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Dating via cell phone

2005-07-18T00:59:00.000-07:00

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How a Mosque for Ex-Nazis Became Center of Radical Islam

2005-07-13T14:47:00.000-07:00

Documents Reveal Triumph

By Muslim Brotherhood
In Postwar Munich

A CIA Plan to Fight Soviets

By IAN JOHNSON
Staff Reporter of THE WALL STREET JOURNAL
July 12, 2005; Page A1

MUNICH, Germany -- North of this prosperous city of engineers and auto makers is an elegant mosque with a slender minaret and a turquoise dome. A stand of pines shields it from a busy street. In a country of more than three million Muslims, it looks unremarkable, another place of prayer for Europe's fastest-growing religion.

The Mosque's history, however, tells a more-tumultuous story. Buried in government and private archives are hundreds of documents that trace the battle to control the Islamic Center of Munich. Never before made public, the material shows how radical Islam established one of its first and most important beachheads in the West when a group of ex-Nazi soldiers decided to build a mosque.

The soldiers' presence in Munich was part of a nearly forgotten subplot to World War II: the decision by tens of thousands of Muslims in the Soviet Red Army to switch sides and fight for Hitler. After the war, thousands sought refuge in West Germany, building one of the largest Muslim communities in 1950s Europe. When the Cold War heated up, they were a coveted prize for their language skills and contacts back in the Soviet Union. For more than a decade, U.S., West German, Soviet and British intelligence agencies vied for control of them in the new battle of democracy versus communism.

Yet the victor wasn't any of these Cold War combatants. Instead, it was a movement with an equally powerful ideology: the Muslim Brotherhood. Founded in 1920s Egypt as a social-reform movement, the Brotherhood became the fountainhead of political Islam, which calls for the Muslim religion to dominate all aspects of life. A powerful force for political change throughout the Muslim world, the Brotherhood also inspired some of the deadliest terrorist movements of the past quarter century, including Hamas and al Qaeda.

The story of how the Brotherhood exported its creed to the heart of Europe highlights a recurring error by Western democracies. For decades, countries have tried to cut deals with political Islam -- backing it in order to defeat another enemy, especially communism. Most famously, the U.S. and its allies built up mujahadeen holy warriors in 1980s Afghanistan to fight the Soviet Union -- paving the way for the rise of Osama bin Laden, who quickly turned on his U.S. allies in the 1990s.

Munich was a momentous early example of this dubious strategy. Documents and interviews show how the Muslim Brotherhood formed a working arrangement with U.S. intelligence organizations, outmaneuvering German agencies for control of the former Nazi soldiers and their mosque. But the U.S. lost its hold on the movement, and in short order conservative, arch-Catholic Bavaria had become host to a center of radical Islam.

"If you want to understand the structure of political Islam, you have to look at what happened in Munich," says Stefan Meining, a Munich-based historian who is studying the Islamic center. "Munich is the origin of a network that now reaches around the world."

Political and social groups affiliated with the Muslim Brotherhood now dominate organized Islamic life across a broad swath of Western Europe. These connections are frequently little known, even by the intelligence services and police agencies of these countries.

While these groups renounce terrorism and officially advocate assimilation, the upshot of their message is that Europe's Muslims -- now representing between 5% and 10% of the continent's population -- need to be walled off from Western culture. This in turn has helped create fertile ground for violent ideas. Islamic terrorists have increasingly used Europe as a launching pad for their attacks, from the Sept. 11 assault on the U.S. to last year's bombing of trains in Madrid.

These current tensions are embedded in the events of half a century ago. Postwar Munich was a ruined city packed with Muslim emigres fleeing persecution. While the West tried to observe and control them as valuable pawns in the Cold War, they encountered formidable rivals seeking their own power bases in Europe's burgeoning Muslim world.

Over the next few decades, four men would try successively to control the Munich mosque: a brilliant professor of Turkic studies, an imam in Hitler's SS, a charismatic Muslim writer with a world-wide following and a hard-nosed Muslim financier now under investigation for backing terrorism. Most favored some sort of accommodation with the West. But the victor had a bolder vision: a global Islam opposed to the ideals of secular democracy.

The Scholar

Gerhard von Mende's interest in Muslims originated in 1919, when his father was murdered. The family had lived in Riga, part of a once-large German minority in Latvia. When the tiny land was invaded by the Red Army at the end of World War I, members of the bourgeoisie were rounded up and sent on a forced march. Mr. von Mende's father, a banker, was pulled out of the line and shot dead.

That awakened in the 14-year-old a loathing of things Russian. After fleeing with his mother and six siblings to Germany, he chose to study other people who were oppressed by Russian rule -- the Muslims of Central Asia. A blizzard of papers and books brought him academic prominence. Linguistically gifted, he spoke fluent Russian, Latvian and French, as well as passable Turkish and Arabic. When he married a Norwegian, he picked up her native tongue as well.

The Nazi invasion of the Soviet Union in 1941 put a premium on people like Mr. von Mende, who understood something about the lands that Germany's blitzkrieg was overrunning. He kept his job at Berlin University but was seconded to the new Imperial Ministry for Occupied Eastern Territories -- or Ostministerium -- to head a department overseeing the Caucasus.

Germany's initial victories left it with staggering numbers of Soviet prisoners -- five million in all. Due in part to the efforts of Mr. von Mende and the Ostministerium, Hitler agreed to free prisoners who would take up arms against the Soviets. The Nazis set up "Ostlegionen" -- Eastern Legions -- made up primarily of non-Russian minorities eager to pay Moscow back for decades of oppression. Up to a million soldiers took up Hitler's offer.

As the war progressed, Mr. von Mende became one of the chief architects of the Nazi policy toward Soviet minorities. He was dubbed their "lord-protector," establishing national committees of Tatars, Turks, Georgians, Azerbaijanis and Armenians. Desperate for soldiers, the Nazis viewed these committees as little more than a way to keep their turncoat allies in the war. But for the people involved, they were like governments-in-exile, a taste of independence for which they were grateful to Mr. von Mende.

Colleagues from this era describe Mr. von Mende as a well-dressed, regal man with a wry smile, who used his personal charm to win over the exiles -- especially his favorites, the Turkic Muslims of Central Asia. He opened his home in Berlin to them for long dinners with the conversation flowing in Russian, Turkish and German. In the last months of the war, he cemented their loyalty through an act of bureaucratic genius: With Germany's infrastructure bombed to a pulp, he managed to get thousands of "his" Turks transferred to the western front -- Greece, Italy, Denmark and Belgium -- figuring it would be better if they ended up in British or American prisoner-of-war camps than Soviet. Those who fell into Soviet hands were shot as traitors.

By the late 1940s, hundreds of Muslim ex-soldiers were stranded in the U.S. zone of occupation in Munich. Mr. von Mende, whose Nazi past left him with limited job prospects, decided to devote himself to looking out for them.

That decision would prove beneficial -- both for the Muslims and for Mr. von Mende. It was the beginning of the Cold War and Western intelligence agencies were desperate for anyone who could provide a glimpse behind the Iron Curtain. They needed people to analyze documents, broadcast anti-Soviet propaganda and recruit spies.

In October 1945, Mr. von Mende wrote a letter to a "Major Morrison" in the British Army, according to a letter in his private papers that his family made available. He laid out the Ostministerium's unique source of knowledge about the Soviet peoples. He explained who worked for it and in which POW or Displaced Persons camp they were being held. It was the beginning of his intelligence career.

Mr. von Mende settled in the British-occupied sector of Germany, in the commercial center of Düsseldorf. Although he was no longer an academic, he called his office the "Eastern European Research Service." His staff was made up of ex-Ostministerium employees -- basically a re-creation of the Nazi apparatus that oversaw the Muslims during the war. Funding came from British occupation forces initially, then a variety of West German agencies, including the national domestic intelligence agency and the German foreign ministry, according to foreign-ministry documents and Mr. von Mende's private correspondence.

Mr. von Mende spent enormous amounts of time helping the Muslims who used to work for him in the Ostministerium. He wrung money out of the West German bureaucracy for them to be fed, clothed and housed -- conditions were appalling and even a decade after the war's end many were still living in barracks.

But at heart, his task was simple: keep tabs on the emigres and prevent them from falling into another country's control. The main threat was the Soviet Union, which wanted to stop the emigres from making anti-communist propaganda. Some emigre leaders in West Germany were murdered. Many carried weapons in defense against KGB assassins.

CIA vs. Nazi Imam

By 1956, a rival emerged to threaten Mr. von Mende's control over the Muslim ex-soldiers of Munich: the American Committee for Liberation from Bolshevism, widely known as Amcomlib. Set up as a U.S. nongovernmental organization to run Radio Free Europe and Radio Liberty, Amcomlib was in fact a thinly disguised front for the Central Intelligence Agency. CIA funding lasted until 1971 when Congress cut Amcomlib's ties to the intelligence agency.

During the 1950s, the head of Amcomlib's political organization was Isaac Patch, who is now 95 and living in retirement in New Hampshire. Reached by telephone, Mr. Patch defended Amcomlib's strategy of using Muslims to fight the Soviets. "Islam was an important factor, no question about it," Mr. Patch said. "They were strong believers and strong anti-communists."

Amcomlib forged ties with Ibrahim Gacaoglu, a former Nazi soldier from the Caucasus who, like Mr. von Mende, was looking after Muslim soldiers stranded in Germany. Mr. Gacaoglu controlled food packages from the U.S., which he doled out to his followers, according to his organization's documents. Mr. Gacaoglu also did propaganda work for Radio Free Europe. In 1957, for example, he held a news conference with another former German political officer, Garip Sultan, who headed Radio Liberty's Tatar service, according to documents and Mr. Sultan. The two decried Stalin's abuses in Chechnya. Mr. Sultan, now 81 years old, said in an interview that he wrote Mr. Gacaoglu's speeches and a pamphlet for him on the situation of Muslims.

For Mr. von Mende and his colleagues, Mr. Gacaoglu's CIA connections were a problem. West Germany and the U.S. were on the same side of the Cold War, but Mr. von Mende didn't appreciate foreign agencies trying to influence German residents. As one informant had put it in a report to his boss: "Germany is a gate that no one controls because there doesn't seem to be a gatekeeper. Everyone comes and does what he pleases."

Mr. von Mende decided that Germany's Muslims needed a leader he could trust. He turned to a friend from the war: Nurredin Nakibhodscha Namangani.

Mr. Namangani had come from a long line of imams in his native land, modern-day Uzbekistan. But his religious service had mostly been in an unholy organization: Hitler's infamous SS. According to an autobiographical sketch he gave German authorities, he had been arrested by Stalin's security forces in 1941 and soon after liberated by the invading German army. He served as imam in various capacities, ending as imam for an SS division. He won some of Germany's highest commendations, including the Iron Cross.

Mr. Namangani arrived in Munich in 1956 to an uproar. Opponents such as Mr. Gacaoglu charged Mr. Namangani with having participated in wartime atrocities. Mr. Namangani's unit reportedly helped put down the 1944 Warsaw uprising of Polish partisans against the Nazis, but any personal role in atrocities is not evident in German war records.

Mr. von Mende beat back the attacks, persuading the federal government in Bonn to accept Mr. Namangani as the "Hauptimam" or "chief imam" of Germany's Muslims, on the West German payroll.

In late 1958, Mr. Namangani came up with a plan to rally the ex-Muslim soldiers behind him: a "Mosque Construction Commission." At the time, Germany had only a couple of mosques. Munich's mosque would be different: bigger and dedicated not to traders and visitors but to Germany's first permanent Muslim population of any note.

"For 13 years, Muslims haven't had a fixed place for their services and have had to hold them in various places," Mr. Namangani told the assembled 50 or so Muslims, including some Muslim students from the Middle East. Once, Muslims had been forced to hold services even in a brewery, other times in a museum, according to minutes of the mosque commission. Now, he told the group, Munich would be a center for Muslims and the Bavarian state government would certainly help out, according to the minutes.

It was a big event, so big in fact that someone special was on hand: Said Ramadan, the Geneva-based secretary general of the World Islamic Congress, a group that wanted to unite Muslims around the world. The rest of those assembled donated 125 marks in total (about $275 in today's money) for the mosque's construction. Mr. Ramadan himself gave 1,000 marks.

Mr. von Mende quickly put out feelers for information on the well-heeled visitor. Soon, his index of people to watch contained a new entry:

"Said Ramadan, Geneva. Circa 36 years old, 3 children. Since 1956 drives an expensive Cadillac, gift of the Saudi Arabian government. R.S. [sic] is supposed to be a member of the Muslim Brotherhood."

The Brotherhood Arrives

Said Ramadan's arrival in Europe was the result of a clash of ideas that continues to tear at Islamic societies. At heart, the problem is how to reconcile Islam with the modern nation-state. Like many religions, Islam is all-embracing, prescribing behavior in many spheres, politics included. But when taken literally, these requirements can clash with today's liberal democracies, which promote individual freedom.

In 1920s Egypt, a young schoolteacher named Hasan al-Banna came down firmly on the side of orthodoxy. Troubled by what he saw as the immorality of a rapidly modernizing Egypt, he set up an organization called the Muslim Brotherhood. His plan was to re-Islamicize society by teaching the fundamentals of Islam in the everyday language of the coffee shop, not the classical Arabic of mosques. He set up welfare organizations and was famous for his commitment to social justice.

But this collided with other visions of Egypt, especially those imported from the West, such as socialism and fascism. Heavily involved in the turbulent politics of postwar Egypt, Mr. Banna was assassinated in 1949. A few years later, a military coup brought in a socialist government that banned the group in 1954.

Many members were thrown in jail and some were executed. Mr. Ramadan was the most prominent member to flee abroad. He was Mr. Banna's son-in-law and was famous for having helped organize Jerusalem's defense against the new state of Israel in 1948. Few countries in the region wanted to shield Mr. Ramadan; Egypt was a regional powerhouse and its neighbors were wary of antagonizing it. After stops in Syria, Lebanon, Jordan and Pakistan, he arrived in Geneva in the summer of 1958 on a Jordanian diplomatic pass, accredited to the U.N. and also neighboring West Germany.

While in Germany, he set out his ideas in a doctoral thesis called "Islamic Law: Its Scope and Equity." It was published as a book and became a classic of modern Islamist thinking.

"He was decent and intelligent," says his doctoral adviser at Cologne University, Gerhard Kegel, now 93, "if a little fanatical."

Not fanatical in the sense of advocating violence, Mr. Kegel says, but in his view of a world in which Islam guides all laws and there is no distinction between religion and state. Mr. Ramadan also published a magazine, Al-Muslimoon, which surveyed events in the Muslim world and criticized secularism.

Mr. Ramadan, like others in the Muslim Brotherhood, strongly opposed communism for rejecting religion. During the Cold War, that made him a natural ally of the U.S. But Mr. Ramadan also opposed the U.S. and other Western countries for their interference in Mideastern affairs. Then as now, that put people like Mr. Ramadan in a tough position: They needed to cooperate with the West but didn't want to be Western collaborators.

