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Is Your Small Business Secure for Cyber Monday?

Some small businesses are licking their proverbial chops about Cyber Monday. Others? Not so much. What’s the difference? Well, your outlook could be a bit different depending on whether you’re an online retailer, or you’re worried about your employees doing some online shopping while on the clock. Either way, small business owners need to be thinking of data security come Cyber Monday, so here are some legal tips. Staff Shopping Of course, you could give your staff Cyber Monday off, but you want to get some things done, right? What you don’t want to happen is an employee taking advantage of some online shopping deals, while hackers take advantage of lapses in your data security. “Employees are opening the electronic front door to letting anyone in as they’re shopping,” according to Edgewise Networks CTO Harry Sverdlove, and they could be just as much at fault for a data breach as an unsecure computer network. As Tech Republic notes: Hackers get into your system two ways: through websites and spear phishing. During the holiday season, shoppers are less discerning about the websites they visit as they look for coupons and good deals. They are also less discerning about what links they click in their inbox, as they await shipping invoices and confirmation emails. So how can you prevent your employees from becoming your own worst enemy on Cyber Monday? It’s starts with a cybersecurity audit to identify potential weakness in your company’s data security, and then involves serious training of staff on password security, two-step authentication, and network security as well. Sales Security And if you’re on the other side of all that online commerce on Monday? TotalRetail also recommends a complete vulnerability assessment to identify any security weaknesses and close any gaps. You’ll also want to invest in data encryption for any financial information gathered from customers, and you might want to think twice before trusting that data to any cloud computing solution you’ve chosen. “These holiday shopping events present a great opportunity for criminals to find opportunities to gain access to shoppers’ data,” according to COO of data security…

Movie Subscription Service Sinemia Sued for Secret Fees

As the tumultuous last few years at MoviePass have proven, a subscription-based movie ticketing service is not the easiest thing to figure out. It turns out trying to price a monthly or yearly cost for unlimited movies is pretty tricky. MoviePass competitor Sinemia is also having trouble with its pricing model. Or, more accurately, is getting into legal trouble for allegedly adding hidden fees to its subscriptions. A group of Sinemia customers is claiming in a lawsuit that the subscription-based service “essentially became a bait-and-switch scheme.” Furtive Fees and Fleeced Film Fans In case you hadn’t heard, Sinemia launched a movie subscription plan at the same price as MoviePass in recent months (after being sued by MoviePass earlier this year for patent infringement). Sinemia offered the same number of movies, but without the same restrictions on movies or showtimes and with an option to book tickets in advance. Sinemia was less than forthcoming, however, about processing fees it charged when customers booked tickets. An annual subscription for two movies per month for two people runs about $192. But Sinemia began charging another $1.80 “processing fee” per ticket. “It lures consumers in by convincing them to purchase a purportedly cheaper movie subscription, and then adds undisclosed fees that make such purchases no bargain at all,” according to the lawsuit filed last week. “Sinemia fleeces consumers with an undisclosed, unexpected, and not-bargained-for processing fee each time a plan subscriber goes to the movies using Sinemia’s service.” Breach and the Big Screen Sinemia claims the fees are “out of our control,” and unavoidable when using other ticketing sites like Fandango. The crux of their customers claims, however, is that fees were altered or added after they had already purchased subscriptions. The suit is alleging breach of contract, unjust enrichment, breach of the covenant of good faith and fair dealing, and fraudulent concealment. Running a business can be hard, and disrupting the entire movie industry is proving even more difficult. Circumstances and costs can change. But be careful before your pass those costs on to customers without notice. Related Resources: Lawsuit Alleges Movie Service…

Cities and the FDA Crack Down on E-Cig Teen Vaping

Cities all across the country are putting pressure on various parts of the e-cigarette industry, in an attempt to dampen what is being called a “teenage vaping epidemic.” For years, the federal government had been fighting traditional cigarette manufacturers, trying to eliminate sales and marketing to those under 18. But the e-cig movement blindsided officials, and though three steps behind, cities are ready to take on the fight to save youth from Nicotine Addiction 2.0. E-Cig Laws for Retailers Federal laws passed in August 2018 dictate that e-cig buyers must be 18 years of age or older. Selling to someone under this age is a crime for retailers, as is giving out free samples. Retailers must ask for proof of age via identification for anyone looking under 27. And unless a vending machine is in a facility that is only for adults, e-cig vending machines are strictly prohibited. Similar state laws are also in effect in most states. Cities Are Tired of the Feds Sitting on Their Hands Various cities are tired of waiting on the federal government to crack down using these laws, and have taken matters into their own hands. Many have, or plan to, file lawsuits. Chicago is planning a lawsuit against online retailers selling to minors. Los Angeles has asked for an injunction against e-cig companies that are selling products without verifying age as well as marketing to minors on social media. And private suits are rampant against e-cig companies marketing to minors on social media. In addition, there are numerous class action lawsuits against e-cig manufacturers alleging nicotine addiction for minors. Federal Government Slowly but Surely Cracking Down on Sellers to Teens The FDA has announced it will restrict sales of flavored cartridge-based e-cig products to tobacco and vape shops, of which there are only about 100,000 in the US. Convenience stores and gas stations will no longer be able to sell the product. The FDA is concerned more about the cartridge based products, which are a bigger draw to teens. The open pen vaping systems are not affected by this ban, since they primarily…

