As smart devices become an ever-larger part of our lives, we look at how Facebook and other companies gather information about their users and turn it into profits.
Reveal’s Nathan Halverson starts with the story of Ninja Saga, a game kids play on Facebook. Like many online games, this one requires players to pay a fee to advance to a higher level, a fee that kids usually ask their parents to put on their credit card. We learn how what parents think is a one-time charge of $20 is actually costing them hundreds, and in some cases thousands, of dollars.
Next, Halverson looks at how online gaming companies and Facebook are using big data to profit from people vulnerable to gambling addiction. He tells us about one woman in Texas who downloaded an app that was advertised as free, only to end up spending hundreds of thousands of dollars.
Finally, Reveal’s Ike Sriskandarajah looks at the biggest smart device most of us own, the television, and how one TV maker was using it to secretly gather marketing data on its customers and sell it to advertisers.
Dig Deeper
- Read: So your child racked up unwanted credit card charges playing video games. Now what?
- Read: Judge unseals trove of internal Facebook documents following our legal action
- Read: Facebook knowingly duped game-playing kids and their parents out of money
- Read: When did Zuckerberg learn about Facebook’s targeting of children? Senators want to know
- Read: FTC should investigate Facebook’s child gaming practices, advocates say
- Read: Facebook’s fraud policies raised red flags. It still hasn’t changed them
Credits
Produced and reported by Reveal’s Nathan Halverson, Ike Sriskandarajah and Anayansi Diaz-Cortes. Edited by Taki Telonidis. Thanks to Reveal’s D. Victoria Baranetsky, Amanda Pike, David Ritsher and Nikki Frick, and to Zach Stauffer, Tom Kaufman and Deirdre Bardolf.
Our production manager is Mwende Hinojosa. Original score and sound design by Jim Briggs and Fernando Arruda.
Support for Reveal is provided by the Reva and David Logan Foundation, the John D. and Catherine T. MacArthur Foundation, the Jonathan Logan Family Foundation, the Ford Found, the Heising-Simons Foundation, Democracy Fund, and the Ethics and Excellence in Journalism Foundation.
Transcript
Reveal transcripts are produced by a third-party transcription service and may contain errors. Please be aware that the official record for Reveal’s radio stories is the audio.
| Al Letson: | From the Center for investigative reporting and PRX, this is Reveal, I’m Al Letson. Facebook has been in the headlines a lot. The company recently got hit with the biggest fine ever from the Federal Trade Commission, $5 billion for violating users’ privacy and security. But our reporter, Nate Halverson, who’s here with me now has been digging into a case that gives us a new look behind the scenes. So Nate, how did you find out about this story?
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| Nate Halverson: | Well Al, to be honest, it was kind of a night like any other when I had gone out to see my buddy’s band on Market Street in San Francisco. And it’s at this place called Cafe Du Nord, which is like literally an underground club where the doors open up and you descend these old Victorian staircase. Then when you get to the bottom of the flight, this beautiful old bar opens up on your right and there’s kind of a dilapidated stage.
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| Al Letson: | Why have you not taken me here?
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| Nate Halverson: | Oh Man. I am remiss in my duties as a San Franciscan. I’ve got to get you down there to this club. This place is great.
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| Al Letson: | All right, so next time you go, I’m going with you. Please continue.
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| Nate Halverson: | And so, you know, I belly up to the bar. I order a whiskey, and I’m sitting there sipping on it when the band goes to set break. And the lead singer, who’s a good buddy, gets down off stage and he sees me sitting there and he goes, “Hey Nate, you got to talk to this guy next to you, J.R., he’s got a heck of a good story for you.”
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| Al Letson: | Wait, is this a you get scoops?
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| Nate Halverson: | Well, I mean, not all of the time, but generally, yeah, this is how… Just being [inaudible 00:01:31], people got great stories to tell.
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| Al Letson: | All right. So you sit down next to this guy J.R. and he starts talking, what does he have to say?
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| Nate Halverson: | So he basically says to me… Now J.R.’s an attorney and he’s got this class action lawsuit against Facebook. And he says to me, “Look, if you really want to understand how Facebook operates, I mean, if you want to understand the business ethics of this company, you got to look at this case I’m working on.” And that’s how I met Glynnis Bohannon.
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| Nate Halverson: | Hello Glynnis.
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| Glynnis B.: | Hi.
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| Nate Halverson: | Nate Halverson.
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| Glynnis B.: | Nice to meet you.
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| Nate Halverson: | Nice to meet you too.
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| Glynnis B.: | Come on in.
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| Nate Halverson: | So let me take you back to a fall day in Phoenix, Arizona back in 2011. It’s like hot outside and this is like [inaudible] even an unusually hot day for Phoenix.
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| Glynnis B.: | Not quite cool enough for kids to be back out playing outside.
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| Nate Halverson: | So Glynnis Bohannon’s son Ian, he’s 12 at the time, he’s doing what all kids will do on a hot day, he’s playing video games.
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| Glynnis B.: | At his age, I would often use his gaming time as a little bit of trade off for doing homework. If you get your work done, your schoolwork done, your chores done, your homework done, then you can have gaming time.
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| Nate Halverson: | He goes in, he gets on the computer, he loads up Facebook and he starts playing a game called Ninja Saga.
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| Al Letson: | I don’t play games on Facebook, so, does Facebook own these games? Like how does that work?
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| Nate Halverson: | No. What Facebook did was it opened up its platform for outside companies to develop these games that are then loaded on Facebook so kids like Ian can play them.
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| Al Letson: | But they’re free, right?
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| Nate Halverson: | Yeah, on the face of it, they’re free. But if you want to do something extra like get a magical sword for your Ninja or just like make it more powerful, to do that, he has to spend money. And Facebook, it gets a 30% cut of that.
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| Glynnis B.: | So, he had approached me with his chore money to get access to be able to play this game, Ninja Saga.
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| Nate Halverson: | So Ian went and grabbed a $20 bill that he earned doing his chores and hands it to his mom.
