Will Security Problems Quash IPO Plans for Controversial Company?

The VeriChip can be hacked! This revelation along with other worrisome details could put a crimp in VeriChip Corporation's planned initial public offering (IPO) of its common stock, say Katherine Albrecht and Liz McIntyre.

The anti-RFID activists and authors of "Spychips: How Major Corporations and Government Plan to Track Your Every Move with RFID" make no bones about their objection to VeriChip's plans to inject glass encapsulated RFID tags into people. But now they've discovered information that could call VeriChip's entire business model into question.

"If you look at the VeriChip purely from the business angle, it's a ridiculously flawed product," says McIntyre. She notes that security researcher Jonathan Westhues has shown how easy it is to clone a VeriChip implanted in a person's arm and program a new chip with the same number.

Westhues, known for his prior work cloning RFID-based proximity cards, has posted his VeriChip cloning demo online at http://cq.cx/verichip.pl.

The VeriChip "is not good for anything," says Westhues, has absolutely no security and "solves a number of different non-problems badly."

The chip's security issues may spell trouble for those who have had one of the microchips embedded in their flesh. These include eighteen employees in the Mexican Attorney General's office who use an implanted chip to enter a sensitive records room, and a handful bar patrons in Europe who use the injected chips to pay for drinks. "What are these people going to do now that their chips can be cloned?" says McIntyre. "Wear tinfoil shirts or keep everyone at arm's length?"

Albrecht quips, "A man with a chip in his arm may soon find himself wondering whether that cute gal on the next bar stool likes his smile or wants to clone his VeriChip. It gives new meaning to the burning question, 'Does she want my number?'"

But the VeriChip's problems don't stop there, says McInytre, who is also a former bank examiner and financial writer. She has carefully analyzed the company's SEC registration statement and associated chipping information and discovered serious flaws. It turns out the company's own literature indicates that chipped patients cannot undergo an MRI if they're unconscious. What's more, the company admits that critical medical information linked to the chip could be unavailable in a real emergency. "These issues call VeriChip's promotional campaigns and business plan into question," McIntyre says.

The instructions provided to medical personnel warn that chipped patients should not undergo an MRI unless they are fully alert and able to communicate any "unusual sensations or problems," like movement or heating of the implant. This conflicts with the company's efforts to promote the device to people who cannot speak for themselves, such as Alzheimer's patients, those with dementia, the mentally disabled, and people who are concerned about entering an emergency room unconscious.

"The irony is that implantees will have to wear a Medic Alert bracelet or bear some obvious marking so they aren't mistakenly put in an MRI machine," Albrecht says.

Chipped patients might also have to wear a Medic Alert bracelet as a back-up in case the VeriChip database containing their critical medical information is unavailable. The fine print on the back of the VeriChip Patient Registration Form warns implantees that "the Company does not warrant...that the website will be available at any particular time," and physicians are told the product might not function in places where there are ambient radio transmissions--like ambulances. In addition, patients are required to waive any claims related to the product's "merchantability and fitness." The waiver paragraph as it appears on the form is reprinted below:

"Patient...is fully aware of any risks, complications, risks of loss, damage of any nature, and injury that may be associated with this registration. Patient waives all claims and releases any liability arising from this registration and acknowledges that no warranties of any kind have been made or will be made with respect to this registration. ALL WARRANTIES, WHETHER EXPRESS OR IMPLIED, HOWEVER ARISING, WHETHER BY OPERATION OF LAW OR OTHERWISE, INCLUDING BUT NOT LIMITED TO ANY IMPLIED WARRANTIES OF MECHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE ARE EXCLUDED AND WAIVED. IN NO EVENT SHALL THE COMPANY BE LIABLE TO PATIENT FOR ANY INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES (INCLUDING LOST INCOME OR SAVINGS) ARISING FROM ANY CAUSE WHATSOEVER, EVEN IF ADVISED OF THEIR POSSIBILITY, REGARDLESS OF WHETHER SUCH DAMAGES ARE SOUGHT BASED ON BREACH OF CONTRACT, NEGLIGENCE, OR ANY OTHER LEGAL THEORY."

[Emphasis in the original.]

"For a life or death medical device, that's unbelievable," says McIntyre. "I wouldn't buy toilet paper that required that kind of a disclaimer, never mind a product that's supposed to serve as a lifeline in an emergency."

McIntyre contacted the VeriChip Corporation for comments on these issues and was initially promised a response. When the company failed to get to get back to her, McIntyre followed up and was told that the employee had been instructed not to answer her questions. The unanswered questions, along with photos of the VeriChip and associated literature, are available at www.spychips.com/verichip/unanswered-questions.html.

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ABOUT THE BOOK

"Spychips: How Major Corporations and Government Plan to Track your Every Move with RFID" was released in October 2005. Already in its fifth printing, "Spychips" is the winner of the Lysander Spooner Award for Advancing the Literature of Liberty and has received wide critical acclaim. Authored by Harvard doctoral researcher Katherine Albrecht and former bank examiner Liz McIntyre, the book is meticulously researched, drawing on patent documents, corporate source materials, conference proceedings, and firsthand interviews to paint a convincing -- and frightening -- picture of the threat posed by RFID.

Despite its hundreds of footnotes and academic-level accuracy, the book remains lively and readable according to critics, who have called it a "techno-thriller" and "a masterpiece of technocriticism."

Read the foreword by Wired technology commentator and best-selling author Bruce Sterling.

www.spychips.com/press-releases/verichip-hacked.html