TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Personal security versus
national security. A court orders Apple (NASDAQ:AAPL) to help the FBI unlock an iPhone used by a domestic terrorist. Apple (NASDAQ:AAPL) says no, and the battle is highlighting one of the most important and
contentious privacy issues of our time.
SHARON EPPERSON, NIGHTLY BUSINESS REPORT ANCHOR: Off the rails. Why cheap
oil is causing a business that had once been booming to go bust.
MATHISEN: And closing the gap. How one program is helping urban youth
gain the skills they need to get the jobs they want. The second part of
our “Bridging the Divide” series tonight on NIGHTLY BUSINESS REPORT for
Wednesday, February 17th.
EPPERSON: Good evening, everyone. I`m Sharon Epperson, in tonight for Sue
MATHISEN: And welcome from me, as well. I`m Tyler Mathisen.
On Wall Street, it was the first three-day win streak for stocks this year.
But we begin tonight with the battle between Silicon Valley and the federal
government. Apple (NASDAQ:AAPL) will fight a court order to help the FBI
unlock an iPhone used by one of the San Bernardino shooters. The decision
sets up a legal showdown between the world`s largest publicly traded
company and federal law enforcement. One side citing privacy, the other
Eamon Javers has more on this escalating confrontation.
EAMON JAVERS, NIGHTLY BUSINESS REPORT CORRESPONDENT: A dramatic standoff
today between the FBI and Apple (NASDAQ:AAPL). The FBI wants access to the
cell phone of one of the shooters in the San Bernardino terrorist attack
back in December. They say they simply can`t get into that phone. They
want Apple (NASDAQ:AAPL) computers` help and they`ve gotten a court order
from a judge that would order Apple (NASDAQ:AAPL) to do that.
Here`s what the order says. The judge saying that the apple computer
engineers have to come up with some kind of system or software that would
bypass or disable the iPhone`s auto erase function so the phone won`t
delete itself when the FBI tries to get in there. It would enable the FBI
to have access to that phone, either through a device port, through
Bluetooth, through Wi-Fi or some other way to get into the phone, and also
that the Apple (NASDAQ:AAPL) software engineers would have to ensure that
that particular phone`s software won`t delay the FBI as they try to use
what`s called brut force to crack into that phone, that is, dialing up
random numbers on the passcode in order to just guess by pure chance what
the password is to that phone.
The FBI thinking if they can do that at computer speed, they can simply
enter in millions of passwords until they get the right one and get access
to the information on that phone, which they say is crucial to their
Meanwhile, Tim Cook at Apple (NASDAQ:AAPL) saying that that company is
going to resist this court order. Here`s what he had to say yesterday,
saying, “opposing this order is not something we take lightly. We feel we
must speak up in the face of what we see as an overreach by the U.S.
government. We are challenging the FBI`s demand with the deepest respect
for American democracy and a love for our country.”
And, guys, not at all clear here where this goes from here, but Apple
(NASDAQ:AAPL) has a number of days now to respond to this court order.
Failing that, we could see this go up to the court of appeals, and
ultimately, this is the kind of case that could be heard before the Supreme
Back to you.
EPPERSON: We have two guests now with opposing views on this battle
between Apple (NASDAQ:AAPL) and the federal government.
Susan Landau is professor of cyber security policy at Worcester Polytechnic
Institute and she supports Apple (NASDAQ:AAPL). And Ron Hosko is former
assistant director at the FBI and now president of the Law Enforcement
Legal Defense Fund. He says the government`s request is narrow and
Susan, let me start with you. I mean, there is a big issue here. A lot of
people may not even realize how secure their phones are at this particular
time, but now they realize that. And the issue with Apple (NASDAQ:AAPL)
has to do with one phone. The DOJ says they just want that one phone.
Why is it such an issue when it`s only that one device?
SUSAN LANDAU, PROF, CYBERSECURITY POLICY: Because in order to do this,
Apple (NASDAQ:AAPL) has to write a piece of software that while it is
targeted at that one phone, can be reused, as long as one has Apple`s,
what`s called sign-in key, in order to use it on other phones, and then it
becomes very dangerous, because Apple`s sign-in key now becomes the target,
for example, for nation states to go after, because that would unlock other
people`s phones. And given the way we use our phones, that`s exceedingly
dangerous, including for national security.
