explicit efforts at control. In their place, he built a square with fountains, a small grassy roundabout in one corner, pinch points where cyclists and pedestrians might try to cross the flow of traffic, and very little signposting of any kind. It looks much like a pedestrianisation scheme – except that the square has as many cars crossing it as ever, approaching from all four directions. Pedestrians and cyclists must cross the traffic as before, but now they have no traffic lights to protect them. It sounds dangerous – and surveys show that locals think it is dangerous. It is certainly unnerving to watch the squareabout in operation – drivers, cyclists and pedestrians weave in and out of one another in an apparently chaotic fashion.

Yet the squareabout works. Traffic glides through slowly but rarely stops moving for long. The number of cars passing through the junction has risen, yet congestion has fallen. And the squareabout is safer than the traffic-light crossroads that preceded it, with half as many accidents as before. It is precisely because the squareabout feels so hazardous that it is safer. Drivers never quite know what is going on or where the next cyclist is coming from, and as a result they drive slowly and with the constant expectation of trouble. And while the squareabout feels risky, it does not feel threatening; at the gentle speeds that have become the custom, drivers, cyclists and pedestrians have time to make eye contact and to read one another as human beings, rather than as threats or obstacles. When showing visiting journalists the squareabout, Monderman’s party trick was to close his eyes and walk backwards into the traffic. The cars would just flow around him without so much as a honk on the horn.

In Monderman’s artfully ambiguous squareabout, drivers are never given the opportunity to glaze over and switch to the automatic driving mode that can be so familiar. The chaos of the square forces them to pay attention, work things out for themselves and look out for each other. The square is a mess of confusion. That is why it works.

Turkey’s Kurds are in the crosshairs as government crackdown widens

October 10, 2016

by Erin Cunningham

The Washington Post

Istanbul- It was just after noon when police stormed the local television station and cut the feed as employees — stunned but defiant — looked on.

“The truth cannot be silenced!” the reporters chanted as authorities charged through the studio.

The channel, aligned with the Kurdish opposition, was one of dozens of outlets closed last week as Turkey expanded a crackdown that began after a failed coup in July.

Thousands of soldiers, bureaucrats, professors and doctors have been suspended or detained since the attempted revolt, which the government blames on an Islamic preacher exiled in the United States. But nearly three months later, authorities have shifted their focus to other perceived enemies of the state.

In recent weeks, officials have targeted the country’s Kurdish minority community, arresting local leaders and shuttering pro-Kurdish institutions such as the news channel IMC TV. Turkey’s government has a history of clamping down on ethnic Kurds, who make up nearly 20 percent of the country’s 75 million people and have fought for autonomy for years.

On Sunday, a car bomb detonated by Kurdish militants at a security checkpoint killed 18 people, including 10 Turkish troops, in the southeastern province of Hakkari. The explosion, which left a deep crater, was a reminder of the ongoing conflict between the two sides.

But emergency powers established after the coup have granted officials the authority to go after all opponents and critics. At least 50,000 people have been detained, and more than 100,000 have been suspended or dismissed from state jobs. The Council of Europe, a leading human rights organization, said the government now enjoys “almost unlimited discretionary powers” that threaten the country’s already fragile democracy.

“The government had two choices: They could have expanded democracy or become more authoritarian” following the attempted overthrow, said Ugur Guc, president of the Journalists Union of Turkey.

The failed coup, which took place July 15, saw a rebel faction of the military seize aircraft and send tanks to parliament. But government supporters rushed to the streets to defend the country from army rule.

Now, “they are closing television and radio stations,” Guc said of the government, led by the increasingly authoritarian President Recep Tayyip Erdogan. And “societies where there is no freedom of thought and no freedom of expression . . . they are not democratic ones,” he said.

Indeed, the order to shut IMC TV and more than 20 other outlets — most of them linked with Kurdish political parties or causes — was issued by decree and accused the channels of airing “terrorist propaganda.”

