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Friday, January 4, 2013

U.S. Banks Again Hit by Wave of Cyberattacks

For the last week, hackers have - once again - attacked the online banking sites of several American banks.

The attacks appear to be the second stage of a campaign that began in September, when a hacker group calling itself Izz ad-Din al-Qassam Cyber Fighters took credit for a series of attacks on the Web sites of Bank of America, Citigroup, U.S. Bank, Wells Fargo and PNC  that caused intermittent delays.

The group said it had attacked the banks in retaliation for an anti-Islam video that mocked the Prophet Muhammad and pledged to continue its campaign until the video was removed from the Internet. They called the campaign Operation Ababil, a Koran reference to the swallows Allah sent to attack an army of elephants dispatched by the King of Yemen to attack Mecca in 571 A. D.

In an online post on Tuesday, the group said that it had resumed Operation Ababil and that, over the last several weeks, it had focused on nine banks: JPMorgan Chase, Bank of America, Citigroup, Wells Fargo, U.S. Bancorp, PNC, BB&T, Suntrust and Regions Financial.

“Our aim of this operation is removal of that insulting and absurd film,” the hackers wrote in an online post.

Of the nine banks, representatives of PNC, BB&T and Citigroup confirmed that their online banking sites had experienced intermittent disruptions because of a high volume of Web traffic, but they said that bank accounts and customer information had not been affected. Though they were not mentioned in the group's online hit list, Capital One and Fifth Third Bank also experienced brief disruptions.

Customers at Bank of America, Wells Fargo, U.S. Bancorp and JPMorgan did not appear to have had any trouble reaching their accounts.

In an e-mail to customers, PNC said it had e xperienced “an unusually high volume of traffic” to its site. “This volume of traffic is consistent with threatened cyberattacks on the U.S. banking system and is designed to cause access delays for legitimate Internet customers,” the statement said.

Debra DeCourcy, a spokeswoman for Fifth Third Bank, said that from 11 a.m. to 3 p.m. on Thursday, Fifth Third also had a high volume of traffic to its site. “We believe it was a denial of service attack designed to disrupt access to our site,” Ms. DeCourcy said. “This was an access issue, not a security issue: No customer information or data was compromised.”

In a denial of service attack, hackers bombard a site with traffic until it collapses under the load. Though banks take great pains to absorb large volumes of traffic, many experienced  unprecedented levels. Typically such attacks are deployed through a Web application, in which hackers recruit volunteers to click on a link that sends signals fr om their computers to a victim's site, or through botnets, networks of infected computers and devices that do hackers' work for them.

But security researchers who studied the attacks on banking sites last fall said hackers had used a new weapon: data centers.

Researchers at Radware who investigated the attacks for several banks found that the traffic was coming from data centers around the world that had been infected with a sophisticated form of malware that was designed to evade detection by antivirus solutions. The attackers used those infected servers to simultaneously fire traffic at each banking site until it slowed or collapsed. By infecting data centers instead of computers, attackers obtained the horsepower to mount an enormous denial of service attack.

Jenny Shearer, a spokeswoman for the Federal Bureau of Investigation, declined to comment on the source of the attacks on Friday.

In an online post, hackers said the attacks had not been sponsored by a country.

Government and intelligence officials have blamed Iran for the fall attacks and for a destructive cyberattack on computers at Saudi Aramco in August, though they have not presented any evidence to back up their claims. Tracing cyberattacks back to one particular country is difficult, security experts say, because traffic can be routed through different Internet addresses to mask their true origin.

Security researchers still do not know how the data centers used in the first wave of attacks were infected in the first place, how widespread the infection rate was and - perhaps most troubling  - whether the servers could be used to damage other sensitive targets in the future.

On Tuesday, the hackers said they had no intention of halting their campaign. “Officials of American banks must expect our massive attacks,” they wrote. “From now on, none of the U.S. banks will be safe.”

Video Shows Airstrikes Near Crusader Castle in Syria

Video posted online by Syrian opposition activists on Friday appeared to show fresh airstrikes near the historic medieval castle Krak des Chevaliers, in Qalaat al-Hosn, west of the city of Homs near the Lebanese border.

Video of explosions near a medieval castle in the Syrian town of Qalaat al-Hosn, west of Homs.

According to a Unesco description of the world heritage site, the fortress “was built by the Hospitaller Order of Saint John of Jerusalem from 1142 to 1271. With further construction by the Mamluks in the late 13th century, it ranks among the best-preserved examples of the Crusader castles .”

As my colleague Liam Stack reported, government forces attacked rebels in near the fortress during the summer. In July, Agence France-Presse produced a dramatic video report on the battles around the castle (which includes graphic images of a rebel fighter who was killed in the fighting).