Historical evidence suggests that Mr. Ramadan worked with the CIA. At the time, America was locked in a power struggle with the Soviet Union, which was supporting Egypt's Gamal Abdel Nasser. As Nasser's enemy, the Brotherhood seemed like a good ally for the U.S.

A document from the German foreign intelligence service, known by its initials BND, says the U.S. had helped persuade Jordan to issue Mr. Ramadan a passport and that "his expenditures are financed by the American side." Swiss diplomats concurred that the U.S. and Mr. Ramadan were close. According to a 1967 diplomatic report in the Swiss federal archives: "Said Ramadan is, among others, an information agent of the British and Americans."

When the Swiss newspaper Le Temps reported the contents of the diplomatic report last year, the Ramadan family responded in a letter to the editor that read in part: "Our father never collaborated with American or English intelligence services. He was, on the contrary, the subject of permanent surveillance for numerous years."

Members of the Ramadan family refused to comment. They include two sons, the popular Muslim intellectual Tariq and his brother, Hani, who heads an Islamic center in Geneva that his father set up.

A Fateful Alliance

Although he was fortunate to have escaped the Middle East, Mr. Ramadan's Swiss exile cut him off from his base of support. He began to look around for allies, according to colleagues who knew him then. Soon, an opportunity presented itself: He was contacted in 1958 by some Arab students in Munich eager to build a new mosque.

The students had come to Germany to study medicine, engineering and other disciplines in which German education excelled. Many had been involved with the Muslim Brotherhood in Egypt and were also using the chance to escape persecution. Mr. Ramadan "was a gifted orator and we all respected him," says Mohamad Ali El-Mahgary, who now heads an organization affiliated with the Munich mosque, the Islamic Center of Nuremberg.

The students quickly united in wanting to get rid of Mr. Namangani, the former SS imam. Fired up by Muslim Brotherhood ideology, they saw the Uzbek as a throwback to an earlier era, one where, for example, local traditions allowed for drinking alcohol when this was expressly forbidden in the Quran. Over the next three years, Mr. Ramadan and the Brotherhood showed their political mettle -- first sidelining the soldiers and their German allies, then striking out on their own.

First Mr. Ramadan teamed up with Amcomlib to undermine Mr. Namangani. In 1959, he organized the "European Muslim Congress" in Munich, which Mr. von Mende's informants reported was co-financed by Amcomlib, according to German foreign-ministry archives and Mr. von Mende's personal letters. The goal: marginalize Mr. Namangani by making Munich's mosque a European-wide center, not just for Munich's Muslims. For the U.S., this would help strengthen their man, Mr. Gacaoglu, and limit the West Germans' influence over the emigres.

In 1960, Mr. Ramadan took formal control of the mosque-construction commission, with the students convincing the former soldiers that only Mr. Ramadan could raise the money needed for a mosque, according to interviews. Mr. Ramadan was elected chairman and Mr. Namangani relegated to deputy.

Flummoxed, Mr. von Mende tried to figure out what Mr. Ramadan's goals were. His reports show that he was convinced that Mr. Ramadan was working with the U.S. But he needed confirmation and so turned to Germany's foreign-intelligence service. In a private letter to a former colleague in the Ostministerium, Mr. von Mende asked for information on Mr. Ramadan and suggested stealing files from his office in Geneva. He even estimated how much the operation would cost, bribes and travel costs included. Mr. von Mende's BND contact confirmed that Mr. Ramadan was backed by the U.S. As for stealing his files, the colleague advised against it: Mr. Ramadan was "much too careful" to leave valuable information in them.

Adding to Mr. von Mende's worries was that the CIA was now openly backing Mr. Ramadan. In May of 1961, a CIA agent attached to Amcomlib in Munich, Robert Dreher, brought Mr. Ramadan to Mr. von Mende's office in Düsseldorf for a meeting to propose a joint propaganda effort against the Soviet Union, according to Mr. von Mende's personal papers and interviews with contemporaries of the men. Mr. von Mende quickly turned them down.

Mr. von Mende decided he had to use Mr. Namangani to engineer Mr. Ramadan's removal. At first, it appeared the two had succeeded. In late 1961, Mr. Namangani called a meeting of the mosque commission. Mr. Ramadan was accused of financial irregularities. The soldiers put forward a new candidate and in a close vote won a simple majority. In memos to each other, German officials crowed that Mr. Ramadan was gone and with him the plans for a "monumental mosque."

But a sharp-eyed city government official noted that the commission's by-laws had required that Mr. Namangani's candidate win a two-thirds majority. The simple majority hadn't been enough. Once again Mr. Ramadan's ability to mobilize had been decisive: His students had turned out in force, unlike Mr. Namangani's more-numerous soldiers. Mr. Ramadan was still in charge of the mosque commission.

Discouraged, the soldiers began to leave the commission. Mr. Namangani remained head of the West German organization that oversaw the former soldiers' spiritual needs, but had nothing more to do with the mosque. In a seven-page letter to German officials that is now in the Bavarian state archives, Mr. Namangani explained he was tired of fighting Mr. Ramadan. "The Mosque Construction Commission has drifted far from its original goal and there is the danger that it will become a center for those engaged in politics," he wrote.

The emigres' departure from the mosque commission slowed its progress but didn't hurt it. The German bureaucracy, packed with many former Nazis, was still sympathetic to the idea of building a mosque, memos among officials show. They apparently didn't know that their former comrades-in-arms had left the commission. The West German bureaucracy even gave the mosque project, now firmly under Muslim Brotherhood control, tax-exempt status, which would be worth millions over the next decades.

Mr. von Mende, though, realized that his Turks were left in the political wilderness. In memos to the German foreign ministry, he said the federal government must do everything possible to block Mr. Ramadan, whom he saw as a foreign-backed outsider. Whether Mr. von Mende could have stopped Mr. Ramadan is unknown: In December 1963, while sitting at his desk in Düsseldorf, Mr. von Mende had a massive heart attack and died immediately. He was 58 years old.

A few months later, his Eastern European Research Service was closed and Mr. von Mende's network of informants dried up. It would only be decades later, after the Sept. 11, 2001, attacks on the U.S., that Germany would seriously focus domestic intelligence on the Brotherhood's Munich operations.

The Banker's Vision

Cloaked from outside scrutiny, the mosque had less and less to do with the needs of Munich's Muslims. And around this time, evidence of the CIA's involvement dried up. Instead, control eventually passed to an unlikely location: Campione d'Italia, a swath of mansions and millionaires in the Swiss Alps. Here, from a terraced villa overlooking Lake Lugano, one of Mr. Ramadan's trusted lieutenants, Ghaleb Himmat, ran the Munich mosque and influenced the network that grew out of it.

Of all the characters in the mosque's history, Mr. Himmat is the most enigmatic, although he is one of the few still alive. A Syrian, he went to Munich in the 1950s to study but ended up amassing wealth as a merchant. Now under investigation by several countries for links to terrorism, he normally shuns publicity. He agreed to comment briefly on the telephone for this article.

Contemporaries and archival records indicate that Mr. Himmat was a driving force behind the mosque. In 1958, members of the mosque commission say, he led the movement to invite Mr. Ramadan to Munich. Documents show that the two worked closely together. They went on fund-raising trips abroad and Mr. Himmat stood in for Mr. Ramadan when the older man was back in Geneva.

Mr. von Mende's death should have left Mr. Ramadan firmly in charge of the project. But over the next few years, he lost control to Mr. Himmat. The exact nature of their split isn't clear, but close associates say it had to do with their different nationalities. Mr. Himmat denies this, saying he does not know why Mr. Ramadan left.

At the same time, Mr. Ramadan was losing the support of his Saudi backers. Short of money, he stopped publishing his magazine in 1967. Over the last quarter century until his death in 1995, Mr. Ramadan's influence waned. His son Tariq describes him in a book as prone to "long silences sunk in memory and thoughts, and, often, in bitterness."

Mr. Himmat assumed control of the mosque just before it opened in August of 1973. Under his leadership, the mosque grew in importance, functioning as the Muslim Brotherhood's de facto European embassy. As its influence grew, its name changed. From Mosque Construction Commission, the group became the Islamic Community of Southern Germany and, today, the Islamic Community of Germany. It is now one of the country's most important Islamic organizations, representing 60 mosques and Islamic centers nationwide.

The group also became a cornerstone in a network of organizations that have promoted across Europe the Muslim Brotherhood way of thinking. The Islamic Community of Germany, for example, helped found the U.K.-based Federation of Islamic Organizations in Europe, which unites groups close to the Muslim Brotherhood and lobbies the European Union.

Mr. Himmat says the mosque has always been open to all Muslims but that the Brotherhood came to dominate it because its members are the most active. "If the Muslim Brotherhood considers me one of them, it is an honor for me," Mr. Himmat said in the telephone interview. "They are nonviolent. They are for interreligious discussion. They are active for freedom."

For decades, German authorities paid little attention to the activities in Munich, viewing them as unconnected to German society. They were slow to grasp the warning signs. In 1993, after a car-bomb attack on the World Trade Center in New York killed six and injured 1,000, investigators discovered that one of the organizers was Mahmoud Abouhalima, who had frequented the mosque. He was tried in the U.S. and in 1994 was sentenced to life in prison without parole. German domestic intelligence began to observe the mosque, intelligence officials say, but dropped their efforts after a short while when no links to terrorism appeared.

The Sept. 11 attacks changed that. Three of the four lead hijackers had studied in Germany, as did another key organizer. As German and U.S. law enforcement searched for clues, some, it is only now becoming apparent, led back to the Munich mosque.

Mr. Himmat, it turned out, was one of the founders of Bank al-Taqwa, a Bahamas-based institution whose shareholder list is a who's who of people associated with the Muslim Brotherhood in Europe. The bank has been identified by investigators in several Western countries as having links to terrorism. Investigators believe the bank helped channel money to the Palestinian terrorist group Hamas and may have transferred money for al Qaeda operatives.

In 2001, the U.S. issued a list of "designated" terrorists that included Mr. Himmat and a fellow shareholder, Youssef Nada. The Treasury Department froze their U.S. assets. Last month, Swiss authorities dropped their own investigation, citing lack of evidence. The men's money, however, remains frozen and the U.S. has indicated that it is continuing its investigation.

Messrs. Himmat and Nada deny any involvement in terrorism. A longtime member of the Munich mosque, Mr. Nada said in an interview that he no longer attends it or its board meetings. He said the mosque wasn't a formal headquarters for the Brotherhood because the group is no longer a formal organization. Now, he says, it has become something different: a matrix of ideas. "There is no form you sign," Mr. Nada said. "We are not an economic and political organization. We are a way of thinking."

The U.S. terror-funding investigation was enough to end Mr. Himmat's career at the Islamic Community of Germany. In 2002, he resigned, he said, because by being put on the terrorism watch list he was no longer able to sign checks for the community, meaning it couldn't pay its staff. He says the organization is doing well on its own and he doesn't contemplate returning to it. "It is running," he said. "There is no need."

In April, German police raided the mosque, claiming that it was involved with money laundering and spreading intolerant material, a crime in Germany. Police carted off computers and files from the offices. That was one of several raids on the center, although none have resulted in charges.

Mosque officials say the organization's days as a focal point of political Islam are long over. "This center has developed from a center that was important in Germany and internationally to a local institution," says Ahmad von Denffer, a leader of the mosque. The Islamic Community of Germany has since moved its operations to Cologne, where its current president resides.

Inside the world of political Islam, though, the Islamic Center of Munich remains something special. Some of the ideology's top leaders have served or spoken there. And the Muslim Brotherhood's current murshid, or "supreme guide," Mahdy Akef, headed the center.

Mr. Akef fondly remembers his time in Munich from 1984 to 1987. A short, friendly man with an elfish smile and big glasses, Mr. Akef says the center is now one of several belonging to the Muslim Brotherhood in Europe. During his stay there, he says, visiting statesmen from the Muslim world visited the Munich mosque to pay respects to the world's most powerful Islamic organization. The mosque was so important that when he was arrested in Egypt in the 1990s on allegations that he had tried to form an Islamic political party, one of the charges against him was that he headed the center.

The Muslim Brotherhood is still formally banned in Egypt but a tiny office in Cairo is tolerated. Sitting on a sofa under a map of the world with Muslim nations colored green, Mr. Akef says the Brotherhood did indeed spread out from Munich to others cities in Germany and Europe. Mr. Akef is a controversial figure who has spoken sympathetically about suicide bombers in Iraq. But he avoids answering questions about terrorism or fundamentalism. Instead, he prefers to talk about the community work the mosque did in Munich, helping to beautify a nearby landfill and plant pines in the mosque grounds.

"We made this dump beautiful and now it's full of trees," he says. "It's one of the most beautiful parts of Germany."

---- Almut Schoenfeld in Berlin contributed to this article.

Write to Ian Johnson at ian.johnson@wsj.com

WSJ - A Different Islamic World

2005-07-13T14:45:00.000-07:00

By CECILIE ROHWEDDER and DEBORAH BALL
Staff Reporters of THE WALL STREET JOURNAL
July 12, 2005; Page B1

LONDON -- Harrods, the iconic upscale department store, extended its opening hours to 8 p.m. this summer in hopes of courting a special consumer group: moneyed Middle Easterners who are accustomed to evening shopping sprees in their native countries. Nearby, rival specialty retailer Harvey Nichols has an Arab-speaking saleswoman on every store floor.

While much of the attention since last week's bombings here has centered on the radical Muslim sects who have sought haven in the U.K., a large community of affluent Muslims continues to influence day-to-day rhythms in the British capital.

Its members, predominantly Middle Eastern, own houses in leafy suburbs, send their kids to private schools and spend weekends in the lush countryside surrounding London. Many live here year-round, though some come to pied-à-terre in posh west London neighborhoods during summer months, to escape the heat in their home countries.

Wealthy Middle Easterners make up only a small fraction of the roughly 600,000 Muslims in London. But they are a visible and powerful part of the city's social, political and economic fabric. Britain's Parliament has had Muslim Members since 1997, and Arabs own major businesses in Britain, including the leisure company that operates Madame Tussauds Wax Museum, a popular tourist site. Harrods is owned by Egyptian-born Mohammed al Fayed, whose son Dodi was dating Princess Diana when they were killed in a car crash in Paris.

Especially in the summer months, these Londoners provide big business for restaurants, real-estate brokers and a wide range of service providers, from nannies to bodyguards. Veiled women are a common sight on retail-heavy Sloane Street. As Middle Eastern women climb into chauffeur-driven limousines outside high-end boutiques, fellow shoppers can often catch glimpses of trendy designer clothes and high-heeled shoes peaking out from beneath black robes.

Even women veiled from top to toe usually carry pricey designer bags, one of the few obvious fashion statements available to conservative Muslim women.

