Charlie Rose:  
And so when you look at where we are going, there seems to be two issues that are apparent to me at least, risk and leverage.  We just lost sight of risk and leverage of what was appropriate?

Warren Buffett:  
Yeah.  Again, because it pays off for a while.  You know, you can lose leverage, and it's the only way a smart guy can go broke.  If you owe money, you can't pay them out.  You just pay for everything, you do smart things, you eventually get very rich.  If you do smart things and use leverage and do one wrong thing along the way, it could wipe you out, because anything times zero is zero.  But it's reinforcing when the people around you are doing it successfully, you're doing it successfully, and it's a lot like Cinderella at the ball.  I mean you know at midnight everything is going to turn to pumpkins and mice; right?  But if the evening goes along, I mean, you know, the guys look better all the time, the music sounds better, it's more and more fun, you think why the hell should I leave at quarter of 12.  I'll leave at two minutes to 12.  But the trouble is, there are no clocks on the wall.  And everybody thinks they're going to leave at two minutes to 12.

Charlie Rose:  
And should wise people have known better?

Warren Buffett:  
People should always know better.

Charlie Rose:  
Yeah.

Warren Buffett:  
I mean people -- people don't get -- they don't get smarter about things that get as basic as greed and you can't stand to see your neighbor getting rich.  You know you're smarter than he is, and he's doing these things, you know, and he's getting rich, and your spouse is getting unhappy with you because you aren't doing -- pretty soon you start doing it.  And so you get what I call the natural progression, the three Is.  The innovators, the imitators, and the idiots.  And that's what happens.  Everybody just kind of goes along.  And you look kind of silly if you disagree.  I mean, you know, you could have these crazy Internet valuations in the late 1990s, but they prove themselves out in the market.  The next day they were selling for more than they were the day before, and people said, you know, you're crazy if you don't get in on this.  So it's very human.  Now, with housing it's something even more dramatic than that, because most people aspire to own their own home.  And if you really think that houses prices are going to go up next year and the year after, you feel if I don't buy it this year, I'm going to have to buy it next year.  That's not true of an Internet stock.  But it's true of a home.  And when somebody makes it very easy for you to do it by saying you don't really have to put up my money, you can lie about your income a little, or we'll give you 100 percent mortgage, you're going to do it, because everybody that's done it has been proven right.  You have what they call social tools, and, you know, you're going to feel like an idiot if you didn't do it, because the house cost more.

Warren Buffett:  
Oh, I think confidence will come back.  I will tell you this.  This country is going -- be living better ten years from now than it is now.  It will be living better in 20 years from now than ten years from now.  The ingredients that made this country, you know, the miracle of the world -- I mean we had a seven for one improvement in the average American standard of living in the 20th century.  Now, we had the great depression, we had two world wars, we had the flu epidemic.  You know, we had oil shock.  You know, we had all these terrible things happen.  But something about the American system unleashed more and of a potential to human beings over that hundred years so that we had a seven for one improvement in -- there's never been any -- I mean, you have centuries where if you've got a 1 percent improvement, then it's something.  So we've got a great system.  And we've got more productive capacity now than we ever have.  The American worker is more productive than he's ever been.  We've got more people to do it.  We've got all the ingredients for a sensational future.  It's just that right now the athlete's on the floor.  But we -- this is a super athlete.

Blogger: Dan Blum

With the crisis in financial markets still unfolding, it is important to draw what lessons we can from the experience. Since the roots of the crisis lie in a monumental failure of risk management, it’s important to understand more about what happened, and then draw some parallels to our business risk management and  IT risk management situations.

The risk management failure in the housing market and on Wall Street had multiple interdependent dimensions:

• Mortgage lenders abandoned long standing prudent loan practices. They made too many loans that buyers might not be able to repay. Exotic instruments like ARMs, option ARMs, and interest only loans proliferated. In many cases, all pretense of lending standards were abandoned, so-called “liar loans” approved.
• Capital was grossly over-leveraged. Mortgage lenders and other financial services packaged loans into securities, which they sold to raise capital to support more lending. Real capital reserve requirements to back loans were reduced. Of course, if borrowers could not repay loans, all or parts of the derivative securities would become worthless.
• Risk was aggregated at Fannie Mae, Freddie Mac, and mortgage loan insurance companies. These companies bought or insured some mortgage loans, providing something of a backstop should loans fail. Government sponsored enterprises (GSEs) Fannie and Freddie in turn became over-leveraged and securities that they sold were in turn repackaged in the murky brew of mortgage-backed securities called collateralized debt obligations (CDOs) and other exotic instruments returning generous yields.
• Non-Caveat Emptor. Institutional wealth funds and financial services firms who should have known better bought securities that had been deliberately structured to obfuscate risk. They bought securities they didn’t understand with buried tranches of toxic subprime loans..