A video report from Agence France-Press showed rebel fighters in the Syrian town of Qalaat al-Hosn in July.

The very start of another clip uploaded to the same activist YouTube channel later on Friday appeared to offer a brief glimpse of the bombs being dropped on the town from jets that screamed overhead. It is difficult to say exactly what sort of bombs were being dropped on the town, but their impact, and the way they seemed to float down, appeared similar to a type of cluster munitions designed to destroy runways.

Video recorded by Syrian opposition activists, said to show air strikes on Qalaat al-Hosn on Friday.

Cleanup Crews Near Fukushima Plant Dump Waste in Rivers, Newspaper Reports

According to Japan's Asahi Shimbun, cleanup crews working near the ruined Fukushima Daiichi nuclear plant, “dumped soil and leaves contaminated with radioactive fallout into rivers.”

The allegation, supported by photographs, was made in the three-part report “Crooked Cleanup,” published on Friday on the Japanese newspaper's English-language site, Asia and Japan Watch.

A team of journalists who observed the decontamination work in the region last month added: “Water sprayed on contaminated buildings has been allowed to drain back into the environment. And supervisors have instructed workers to ignore rules on proper collection and disposal of the radioactive waste.”

Workers were apparently aware that they were breaking rules, the paper reported:

From Dec. 11 to 18, four Asahi reporters spent 130 hours observing work at various locations in Fukushima Prefecture. At 13 locations in Naraha, Iitate and Tamura, workers were seen simply dumping collected soil and leaves as well as water used for cleaning rather than securing them for proper disposal. Photographs were taken at 11 of those locations.

The reporters also talked to about 20 workers who said they were following the instructions of employees of the contracted companies or their subcontractors in dumping the materials. A common response of th e workers was that the decontamination work could never be completed if they adhered to the strict rules.

Images of North Korean Leader\'s Wife Fuel Pregnancy Rumors

SEOUL, South Korea - The wife of the young North Korean leader, Kim Jong-un, might have recently given birth, South Korean journalists reported on Thursday.

The leader's wife, Ri Sol-ju, had recently sported what appeared to be a baby bump. When she appeared at an event televised by North Korea's state broadcaster on Dec. 17, she was wearing a billowing Korean dress around a seemingly pregnant belly.

Video from North Korean television showed Kim Jong-un and his wife, Ri Sol-ju, at an event honoring the leader's father and grandfather last month.

But when she appeared with Mr. Kim at concert on New Year's Day, there was no sign of a swollen belly in < a href="http://youtu.be/opIJS0iLEoY">video of the event, and Ms. Ri looked noticeably slimmer, wearing a tighter dress.

Video from North Korean television showed the country's first couple at a New Year's Day concert.

That triggered reports in the South Korean media suggesting that she might have given birth in the interim.

A screenshot of a report from the South Korean broadcaster SBS on the changing waistline of North Korea's first lady. A screenshot of a report from the South Korean broadcaster SBS on the changing waistline of North Korea's first lady.

North Korea's state media has not reported that Mr. Kim is a father and made no mention of the speculation that Ms. Ri might have been pregnant last month.

For decades, North Korea's ruling family has kept the private lives of its members under the wraps, so much so that most ordinary North Koreans had never seen their country's first lady when Mr. Kim's father, Kim Jong-il, was in power. After Mr. Kim took over following his father's death in December 2011, Ms. Ri began accompanying her husband to arts performances, school visits and amusement park inspections.

Still, outside analysts don't know for sure how old she is or when she married Mr. Kim. Some South Korean officials believe that Mr. Kim turns 29 next Tuesday.

Malala Yousafzai Discharged From Hospital

Video of the young Pakistani activist Malala Yousafzai leaving Queen Elizabeth Hospital in Birmingham, England on Thursday. The images were released without sound.

Malala Yousafzai, the 15-year-old Pakistani schoolgirl who survived an assassination attempt by Taliban militants, was discharged from Queen Elizabeth Hospital in Birmingham, England, on Thursday.

Malala “is well enough to be treated by the hospital as an outpatient for the next few weeks,” the hospital said in a statement. “She is still due to be readmitted in late January or early February to undergo cranial reconstructive surgery as part of her long-term recovery and in the meantime she will visit the hospit al regularly to attend clinical appointments.”

The complete text of the statement was posted on the hospital's Web site, along with video of the girl walking out of her hospital room under her own power.

Dr. David Rosser, the hospital's medical director said: “Malala is a strong young woman and has worked hard with the people caring for her to make excellent progress in her recovery.”