"We're lucky, many of us, because we come from families that never had to think about money, so yes we go into designer shops and just buy without looking at the price tag," says Jawhara Fawaz, a 32-year-old Saudi woman who lives in a five-bedroom apartment in the ritzy Knightsbridge area.

Since the Sept. 11 terrorist attacks in New York, some Arabs say they have felt more welcome in Britain than in the U.S., which has stricter entry and security rules. Kuwaitis, for instance, can get visas to Britain within a day, while permits to travel to the U.S. can take months. Some Arab women also often feel more comfortable in London than on the Continent, where veils have sparked public controversy.

In these early days after last week's subway and bus bombings, however, it is hard to say if Middle Easterners will keep coming to Britain in undiminished numbers. Many British Muslims have expressed concern about a backlash against their community. So far, there is no evidence confirming that last week's attacks were committed by Muslims. But British Prime Minister Tony Blair, speaking in Parliament on Monday, said it was probable that the attacks were carried out by Islamist extremists.

ADDITIONAL COVERAGE

• Police Make One Arrest After Raids in North England

• Network Links U.K. Police, Muslims

• British Police Fear More Attacks by Terrorists

• Complete coverage: Terror in London

London's continuing appeal depends on the British government's response to the attacks, some wealthy Middle Eastern residents say. If immigration rules are significantly tightened or new security measures make life more difficult for Muslims and Middle Easterners in the months to come, fewer people may come, they say.

"People have been put off by the Americans' extreme measures after 9/11," says Abdul Bari Atwan, editor of Al Quds, an Arab-language daily published in London. "If the British government's reaction is similar to that, the same thing will happen here."

"Things have changed since 9/11," says Hissa Al-Majed, a Kuwaiti woman, whose family owns a house in London's Chelsea district, where she spends a month every summer. "Before, we'd never get looked at in the streets. Now we do. I wouldn't say it has changed how we feel about the city or would stop us from shopping there, but it's not the same as before," says Ms. Majed, 59, who always wears a veil when outside the home.

Despite the complex emotions, there are few tangible signs that Thursday's terrorist attacks have diminished London's lure among Middle Easterners.

The British Tourism Council said it expects just a temporary drop in visitors from the Middle East, comparable to what Spain experienced after the Madrid bombings in March 2004, but that the numbers will recover. The Lanesborough Hotel, a deluxe destination overlooking Hyde Park popular with wealthy Middle Eastern tourists, had cancellations from European and American visitors, but none from Middle Eastern guests.

"We've seen a downturn in Americans, but not Arabs," echoes David Serlui, co-founder of Aura, a trendy bar and restaurant near the Mayfair district.

As a former colonial power in the Middle East, Britain is familiar to many Arabs, who have sent their offspring to British schools for decades. Prominent graduates from British universities include the current rulers of Jordan and Syria. At the two French Nursery Schools in west London, 50 of 220 children are from Lebanon alone.

The British tax system also attracts wealthy foreigners. Unlike in other countries, such as the U.S., foreigners who reside in Britain but don't have their permanent homes here, pay taxes only on their British incomes, not on investment income from overseas, provided it isn't sent to Britain.

Jimmy Choo, a London-based purveyor of luxury shoes and handbags, recently added a VIP room to its Sloane Street flagship store and offers home visits for Middle Eastern women who often prefer privacy to a busy store environment.

"For many Arabs, London is a home away from home," says Tara Ffrench-Mullen, a spokeswoman. "We try to sell to them any way they want."

--Yasmine el-Rashidi contributed to this article.

Write to Cecilie Rohwedder at cecilie.rohwedder@wsj.com and Deborah Ball at deborah.ball@wsj.com

The latest on RSS, search engines, privacy, and more

2005-07-03T13:53:00.000-07:00

Information Today, May 2005 v22 i5 p7(5)
(NewsBreak Update)Paula J. Hane Full Text: COPYRIGHT 2005 Information Today, Inc.
Almost daily during the past several weeks, I've stumbled across sites and resources that now offer to deliver information directly to users' desktops via RSS feeds. The Coalition for Networked Information, the Encyclopaedia Britannica, Yahoo! Shopping, the state of Missouri, and others now provide this service. Even Information Today, Inc.'s weekly NewsBreaks have been RSS-enabled.
Participants at the Computers in Libraries conference in March heard plenty about RSS. It was discussed in a number of sessions including the (infamous) Looking at Dead and Emerging Technologies session. According to panelist Genie Tyburski, the dead technologies are e-mail, stand-alone software, advanced search interfaces, bar codes, and physical information. What's emerging? Instant messaging, RSS, podcasting, browser access to information, simple search interfaces, RFID, virtual, and mobile information. Given the news crossing my desk, I'd say these picks are definitely on target. By the way, many of the conference presentation links are now available at http://www.infotoday.com/cil2005/Presentations.
RSS for Factiva.com Users
Steve Cohen of Librarystuff.net recently steered readers of his blog to RSS news from Factiva. According to information on the Factiva site, the company is now making standard folders of content, such as its Editor's Choice articles (covering 30 industries), available through RSS feeds. The feeds will show the headline and lead paragraph of each article as a hyperlink. When you click on the link, your RSS reader will open Factiva.com in a browser window and attempt to log in and display the article. Currently, the service only works for Factiva.com content and can't handle content in customers' personal folders. It also does not work with IP validation. An FAQ explains: "When the RSS authentication standard matures, Factiva will be the first to take advantage of it. In the meantime, Factiva will be looking at ways to provide access to our content for the enterprise with our current authentication model." Factiva said it welcomes any feedback and suggestions and would like to hear from enterprise users about their plans for using RSS within their organizations.
A Shower of Search Engine News
Besides the steady stream of RSS news, there was a constant springlike shower of news from the search engines. Yahoo! had one announcement after the other. Yahoo! 360, which launched as an invitation-only beta on March 29, offers users an integrated experience, bringing together communications, content, and community services such as Yahoo! Messenger, Yahoo! Photos, Yahoo! Local, LAUNCHcast Music, and Yahoo! Groups with new services such as blogs, moblogs (mobile Weblogs that consist of content posted from portable devices), and other sharing tools.
Yahoo! expanded the storage it offers for its free e-mail service from 250 MB to 1 gigabyte. Of course, Google then raised Gmail's storage from 1 gigabyte to 2. The announcement came on April 1, exactly 1 year after the launch of the beta e-mail service. Gmail use is still by invitation only.
Yahoo! also beefed up its desktop search software. The software, licensed from X1 Technologies, Inc., now indexes content from e-mail address books and discussions in Yahoo!'s instant messaging service.
The company also launched Yahoo! Search for Creative Commons beta, a service that provides Internet users with access to the collection of Creative Commons Web content. Content is identified by special license information, indicating that the owners' copyrighted works are available for free through required attribution or noncommercial use. At this point, the service isn't accessible from the main Yahoo! search page.
Marking a bit of a coup, Yahoo! won the Outstanding Search Service category in the 5th Annual Search Engine Watch Awards, breaking Google's 4-year streak. But Google won in several other categories, including Best News Search Engine. Speaking of news, Yahoo! is expected to roll out a new version of Yahoo! News any day.
Amazon's A9 service now has a new capability called OpenSearch that syndicates vertical search. The new technology uses RSS to let content providers create "columns" of search results that can be syndicated. Nearly 100 columns (from an eclectic mix of sources that includes The New York Times, PubMed, The British Library, as well as the best bars in Connecticut to enjoy happy hour) are already available at A9. Like some other search engine initiatives, however, the good stuff may get lost among the masses of results.
Furthering the increasingly popular search engine trend to provide answers, not just links, Google introduced a new question and answer service. Google's Q&A uses open Web resources, not proprietary information or subscription databases, to answer questions. While the service still has bugs and many unanswered questions at this point, Google promises it will evolve as the company works to better understand the structure of information and how facts relate to each other.
Google definitely kicked things up a notch in search visualization when it integrated satellite photos into its mapping applications. When using Google Maps or Google Local, you can now plot driving directions and pinpoint locations on detailed satellite maps, which use the technology that Google acquired when it purchased Keyhole Corp. last year. It's actually very cool--you can switch between the map view with labeled streets to the satellite view to see the buildings and landscape.
Not so cool, in my view, was Google's announcement that it would let consumers upload their home videos, even the raunchy, adult-rated ones. The goal of digitizing the world's content is one thing, but, personal videos? First, everyone can be a publisher, now everyone can be a video producer. Sheesh ...
The Dutch-owned ixquick metasearch engine has some new features, including a re-engineered metasearch algorithm, simpler interface, an international phone directory, and more. ixquick's metasearch technology utilizes its exclusive Star System, which gives each result one star for every search engine that ranked it as one of the 10 best results for a given search. For example, a five-star result at ixquick means that five search engines rated the result top-10 relevant.
There's a new version of the blinkx search engine: blinkx 3.0, which the company called "the world's first fully integrated search tool." With blinkx 3.0, users can view results from their desktop, the Internet, or television set in a single, combined list. The blinkx PC-based application is free to download at http:// www.blinkx.com.
And, stretching further into nontext digital media, Podscope was just announced (and should've launched last month) as the Internet's first spoken-word search engine for audio and video podcasts. Podscope uses technology from TVEyes, a company that has been indexing television and radio broadcasts since 1999. According to the company, Podscope, which makes every word searchable within a podcast, enables the audio indexing of podcast content, which is equally applicable to video blogs and personal videos. TVEyes recently announced a partnership with Yahoo! to provide real-time broadcast search for Yahoo! TV.
More Google Reactions
Reactions to Google's recent digital initiatives continue to ripple over the information world. Officials in France have begun laying the groundwork for a European endeavor similar to the Google Library digitization project. French President Jacques Chirac asked the Bibliotheque Nationale de France to make plans for a digitization program, and he asked several other countries to do the same. While begun as a reaction against Google's supposed Anglo-American bias, projects like these will only benefit users. (There's even been talk of developing a French search engine because of unhappiness with Google's popularity ranking.)
Peter Suber, in a recent SPARC Open Access Newsletter, commented: "This wave of digitization projects could be cooperative instead of competitive, but it's good for research, scholarship, education, digital culture, and OA."
Grass-Roots Media
Support for grass-roots digital media initiatives grew with the recent "alpha" launch of Ourmedia.org. The new site provides free storage and bandwidth for registered users to post files of all kinds-video, audio, photos, text, or software. Media files are hosted by the Internet Archive (IA); pages/data are hosted at Bryght. Members also get a free blog. The co-founders of Ourmedia.org are blogger J. D. Lasica and Marc Canter, founder of Macromedia. (What's not clear is whether there's a practical limit to the number and size of files stored.)
The Internet Archive made the news again with the announcement that it would host a new "universal repository" that will accept e-prints from any scholar in any discipline. According to Suber, who is working with the IA staff to set up the repository: "Not only will it host new content for scholars with no other place to deposit their work, but it will offer to preserve all the other OAI-compliant repositories in the world."
The Internet Archive is not only valuable for its Wayback Machine, which lets people visit archived versions of Web sites, but also for the range of digital resources it now collects, including collections of text, audio, moving images, and software. The Live Music Archive, for example, is an online public library of live recordings available for royalty-free, no-cost public downloads. There are also films of math lectures from the Mathematical Sciences Research Institute as well as episodes of Computer Chronicles, which was a popular television program on personal technology that was broadcast from 1983 to 2002. And, don't forget about IA's Million Book Project, which is scanning books and indexing the full text with OCR technology. (Google isn't the only one with digitization projects.) The goal is to create a free-to-read, searchable digital library the approximate size of the combined libraries at Carnegie Mellon University. It's definitely worth your time to browse the Internet Archive.
Privacy Breached
Reports of personal data loss have escalated in recent weeks. Reuters reported that hackers attacked computer servers of California State University--Chico and may have gained access to the personal information--including Social Security numbers--of 59,000 people affiliated with the school. Boston College admitted a similar incident and warned approximately 120,000 alumni that their identities could be compromised as a result of a computer breach. And, a thief recently walked into a University of California-Berkeley office and swiped a computer laptop containing personal information of nearly 100,000 alumni, graduate students, and past applicants.
As a follow-up to the previously reported ChoicePoint fiasco, an article in Wired reported that, even though a federal law requires consumer-reporting agencies to either verify the data they give employers or notify job applicants about negative reports, ChoicePoint appears to be doing neither in some cases. More recently, ChoicePoint representatives said the company is developing a system that would allow people to review their personal information that is sold to ChoicePoint customers.
At press time, Reed Elsevier Group, PLC said that up to 10 times as many people as originally thought may have had their profiles stolen from LexisNexis' Seisint database, putting the total at 310,000 people.
Meanwhile, in other privacy-related news, we haven't heard the end of debates over the USA PATRIOT Act. The current administration urges for the renewal of all provisions of the controversial anti-terror legislation. A Senate Judiciary Committee has been holding hearings on potential changes, and librarians, civil libertarians, and others continue to voice concerns.
For the latest industry news, check http://www.infotoday.com every Monday morning. An easier option is to sign up for our free weekly e-mail newsletter, NewsLink, which provides abstracts and links to the stories we post.
Links
http://fce.factiva.com/ rss/marketing.htm
http://search.yahoo.com/cc
http://searchenginewatch.com/ awards/article.php/3494141
http://www.infotoday.com/ newsbreaks/nb050328-2.shtml [NewsBreak on Amazon's OpenSearch]
http://www.infotoday.com/ newsbreaks/nb050411-1.shtml [NewsBreak on Google Q&A]
http://www.ixquick.com
http://www.podscope.com
http://www.tveyes.com
http://www.archive.org
http://archives.eprints.org/ eprints.php
Paula J. Hane is Information Today, Inc.'s news bureau chief and editor of News Breaks. Her e-mail address is phane@infotoday.com.