The terrorism accusations refer to the militant Kurdistan Workers’ Party (PKK), which has been locked in a guerrilla war with the Turkish state for years. But under Turkey’s state of emergency, the cabinet has the power to issue such edicts, which are then signed by the president and leave few avenues for appeal.

“Even before the state of emergency, it was common for academics, NGOs and journalists to feel pressure from the courts,” said Erol Onderoglu, Turkey representative for the press freedom watchdog Reporters Without Borders.

Onderoglu was briefly detained this year for “distributing terror propaganda” because of his support for a pro-Kurdish outlet, Ozgun Gundem. More than 100 media outlets have been closed since the coup attempt, Reporters Without Borders said.

“But the decrees that have come from the state of emergency show us that we have bypassed the law” since then, Onderoglu said. “And that they are being used as a tool” to suppress the opposition.

Academics, writers, politicians and professionals have all been affected by the purge. Actors have been dismissed by government-run theaters, and authorities have canceled or confiscated the passports of writers critical of state officials. Health clinics were shut down, and spouses of alleged coup supporters detained.

“The state is trying to create one voice,” said Nurcan Kaya, a lawyer and coordinator for the Minority Rights Group, an international advocacy organization. “There is a desire [on the part of the government] to destroy all opposition.”

Kurdish activists and politicians, however, are especially under threat, Kaya said.

In 2015, the pro-Kurdish People’s Democratic Party won enough parliamentary seats to threaten the majority of Erdogan’s ruling Justice and Development Party. But soon after, the government’s two-year-old truce with the PKK fell apart, and Turkey’s military renewed operations in Kurdish strongholds in the southeast.

IMC TV, which later grew popular for its progressive news coverage, began reporting on the civilian impact of the offensives, which rights groups say have displaced more than 350,000 in the past year. Another channel, Zarok TV, was pulled off the air despite having exclusively broadcast Kurdish-language cartoons for children.

In September, the government seized control of more than two dozen municipalities in the south, most of which are majority Kurd.

The arrests drew protests and even a statement from the U.S. Embassy, imploring Turkish authorities to quickly hold new local elections.

“The state of emergency is not being used to fight coup plotters . . . but to seize the Kurdish opposition,” said Veysel Keser, a local official ousted from a district in the province of Van.

In a report released Friday, the Council of Europe called the removal of the local Kurdish mayors “collective sanction.” The officials were elected in 2014.

“There has been no court decision,” Keser said of the government move to seize Kurdish-run municipalities.

“Even if something did take place,” Keser said, denying any wrongdoing, “it is through the judiciary that these alleged crimes would be punished.”

The opposition Republican People’s Party has filed appeals with the Constitutional Court to repeal some of the decrees. But few activists and opposition leaders believe the decrees will be subject to any legal scrutiny.

Journalists’ Association, said at a news conference on the media closures.“We wanted a country with many voices. We wanted everything to be open for debate,” Turgay Olcayto, president of the Turkish Journalists’ Association, said at a news conference on the media closures.

“But now there is a police state here,” he said. “Turkey is now a country where there is no democracy.”

Britain says to take in Calais migrant children

October 10, 2016

Reuters

Britain will honor a commitment to take in migrant children from the “Jungle” camp in the French port city of Calais, interior minister Amber Rudd said on Monday, urging France to help her speed the process.

Rudd said progress had been made at a meeting with French Interior Minister Bernard Cazeneuve to help resettle unaccompanied children in the camp to Britain or to a safe children’s center while any necessary paperwork is processed.

Britain has been accused of dragging its heels on helping move the around 1,000 unaccompanied children in the Jungle, an overcrowded camp which is home to nearly 10,000 people fleeing war and poverty in the Middle East and Africa.

Paris has said the camp will be demolished soon.

“The UK government has made clear its commitment to resettle vulnerable children under the Immigration Act and ensure that those with links to the UK are brought here using the Dublin regulation,” Rudd told parliament.

Under EU rules known as the Dublin regulation, asylum seekers must make an initial claim in the first country they reach, but can have their application examined in another if, for example, they have relatives living there.