MATHISEN: Ron, well, take the other side of this. Why do you think Tim
Cook is wrong?
RON HOSKO, FORMER ASSISTANT DIRECTOR, FBI: Well, I think this order that
was issued in California is very narrow. We are talking about a phone that
the FBI is in lawful possession of after this horrific terrorist incident,
that the county has consented to a search of because it was the county`s
phone possessed by a terrorist. And what the order requires and expects is
that apple take reasonable steps to develop the tools to get in there.
That doesn`t necessarily equate with the FBI driving away with the tools.
What the FBI wants is the data from the phone, which is potentially
evidence of a crime, evidence of a broader conspiracy.
EPPERSON: So, Ron, could all of this be done in Apple`s offices? They
just unlock that phone, get the data that the FBI needs, provides the FBI
with that data without giving them the whole back-door process to the way
that they actually were able to get the data from the phone?
HOSKO: That is my understanding of the order. The order does not
contemplate the FBI being handed over the encryption or the decryption
tools or software that could act upon other phones. This is much more
What the FBI is looking for, reasonably and responsibly, is the data. But
this does lead us into the broader conversation.
HOSKO: Sadly here, the terrorist attack is over. And where the FBI wants
to be is in front of a terrorist attack the next time so it can defeat it.
MATHISEN: Susan, play out for me this scenario that I sense you are — you
fear in response to what appears to be a reasonable court order to go after
a device that was owned by a terrorist murderer. Play it out. Why should
we, the users of cell phones, be worried that Apple (NASDAQ:AAPL) would
have the ability to unlock a phone that is now not unlockable?
LANDAU: Right. So, ten years ago, before the iPhone, what we had was a
situation where corporate data was accessed through BlackBerrys, which were
quite secure. But as soon as the iPhone was developed and then the
Android, apps became really important and people started carrying iPhones
and Androids and then started using them at work. Now we have BYOD, bring
your own device.
So, while somebody working in the Department of Defense or in the defense
industrial base of Lockheed Martin (NYSE:LMT) or Martin Marietta or one of
those companies, those people carry two phones, one for work, one for their
own personal information. But almost everybody else carries just one
phone, and that phone not only has their family photos and their mail with
their spouse, but it also has access to work, and it sometimes has work
information on it.
And those phones then become very interesting to nation states, whether
they`re a lawyer, an employee at Ford, an employee at some other U.S.
company. The information there is really important. If Apple
(NASDAQ:AAPL) makes — creates software that enables it to unlock a single
device, that software will enable it to unlock other devices, and then that
software and Apple`s sign-in key become a real target for other nation
states, and we make ourselves less secure.
EPPERSON: Are you concerned, Susan, that this also sets a precedent?
Again, what if it`s just as narrow and reasonable, as Ron has suggested it
may be, and we are only talking about one phone that could be unlocked,
again, at Apple (NASDAQ:AAPL) without the FBI really having access to the
process of unlocking?
Is your concern that this then would open a precedent, though, for requests
to come from another country, perhaps?
LANDAU: I`m absolutely concerned that, you know, a businessperson, a U.S.
businessperson is traveling in Russia, is traveling in China, is traveling
in many other countries in the world, and the governments there go to Apple
(NASDAQ:AAPL) and they say we know you know how to unlock the phone, do it.
It could be a U.S. businessperson, it could be a German, it could be a
French person, a Brit.
The point is that we are only as secure as the device is secure, and that`s
where the risk is. We`re also at risk because the software can be stolen.
It would be nice to say Apple (NASDAQ:AAPL) has amazing security, but we
know from the OPM hack where the Chinese went into the U.S. government
Office of Personnel Management and stole records, we know from many other
hacks just how determined nation state actors are.
EPPERSON: Well, we`ll see —
LANDAU: And that`s the concern.