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| Glynnis B.: | I said, “Okay, I’ll go ahead and I’ll put my credit card in and give me your $20.” And I loaded my credit card in the system and he proceeded to start playing the game.
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| Nate Halverson: | So Glynnis takes off, she goes and hangs out with some friends and doesn’t think another thing about it until she gets back to the house.
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| Glynnis B.: | And my husband said that Wells Fargo called, and I thought, oh, I hope somebody didn’t go on a shopping spree with my card.
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| Nate Halverson: | So she goes and she logs onto her wells Fargo credit card account and she sees a string of charges.
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| Glynnis B.: | $20, $50, $50, $20, 21 transactions on the backside of this paper.
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| Nate Halverson: | Totalling almost a thousand bucks.
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| Glynnis B.: | So when I pulled up that account on the computer and I see Facebook, Facebook, Facebook, Face… I’m like, what is going on? What is all this?
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| Nate Halverson: | She thought that her son had asked to spend $20 and then just compulsively kept spending.
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| Glynnis B.: | Oh yeah. I’m like, Ian Michael, what have you been doing with my credit card? I’m like, look at the statement, I have $1,000 in charges from Facebook. What have you been doing with my card? He’s like, I don’t have your card, mom. I don’t know what you’re talking about.
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| Nate Halverson: | And so she says, well, load up the game on Facebook and, and show me what you did. And so he loads it up and he starts playing and he’s playing the game.
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| Glynnis B.: | And it’s ringing and bells and whistles and [gling] gling, gling, gling, gling, gling, you know, kind of noises. And then the stack of coins got small, like two coins, and it would blink at him. It kept blinking, blinking, blinking at him, and then he hit it and it went [prrring] and shot up. And now there was this big tall stack of gold coins and nothing else popped up. And then he started to play again.
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| Nate Halverson: | And she doesn’t see him spend any money.
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| Glynnis B.: | And then he’s, that’s all I’ve been doing.
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| Nate Halverson: | So she goes and she logs back into the credit card account.
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| Glynnis B.: | And sure enough, brand new charge of $19.95.
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| Nate Halverson: | Facebook has stored her credit card, and she’s not used to this because every time Ian wanted to spend money on his x-box, she would have to go over and reenter her credit card. But on Facebook-
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| Glynnis B.: | Nothing popped up and said, “Do you want to proceed with this transaction of $19.95?” Nothing came up at all.
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| Nate Halverson: | Ian could rack up hundreds of dollars without ever realizing it.
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| Glynnis B.: | Oh, I was so mad. I was like, this is so wrong.
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| Al Letson: | Was she able to stop payment with the bank? Like what happened with her?
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| Nate Halverson: | So first she tried to reach out to Facebook. Emails, emails, emails, she tried to find a phone number to call them, she left voice messages for them, never heard back, never got a response. So finally she reaches out to her credit card and she says, look, my son accidentally spent this money, we didn’t realize it, it wasn’t clear. And her credit card company said, well, we can refund the money for you, but you have to file a criminal complaint, essentially a criminal felony complaint against your son for spending nearly a thousand dollars without your permission. So she didn’t want to do that, and she realized that she probably wasn’t the only one facing this.
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| Glynnis B.: | My feelings were that this could have impacted a lot of people and a lot of families.
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| Nate Halverson: | So back in 2011 she reaches out to a lawyer.
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| Glynnis B.: | J.R. Parker.
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| Nate Halverson: | J.R. Parker, the same guy that I sat down and next to in that bar in San Francisco.
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| Glynnis B.: | And that was it.
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| Nate Halverson: | They began finding other people that it has happened to, and it was happening to a lot of folks. And they turned it into a class action lawsuit.
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| Al Letson: | And so what happens during that lawsuit?
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| Nate Halverson: | Well, J.R. and his colleagues want to know a bunch of stuff. They want to know how much children were spending on these games, how much money they and their parents were trying to claw back from Facebook and they wanted to know when Facebook realized that this was a problem and what they did to try to stop it.
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| Nate Halverson: | Glynnis’s lawyers and Facebook’s go back and forth and eventually decide to settle. Two important things happen. The first is that Facebook agrees to create an easier way for kids and parents to ask for refunds, but they don’t actually force developers to stop doing what they’ve been doing. The second thing is that all the information gathered in this case is sealed. It gets buried in a courthouse in San Jose and that’s where it would have stayed.
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| Al Letson: | But it didn’t.
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| Vicky B.: | Nate walks by my office and says, if you have some time later today, I’d really love to talk to you.
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| Nate Halverson: | I turned to Reveal’s lawyer, an absolute hero, Vicky Baranetsky.
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| Vicky B.: | And so, he gave me the docket, I went and did a deep dive into it and started looking into ways that we could file a motion to unseal.
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| Nate Halverson: | So basically that means she asked the court to make that evidence public.
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| Vicky B.: | So this is protected by the First Amendment and common law to have access to court records. It goes really far back in time. You can trace it back to the British judicial system and I’m not going to go into that history right now, but these are really strong rights.
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| Nate Halverson: | And so she argued that it’s especially important for the public to know about this stuff given the privacy troubles Facebook has gotten into recently.
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| Vicky B.: | We trotted out the history of this company with cases such as Cambridge Analytica, where they have not earned the trust of the public. And so after we filed the brief, Facebook files their brief, we filed a response, Facebook files a response, the court does a review and Oh, I think it was two or three months later, the court came back and issued an order.
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| Nate Halverson: | And what happened?
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| Vicky B.: | The court said-
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| Nate Halverson: | We won.
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| Al Letson: | Wow.
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| Nate Halverson: | Almost completely across the board.
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| Vicky B.: | You know, I always temper everything, but it was a bit of a celebration. So we got information.
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| Nate Halverson: | We got memos, strategies, employee emails, more than 150 pages of stuff.
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| Al Letson: | And so what’d you find out?