“We have made good progress today but there is much more work to do,” Rudd said, referring to the meeting with Cazeneuve where the two sides agreed to speed up the process of moving the children before the camp is demolished.

Rudd said more than 80 unaccompanied children have been accepted for transfer under the Dublin regulation since the beginning of this year and urged France to come up with a list of those who are also eligible to move under EU rules.

Earlier, Cazeneuve said he would press the case for Britain to honor its commitment to take in the children after the Red Cross charity said many had been held back by bureaucracy.

“Of the estimated 1,000 unaccompanied children who are currently living in the Calais Jungle, 178 have been identified as having family ties to the UK. This gives them the right to claim asylum in the same country,” the Red Cross said.

Calais is one of several places in western Europe faced with huge build-ups of migrants.

More than 11,000 were rescued in just 48 hours last week off the coast of Libya as they sought to cross the sea to Europe.

(Reporting by Brian Love and Michel Rose in Paris, Elizabeth Piper in London,; Editing by Stephen Addison)

Hillary Clinton Privately Pitched Corporations on “Really Low” Tax Rate for Money Stashed Abroad

October 10, 2016

by Jon Schwarz

The Intercept

In public, top Hillary Clinton surrogate Neera Tanden said at the Democratic convention in Philadelphia that there’s no need to cut the federal corporate tax rate from its current 35 percent.

But in private, Clinton says something quite different to corporations and trade groups.

An 80-page report compiled by Clinton’s own campaign of potentially damaging remarks she made behind closed doors was published by Wikileaks on Friday. It includes extensive comments on tax policy.

During an October 13, 2014, speech to the Council of Insurance Agents and Brokers, Clinton told the audience that “A number of business leaders have been talking to my husband and me about an idea that would allow the repatriation of the couple trillion dollars that are out there. And you would get a lower rate — a really low rate — if you were willing to invest a percentage in an infrastructure bank.”

Clinton has repeatedly called for increased spending on U.S. infrastructure, but has never specified where the needed revenue would come from.

In a speech the previous month to the Cardiovascular Research Foundation, Clinton also said that a lower rate for all corporate profits regardless of where they are earned “certainly could be on the table” as long as that was “part of a broader package.” However, she specified that “if all you do is lower the rates” that “there’s a price to pay” in terms of lower tax revenue.

American multinational corporations are currently stashing a staggering $2.4 trillion in profits — about 14 percent of the size of the entire U.S. economy — overseas. Multinationals are required by U.S. law to pay the statutory 35 percent tax on profits they earn anywhere on earth, but the tax is not assessed until the profits are brought back to the U.S.This has allowed Corporate America to essentially hold U.S. tax revenue hostage, refusing to pay its taxes until Americans become so desperate that they will cut a deal giving multinationals a special new tax rate.

This strategy has already paid off once, in 2004, when multinationals got Congress to let them bring back $312 billion in profits at a one-time rate of about 5 percent. The legislation required that the cash be used to hire Americans or conduct research and development. Corporations ignored these provisions and instead used the money to enrich their executives and stockholders, while cutting U.S. jobs.

Both Hillary and Bill Clinton clearly envision cutting a similar deal during a Hillary Clinton presidency, although presumably they intend for the corporations to keep their part of the bargain this time.

Just last month, Bill Clinton told the audience at a Clinton Foundation Event that the corporate tax rate “should be lowered” with “X percent of [repatriated profits], whatever percent, [going] into buying investments in the national infrastructure program.” Clinton added, “This is just me now, I’m not speaking for …” and then trailed off.

Hillary Clinton said the same thing during a private August 2014 speech to the software storage company Nexenta: “I would like to find a way to repatriate the overseas earnings and I’ve read a really interesting proposal. … John Chambers and others … basically have said they would be willing to invest a percentage of their repatriated profits in an infrastructure bank … I thought that was a really intriguing idea.”

Chambers was the CEO of Cisco at the time, and a vociferous proponent of corporations refusing to bring their profits home until they receive such a sweetheart deal.

Donald Trump has a similar plan to slash corporate tax rates to 15 percent (with a special rate for repatriated profits of 10 percent) although without requirements for corporations to participate in funding an infrastructure bank.

