Weekly Geopolitical Report – The Apple Problem (March 14, 2016)

by Bill O’Grady

On December 2, 2015, Syed Rizwan Farook and his wife, Tashfeen Malik, attacked a San Bernardino county facility, killing 14 people and seriously injuring 22 others.  The couple was subsequently killed by local law enforcement in a shootout several blocks from the facility.  The Federal Bureau of Investigation (FBI) opened an investigation into the attack.  As part of this work, an Apple (AAPL, 101.20, -0.67) iPhone was discovered that was used by Farook but owned by the county.  The FBI wanted to look at the information on his phone, but the encryption built into the device prevented authorities from accessing the data.  The government has sued Apple to force the company to circumvent its security; thus far, the company has refused.

In this report, we will discuss the attack and the perpetrators, including the gathering of evidence which included the phone in question.  We will explain in non-technical terms how Apple software protects the data on the iPhone.  We will compare and contrast the legal positions taken by the company and the government and frame the controversy using the U.S. Constitution, examining the tensions between the Bill of Rights and the problems presented by wartime.  As always, we will conclude with market ramifications.

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