It was a great Ponzi scheme – one that kept working as long as housing prices were going up; the recipients of subprime loans could always flip that house to the next buyer. Everyone made money. As Chuck Prince of Citigroup famously put it during a July, 2007 interview: “So long as the music is playing, you’ve got to keep dancing. We’re still dancing.” But one month later, the music stopped. Since then, Citigroup and other financial institutions have taken massive writeoffs with more to come. Wall Street titans like Bear Sterns, Lehman Brothers, Merrill Lynch, and AIG have fallen or been bought out.

What can we learn from this risk management debacle?

As business risk managers and investors, we should ask questions like these:

• Does the executive incentive structure of the company encourage managers to dance around risk? Many Wall Street firms paid senior managers 5 times their salary in bonuses tied to annual growth alone.
• Is the company over-leveraged? Is it borrowing too much money and betting it on ventures with uncertain outcomes?
• Are financial models used for risk management realistic? Earlier, I described the mortgage market of the past few years as a Ponzi scheme, where risk management models must have assumed prices would keep rising. Unlike the dotcom boom whose demise many predicted, very few in the industry foresaw the sharp declines to come in housing prices and sales volumes. Historically, the U.S. housing market has been a steadily rising one, but on the other hand the 2000s saw unprecedented rates of price increases. In reality, what goes up must come down.
• Has your company’s risk council ever performed worst case scenario analysis and built adequate reserves? In the days before economics emerged as a would-be “hard” deterministic science, business leaders may have been more cautious, more aware of and more accepting of uncertainty. Events like the Great Tulip Bubble came once in decades or centuries – not every few years. Note that legendary investor George Soros has proposed a Theory of Reflexivity that, if true, helps explain the recent extremes of boom and bust cycles. This theory holds that market participants model market behaviors based on self-interest, and for a time, their manipulations change the reality of the market – until gravitational forces bring it back to earth. Has the music of ephemeral success played to the backbeat of deterministic-sounding economic models gone to your heads and infected your risk management models?
• Are cost cutting efforts pursued blindly? Outsourcing and other forays into treacherous global waters may be giving away the crown jewels. Smart companies cut costs, but they do it in smart ways. Smart companies think like intelligence agencies as they parcel out work to different partners with varying levels of dependability, and they check on those partners.

Risk management failures can also occur at the more technical level of IT security. As IT risk managers, we might ask questions like these:

• Are the accounting and financial systems your IT department supports under adequate control? As Fred Cohen wrote in one of our documents: “Many companies use computers to manage financial systems, and despite the Sarbanes-Oxley Act (SOX) claims about accounts being properly kept, there are many attacks on financial systems that remain. For example, most of the largest financial systems in the world running on common financial databases do not use double-entry bookkeeping and are thus susceptible to all manner of frauds by insiders.” We find it troubling that a prudent control dating back to the 12th century is going out of style in the name of convenience and cost cutting. Kind of like credit checking became anachronistic during the housing bubble, eh?
• Is the “separation” in your “separation of duty” (SoD) for real? Sure the SOX auditors are looking for SoD, and maybe you have different administrators with different accounts maintaining different systems or functions. But when they say Western civilization may be but one weak password from collapse they’re not lying. Look what happened to Sarah Palin’s email account! Weak and straggly SoD is a problem across all critical IT systems where deperimiterization and server consolidation may be bringing down protective barriers, identity management is weak, and strong process controls (e.g., where two people must sign on, one perform a critical operation such as backbone router reconfiguration, and the second observe) abandoned in the name of expediency.
• Are risks being aggregated to unacceptable levels in centralized control systems? There are many ways that risks aggregate within enterprise IT infrastructures as we pursue automation and cost cutting. Network risks aggregate when centralized domain name system control is implemented. Application risks aggregate when common infrastructure is shared among applications. And enterprises aggregate platform risks when they use low-assurance endpoints, authentication, and directory systems with single sign-on to access large numbers of resources and don’t separate high consequence systems.
• Non-caveat emptor: Has IT security really done the worst case consequence analysis, attack graphs, and vulnerability analysis to know when putting more eggs in a supposedly stronger basket aggregates risks to an unacceptable level? Or are you depending only on vendor claims about some black box appliance equivalent of a risk-obfuscated CDO security? Caveat emptor (buyer beware) again! (The good news is we’ll keep talking about promoting vendor and product rating systems so you don’t have to do all the detailed product analysis yourself, but that’s another post.)