EPPERSON: There is a concern, but we`ll have to see whether Apple
(NASDAQ:AAPL) is able to prevail here or whether they will have to comply
with that court order. And of course, it could go, as Eamon said, all the
way to the Supreme Court.
Susan Landau with the Worchester Polytechnic Institute and Ron Hosko with
the Law Enforcement Legal Defense Fund — I`m sure we`ll be talking to you
again. Thank you.
HOSKO: Great to be with you.
LANDAU: Thank you.
MATHISEN: Fascinating issue.
Wall Street sees its first three-day win streak this year helped by a
rebound in oil prices, some decent economic data and some upbeat earnings
reports. The Dow Jones Industrial Average gained 257 to 16,453. NASDAQ
added 98. S&P 500 exited correction territory with a gain of 31 points.
Also had its first back-to-back-to-back gains of 1 percent or more since
EPPERSON: Tyler, as for that economic data, wholesale prices ticked higher
in January, offering hints of inflation in an economy looking for it. The
producer price index rose 0.1 percent last month, and that was stronger
than the decline that economists had been looking for. Core prices, which
exclude food and energy, rose 0.4 percent, the biggest one-month jump in 15
MATHISEN: A reading on industrial production, that`s a broad measure of
everything made by manufacturers, mines, utilities, up in January after
three straight months of declines. Some economists say the 0.9 percent
rise should allay fears that the economy`s headed for recession and
suggests the manufacturing sector may be weathering weak demand globally
all right. The rebound last month being attributed to strong car sales.
EPPERSON: But the latest housing data wasn`t as strong. The Commerce
Department reports that new home construction fell nearly 4 percent in
January, and that`s the second straight monthly decline, which some say is
due to snow in the Northeast. We`ve certainly had a lot of it. Despite
the drop, though, many economists feel the fundamentals of the housing
market remain strong.
MATHISEN: At the last Federal Reserve meeting, many policymakers weren`t
sure whether the U.S. economy could withstand the turmoil in global
financial markets. According to the minutes of the January meeting,
members of the Fed saw more pronounced downside risks, and as Hampton
Pearson reports, their outlook for the economy was growing increasingly
HAMPTON PEARSON, NIGHTLY BUSINESS REPORT CORRESPONDENT: When monetary
policymakers met at the end of January, concerns about commodity and
financial market volatility and the economic slowdown in China raised
concerns about the impact on the U.S. economy. According to the minutes
from the Fed meeting, it was enough for Fed members to decide they would
move slowly and cautiously along the path of raising interest rates.
Fed Chair Janet Yellen echoed those concerns during two days of
congressional testimony last week, and longtime Fed-watchers see little
likelihood of an interest rate hike in March.
ROBERT MCTEER, FORMER DALLAS FED PRESIDENT: They didn`t act in late
January, and I think they won`t act in March. There`s a lot of emphasis
there on global developments and instability. So, I think they`re on hold
for a while.
PEARSON: Stocks held on to gains after the release of the Fed minutes.
Monetary policymakers say market volatility so far this year has been a
factor in figuring out a timetable for raising interest rates. Those
policymakers also want to see proof of inflation moving closer to the Fed`s
2 percent target. But market-watchers say the Fed needs to send a clearer
MARK TEPPER, STRATEGIC WEALTH PARTNERS: If they hold to the increases that
they`re implying, you know, the market is not going to be able to move
forward. We really do need the Fed to take their foot off the accelerator,
ratchet back those rate increases maybe just to 1 percent, 2 percent.
PEARSON: Those Fed minutes also shed light on why Fed Chair Janet Yellen
says rate hike policy is on no preset course. On the one hand, there is a
U.S. economy with strong fundamentals offset by global uncertainty.
For NIGHTLY BUSINESS REPORT, I`m Hampton Pearson in Washington.
EPPERSON: Still ahead, the high cost of cheap crude to one part of the
EPPERSON: Oil prices moved back above $30 a barrel on hopes of a deal
among some oil producers to freeze production. Domestic crude rose about
5.5 percent. Iran says it welcomes the Saudi/Russian deal to freeze
production that we told you about yesterday, but stopped short of
committing to hold back output. And despite today`s price rise, many who
follow the energy markets remain skeptical such an agreement will ever
MATHISEN: For years, oil shippers preferred to move crude by train, rather
than by pipeline to save on cost, but the economics have changed.
