The former executives in charge of MoviePass have been indicted in what the Justice Department calls "a scheme to defraud investors." Ex-MoviePass CEO J. Mitchell Lowe and Theodore Farnsworth, who used to be the chairman of the service's former parent company Helios and Matheson Analytics (HMNY), have been charged with one count of securities fraud and three counts of wire fraud. Federal authorities accuse them of making materially false and misleading claims regarding MoviePass' business in press releases, interviews and even SEC filings in a bid to artificially inflate HMNY's stocks and entice new investors.
According to the newly unsealed court documents, Farnsworth and Lowe allegedly knew from the start that the business' $9.95 "unlimited" plan was a temporary gimmick to attract new subscribers and, hence, artificially inflate HMNY's stock prices. They also falsely claimed that the business model was tested to be sustainable and that it was possible to become profitable on subscription fees alone, the feds said.
In addition, the executives allegedly claimed that HMNY had "big data" and AI technologies that could be used to generate revenue for the company by analyzing data collected from MoviePass subscribers. The indictment accuses them of making the claim even though they knew that HMNY did not have the technology or the capability to monetize subscriber data.
Another allegation against the executives is that they'd made false representations that MoviePass was earning considerable money from multiple revenue streams. The business did not have a non-subscription revenue stream that would make it self-sufficient or offset its losses, according to authorities. Farnsworth and Lowe were also accused of implementing various tactics to prevent certain subscribers from being able to use their "unlimited" service. If you'll recall, MoviePass had to settle with the FTC in 2021 over allegations that it invalidated subscriber passwords on purpose to give it sufficient reason to freeze accounts of frequent users.
In a statement made to The Verge, the spokesperson for Farnsworth said: "The indictment repeats the same allegations made by the Securities and Exchange Commission in the Commission's recent complaint filed on September 27th against Mr. Farnsworth, concerning matters that were publicly disclosed nearly three years ago and widely reported by the news media. As with the SEC filing, Mr. Farnsworth is confident that the facts will demonstrate that he has acted in good faith, and his legal team intends to contest the allegations in the indictment until his vindication is achieved."
The SEC sued MoviePass for fraud back in September and also accused the executives of misleading investors about the viability of the company's $9.95-per-month business model. Despite its tumultuous past and all the accusations the former people in charge still have to face, MoviePass is back. Stacy Spikes, its original co-founder, purchased it back after HMNY filed for bankruptcy. The service relaunched in September 5th and now charges subscribers $10 a month for up to three movies, $20 a month for up to four and $30 for a maximum of five movies a month.
As for Farnsworth and Lowe, they're now facing a maximum penalty of 20 years in prison for each count of securities and wire fraud.
Twitter is facing a class action lawsuit over its ongoing mass layoffs today, which could likely cut its workforce in half. According to Bloomberg, employees filed a class action lawsuit against the company in San Francisco federal court, arguing that Twitter's actions run afoul of the US Worker Adjustment and Retraining Notification (WARN) Act. Under the labor law, companies with 100 or more employees are required to notify them of mass layoffs 60 days in advance.
The New York Times reported earlier that Twitter will begin layoffs on Friday and that around half of the company's staff members will lose their jobs. In an email seen by The Washington Post, Twitter said that the layoffs are "unfortunately necessary to ensure the company's success moving forward." The company also told employees to stay at home today and to wait for an email. If they get one in their Twitter account, their job is safe. But if they receive the email in their personal account, that means they're being let go. Some people are reporting on the social network that they already got locked out of their work emails and had been removed from company Slack.
The plaintiffs are asking the court to issue an order forcing Twitter to obey the WARN Act. They also want the court to prohibit the company from soliciting employees to sign away their right to litigate. Shannon Liss-Riordan, the lawyer representing the plaintiffs, said they filed the complaint "in an attempt to make sure that employees are aware that they should not sign away their rights and that they have an avenue for pursuing their rights."