Privacy and the database industry

2005-07-03T13:52:00.000-07:00

Information Today, May 2005 v22 i5 p17(2)
George H. Pike Full Text: COPYRIGHT 2005 Information Today, Inc.It has been a difficult couple of months for many of the data broker industry's heavyweights. In mid-February, ChoicePoint reported that credit reports and other data for more than 140,000 people were provided to criminals posing as legitimate businesses. Later that month, Sen. Charles Schumer, D-N.Y., chastised Westlaw for the ease in which sensitive records can be attained through "egregious loopholes" in its database access policies. Finally, LexisNexis reported that "potentially fraudulent access" may have compromised the records of 32,000 individuals.
These incidents have led to calls for increased regulation of data brokers and other consumer information companies, as well as to questions about privacy and the information that these brokers hold. Social Security numbers (SSNs) are of particular concern, since they are often the base on which identity fraud is built. But what about other information such as names, addresses, and phone numbers? Or more detailed information such as birth date, employer, income, marital status, and home value? Or potentially harmful or embarrassing information such as credit reports, criminal records, bankruptcies, or lawsuits? How does the law cover the creation and distribution of these records?
Privacy Is Not Absolute
Privacy is a complicated area of the law. The Constitution does not identify a specific right of privacy. The privacy rights that we enjoy are implied from a variety of sources and include the right to life and liberty, freedom from warrantless searches, and even the rarely mentioned 3rd Amendment right to not have soldiers "quartered in any house." Courts have also made it clear that privacy of personal information is not absolute. There are few facts about ourselves that are not divulged at one time or another. The more such facts are divulged in the normal course of life, the less privacy protection they receive.
Social Security numbers are especially problematic, since they can be used to forge new and illicit identities. There are contrasting popular views regarding the use of SSNs. One view is that they are only to be used for income tax and Social Security purposes. Another view perceives that they are national identification numbers, available for use by both public and private entities.
Social Security Numbers
The law, of course, lies in the middle. Social Security numbers are controlled by a number of federal statutes that dictate what they can be used for and under what circumstances they can be disclosed. Many government benefit programs require SSNs to determine eligibility. Obtaining a commercial driver's license requires an SSN, and people who pay child support are required to submit them in order to create tracking databases. Similar federal laws allow states to require SSNs on state documents such as professional and marriage licenses, vital statistics documents, and court filings. IRS regulations require private companies to obtain SSNs for any person receiving taxable income--such as wages, dividends, interest, or similar payments.
Many private companies, particularly financial companies, healthcare organizations, and insurers, use SSNs to verify identity. While laws exist that restrict how such companies can distribute SSNs, those laws do not necessarily regulate the right of the company to request an SSN. As a result, it has become common practice to require an SSN in order to obtain credit, participate in an HMO, or obtain insurance. The law, however, may not require the use of SSNs for these purposes.
A Variety of Data Sources
Several federal laws restrict access to SSNs and related personal information. Generally, these acts--which include the Fair Credit Reporting Act, the Gramm-Leach-Bliley Act (affecting financial institutions), and the Health Insurance Portability and Accountability Act--limit distribution to defined purposes or only those with specific consent. In addition, several states have additional laws restricting the display or use of SSNs. A California law requiring notification of leaked personal information is credited with compelling ChoicePoint to publicly acknowledge its stolen credit reports. Data brokers are required to comply with these laws for the information that they have in their files.
Data companies receive information from a number of sources. Newspapers, telephone directories, business and product registries, and other published resources provide some data. Other data is obtained from government sources such as property and court records, licensing bureaus, corporate filings, and deed and will registers. More restrictive sources of data are vital statistics registries, motor vehicle and drivers licensing bureaus, and criminal records. These sources have limited public availability, and how they are obtained and used may be restricted. Credit, tax, and financial records are generally nonpublic information, regardless of whether the source is government or nongovernment. Data brokers obtain such information by license from the original data gatherer and are subject to the same legal restrictions as the data source.
Practical Obscurity
Back in the old days, this information was cumbersome to obtain and gather. The searcher needed to go to courthouses, vital records bureaus, and secretaries of state and sort through city-by-city telephone directories and the like. There was an inherent privacy in these records that arose from what the courts called "practical obscurity," i.e., due to the sheer difficulty of creating a meaningful database, records were open but often in limited formats and locations. The age of computer filing reduced this difficulty by allowing for compiled databases. Networking allowing those databases to be shared reduced the difficulty further. Searching through multiple databases allowed multiple points of data to be collected about individuals with ease. Finally, the availability of these databases over the Internet--whether on public or proprietary platforms--opened these files to a global audience of both legitimate and illicit users.
There is value in having a database industry that can put collections of information together. Employers needing background checks, consumers applying for mortgages, and law enforcement agencies investigating crime all benefit from access to personal data. But that value comes at a price of increasing identity theft and a loss of privacy. Congressional hearings held in the wake of the Choice-Point and LexisNexis problems may result in additional restrictions on the use of sensitive personal information, particularly its use by data brokers. The data broker industry is still relatively young and is going through some growing pains. But the industry carries a great responsibility to millions and needs to demonstrate a continuing commitment to enhancing security and privacy. If it doesn't, the law will impose one.
George H. Pike is director of the Barco Law Library and assistant professor of Law at the University of Pittsburgh School of Law. His e-mail address is pike@law .pitt.edu.

Growth Of Online Services And E-Commerce Increasing Demand For Toll-Free Services

2005-07-03T12:28:00.000-07:00

InternetWeek, August 10, 2004
New research from Insight projects total toll-free services revenue will grow from $10.9 billion in 2004 to almost $14.5 billion in 2009.

The growth of online services and e-commerce is actually increasing demand for 800 or toll free services, says a new research study released by the Insight Research Corporation.
Insight projects that total toll-free services revenue will grow from $10.9 billion in 2004 to almost $14.5 billion in 2009.
Call centers, the specialized organizations within an enterprise that have traditionally been big buyers of to toll free to provide customer service, are adapting to online growth by providing Web-based customer services. Though migrating customer service from a voice-oriented toll-free service to Web-enabled customer service costs the enterprise less per transaction, online shopping and customer service continues to drive demand for voice-based customer service.
"As consumers shift from brick and mortar shopping to shopping on-line the need for service doesn't go away," says Insight's president Robert Rosenberg. "When shoppers migrate away from brick and mortar stores to make an online purchase, they know they cannot go back to a store clerk to resolve a problem. In this context, the toll-free call that the customer can make to register a complaint or resolve an issue takes on an even more strategic role that the 800 call did when first used to build recognition in the late 1980s" Rosenberg concluded.

Firm offers toll-free real estate service

2005-07-03T12:25:00.000-07:00

San Diego Business Journal, Dec 6, 2004 v25 i49 p23(1)
(Freedom Voice Systems)(Brief Article)Lisa Kovach

Full Text: COPYRIGHT 2004 CBJ, L.P.Freedom Voice Systems, an Encinitas-based company that develops and markets feature-rich voice messaging systems and services, has launched version 2.0 of the AdTrakker toll-free service.
The service enables real estate brokers and agents to connect with potential clients and develop new leads automatically.
It also allows people interested in buying or selling a house to call a toll-free number and hear valuable recorded information at their own convenience.
Through the toll-free number, the caller is able to receive additional information via fax, telephone or a transferal to a real estate agent.
The new version measures advertising ell fectiveness by tracking the number of calls to the toll-free number and capturing the contact information of the callers for potential new leads.
It can be purchased online at www.adtrakker.net.
Article A126315668

Freedom Voice Systems

2005-07-03T12:22:00.000-07:00

San Diego Business Journal, Feb 21, 2005 v26 i8 p33(2)
Spotlight: Freedom Voice Systems.
(Small Business)(Eric Thomas)Lisa Kovach Full Text: COPYRIGHT 2005 CBJ, L.P.

Eric Thomas has grown his business into a $5.2 million-a-year company in nine years.
Thomas is the president and chief executive officer of Encinitas-based Freedom Voice Systems, a provider of toll-free communication services.

With 12,000 customers, Freedom Voice helps businesses have the feel of a larger company and allows them to work more efficiently by offering an answering service, which can direct the phone call to the client's home-based business or a firm that does not have a receptionist, he said.

And the service seems to be a hit with smaller companies that want to give off the image of a larger corporation but may not have the capital to do so.

Freedom Voice, which produced a nearly 95 percent increase in revenue from $2.7 million in 2002 to $5.2 million in 2004, also offers a toll-free hot line lead generation system for real estate agents and mortgage brokers and a service that allows a client to send and receive faxes from any computer through a broadband connection.

RESUME
Name: Eric Thomas.
Title: President and chief executive officer.
Company: Freedom Voice Systems.
Address: 169 Saxony Road, Suite 206, Encinitas.
Phone: (800) 477-1477.
Founded: January 1996.
Prior experience: I had started a laboratory supply company, B/T SciTech, which, in its early years, was a home-based business and then a small business.
Source of startup capital: $120,000.
2004 revenue: $5.2 million.
2003 revenue: $3.3 million.
2002 revenue: $2.7 million.
Number of employees: 17.
Web sites: www.freedomvoice.com, www. adtrakker.net, www.faxfreedom.com.

BACKGROUND
Born: June 15, 1962, in Plainfield, N.J.
Education: Master of arts in biochemistry and molecular biology from UC Santa Barbara. Residence: Rancho Santa Fe.
Family: Wife, Julie Bryant; her parents, Roly and Brenda Bryant.
Hobbies: Soo bahk do, which is a Korean martial art, kayaking, photography and travel.

JUDGMENT CALLS
Reason for getting into the business: I had already done well with my previous company but I saw this as a way of doing something more useful. How I plan to grow the business: Our primary means of growth is to listen to our customers. Based on what they tell us, we continually add features to our existing technology and introduce new services. We will add conference calling and Web conferencing services in the first quarter of 2005 and are looking at Web and e-mail hosting.
Biggest plus of business ownership: I get to do something that makes a difference.
Biggest drawback: Lots of responsibility.
Biggest business strength: We've hired really well. The employees at Freedom Voice are top of their class and very talented.
Biggest business weakness: It'd be nice to have our own Telco network, which is a network of switches connected through the public service telephone network, to make some of our future vision happen, but we can overcome that by partnering carefully and with long-term goals in mind.
Biggest risk: Changing technology.
Smartest business decision: Marrying my wife. Of course, I married her because I love her, but she's so good at business and she's been able to teach me a lot about how to be successful.
Biggest business mistake: Mistakes are teaching tools so they are only bad in the short term, but it would have to do with overestimating the character of someone whom I thought was trustworthy.
Toughest career decision: Leaving my 9 a.m. to 5 p.m. job and starting my own company.
The most important part of my business: The quality of our client services. We have a feature-rich technology that can be used in many ways for the exact same business objective.
How your business has changed throughout the years: We've grown quite a bit in terms of number of employees and I've been fortunate to see people grow within the company.
Best way to stay competitive: Listen to your customers.

GOALS
My five-year business plan: I think one key element is going to be client services. I think the power and availability of technology will continue to increase.

PHILOSOPHY
I would sell my business only if: My customers, distributors and employees were looked after.
Guiding principles: Product first--make the product or service and the support as good as I possibly can.

Most admired entrepreneur: I like Richard Branson's ability to take risks, and I like Donald Trump's business philosophy in that he's very direct and straightforward.
Important lessons learned: Always deal with the truth. Don't try to lie to yourself so you can feel better in the short term.

Advice for those looking to go into business: Persistence. I can't tell you how many times I would have been perfectly justified in walking away. But if you believe in what you're doing, you have to keep going.

Article A130051654

Zions' Bold New Mission: The bank puts its reps on salary, offers products with lower fees, and launches aggressive online services.

2005-06-27T11:31:00.000-07:00

Bank Investment Consultant - June 2005 v13 i6 p26

By Stock, Howard J.

At the beginning of this year, Zions Bancorp adopted a strategy that may send shivers down the spines of the industry's commissioned brokers-the successful ones, at least: The bank dropped commissions for its financial consultants in favor of a salary-plus-bonus combination.

But for executives in the bank's boardroom, the move made perfect sense. Regulators have long complained that complicated commission structures can make some products more lucrative for brokers to sell than others. Legislators fear that this puts clients at risk, so they're targeting financial institutions that have failed to police their commissioned salespeople. This is leading to costly settlements and fines for errant financial services firms-and worse, it's causing consumers to question their brokers' motives.

Anticipating such problems, Salt lake City-based Zions switched its brokers to salaries based on past production combined with a quarterly bonus. It also has shifted its product offerings and launched an aggressive new online initiative.

"Basically, we wanted to make sure that we had the controls in place so clients were sold the right products," says James Cooper, the bank's chief operating officer. "We figured this was one step to ensure this happens. A lot of the problems the industry is facing are related to suitability, and commissions can be a factor in advisers selling one product over another."

Cooper concedes that the move has not been popular, initially at least, with many of the bank's commission-based brokers. More than 10 brokers left, reducing the number of advisers in Zions' brokerage operation to around 30. "At first it was hard, but now the financial consultants are starting to understand our goals," Cooper says. "Taking our consultants from commission to salary-plus-bonus is new to the industry as a whole, and it took some by surprise."

The bank's new financial planning platform will help make fee accounts a reality. "We're trying to move toward financial planning," says David Hemingway, the bank's executive vice president and senior investment officer. "Customers are much better off with fees. They could pay 250 basis points for a variable annuity, or 90 basis points for the S&P 500 index. For a $100,000 account, that's the difference between paying $2,500 or $90 per year. We don't want conflicts-we want people in branches to get the best advice possible."

Currently, only about 7.5% of the bank's brokerage business is in fee-based accounts, but Cooper says he expects that share to grow as the bank begins to shift its biggest accounts toward financial planning. "We're working with the branches more closely to get them more focused on high-net-worth opportunities," he says. Brokerage accounts, including annuities and mutual funds, amount to over $2 billion in assets under management.

The bank is also positioning more-efficient, lower-cost products for all of its clients, according to Hemingway: "Most of them don't do a lot of trading and they tend to be conservative in their outlook." Zions has dropped variable annuities and (except for specific situations) fixed annuities, shifting instead to products with lower fees. It has adopted Vanguard funds, which are known for low management fees, as its preferred mutual fund provider, will soon introduce exchange-traded funds, and will continue its long-standing focus on bonds.

Moving THE MASSES Online

The bank has also launched a new Web site to handle less-lucrative accounts and self-directed investors. Following the example of many wirehouse giants, Zions has moved its smaller clients either online or to a call center, freeing up its full-service reps to work solely with clients who have assets of $50,000 and up.

"The concept is that the larger accounts stay with reps in our branches," Hemingway says. "Our wealth management arm attracts a different type of rep-an investment adviser, not a broker. Merrill Lynch drew the line at $100,000 and transferred anything less than that to a call center, focusing on people who can afford to pay for advice. So this model requires fewer reps in the branch system." With fewer customers qualifying for face time, the bank doesn't actually need as many financial consultants as it once had.

The move makes financial sense. Eighty percent of the bank's accounts make up only 17% of its assets, says Hemingway. "This is an efficient program to maintain relationships from an economic standpoint; it would be more difficult to attain profitability if lower-net-worth investors all had face time with financial consultants," says David Warne, vice president and manager of Zions Direct, the bank's revamped online trading platform.

"Before, financial consultants were opening accounts for as little as $2,000, and spending too much time with smaller clients. Now, they can refer them to us," Warne says. "We have a pretty good relationship with our financial consultants. I'm in direct daily contact with them, and we've received both support and referrals from them."

So far, clients who have shifted to the Web site and call center have been pleased. "We called individually the 80% who moved to Zions Direct and explained the benefits, particularly lower commissions, and we got a very good response," Hemingway says. "Due to the sizes of their accounts, they didn't get much coverage anyway, so they're probably getting more now from the call center."