Aggressor squadron? Pics of US jets painted in Russian colors spark Syria false flag conspiracy

October 11, 2016

RT

Photos showing US jets being painted Russian colors have triggered debates and conspiracy theories online, with many saying Washington plans to conduct false flag attacks in Syria and blame them on Moscow.

The pictures of the US jets were posted by a Canadian journalist last week on his Twitter account.

Although the journalist noted that painting fighter jets in the colors of potential adversaries is standard practice, they caused a stir among conspiracy theorists.

Many of them accused the US of preparing a false flag attack aimed at framing Russia in Syria.

The publication of the images fell on fertile ground. Relations between Russia and the US over the Syria conflict are at an all-time low, with both countries exchanging threats and warnings with each other over their involvement in Syria.

The US and other militaries are known for using aggressor squadrons, which act as opposing forces in military war games. In addition to being painted in an adversary’s colors, they also use enemy tactics to provide realistic simulations of air combat.

ISIS propaganda crippled by military defeats, study finds

October 11, 2016

RT

Islamic State’s online media output has dropped drastically as advertising a viable caliphate becomes harder amid military defeats, US scholars found. Another reason for it is that many propagandists were killed in airstrikes, becoming “media martyrs.”

Once notorious for inspiring thousands of foreign fighters to wage jihad in Syria and Iraq, Islamic State’s (IS, formerly ISIS/ISIL) online propaganda coverage is now shrinking, according to a study released by Combating Terrorism Center at the US Military Academy West Point.

Last August, the terrorist group produced over 700 media items in its “official” outlets in Syria and other countries, the research says. In August this year, there were only 200.

“It’s not just the numeric decline,” Daniel Milton, who authored the report, told the New York Times. “The caliphate was their big selling point. Now there’s an inability to say we’re doing the things that make us a state. And that was behind their broad appeal.”

Since 2014, IS’s online propaganda was efficient not just because it featured sophisticated and high-quality videos, graphics and social media posts, but because its message tended to reach Muslims all over the world, urging them to come to a viable Sharia state with functional institutions, bureaucracy and welfare system.

Throughout 2015, thousands of foreign fighters came to either Syria or Iraq on the back of the terrorist group’s military advance on the ground. Now, though IS still holds sizeable parts of both countries, things are different, Milton’s study notes.

Decimated in air campaigns run by Russia and the US-led coalition, IS looks less like a messianic state and more like a weakening terrorist army, the research claims.

“The Islamic State’s media people are fighters, too. And when they’re fighting, they can’t put out their message,” adding that some media personnel killed in airstrikes have been eulogized as “media martyrs.”

Interestingly, IS has reduced the production of its most gruesome media items, namely broadcast beheadings of hostages, making instead more videos showing executions of its own militants for espionage and treason.

Over the past months, many social media platforms, including Twitter, have aggressively suppressed IS-related posts and accounts. Google has launched an online project tackling terrorist propaganda by redirecting users to anti-Islamism links.

However, there are still some indications that battling IS’s online presence is far from over. Milton cites one alarming yet unpredictable trend – the group expands domestic propaganda to indoctrinate people living in territories it controls.

“How do you deal with all the children who have had these experiences and who have been exposed to this worldview?” Milton said. “This is going to be a long-term problem.”

Learning from History: 911 and the Reichstag Fire

by Harry von Johnston, PhD

Nearly five thousand died domestically in the 9/11 attacks and only thirty-seven subsequently but the death toll outside the United States, due to Muslim radical actions has exceeded over ten thousand with a death toll of ninty eight thousand in the Syrian civil war and an estimated one million in the sectarian wars in Iraq following the American invasion and occupation

This vast program of politically-motivated illegal domestic surveillance, ordered by Bush, is only part of an ambitious program brought forward in the first year of the Bush administration by Karl Rove. Rove is the architect of the ‘GOP Rules’ program, the basic premise of which was to secure a permanent control, by the Republican Party, of both branches of Congress, the White House and the leadership of all the agencies of control such as the CIA, later the DHS, the FBI, the Department of Justice, and, most important, the U.S. Army.