And as Morgan Brennan reports from Linden, New Jersey, that`s pushing the
crude-by-rail business off the tracks.
MORGAN BRENNAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: From 2008 to 2014,
as fracking boomed, so did the business of hauling oil by train. During
that time period, crude-by-rail surged 5,000 percent, peaking at just over
a million barrels per day in the third quarter of 2014. But as crude
prices have collapsed, volumes for the biggest railroads have tumbled by
nearly a quarter, according to the Association of American Railroads.
TONY HATCH, ABH CONSULTING ANALYST: When oil production starts to drop, so
does moving oil drop. And one of the areas that`s been the most affected
has been the light sweet crude that comes out of the Balkan and the larger
percentage which went on rail.
BRENNAN: The larger trains that haul crude rail come from the Bakken
formation. Energy data firm Genscape estimates there`s 1.2 million barrels
of day of rail capacity, but only 350,000 barrels are currently being
loaded, down almost half from a year ago.
The process of railing Boston crude to closer refineries has become less
economical because it`s expensive and the pricing premium of international
oil has disappeared, which has made imported crude is more attractive once
again to those refineries.
Now, oil`s still a small piece, only 2 percent of overall business for the
railroads, but it was a fast-growing, high-margin one. It`s also throwing
a number of infrastructure projects into question, including how much oil
this Philips 66 refinery, Bayway, will continue to accept via rail.
The slump is beginning to affect rail car manufacturers and leasing
companies like Greenbrier Companies (NYSE:GBX), Trinity Industries
(NYSE:TRN), American Rail Car Industries and GATX (NYSE:GMT). After a
record number of deliveries in 2015, analysts say rail car demand has begun
JUSTIN LONG, STEPHENS RAILROAD ANALYST: All of those items have combined
to form a headwind in this market, and we`ve seen rail car backlog fall by
roughly 20 percent from peak levels a year ago.
BRENNAN: But there have been some winners as well, particularly grain
shippers. Over the last two winters, when oil trains still took precedence
in the Dakotas, many agricultural customers suffered steep delivery delays.
That dynamic has reversed. And while the grain market is struggling with
its own headwinds, railroad gridlock is no longer one of them.
For NIGHTLY BUSINESS REPORT, I`m Morgan Brennan in Linden, New Jersey.
EPPERSON: Priceline reports higher-than-expected quarterly profit, and
that`s where we begin tonight`s “Market Focus.”
A rise in hotel and rental car bookings lifted results and helped offset
the effect of a strong dollar. CEO Darren Huston is also attributing the
results to a decline in the price of gas.
(BEGIN VIDEO CLIP)
DARREN HUSTON, PRICELINE CEO: One of the things people underestimated was
travel specifically really benefits from lower oil prices, and we`re seeing
in particular that macro effect having a positive impact on our business.
(END VIDEO CLIP)
EPPERSON: Shares gained more than 11 percent to $1,232.56.
Shopify`s revenue doubled in its fourth quarter, thanks in part to a strong
holiday shopping season. The e-commerce companies make software that helps
retailers manage online stores. Shopify also issued an upbeat outlook for
2016 and said it expects to see a jump in revenue as high as 61 percent.
That`s as a record number of new merchants recently signed up for the
service. Shares of Shopify rose 9 percent to $22.37.
And Garmin (NASDAQ:GRMN), the maker of GPS devices and wearable fitness
products, reported a 37 percent drop in profit for its last quarter, but
that was still good enough to beat the street`s estimates. Revenue also
came in above targets, and the company forecasted full-year revenue to come
in above expectations, but it does expect profit to lag. Garmin
(NASDAQ:GRMN) shares still rose more than 16 percent to $41.06.
MATHISEN: Bloomin Brands, operator of Outback Steakhouse, saw a decline in
both profit and revenue for its most recent quarter, as same-store sales
fell across all four of its brands. As part of a restructuring effort, the
company said it would close 14 of its Bonefish Grill locations. The
company also announced a new $250 million share buyback program. Shares of
Bloomin lost more than 10 percent today to $15.10.
