Reports: NSA Spying Included Major Internet Companies

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Patrick Semansky/AP
By Mark Hosenball and John Whitesides

WASHINGTON -- The debate about whether the government is violating citizens' privacy rights while trying to protect them from terrorism escalated dramatically on Thursday amid reports that authorities have collected data on millions of phone users and tapped into servers at nine Internet companies.

The White House spent much of the day defending the National Security Agency's secret collection of telephone records from millions of Americans as a "critical tool" for preventing attacks, as critics called the program -- first reported by Britain's Guardian newspaper -- a heavy-handed move that raised new questions about the extent of the U.S. government's spying on its citizens.

At day's end, the flap over the NSA's mining of data from customers of a subsidiary of Verizon Communications (VZ) was overtaken by a Washington Post report that described an even more aggressive program of government surveillance.

The Post reported that the NSA and the FBI have been tapping "directly" into the central servers of leading U.S. Internet companies to gain access to emails, photographs, audio, video, documents, connection logs and other information that enable analysts to track a person's movements and contacts over time.

Some of the companies named in the article -- Google (GOOG), Apple (AAPL), Yahoo (YHOO) and Facebook (FB) -- immediately denied that the government had "direct access" to their central servers. Microsoft (MSFT) said it doesn't voluntarily participate in any government data collection and only complies "with orders for requests about specific accounts or identifiers.
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James Clapper, the director of national intelligence, said the report contained "numerous inaccuracies."

Washington Post spokeswoman Kristine Coratti said the paper stood by its report, which was based on an NSA document that it published online.

Taken together, the reports suggested that U.S. domestic surveillance, long acknowledged to have become more prevalent since the September 11, 2001 attacks, was far more extensive than the public knew.

The Post said that the secret program involving the Internet companies, code-named PRISM and established under Republican President George W. Bush in 2007, had seen "exponential growth" during the past several years under Democratic President Barack Obama.

The Post said an NSA report had found that the agency "increasingly relies on PRISM" as its leading source of raw material, accounting for nearly 1 in 7 intelligence reports.

Technology companies taking part in the program, the Post said, include Microsoft, Yahoo, Google, Facebook, PalTalk, AOL (AOL), Skype, YouTube and Apple.

Clapper indicated that Thursday's reports were indeed significant but disputed the notion that government agents could use such data without a specific investigative purpose in mind. He also said the program doesn't allow the government to listen in on anyone's phone calls.

"The unauthorized disclosure of information about this important and entirely legal program is reprehensible and risks important protections for the security of Americans," he said in a statement.

Fuel for Critics

The reports on Thursday drew attention to U.S. authorities' use of a secret federal court, the U.S. Foreign Intelligence Surveillance Court, which reviews and approves investigators' requests to conduct extraordinary surveillance in national security cases.

The NSA surveillance programs are among thousands of operations approved by the court in the years since the 9/11 attacks. Under federal law, Congress is briefed about the court's actions.

For civil libertarians and other critics of expanded secret surveillance, Thursday's revelations amounted to a reminder of how the 9/11 attacks increased the government's reach into Americans' daily lives.

"These revelations are a reminder that Congress has given the executive branch far too much power to invade individual privacy (and) that existing civil liberties safeguards are grossly inadequate," said Jameel Jaffer, deputy legal director of the American Civil Liberties Union.

As Obama arrived in California late on Thursday for a summit with China's new president, Xi Jinping, it was clear that administration officials were sensitive to such criticism.

A senior administration official emphasized that although the activities of people in the United States are included in the data being amassed by the government, the surveillance programs may target for investigation only non-Americans living outside the country.

The surveillance program "was recently reauthorized by Congress after extensive hearings and debate," the official said. "Information collected under this program is among the most important and valuable intelligence information we collect, and is used to protect our nation from a wide variety of threats."

'It's Called Protecting America'

Before the Post's report on the Internet companies was published, leading members of Congress - who routinely are briefed by the NSA on secret surveillance programs, and were again on Thursday - defended the agency's efforts to build a database of phone records for use in investigations. They said the program had been going on for seven years.

Republican Mike Rogers of Michigan, chairman of the House of Representatives Intelligence Committee, said the surveillance effort had stopped a "significant" attack plot within the United States, but didn't give details.

