The Militant Libertarian

I'm pissed off and I'm a libertarian. What else you wanna know?

Thursday, February 15, 2007

How Politicians Work

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Tuesday, February 13, 2007

Human Chipping Company Omits Salient Risks from IPO Disclosure

Human Chipping Company Omits Salient Risks from IPO Disclosure

VeriChip Corporation, the much-hated purveyor of the VeriChip human ID
implant, is airing its dirty laundry this week. This is not by choice,
mind you, but because the Securities and Exchange Commission (SEC)
required the company to disclose its "risk factors" prior to launching
its initial public offering of stock (IPO) Friday.

The company lays out nearly 20 pages of risk factors in its Form S-1
Registration Statement, a required document for the IPO. But what the
company failed to reveal in its filing may be even more eye-opening, say
CASPIAN privacy advocates Dr. Katherine Albrecht and Liz McIntyre. The
pair, authors of the "Spychips" series of books, have been vocal critics
of VeriChip, dogging the company in recent years and facing down its
senior executives on radio and national television.

"Potential investors should be told how a hacker can simply walk by a
chipped person and clone his or her VeriChip signal, a threat
demonstrated by security researcher Jonathan Westhues months ago," says
McIntyre, who is a former federal bank examiner.

"Omitting the cloning threat from its SEC documents is a serious
oversight that could affect the value of VeriChip's stock. This is
materially relevant information, considering VeriChip's claim that its
product could be used to tighten security in facilities like nuclear
power plants," she adds.

(For more on VeriChip's vulnerability to hacking, see "The RFID Hacking
Underground,' Wired Magazine, )

Verichip also failed to disclose to investors and the SEC that patients'
VeriChip implants might not be readable in ambulances. VeriChip's
chipping kit literature cautions that ambient radio waves, like those in
ambulances, can interfere with the equipment that reads the implanted
tags, but this important fact somehow didn't make its way into the SEC

(Scanned images of VeriChip's chipping kit literature, including the
ambulance caution, are available here: )

Even with crucial information missing, investors may still find
themselves scratching their heads over poorly conceived aspects of
VeriChip's business model. "Anyone reading VeriChip's SEC filing would
have second thoughts about the stock," says Albrecht. "Who, after all,
would invest in a company that expects patients to document their own
medical history and blood type in a database? This could prove risky for
anyone, not to mention the elderly, Alzheimer's, and cognitively
impaired patients that VeriChip is targeting."

She cites a passage from the registration statement that reads, "we
anticipate that individuals implanted with our microchip will take
responsibility for inputting all of their information into our database,
including personal health records."

Other risks identified in the VeriChip filing could also scare investors
away. These include anticipation of ongoing multi-million dollar loses,
the "modest" number of people willing to get chipped, public opposition,
and the risk that the microchip may be found to damage a person's
health. The company also warns that it could be subject to lawsuits and
loss of confidence if its patient database is unavailable in an
emergency. The company admits that the database has been unavailable in
the past.

The market seemed to be catching on to some of these problems as
VeriChip began offering stock Friday in a bid to raise million of
dollars to fund its human chipping operations. Analysts noted a
"lukewarm reaction" to the stock and that it was trading on "the low end
of the expected range."

To read the VeriChip Form S-1 Registration Statement (Amendment No. 7)

The VeriChip implant is a glass encapsulated RFID tag that is injected
into the flesh to uniquely number and identify individuals. The tag can
be read by radio waves from a few inches away. The highly controversial
device is being marketed as a way to access secure areas, link to
medical records, and serve as a payment instrument when associated with
a credit card or pre-paid account.


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Sunday, February 11, 2007

What Passes for Freedom and Democracy...

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