Michael Daugherty – The Devil Inside The Beltway

Interview with Michael Daugherty

Mandeville, LA – Exclusive Transcript – “Let’s go to the Dude Maker Hotline and say hello to Michael  Daugherty.  The book is The Devil Inside the Beltway.  Just explain the first 60 pages or so and then you and I can walk the audience through the rest.”  Check out today’s transcript for the rest…

Begin Mike Church Show Transcript

Mike:  Let’s go to the Dude Maker Hotline and say hello to Michael J. Daugherty.  The book is The Devil Inside the Beltway.  Just explain the first 60 pages or so and then you and I can walk the audience through the rest.

Michael Daugherty:  Literally it’s like a movie.  We are a cancer detection firm.  This is what we’re doing, which, as you know, is an incredibly dangerous thing.

Mike:  It is.

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Daugherty:  We can’t have cancer detected.  The phone rang and this guy calls and says — this is 2008 — he says: We found a file of yours.  We do data security and information detection.  Would you like to hire us?  This is straight out of a script where we’re like: How’d you find it?  Basically this guy would not tell us anything other than he had it unless we paid him.  I didn’t believe him immediately, so I only communicated with him in emails.  The book is written like a story.

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I show you and not tell you exactly how these operatives work.  In his instance, he’s just another one of these cape-wearers saving the day.  He’s going to save us as long as we pay him.  We immediately called the lawyer and to this day have never found this file, which turned out to have 9,000 of our patients out in cyberspace.  To this day we have not found it.  Wondering how he got it, we’re in this quagmire that he wouldn’t tell us any information unless we paid him, after some back and forth, the end of 2008 his lawyer called and said: They’re going to give it to the Federal Trade Commission, which we thought was hot air.  In 2010, the Federal Trade Commission called.

I’ll tell you, there’s never a connection between a phone call from a company and a government agency.  They don’t really take seriously these random calls.  I knew there had to be a connection, and I found one.  I found that Homeland Security had given $24 million to Dartmouth to do a cyber-security study.  They monitored — they don’t like the word “surveillance;” they like the word monitor.  They monitored millions of our workstations and downloaded over 13 million files.  One of them was mine.  They consider this an issue.  I consider it a bunch of government lawyers that don’t understand anything about technology that are just keeping their job security ahead of the nation’s security.  It goes from there into such craziness.  With this Nevada rancher going on, unfortunately it’s another day in the life of a DC government attorney.

Mike:  That’s right.  What Michael has just explained to you, I just want to reset this and make sure the audience is up to speed and understands this.  So what happened is Michael’s company is called LabMD.  As he said, they do cancer screening tests.  The entire process — in one of the chapters, Michael, you describe how your technicians – the laborious, unbelievably detailed and very safe at every juncture of the handling of the bio matter, of the process of analyzing, in your case some guy named George’s prostate biopsy, and determining whether or not he might have prostate cancer.  Unfortunately for George, he did.  This is what LabMD does.

One day Michael and Bill, his COO, get an email from this guy, whose last name is Bobock, who purports to have this file.  Of course, first they say: No, we don’t believe you.  Then they find out he may actually have the file because he starts telling them things in the file that only someone that has seen it would know.  Then the process of how he got it.  This is where it gets really scary.  What Michael just said about the Department of Homeland Insecurity funneling $24 million out to Dartmouth University to do this, what they were doing was they were data mining all of our computers using LimeWire, specifically our government went after all of us to see whether or not they could crack onto our hard drives, using LimeWire or P2P services.

Where it gets really nefarious — I haven’t read the rest of the book, so don’t give away the entire ending.  Apparently the Federal Trade Commission, while it’s doing all of this, is alerting people like this Bobock — Tiversa is the company — is alerting companies like Tiversa: You may find a file somewhere, I won’t tell you exactly where, but you may find a file that has medical records in it.  If you do, we’ll give you permission to sell the file back to the owner.  Pick up from there.  What happens after all of this in the opening stages?  I’m in January of 2010 right now.