There are many parallels between the monumental risk management failure in the financial markets, and the probable weaknesses in our day to day business risk management and IT risk management. Abandonment of prudent practices for profit; excessive leverage and centralization; ill-constructed risk analysis models; risk obfuscation; and a failure of caveat emptor seem to be common problems. Please take this as a wakeup call to sharpen up the risk management thinking, process, and execution.

In fact, it’s not just great artists like Mr. Lucas and I starting up old projects, our honourable colleagues wearing the black hats have got the same idea. We have new victims reporting in, rumours abound of an auth system compromise at Citi, the Ombudsman is backlogged with months of disputed withdrawal cases, and some like Alain Job are even going to court.

One original contributor to the phantom case histories has just been hit by a second phantom withdrawal five years on and is chalking up another case in the files. While her new phantom is a bread-and-butter skim incident (a magstripe clone used in the far east), amongst this mass, true phantoms — the real mystery cases — are on the rise too. Two new victims with whom I have been corresponding very kindly offered to fund the hosting for the revamped site.

Let’s consider one of these mysteries. The McGaughey case has been reported in the media in Northern Ireland: dozens of withdrawals taking place over four weeks, totaling almost five thousand pounds, all within a ten mile radius of the McGaughey’s home. Summarised that way it looks like a classic first party fraud (couple short on cash withdraw money, then deny it later). But no-one in the family is short on cash, the McGaugheys look after their card details carefully, and have solid alibis at the time of many of the withdrawals, and the interlocking pattern of real and disputed withdrawals is such that any third party would have a hard time taking and returning the card (whether covertly or in collusion with the McGaugheys). No-one appears to have either the means or the motive.

Unusually the bank has been very cooperative, providing logs from their authorisation system (BASE24), including all of the cryptograms, input data and transaction parameters covering the affected transactions. Everything turns on the Application Transaction Counter (ATC), an on-card counter which increments with every transaction initiated. If an EMV chip can be fully cloned (secret keys and all), then it will have to submit an ATC value when transacting, and if used in parallel with the real card, it won’t be long before the same number pops up twice in the auth system, or large gaps in the sequence appear. The McGaughey’s ATC sequence appears to interlock perfectly: clearly the original card was used?

Of course logs can be misinterpreted (Badger) or even faked, auth systems may not work as expected, and customers may lie and cheat following all sorts of agendas; just around the corner the missing piece of the jigsaw may lie, which reveals the truth behind the case. And there is the totally separate matter of who should suffer the loss in the interim, whilst the truth remains unclear. Liability for disputed withdrawals is the most hotly contested issue of all.

phantomwithdrawals.com can’t do much more for the McGaugheys, but it can bear witness. Documenting the incidence of phantoms and the experiences of customers disputing them adds much needed transparency to the process, and helps researchers and experts seek out the really interesting cases.

Maybe we can lift the lid and discover the truth behind the “phantom menace” — everyone is united in that goal at least — but let’s also hope that Episode 2: Attack of the Clones has not yet started shooting!

Mike.

Some of you may know I’ve been preparing to brush up on my *nix skills. A couple of our new solutions are running on Linux platforms and I feel compelled to understand any platform I’m working with inside and out… I know, it’s a bit OCD.

But to be honest, I haven’t really touched a Linux platform for about 10 years, since I was one of the three students running the Sun network over at NCSSM. I still remember the humorous ‘root’ ‘of all evil’ admin name that we used and the password, iaceo (in mixed caps), which was a Latin word for (I think) to lie dead. (Please correct me if you know what it means).  When you’re 17, these things are amusing.

I’ve kept my ls-ing and cd-ing over the years, but will be brushing up on the grep-ing and tail-ing ;)

So with any system, I think we all have our favourite commands that we use daily and are part of our daily arsenal. I’m working out mine but wanted to hear from you…

What are your 3 favorite Linux commands?

And is there 1 obscure one you really love (or hate)?

