IBM Denies NSA Collaboration, Says They Would Challenge Government

IBM Denies NSA Collaboration, Says They Would Challenge Government

As US cloud computer companies potentially face $22 billion to $35 billion in losses in foreign markets, International Business Machines Corp. (NYSE:IBM) denied it provided client information to the NSA or any government agency.

IBM executive says company would challenge NSA efforts to collect their customers’ data

In a March 14, 2014 letter to customers, IBM clearly stated they do not cooperate with the NSA or the PRISIM program and said it does not have “backdoors” in its products, nor does it provide encryption keys to the NSA or any other government agency.

“In general, if a government wants access to data held by IBM on behalf of an enterprise client, we would expect that government to deal directly with that client,” Robert C. Webber, vice president for legal and regulatory affairs, wrote in a letter posted online.

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Webber then stated IBM would challenge the US government if it asked to provide customer information without notifying the client and implied hosting data outside the US might be a better option for security.  “If the U.S. government were to serve a national security order on IBM to obtain data from an enterprise client and impose a gag order that prohibits IBM from notifying that client, International Business Machines Corp. (NYSE:IBM) will take appropriate steps to challenge the gag order through judicial action or other means,” Webber wrote, then pointed to foreign hosting options, saying they would challenge government orders. “For enterprise clients’ data stored outside of the United States, IBM believes that any U.S. government effort to obtain such data should go through internationally recognized legal channels, such as requests for assistance under international treaties.”

As projections of the US market share of cloud computer slip, Webber called on the US government to restore trust, saying governments should “reject short-sighted policies” and they “should not subvert commercial technologies, such as encryption, that are intended to protect business data.”  To help restore trust, Webber thinks the U.S. government should promote “a robust debate on surveillance reforms, including new transparency provisions that would allow the public to better understand the scope of intelligence programs and the data collected.”

Loss of global market share a concern

NSA loss estimates IBM

As nations such as Brazil consider asking US internet service providers to host data in their local regions – putting data under local laws – pressure on Silicon Valley mounts. Google Inc (NASDAQ:GOOG) has warned in Congressional testimony that the Internet risks becoming fractured.  “Today, calls for the Internet to be regulated by the U.N.-chartered International Telecommunications Union or other United Nations institutions and put solely under government control are louder than ever,” Richard Salgado, director for law enforcement and information security at Google, told the Senate Judiciary Subcommittee on Privacy, Technology and the Law.  Google could be barred from doing business in an important market or have to pay “hundreds of millions of dollars in fines” resulting from fracturing of the Internet, Salgado said.

These concerns come on the heels of an August, 2013 report by the Information Technology and Innovation Foundation, which noted the financial impact of the NSA’s spy program at a $22 to $35 billion hit on the cloud computer segment, all while rival countries in Europe and Asia are capitalizing at the expense of US firms.

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Mark Melin is an alternative investment practitioner whose specialty is recognizing a trading program’s strategy and mapping it to a market environment and performance driver. He provides analysis of managed futures investment performance and commentary regarding related managed futures market environment. A portfolio and industry consultant, he was an adjunct instructor in managed futures at Northwestern University / Chicago and has written or edited three books, including High Performance Managed Futures (Wiley 2010) and The Chicago Board of Trade’s Handbook of Futures and Options (McGraw-Hill 2008). Mark was director of the managed futures division at Alaron Trading until they were acquired by Peregrine Financial Group in 2009, where he was a registered associated person (National Futures Association NFA ID#: 0348336). Mark has also worked as a Commodity Trading Advisor himself, trading a short volatility options portfolio across the yield curve, and was an independent consultant to various broker dealers and futures exchanges, including OneChicago, the single stock futures exchange, and the Chicago Board of Trade. He is also Editor, Opalesque Futures Intelligence and Editor, Opalesque Futures Strategies. - Contact: Mmelin(at)

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