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| Nate Halverson: | I mean going through these documents for the first time, at least for me as a nerdy journalist, was like reading a thriller. There was one email exchange between two employees and they’re referring to a child as a whale. A whale of course is a term that the casino industry uses to describe a big spender, somebody that flies in on a private jet but this was a 15 year old girl. Now one of these Facebook employees says, “Would you refund this whale ticket?” Referring to this child who’d just spent $6,500 in a couple of weeks. And when this child realized what she had done, she asked for a refund. But the Facebook employee and her supervisor actually joked about how the girl looks more like 13 in her picture, and then the supervisor just comes out and says it, “I wouldn’t refund.” It’s 6,500 bucks.
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| Al Letson: | For a kid who probably does not have that money, which means her parents have to come up with that money.
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| Nate Halverson: | Which she’s grounded for like until she’s on Social Security.
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| Al Letson: | Yeah.
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| Nate Halverson: | And the material that we got on sealed, it begins to give us clues as to how a child might spend thousands of dollars and you know it wasn’t just documents that we got.
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| J.R. Parker: | Marked as exhibit 35-
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| Nate Halverson: | We actually also got audio from the interviews that Glynnis’s attorney J.R. did with Facebook employees.
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| J.R. Parker: | Are you familiar with this document?
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| Bill Richardson: | Yes.
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| J.R. Parker: | What is it?
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| Nate Halverson: | Bill Richardson is in charge of all payments at Facebook.
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| Bill Richardson: | It is a discussion thread post which summarized a data analysis sheet-
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| Nate Halverson: | Here is where we learn that Facebook did a study and identified this problem all the way back in 2011. That’s when they first noticed they’re getting lots of refund requests from credit card companies trying to claw back money from Facebook. They’re called charge backs and if you have a chargeback rate of 2%, the Federal Trade Commission will actually say that’s a red flag for fraud. But when it came to games that children played on Facebook, the total amount being charged back was 9% and Facebook knew about this well before the lawsuit.
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| J.R. Parker: | And that push back response says it is not our current policy to issue refunds in cases when charges were made by someone in your household or someone who is known to you. Is that right?
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| Bill Richardson: | Yes, that’s what it says.
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| J.R. Parker: | Okay.
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| Nate Halverson: | And so Facebook had come up with a solution to this problem. Kids would just have to reenter the first six digits of their parents credit card number before they could spend more money.
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| J.R. Parker: | But Facebook has never, other than this specific testing, has never actually imposed that rule on minor transactions, first six digits of a credit card be inputted per transaction. Is that correct?
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| Bill Richardson: | Not to my recollection, no.
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| J.R. Parker: | Okay.
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| Nate Halverson: | But they never implemented it.
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| Al Letson: | So Facebook knew this was a problem and decided not to do anything about it?
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| Nate Halverson: | Yeah, they knew that that children were unwittingly spending their parents’ money. In fact, they started calling it friendly fraud, which is a term that comes from the credit card industry. But Facebook sort of redefined it to mean when a child would spend their parents’ money without their parents knowing.
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| Al Letson: | So they gave it a name but decided not to fix it? Why?
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| Nate Halverson: | Well, we got ahold of an email that might actually answer that question. A Facebook employee studied this problem and wrote to his bosses that this extra step of adding in credit card numbers would cut into the company’s revenue. Back then, Facebook was making about $500 million on social games like Ninja Saga. Facebook never adopted the rule. That’s why Glynnis filed this lawsuit.
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| Facebbok Lawyer: | Can you please state your full name for the record?
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| Ian Michael B.: | Ian Michael Bohannon.
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| Nate Halverson: | And it’s the reason that she and her son had to fly all the way to San Francisco to sit down in front of Facebook’s attorneys to answer their questions. Now, we didn’t get to talk with Ian for this story, but we were able to get ahold of the court recordings of him being deposed. This is back in 2014 after Ian had just finished the eighth grade.
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| Facebbok Lawyer: | Isn’t it true that you knew exactly what you were doing when you made the purchases and then when your mom found out you were scared and so you brought her to a different page on Ninja Saga and did something different that got you coins?
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| Ian Michael B.: | No.
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| Facebbok Lawyer: | And when Facebook puts on its evidence, you’re not going to change your story then are you?
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| Ian Michael B.: | No.
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| Facebbok Lawyer: | You understand that perjury under the US system is punishable by law, up to five years in jail.
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| Ian Michael B.: | Yes.
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| Facebbok Lawyer: | And you’re not going to change your testimony.
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| Ian Michael B.: | No.
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| Al Letson: | Man, that is harsh. I would not like it if these lawyers were grilling my kid that way.
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| Nate Halverson: | Yeah. Glynnis felt the same way.
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| Glynnis B.: | My stomach hurt and I was just full of nerves because I had to sit there and be quiet. And so it was upsetting me that I couldn’t protect him in the way that I wanted to.
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| Al Letson: | So Nate, what is the story about, is this a story about a tech company that just grew too fast or is it something more sinister?
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| Nate Halverson: | Well, Facebook knew it was duping kids into spending money and it even designed a solution to fix that problem, but it never implemented it because it would hurt Facebook’s revenues. So what this lawsuit did, what this story shows is the culture, the decision making inside of Facebook. Now in the end, because of the lawsuit Glynnis and the other people did get their money back. But that was about it.
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| Glynnis B.: | That’s really what I wanted. I didn’t go at this like, I’m going to make a bunch of money off Facebook. I didn’t make any money. I did it for the principle of the thing because in my heart and in my gut and in my mind they were doing the wrong thing.
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| Al Letson: | Thinking about all of this, you know, the lawsuit didn’t actually address the root problem. It’s still possible for kids to spend their parents’ money without realizing it, correct?
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| Nate Halverson: | That’s right.
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| Al Letson: | So what has been the impact of your reporting? Is Anybody doing anything to actually stop that?
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| Nate Halverson: | So as part of the settlement, Facebook beefed up its refund policy for children. But, you know, I was reading through their website recently, and I found that they still let game developers get away with a chargeback rate that is more than double what the government says should be a red flag for deceptive behavior.