# # #

Usually, cuttlefish eggs lie in an envelope full of black ink. But this clears as the embryos grow older, leaving them growing within translucent eggs.

These unborn cuttlefish also have fully developed eyes. That leads the researchers to conclude that the cuttlefish embryos must peer through their eggs, and learn to recognise their prey, a behaviour which will help give them a head-start in life.

Beginning Saturday, June 21, 2008 passengers that willfully refuse to provide identification at security checkpoint will be denied access to the secure area of airports. This change will apply exclusively to individuals that simply refuse to provide any identification or assist transportation security officers in ascertaining their identity.

This new procedure will not affect passengers that may have misplaced, lost or otherwise do not have ID but are cooperative with officers. Cooperative passengers without ID may be subjected to additional screening protocols, including enhanced physical screening, enhanced carry-on and/or checked baggage screening, interviews with behavior detection or law enforcement officers and other measures.

That's right; people who refuse to show ID on principle will not be allowed to fly, but people who claim to have lost their ID will. I feel well-protected against terrorists who can't lie.

I don't think any further proof is needed that the ID requirement has nothing to do with security, and everything to do with control.

But two weeks ago a jury in the civil lawsuit against that employer, NDS Group, largely cleared the company -- and by extension Tarnovsky -- of piracy, finding NDS guilty of only a single incident of stealing satellite signals, for which Dish was awarded $1,500 in damages.

"I knew this was going to come," Tarnovsky says. "They didn't have any proof or evidence."

The trial was years in the making, yet raised more questions than it answered. It came down to testimony between admitted pirates on both sides who accused each other of lying. Now that it's over Tarnovsky, who was fired by NDS last year, is eager to tell his side of the story.

Dressed in loose jeans, flip-flops and a T-shirt, Tarnovsky, 37, spoke with Wired.com by phone and in an air-conditioned lab in Southern California where he's been running a consultancy since losing his job. Surrounded by boxes of smart cards and thousands of dollars worth of microscopes and computers used for researching chips, he talked excitedly at lightning speed about his strange journey, which began in a top-secret Pentagon communications center, and ended with him working both sides of a heated electronic war over pay TV.

His story sheds new light on the murky, morally ambiguous world of international satellite pirates and those who do battle with them.

The stakes are high: Earnings in the satellite-TV industry reach the billions. In the first quarter of this year alone, U.S. market leader DirecTV announced revenue of $4.6 billion from more than 17 million U.S. subscribers. Dish Network earned $2.8 billion from nearly 14 million subscribers. Although satellite piracy has greatly diminished from its peak seven to 10 years ago when the events detailed in the civil lawsuit took place, the two companies lost millions in potential revenue, and spent millions more to replace insecure smart cards used in their systems and track down dealers selling pirated smart cards.

Those smart cards are at the center of the controversy over NDS, a British-Israeli company and a majority-owned subsidiary of Murdoch's News Corp. The company makes access cards used by pay-TV systems, most prominently DirecTV -- itself a former Murdoch company. Nagrastar, a plaintiff in the case and NDS's chief competitor, makes access cards used by Dish Network and other runners-up in the market.

According to allegations in the lawsuit, in the late '90s NDS extracted and cracked the proprietary code used in Nagrastar's cards, a fact that NDS doesn't contest. What happened next, though, is hotly disputed. Nagrastar says Tarnovsky used the code to create a device for reprogramming Nagrastar cards into pirate cards, and gave the cards to pirates eager to steal Dish Network's programming. Tarnovsky was also accused of posting to the internet a detailed road map for hacking Nagrastar's cards.

Nagrastar says NDS had an obvious motive for these antics: Their own chip, the so-called P1 or "F Card," had already been thoroughly cracked by pirates, and the company wanted to level the playing field with its competitors.

NDS denied the allegations at trial. The company declined to comment for this article or to confirm details of Tarnovsky's employment other than to say it was pleased that the verdict "ended in a resounding affirmation of NDS and its business ethics and proper conduct."

Tarnovsky began his pirating career in the '90s while serving in the U.S. Army. He had a top-secret SCI security clearance working on cryptographic computers in Belgium for NATO headquarters, and spent a year at Ft. Detrick in Maryland providing support to the National Security Agency for satellite transmissions to Europe.

In 1996, he was stationed in Germany when his colonel sold him a used satellite-TV system, along with two pirated access cards, neither of which worked. Tarnovsky began posting on online pirate forums, and developed contacts in the community, ultimately learning how to fix the cards to access English-language programs from Sky in the United Kingdom.