Liss-Riordan was also the lawyer who handled the lawsuit against Tesla in June over layoffs that cut 10 percent of the automaker's workforce. Similar to this complaint, the plaintiffs back then argued that Tesla violated the WARN Act. Company chief Elon Musk, who took over Twitter a week ago, called the lawsuit "trivial" in a talk with Bloomberg Editor-In-Chief John Micklethwait. The court had also sided with the company and ruled that employees should negotiate with Tesla in a closed-door arbitration instead.
Elizabeth Warren is calling for more federal oversight of Big Tech. In a letter (PDF link) the Democratic senator sent on Tuesday, she asked the Federal Trade Commission and Department of Justice to look into Google, Apple and Amazon’s expansion into the automotive industry.
Warren claims the three companies are using their positions in mobile and cloud computing to become dominant players within the sector. “This expansion has potentially alarming implications for developers, workers, and consumers,” Warren states. She’s urging FTC Chair Lina Khan and Jonathan Kanter, the head of the Justice Department’s antitrust division, to act decisively before it’s too late. “As Chair Khan has written, ‘it is much easier to promote competition at the point when a market risks becoming less competitive than it is at the point when a market is no longer competitive.’ This market finds itself at exactly such a juncture,” Warren warns.
Specifically, the senator calls out the companies for employing “all-or-nothing” bundling tactics. As one example, she points to the terms of Android Automotive. Google’s operating system doesn’t come with Maps or Assistant included. To access one of those services, automakers must purchase a bundle that includes all of them. Warren argues that tactic allows Google to leverage its dominant position in one area to obtain market share in another. In this specific case, she suggests the company is using Maps to grow Assistant.
“These tactics are reminiscent of past Big Tech bundling controversies,” Warren states, drawing a parallel to cases like the Justice Department’s 2001 lawsuit against Microsoft. Apple and Amazon did not immediately respond to Engadget’s request for comment. “Carmakers choose to partner with tech companies to improve the experience for their customers,” a Google spokesperson told Engadget. "There is enormous competition in the connected car space – including Apple CarPlay, Amazon Alexa, Cerence, TomTom, ChargePoint and many others – and carmakers continue to invest in their in-house solutions simultaneously. At Google, our goal is to enable carmakers and developers across the auto industry to develop software solutions at scale.”
As Vox points out, automakers are partly to blame for the current state of the market. One reason platforms like CarPlay and Android Auto are so popular is that first-party options from car companies have historically failed to meet consumer expectations. In 2019, Ford paid $17 million to settle a class-action lawsuit related to its MyFord Touch infotainment system. The platform was known for freezing and crashing while in use.
Warren says ensuring there’s fair competition in the automotive sector should be a priority for the FTC and DOJ. “The FTC and DOJ don’t have to wait until there’s a problem to take action,” she writes. “Now is the time to prevent Big Tech from strangling competition in the automotive industry before it’s too late.”
A former Apple employee has pled guilty to defrauding the company out of over $17 million. Dhirendra Prasad, who spent most of his decade at Apple working as a buyer in the Global Service Supply Chain department, admitted to "taking kickbacks, inflating invoices, stealing parts and causing Apple to pay for items and services never received,” according to the US Attorney's Office for the Northern District of California. Prasad started these schemes in 2011 and continued them until 2018.
In one scam, Prasad shipped motherboards from Apple's inventory to CTrends, a company run by a co-conspirator, Don M. Baker (who previously admitted to taking part in the fraudulent schemes). Baker harvested components from the motherboards, then Prasad organized purchase orders for those parts. After Baker shipped the components back to Apple, CTrends filed invoices for which Prasad arranged payment. In the end, the pair got Apple to pay for its own components and they split the proceeds of the scam.