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| Al Letson: | Now since Nate started reporting on this story, a dozen child safety and online privacy groups filed a complaint with the Federal Trade Commission calling on them to investigate Facebook. In their letter they said Facebook has a callous disregard for young people, and a culture that prioritize profits over people. Has this happened to you? Have you kids racked up unexpected charges from games on Facebook? If so, we want to hear from you and we’d like to share with you some resources to help you navigate what to do next. Reach out by texting Charge to (903) 2012123 standard texting rates apply. Again, that’s charge C-H-A-R-G-E to (903) 2012123. When we come back, Nate has a story about even bigger spenders, bigger whales and how they get hooked. That’s next on Reveal from the Center for investigative Reporting and PRX.
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| Al Letson: | From the Center for Investigative Reporting and PRX, this is Reveal, I’m Al Letson. Facebook exploited children to make big money, but it didn’t stop there. Reveal’s Nate Halverson is back in the studio with another story about Facebook. And Nate, this again is something you just kind of stumbled onto, right?
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| Nate Halverson: | Yeah man. It was me and a buddy in the dead of winter and we went into Yosemite up to this ski hut in the mountains. You know, you’ve got to truck way back there to find this thing and the sun had set and it was getting cold. And we got to the front door of this little hut and opens up, an orange light kind of glows out and inside is this feast that they’ve laid out on the table. So we drop our packs, grab beers, sit down and join people. And I happened to sit next to a dude who worked for a tech company in San Francisco and he begins to tell me the story, this dark story about social casinos and how they were taking advantage of their users all with the help of Facebook.
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| Al Letson: | Wait. What exactly is a social casino?
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| Nate Halverson: | These games you play that bundle together slot machines, roulette, poker, you play them on Facebook or you can download an app on your phone.
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| Al Letson: | So people are getting into trouble with these?
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| Nate Halverson: | Yeah, I mean on the surface it sounds super innocent, right? I mean, for a slot machine, you open it up, you hit tap to spin it, right? But underneath is this technology, this deeply sophisticated technology designed to hook people to spend as much money as possible. And as I started reporting this story, I met somebody who fell deep into that trap.
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| Nate Halverson: | Suzie Kelly is a grandma from suburban Dallas. On the outside she has a wonderful life. Five years ago, she and her husband, Chuck had almost paid off their house in a quiet treeline neighborhood, a pool in the backyard, surrounded by a little safety fence to keep their granddaughter from falling in. They’re cautious like that. They plan to buy a retirement home down on the Texas coastline, or at least that was the plan. Then one day Suzie sat down to watch Judge Judy.
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| Suzie Kelly: | There was a commercial for Big Fish Casino, I thought it was a casino casino at first and then I realized it was a game. They said, play for fun, play for free.
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| Speaker 10: | Big Fish Casino, play for free, play for fun.
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| Suzie Kelly: | I thought what? So I realized it was an app download it now, and I was bored or restless or something, but I figured what the heck, you know, just download it and see.
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| Nate Halverson: | Suzie got free chips when she downloaded the game, but when those free chips ran out, she would need to buy more if she wanted to keep playing.
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| Suzie Kelly: | I had those chips for maybe a day, not even. So I figured, well, you know, I’ll purchase a little small package.
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| Nate Halverson: | So she bought a bunch of chips for $19.99. Then those ran out too.
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| Suzie Kelly: | Then it was the $49 and then $99.99. I would say my spending increased to hundreds of dollars and thousands of dollars within the first month.
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| Nate Halverson: | Suzie spent about $8,000 that first full month, 8,000. How much could you win playing Big Fish Casino?
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| Suzie Kelly: | Real money? Zero, nothing at all. I couldn’t win any money from Big Fish Casino. That’s it.
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| Nate Halverson: | Why?
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| Suzie Kelly: | Because they don’t pay real money. They only take money to give you virtual chips to continue to play on their app.
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| Nate Halverson: | So you can’t ever win your money back?
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| Suzie Kelly: | You cannot win any money back. No sir.
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| Nate Halverson: | And this is the crazy thing about social casinos. It’s not like traditional gambling. In fact, social casino executives don’t call it gambling, they say it’s just entertainment. Suzie can never win her money back. She’s playing in part for the social aspect of the game, meeting other players, developing online friendships.
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| Suzie Kelly: | Your new friends are here and they’re all over the world and they really like you and we’re having fun. And as crazy as this sounds, even when I say it out loud, that became my new life, my new world. This was my family and friends.
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| Nate Halverson: | Suzie was now playing daily to keep her new friends close, sometimes playing around the clock. Falling asleep with her phone in her hand, tapping her phone to spin, spin, spin, waiting for that beautiful noise, that sound of winning chips. But Suzie knew something was wrong.
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| Suzie Kelly: | I lost myself in this game. That’s the truth. I literally got lost and lost me at the same time in that game, in that app.
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| Nate Halverson: | Less than a year after she downloaded the Big Fish Casino app, Suzie had lost control. She’d spent more than $40,000, 40,000 playing a free game on her iPhone. She’d taken out a home equity loan to pay down credit card debt from the game. Her husband, Chuck didn’t know. She was terrified he’d find out. Suzie realized the truth of what was happening.
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| Suzie Kelly: | I have an addiction, it’s online gaming. I didn’t realize that you could have that, but that’s the truth. I needed out.
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| Nate Halverson: | So one day she opened the app and wrote to their customer service a simple message with a simple subject line, it read, cancel account.
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| Suzie Kelly: | I wrote, so, even though I love the app, I just can’t do this anymore. I’ve maxed out my Amex twice and don’t want to go for three. I said, please let me know when the account will be closed. Thanks.
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| Nate Halverson: | Did they close the account?
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| Suzie Kelly: | No sir.
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| Nate Halverson: | It’s at this point that Suzie story moves from being about addiction to being about manipulation. A few days after Suzie sends that message, her phone rings, it’s a man calling himself Byron Scott and he says he works for Big Fish Casino.
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| Nate Halverson: | What did he want to talk about on the phone?
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| Suzie Kelly: | He said he was my VIP representative with Big Fish Casino.
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| Nate Halverson: | A VIP host is what Las Vegas Casinos provide for their biggest spenders. The people who fly in on private jets. Now Suzie, a grandma from suburban Dallas has a VIP host for the game she’s playing on her phone. And Byron, he pushes her to keep playing. He gives her free chips and he doesn’t close her account.