Similar story at the newspaper publisher Gannett (NYSE:GCI). It saw its
sales and profit fall for the fourth quarter as a result of lower
advertising demand and declining circulation. The company said it expects
the declines to continue through the year. Shares down more than 7 percent
And Sherwin-Williams (NYSE:SHW) announced a quarterly dividend increase of
25 percent. Shareholders will be paid 84 cents a share on Friday, March
11th. The paint company has increased its dividend — get this — for 37
consecutive years. Shares up fractionally to $259.15.
EPPERSON: Now, here`s a good story. A dairy farmer, a convenience store
owner and the IRS. Well, it is a bizarre business tale of small
businessmen who got caught up in laws that were designed to target
Kate Rogers (NYSE:ROG) has the story.
KATE ROGERS, NIGHTLY BUSINESS REPORT CORRESPONDENT: Maryland dairy farmer
Randy Sowers had no idea large cash deposits could be a problem until he
found out the hard way, when the IRS seized $63,000 from him in 2012.
RANDY SOWERS, DAIRY FARMER: We didn`t do anything wrong. We were just
depositing cash into the bank, like, you know, we thought was very
legitimate. I mean, if I wanted to hide it, I would have put it in a can.
I wouldn`t have deposited it in a bank. And, you know, the government
comes in, takes your money.
ROGERS: Sowers and his wife, Karen, were bringing in cash they earned at
weekend farmers` markets when a bank teller suggested making smaller
deposits to avoid filling out tedious paperwork. Transactions higher than
$10,000 have to be reported to the federal government. The pattern of the
cash deposits caught the attention of the IRS and the agency invoked
structuring laws. Those laws are meant to target money launderers,
terrorists and drug dealers who often break up deposits into less than
Randy Sowers maintains the family had no idea. They settled, but the IRS
kept nearly half their cash, almost $30,000.
Convenient store owner Ken Quran was less lucky. He unknowingly agreed to
forfeit his entire bank account to IRS agents who came to his North
Carolina store in June 2014, accusing the Palestinian immigrant of skirting
reporting laws. He drew a red flag for a different reason, withdrawals of
less than $10,000. The IRS took more than $150,000 from Quran who denies
KEN QURAN, CONVENIENCE STORE OWNER: He said you need to sign a paper. I
said, listen, I can`t, you know, my English is, you know, it`s not right.
You need to sign it or we go to your wife and have her sign it.
ROGERS: Both businesses are fighting to get their cash back. They`ve
turned to the non-profit Institute for Justice, which has petitioned the
government to return the seized assets. This week, it sent letters to the
Department of Justice on behalf of the Sowers and the IRS on behalf of
Quran, seeking answers.
The IRS and DOJ declined to comment on specific cases.
ROBERT EVERETT JOHNSON, INSTITUTE FOR JUSTICE: The government`s able to
take property based on mere suspicion that they`ve done something wrong,
and then to force them to prove their innocence in order to get that
property back, and that takes the fundamental American principle of
innocent until proven guilty and it turns it on its head.
ROGERS: The IRS changed their policies in 2014, saying that asset
forfeiture would be restricted to cases in which property owners were
suspected of criminal activity. A new directive followed suit from the DOJ
in March of 2015. The policies are meant to apply towards new cases, but
that hasn`t stopped the dairy farmer and the convenience store owner from
taking on the U.S. government.
For NIGHTLY BUSINESS REPORT, I`m Kate Rogers (NYSE:ROG).
EPPERSON: And to read more about small business owners fighting the IRS,
head to our website, NBR.com.
MATHISEN: Coming up, an organization that`s helping to bridge the wage and
employment divide and has already helped thousands of low-income inner
cities join the ranks of corporate America. The second part of our week-
long series is next.
EPPERSON: The gap between blacks and whites in the U.S. is particularly
stark when it comes to employment and wages, especially among young adults.
The unemployment rate for African-Americans between 20 and 24 years old is
more than double that of whites.