Malala became an outspoken advocate for the education for girls in Pakistan at the age of 11, when the BBC's Urdu-language service published her “Diary of a Pakistani Schoolgirl.” The blog chronicled life under Taliban rule, after her home in the Swat Valley was overrun by the Islamist militants in 2009. She was shot in the head by a militant in Octob er and airlifted to England for treatment the same month.

Her father, Ziauddin, has been appointed to a three-year term as Pakistan's education attaché in Birmingham, ITV News reported on Wednesday.

Robert Mackey also remixes the news on Twitter @robertmackey.

Daily Report: Google Pushed Hard Behind the Scenes to Convince Regulators

For 19 months, Google pressed its case with antitrust regulators investigating the company. Working relentlessly behind the scenes, executives made frequent flights to Washington, laying out their legal arguments and shrewdly applying lessons learned from Microsoft's bruising antitrust battle in the 1990s, report Claire Cain Miller and Nick Wingfield of The New York Times.

That is why one of the biggest antitrust investigations of an American company in years ended with a slap on the wrist Thursday, when the Federal Trade Commission closed its investigation of Google's search practices without bringing a complaint. Google voluntarily made two minor concessions.

Edward Wyatt of The New York Times reported that by allowing Google to continue to present search results that highlight its own services, the F.T.C. decision could enable Google to further strengthen its already dominant position on the Internet. It also enables Google to avoid a costly and lengthy legal war of attrition like the antitrust battle that Microsoft waged in the 1990s.

“The way they managed to escape it is through a barrage of not only political officials but also academics aligned against doing very much in this particular case,” said Herbert Hovenkamp, a professor of antitrust law at the University of Iowa who has worked as a paid adviser to Google in the past. “The first sign of a bad antitrust case is lack of consumer harm, and there just was not any consumer harm emerging in this very long investigation.”

Elsewhere on the Web, FOSS Patents, which has in the past been paid by Goog le, focused on the part of the F.T.C.'s ruling regarding Google's standard essential patents. “In terms of impact on other cases, the order is a consent decree: Google accepted it as part of a broader settlement,” wrote Florian Mueller. “Over the last couple of years I've been watching a certain pattern of companies making licensing offers on outrageous, totally unacceptable terms, knowing that no one in his right mind would accept them, only to then seek injunctive relief against an allegedly-unwilling licensee,” he writes.”The FTC undoubtedly wanted to put an end to these games.”

Politico reported that “instead of ignoring Washington - as rival Microsoft did before its costly monopolization trial in the 1990s - Google spent about $25 million in lobbying, made an effort to cozy up to the Obama administration and hired influential Republicans and former regulators. The company even consulted with the late Robert Bork and the Heritage Foundation and met with senators like John Kerry to make its case. In other words, these traditional outsiders worked the system from the inside.”

GigOm said, “The biggest loser is Microsoft, which funded a long-running cloak-and-dagger lobbying campaign to convince the public and government that its arch-enemy had to be regulated. Sites like Yelp, Kayak and Expedia also lose in the sense that Google can now push them down its search listing with impunity (though there is no sign for now that Google is actually doing this).”

The Washington Post said that the F.T.C. was not persuaded by the evidence at hand. “‘The American antitr ust laws protect competition, not competitors,' said Chairman Jon Leibowitz. Establishing whether consumers have suffered - or are likely to suffer in the future - has long been the quicksand in the middle of U.S. antitrust cases. Wait too long to rein in monopolists, and the damage might be irrevocable. Move too fast, and the evidence of consumer harm might lack the clarity necessary to survive a court challenge.”

The Wall Street Journal focused on a stinging dissent from J. Thomas Rosch of the F.T.C.: “He didn't advocate suing Google, but said that in principle the FTC should require legally binding consent decrees if problems are found. ‘After promising an elephant more than a year ago, the Commission instead has brought forth a couple of mice,' Mr. Rosch said.”

Inquiry Into Tech Giants\' Tax Strategies Nears End

Inquiry Into Tech Giants' Tax Strategies Nears End

Congressional investigators are wrapping up an inquiry into the accounting practices of Apple and other technology companies that allocate revenue and intellectual property offshore to lower the taxes they pay in the United States.

Carl Levin, the Michigan senator who heads the Senate investigations panel.

The Senate Permanent Subcommittee on Investigations inquiry now drawing to a close began more than a year ago and involves at least a half dozen technology companies, according to people with firsthand knowledge of it, who declined to be identified.

Those people said the subcommittee had subpoenaed or otherwise asked the companies to explain methods they used to avoid domestic taxes. They said Apple had become a focus of the inquiry and was cooperating with the subcommittee, which is expected to issue wide-ranging recommendations that are likely to play a significant role in Congressional tax code negotiations.

