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Saturday, July 23, 2016

What new jobs will exist in 2035?

A visitor stands in front of QR-codes information panels during a ceremony to open an information showroom dedicated to the Zaryadye park project in central Moscow April 29, 2014. The showroom, shaped as a dome which houses exhibition halls covered with QR-codes information panels and displaying digital illustration of the project, was opened by Moscow's Mayor Sergei Sobyanin on Tuesday on the site of the future park in a few minutes walk distance from Red Square and the Kremlin, according to organizers. REUTERS/Maxim Shemetov

A visitor stands in front of QR-codes information panels.
Image: REUTERS/Maxim Shemetov
Written by
Joe MyersAccount Manager, Formative Content
Published
Monday 29 February 2016
As the infographic highlights, the impact of automation will vary considerably. For the authors of the report, creativity is an increasingly sought after skill, while the employment landscape in 2035 will work “to the advantage of tomorrow’s entrepreneur”.
The human-only jobs of 2035
Given the demographic and technological changes now set in motion, these are some of the new human-only jobs that could emerge.
The rise of unmanned and un-crewed vehicles will need a new workforce of remote operators. Pilots, ship captains and drivers could all be sitting in an office, potentially thousands of kilometres from the vehicle they are controlling. While many existing skills will transfer, new skills will also be needed to fly a plane remotely.
A new category of "personalised preventative health helpers" will also emerge. These workers will possess great people skills, and the ability to interpret and understand health and well-being data. They “will help their clients avoid chronic and diet-related illness, improve cognitive function, achieve improved mental health and achieve improved lifestyles overall.” As the global population ages, such a role will become increasingly important, and the report argues the growing popularity of personal trainers indicates the potential of this job.
The increasing risk posed by cyber-crime will see a new profession of online chaperones. These professionals will provide protection and support for online activity. This could extend from fraud and identity theft to social media and reputation management.
Finally, the report sees the demand for big data analysts continuing to expand rapidly, along with specialisation of analyst roles. The world currently creates 2.5 quintillion bytes of data a year, and the growth of the Internet of Things will see this increase exponentially. Someone has to tackle this data, argues the report.
However, the authors highlight that “although change is inevitable, future destinations are not.” These new jobs are predictions, not set in stone. So if you fancy a career as a remote-control pilot, watch this space.
The World Economic Forum’s Future of Jobs report has predicted the skills that will be needed in a future workplace. As the following graphic highlights, these range from creativity to negotiation.
Have you read?

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Friday, July 22, 2016

Amending the amendments proposed in Finance Act 2016 – an account of recent happenings


Posted: 21 Jul 2016 06:01 AM PDT
taxes
The recent standstill seen in the market in terms of property sale and purchase activity followed by protests held by property agents throughout the country lead to a formal meeting between Special Assistant to Prime Minister on Revenue Haroon Akhtar Khan, Federal Board of Revenue (FBR) senior officials and representatives of Federation of Pakistan Chambers of Commerce and Industries and property dealers association held a couple of days ago. The meeting turned out to be successful, and the government has taken back its decision to valuate property through State Bank of Pakistan’s appointed valuators. Congratulations readers!
With regard to how the offices concerned will now valuate the property and reduce the stark difference between Deputy Commissioner (DC) Rate and real time market value, several theories are circulating the market. Please note that the final decision is yet to be taken and a meeting will be held in this regard between Finance Minister Ishaq Dar and FBR officials. Before details of this meeting are shared with the media through a press conference, nothing can be said with certainty about how the process will actually take place.
On the other hand, the details of the meeting held between Haroon Akhtar and the representatives of real estate associations are being circulated widely through WhatsApp and related mediums. I have also come across a few voice messages and also spoke to the Hayatabad Dealers Association President Mazhar Wakeel Durrani, who was also present. The meeting had a 4-point-agenda to discuss. According to Durrani, Khan and FBR officials graciously agreed to discard the appointment of SBP valuators to determine the fair market value of the property. Instead, they put forward a proposal to increase the current DC rate by 40% this year and continue increasing gradually over a period of 5 or more years until this difference is removed.
According to a news report published in Dawn today, the FBR is considering a specific formula to set a reasonable mechanism to evaluate fair market value of property throughout the country. Per this report, a mutual consensus was developed between the government officials and stakeholders from the real estate and trade industry on the proposed formula. This formula suggests that 50% of the difference between the DC rate and the real time market rate of the property be added to the old DC rate, to get the new DC rate, and this will be considered the fair market of property during the next two to four years. If I understand correctly, the remaining difference will still be removed in the future, if not right away.
Another amendment in the Finance Act 2016 that bothers real estate agents is the proposal of taxing property transactions done in the last five years by filers and 10 years by non-filers and the imposition of an equal amount of penalty. The agents want the government to give one-time amnesty in this regard and leave the old transactions be.
Furthermore, in case of Capital Gain Tax, they have specifically asked Khan and FBR officials to not increase the 2 year condition to 5 years. In terms of increased tax ratio for the filers and non-filers, the agents also want a similar amnesty. To be clear, the stakeholders have no reservations about penalizing the non-filers, they simply don’t want this penalty to call for a similar rise in tax applicable on the filers.
So this is some of the information that might help you get an idea about what actually happened in the meeting and what the possible outcomes could be. What do you think is ultimately going to happen? Let me know through your comments below.