In addition to fleecing Apple, Prasad confessed to engaging in tax fraud. He directed payments from Robert Gary Hansen (another co-conspirator who has admitted to taking part in the schemes) straight to his creditors. In addition, Prasad arranged for a shell company to send sham invoices to CTrends with the aim of covering up illicit payments Baker made to him. This enabled Baker "to claim hundreds of thousands of dollars of unjustified tax deductions," the US Attorney's Office said. All told, prosecutors claim that the scams resulted in the IRS losing over $1.8 million.
Prasad will be sentenced in March. He pled guilty to one count of conspiracy to commit mail fraud and wire fraud, which carries a maximum prison sentence of 20 years. Prasad also pled guilty to one count of conspiracy to defraud the United States, which has a maximum sentence of five years' imprisonment. Moreover, Prasad agreed to forfeit around $5 million worth of assets he accrued as a result of his criminal actions, including real estate properties.
Women have faced gender-based discrimination in the workforce throughout history, denied employment in all but a handful of subservient roles, regularly ignored for promotions and pay raises — and rarely ever compensated at the same rates as their male peers. This long and storied socioeconomic tradition of financially screwing over half the population continues largely unabated into the 21st century where women still make 84 cents on the dollar that men do. In her new book, The Equality Machine: Harnessing Digital Technology for a Brighter, More Inclusive Future, Professor of Law and founding member of the Center for Intellectual Property Law and Markets at the University of San Diego, Dr. Orly Lobel, explores how digital technologies, often maligned for their roles in exacerbating societal ills, can be harnessed to undo the damage they've caused.
For years, the double standard was glaring: employers demanded secrecy about salaries while asking prospective employees for their salary histories. Now, we can tackle both ends of this asymmetry. Just as digitization is helping to reverse information flows to foster more transparency in the market about employees’ worth, new laws are also directing employers to not rely as much on past pay levels, which can be tainted by systemic inequality. In 2016, Massachusetts became the first state to pass a law prohibiting employers from asking job candidates about their salary histories. Since then, more than a dozen states have followed suit.
Barring employers from asking prospective job candidates about their salary histories has two goals. The first is breaking the vicious pay gap cycle, which emerges when women are paid less at a previous job and that gap is then replicated by the next employer. The second is addressing gender differences in the negotiation process Salary figures are plagued by gender disparity, and they can perpetuate and further exacerbate existing market disparities. When a woman discloses that she currently earns less than a man, she could be harming her salary trajectory — both in the applied-for position and for the rest of her career. Each time she discloses her current salary to a potential employer, that gap is likely to grow, as recruitment efforts and promotions are often offered as a percentage increase in relation to current base salary. Rather than relying on biased figures, bans on salary history inquiry induce employers to use other ways to determine a potential employee’s worth, including a shift to automated computation. Employers using market and internal data can consider merit-related characteristics when determining pay, such as experience, training, education, skill, and past performance.
And yet, as we have seen, human bias can creep into our algorithms, and an algorithm that is fed data tainted by salary bias is likely to perpetuate that bias itself. Feedback loops are digital vicious cycles that can result in self-fulfilling outcomes. Once again: bias in, bias out. The risk is that an algorithm will learn that certain types or categories of employees are on average underpaid, and then calculate that into salary offers. This is the wrong that recent policy has been designed to eliminate — and that we can program AI to avoid. Removing the anchored numerical figure encourages employers to proactively assess pay based on the company’s needs and the candidate’s fit rather than on a tainted number. At the same time, having pay scale information for a job but not having a salary history on the table can embolden women to ask for more.
What’s more, AI can also help in the future — maybe not even the distant future — by replacing some of the negotiation that takes place in unequal settings. Empirical studies on negotiation differences between men and women have repeatedly shown that women on average negotiate less, and that when they do, employers react negatively. Women don’t ask for higher salaries, better terms, promotions, or opportunities nearly as frequently as men do. In my research, I’ve called this the negotiation deficit. In one study at Carnegie Mellon University, 93 percent of female MBA students accepted an initial salary offer, while only 43 percent of men did. In another study, female participants simulating salary negotiations asked for an average of $7,000 less than male participants. Economists Andreas Leibbrandt and John List have also found that while women are much less likely to negotiate with employers over salary, this difference disappears when all job seekers are explicitly told that pay is negotiable, mitigating the pay gap. My own experimental research with behavioral psychologist and law professor Yuval Feldman, my longtime collaborator, has found that women in some work environments act less as “homo economicus” — that is, as rational economic actors — and more as altruistic social actors, such that women do not demand for themselves as much as men, and are more likely to value non-monetary benefits, such as good corporate culture.