3 Reasons Startups Are Vulnerable to Fraud

There’s a lot you need to worry about as an entrepreneur. Can you hire the right team and get the equipment, materials, or data to execute your vision? Is it scalable? Is it even really that good of an idea in the first place? Your nascent business may be the victim of a supply shortage, bear market, or plain old fashioned bad luck, but the last thing you’re probably worrying about is your startup being a victim of fraud. Well, you might want to change that. A new study by the Harvard Business Review shows that startups are uniquely susceptible to fraud. But why? Bad Actors The HBR study simulated sales calls from associates to purchasers and sellers, and when participants were told that their counterpart was working for a startup, they tended to engage in more deception during the call. Two thirds of the faux buyers and almost three in four sellers opted to deceive who they believed to be a startup, compared to just half who thought they were dealing with a mature firm or were given no information about their counterparts. So why would ersatz sales associates endeavor to take advantage of a startup? Rogue Startups: Certainly, some of this was due to the reputation garnered by some startups as rulebreakers themselves — is it against the rules to deceive a deceiver? But researchers found some other, more relevant causes as well. Inexperienced Employees: While counterparts behaved in exactly the same manner towards every sales associate participant, the participants surveyed believed that the person on the other end of the line was less experienced if they were told they were working for a startup. “In other words, participants used the newness of the counterpart’s employer as proxy for the counterpart’s experience – and adapted their behavior accordingly,” according to HBR. Smaller Partner Pools: Mature firms can sift through a multitude of offers from both buyers and sellers. New businesses? Not so much. “Compared to more mature firms, the pool of potential business partners is considerably smaller for startups,” according to researchers. “Thus, many cannot afford to turn…

Lawsuit: Lobster Company Co-Owner Behind $1.5M Embezzlement

Owning a business is like having a second family. No business owners ever want to believe that an employee, or worse yet a fellow co-owner, is embezzling funds from their company. But unfortunately it happens more often than is ever known, and this time, it happened to a lobster company in Maine. The other owners caught on to the shell game, but not before having tens of thousands of their lobsters sold, without ever receiving a dime. The Case of the Hot Lobster Sea Salt, a seafood wholesaler in Saco, Maine, alleges that one of its newly minted part-owners, Matthew Bellerose, set up a sham distributor customer, and then sold this fake customer one to two million dollars worth of lobsters without billing them. Bellerose then sold the lobsters to other businesses, mostly restaurants. Little did these end customers know that they were buying hot lobsters, as in, stolen goods. Bellerose was pocketing the money from the sale of the lobsters from the fake company to the end user, and never paying Sea Salt for the lobsters. Sea Salt started to notice that they were not being paid for all of their inventory, and after a forensic accountant came to research the problem, it was clear that at least $1.5 million worth of lobsters had been “stolen” from Sea Salt — allegedly shipped to the fake customer with no bill of lading or invoice ever created. Sea Salt claims Bellerose admitted to embezzlement when he was fired in June 2018, offered to pay back the money, and blamed the expense of having to buy into his 20% ownership stake as the reason he embezzled. Can You Sue for Embezzlement? Bellerose is being sued for at least $1.4 million in damages for conversion, breach of fiduciary duty, negligent representation, breach of contract and violation of Maine’s deceptive trade practices laws. Why isn’t he being sued for embezzlement? Because embezzlement is actually a criminal offense, similar to theft except for that the suspect stole from someone they had a relationship with in which they promised never to steal. This is called a…