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| Nate Halverson: | Where would this relationship with Byron Scott go? What did it become?
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| Suzie Kelly: | This was a daily thing, back and forth. It was like a friendship. He would send me, you know, VIP gifts every Christmas. We’d get packages, to keep me playing. This is going to sound crazy, but it was like a friend
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| Nate Halverson: | But Byron Scott is not Suzie’s friend. I find out it’s not even his real name. What Suzie doesn’t know is that the game is monitoring and tracking her as she plays. Byron is part of a sophisticated system that collects data on her and targets or to spend more and more. He’s trying to maximize what the social casinos call her LTV or Life Time value. In simple terms, they’re trying to get as much money as possible from Suzie.
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| Jose Brotons: | Hi Guys. Thank you so much for having me. Who’s got some sort of social casino application right now?
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| Nate Halverson: | This is Jose Brotons speaking at a tech conference in 2013. He calls himself the grandfather of social casinos. Jose worked for Aristocrat Leisure, the company that now owns Big Fish Casino and he explained why social casinos need VIP programs.
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| Jose Brotons: | You’ve got to think that about 3% of your users are going to be generating 80 to 90% of the value for the company.
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| Nate Halverson: | He calls these people whales, and he designed the VIP system to closely monitor them.
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| Jose Brotons: | What we attempt to do with our VIP and loyalty programs is to ensure that we have a very close relationship with our VIPs. That we’re tracking what is their experience like? What are they up to? Are they playing, are they paying? And so far it’s been extremely helpful.
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| Nate Halverson: | These slot machine games are using big data and behavioral analysis software to hunt down target and trap those big spenders, those whales. This is almost science fiction.
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| Jose Brotons: | We’ve seen people that had lapsed and sort of we’ve been able to bring them around and start to get them to pay again.
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| Nate Halverson: | For Jose, this was all business and big profits, but for some of his employees it was disturbing. They’re using technology to fleece gambling addicts. None of the former employees I spoke with wants to be named. They fear the company might come after them in court, but they told me Suzie’s story was all too common. One player couldn’t buy her prescription medicine because she’d gone broke playing the game. Another woman, her home was in foreclosure. They told me these players were addicted and the companies were doing nothing to help them. One former employee said, at some point you realize this has gone way past entertainment.
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| Nate Halverson: | But one story really stuck with me, from a woman who was a VIP host like Byron. She was so disturbed by what they were doing that nearly every day she would find a quiet place somewhere in their office and cry, cry because of what they were doing to people like Suzie.
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| Suzie Kelly: | There were days where I would spend five, $600 or sometimes even more in one day,
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| Nate Halverson: | And it wasn’t just the social casinos that were making big money, Facebook was cashing in too. Suzie was buying her virtual chips through Facebook, which was getting a 30% cut. She originally used Apple’s app store, which also took a cut, but Byron told her that Facebook had better deals on chips and made it easier to spend money.
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| Suzie Kelly: | There’s nothing to stop and say, are you sure you want to buy this? It was clicking and done. Extremely easy.
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| Nate Halverson: | So easy, she says it fueled her addiction. I ask Suzie if I can see how much money she spent. She logs into her Facebook account and scrolls down.
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| Suzie Kelly: | Here they are, see all.
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| Nate Halverson: | $249.99, $249, I mean… This is one, two, three four, five, six, seven, eight, nine, 10, 11, 12, 13, 14 lines, all of them say $249 99 and you’re just scrolling through it.
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| Nate Halverson: | Facebook was making a killing on these games and they even talked about it at tech conferences.
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| Julien C.: | It’s the number one category on Facebook.
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| Nate Halverson: | This is Julien Codorniou, the director of Facebook’s global network of game developers, in 2014.
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| Julien C.: | It’s a category that never stops growing. Every year we see new companies coming up with amazing games, launching on Facebook, launching on mobile, making significant money.
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| Nate Halverson: | The social casino industry has gone from essentially no revenues ten years ago to now being a $5 billion a year industry. That’s almost as big as the whole Las Vegas Strip. And social casinos are growing so fast, soon, they’re expected to overtake it. And Facebook is driving that growth with its massive advertising reach. Facebook can target and show social casino ads to the people it calculates are the most likely to spend huge amounts of money, the whales.
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| Julien C.: | It’s very good for gaming companies because they can decide to target on Facebook or on mobile specific users or just the whales.
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| Nate Halverson: | And how does it do that? Facebook analyzes its huge database of personal information on it’s almost two and a half billion users. After it identifies who will be the biggest spenders, it charges a premium to social casinos to advertise to those whales. This practice of profiting from social casinos made at least one executive at Facebook uneasy. I uncovered a confidential email from Sam Lessin the former vice president of product management. He told Facebook founder Mark Zuckerberg, “I am not proud of the fact we are currently extolling game companies that make online slot machines as positive examples of those willing to pay our fees, I’m fine with it, just not proud of it.” The email was from 2012 when the social casinos were just starting to take off, a year later, Facebook awarded Jose Brotons Social Casino as one of its games of the year.
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| Suzie Kelly: | I had no idea this was going on.
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| Nate Halverson: | I’ve taken what I’ve learned back to Suzie and we’re sitting in her living room. I’m showing her internal company documents which were leaked to me. We can see how Jose Brotons created the VIP program to track players by their Facebook ID, monitor their spending and entice them with gifts.
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| Suzie Kelly: | I was nothing but a pawn, just money.
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| Nate Halverson: | Does it feel like they’re targeting your addiction?
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| Suzie Kelly: | Absolutely. For me that’s like let’s find the weakest person and destroy their life. You know what I mean? Let’s find the person that is going to just go bonkers over this and let’s take them for everything they’ve got.
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| Nate Halverson: | And they took nearly everything Suzie had and not just her money, but moments she’ll never get back. She remembers sitting at her dying mother’s bedside.
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| Suzie Kelly: | My Mom’s in the hospital on her death bed and I’m playing this stupid game, logging on to get my bonus. I mean, what the heck was I thinking?