Can these research insights offer us clues for developing new software tools that will spur women to negotiate? Digital platforms can serve employees by providing advice and information on asking for a raise or preparing for an interview. Information on pay—and especially an explicit expectation that pay can and should be negotiated—can empower applicants to negotiate higher salaries before accepting job offers. The digital platform PayScale conducts annual surveys asking thousands of job seekers whether they disclosed their pay at previous jobs during the interview process. PayScale’s 2018 survey found that women who were asked about their salary histories and refused to disclose were offered positions 1.8 percent less often than women who were asked and disclosed. By contrast, men who refused to disclose when asked about salary history received offers 1.2 percent more often than men who did disclose.
Even when women do negotiate, they are treated differently. In my research, I call this phenomenon the negotiation penalty. Women are told to “lean in” and make demands, but the reality is that for centuries, women have been universally viewed as weaker negotiators than their male counterparts. In one series of experiments, participants evaluated written accounts of candidates who did or did not initiate negotiations for higher salaries. The results in each experiment showed that participants penalized female candidates more than male candidates for initiating negotiations, deeming women who asked for more not “nice” or too “demanding.” While qualities such as assertiveness, strength, and competitiveness culturally benefit male negotiators, women who display such characteristics are often considered too aggressive. Another study looked at data from a group of Swedish job seekers and found not only that women ended up with lower salaries than equally qualified male peers, but also that they were often penalized for negotiating like them. Nick Yee and Jeremy Bailenson have shown that attractive avatars lead to more intimate behavior with a confederate in terms of self-disclosure and interpersonal distance. In a second study, they also observed that tall avatars lead to more confident behavior than short avatars in a negotiation task. They term it the Proteus Effect (the Greek god Proteus was known to have the ability to take on many self-representations). The Proteus Effect suggests that the visual characteristics and traits of an avatar are associated with correlating behavioral stereotypes and expectations, including those that affect the way we negotiate.
The eleventh annual competition for artificial intelligence that has been trained to negotiate — the Hagglebot Olympics, as it’s been termed in the popular media — was held in January 2021. Universities from Turkey and Japan won this time. In some experiments involving negotiations with bots, most people did not even realize they were talking to a bot rather than another person — the bots had learned to hold fluent conversations that completely mimicked humans. Using game theory, researchers are increasingly improving the ways bots can negotiate on behalf of humans, eliminating some of the aspects in which we humans are fallible, like trying to factor in and weigh many different aspects of the deal. AI can now predict the other side’s preferences quite fast. For example, an AI listening by microphone to the first five minutes of negotiation is learning to predict much of the eventual deal just from the negotiators’ voices. Following these speech patterns through machine learning, it turns out that when the voice of a negotiator varies a lot in volume and pitch, they are being a weak player at the negotiation table. When the negotiating sides mirror each other, it means they are closer to reaching an agreement. Using AI also has helped uncover the ways in which women are penalized at the negotiation table. A new study out of the University of Southern California used a chatbot that didn’t know the gender identities of participants to evaluate negotiation skills. The study showed that most of us — both men and women — do quite badly at negotiating salaries. Over 40 percent of participants didn’t negotiate at all, and most people left money on the table they could have received. Women valued stock options less than men did as part of their compensation package, affecting women’s likelihood to accumulate wealth over time. These advances can also help with negotiation disparities across different identities. A group of Israeli and American researchers looked at how a smart computer can negotiate with humans from different cultural backgrounds. Without telling the machine anything about the characteristics of people from three countries — Israel, Lebanon, and the United States — they let the AI learn about the patterns of cultural negotiation differences by engaging in negotiation games. They found that the computer was able to outperform people in all countries. These developments are promising. We can envision bots learning about negotiation differences and ultimately countering such differences to create more equitable exchanges, level the playing field, and achieve fair outcomes. They can be designed to tackle the specific distributive goals we have.