Tonight, we continue our series on efforts to bridge the economic divide
with a look at a program helping many young men and women who were jobless
or in low-paying jobs find new career opportunities.
BRANDON JORDAN, YEAR UP STUDENT: There were times where I didn`t know I
was going to eat. There were times where I didn`t know where I was going
EPPERSON: At 18, Brandon Jordan was a high school dropout, homeless but
JORDAN: I ended up realizing that I need to do what I need to do.
EPPERSON: He eventually got a GED and an apartment with friends in
Atlanta. He took some college courses but didn`t have the money to finish.
JORDAN: I wanted more for myself, but I didn`t quite have the opportunity.
EPPERSON: But that all changed. While working at a Panera last summer, he
saw an ad for Year Up. Jordan, now 24, applied to the non-profit, which
offers low-income, young adults training and a corporate internship in IT,
finance and other areas.
JORDAN: It just seems too good to be true when you first hear about it.
EPPERSON: More than 6.5 million 16 to 24-year-olds in the U.S. are not in
school or working. Almost one-third of them are black. Year Up, which
offers a stipend and college credit to each participant, is aimed at
helping these so-called opportunity youth.
Students go through a six-month boot camp, learning technical and
professional skills, including the importance of showing up on time.
They`ll get a stipend for every day they attend class, but they`ll lose
points and money if they`re late, dress unprofessionally or fail to
complete assignments. And if they lose too many points, they`re out.
GERALD CHERTAVIAN, YEAR UP FOUNDRE & CEO: Year Up fundamentally believes
that you hire for skills but you fire for behavior.
EPPERSON: Gerald Chertavian founded Year Up in 2000.
CHERTAVIAN: We know that talent is distributed evenly across this country,
yet opportunity is not.
EPPERSON: More than 13,000 young people have gone through the program
since it started in Boston with 22 students, 3,200 will enroll this year in
13 metro areas.
Chertavian hopes to eventually serve youth in 30 metro areas. Twenty-five
percent of those who start don`t finish. Those who make it through the
first six months are awarded a six-month internship. About 250 companies
have partnered with Year Up and spend almost $28,000 to cover the cost of
CHERTAVIAN: If you talk to many, many companies across the country today,
they`re not getting the professional skills and the customer service
skills, and really, the teamwork, reliability, problem-solving, they`re not
getting those skills from many young adults coming out of even four-year
EPPERSON: Year Up alum Bryan Goodson was working in a pizza shop four
years ago. Now, he`s a business solutions consultant at Salesforce.com
(NYSE:CRM), which has hired almost half of the 200 interns it`s hosted
BRYAN GOODSON, YEAR UP GRADUATE: If someone told me three years ago that
I`d be doing what I`m doing today, I wouldn`t believe it. I might even
EPPERSON: Eighty-five percent of year-up alums have a full-time job or
enrolled in college full time within four months of graduating. Their
average starting salary is about $36,000 a year.
Jordan hopes to follow Goodson`s path. He landed an internship in the IT
department at the retailer Aaron`s.
JORDAN: I was like, yes, you know, I did it, I earned it. This is — I`m
going to do this. This is fine. This is mine.
EPPERSON: The Year Up experience doesn`t end when a student finishes his
or her internship. There is an extensive alumni network. Bryan Goodson
sits on the alumni board, and in addition to mentoring new Year Up interns
at Salesforce, and most of the current students I talked to in Atlanta are
already talking about staying involved, just like Bryan, with Year Up when
Now, tomorrow we`re going to continue our series “Bridging the Divide” with
a visit to a unique company in Cleveland, where your paycheck can include
MATHISEN: It`s such a good thing that they teach them not only some of the
work skills but also some of the behaviors — showing up on time, dressing
EPPERSON: How to write a succinct e-mail.
EPPERSON: All of those things are very important to know in the business
And that is NIGHTLY BUSINESS REPORT for tonight. I`m Sharon Epperson.
Thanks so much for watching.
MATHISEN: And I`m Tyler Mathisen. Thanks from me as well. Have a great
evening, everybody, and we will see you right back here tomorrow night.