Apple's domestic tax bill has drawn the interest of corporate tax experts and policy makers because although the majority of Apple's executives, product designers, marketers, employees, research and development operations and retail stores are in the United States, in the past Apple's accountants have found legal ways to allocate about 70 percent of the company's profits overseas, where tax rates are often much lower, according to corporate filings.

Apple, in a statement on Thursday, said the company was “one of the top corporate income taxpayers in the country, if not the largest.” The statement said the company “conducted all of its business with the highest of ethical standards, complying with applicable laws and accounting rules.”

It is unclear how broadly Senate investigators are looking into the technology industry, if any laws are thought to have been broken and how many companies are involved. The subcommittee is also known to be looking at Google, Hewlett-Packard, Microsoft and firms in such fields as biotechnology.

The subcommittee, which is overseen by Senator Carl Levin, a Michigan Democrat, has been interested in the impact on the budget deficit of offshore tax strategies. Representatives from Microsoft and Hewlett-Packard testified at a subcommittee hearing on the subject in September. Both companies were criticized sharply by Senator Levin for using accounting rules to allocate revenue to other nations to avoid paying taxes in the United States.

“This subcommittee has demonstrated in hearings and comprehensive reports how various schemes have helped shift income to offshore tax havens and avoid U.S. taxes,” Senator Levin said at that hearing. “The resulting loss of revenue is one significant cause of the budget deficit, and adds to the tax burden that ordinary Americans bear.”Apple has long been a pioneer in developing innovative tax strategies that lessen its domestic taxes. At the September hearing, Senator Levin said the investigation indicated that Apple had deferred taxes on over $35.4 billion in offshore income between 2009 and 2011.

Tech companies are able to easily shift “intellectual property, and the profit that goes along with it, to tax havens,” said a former Treasury Department economist, Martin A. Sullivan. “Apple went out of its way to try and ensure that its tax savings didn't attract too much public attention, because tax avoidance of that magnitude - even though it's legal and permissible - isn't in keeping with the image of a socially progressive company.”

In its statement, Apple said it paid “an enormous amount of taxes” to local, state and federal governments. “In fiscal 2012 we paid $6 billion in federal corporate incomes taxes, which is 1 out of every 40 dollars in corporate income taxes collected by the U.S. government,” it said. In the 1980s, Apple was a pioneer of an accounting technique known as the “Double Irish With a Dutch Sandwich,” which reduces taxes by routing profits through Irish subsidiaries and the Netherlands and then to the Caribbean. Today, that tactic is used by hundreds of other corporations - some of which directly imitated Apple's methods, say accountants at those companies. More recently, Apple has moved revenue to states like Nevada and overseas nations where the company pays less, or in some cases no, taxes.

Almost every major corporation tries to minimize its taxes. However, technology companies are particularly well positioned to take advantage of tax codes written for an industrial age and ill-suited to today's digital economy.

Some profits at companies like Apple, Google, Amazon, Hewlett-Packard and Microsoft emerge from royalties on intellectual property, like the patents on software. At other times, products are digital, such as downloaded songs or movies. It is much easier for businesses with royalties and digital products to move profits to low-tax countries than it is, say, for grocery stores or automakers.

Although technology is now one of the nation's largest and most highly valued industries, many tech companies are among the least taxed, according to government and corporate data. Over the last two years, the 71 technology companies in the Standard & Poor's 500-stock index - including Apple, Google, Yahoo and Dell - reported paying worldwide cash taxes at a rate that, on average, was a third less than other S.& P. companies', according to a New York Times analysis. (Cash taxes may include payments for multiple years.)

Companies report their cash outlays for income taxes in their annual Form 10-K, but it is impossible from those numbers to determine precisely how much, in total, corporations pay to governments.

This article has been revised to reflect the following correction:

Correction: January 3, 2013

An earlier version of this article included outdated information on Apple's tax payments. The company paid $6 billion in federal corporate income taxes in fiscal year 2012, according to a company statement on Thursday; it did not pay $3.3 billion “last year.” (That was the amount of cash taxes the company paid in fiscal year 2011.)


A version of this article appeared in print on January 4, 2013, on page B1 of the New York edition with the headline: Inquiry Into Tech Giants' Tax Strategies Nears End.

Barnes & Noble\'s Strategy In Question as Holiday Nook Sales Decline

A Barnes & Noble store in New York City. Overall sales in the nine-week holiday season for the retailer fell 10.9 percent.Brendan McDermid/Reuters A Barnes & Noble store in New York City. Overall sales in the nine-week holiday season for the retailer fell 10.9 percent.