The Federal Trade Commission will call on Meta CEO Mark Zuckerberg to testify in its upcoming case against the company. The FTC sued the social media giant in July in an attempt to block it from buying Within Unlimited, the creator of the popular VR workout app Supernatural.
Reuters reports that the agency listed 18 witnesses, including Zuckerberg and Meta CTO Andrew Bosworth, in a court document filed with California’s Northern District Court on Friday. In addition to answering questions about the potential acquisition, the FTC plans to ask Zuckerberg about Meta’s VR strategy and how the company intends to support third-party developers, according to court documents seen by Reuters.
In July, the FTC accused the company and Zuckerberg of attempting to “illegally acquire” Within. “Instead of competing on the merits, Meta is trying to buy its way to the top,” John Newman, deputy director of the FTC’s Bureau of Competition, said at the time.
Meta has dismissed the FTC’s lawsuit, claiming it is based on “idealogy and speculation, not evidence.” The case could be another costly setback for a company struggling to convince the public and Wall Street of its vision for the future. Earlier this week, Meta disclosed in its latest earnings report that its Reality Labs VR and AR division is losing more money than ever. In Q3 2022, the unit lost $3.7 billion. That’s a trend David Wehner, the company’s outgoing chief financial officer, told investors would continue through 2023.
The Minnesota and District of Columbia attorneys general are suing Target-owned Shipt delivery service over worker misclassification, CBS News has reported. The lawsuits accuse the company of designating its "personal shoppers" (who pick and deliver grocery orders) as independent contractors to avoid paying benefits like state unemployment insurance and worker's compensation.
"Increasingly, we’re seeing companies abuse hard-working District residents by fraudulently calling them independent contractors and, as a result, denying them wages and benefits they are legally owed," said DC AG Karl Racine in a statement.
Shipt said it disagrees with the allegation and that most of its workers prefer being able to set their own hours. "Shoppers with Shipt are independent contractors, and the flexibility that comes with being an independent contractor is the primary reason Shipt Shoppers choose to earn on our platform," spokesperson Evangeline George told CBS News. Citing its own survey, it said that 80 percent of its workers named such flexibility as a key priority.
However, Minnesota attorney general Keith Ellison said the company controls "virtually every facet of a shopper's work" despite claiming the workers are independent. "Unlike other employees, these workers have no clarity on how much they will be paid day to day, and they often don't receive the minimum wage and overtime they're entitled to," he added.
The suits seek to recover paid sick leave owed, unpaid wages, payments owed for unemployment insurance, penalties and more. Other delivery companies including DoorDash have faced similar actions, and Instacart recently agreed to pay $46.5 million in a settlement with the city of San Diego over misclassified workers. Earlier this year, Massachusetts sued Uber and Lyft for identifying drivers as contractors.
A group of workers at YouTube Music Content Operations, an Alphabet subcontractor, have filed with the National Labor Relations Board for union recognition and bargaining power after a supermajority of the 58-strong group signed union cards. "As a part of the YouTube Music Content Operations team, workers ensure music content is available and approved for YouTube’s 2.1 billion monthly active users worldwide," the Alphabet Workers Union-Communications Workers of America (AWU-CWA) said in a statement.
The workers, who are based in Austin Texas, were already paying AWU-CWA dues and are now seeking bargaining rights. The AWU-CWA says those rights would force Alphabet to recognize the union as the workers' bargaining unit. The NLRB has scheduled a hearing for November 14th. The union, which was formed in January 2021, now counts nearly 1,200 Alphabet workers as members, including full-time employees as well as temporary, vendor and contract workers.