A search tool on the Web site enables clients to sort through the universe of available mutual funds using their own criteria, such as performance, investment objective, expense ratio, and load type. Self-directed investors tend to search for no-load funds, of which Warne estimates there are 1,000 on the shelf. "Self-directed investors don't normally buy load funds, so we charge $17.95 per transaction," he explains. "The fee for load funds is dictated by the mutual fund company." Fees for customers dealing with reps at the call center are a little higher, but they are still lower than the bank would charge if the customers dealt directly with branch-based brokers.

BOND BONANZA

The Web site also makes sense for affluent, buy-and-hold investors shopping for bonds. After the site was revamped last October, its "Bonds for Less" program officially launched in January. It offers an inventory of 10,000 bonds at $10.95 per transaction, no matter how many bonds clients buy, Warne says. "Traditionally, these have only been available to institutional investors," he adds. "Now they're available to individuals, which is quite compelling."

With the bond service in particular, the bank is successfully attracting investors even from outside its footprint at an average account size of $100,000, who will hopefully become clients. "We built a $2 million bond ladder through Zions Direct for one client who has subsequently brought in a $78 million relationship," Warne says.

The site doesn't require a password for those wishing to browse, which Warne says makes it more likely to attract visitors. Zions also made it easier for customers to open accounts online and to transfer funds from competing institutions. While the site offers a full range of investment products, bonds are its core competency.

"We're interested in bringing in new clients' bond portfolios and cash balances," Warne says. "The money we make off this is in deposit dollars-not in the transaction but on the balances. The transaction is a loss leader-the more relationships our clients have, the more likely it is that they will continue to do business with us. Plus, Internet-banking clients are the most profitable, and we're now able to serve new folks with outside accounts by allowing them to self-direct, which is a market we haven't exploited in the past."

Since this activity has a tendency to translate into more business down the line, Zions is pushing its Web presence pretty hard. Its online advertising budget is $100,000 per month, and its goal is to double assets under management within a year. It primarily advertises on two Web sites-Google and BankRate-and also uses Overture's search marketing services. "We bought key words on Google associated with fixed income," he says. "We've had a pretty good success rate already."

Clients below the $50,000 threshold who lack access to the Internet-or simply prefer dealing with a human being-use Zions' call center, which is manned by 15 Series 7 and insurance-licensed reps, who, like the reps in branches, are salaried. The call center also acts as a referral source for higher-net-worth business. It supports trading, backup, and compliance for the financial consultants in branches who are therefore in frequent contact with the call center as well. Plus, using a combination of Web site and call center enables the bank's brokerage operation to reach customers located too far from Zions' home cities to fall into its reps' territories.

"We don't have consultants at every branch-we have around 30 FCs across our 400-branch footprint, so it's a matter of coverage," Warne says. "So Zions Direct provides a brokerage alternative to branches in our network. They can call the 800 number, or if they're better suited to work with a consultant, we can direct them there. But it has opened up brokerage opportunities in rural areas where we don't have brokerage coverage."

Of course, clients transitioned to Zions Direct can elect to return to full-service brokerage when their assets reach an appropriate level. In fact, the system is engineered to alert Zions when a client crosses the threshold. "While we segment our clients, it needs to be fluid," Warne says. "A $50,000 client may start with $25,000, and then our referral program transitions them. Referrals are key to the bank-brokerage market. Financial consultants then ascertain whether the client needs them, or whether the client would be better served online." Branch personnel who refer business to either Zions Direct or the full-service brokerage receive a nominal one-time payment of $25.

SPREADING THE WORD

Zions Bancorp's strongest operations are in Utah, Idaho, and California, but the company also operates several locally managed banking subsidiaries across its footprint, which extends to Arizona, Colorado, Nevada, New Mexico, and Washington.

Zions Bancorp generated 38% of its total $1.59 billion in 2004 revenues in its home states of Utah and Idaho via Zions First National Bank; another 31% comes from its California Bank and Trust subsidiary. Zions' other banking subsidiaries include National Bank of Arizona, Nevada State Bank, The Commerce Bank of Washington, and Vectra Bank Colorado.

Zions intends to roll out a training program throughout its footprint to get all of its brokers up to speed with their new role as salaried financial planners, Cooper says. "We're training our financial consultants right now, working with Pershing. We sell Lockwood products on an RIA platform, and then there's a fee-based platform called Gold Advisor, so we're making sure our reps and their clients fully understand their options. We're also putting together seminars for outlying cities to explain what we're doing."

While it's too early to say whether this strategy will pay off for the bank's reps, its switch to low-fee financial planning is sure to be a hit with customers. Positive feedback is already coming in from Web-site and call-center clients and the bank is also attracting big bond business from outside its geographical footprint. Time will tell whether this will represent a major new step for bank brokerages in general. But in an increasingly regulated environment, the switch to salaried reps and fee-based business certainly makes sense now.

Small Companies leverage Blogs

2005-05-05T16:34:00.000-07:00

The business of blogging:
Small companies promote themselves through Web logs
Ilana DeBare, Chronicle Staff Writer
SFgate.com
Thursday, May 5, 2005

Dennis Woo had doubts at first when an employee asked to start a blog for GreenCine, his online DVD rental company. It seemed like a big and risky commitment for the small San Francisco firm, which at the time had a staff of about 10.
But Woo took the plunge and allowed employee David Hudson to start writing full time about film festivals and other news from the world of independent and alternative cinema. Now, two and a half years later, the GreenCine Daily blog (daily.greencine.com) draws about 80,000 visitors each month with its dispatches from film festivals around the world.
Woo credits the blog with helping double his company's sales in 2004. "When we started off, I was skeptical about whether it would be successful, but it is core to our strategy," he said.
GreenCine is a nationwide pioneer when it comes to the effective use of blogs by small businesses. Blogging -- the creation of a kind of online public diary -- got its start among tech-savvy individuals as a means of creative expression or social commentary. It has recently been taken up as a marketing tool by some big companies like General Motors and Stonyfield Farm, the New Hampshire yogurt manufacturer.
Now small businesses are starting to dip their toes into what is called the blogosphere. Some analysts suggest that blogging presents an ideal marketing opportunity for small business -- that blogging is in fact better suited to the needs of small firms than large ones.
"For small, small businesses that have little money for advertising and don't have a Web site, a blog can become your Web presence," said Paul Chaney, an Internet marketing expert with Radiant Marketing Group in Mississippi. (radiantmarketing.typepad.com).
Blogs, short for Web logs, can be produced for low or no cost and with virtually no technical skill. Web sites like www.blogger.com or www.typepad.com provide blog templates. All that users need to do is type in their message.
Blogs can be easily updated on a weekly, daily or even hourly basis. And because the content is constantly changing, blogs often end up ahead of static Web sites when doing an Internet search for a particular topic.
All of this makes blogging a potentially cheap and accessible form of marketing for small businesses.
An additional boon for small businesses is that blog entries often work best with an informal, conversational tone, so they don't need a publicist to write the content for them. In fact, sounding too slick can be the death knell for a blog.
"At the heart of every great blog is the blogger, someone speaking passionately and personally, whether it's about their family or about their business," said Chaney.
"It's not so much about controlling the message as engaging in a conversation. It lets people see the inside of your business and who you are. It builds a relationship on the blog and off the blog. I don't know of any other medium that allows that kind of communication," he said.
Individual marketing
So far, small businesses are responsible for only a tiny number of the 9 million blogs currently in existence. Some of the earliest small-business bloggers have been independent consultants and professionals -- people who find blogging a good way to market their individual expertise.
Like a newsletter, a blog allows them to keep clients up to date on news in their field and impress potential clients with their knowledge.
Folger Levin & Kahn, a midsize San Francisco law firm, started an intellectual property law blog in March (www.iplawobserver.com) as a way to showcase its IP knowledge to potential clients.
Folger attorneys spend a total of 10 to 15 hours per week writing blog entries about recent appellate court decisions on IP law.
"A lot of law firm business is based on word-of-mouth, where someone tells a friend about Folger," said Gregory Call, a Folger partner. "That works very well with my generation, which is 45 and over. But what's the equivalent of word-of-mouth for younger people today, many of whom are moving into decision-making positions? Maybe a blog will do that .... I don't think people will hire us just because we have a blog, but they may talk to us because we have a blog."
In El Cerrito, business consultant Sallie Goetsch has a blog focused on developments in computer-backup technology (www.fileslinger.com/blog). She had been sending her clients weekly e-mails reminding them to back up their computers, when she realized she had enough news and anecdotes to fill a blog. She uses the blog to attract visitors to her main Web site, which promotes her services in writing, research and technical support.
"It's definitely increased the profile of my Web site generally and provides a showcase for my writing services," Goetsch said.
While it started with consultants and professionals like Goetsch, blogging is spreading into the realm of bricks-and-mortar small businesses.
Posting signs and rabbits
J.D. Iles, owner of a custom-sign shop in Lincoln, N.H., has a blog that mixes photos of his signs and descriptions of the sign-making process with more personal entries, including recent notes on a family vacation and a photo of the family's new pet rabbit (www.signsneversleep.typepad.com).
Ben Williams, co-owner of the Horsefeathers restaurant in North Conway, N. H., replaced his Web site last summer with a blog (hihowaya.blogs.com) aimed at keeping customers connected with the restaurant.
His blog is an eclectic mix of recipes, food news and musings on topics ranging from the history of Orangina to women taking up archery.
Williams sees the blog as a quantum leap beyond his old static Web site, which consisted of little more than a menu and pictures of the restaurant.
"I paid someone way too much money to develop our Web site, and then I had to argue and fight with them every time we wanted to change something," Williams said. "Now with the blog, I just grab my computer and write up the stuff we're talking about every day in the restaurant -- the Red Sox, the weather, the ski conditions."
The Horsefeathers blog takes Williams 10 to 15 hours per week to write and gets about 150 visitors per day. "We are getting as many people checking the site every day as we have seats in the dining room," he said.
Other small businesses around the country that have taken up blogging as a marketing tool include architects, home remodelers, jewelers, furniture- makers and artists.
Some have experienced dramatic results.
Anita Campbell, an Ohio business consultant (www.smallbusinesses.blogspot.com) said her blog helped her position herself as a national expert who now makes more money speaking and writing about small business than from local consulting engagements.
Artists sells paintings
Colorado artist Nicole Hyde has sold six paintings through her blog (nhydefineart.typepad.com/bijou) since she started it in February, compared with just two paintings at her real world gallery during that same time.
"So far the blog's winning," Hyde said.
Often, however, it can be hard to measure the value of blogs to businesses. For one thing, blog traffic can vary widely -- from a few dozen visits per month to the 80,000 visits that GreenCine Daily is getting. Not every blog reader turns into a customer.
And even when blogging helps lead to a sale, it is often in conjunction with other marketing efforts like a Web page, a phone conversation or word of mouth.
In the case of Lincoln Sign Shop, Iles said the blog has been most useful on a local level as a supplement to his other sales efforts. For instance, after speaking with potential customers, he directs them to the blog to see examples of his work.
At GreenCine, Hudson's passion and knowledge about independent, alternative film clearly struck a chord with the company's target market of film aficionados. The blog itself didn't directly promote the company's DVD rental business, but it increased GreenCine's name recognition and provided easy links to the firm's main Web site for rentals.
"We were trying to differentiate ourselves (from other DVD rental companies) in a way that was not just posting movie reviews," Woo said. "At a certain point, traffic on this thing just shot through the roof. It was the quality of the thing and the way we wrote it. It came back to us in positive word on the street, respect from the (film) community and higher sales."

SMALL-BUSINESS BLOGS
Here are some examples of small business blogs that use a wide variety of styles and approaches:
Better Home Design (betterhomedesign.blogspot.com) -- Ohio architect Richard Taylor created this site to post his views on various aspects of home design. He sees the blog as part of a broader marketing effort that includes writing articles for the local paper and sponsoring Little League teams.
Bijou (nhydefineart.typepad.com/bijou) -- Colorado painter Nicole Hyde is an example of an artist using a blog instead of a Web site to display and sell her work. Unlike many individual blogs that are mostly text, Hyde's blog is a gallery of her paintings.
E. coli (www.ecoliblog.com) -- This is one of five separate blogs on food- borne illness written by the Seattle law firm of Marler Clark, one of the country's top legal advocates for victims of food-borne illness. The blog provides news on E. coli-related illnesses.
Horsefeathers (hihowaya.blogs.com) -- Possibly the first restaurant blog in the country, it provides a mix of food news, recipes and random anecdotes that would interest even people far from the restaurant's New Hampshire resort location.
Fileslinger (www.fileslinger.com/blog) -- El Cerrito consultant Sallie Goetsch writes a blog about computer backup technology that she uses to attract attention to her business doing tech support, trademark research and business writing.
Genuine Gems for Pearl Girls (mgoldman.blogspot.com) -- Maurice Goldman is a family-owned jeweler in New York that uses its blog as an online catalog linked to an eBay store.
Greencine Daily (daily.greencine.com) -- This San Francisco DVD rental firm has a blog whose lengthy reporting on international film festivals and other cinema news complements its main Web site.
IPA Law Observer -- (www.iplawobserver.com) The San Francisco law firm of Folger Levin & Kahn uses this blog to post summaries of recent court decisions on intellectual property. The firm purposefully chose a factual, serious tone that is very different from the more personal kind of blogs written by individuals.
Signs Never Sleep -- (signsneversleep.typepad.com) This New Hampshire custom-sign business mixes personal anecdotes with product photos and behind- the-scenes descriptions of how signs are made.
Surgery Sucks (www.surgerysucks.blogspot.com) -- Body work practitioner Richard Rossiter created this site for his book and business, which promote rolfing as an alternative to surgery. The entries are more directly self- promotional than the other business blogs listed here.

DoubleClick Sold to Buyout Firm for $1.1 Billion

2005-04-26T15:56:00.000-07:00

The deal will bring to an end the 6 1/2-year run as a public company for DoubleClick, which was an early symbol of the rise of the dot-com world. The fact that interest in the firm ran high is not surprising given the resurgence in online marketing spending on everything from search marketing to more traditional banner ads

Q1 Smartphone Shipments Up 82 Percent Year-on-Year

2005-04-26T15:54:00.000-07:00

Global sales of smart mobile devices have surged past 10 million in the first quarter with overall global shipments of smart mobile devices up 82 percent year-on-year, a report from UK-based researcher Canalys.com showed

Cisco, Verizon Make Moves on VoIP

2005-04-26T14:37:00.000-07:00

Cisco Systems (Nasdaq: CSCO) buying a small firm that could help turn its home-networking unit into a VoIP player and Verizon announcing a solution to the enhanced-911 problem nagging the emerging technology

IP-PBX Takes Digital Networking One Step Further

2005-04-05T12:42:00.000-07:00

3Com White Paper

In 1998, 3Com introduced the NBX® solution, the first IP-PBX. The IP-PBX changed the fundamental structure of the PBX market to deliver a new set of benefits to enterprises. Since their introduction, 3Com has shipped more than 18,000 IP PBX phone systems and 650,000 IP PBX ports.