Amendments recommended by FBR in Income Tax Ordinace 2001 rolled back – What are the implications?

July 22, 2016 • 
Negotiations held between the government and representatives of real estate associations on amendments proposed in the Income tax ordinance 2001 have been successful. The government has taken back almost all of these amendments and has shown a willingness to levy new taxes that would be finalized after consulting the stakeholders.
While the criticism stands true that amending the FBR’s attempts to stop black money from entering the market and seeing a tremendous gain on the original amount isn’t something a sane mind can support, it is also true that introducing such a massive revamp on such an urgent basis and not expecting to face any resistance would be equally insane.
What surprises me here is that these negotiations weren’t prolonged unnecessarily. You see, when it comes to money matters, we can all show flexibility. For instance, if the intention to block the black money through these tax amendment can cause a sudden and sharp drop in terms of sale and purchase activity seen in the real estate sector, implementation of these amendment will certainly have even more serious repercussions, which means that the huge tax income collected from the real estate sector by the FBR will dwindle. Not just this, but the flight of capital can very well make things worse for the country’s economy.
Per news shared in local press and news media, the Federal Board of Revenue (FBR)’s proposal to determine fair market value of real estate through State Bank of Pakistan’s valuators has been turned down by the Finance Minister Ishaq Dar. According to details, the FBR is also not going to hold any audit of real estate transactions recorded in the past. The new means to determine the fair market value of real estate will stand valid for one year alone. In other words, rates will be increased, per the set formula, each year.
Dar has invited the property dealers to share fair market value chart from 18 cities with the FBR in 5 days. This chart will help the FBR determine the property rates throughout the country. In the next meeting, which is scheduled for July 27, 2017, dealers will share their findings with the FBR. It is quite likely that the fair market value from these 18 cities will suffice to assess real time market value of real estate in the country and thus be acceptable for the FBR

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Thursday, July 21, 2016

World’s Top 15 Most Amazing Elevators… #7 Will Take Your Breath Away.

Leilani
By Leilani
LifeBuzz Staff


The need for elevators has existed for longer than you might think. In 236 B.C., the Greek mathematician Archimedes designed a rudimentary elevator using ropes and a rotating spindle called a capstan. The Romans used a hauling device called a winch and counterweights to lift gladiators and animals up to the arena for battle.
Transporting goods, people, and livestock were some of the main reasons there was a need for these early shafts. Another reason included privacy. Louis XV had a few contraptions called the flying chair, for his mistress, and the flying table, for private dining affairs.
The modern elevator had its beginnings in the early 1800s, and by 1853, American industrialist Elisha Graves Otis introduced something spectacular at the New York Crystal Palace exposition: an elevator with a safety feature that broke the cab's fall in case the ropes broke, a common problem at the time. Four years later, the first passenger elevator was ready for use at a department store in New York City.
Scroll below to see some of the most stunning modern elevators around the world.

AquaDom, Berlin, Germany

The AquaDom is a stunning acrylic glass aquarium featuring a built-in transparent elevator. It's located in the Radisson Blu Hotel in Berlin-Mitte. Opened in 2004, the project cost about 12.8 million euros and stands at about 82 feet.
AquaDom, Berlin, Germany
The complex is also home to a hotel, offices, restaurants, and a Sea Life Center. It takes about 3-4 divers each day to feed the fish and clean the tank.

Bailong Elevator, Zhangjiajie, China

The Bailong Elevator, or Hundred Dragons Elevator, is situated in the Wulingyuan area of Zhangjiajie. It is 1,070 feet high. Just last year, it was recognized as the world's tallest outdoor lift.
Bailong Elevator, Zhangjiajie, China
Construction began in October 1999, and three years later, the public was able to try it out. Some people are worried about the environmental effects of the elevator as the area has been dubbed a World Heritage Site.