The AWU-CWA says it "won't stop organizing until all Alphabet workers (full-time, temporary, vendor and contract workers) have dignity on the job, the pay and benefits we deserve, and a seat at the table." Earlier this year, a group of Google Fiber workers in Kansas City voted to unionize with the AWU-CWA. This month, the AWU filed complaints with the NLRB, accusing the company of firing Google data center workers in retaliation for union activity. The union says Google fired two workers who attempted to discuss pay and working conditions.
“We are honored to welcome the workers of the YouTube Music Content Operations team as members of the Alphabet Workers Union-CWA," Google software engineer and AWU-CWA executive chair Parul Koul said. "Google platforms like YouTube have largely been a success thanks to the labor and efforts of the thousands of contract workers that ensure quality content while being denied their fair share. We’re excited to see these workers bring Alphabet to the bargaining table and use their power to win the quality pay, benefits and rights on the job they deserve.”
The Republican National Committee is suing Google. According to Axios (via The Verge), the organization filed a lawsuit with California’s Eastern District Court on Friday. The complaint accuses Google of sending “millions” of RNC campaign emails to Gmail spam folders in an extension of the company’s “discriminatory” filtering practices.
“At approximately the same time at the end of each month, Google sends to spam nearly all of the RNC’s emails,” the complaint claims. “Critically, and suspiciously, this end of the month period is historically when the RNC’s fundraising is most successful.”
The lawsuit comes after Google launched a controversial program to appease GOP lawmakers concerned about its filtering practices. In June, after a study found that Gmail was more likely than competing email clients to filter emails from Republican campaigns, the company said it would work with the Federal Election Commission to pilot a system designed to prevent political messages from ending up in spam folders. The concession came after Republican lawmakers introduced a bill that sought to ban email platforms from using algorithms to route campaign messages automatically.
According to a recent report from The Verge, the Republican National Committee is not taking advantage of the program Google built to address the party’s concerns. The organization’s complaint doesn’t explicitly mention the pilot. Instead, it points to a training session the RNC attended on August 11th, the same day the FEC approved Google’s program.
“This discrimination has been ongoing for about ten months — despite the RNC’s best efforts to work with Google,” the organization claims. Google did not immediately respond to Engadget’s request for comment. “As we have repeatedly said, we simply don't filter emails based on political affiliation," the company told Axios, adding that Gmail’s spam filters reflect user actions.
The office of Texas State Attorney General Ken Paxton announced on Thursday that it has filed a lawsuit against Google over the company's alleged years-long practices to capture and use of biometric data from, "millions of Texans without properly obtaining their informed consent to do so." This is allegedly a violation of the state's Capture or Use of Biometric Identifier Act of 2009.
The AG argues that Google used features in its Photos and Assistant apps, as well as through Nest Hub Max hardware, to scan and store the facial and voice data without first acquiring user consent. Furthermore, Paxton alleges, Google then leveraged that data for commercial gain by using it to train the company's machine learning algorithms.
“Google’s indiscriminate collection of the personal information of Texans, including very sensitive information like biometric identifiers, will not be tolerated,” Texas Attorney General Ken Paxton said in the Thursday press release. “I will continue to fight Big Tech to ensure the privacy and security of all Texans.”
This is far from the first time that Paxton, who is up for re-election in November, has targeted Alphabet and its subsidiaries. His office filed a suit in January, "for engaging in false and misleading practices in violation of the Texas Deceptive Trade Practices—Consumer Protection Act," and then again less than a week later for, "systematically misleading and deceiving Texas consumers in violation of Texas’ Deceptive Trade Practices Act."
Paxton's office is asking the court for a permanent injunction in the case. This would prohibit Google from "capturing, maintaining, or using in any way the biometric identifiers captured in Texas" or "performing voice or facial recognition in Texas" without the informed consent of the relevant individual as well as invoke a $25,000-per-infraction fine against the search company.