"It's called protecting America," added Sen. Dianne Feinstein, a California Democrat who heads the Senate Intelligence Committee.

But there also was a diverse group of Republicans and Democrats -- some who knew about the program and its scope, others who apparently didn't -- who blasted the gathering of such a huge database of details about Americans' phone habits as an unwarranted intrusion.

"The United States should not be accumulating phone records on tens of millions of innocent Americans. That is not what democracy is about. That is not what freedom is about," said Sen. Bernie Sanders, a liberal independent from Vermont.

Conservative Republican Sen. Rand Paul of Kentucky called the program "an astounding assault on the Constitution" and said the Obama administration "had sunk to a new low."

The Wall Street Journal reported that the NSA's monitoring of Americans includes customer records from AT&T Inc. (T) and Sprint Nextel Corp. (S) in addition to Verizon, as well as emails and Web searches. The agency also has cataloged credit-card transactions, the Journal said.

A New Controversy

For an administration that has promoted an activist government as a helper and protector of Americans, the flap over the NSA's surveillance became a new battle front.

Obama's White House already was under fire on another matter involving the delicate balance between security and privacy: its search of the telephone records of Associated Press journalists and the emails and phone records of a Fox News reporter as part of an inquiry into leaked government information.

And in the coming days, it's also likely that the details of the Guardian and Post reports will be sifted for clues into other U.S. surveillance activities, and who might have leaked them despite the risk of federal charges.

The Post story said part of its knowledge about the NSA programs came from a "career intelligence officer" who cited "firsthand experience with these systems, and horror at their capabilities."

There also was a curious twist to the Post story, which was written by Barton Gellman and Laura Poitras.

Gellman is a longtime Post reporter; Poitras is a documentary filmmaker who has been working on a film about Julian Assange, the founder of WikiLeaks, the website known for publishing secret government documents. Last year, Poitras made a documentary on Bill Binney, a former code-breaker at the NSA who became a whistle-blowing critic of the agency's surveillance of U.S. citizens.

Additional reporting by Susan Heavey, Patricia Zengerle, Thomas Ferraro, Andrea Shalal-Esa, Lawrence Hurley and Alina Selyukh in Washington, Ben Berkowitz and Jim Finkle in Boston and Sinead Carew in New York.

Reports: NSA Spying Included Major Internet Companies

The Big 3 carmakers get plenty of press, but what about the carmaker makers? Enter Johnson Controls, a deceptively under-recognized name for its contribution to one of the most consumer-focused industries.

Johnson Controls (JCI) makes much of that cushy seat-foam that lets you ride in cars in comfort. The company is the world's largest supplier of "seating solutions," a segment that pulled in $15.5 billion in sales for the company in 2012. Johnson Controls also makes products tagged to the construction industry such as heating, air-conditioning, ventilating and security systems.

The company has broadened its reach well beyond its roots. In 1885, Warren Johnson, developer of the first electric room thermostat, founded Johnson Controls to sell his invention. Johnson Controls was also first to market with lithium ion batteries for hybrid cars, and is currently the biggest supplier for battery technology for vehicles. It also makes driver information display panels, floor consoles and those garage-door clickers that are integrated to the interior of the car.

You can't tell by the company's name what it does, exactly. CHS Inc., however, has its hands in a wide range of lucrative industries: petroleum products, chemicals, food and financial services. The company is owned by United States agricultural cooperatives and has been ever since it was founded in 1929 as the North Pacific Grain Growers. In 2003, it changed its name from Cenex Harvest States Cooperatives to CHS Inc., keeping Cenex as the name for its energy business, and offering preferred stock and non-voting ownership to investors.

Today, the company is not necessarily the No. 1 player in any of the categories it's involved in, but sweeps in at second or third place in a variety of categories. CHS is the nation's third largest U.S. grain exporter, and the third largest U.S. propane retailer. It has a joint venture with Ventura foods, a major manufacturer of bulk margarine. And while it is by no means up there with the Exxons of the world, CHS sells more than 3 billion gallons of refined fuels such as gasoline and diesel.

(Pictured is CHS's propane innovation from weed control to irrigation.)