Hammetschwand Elevator, Ennetbürgen, Switzerland

The highest outdoor lift in Europe is Switzerland's Hammetschwand Elevator, just over Lake Lucerne. If you're afraid of heights, you might want to avoid visiting this site (but we definitely support you facing your fears if you're up for the challenge!). At the top, visitors are 1132 meters above sea level.
Hammetschwand Elevator, Ennetbürgen, Switzerland
A towering feat, the Hammetschwand Elevator was originally built in 1905 by a nearby hotel, and it has remained intact through the world wars.

SkyView Elevator, Stockholm, Sweden

If you're ever in Stockholm, make sure to check out Ericsson Globe, the world's largest spherical building. To get to the top, take the SkyView elevator.
SkyView Elevator, Stockholm, Sweden
The top center puts you at 425 feet above sea level, and there, you can see a panoramic view of the city.

Gateway Arch, St. Louis, Missouri

You've seen this landmark million of times in photos, but you've got to see it in person. St. Louis's stainless steel Gateway Arch stands at 530 feet tall and holds the record as the world's tallest arch.
Gateway Arch, St. Louis, Missouri
The structure was originally designed by Finnish American architect Eero Saarinen in 1947. It was completed in 1965 and opened for public exploration in 1967. There are three ways to get to the top: emergency stairs, a 372-ft elevator, and trams.

Eiffel Tower Lift, Paris, France

We couldn't forget this iconic tower. There are three lifts altogether at the North, East, and West pillars, but to ascend to the top, you must change lifts at the 2nd floor. You can also take the stairs for a unique perspective.
Eiffel Tower Lift, Paris, France

Louvre Lift, Paris, France

When in Paris, you must visit I.M. Pei's iconic pyramid at the Louvre. A great accessibility option is located inside for your convenience.
Louvre Lift, Paris, France
The unenclosed elevator blends in cleverly with the spiral staircase. How imaginative!

Elevador Lacerda, Salvador, Bahia, Brazil

In just 20 seconds, you can go from the Praca Tome de Souza in Cidade Alta, the Upper City, to the Praca Cairu in Cidade Baixa, the Lower City via Elevador Lacerda.
This elevator is lauded as an Art Deco masterpiece and the most significant landmark in Salvador. Check out the sparkling views of the surrounding sea.
Elevador Lacerda, Salvador, Bahia, Brazil

Santa Justa Lift, Lisbon, Portugal

To get from the Baixa district to the ruins of Igreja do Carmo, take Elevador de Santa Justa, or the Santa Justa Lift. You can admire the ironwork and neo-gothic arches while at the same time avoiding the hike up Carmo Hill.
Santa Justa Lift, Lisbon, Portugal
You'll delight in the sweeping views of central Lisbon as well as the stylish wood carriages that take you there.

Mercedes-Benz Museum Elevator, Stuttgart, Germany

If you're planning on visiting the Mercedes-Benz Museum, make sure to allot a large chunk of time for it. Many visitors said they've spent the whole day there. To start the tour, you can take the elevator up to the 8th floor and walk down from there.
Mercedes-Benz Museum Elevator, Stuttgart, Germany
According to European Traveler, visitors walk for at least 1.5 km, some up to 5 km just inside the museum.

Sky Tower, Auckland, New Zealand

In just 40 seconds, you can reach the observatory at Auckland, New Zealand, where you'll be 610 feet high. Get ready to soak in a 360 view of the city.
Sky Tower, Auckland, New Zealand
Steve Vidler/SuperStock

Lloyd's Building, London, England

Located on Lime Street, Lloyd's of London is the world's most famous insurance specialist market and it boasts one of the most futuristic buildings in town. From one of the twelve external glass elevator pods, you can soak in panoramic views of the city. It takes about 30 seconds to reach the top.
Lloyd's Building, London, England
Julio Etchart/Alamy

Luxor's Inclinators, Las Vegas

Looking to head in another direction? Look no further and visit the Luxor in Las Vegas, were you can ride one of its "inclinators." You'll be taken up the pyramid at a sharp 39-degree angle.

Taipei 101, Taipei, Taiwan

Taipei 101 used to hold the title as the world's tallest skyscraper in 2004, that is until Dubai surpassed it with the completion of Burj Khalifa five years later. Still, this LEED platinum certified building is still pretty special. Reach the 89th floor in a mere 37 seconds, where you'll be 1,000 feet above ground level. Everything will look so tiny from there, like little stars.