After leaving the Army and returning to the States, he got a call from Ron Ereiser, a Canadian pirate who'd heard about him through the grapevine. Pirates had found a back door in the P1 card and were vigorously exploiting it to get DirecTV content. But the cards kept failing. In a game of pirate pingpong, DirecTV periodically deployed electronic countermeasures, or ECMs, in the satellite stream that killed the cards in their set-top boxes. Ereiser needed someone to fix the cards.

There was serious black-market money on the line. In Canada, where pirating of U.S. satellite services wasn't considered illegal until 2002, syndicates of dealers did enough business that they could afford to chip in about $50,000 to hire a programmer to reverse engineer the latest cards. Pirate cards would sell for about $200 each, with the profit split between the investors and engineers. Tarnovsky claims Canadian pirate dealers could make $400,000 in a weekend; when Reginald Scullion, a notorious pirate in Canada, was raided in 1998, authorities seized $5.5 million from his bank accounts and safe-deposit boxes, though not all of it was from piracy.

Ereiser, who now works as a consultant to Nagrastar, concedes that the money from piracy was good, but insists that nobody became an overnight millionaire. "It was lucrative," he said in a telephone interview. "But to suggest that millions were being made in a month is an absolute crock."

DirecTV's countermeasures were a nagging drag on this lucrative trade. Every time an ECM was deployed, Ereiser and other dealers would be harangued by customers demanding to have the cards fixed and their TV programs restored.

Tarnovsky, who was known online as "Big Gun," says Ereiser offered him $20,000 to fix cards that were killed by ECMs, and he agreed. Each time NDS created a countermeasure, Tarnovsky would analyze the code and find a way to circumvent the countermeasure. He did it while working full-time as a software engineer for a semiconductor company in Massachusetts.

"I'd be at work and I'd check the IRC (channel) to see if they'd launched their Thursday countermeasure yet," he says. "It was like a chess game for me. I couldn't wait for them to do a countermeasure because I would counter it in minutes."

Tarnovsky suffers from attention deficit hyperactivity disorder, which he says helped with the detailed work.

"I think so fast," he says.

It wasn't long before NDS came courting. Tarnovsky had a contact at the company to whom he'd begun passing information about holes in its software, even supplying patches to fix them. NDS offered him a job earning $65,000 a year. By the time the company fired him last year, he was earning about $245,000 in salary and bonuses and had another $100,000 in stock options, he says.

The company set him up in a lab in Southern California equipped with a computer, some DirecTV set-top boxes, sample DirecTV cards and NDS source code. There was no fancy equipment at first, but his relationship with NDS and the lab grew over the decade he worked with them. Tarnovsky says the job was a dream come true. While living in Europe he'd once seen a news report showing an engineer at a French satellite company writing countermeasures, sitting in a lab with smart cards piled around him on his desk.

"I always thought it would be so cool to be that guy," Tarnovsky says. "Finally I got the chance."

Tarnovsky had two roles at NDS -- to find holes in its software and work undercover with pirates to discover what they were doing against NDS technology.

To conceal his relationship with NDS from pirates, few people at the company knew his identity. He used the name "Michael George" and for the first four years was paid through other companies, including, for about five months, HarperCollins, the Murdoch-owned book publisher.

"It was very hush-hush, because we didn't know who could be an inside informant," he says.

Part of his job was developing ECMs for NDS. He'd examine pirate NDS cards to determine how they worked, then send instructions to engineers in Israel to create a kill for them.

"I didn’t actually load the gun and pull the trigger but I got to make the bullet," Tarnovsky says.

Among the countermeasures he says he created was one known among pirates as the "Black Sunday" kill -- an elaborate scheme that destroyed tens of thousands of pirate DirecTV cards a week before Super Bowl Sunday in 2001.

Instead of being delivered all at once like other measures, the Black Sunday attack code was sent to pirate cards in about five dozen parts over the course of two months, like a tank transported piece by piece to a battlefield to be assembled in the field. "They never expected us to do this," Tarnovsky says.

The kill didn't last long before pirates found a way to jump-start the cards. But it holds an enduring position in pirate lore; for the first time, they could see a cunning mind at work on the other side.

While Tarnovsky was killing cards, however, he was also helping pirates fix them.

