PayPal Ousted from Bayou
PayPal Inc. said Monday that its popular online payment service is about to be shut down in Louisiana by the state's banking regulators, casting another cloud over the company's widely anticipated initial public offering.
The imminent shutdown of PayPal's service in Louisiana was disclosed in Securities and Exchange Commission documents. The documents detail the risks the Palo Alto-based company faces as it tries to overcome the stock market's distaste for unprofitable Internet companies.
PayPal had hoped to sell 5.4 million shares at $12 to $14 apiece last week, but a patent infringement lawsuit filed by CertCo Inc. threatened to short circuit the company's online payment service. That prompted investment bankers to delay the IPO until this week.
The delay forced PayPal to disclose several new developments, including word that Louisiana regulators sent a letter on Feb. 7 ordering the service to stop brokering payments between online buyers and sellers until the company receives a money transmission license.
In its SEC filing on Monday, PayPal said it will comply with the Louisiana order when management receives the notice. The company also said it may appeal the Louisiana order in an administrative hearing.
Chain Letter Participants Get Warning
More than 2,000 people involved in an Internet chain letter that promises "$46,000 or more in the next 90 days'' are receiving government warnings that the scheme is illegal, the Federal Trade Commission said Tuesday.
"This is the kind of activity that somebody's grandmother could be engaging in without fully appreciating that it's illegal,'' Eileen Harrington, a director with the FTC's division of marketing practices, told the Associated Press. "The vast majority of participants will lose money.''
The warnings say the FTC has already sued people for being involved with the chain e-mail. Recipients of the warning are told that, to avoid a similar fate, they should stop promoting the chain and return any money they have received.
The scheme promises extravagant amounts of money in exchange for consumers sending $5 in cash to each of four or five people on a list. Recruits add their own names to the top of the list before sending it on.
The chain e-mails even suggest that skeptical recipients contact Harrington's office at the FTC to confirm that the scheme is legal.
Tech Group Warns of Security Risks
Much of the Internet's network devices--from desktop computers to traffic management systems--have a security flaw that could allow hackers to shut them down or gain control of them, a government-funded research group warned Tuesday.
The problem is most serious for Internet service providers, which use systems called routers to manage the flow of messages across computer networks and the Internet, the group said.
The CERT Coordination Center, based at Carnegie Mellon University in Pittsburgh, planned to release an alert Tuesday. Marty Lindner of CERT said hundreds of vendors use the Internet protocol found to be at risk. The warning, to be posted on CERT's Web site, lists the steps businesses and consumers should take to protect themselves.
EU Adopts Taxing Rules Against U.S. Wishes
Ignoring U.S. objections, European Union finance ministers on Tuesday approved new rules for taxing Internet purchases of software, music and other "virtual goods'' from non-EU companies.
Spanish Finance Minister Rodrigo Rato, whose country holds the EU presidency, called the decision "an important step forward, particularly in bringing new technologies into the European economy."
But the action sets the stage for another potential trans-Atlantic trade rift.
The United States had pushed for a moratorium on sales tax on digital products until a "global consensus'' could be reached.
Internet Explorer Patch Released
Microsoft Corp. on Monday released a patch to correct six new security vulnerabilities in its Internet Explorer browser, including one that could let a hacker run any program on a victim's computer.
The patch covers three critical and three moderate vulnerabilities in the free Internet software. The vulnerabilities affect the three latest versions of Internet Explorer, including the version found in Windows XP.
The free, downloadable patch also ensures that users have updated their systems to include past patches.
The most serious of the vulnerabilities could allow a hacker to run any program on a user's computer simply by e-mailing the user a Web site, or luring the user to the Web site.
New Film Explores .com Bust
What burst the Internet bubble? A documentary making its debut at the New York International Independent Film and Video Festival offers dozens of theories.
Using interviews of former dot-com workers, the film, "What Happened," highlights the frenzy's winner and losers. Winners include Broadcast.com founder Mark Cuban, who sold out early to Yahoo.com. One of the losers was Michael LeFort, the film's producer. "My Internet business was going very well for a couple of years," he told Reuters. "All of a sudden people owed me money and my clients were falling apart, and my back started hurting, and there wasn't a lot of work out there for us."
The film's writer offered one of the more bizarre analyses.
"The advent of gourmet coffee contributed to a certain overexcitement and lack of questioning," said Chas Mastin.
Tax Filing Sites Growing in Popularity
Intuit reports that its Quicken TurboTax for the Web has helped complete 1 million federal tax returns this year, two weeks earlier than last year. Calling the number "unprecedented," Intuit also said the number of federal and state returns filed electronically through TurboTax is 35 percent greater than this time last year.
Last week, Nielsen/NetRatings reported weekly visits to tax preparation sites including H&R Block and TurboTax.com had shown gains by as much as 100 percent by the end of January.
January Sees Slow Down in .com Closures
The number of Internet companies declaring bankruptcy or ending operations in January was the lowest since August 2000.
Webmergers.com said it counted at least 19 casualties, bringing the total number of dot-com failures in the past two years to 788. Notable companies on the month's list were telecom Global Crossing, application service provider USinternetworking and e-tailer Beyond.com.