For the first time, new IP-PBX shipments exceed traditional PBX shipments. The trend represented by this shipment data can be traced to IP-PBX architecture that allows businesses to reduce infrastructure cost while improving productivity.
IP PBX - Offer

With an IP-PBX, the Local Area Network is the platform for connecting smart IP phones logically over a shared packet network to the call manager. This unifies the data applications and the voice network, but places demands on the packet prioritization aspects of the LAN infrastructure to ensure user satisfaction with the quality of audio. Power to the IP phone is provided via the standard power brick-style transformer or via Power over Ethernet using the IEEE 802.3af standard.

Easy configuration of IP-PBX services is aided by browser-enabled administration and moving an employee with an IP-PBX is as simple as unplugging a telephone and plugging it in at a new location—as opposed to costly service calls from legacy PBX vendors. Additionally, IP-PBX owners do not have two separate networks to manage or the costs of additional infrastructure.

Selecting the right IP-PBX is an extremely important business decision. Many products are marketed as IP-PBXs but actually offer traditional PBX architecture and IP phones. The capabilities of these systems may rely on traditional rather than IP switching, resulting in the need to purchase conventional handsets, hardware that requires two backplanes with two points of failure, and processing requirements that exceed those needed by an IP-only system. These solutions may fail to deliver economies resulting from IP benefits such as the reduced cost of moves, adds, and changes and the savings of wiring a single converged network.

IP-PBX technology is integral to the SIP-PBX, an important and emerging product category for IP telephony in enterprises. This category of product uses the Session Initiation Protocol (SIP) to establish connections between users, and combines the local features of the PBX with the networking advantages of the IP-PBX and the scalability and trunking services of the softswitch. The SIP-PBX delivers a new architecture for enterprise communications applications, enabling enterprise-wide features, find me/follow me support, and extensive presence management. The 3Com® VCX™ solution is the first entrant in this new category.

SIP-PBX Fulfills the Promise of VoIP for Enterprises—New, Advanced Applications

2005-04-05T12:35:00.000-07:00

3Com White Paper

The SIP-PBX is a new category of product for enterprise-wide communications and communications-intensive applications.

It combines:

the locally-delivered services of the PBX
the IP networking features and distributed architecture of the IP-PBX
the trunk management (trunks interconnect two or more voice devices over the wide area network) power of the carrier softswitch

The SIP-PBX uses advanced protocols such as Session Initiation Protocol (SIP) to enable a new framework for advanced enterprise-wide productivity enhancing and customer interaction applications.

The SIP-PBX can be deployed in a variety of customer scenarios. The telephony networks of most major enterprises use a host of vendor equipment that has delivered digital voice services over the years. These companies are in no position to throw out all their capital equipment. Furthermore, each of these services such as voice mail, call center, and other offerings involve adjunct servers, attached to the PBX fabric through proprietary line side ports or data interfaces. These applications do interoperate through standards, but at great cost.

The vast majority of PBXs are network islands connected via traffic-bearing circuits.

The SIP-PBX can work with legacy PBX implementations to bring these islands together, participate fully in forklift upgrades of already depreciated telephony infrastructure, and act as an overlay application to unify control of the VoIP network backbone. Furthermore, the SIP-PBX enables powerful services such as centralized voice mail for inexpensive storage, backup and regulatory compliance, corporate-wide directory for stronger customer service, global follow-me services for more productive employees, and many other applications that will drive successful penetration of this new technology.

The 3Com® VCX™ solution is the first product in the new category of SIP-PBX.

For Photo-Share Sites, A Second Act on Web

2005-03-28T14:51:00.000-08:00

WSJ

Say cheese: Your picture may soon be online. It's as though the Web has just discovered, or perhaps rediscovered, photography.

In recent days, Yahoo and Hewlett-Packard have both acquired big photo-sharing sites, though the two, Snapfish, now H-P's, and Flickr, bought by Yahoo, each has its own emphasis. By now, just about every big-name Internet, computer and consumer-electronics company has some sort of photo-oriented Web site or service, from Sony's ImageStation to Kodak's Ofoto (now called Kodak EasyShare Gallery), Apple Computer's iPhoto and Google's Picassa.

The current move toward photography is the Internet's second encounter with the field. Back in the glory days of the dot-com bubble, photo sites sprang up like video cameras at a kindergarten recital. These sites typically offered free photo storage, and occasionally even free photo processing and prints. Many didn't survive the bust.

Most of the current crop of photo sites and services still store pictures for free, which they can do because disk storage has gotten so cheap. They also take traditional steps to try to make money from your use of them, often by trying to get you to order prints of your digital pictures, along with calendars and mouse pads.

But getting consumers to do something physical with a virtual image is an increasingly tough sell. Photographs today are much more likely to be e-mailed than they are to be printed. In fact, in middle-class families all around the country, kids are growing up looking at more family photos than their parents ever dreamed possible -- courtesy of, if nothing else, their cellphone cameras -- but without ever actually holding any of these pictures in their hands. Sometimes, they don't even bother to keep the pictures, taking a quick look at them and then erasing them to make room for even more.

When you are a company that is used to selling well-branded, high-margin photo-based consumables, like Kodak's photo paper or H-P's ink-jet printer ink, this new world of abundant but entirely screen-based photography can be a scary place.

Kodak had to begin making its peace with the trend several years back. It will be a struggle for H-P, too. The company makes roughly a fifth of its profit from the sale of printer ink. For the time being, both companies seem content to use the Internet to try to collect all their potential customers in a single place.

Someone who had spent the last few years in a cave wouldn't find anything about sites like Snapfish and EasyShare Gallery very difficult to understand. They are dedicated to the preservation of familiar Kodak moments, in which adorable, sentimental photos are shared, often with the grandparents.

Flickr, though, represents something of a generational shift in photo sites. It has a hipper sensibility, one that owes less to the world of birthday-party portraiture and more to the world of blogs and online communities. That might explain why it was bought by Yahoo rather than by H-P or Kodak.

The Flickr site lets you upload your photographs and then assign labels, or "tags," to them. These are a bit like captions, though a picture can have more than one tag. You can then search through other tags on the site to find people interested in the same things you are. The most common tag on Flickr, by the way, is "cameraphone."

And while you can set up your Flickr account so that only friends and family can see your pictures and tags, just as photos used to be shared in the old days, what would be the point of that? Indeed, Flickr is aimed at the growing numbers of people who would never dream of doing something without chronicling it online, often while they are still doing it.

Flickr was started a year ago by a husband and wife team in Vancouver, British Columbia, and it grew by word of mouth to the point where it was able to attract Yahoo's attention. Flickr used generic Internet technologies that other services could take advantage of. As a result, there is a constellation of emerging technologies around Flickr, making the site a good example of the new rule for Web businesses: If you want to get big, let other businesses help you do it.

Mappr, for instance, was developed by a team of San Francisco programmers. The free Web site looks through the tags of all the Flickr pictures, and tries to guess where the picture was taken. Sometimes the job is easy, as when the tag says "Golden Gate Bridge." Other times, say when the tag just says "Blushing bride," it's impossible.

For all the pictures for which it has a location, Mappr creates a map, with a small "thumbnail" of each shot at the place on the map where it was taken. It is thus a great way to see what people in different parts of the country are photographing, or to see how pictures of, say, "home remodeling" vary from region to region.

Sometimes, the results are remarkable. Mappr's programmers searched Flickr for all shots tagged "Route 66," and then plotted them. Sure enough, the pictures wound from Chicago to L.A., with stops in Kingman, Barstow and San Bernardino. Oh, so pretty.

Does IM stand for insecure messaging?

2005-03-25T07:48:00.000-08:00

CNET News

update When Jimmy Kuo gave his 13-year-old daughter permission to begin using America Online's AIM Express, he warned her that if she managed to download any viruses, the result would be no IM for a long, long time.

Of course, since Kuo is a research fellow at IT security specialist McAfee, he's significantly better informed about the risks of instant messaging than the average parent. Because teenagers as a group are among the most active regular users of IM, lax habits at the keyboard on their part could result in a serious problem, Kuo said.

At the heart of the matter is the growing number of IM-borne threats, most of which rely for their proliferation on ignorance of their existence among users and IT administrators.

News.context

What's new:
Rapid development in the sophistication and frequency of IM-borne attacks is almost guaranteed, security industry experts say.

Bottom line:
Experts agree that all IM users--whether on a home computer or a corporate network--need more education in how to protect themselves.

Phishers target Yahoo Messenger

2005-03-25T07:03:00.000-08:00

CNET NEWS

Yahoo's free instant-messaging service is being targeted by phishers attempting to steal usernames, passwords and other personal information.

Yahoo confirmed Thursday that its service, Yahoo Messenger, was being targeted by a scam. According to the company, attackers are sending members a message containing a link to a fake Web site. The fake site looks like an official Yahoo site and asks the user to log in by entering a Yahoo ID and password.

The scam is convincing because the original message seems to arrive from someone on the victim's friends list. Should the recipient of the phishing message enter his details on the Web site, the attackers can gain access to any personal information stored in the victim's profile and, more important, access to the victim's contact list and IM friends list.

A Yahoo representative told ZDNet Australia on Thursday the attack was not very widespread but that consumers should be aware it exists so they can protect themselves.

"Hackers have become very devious in their methods to obtain personal information," the representative said. "In this case, the hacker was able to trick the user into providing personal information by disguising their identity to make it appear that the message was coming from a trusted source."

During the past month, Microsoft's MSN Messenger service has been targeted by various pieces of malicious software, including a Trojan horse and a virus. In late February, Microsoft had millions of its MSN Messenger users update their client software in order to stop one of the worms spreading around its network.

MSN Messenger was an obvious target because of its popularity, said Graham Connolly, Australia and New Zealand manager of Websense, a Web-filtering and security software company.

"Hackers want to use IM as another attack vector to steal personal information. They hit MSN Messenger first because it is the most popular," Connolly said.

Connolly said that as e-mail filtering technology matures, attackers look for new ways to access confidential information.

"Content filtering, e-mail filtering and antivirus are now mature technologies, so the attackers need to find another way, and IM is becoming one of those ways--like spyware," Connolly said.

According to a survey of businesses published Thursday by Internet security specialist SurfControl, 90 percent of respondents said they have an Internet access policy--but about half have no policy concerning the use of IM and peer-to-peer applications.

Charles Heunemann, managing director in Australia for content-filtering company SurfControl, said IM and peer-to-peer communications are rarely encrypted, making them susceptible to snooping, hijacking and impersonation attacks.

"Serious security vulnerabilities such as buffer overflows, denial-of-service attacks and encryption weaknesses continue to be found and exploited in all popular instant-messaging clients," Heunemann said.

Heunemann said companies should protect themselves by enforcing strict policies regarding the use of IM and peer-to-peer applications in corporate environments.

"Left ungoverned, instant-messaging applications are an easy vehicle for accidental or malicious disclosure of sensitive corporate data, including company financials, personnel records and customer data," he said.

Munir Kotadia of ZDNet Australia reported from Sydney.

Dot CON Job - Info Space - Part 2

2005-03-23T16:37:00.000-08:00

Seattle Times

When times got tough, execs hid troubles, dumped stock...

Though their relationship would sour, InfoSpace Chairman Naveen Jain, left, and Go2Net CEO Russell Horowitz, right, are all smiles at a July 2000 conference call with analysts about the companies' upcoming merger. Arun Sarin, InfoSpace CEO, is at center. Within six months, all had quit. Only Sarin did not sell his stock.

When InfoSpace Chairman Naveen Jain went on CNN's financial network in late 2000, he proclaimed that his Internet company was doing great. "Our wireless business is on fire!"

But privately, he and key executives knew better.

As the company's finances worsened, key executives angled to get around trading restrictions to sell large blocks of personal stock before its value evaporated. Others just quit and sold their holdings.

Unknown to investors, Jain and his top two executives all resigned in a single week.

"I had never heard of anything like that before," Rick Thompson, former InfoSpace executive vice president, said in court documents. "It was the [Exxon] Valdez running along with nobody driving the damned thing."

Five years ago this week, at the peak of the dot-com stock mania, InfoSpace was worth $31 billion and was promising to eclipse Microsoft by bringing the Internet to everyone's cellphone.

But InfoSpace's success was an illusion, built on accounting tricks and the hype of charismatic founder Jain, a Seattle Times investigation has found.

InfoSpace had merged that October with another dot-com and, as a result, key executives could sell only a few shares for the next six months. Sales of too many shares by insiders would violate securities law and require InfoSpace to report a $1 billion loss, devastating its stock.

But interviews, court records and internal company documents show:

Key InfoSpace players

Ellen Alben: general counsel

Tammy Halstead: chief accounting officer

Larry Hile: outside auditor, Deloitte & Touche

Russell Horowitz: president

Naveen Jain: founder, chairman

Garth MacLeod: finance director

Arun Sarin: chief executive officer

Rick Thompson: executive vice president

• InfoSpace general counsel Ellen Alben demanded a demotion to skirt trading restrictions and made $1.6 million selling her stock. When her successor urged her not to sell, he said Alben brushed him off.

• Chief accounting officer Tammy Halstead took a demotion to staff accountant and sold $627,500 of stock. Jain said she wanted an "Ellen deal."

• InfoSpace concocted a plan to give its chief technology officer, who had financial problems, a fake demotion to allow him to sell shares. But in an anxious voice mail, the company's auditor warned, "If we got caught, we could burn."

• Jain himself accused several fellow executives of illegal insider trading, saying they sold stock knowing InfoSpace revenue projections were vastly inflated.

Through it all, faithful shareholders lost their savings. A dollar invested in InfoSpace at its peak five years ago is worth 3 cents today.

InfoSpace today has new managers and a culture that won't tolerate accounting tricks and exaggerations, CEO James Voelker said. The Bellevue company is profitable.

The story of InfoSpace's turmoil emerges now because The Seattle Times won a two-year legal battle to obtain thousands of pages of company records that had been sealed in a local shareholder lawsuit.

The documents, along with scores of interviews, offer a rare look at the insider dealings at what was once the region's biggest dot-com.

Two leaders clash

It was the summer of 2000 and Naveen Jain faced serious problems.

InfoSpace had made a name for itself as one of the few profitable dot-coms. But it relied on a controversial accounting method, used by many dot-coms, to calculate those profits. Known as "pro forma," this method didn't include such one-time expenses as the costs involved in buying a company.

When InfoSpace reported $46 million in pro-forma profits for 2000, for example, the company, by Securities and Exchange Commission accounting standards, had actually lost $282 million.

That summer, InfoSpace was losing money even using pro forma calculations. Jain needed to find revenues to buoy the stock price, then around $50 a share.