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| Nate Halverson: | After Suzie’s mom died, she received a sizable inheritance. She spent it on Facebook, on Big Fish Casino chips. And again, she tried to quit.
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| Suzie Kelly: | May 2nd, 2016 well this is right after my mom passed, “Hey Byron, can you please go ahead and delete my account.”
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| Nate Halverson: | Did he go on, did he delete your account?
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| Suzie Kelly: | No sir. Not at all.
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| Nate Halverson: | Did he give you more free chips?
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| Suzie Kelly: | Oh yeah. And I started to pay and pay and pay and pay insane amounts of money.
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| Nate Halverson: | All told, Suzie would spend more than $400,000. And then there was Chuck, her husband, she couldn’t keep her spending hidden forever. She had to tell him.
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| Suzie Kelly: | I sat him down and I said, you know, I really want to talk to you and, and he’s what’s going on. I’ve spent a lot of money on that app, Big Fish Casino [inaudible] that. I said no, I spent a lot of money and took a breath, I remember this, I said, I’m sorry Chuck I think you know, we might lose… I’m like, I don’t want to lose everything.
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| Nate Halverson: | Did you tell him how much you lost?
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| Suzie Kelly: | I kind of stopped counting after 300,000. It’s a scary thought when you see those purchases and you’re like, oh my God, it’s just day after day after day, you know what I mean?
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| Nate Halverson: | And for Chuck, it was beyond scary. He got up and left.
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| Suzie Kelly: | I just sat down on the floor and started crying and Jackson and George came over to me. Those are our dogs, I was petting them and I said I don’t think daddy’s coming back.
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| Nate Halverson: | And what did Suzie do that night?
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| Suzie Kelly: | Yeah, I was already back to playing. Yep, Suzie blows $1,000 playing the game that night. Yep. It’s like when things got bad, that’s where I went.
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| Nate Halverson: | This didn’t have to happen. And in fact, at a real casino-
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| Keith White: | If this was a customer in the legalized regulated space, we would say absolutely, you should exclude her from play.
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| Nate Halverson: | This is Keith White, executive director of the National Council on Problem Gambling in Washington, a nonprofit that provides help for people suffering from gambling addiction. He says, Social Casino Games have an addiction rate five times higher than regular casinos.
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| Keith White: | In the US alone, you’re talking well over 100 million people who are report playing somewhat regularly on Social Casino apps. That’s a pretty high number. It’s an incredibly high number. No one’s tracking this because it’s not being regulated.
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| Nate Halverson: | Social Casinos have been able to avoid regulation because again, they claim it’s not real gambling, it’s just entertainment. That’s the argument they’ve made so far successfully to state regulators who oversee casinos and that lack of oversight leaves people like Suzie vulnerable.
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| Keith White: | This is in some ways pure addiction. So you wouldn’t tell someone who has a massive cocaine problem, why don’t you just stop? Or you might tell them that, but we know it’s not going to be very effective. In the same way, someone with a severe gambling problem, they can’t just stop and especially if you then continue to provide them with chips, with the object of their addiction, with access to this app.
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| Nate Halverson: | But Suzie did try to stop.
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| Suzie Kelly: | Hi Byron, can you please block [crosstalk 00:34:08].
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| Nate Halverson: | Close to a dozen times, Suzie asked the Big Fish Casino to close her account to stop letting her spend more.
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| Suzie Kelly: | Hey Byron, can you please go ahead and delete my account? Are you sure you want me to delete it Suzie? Can you please block/delete my account? Please think it over, but Suzie, let me know tomorrow if you’d like me to block it. I’d love to offer you a super special deal which will currently reward you… Block me, ban me, delete me, please, please, please. And then in caps I put DELETE MY ACCOUNT.
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| Nate Halverson: | Please, please, please delete my account. And that’s a very clear call for help. That’s a very specific request. I show Keith, Byron’s response.
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| Keith White: | And again, are you sure you want to delete it? Are you sure you want me to delete it Suzie? This is just, I mean it’s absolutely predatory and it should be unacceptable.
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| Nate Halverson: | I requested an interview with Aristocrat Leisure, the parent company of Big Fish Casino. They declined but sent me a statement that reads, in part their gaming companies are dedicated to delivering great entertainment experiences. We strive to ensure that our social games comply with all applicable standards, rules and requirements. I reach out to someone else, remember that top Facebook executive Sam Lessin who told Mark Zuckerberg he wasn’t proud they were promoting slot machine companies. I sit down with him and tell him what happened to Suzie.
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| Nate Halverson: | She ended up spending over $400,000 playing a slot machine game, you know?
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| Sam Lessin: | Yeah. I mean, it sounds disgusting, right? For sure. We’re going to have to live in a world where both very, very good people and very, very bad people have better tools.
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| Nate Halverson: | These days Sam Lessin is a technology investor, an influential voice in Silicon Valley. He won’t discuss his time at Facebook, but speaking generally, he says, companies are gathering information on specific people and delivering tailored ads to them.
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| Nate Halverson: | Is this now happening everywhere?
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| Sam Lessin: | Pretty much, yeah. Do we want hyper targeted ads from beer companies to alcoholics? Do we want hyper targeted ads from casinos to gambling addicts? And the tough thing about that is obviously the human answers. No, of course we don’t want those things, right? Like no thinking person is like, that’s great, but then the question is, well, okay, let’s be really clear, what rule do you want to write, right? And how are you going to enforce that rule?
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| Nate Halverson: | I wanted to talk to Facebook directly about its role in social casinos, but they turned us down for an interview. Instead a spokesperson sent us a written statement that says we already provide people with controls around the ads they see and in the coming year we’re looking to make them even stronger as well as exploring additional safeguards. And they added, we understand that certain games or products can impact some people differently than others.
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| Nate Halverson: | We’re back at Suzie’s house on a hot night outside Dallas.
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| Suzie Kelly: | Go lay down.
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| Nate Halverson: | Suzie has joined a 12 step program for addicts and has finally stopped spending money on Big Fish. And Suzie’s husband, Chuck, who stormed out when he learned how much she spent, he wasn’t gone for long.