Days before Tarnovsky began working for NDS, the company began phasing in its latest-generation smart card, the P2, which was thought to be virtually uncrackable. But word reached the company that two Bulgarian hackers working for Ereiser had cracked the P2. On NDS's instructions, Tarnovsky met with Ereiser undercover in Calgary to get the code. When he got there, Ereiser offered him $20,000 to work for him fighting whatever countermeasures NDS and DirecTV cooked up to thwart their P2 hack.

NDS considered it a great opportunity for Tarnovsky to maintain his pirate identity, but DirecTV insisted on some controls. Under "Operation Johnny Walker," as they dubbed it, Tarnovsky gave Ereiser a program to create pirate NDS cards, but encrypted it so no one could copy it. The program worked only with a dongle attached to Ereiser's computer and created a limited number of cards that could be killed at any time.

But, according to Nagrastar, Tarnovsky wasn't just helping NDS fight piracy by working undercover and creating ECMs, he was also committing piracy against NDS's competitors to weaken their place in the market.

After NDS engineers in Israel hacked the Nagrastar code in the late '90s, Nagrastar says Tarnovsky created a "stinger" program that turned Nagrastar cards into pirate cards. He allegedly gave the program to a Canadian named Al Menard in 1999 who sold reprogrammed Nagrastar cards for $350 each. Then in December 2000, someone anonymously posted code and detailed instructions for hacking Nagrastar's card to two websites, one of them run by Menard, exposing Dish Network to even more piracy. It was estimated in court testimony that between 100,000 and 165,000 pirated Nagrastar cards were released to the market in the wake of this posting.

Nagrastar says Menard began sending Tarnovsky cash from the sale of the pirate cards. At the end of August 2000, authorities acting on an anonymous tip seized two boxes destined for a mail drop Tarnovsky rented in Texas. Inside, they found a CD and DVD player with $20,000 and $20,100 concealed inside.

The boxes were sent from a phony address for "Regency Audio" in Vancouver to C.T. Electronics at Tarnovsky's address. A customs form for a third package that wasn't seized indicated that it was sent from Menard to Tarnovsky and also contained electronic goods.

Tarnovsky was in Israel at the time, and says he didn't know anything about the packages until he was notified that they'd been seized. He thinks they were sent by someone in Nagrastar's camp who was trying to frame him. He says Nagrastar's accusations about the "stinger" program were baseless, and that he never gave Menard any software.

On Feb. 9, 2001, U.S. Customs agents appeared at his doorstep. On advice of a lawyer, he declined to let them search his house without a warrant. Tarnovsky was never arrested or charged with any crime, but suspicions against him were mounting. NDS gave Tarnovsky a polygraph test, but asked only two, self-interested questions that never touched on the Nagrastar accusations: Had Tarnovsky sold any modified NDS smart cards, or company secrets, since he'd been working for the company? Tarnovsky answered no, and passed the test.

He continued to work for NDS for six years. But then last year, Nagrastar confronted NDS with a sheriff's report showing that fingerprints lifted from the seized electronics equipment sent to Tarnovsky's Texas mail drop belonged to an associate of Menard, raising suspicions again that Tarnovsky might have sold pirate Nagrastar cards without NDS's knowledge. NDS fired him.

Tarnovsky says his termination proves he and NDS weren't conspiring against Nagrastar. Had they been, NDS would have done anything to keep him happy, and quiet. He says the fact that Nagrastar lost the case shows he wasn't pirating on his own either.

"I've never sold a single Nagra card, ever," he says.

Although he was angry at NDS for abandoning him, he told Wired.com before the trial ended that he hoped to work for the company again.

"I want to make sure that NDS wins this lawsuit because that will clear my name," he said at the time.

When it was suggested that someone might view this as motivation for him to lie on NDS's behalf, he disagreed.

"That's crazy. I could go to jail," he said. "I would never perjure myself for some company."

Since NDS fired him he's been consulting for two semiconductor companies and a manufacturer of dongle tokens, but he misses his life in electronic warfare. If NDS doesn't want him, he says he'd be happy to work for Nagrastar -- jumping sides once again.

"I could design a whole entire chip for them like I did for NDS," he says. "NDS thinks today that their technology is superior to everybody else's and it probably is, because they're 17 years ahead of Nagra technologically. But Nagra could catch up overnight if they used my services.

"I'm a very valuable asset as far as smart-card technology goes," he adds. "I know everything about (NDS) as far as their intellectual property models go."

He offered his services to the company last year, while the lawsuit was pending. Nagrastar declined.