Daugherty:  Then we start this investigation.  We get a phone call.  It’s the beginning of a pattern of no specifics in great brevity by government lawyers where they call and say: We’re sending you a letter tomorrow.  We’re starting a non-public inquiry.  Every word they say you have to really concentrate on.  They get a letter and what arrives the next day?  Eleven pages, single spaced.  We know you’ve got a lawyer asking questions and they’re that detailed and that broad, eleven pages, single-spaced, of broad lawyer speak.  We just sent them everything, 5,000 pages of everything we could think of to answer the questions about what our data security practices were like, because we have nothing to be ashamed of.  They didn’t like that.  They considered that not answering their questions.  Our trust in them evaporated in two seconds.  It was strange because we really had good relations with the federal inspectors that inspected our laboratory every year because they were scientists and we were fact-based.  These guys are not scientists and they’re not technologists.  It became very clear they were on a fishing expedition and a witch hunt.

The bigger picture of the book is the Frankenstein that Congress has created.  The Federal Trade Commission has been told by Congress and empowered to “protect” consumers from unfairness and deception.  They get to define what that is as they go along, and they stretch the loophole of what is unfair unbelievably.  What they say is unfair is whatever they say is unfair.  They argue they don’t have to have standards or rules.  We don’t know what we’ve done wrong.  They won’t say what we’ve done wrong.  They won’t say what’s right.  We start in that quick span there for years, spending thousands of dollars trying to make them go away.  It is beyond comprehension the cronyism and what goes on.  It’s turned into a huge power play.

Mike:  Yet the people that actually breached your privacy, this company called Tiversa — and there are others like them — seem to be able to operate with impunity.  If they can find a file like the one they found on your computers through P2P, then there doesn’t seem to be any concern about that kind of theft and what it is that companies like that are doing, right?

Daugherty:  Exactly.  It comes down to incompetency and indifference.  These people are so entitled and arrogant they’re sloppy.  The Federal Trade Commission is an agency that has such a reputation in the business world of having so much power that everyone rolls over.  The only two people that have even gone to court with them on this is myself and Wyndham.  We argue our stuff never even got out.  They don’t even use the word breach in their suits or their press release.  To get more high level on this, they are allowed to do this because of the meat grinder they put you through.  You never get to the facts.  I basically got a transfusion of blood from cause of action, other legal entities to get through this to show people the hypocrisy and really the incompetence.  It’s beyond comprehension.

Mike:  Michael, let’s go to page 231 of The Devil Inside the Beltway, a couple pages that I bookmarked but I actually haven’t gotten to yet but look forward to.  You’re corresponding with an attorney named Dana Rosenfeld, right?

Daugherty:  Right.

Mike:  You’re in this chain of emails with you and several others.  The mail is “Questions for the client.”  A little into the email or letter we find this:

[reading]

It felt like Dana thought I didn’t get it and was saying something like, “Here are the inside-the-beltway rules in dealing with FTC people that you don’t get, Mike.” [Mike: I love how you’re getting lectured here.] Number one, don’t piss them off.  Number two, take them seriously. [Mike: By the way, folks, this is not a David Letterman Top 10 list.] Number three, respond in a timely manner. Number four, I’m your lawyer.  I know what I’m doing so just let me do it, carte blanche. Number five, remember they have huge resources and they are the federal government.

[/private]

Number six, again, I repeat, don’t piss them off. Number seven, let me spend your money speaking their language and I’ll tell you about it later. Number eight, the fact is the FTC could not care less about you and LabMD is expendable. Just do as you’re told. Number nine, no guarantees. Number ten, if you would just shut up and cooperate, things would be so much easier. The only way out of this is to roll over and hope for the best.

[end reading]

Mike:  In other words, it doesn’t even matter if they have a case against you.  They’ve got you out-funded, out-gunned, out-lawyered, and besides that, they are the federal government.  I thought our government was here to protect our liberties and protect us from madmen like the ones that are tormenting you, right?

Daugherty:  That’s why the story is so important.  That is not exactly a list of lies.  That’s exactly what goes on, and that’s exactly why businesses roll over.  They think of the regulatory state as such a mockery.  I had nothing to lose.  I was given two very bad choices.  They were going to assassinate our reputation anyway.  I turned this into a positive by letting people know this is the reality.  That is not exactly an accurate advice, but I wanted her to know: I get it, I don’t care.  That’s tough.  If you’re inside, you know how big and bad these things are.  There’s kind of an: Oh, come on.  Get with it.  Just roll over and move on.  When that happens, these lawyers inside the beltway use all those settlements as common law.  They bully you down to settle, you don’t admit you’ve done any wrongdoing, it’s buried in the fine print, and then they run to Congress with all these settlements acting like they’ve just saved the day.

End Mike Church Show Transcript