Rove, an accomplished student of history, had carefully studied the circumstances that permitted Adolf Hitler to rise to power in 1933. His was not a solid electoral victory but he was only a participant in a coalition government. What brought him to the beginning of absolute power was the Reichstag fire. It was long preached that this incendiary act was the result of Goering’s activities to facilitate an atmosphere of public panic but Fritz Tobias has effectively demolished this shibboleth and in fact, the fire was set by a lunatic young Dutch communist without any assistance from either the Nazis or the Communists.

Nevertheless, in its wake, the fire did create such an atmosphere of national fear that Hitler was able to tighten his control over the legislators and push through the Enabling Act that gave him the power to establish the control he badly needed. And a year later, the old Prussian Secret State Police, the Gestapo, was put into the hands of Heinrich Mueller who eventually set up a national card index with information on every German citizen.

Given the weak origins of Bush’s presidency, Rove contemplated his own Reichstag Fire and when the Israeli Mossad reported to the top Bush administration officials that they had penetrated a group of Saudi terrorists working in Hollywood, Florida and that this group was planning an aerial attack on important American business and government targets, Rove had found his Reichstag Fire.

Bush was informed by the Israeli government at every stage of the pending attack but advised the Israelis that he did not want to interfere with it “until the last possible moment so as to be able to arrest the entire group.”

As the plot progressed and Washington learned that the major targets would be the World Trade Centers in New York, and the Pentagon and the Capitol building in Washington, someone high up in the administration, currently unknown, wanted the Israelis to convince the Saudis to attack the side of the Pentagon that was currently unoccupied due to reconstruction. There was no point, the plotters decided, to kill the useful Secretary of Defense who was a member of their team.

The attack on the Capitol would, they reasoned, fall when Congress was in session ( In 2001, the first session of the 107th Congress was from January 3, 2001  through December 20, 2001 and the House and Senate planned to begin their 10 day Thanksgiving recess, between November 17 and November 27 of that year) and this meant that if a large commercial aircraft, loaded with aviation fuel, slammed at high speed  into either wing of the immense building while Congress was in session, it could reasonably be expected that a siginficant number of Federal legislatiors would be killed or incapacitated.

This, coupled with the attacks on the Pentagon and the WTC, would give the Bush people the very acceptable excuse for the President to step up, (after he returned from a safe and distant vacation,) and assume ‘special powers” to “protect this nation from new attacks” until Congress could be “satisfactorily reformed” via somewhat distant “special elections” to fill the vacancies created by the Saudi attackers.

Then, it would be quite acceptable, and even demanded, that the Army would establish “law and order” in the country and that other agencies would step forward to “guard this nation against” possible “ongoing terrorist attacks.” ‘Speak not of the morrow for thou knowest not what it might bring forth’ is a Biblical admonition that apparently Bush, Rove and Cheney never considered.

The aircraft designated to slam into the Capitol building and immolate both sides of the aisle, crashed as the very fortunate result of its passenger’s actions and that part of the plan had to be shelved. But not so the formulation of the machinery designed solely to clamp down on any possible dissident voices in the country and ensure a very long term Republican policical control.

The Saudi terrorist attacks went forward as planned, minus the one on the members of Congress and Bush indeed rose to the occasion and promised to protect the American public. A Department of Homeland Security was set up under the incompetent Governor Ridge but as for the rest of the plan for Republic permanence, it began to disintegrate bit by bit, due entirely to the gross incompetence of its leaders. The Bush-Rove-Cheney plan consisted, in the main, of the following:

  1. Federal control of all domestic media, the internet, all computerized records, through overview of all domestic fax, mail and telephone conversations,
  2. A national ID card, universal SS cards being mandatory,
  3. Seizure and forced deportation of all illegal aliens, including millions of Mexicans and Central Americans, intensive observation and penetration of Asian groups, especially Indonesian and Chinese,
  4. A reinstitution of a universal draft (mandatory service at 18 years for all male American youths…based on the German Arbeitsdienst.)
  5. Closer coordination of administration views and domestic policies with various approved and régime supportive religious groups,
  6. An enlargement of the planned “no travel” lists drawn up in the Justice Department that would prevents “subversive” elements from flying, (this list to include “peaceniks” and most categories of Muslims)
  7. The automatic death penalty for any proven acts of sedition,
  8. The forbidding of abortion and any use of medical marijuana,
  9. Any public approval of homosexual or lesbian behavior to include magazines, websites, political action groups and soon to be forbidden and punishable.