An accomplished deal maker, Jain believed he had found a fix: a $1.5 billion merger with Go2Net, a Seattle dot-com that ran Web sites and search engines.

On paper, Go2Net was profitable, plumped up with $426 million in financial backing from Microsoft co-founder Paul Allen's Vulcan Ventures. With Go2Net, Allen and other investors had placed a huge wager on the concept of connecting the masses to the Internet through their cable-ready TVs, using them as a big, interactive computer screen, downloading movies and music, and searching and shopping the Web.

But the merger sparked more problems than it solved.

Jain and Go2Net chief executive Russell Horowitz, then 33, soon developed a personality clash. Jain was boisterous and freewheeling, while Horowitz was pensive and private.

Horowitz thought Jain's claim that InfoSpace would make billions by charging the world's cellphone users monthly fees was misleading. Most cellphones couldn't access the Internet at all; those that could had painfully slow connections. What's more, cellphone users were reluctant to pay for stock quotes and weather reports they could get elsewhere for free.

By the time the companies formally merged on Oct. 12, 2000, Rick Thompson, an executive vice president, expressed contempt for Jain, records show. Thompson had been traveling with Jain to meet with fund managers and analysts, and he was shocked by Jain's extravagant claims about the company's finances and upcoming products, he later said in court documents.

The day after the merger, in a meeting with new president Horowitz, Thompson brought a list of obstacles facing the new InfoSpace. At the top: "Naveen." Others included: "reality versus the smoke," "assume nothing" and "verify everything."

Horowitz quietly put plans in place to keep Jain out of the media.

Skirting the rules

Despite the merger, InfoSpace's share price continued to fall. This alarmed insiders who watched their personal fortunes in InfoSpace stock slipping away.

But since the announcement of the merger, Horowitz, Jain, Alben, Halstead and other top executives were prohibited by federal securities laws from selling more than a minimal amount of their holdings until late January 2001.

By early October, Russ Arun, InfoSpace's chief technology officer, faced a personal financial crisis. In an e-mail to Jain, Arun said his stock-option riches from Microsoft, where he once worked, had been wiped out and he needed $5 million to pay income taxes.

Arun thought that if he quit, he could then sell his stock. But InfoSpace wanted Arun to stay and tried to find a way to enable him to raise the cash.

One idea was to demote Arun so that he was no longer an executive, allow him to sell stock, and later promote him back to his current job. Halstead, chief accounting officer, presented this plan to Larry Hile, a partner at the auditing firm Deloitte & Touche in Seattle.

As InfoSpace's auditor, Hile's job was to serve as a watchdog for the stockholders and to make sure that InfoSpace accurately reported its financial condition.

Listen to the voice mail from Hile to Halstead regarding "demotion by design" of Russ Arun.

In an Oct. 11 voice mail to Halstead, Hile raised concerns about the plan to demote Arun. Would it be a real demotion? Would Arun get paid less than his new boss? They might need to wait a year before giving Arun his old job back.

Hile said he had consulted with Russ Golden, a Deloitte colleague. "This is one that Russ feels is pretty dangerous to do," Hile said in the voice mail. "If we got caught, we could burn."

Gary Zeune, an accounting-fraud expert in Columbus, Ohio, said recently that it is shocking that the auditor was discussing a phony demotion.

"To me, that's clearly illegal. It's securities fraud," Zeune said. "What [Hile] should have said is, 'If you're going to do that, we're not going to be associated with you.' "

Hile later told the company not to carry out the demotion scheme, court documents show.

Hile declined to be interviewed. Deloitte & Touche said recently: "Any suggestion that Deloitte and Mr. Hile agreed to accept anything short of full and complete compliance with the rules is contrary to the evidence and is false."

Heeding Hile's advice, InfoSpace devised a new plan. Without telling its board of directors or seeking its permission, InfoSpace loaned Arun $4 million, allowing him to use his 200,000 InfoSpace shares as collateral. If he stayed for a year, Arun wouldn't have to repay the loan.

In essence "we agreed to buy those 200,000 shares at the current (market price)," Jain later said in an interview.

On Oct. 25, 2000, the newly combined management team faced its first conference call with stock analysts. The call was being broadcast to the public over the Internet. Jain and his managers hoped the analysts would continue to tell investors to buy InfoSpace.

That would be unlikely if the analysts knew the bad news that finance director Garth MacLeod earlier had given Jain and others. The merger was exacerbating revenue problems, he'd said. Revenue for the fourth quarter, expected to be $72 million, was going to fall $15 million to $20 million short.

Optimism in public

Talking with stock analysts could be a delicate dance. Securities law prohibits executives from misleading investors about company finances.

In preparing for the call, InfoSpace executives knew analysts had been asking for more information about its wireless Internet business — the key to the company's future success.

But they couldn't even agree on how much wireless revenue they had. MacLeod told Jain and chief accountant Halstead that wireless revenue made up only 8 percent of revenue.

Halstead disagreed, saying wireless accounted for 13 percent of revenue.

Your number is misleading, MacLeod replied to her by e-mail, because "as we know [it] is inflated by warrant revenue" and one-time startup fees.

Jain picked the higher figure. "I am at ease with our decision and let's roll with it," he said.

During the conference call with analysts, Jain, Horowitz and other InfoSpace executives gave no hint of the fourth-quarter troubles facing the company. The mood was upbeat, transcripts show. In fact, things were going so well, executives said, that the company was increasing its fourth-quarter revenue forecast.

What's more, the company said it was "extremely confident" that annual revenue would soar to $360 million in 2001, up from about $215 million.

Jain appeared on CNN's financial network the next day and bragged: "Our wireless business is on fire!"

"Over a barrel?"

Another insider who wanted to sell stock was chief counsel Ellen Alben. She demanded that Jain demote her to a part-time staff attorney, working 15 hours a week but at full pay, court records show. Once she was no longer an executive, she planned on cashing out her stock.

MIKE SIEGEL / THE SEATTLE TIMES, 2004

As InfoSpace's stock tumbled, general counsel Ellen Alben demanded a demotion to part-time staff attorney so she could sell her stock despite trading restrictions, court records show.

Jain was furious with Alben, worried that any future sales would cause trouble at a tricky time for the company.

Joanne Harrell, head of human resources, asked Jain in an Oct. 25 e-mail, "If she knows where all the 'dead bodies are' does she have us over a barrel? Or is it worth a court case with her?"

"Are you saying that we should give in to blackmail?" Jain replied. "Nobody has a sweet deal like her. I will like to sign up a deal like that too, where I work for 15 hours and get full pay. Where do I sign up?"

When Alben announced plans to sell all of her stock later that year, her replacement raised the prospect of suing her. "This would be ugly, however," wrote Ed Belsheim, the new general counsel.

He tried to change Alben's mind but she replied that "she was not going to see her investment reduced to a small amount and she was going to sell," according to Belsheim's account.

Alben made a "veiled threat," saying she was selling because "you don't know what I know," Belsheim noted.

In an interview several months ago, Alben said she stepped down as general counsel because she wasn't interested in working at what was now a big company. She said she sold stock late in the year to reduce her tax bill, not because she saw trouble coming for the company.

"Wanting to sell a whole bunch of shares was not my motivation. If I had wanted to do that, I would have done it well before the closing from the Go2Net merger" when stock prices were higher, she said. Records show she sold $12.5 million in shares before the merger and $1.6 million after.

Alben also said in court records that she believed the trading restrictions no longer applied to her. She had consulted with Larry Hile — the auditor from Deloitte & Touche — and with an outside lawyer about whether an executive at her level could sell InfoSpace stock 30 days after quitting or being demoted. She said they gave her their blessing.

An expert later hired by InfoSpace representatives in a shareholder lawsuit said there was no 30-day rule and concluded that Alben's sale of stock violated securities laws.

Another executive wanted to cash in her stock during the waiting period. In November, according to Jain, Tammy Halstead wanted an "Ellen deal."

Halstead had clashed with Horowitz, company president, who didn't like her accounting methods, according to court records. For example, Halstead credited InfoSpace with $1 million in revenue for services it sold to American Express, but the $1 million actually was a value she assigned to the "exclusivity" of the deal.

Under accounting rules, payments for a service can't be counted as revenue until the service is performed.

Horowitz wanted her fired, records show. But during a heated meeting, Jain and others strongly backed her.

Halstead accepted a demotion to staff accountant in November and soon sold most of her InfoSpace stock, making $627,500, records show. Halstead's lawyer recently said she couldn't comment because she had agreed to confidentiality when settling a shareholder lawsuit. In court records, she said she sold because she needed money for taxes, and left InfoSpace because her future there after the merger was limited.

Pessimism in private

From: Russell Horowitz
To: Naveen Jain, Arun Sarin
Subject: October consolidation distributed
"In looking at Q1, we have some SERIOUS work to do."

From: Jeff Bergstrom
To: Russell Horowitz
Subject: Revenue consolidated
"Pipeline is anemic."

Behind closed doors, Horowitz was sounding alarms about lagging revenue. In an e-mail to Jain and others, he noted that $16 million in revenue was coming from one-time deals that "fall off" at the end of the year.

"In looking at Q1, we have some SERIOUS work to do," Horowitz wrote on Nov. 15, 2000. He warned that InfoSpace needed to come up with another $40 million just to meet the first quarter target of $78 million.

Two weeks later, Horowitz received more bad news from the finance director. For the second and third quarters of 2001, InfoSpace had signed contracts for only one third of the revenue the company had told Wall Street to expect.

As for deals in the works, the "pipeline is anemic," the finance director wrote.

"Analysts vs. INSP Revenue Targets"
InfoSpace chart showing number of contracts signed

Its stock, trading around $11, down from $50 in midsummer, would take a beating if InfoSpace failed to meet its financial promises.

On Dec. 11, 2000, InfoSpace was dealt a blow by the man who once had boosted the company's stock by being its most influential cheerleader.

Famed Internet stock analyst Henry Blodget at the brokerage house Merrill Lynch had been receiving hate e-mail for months from stockbrokers who had followed his strong recommendation to buy InfoSpace stock. The brokers had been getting hit with complaints from angry clients who had lost money on InfoSpace.

Why was he backing InfoSpace so strongly when company insiders were selling so heavily? they asked by e-mail.

Merrill Lynch had made millions as a consultant in the Go2Net merger. But Blodget had lost confidence in InfoSpace, records show. He asked a colleague to remove the stock from the brokerage house's most-favored-stocks list.

From: Henry Blodget
To: Virginia Syer
Subject: FW: Handwritten InfoSpace Annual Report!?!?
"I am so tired of getting these things."

"Can we please reset this stupid price target and rip this piece of junk off whatever list it's on?" he wrote Oct. 20. "If you have to downgrade it, downgrade it."

It took seven weeks, but on Dec. 11, Merrill Lynch downgraded InfoSpace to "accumulate." The decision pummeled the stock, which fell 16 percent that day.

InfoSpace employees, who'd been watching their wealth evaporate for months, were shell-shocked and urged their executives to respond.

"It is difficult to see the NASDAQ ready to take off when we keep tanking and no reaction comes to calm down a growing frustration," one employee wrote Jain.

After internal debate, InfoSpace issued a news release on Dec. 13, saying it expected to meet its fourth-quarter revenue target. It added: "InfoSpace continues to experience momentum across all of our areas of focus, and we remain very confident with the financial guidance we have previously provided."

From: Naveen Jain
To: Dino Christofills
Subject: Updated language
"What's the internal forecast (not that it has any meaning)?"

It was obvious by then that InfoSpace could not meet its target of $360 million for 2001, Jain would later insist. He was in India at the time and said he wasn't involved in the release. Before Dec. 13, however, he and other insiders had seen internal forecasts that indicated the $360 million figure was two to three times greater than it should have been, Jain told lawyers doing a confidential investigation for InfoSpace's directors.

After Horowitz sold $1.4 million of InfoSpace shares on Dec. 15, Jain lashed out. Jain was furious at Horowitz because the sales signaled that insiders didn't believe in their own company and would drive investors to unload their InfoSpace stock.

In court documents, Horowitz said that he didn't know the $360 million forecast needed to be revised until a month after he sold his shares. He contended that the Dec. 13 press release was not about the $360 million figure.

No one in charge

Just after the New Year, executive vice president Thompson pushed his friend Horowitz to take control of InfoSpace, calling in an e-mail for an "insurrection."

"We have to make something happen," Thompson wrote Jan. 4, 2001. "This company has a great opportunity and it is dying of cancer at the same time."

The next day, Thompson lectured Horowitz for his inaction: "When you get pissed off or disillusioned, you sort of disappear. We all [are] starting asking each other, 'You seen Russ? What's he up to?' What we want is for you to rally us and to be our QB and to tell us how to get into the fight and what hill to take."

Instead of taking control, Horowitz quit on Jan. 8, 2001. InfoSpace's board assumed that most of the former Go2Net executives running InfoSpace would bolt as well, and sprang into action.

"He is fed up with InfoSpace's board and with Naveen," Thompson explained in a phone call to InfoSpace Chief Executive Officer Arun Sarin, court records show.

What would it take to keep Horowitz? Sarin asked.

You and Jain would both have to quit, for starters, Thompson replied.

On Jan. 10, Jain and Sarin both quit — leaving no one in charge.

The board tried to get Horowitz to return. He listed several demands, including making Jain personally pay $16 million to an employee investment fund that had tanked.

During negotiations, word spread that Jain was looking at office space in the same Bellevue building to start his own wireless company. His business concept involved micropayment technology — using a cellphone, for instance, to order and pay for a latte at Starbucks and having it ready when the customer walked in the door.

Some within the company were aghast. "There is NO way we can allow this," one manager said in an e-mail. "I think he's trying to do a land grab for one of the most prized [technologies] that we could offer."

Horowitz negotiated with Jain on terms of taking over the company. When they reached an oral agreement, the two men hugged. The board was relieved.

But on Jan. 20, 2001, Horowitz told the board he was quitting for good. He told friends he didn't think InfoSpace could deliver a "clean company" to him, and that Jain, its largest shareholder, would never truly cede power.

The board decided it had no choice but to ask Jain to return and run InfoSpace as chairman and CEO. Thompson could not believe it and lashed out at Jain, telling him "the Board had failed to do its job and had embraced a crook," court records show. Thompson was forced to resign.

On Jan. 22, the InfoSpace directors finally let investors and the public know about Horowitz's resignation and Jain's expanded duties.

In a press release, Horowitz was full of praise: "InfoSpace is exceptionally well positioned for success and I have very much enjoyed working with the strong management team in place."

Jain, his new chief financial officer, Halstead, and others quickly threw aside the $360 million revenue forecast, cutting it to $215 million for 2001.

Horowitz sold all of his InfoSpace stock on Jan. 31, making $33 million. A company investigation later concluded that Horowitz may have illegally sold his stock based on insider information about an impending layoff. Two other executives were also named as possible illegal insider traders.