Goop Settles Lawsuit Over Unscientific Health Claims

Gwenyth Paltrow’s company, Goop, settled a lawsuit this week brought by 10 California counties for false advertising after numerous medical and consumer protection groups complained that their products didn’t do what they claim they could. Goop agreed to pay $145,000 in fines as well as refund customers that bought three of its products: the Jade Egg, the Rose Quartz Egg, and the Inner Judge Flower Essence Blend. The first two are egg-shaped products that are vaginally inserted and left for varying lengths of time to balance hormones, regulate menstrual cycles, prevent uterine prolapse, and increase bladder control. Wow — talk about a panacea! The Inner Judge Flower Essence Blend is a blend of essential oils that can either be consumed or put in bathwater. Goop claimed it counteracted depression. No Scientific Evidence of Forum’s Claims According to the lawsuit, plaintiffs contend that “none of these products were scientifically tested to prove what Goop claim they did.” In Goop’s settlement papers, it specifically agrees to no longer make any claims “regarding the efficacy or effects of any of its products without possessing competent and reliable scientific evidence that substantiates the claims.” However, Goop refuses to admit liability. But rather, Goop sees this as an “honest disagreement.” The company believes that it provides a forum for practitioners to present their views and experiences regarding Goop products, and the company didn’t think the forum amounted to advertising, which is governed by stricter laws than forums. Other False Advertising Claims Goop has been hit with numerous truth-in-advertising claims, stemming from both its own products as well as third party products it promotes on its site. In addition to the vaginal eggs and essential oil, other hotly contested products include crystal harmonics for infertility, black rose bar for psoriasis, wearable stickers for anxiety, and vitamin D3 for cancer. All total, over 50 claims have been made against Goop by professional groups for false advertising. If you would like a refund for your Goop vaginal egg or essence blend, contact Goop customer service by calling 844-WTF-GOOP. If you are concerned that your website’s forums may amount…

New Tesla Whistleblower Claims Spying, Drug Dealing at Nevada Plant

Tesla is on a good run of bad luck in the public relations department. In June, whistleblower Martin Tripp alleged that Tesla manufactured batteries with puncture holes and systematically used waste material in vehicles to chase production goals. Tesla responded with a $1 million lawsuit for hacking and stealing trade secrets. Two weeks ago, Elon Musk almost broke the internet over his tweet to re-privitize the company, which resulted in an SEC investigation. Last week, in an interview with the New York Times, Musk broke down in tears, saying his work/life balance is “excruciatingly” out of whack, and offered anyone that wanted to take a crack at running the company to give him a call. Spies, Drugs, and Thievery: a John le Carre Novel? Or Tesla Gigafactory? Now, Karl Hansen, the latest whistleblower, has accused Tesla of spying on employees’ cell phone communication and computer usage through surveillance equipment, and failing to act after learning that a Mexican cartel had been dealing “significant quantities” of cocaine and crystal methamphetamine through its Nevada Gigafactory battery manufacturing plant. Hansen also alleges that Tesla didn’t disclose to investors that it had been robbed of $37 million worth of copper and other raw materials earlier this year. Hansen claims that he brought all of these issues to Tesla’s attention during his employment on the internal investigation team, but was subsequently retaliated against, and fired on July 16. Hansen filed a tip with the SEC on August 9. The tip has not been published, but details have been released through Hansen’s attorney, Stuart Meissner. Tesla claims it is taking this seriously, but has no further comment. Hansen can’t be reached for comment. The SEC is declining to comment. The DEA is declining to comment. And Sheriff Gerald Antinoro of Storey County, where the Gigafactory is located, declined to comment on the drug dealing, but did state that regarding the theft, Tesla had disclosed that there had been a theft, but not what was taken. Whistleblowers as Heroes Whistleblowers have served our country well over the last decade, and have had a profound influence on both…

California Pool Hall Would Rather Close Than Become ADA-Compliant

The Americans with Disabilities Act requires that public accommodations must provide reasonable modifications in their policies, or procedures for those with disabilities and remove structural, architectural, and communication barriers when such removal is “easily accomplishable and able to be carried out without much difficulty and expense.” The Act also allows a private person to bring a lawsuit to enforce these requirements. And while increasing access for disabled persons is essential, even the best intentions can be manipulated for personal gain. That’s what Mike Murphy, owner of Jointed Cue Billiards in Sacramento, California, thinks is happening. The pool hall was sued by Scott Johnson, a quadriplegic attorney who claims the location is not ADA-compliant. Rather than upgrade the facilities or settle with Johnson, however, Murphy is closing the 50-year-old pool hall down. No Benefit to the Disabled Community “He’s using that as an advantage to benefit himself,” Murphy told the Sacramento Bee. “Nothing this guy ever does is to benefit the disabled community. He’s using (the law) to benefit himself.” According to the paper, Johnson is listed as a plaintiff in over 2,000 federal ADA lawsuits — all filed in the same district that includes Sacramento — and routinely settles with defendants out of court for $4,000 to $6,000. His attorney Russell Handy, however, pushed back on Murphy’s characterizations: “The fact that the ADA was passed 28 years ago and that businesses still flagrantly violate the law is frustrating to him and many persons who use wheelchairs for mobility,” Handy said. “As for making money for himself — Mr. Johnson has never stated this as a primary motivation but I cannot help but believe that it is gratifying to Mr. Johnson that he is compensated for his effort and for the infringement upon his civil rights.” Murphy also claims that, while many disabled persons — including those in wheelchairs — have been able to access the pool hall facilities, Johnson has never been one of them. Handy alleges that Johnson has eaten lunch at the attached restaurant. Not Getting Anything So why not just bring the Jointed Cue up to code?…