U.S. watchdog expands scrutiny to more Chinese deals

October 11, 2016

by Greg Roumeliotis

Reuters

Insurance mergers and acquisitions rarely raise red flags with U.S. national security watchdogs. China’s Fosun International Ltd (0656.HK) took that history to heart last year when it paid $1.84 billion for the remaining 80 percent stake of U.S. property and casualty insurer Ironshore Inc that it did not already own.

But in December 2015, one month after Fosun completed the acquisition, it was approached by officials at the Committee on Foreign Investment in the United States (CFIUS), a government panel that scrutinizes deals over national security concerns, according to people familiar with the matter who asked not to be identified because these details are not public.

CFIUS was concerned about how Fosun would operate Ironshore’s Wright & Co, a provider of professional liability coverage to U.S. government employees such as law enforcement personnel and national security officials, including the Central Intelligence Agency, according to these sources.

Fosun, Ironshore and CFIUS all declined to comment on the process.

CFIUS operates a voluntary filing system for companies engaged in a deal. Such an instance of the panel approaching companies after they complete a deal is rare.

But the recent U.S. scrutiny of Fosun — which did not seek CFIUS approval for the Ironshore deal — is just one example of a new impetus by CFIUS to target what it refers to as “non-notified transactions” — or deals that did not seek CFIUS approval in advance.

In the last twelve months CFIUS has stepped up its pursuit of these non-filers over concerns that some deals were falling through the cracks, according to sources with direct knowledge of the panel’s inner workings. This previously unreported push by CFIUS has the potential to delay some deals and raises the risk of them being thwarted altogether.

While Wright accounted for a tiny fraction of Ironshore’s business, the inquiry has forced Fosun to delay its initial public offering of Ironshore, which has been registered with the U.S. Securities and Exchange Commission since June, until CFIUS clears the original acquisition. Fosun will now likely miss a window for IPOs due to the expected market volatility around the Nov. 8 U.S. presidential election, according to the sources.

Chinese companies have been treated with suspicion by CFIUS because of the ties many of them have to the country’s communist regime, reflecting the complicated diplomatic and commercial ties between China and the United States.

This has not stopped Premier Li Keqiang’s “going out” policy, which encourages Chinese companies to buy foreign trophy assets. The push — aided by CFIUS’s history of rarely shooting down deals altogether — contributed to Chinese M&A activity in the United States reaching a record high of $32 billion so far this year.

To be sure, CFIUS has approached companies in the past as well, and does not limit its review to only Chinese deals. In 2010, CFIUS contacted Russian internet company CMail.ru and AOL Inc over the latter’s $188 million divestment of messaging service ICQ to Cmail.ru, which had already been completed. The CFIUS review in that instance did not require the deal to be unraveled.

On rare occasions, the panel has also vetoed deals, such as the $3.3 billion sale of Koninklijke Philips NV’s (PHG.AS) lighting business to a consortium of Chinese investors, which it blocked last January.

But Ironshore and similar cases this year show that the U.S. watchdog is flexing its muscles in a more subtle, albeit disruptive, fashion.

“Companies may assume that there is no chance that CFIUS would have an interest in their transaction, but that runs the risk of possible miscalculation,” said Eric Dinallo, a partner at law firm Debevoise & Plimpton LLP.

RISING SCRUTINY

CFIUS, an agency made up of eight U.S. government departments and chaired by the Treasury Secretary, does not publicize the reasons for its decisions. The majority of transactions involve private companies with no SEC filings.