It's got a pretty hands-off name, but United Technologies (UTX) is a manufacturer with many arms, and it oversees some of the U.S.'s most prominent brands. Sure, Boeing (BA) and Airbus make the news when they win or lose bids, but United Technologies owns Pratt & Whitney, the company that powers many of the planes those companies produce. And, of course, we all know Otis, the iconic elevator brand, which is a United Technologies company too. Manufacturer Sikorsky is another part of United Technologies' profile. And while Sikorsky may not ring a bell, it made the famous Black Hawk helicopters for the U.S. military.

Even less sexy but more pervasive, perhaps, is United Technologies bread and butter -- its climate, controls and security unit. The division made up the largest portion of the company's net sales in 2012 -- $17.1 billion out of $57.7 billion total.

Behind the drugs you buy is an entire industry built on supplying, pricing, and subsidizing those meds, which is where AmerisourceBergen (ABC) lives. The megapharma company was formed in 2001, when Amerisource Health Corporation merged with Bergen Brunswig Corporation. Today, the resulting hybrid handles 20% of all of the pharmaceuticals sold and distributed throughout the United States, and employs 13,400 people full-time.

The pharma industry has undergone consolidation, with companies forming even larger units to prepare for health care reform, when the government will become an even more powerful drug-purchasing competitor. So AmerisourceBergen signed a three-year contract with Express Scripts, which had just bought Medco Health. Both Express Scripts and Medco are pharma suppliers and consultants. In 2013, AmeriSourceBergen penned a deal with Walgreen (WAG) and Alliance Boots. The deal could give the triad the purchasing power to buy more generics than any other purchaser in the industry.

Archer Daniels Midland Company has been around since the turn of the century, when George Archer and John Daniels went in together on a business based on crushing linseeds. ADM (ADM) has flown under the radar aside from a press spike when it got caught up in a price-fixing scandal during the 1990s, which was featured in the 2009 movie "The Informant."

By that time, the company had somewhat righted its reputation -- it was ranked the Most Admired company in the food Industry on Fortune's 2009, 2010, and 2011 lists.

ADM is known primarily for its involvement in the corn industry, but its reach extends far beyond that. ADM still crushes linseeds and other oilseeds, for example. In fact, strong global demand for those products protected the company this past year from drought problems in the U.S. that hurt harvests and lowered levels on the Mississippi River, a major ADM shipping channel.

ADM is also one of the largest milling companies anywhere, processing 20 acres of wheat per-minute, all over the world. If you've got a sweet tooth, ADM is one of the largest cocoa product producers and owns roughly 16% of the ground cocoa market. If you raise pig, horse, fish or any of several other animals, ADM cranks out the corn- and soy-based products to feed them.

McKesson was around during the old days of the American medical industry. In 1833, John McKesson and Charles Olcott formed the company in New York, starting out stocking medical ships coming to port with chests full of herbs, roots and spices from Pennsylvania Shaker communities.

Medical services, of course, have come a long way, and so has the company, which is now the largest pharmaceutical distributor on the continent. McKesson (MCK) peddles more than 150,000 medical-surgical products, including bandages and exam tables, and, it claims, offers healthcare solutions that touch "more than 160 million covered lives."

No more a conduit for Shaker spices, the industry today involves selling a much murkier product called "health solutions," which guides clients through the coverage levels they should offer, among other things, and "provider technologies," which aim to help clients deal with the digitization of medical records. Over half of all "health systems" in the United States use McKesson's technologies in this category. It's lucrative -- McKesson nets more than $123 billion in annual revenue.

Also, McKesson is building a medical robot army. Every year, according to the company, "More than 300 Robot-Rx pharmacy robots deployed in North America dispense 350 million medication doses error-free." The future of medicine, ladies and gentlemen.

Lurking behind the health care debate are, of course, the companies that provide health care. Though it sounds like some kind of futuristic supercontinent, Humana (HUM) is actually the fourth largest provider of health care in the United States, with nearly 30 million policyholders.

The company, with its headquarters in Louisville, Ky., is poised to thrive as health care reform shapes the industry. Humana brought on 2,900 new care management professionals in 2012. Though costly, the price of that and other operational solutions should be offset by other areas in which the company made a profit. For example, the flu, though bad for your respiratory system, was good for Humana's bottom line. Incremental costs from increased hospital admissions, thanks to the flu, should earn Humana $75 million for 2012 and 2013.

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