21-Year-Old Made $1.6M in 23 Days; Yep, It Was a Scam

You may have heard the term ‘drug mule’ — a person who, wittingly or not, transports illicit drugs across the border. You may not, however, have heard of a ‘money mule.’ These folks set up bank accounts to funnel ill-gotten money from U.S. business to international scam artists. Being a money mule can be incredibly easy, unbelievably lucrative, and most definitely illegal, as over 20 Floridians indicted for a laundry list of federal financial crimes recently found out. Money Making Destiny Asjee Rowland was one of those Floridians. The 21-year-old’s Asjee Luxury, opened in July 2017, had $1,651,699 in the bank after its first month. How? Rowland’s guilty plea to federal wire fraud charges explains that her TD Bank account was opened “so that proceeds of a wire fraud scam could be deposited into the bank accounts; Rowland then agreed to have a portion of the fraudulently obtained funds wired to other bank accounts in return for a cut of the proceeds.” According to the Miami Herald, Rowland was part of a $16 million international email con network that included 74 people worldwide — 42 of them in the United States and 23 of those residing in South Florida. Scammers in Rowland’s case posed as a Wisconsin company’s business partner, and convinced that company to wire money to Rowland’s bank account. Fortunately for the victim company, Rowland and others were busted while the money was still in her account, before it made its way across the border. Money Laundering While Rowland pleaded guilty to one wire fraud, 23 other Floridians were charged in this and other, similar criminal schemes, most for money laundering or conspiracy to commit money laundering by recruiting others to the scam. Almost all of those charged were working from their homes, for their self-owned “businesses.” “Operation Wire Wire,” a collaboration of the FBI, Department of Treasury, Secret Service, and even the U.S. Postal Inspection Service, also nabbed 29 people in Nigeria and others in Canada, Poland, and Mauritius. We all want to be our own boss, and working from our couch (especially if it’s air-conditioned in…

Public Nuisance Lawsuit Leads to Bar Booze Ban

Multiple shootings, assaults, aggravated robberies, narcotics, and other crimes. At least four patrons arrested on charges of driving while intoxicated. One intoxication assault of a police officer. A grand total of 90 arrests at the location since it opened. Perhaps Harris County District Attorney Kim Ogg wasn’t far off when she called Houston sports bar Bombshells a “crime factory.” Ogg’s office filed a public nuisance lawsuit against the bar last week, and obtained a temporary restraining order banning the bar from serving booze until the case is resolved. And rather than serve food exclusively during the ban, the bar’s owners chose to shut up shop completely. Magnets for Crime “We’re trying to stop the carnage that results from many intoxicated people leaving Bombshells and hurting someone else,” Ogg said after filing the nuisance suit. “Bombshells on I-45 has been a magnet and a source for a lot of crime in the restaurant-bar, the parking lot, and this is classically what we call a nuisance.” The lawsuit against Bombshells has been seen as part of the new district attorney’s office task force attempting to trace alcohol causing drunken-driving crashes to its source. Bombshells petitioned District Judge Steven Kirkland to dismiss the restraining order, but that request was rejected this week. Bar owners have yet to comment publicly on the matter. Liability for Nuisance Public nuisance refers to a range of minor crimes that threaten the health, morals, safety, comfort, convenience, or welfare of a community. Businesses declared a public nuisance can face criminal penalties like fines, and may also be required to remove the nuisance or to pay for the removal. And businesses normally can’t escape liability by arguing that others are also contributing to the harm — liability and damages are usually apportioned according to the business’s share of the blame. Additionally, a business could be liable under nuisance law even if its actions (like, say, serving alcohol) would not have constituted a nuisance without the actions of others (like assaults, shootings, and drunk driving). Being declared a public nuisance can shut down your business. Make sure to avoid public…

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