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| Suzie Kelly: | Did you ever contemplate leaving me?
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| Chuck: | It was what was going through my mind when I left, but that was never going to happen. We’ve been together for 32 years. I’m not going to throw away 32 years of happiness because she messed up. And my mindset was, okay, what do we need to do to fix this? Realized that if I took out another loan from my 401k that I could probably just struggle to get by. We’re still catching up at this point. Can I go eat my dinner now?
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| Suzie Kelly: | Sure [inaudible 00:37:57], I love you.
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| Chuck: | I love you too. I’m here for you and I’ll do whatever it takes to make things right here and help you with anything you need.
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| Suzie Kelly: | Go eat dinner.
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| Nate Halverson: | Suzie Kelly joined a class action lawsuit last year against Big Fish and is asking for her money back. The lawsuit alleges the social casinos are illegal gambling. In the company statement to us they said they couldn’t comment on the lawsuit except to say they are fighting it vigorously.
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| Nate Halverson: | In a moment we’ll walk further into the new frontier where companies watch our every move, then turn our personal data into profits.
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| Al Letson: | That’s not good. You need permission for that. That’s creepy.
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| Nate Halverson: | You’re listening to Reveal.
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| Al Letson: | From the Center for investigative reporting and PRX, this is Reveal. I’m Al Letson and I’m back again with our reporter Nate Halverson.
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| Nate Halverson: | Hey Al.
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| Al Letson: | Hi man. So in this hour we’ve heard you get tips from stories at a dive bar in San Francisco, which you didn’t invite me to, a ski hut in the middle of nowhere, which you definitely didn’t invite me to, and if I understand this last story correctly, it starts in your own living room, which you haven’t invited me to.
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| Nate Halverson: | Nope, that is right. I came home one day after work, plopped down in front of the television, turned on my TV and this little window pops up.
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| Al Letson: | And what’s it say?
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| Nate Halverson: | It says, I’m entitled to money from a class action lawsuit against my TV maker Vizio. Now Vizio denies wrongdoing, but the lawsuit alleged Vizio violated privacy and consumer laws by collecting viewing data for sale to advertisers.
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| Al Letson: | Like Vizio was watching what you watched?
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| Nate Halverson: | Yeah, it was like they were watching me watch the TV, you know, tracking what I watch and then selling that to advertisers. They actually kind of reminded me of how Suzie from our last story was being tracked as she played the game.
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| Al Letson: | Is that legal?
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| Nate Halverson: | I honestly didn’t know but I wanted to know.
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| Al Letson: | But you had your hands full with the Facebook stories and so we asked Reveal’s Ike Sriskandarajah to take it from here.
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| Ike S.: | If you want to learn about new TVs, this is a pretty good place to start. Do you work in this department?
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| Speaker 17: | Yes.
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| Ike S.: | In the TV department?
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| Speaker 17: | Yup.
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| Ike S.: | I’m in the Best Buy in downtown Brooklyn.
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| Ike S.: | Do you think you could walk me through some of the [crosstalk 00:40:35].
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| Speaker 17: | Which TV would you like to see? The new stuff?
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| Ike S.: | Most TVs now have a built in computer that lets you stream from any service.
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| Speaker 17: | There’s a Netflix button, you press it, take you right to Netflix. Press it again, you can leave Netflix and it’ll take you right to Amazon Prime. You could place orders and stuff on here too.
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| Ike S.: | So you can shop on your TV? Next year, the television industry is predicting they will sell about 260 million TVs and the vast majority of those will be Internet connected.
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| Speaker 17: | And we sold almost all of them, we’re Best Buy, it’s what we do.
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| Ike S.: | Vizio based in southern California is one of the two biggest makers of smart TVs, they’re also one of the cheapest. So how do you sell high def big screen TVs that can connect to the Internet for just a couple of hundred bucks? Well, it seems like you’re actually helping offset the cost while you watch through advertising. See, their smart TVs were tracking what you watch and selling that data to advertisers without asking.
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| Al Letson: | That’s not good. You need permission for that. That’s creepy.
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| Ike S.: | Creepy and completely under the radar until, that is, someone figured out what was going on.
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| Ross Dickey: | Okay. My name is Ross Dickey and I was a security researcher at Avast.
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| Ike S.: | Avast is a company that makes antivirus software. And back in 2015, Ross and a few colleagues were working at their office in Austin. They wanted to know, did these new smart TVs protect your privacy? So they borrowed the company credit card and bought one of every major brand. And of all of them, Vizio, was the easiest to hack. Once they got inside the TV’s operating system, they noticed it was up to something.
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| Ross Dickey: | There’s a server that would automatically start sending information to, and we’d see that it’s sending this information once a second.
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| Ike S.: | Every second the TV was uploading a fingerprint made out of the pixels on your screen.
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| Ross Dickey: | Then it should be able to compare that fingerprint to a database and figure out what show it is that you’re watching and when.
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| Ike S.: | So let’s say you’re watching your favorite cable news show-
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| Speaker 19: | The president is delivering on his promise to buy American and hire [crosstalk 00:42:45].
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| Ike S.: | It takes a snapshot. And if you flip over to Netflix, it takes a snapshot. Even if you watch something kind of steamy from your own DVD collection that you’d really rather keep private.
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| Speaker 20: | What do you do?
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| Speaker 21: | I produced records.
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| Speaker 20: | That’s good.
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| Ike S.: | You guessed it. There was a second by second record of everything you watch that then got uploaded, matched to a database of TVs and movies and sold to advertisers. Ross says most viewers had no idea.
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| Ross Dickey: | As a consumer you want to trust the companies that are creating the products that you use to not violate your privacy or trust them to be secure. But really what the reality is, is that you can’t trust them.
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| Speaker 22: | Smart and spying going hand in hand when it comes to Vizio’s TVs.
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| Speaker 23: | So viewers can be tracked across their phones, across their computer, across everything.
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| Speaker 22: | And you know what’s really interesting is there’s really no law that says any TV manufacturer cannot do this so-
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| Speaker 23: | You’re being watched America.
