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The Life of a Stolen Phone: For the Smartphone Industry, Theft Is a Part of the Business Model 

Wednesday, Apr 23 2014
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While the global black market for smartphones is vast and byzantine, law enforcement has reason to believe that part of it originates in San Francisco — a dense city with tons of pedestrians, battalions of tech workers, and a few sophisticated crime networks.

In November 2012, San Francisco police busted brothers Henry and Victor Gamboa for allegedly running a fence out of their apartment in the Tenderloin with more than $500,000 in stolen property, including 100 cellphones. Investigators suspect the Gamboas were part of a much larger ring, and that the goods — which were procured from auto burglaries throughout San Francisco and Oakland — were being shipped overseas. In December of that year, police busted another electronics fencing operation in the Excelsior, allegedly run by Hung Huynh and Heriberto Cardenas. Police say Cardenas was routing items to Mexico.

The market for stolen cellphones has swelled so much in Colombia — a country traditionally known for drug-trafficking — that many cartels are now smuggling Apple devices and Galaxy 5s instead of narcotics, because there's less risk in the gadget trade. A recent Huffington Post investigation showed Colombian police struggling to keep tabs on this new contraband network, even as they crack down on international drug sales. So far, the Colombian government has tackled the problem with grisly public service announcements, which show blood seeping out of stolen iPhones.

"Comprar un cellular robado es cargar con un muerto," the ads warn: Buy a stolen cell phone; carry a corpse.

In February of this year, DA Gascón and state Sen. Mark Leno unveiled a legislative salvo for San Francisco's smartphone theft epidemic. Senate Bill 962 would require every smartphone and tablet sold in California to come equipped with a kill-switch, beginning in 2015. That, the authors believe, would be enough to deter most criminals.

No state has ever passed such a law, so Leno and Gascón have to cite different historical antecedents to substantiate their claims. The closest analogue might be car theft laws passed in the 1980s and '90s, which tightened penalties for carjacking and burglary, but also required manufacturers to install antitheft devices, or inscribe vehicle identification numbers on their auto parts. The laws were successful: Studies by the National Highway Traffic Safety Administration showed substantial theft reduction in car lines with preventative equipment or marked parts.

Leno and Gascón hope to see similar results in the smartphone industry, as do their legislative counterparts in New York, Minnesota, and Illinois, who all have similar proposals in the works. And so far, California's kill-switch bill seems to have a tide of support behind it. On April 1, it cleared the Senate Energy, Utilities, and Communications Committee by a 6-2 vote, prompting a spate of jubilant press releases from Leno's top brass.

"Our proposal eliminates the financial motive behind this crime, which will help curb thefts and protect the safety of smartphone users," the senator trumpeted in a canned statement. "This is a crime of convenience. End the convenience. End the crime."

For a state in which smartphone capers have surpassed all other forms of robbery, the idea didn't seem profoundly controversial — until industry representatives stepped in. It turns out Leno and Gascón face opposition from cellphone carriers and tech companies — even the ones that previously paid lip service to the idea of theft prevention.

Representatives of the CTIA declined to comment for this story. Instead, the association emailed a prepared statement from its senior vice president and general counsel Michael Altschul, who derides kill-switch features as a "trap door" for hackers and cyber-criminals. Some privacy stalwarts have floated the same theory, arguing that if a citizen can turn off his device remotely, the government can too. As one InformationWeek blogger noted, that could "hasten the arrival of the Surveillance of Everything."

Apple's government affairs manager, Jason Lundgaard, was less apoplectic in his own "letter of concern" to Leno. Nonetheless, he argued that the Senate bill's language "limits consumer choice, and is inconsistent with global best privacy practices." Users should give consent before any remote geo-tracking application — such as the "Find My iPhone" feature — is installed on their devices, Lundgaard maintained. Because the bill averts the consent process, it "undermines such a crucial consumer privacy tenet."

"Unless these fundamental issues are addressed," Lundgaard continued, "we [Apple] must regretfully oppose SB 962."

As an alternative, the CTIA proposed a "Smartphone Anti-Theft Voluntary Commitment," basically a pledge for manufacturers and carriers to sign, promising that by July 2015, they'll offer a downloadable anti-theft tool that functions similarly to a kill-switch — except that it's voluntary, rather than standardized. Thus far, Apple, Google, AT&T, Samsung, Sprint, Verizon, and several others have signed on.

Leno and Gascón are not pleased. Leno calls the solution "incremental yet inadequate," and says it completely misses the goal of combating smartphone robbery. Consumers can't be expected to download the safeguard on their own, especially if it requires all the rigmarole of installing a new operating system, or creating an account, in order to activate the kill-switch. People who aren't tech-savvy won't bother to do that, Gascón's legislative affairs and policy manager Maxwell Szabo contends. Thieves will safely assume that the majority of smartphones still lack kill-switch technology, he says; there won't be "the nexus of individuals" to create an effective deterrent.

And if optional switches don't deter robbery, they also won't reduce a stolen phone's value on the black market, Leno notes. They won't stifle the fencing operations on Seventh and Market, or the bigger rings that ship suitcases and fruit containers full of phones overseas. In fact, Szabo argues, they're little better than the carriers' current solution, which is to wait for a call from the robbery victim, deactivate her account, and then log the stolen phone's ID number into a giant database. Stolen-phone databases haven't stamped out Craigslist sales of secondhand phones in the U.S., and the U.K.'s similarly designed "stolen phone" blacklist hasn't inhibited crime, despite its honorable intentions.

About The Author

Rachel Swan

Rachel Swan

Bio:
Rachel Swan has been a staff writer at SF Weekly since 2013. In previous lives she was a music editor, IP hack, and tutor of Cal athletes.

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