InfoSpace lawyers could have pursued the matter, which might have resulted in millions of dollars being returned to the company and its shareholders. But they did not, giving as reasons "dirty laundry is aired" and "all the issues become very public," court records show.

Horowitz denies he knew about the layoff.

Founders again

Jain stayed at InfoSpace for two more years. He dumped shares of InfoSpace at rock-bottom prices, once even selling 81,900 shares for $1 each. To the investing public, it sent a message: Jain, worth several hundred million dollars, saw little future in the company.

The board ousted him around Christmas 2002.

Far from Seattle, the office of New York Attorney General Eliot Spitzer already was investigating a complaint from a Queens, N.Y., pediatrician, who had poured $500,000 into InfoSpace and kept it there at Merrill Lynch's urging.

Before long, investigators found that at the same time Blodget was denigrating InfoSpace as a "powder keg" in e-mail, he publicly promoted the stock to help Merrill Lynch's investment bank division, which was getting $10 million to advise on Go2Net's merger with InfoSpace.

The Spitzer inquiry ended in 2003 with 10 of the nation's largest brokerages agreeing to a landmark $1.4 billion settlement. Blodget was fined $4 million and banned for life from Wall Street.

By then Jain had started a new company, Intelius, which provides public-records information on people.

Horowitz also founded a new company, Marchex. It provides online marketing and search services for merchants.

Last April, Horowitz and his directors took Marchex public, making it the first new public Internet company here since the crash five years ago. With the wildly successful public launch of search engine Google, Wall Street watchers suggest that the dot-coms are coming back.

Last month, Marchex raised $222 million in another stock offering. Horowitz's holdings in his new company are now worth about $190 million.

Naveen Jain says when the time is right, he will consider taking Intelius public, too.

David Heath: 206-464-2136 or dheath@seattletimes.com

Sharon Pian Chan: 206-464-2958 or schan@seattletimes.com

Mutual Funds Reveal Clients' Data on Web

2005-03-23T13:14:00.000-08:00

Wall Street Journal

Lois Hatten, a 60-year-old widow of a truck driver in Otsego, Mich., was astonished to find out recently that her Individual Retirement Account number was posted on the Internet, along with her name, home address and the approximate number of shares she holds in two mutual funds. Even more surprising is who made the disclosure: her mutual-fund firm, Armada Funds.

In what appears to be a significant privacy breach, some of the nation's leading mutual-fund companies have publicly disclosed similar information about certain of their customers. The postings are readily accessible on a U.S. government Web site, and could leave these individuals vulnerable to identity theft or other crimes.

"I was pretty shocked," said Ms. Hatten, a retired former grocery-store employee, when told by The Wall Street Journal about the posting. "Nobody should know my business."

Among other fund companies that have made some customer account numbers publicly available: Pimco, a unit of German insurance giant Allianz AG; the Dreyfus unit of Mellon Financial Corp.; Bank of America Corp.'s Columbia Funds unit; Nuveen Investments; the First American Funds unit of U.S. Bancorp; AmSouth Bancorp's fund unit, and the CNI Charter fund unit of City National Bank of Los Angeles.

The leaks can be traced, in part, to Securities and Exchange Commission regulations that require fund firms to disclose the name, address and percentage ownership of any owner of more than 5% of a particular class of any mutual fund. The provision is meant to let shareholders know of anybody who might be in position to control or influence the fund.

The disclosures are typically contained in a "Statement of Additional Information" -- a supplement to the fund's prospectus -- and posted on the SEC's Web site. Many fund companies also post the supplements on their own Web sites.

Not-So-Private Equity

The proliferation of mutual funds in recent years, combined with some funds' array of different share classes, means that it sometimes doesn't take much to go over the 5% threshold. Armada lists Ms. Hatten, for example, as owning more than 7% of the "H Class" shares of two funds as of September 2003, even though her holding in each fund at the time was only about $10,000. Armada has since folded the Class H shares into another share class, and doesn't cite Ms. Hatten in its latest filing. But the filing that lists her account number, made in late 2003, is still on the Web.

Kathleen Barr, chief compliance officer at Armada Funds, a unit of the Cleveland-based bank National City Corp., says Armada was unaware of the breach before The Journal discovered it. "This is a big problem industrywide," she says. She adds that Armada now has contacted the customers involved and changed their account numbers, and has no reason to believe any of their accounts were affected. Most other fund firms asked about such inadvertent disclosure agree they made a mistake. "It is not our policy to disclose account numbers," says a spokesman for CNI Charter, which also says it is changing customer account numbers and preparing amended filings.

It's impossible to say how many customers have been affected, because such information is scattered among thousands of regulatory filings, just one of which sometimes runs hundreds of pages. Some filings on the Web list scores of 5% owners. Not all are individuals; some are investment institutions. It appears the majority doesn’t have account numbers attached. Still, there are some recent filings that appear to include account numbers for as many as 18 individual investors, along with their names and addresses.

The leaks come amid broader concern about electronic privacy. Congress earlier this month held hearings on the issue, after breaches of consumer information occurred at ChoicePoint Inc., LexisNexis and Bank of America. ChoicePoint, for instance, sold private data on 145,000 people to criminals posing as legitimate small-business customers, a breach that the people might never have known about but for a California consumer-protection law.

Review of 5% Rule

While the SEC requires disclosure of who holds 5% of any class of a fund and their addresses, "the law does not require brokerage-account numbers" be disclosed, said a spokesman for the agency. He wouldn't comment on individual filings. A person familiar with the SEC said its staff will review whether the 5% rule, first imposed in 1978, might need to be revised as part of a broader look at mutual-fund disclosure issues.

Some industry executives blame a fairly simple mistake: In putting together disclosure statements, fund companies or their outside administrators sometimes pick up account ownership information from a computer database. It often includes the customer's bank, mutual-fund or brokerage-firm account number. At AmSouth, a spokesman blames an "error" by an outside fund administrator for its posting of five account numbers in a recent filing, adding that the firm notified the customers and is taking steps to prevent a recurrence.

Not every fund firm has the problem. Fidelity Investments says it has a policy against including account numbers in such filings. Regions Financial Corp.'s Morgan Keegan fund group says it goes further. It includes only the name, hometown and ownership stake of the customer, omitting the street address and any other identifying data.

Banks and brokerage firms generally say the information listed in the filings wouldn't be enough to compromise a customer's account, because they have several layers of security protection.

Robert Douglas, a former private investigator who has testified before Congress on information privacy, isn't so sure. Armed with the data posted, "realistically and without too much difficulty an unscrupulous person could steal that money," he says.

Mr. Douglas, who heads a consulting firm called PrivacyToday.com, says many identity-theft crimes entail "pretext calling": The fraudster phones a customer-service center and pretends to be an account owner. The more information the caller has about a real account holder, the more likely it is he can convince the customer-service representative that he is that person.

Suppose that "I now know the custodian, the account number, the account holder's address and the name of one security in the account," Mr. Douglas says. Additional persuasive information, such as a Social Security number, can easily be purchased on the Internet. Once a bank, mutual-fund firm or brokerage house is convinced the caller is genuine, Mr. Douglas adds, it's relatively simple to arrange to wire money out of the account.

'Very, Very Disturbed'

That prospect alarms Richard Murphy of West Simsbury, Conn., who was "very, very disturbed" to learn that information about his wife's ownership of a Pimco fund had been posted on the Internet in July, along with similar data for roughly a dozen other people. In addition to Nancy Murphy's name and address, the SEC Web site listed the account number of a family brokerage account that contains other holdings besides the mutual fund.

"Once they know the brokerage-account number, it wouldn't take much more to get into that account and make some transactions," says Mr. Murphy, a 62-year-old actuary. "You wonder why Pimco would consider it appropriate to put it out on the Web site."

A spokesman for Pimco, a big Newport Beach, Calif., firm best known for its bond funds, says the firm "inadvertently" included extra information about customers in a "very small number of cases." He says the firm has reinforced its operational procedures to prevent a recurrence, and has notified the affected investors' representatives.

Scottrade Inc., a discount brokerage firm, says it launched an inquiry after finding out that Pimco had posted a Scottrade account number for one of its customers, a man in Niagara Falls, N.Y. "That seems like the antithesis of any privacy policy," says a Scottrade spokeswoman. "Why have that information out there if it doesn't need to be?"

Scottrade quickly changed the customer's brokerage-account number and password, and doesn't believe the account was tampered with, says the spokeswoman, Kelly Doria.

Many people whose names appear on the lists of 5%-plus holders are surprised they are such big owners. Joe Isaac, a retired U.S. Treasury agent in Jacksonville, Fla., was listed along with his aunt as holding 6.5% of the Class C shares of Columbia Balanced Fund. "I wouldn't think we would own that much of it," says Mr. Isaac. "You're talking about millions of dollars that goes into these funds. I certainly don't have that kind of investment."

A Closer Look

In its December 2004 disclosure, Columbia Funds listed Mr. Isaac's name and address, the number of a brokerage account through which he owns the fund shares and the size of his holding. After being contacted by The Journal, Mr. Isaac said he informed his broker, Wachovia Securities.

"They were really upset," he said, adding that the brokerage firm told him it had begun investigating the matter. He also said it had changed his account number, which Wachovia confirms. Mr. Isaac was among 17 individual holders whose names and what appear to be their account numbers were listed in the filing by Columbia Funds.

Columbia says it is examining its processes to find out what happened. The firm is "committed to preserving customer privacy" and intends to "take additional steps above and beyond general industry practices to fulfill this commitment," says a spokesman, Tom Gariepy. A spokeswoman for Dreyfus funds, meanwhile, says the firm is "currently re-evaluating" the way it provides account identification in its filings, saying the information comes to it from a transfer agent. A U.S. Bancorp spokeswoman says First American officials are still looking into the matter. Finding all affected customers of all mutual funds may be difficult, requiring fund companies and brokerage firms to sort through thousands of filings. And it won't be enough just to scan recent ones. Some of the disclosures were made years ago and remain publicly available. Even if a customer has since sold that mutual fund, he or she may still have an IRA account or brokerage-account number that was listed in the filing.

At Armada Funds, Ms. Barr says, scanning filings "will be a huge endeavor. Every single page will have to be reviewed for that. But it will just have to happen."

Hot-ticket item for kids: cell phones

2005-03-20T13:00:00.000-08:00

Business Week

While some might question why someone so young might need one, and some scientists have expressed health concerns, many young kids are asking their parents for cell phones. And increasingly, they're getting them.

There were two things 11-year-old Patty Wiegner really, really, really wanted for Christmas. One was a furry, playful dog that's now filling her parents' home with the sound of barking. The other gift makes a different kind of noise -- it has a ring tone that mimics rapper 50 Cent's hit song "Candy Shop."

"It's cool and popular," Patty, a sixth-grader in Valrico, Fla., says of her reason for wanting the mobile phone. "And I can talk to my friends and talk to my dad and mom."

Her mom, Lisa Wiegner, wasn't entirely thrilled with the idea but gave in because she likes knowing her daughter can contact her if she needs to. "And," mom says, "I wanted to be able to be in touch with her in an emergency."

Some parents have been prompted to add their kids because their wireless companies offer "family plans," giving them a specified number of minutes to chat with one another each month.

Now, a few other companies are pushing the trend further by creating specific products for "tweens," a population of preteens as young as age 8 that some consider the next big, untapped market of cell phone users.

Firefly Mobile, one company that's developed a cell phone product for younger users, found that about 10 percent of tweens in its focus groups had phones, but that many more wanted them. The company also identified parent interest in a product that would allow them to keep tabs on their kids.

"What the market was telling us is that there's a need for kids to stay in touch with the people who are important to them," says Robin Abrams, Firefly Mobile's CEO.

The Firefly phone, created by a father in Illinois and being launched nationwide in months to come, is smaller than other cell phones, allowing it to fit more easily in a kid's hand. It has simpler buttons, including ones that speed dial "Mom" or "Dad" -- and gives parents more control by giving them password-protected access for programming the numbers the phone can dial and calls it can receive. The Firefly phone also has no games or capabilities for text messaging, a popular function with teens that some parents dislike because it can get expensive -- and distracting.

Meanwhile, Tiger Electronics, a subsidiary of Hasbro Inc., is taking another tack with its CHATNOW two-way radios, which allow communication -- including sending text messages and photos -- within a two-mile range. And toymaker Mattel is coming out with its own Barbie-themed prepaid cell phone.

It remains to be seen whether options like these will be a hit with their target age group.

Some kids say any phone is better than no phone. But others say they think they're old enough to handle a standard cell phone -- and abide by the limits their parents place on calling during expensive weekday hours.

"It shows if you're mature; it's a privilege to get a phone," says Stephanie Beaird, a 12-year-old in Northridge, Calif., who recently got a cell phone after begging her parents for more than a year.

Getting a phone was partly a reward for a very good report card -- but also a matter of convenience for Stephanie's parents, who've used it to find her when picking her up from school and after sporting events.

Seventh-grader Alex Chmielewski's parents have even called his phone to track him down while shopping in the same store. The 13-year-old from Irvine, Calif., got his phone when he was 12, and also carries it with him when he rides his bike to school, something he does often because there is no bus service.

If you have a phone, "some people view it as you're lucky," Alex says. "But I don't just use it for calling friends and stuff like that," he adds. "It gives me a sense of security or safety."

It's already common for kids in parts of Europe and Asia to have cell phones, though British officials have been more cautious, recommending against giving them to children until more research can be done on potential health risks to growing young bodies from the electromagnetic radiation that phones emit.

In this country, Rosemarie Young, president of the National Association of Elementary School Principals, says cell phones are more often an issue in schools in higher-income neighborhoods where students and their parents can afford them.

But increasingly, she says, schools that once had all-out bans on cell phones are allowing them, as long as students keep them turned off during class.

"I don't have a problem with it if parents are clear about the use of it," says Young, who's also an elementary school principal in Louisville, Ky., and has had teachers who've had to confiscate the occasional cell phone from kids who don't follow the rules.

Jennifer Hartstein, a child and adolescent psychologist at Montefiore Medical Center in the Bronx, N.Y., agrees that parents need to stick with limits they place on using the phones.

"The problem is, I'm not sure parents are doing that," says Hartstein, who has a few younger clients with cell phones.

She still thinks cell phones can be a good idea, depending on the kid. "But I also kind of laugh that my parents knew where I was when I didn't have a cell phone," says Hartstein, who's in her 30s. "When I was 8 or 9, we barely had answering machines."

That thought is not lost on Lisa Wiegner, the mother in Florida whose daughter got the dog and cell phone last Christmas. But she says that, so far, Patty has handled having a phone very well.

Her daughter thinks so, too: "I, as a person," Patty says in a grown-up tone, "am very resourceful with my minutes."

Martha Irvine is a national writer specializing in coverage of people in their 20s and younger. She can be reached at mirvine(at)ap.org

Dot CON Job - Info Space - Part 2

2005-03-07T16:37:00.000-08:00