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| Ike S.: | That’s when the Federal Trade Commission tuned in.
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| Kevin Moriarty: | The FTC started investigating Vizio in the fall of 2015.
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| Ike S.: | This is Kevin Moriarty, a lawyer at the FTC, and for him flags went up because on the one hand Vizy was saying nothing about tracking to consumers, but on the other hand, they were bragging about it to investors saying that they can offer the most accurate, realtime information about what people are watching.
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| Kevin Moriarty: | Essentially that, hey, look, we have this massive trove of television viewing data that tells us all of these minute details about the television viewing habits of Vizio consumers.
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| Ike S.: | While the government was getting their case going, there was another case against Vizio, this one was a class action lawsuit. One of their arguments was that Vizio violated something called the Video Privacy Protection Act. A law written back in the ’80s when people rented movies on VHS. At the time Ronald Reagan had nominated conservative Judge Robert Bork to the Supreme Court. Bork testified that the constitution didn’t guarantee a general right to privacy.
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| Speaker 25: | But be that as it may, let me illustrate my objection to what this generalize right of privacy is-
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| Ike S.: | So an enterprising reporter at a DC paper went to Judge Bork’s video store, asked for a list of the nominees rental history and put it in the paper. Nothing too salacious, one slightly troubling movie, the Michael Douglas Thriller Star Chamber about a clandestine group of judges who take the law into their own hands. Anyway, it wasn’t the thing that ultimately killed Bork’s nomination, but it did motivate lawmakers to quickly pass this act that made video rentals private.
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| Speaker 25: | …to reserve personal privacy with respect to the rental purchase or delivery of videotapes or similar audio visual materials. And the use of library-
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| Ike S.: | That 30 year old law gave class action lawyers the grounds to sue Vizio for illegally sharing the current version of viewers video rental history. And in 2018 it led to a $17 million settlement and that message that popped up on Nate’s TV screen. Meanwhile, the FTC, the government agency that regulates our privacy online is relying on an even older law created during the FDR administration to curb deceptive and unfair business practices.
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| Kevin Moriarty: | So this is a law that was passed in 1938 and congress certainly wasn’t thinking about computers or the internet or smart televisions when it passed it. And so one of the challenges that the FTC has is to apply this law in an area that is really unanticipated by the original statute.
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| Ike S.: | Eventually, Vizio settled with the government for $2.2 million. The company also agreed to delete as much data as they could from people who didn’t give permission and going forward to have really clear language, giving consumers the option to share their viewing data or not.
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| Ike S.: | Meanwhile, the person who came up with Vizio’s tracking software is philosophical about getting sued by the FTC and class action lawyers. His name is Zeev Neumeier and he’s the head of Vizio smart TV data tracking division. He compares the lawsuits to the story of Abraham in the Bible.
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| Zeev Neumeier: | Abraham was a good guy. Why does God put Abraham through so much grief? He gives Abraham the most amount of grief and says, look, he still believes.
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| Ike S.: | God is so pleased with Abraham’s devotion that he blesses his family and promises they will multiply and take over the cities of their enemies. Biblically speaking, I think Zeev is saying that Vizio was tested and in the end rewarded because Vizio got to help write the new rules for the whole smart TV industry.
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| Zeev Neumeier: | And we’re able to sit down and craft with them. And that’s why I don’t mind that so much because the end result is that we now have a privacy regime for television that I can be proud of. Right? And we had craft it.
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| Ike S.: | He says Vizio now holds the gold standard for disclosure, something the rest of the Internet should look at as a model. But the company, kind of like the devices they sell is a black box about how it all works. We asked to see some of the details that were in Vizio’s class action lawsuit, but a lot of it was under seal and Zeev didn’t want to talk about it.
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| Zeev Neumeier: | I cannot get into the details of the settlement notice for a whole variety of reasons.
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| Ike S.: | That’s why Reveal filed a motion in court to unseal the information so we can better understand the growing marketplace of data. We’re still waiting for the court to decide. In the meantime, Zeev and Vizio are still bullish on the company’s big data future. They recently partnered with Disney, NBC, and other companies to make a massive new push to use all that data to put tailored ads on your set and even your other smart devices by 2020. But is there anything to stop these targeted ads from selling addictive products to the most addicted people like we heard in the last story?
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| Zeev Neumeier: | That’s a complicated question. The answer is you will find an example of some gambling app being promoted to gambling addicts. We’re using old technology and new technology and any technology. The technology does not fix basic human nature. The market, however, does. The market fixes these things pretty quickly actually, all right? Faster than the regulators in many ways.
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| Ike S.: | The regulators? They don’t seem to have the same faith in the market that Zeev does and they’re trying to step up their game. In May, the FTC chairman asked Congress to update their antiquated laws and to give them money to hire more help. He counted 40 regulators at the FTC working on protecting all Americans privacy online. The UK, for example, with a much smaller population, has about 500.
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| Al Letson: | That story from Reveal’s, Ike Sriskandarajah, who also was the lead producer for this week show along with Anayansi Dias-Cortes. Taki Telonidis edited the show. Thanks to Victoria Baranetsky for her legal help. Thanks also to our director of TV and documentary, Amanda Pike and to David Ritsher, Nikki Frick, Zach Stalford, Tom Kaufman, Angie [Paedeiski 00:50:38], and Deirdre [Bernoff 00:50:39]. Our production manager is Mwende Hinojosa. Original score and sound designed by the dynamic duo J Breezy, Mr Jim Briggs and Fernando, my man yo Arruda. Our CEO is Christa Scharfenberg, Matt Thompson is our editor in chief. Our executive producer is Kevin Sullivan. Our theme music is by Comerado, lightning. Support for Reveal is provided by the Reva and David Logan Foundation, the John D and Catherine T MacArthur Foundation, the Jonathan Logan Family Foundation, the Ford Foundation, the Heising-Simons Foundation, the Democracy Fund, and the Ethics and Excellence in Journalism Foundation. Reveal is a co-production of the Center for Investigative Reporting and PRX. I’m Al Letson, and remember there is always more to the story.
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| Speaker 27: | From PRX.
|