Government Cracks the iPhone 5c

The FBI was successful in jailbreaking, uh, I mean, cracking that iPhone 5c they have…

iphone 5c_unlockBefore I get into it, let me say, this is (probably) the best possible outcome of this whole crazy mess.

Early Monday evening, Chicago Time, the Department of Justice announced that its efforts to crack the iPhone 5c used by Syed Farook and his wife Tashfeen Milik. I’ve tried my best to cover this story while it has been going on. Just to recap:

Back door..?!? We don’ need your stinkin’ backdoor..!
The DoJ to Apple Computer – Byte Me…
The All Writs Act is an All Access Pass
Apple Tells the FBI to go Pound Bits

It’s not been exactly our best moments… with grandstanding and posturing on both sides. However, with the phone cracked and the data “safely” in the hands of the FBI, the DoJ has moved to vacate its court order compelling Apple to provide aid in giving them access to the phone in their ongoing investigation. Now that they’ve got a way in, they don’t need Apple to build them that back door.

Melanie Newman, a DoJ spokesman, provided the following statement via Twitter on their plans:

“It remains a priority for the government to ensure that law enforcement can obtain crucial digital information to protect national security and public safety, either with cooperation from relevant parties, or through the court system when cooperation fails… We will continue to pursue all available options for this mission, including seeking the cooperation of manufacturers and relying upon the creativity of both the public and private sectors.”

Apple has issued a brief statement, as reported by Buzz Feed’s John Paczkowski:

“From the beginning, we objected to the FBI’s demand that Apple build a backdoor into the iPhone because we believed it was wrong and would set a dangerous precedent. As a result of the government’s dismissal, neither of these occurred. This case should never have been brought.

We will continue to help law enforcement with their investigations, as we have done all along, and we will continue to increase the security of our products as the threats and attacks on our data become more frequent and more sophisticated.

Apple believes deeply that people in the States and around the world deserve data protection, security and privacy. Sacrificing one for the other only puts people and countries at greater risk.

This case raised issues which deserve a national conversation about our civil liberties, and our collective security and privacy. Apple remains committed to participating in that discussion.”

There are a number of groups, that are calling for the government to disclose information on the actual exploit that was used to gain access to the iDevice in question, including the American Civil Liberties Union.

However, there are two takeaways here that everyone should be cognizant of, and that are near certainties:

1. The government isn’t going to share the information
If they disclose the method used to access the iDevice, Apple will certainly plug the hole, preventing the government from using it on other iDevices in the future. Besides, they’re probably a little more than miffed at Apple for not giving them what they wanted without putting up a fight.

2. Apple is going to devote a great deal of time hardening iOS
Apple is going to make certain that it goes on a big enough bug hunt that it squashes any and all security holes it finds. Its then going to go and improve the encryption and other security features in iOS to insure that end user data that is supposed to be private, remains private.

So, how is this likely the best outcome, given the above, and other developments?

That’s easy – because no one had to force their hand…

Simply put, the government didn’t have to (really) try to make Apple comply, and Apple didn’t have to refuse. The debate on the case, isn’t far from over, however, as I’m certain that its likely to come to a boil before Apple has a chance to release a version of iOS with “uncrackable” encryption.

What do you think of all of this? Is this the outcome you were hoping for? Are you Team Apple or Team DoJ? Should Apple build the back door the government was initially asking for, or should it harden iOS to the point where no one can get it without the proper password or biometric data?

I’d love to hear from you. Why don’t you sound off in the Discussion area, below and let me know what you think of all of this?

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US Government Considering Tax Holiday

Of its $156B in cash, $138B (88.5%) is banked overseas…

TaxHoliday

Apple has a lot of cash. $156B USD to be exact, and $138B USD of it, or just about 88.50% is kept in banks outside the US. To the unfinancially initiated, like me, this seems curious. However, when you consider the 35% tax hit ($48.3B USD) that Apple would be charged to bring the money back to the United States, it’s no wonder they don’t think twice about it. Spending $$48.3B to bring back just $89.7B isn’t worth the hit. So, the money stays outside the US, and Apple deprives the US of the tax revenue.

Apple needs a place to park the money, and it – like nearly every other large corporate entity – banks a lot of it in Ireland. They have much kinder tax laws, making it more fiscally responsible for Apple to store it there. However, this makes it difficult for Apple to use it the way they want to; and it would be a lot easier for them to bring the money home.

As such, the US Government is currently considering a tax holiday that would allow Apple to make a one-time transfer of its cash hoard back into US banks. The last time this happened in 2004, the government lowered the tax rate to 5.25%. However, at that time, Apple was still three years away from releasing the iPhone and six years away from releasing the iPad. It wasn’t able to take advantage of the tax break.

Recently, Apple has been the target of a US government cash into its tax payments. This effort, and the resulting news coverage on Apple’s – as well as other organization’s – legal use of Ireland’s corporate tax haven, has caused the European Union to take a much longer, more scruitinous look at those laws. While Apple hasn’t broken any laws with its international tax policies – Apple paid over $7.0B in US Federal, corporate taxes in fiscal 2013 – the company wants permanent tax reform in the US.

The US Federal Highway Trust is out of money at the end of August 2014. With major road repairs to major infrastructure – like I-80, which crosses the Continental US from Coast to Coast, East to West – the US government must do something. For its part, Apple is willing to repatriate its large cash hoard, but won’t without a tax repatriation holiday and without permanent tax reform.

This particular issue is going to linger on for quite a while. While I’m not one for financial news, I will update this story if anything interesting develops over the next few months.

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