Recent regulatory filings and statements by publicly listed companies, however, offer glimpses of CFIUS catching some companies off guard. U.S. electronics distributor Ingram Micro Inc (IM.N) said in July it would seek CFIUS approval for its acquisition by Chinese shipping company Tianjin Tianhai Investment, despite saying in February it did not need to, following “consultation” with CFIUS.

As a result, in August Ingram Micro pushed back the deadline for the deal with Tianjin to close by three months to Nov. 13. CFIUS is interested in learning more about the company’s supply of technology to the U.S. government, according to the sources. Ingram Micro and Tianjin Tianhai declined to comment.

CFIUS has added staff and resources in the last two years to identify non-notified transactions, the sources said, though the number of additional people recruited or the extra funding it was given could not be learned.

Among the CFIUS staffers playing a role in identifying non-filers, alongside CFIUS Staff Chairman Stephen Hanson and Treasury Deputy Assistant Secretary for Investment Security Aimen Mir, is Brian Reissaus, a former member of the Defense Security Service, an agency of the U.S. Department of Defense, according to the sources. Reissaus will often be the CFIUS staffer reaching out to companies, the sources said.

A Treasury spokesman declined to comment on behalf of CFIUS and the staffers. Chinese government officials declined to comment on CFIUS’s new focus.

CAUGHT OFF-GUARD

CFIUS’s crackdown on these non-notified transactions shows how the agency’s focus has expanded beyond traditional sectors of national security concern, such as aerospace and semiconductors, to less obvious areas ranging from commercial IT and agriculture to biomedical science and electronics.

Companies whose deals are reviewed by CFIUS without having made voluntary filings risk delays in completing them and uncertainty over their investment plans, lawyers say.

In the case of Fosun, to ensure CFIUS approval Ironshore agreed to sell Wright last month to former American International Group Inc (AIG.N) CEO Hank Greenberg’s Starr Companies, according to the sources.

In light of this divestment and other conversations it had with CFIUS, the company has reset the CFIUS review process by making another filing with the panel, and an outcome is expected in the coming weeks, one of the sources added.

In the interim, Fosun has been exploring selling Ironshore outright as an alternative to an IPO, according to the sources.

HELL OR HIGH WATER

Some companies resist filing for a CFIUS review voluntarily because they fear that addressing this issue during their tough merger negotiations will add an extra layer of complexity to the talks, and some times risk complicating them to the point that a deal is not reached.

This is because, once the possibility of a CFIUS review is foreseen in a merger contract, companies have to haggle over who assumes the financial risk under various scenarios.

Sellers try to push for “hell-or-high-water” provisions in contracts requiring the buyers to do whatever it takes in terms of divestitures and other measures to obtain CFIUS approval. Buyers resist this and seek to negotiate in advance what CFIUS remedies would be acceptable to them.

A case in point is Zhongwang USA LLC, which is backed by Chinese aluminum magnate Liu Zhongtian, and its $2.33 billion deal last month to acquire U.S. aluminum company Aleris Corp (ALSD.PK). Zhongwang USA agreed to “undertake best efforts to obtain CFIUS clearance as soon as practicable,” while also limiting any CFIUS-related divestitures it would be willing to accept to 5 percent of Aleris’ 2015 U.S. net sales, a regulatory filing shows.

The heightened scrutiny is also jacking up CFIUS-related breakup fees that buyers have to agree to in order to get a deal done, with sellers often asking these to be deposited in escrow accounts for more security. In the case of Zhongwang, it placed its $100 million breakup fee in an escrow account when it signed its deal with Aleris.

Taken together, CFIUS lawyers and other consultants are advising their clients to proactively file with the agency to get out in front of the scrutiny.

“Go to CFIUS before you close a transaction,” said Dinallo. “Our experience has been that, if there is no issue, CFIUS has been quick to respond.”

(Additional reporting by Diane Bartz in Washington D.C., Mike Stone in New York and Sue-Lin Wong in Beijing; Editing by Carmel Crimmins and Edward Tobin)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

No responses yet

Leave a Reply