For Barnes & Noble, the digital future is not what it used to be.

After a year spent signaling its commitment to build its business through its Nook division, Barnes & Noble on Thursday announced disappointing holiday sales figures, with steep declines that underscored the challenge it faces in transforming from its traditional retail format.

Retail sales from the company's bookstores and its Web site, BN.com, decreased 10.9 percent from the comparable nine-week holiday period a year earlier, to $1.2 billion, the company reported. More worrisome for the long-term future of the company, sales in the Nook unit that includes e-readers, tablets, digital content and accessories decreased 12.6 percent over the same period, to $311 million.

“They are not selling the devices, they are not selling books and traffic is down,” said Mike Shatzkin, the founder and chief executive of Idea Logical, a consultant to publishers. “I'm looking for an optimistic sign and not seeing one. It is concerning.”

Nooks at a Barnes & Noble distribution cente   r. The e-reader units holiday sales fell 12.6 percent.Julio Cortez/Associated Press Nooks at a Barnes & Noble distribution center. The e-reader unit's holiday sales fell 12.6 percent.

The results, covering a period that ended Dec. 29, are a sobering development for the nation's largest bookstore chain. The declines occurred during what is supposed to be peak buying season. And the Nook unit's sagging fortunes came despite a 13 percent increase in sales of digital content, suggesting that it is the tepid demand for Nook devices that is dragging down the unit's performance. Over all, the numbers underscore the difficult challenge the company faces in an increasingly competitive e-reading market.

Barnes & Noble has invested heavily in developing a tablet that can compete with offerings from media giants like Google, Apple and Amazon.com. Last April, in announcing a $300 million investment in Nook by Microsoft, the chief executive of Barnes & Noble's chief executive, William J. Lynch, said the company wanted “to solidify our position as a leader in the exploding market for digital content in the consumer and education segments.”

A few months after that, the bookseller began breaking out the financial results of the Nook division, In October it completed its strategic partnership with Micr osoft by creating Nook Media, a subsidiary and a signal that it was ready to ride its digital business into the future.

But while Barnes & Noble's most recent Nooks have won critical praise, they have failed to gain significant traction with consumers.

Other companies do not break out sales of their digital tablets, but Amazon has been saying sales of its Kindle Fire were strong. Analysts say Apple's iPads also appear to be doing well.

“The problem is not whether or not the Nook is good,” said James L. McQuivey, a media analyst for Forrester Research. “What matters is whether you are locked into a Kindle library or an iTunes library or a Nook library. In the end, who holds the content that you value?”

For an increasing number of consumers, he said, the answer is not Barnes & Noble.

Though the company's stock was down only slightly - falling 2 percent to $14.22 - the reaction in the financial world was unsparing. Analysts stopped short of saying that this was a do-or-die moment for the Nook Media division, but they acknowledged that options for a strong digital future were narrowing.

In a note to clients, S&P Capital IQ said, “We think this portends greater market share losses for the Nook over the medium term” and downgraded its recommendation on Barnes & Noble stock from hold to sell. Barclays said in a note that the Nook's precipitous decline was “quite concerning” and †œbelow even our modest expectations.”

The declining retail numbers were also troubling when viewed in the context of a rise in sales among independent booksellers. The American Booksellers Association, which has not yet released official holiday sales, estimated Thursday that its members' sales would be up about 8 percent over last year.

Barnes & Noble executives were not available Thursday to discuss the sales numbers. But a statement from Mr. Lynch indicated that the company was searching for a solution.

“Nook device sales got off to a good start over the Black Friday period, but then fell short of expectations for the balance of holiday,” Mr. Lynch said. “We are examining the root cause of the December shortfall in sales, and will adjust our strategies accordingly going forward.”

The most intriguing, and troublesome, question is whether the company can stay in the digital device business at all over the long run. Nook has been expensive to develop and market and the company does not have the hefty financial resources of its competitors.

Other options are strategic partnerships. Microsoft's investment last spring was seen at the time as a way to promote Nook through a powerful partner. But sales of the Windows 8 operating system have been disappointing and the Nook has been featured as little more than an app among hundreds on the Windows 8 platform.

“It is going to prove to be a missed opportunity,” said Mr. McQuivey of Forrester.

Last month, Barnes & Noble announced that Pearson, the British education and publishing conglomerate, was taking a 5 percent stake in Nook for $89.5 million. Analysts said that cash investment was welcome and the partnership with Pearson, a major publisher of educational textbooks, might herald a strategy to move toward dominating an education niche market. Still, that would be a significantly smaller business.