Rockefeller Center, New York

It's a popular spot, especially around the holidays, but it's one that never gets old. Located in midtown Manhattan, Rockefeller Center is a must-see for history buffs and Instagrammers alike.
Rockefeller Center, New York
You can reach the 70th floor, called the Top of the Rock, in just 42 seconds. If you've never visited, you should know that Rockefeller Center comprises of 19 buildings. If you want to get to the observatory deck, head to the 30 Rockefeller Center, also called the Comcast Building or 30 Rock.
Next, 21 of the greatest views on earth.

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Tuesday, July 19, 2016

Real estate taxation – a blessing or a curse?


Taxation
The Finance Bill 2016 caught everyone by surprise in the real estate sector, especially persons with black money and short term speculators. For them it is a nightmare that FBR can value the properties at fair market value, which has taxation repercussions regarding source of investment and thereafter can levy Capital Gain Tax (CGT) if the asset is held for less than five years. The whole real estate market is in shock and allegedly, in some major housing entities the business is almost at a halt. There are visible signs that strikes are being arranged in some major cities of Pakistan but so far no defined agenda in terms of demands has been made public especially by any real estate dealers association.
Interestingly, the hearsay is that the two major amendments would discourage foreign remittance to Pakistan. If overseas Pakistanis remit their money through normal banking channels per Income Tax Ordinance 2001, they are exempt from tax and the remitted money is treated as purely “white”. In fact, previously, when an overseas Pakistani with “white” money used to buy an asset and get it registered at Deputy Commission (DC) value he was willingly or unwillingly converting part of his “white” money into “black” money.
As an example, an asset bought for PKR 10 Million and registered at a DC value of PKR 2.5 Million would transform an overseas person’s major chunk of money i.e. PKR 7.5 Million into “black”. This was totally undesirable but he had to follow the market practice by getting the sale purchase agreement registered at the DC value. The beneficiary could be the other party who in most  cases does not have enough “white” money to complete the transaction. Therefore, the concern should be for people who have untaxed money but not the overseas Pakistanis who have, in fact, only “white” money.
Secondly, the government is to levy a 10% capital gains tax on the gain between sale and purchase price if the property is sold within five years of its purchase. This amendment is also geared towards curbing speculative trading which the majority of the overseas Pakistanis do not intend to undertake due to their remoteness and investment strategy. Hence, it barely impacts overseas Pakistanis and even in case a 10% tax is paid on the gain, it should be acceptable considering the high tax rates on capital gains which they are bound to pay in most of the foreign countries of their residence, except for middle east.
The 10% tax slab is rational considering that on other business incomes, the applicable rate is around 35%. Hence the applicable rate is still lower than the tax rate levied on normal business income. Conclusively, the overseas Pakistanis should consider these aforesaid changes in the tax statute a blessing in disguise as it will allow them to properly make their declaration and let their “white” money remain “white” instead of being forced to convert it in to “black” money, under the older system. However, I would advise overseas Pakistanis would be to at least stick to the below:
1) Use normal banking channels to remit their money into their bank accounts from overseas. Keep the relevant documents in their record for future purposes. The documents in order of precedence would proceed thus: realization certificate issued by their Pakistani bank, bank statement from Pakistani bank and remittance receipt of overseas bank.
2) If you intend to purchase the property it should be purchased with “white” money. The sale-purchase agreement should be on the fair market value of the property and not the DC vale. The agreement has to be signed by both parties and should not be left blank. If you are a filer, you can declare it, or else keep it in safe record for future use.
3) In case you intend to sell a property, hold on to it until the dust has settled and the issue of capital gain is cleared. Else, the maximum you have to pay is 10% of the gain between fair market value and purchase price.
Federal Board of Revenue (FBR) remained helpless especially during the last five years and was made to accept DC values owing to FBR’s own circulars wherein the aforesaid were binding. FBR tried to suggest changes in the statutes which included desperate measures including proposing to the government that FBR could acquire the property at 25% additional price compared to the registered price. But government rightly struck down these proposals as it could have created panic in the market. However, the recent amendment regarding fair market valuation and levying of capital gain if an asset exchanges hand within five years of its purchase merited consideration which the government approved through legislature. The implications of these two amendments are far reaching:
Fair Market Value: If the transactions would be registered at Fair Market Value, the seller would have to pay CGT (within five years of its purchase) and purchaser would have to produce “white” money to complete the transaction which will be an uphill task. Else, the tax implications, including levy of evasion penalties and additional tax, could eat up a major portion of the market value of the asset under transaction. The measure would definitely discourage “black” money holders who were hiding their wealth in real assets.
Capital Gain Tax (CGT): The levy of CGT withholding period less than five years is an attempt to discourage speculative trading. Currently, speculative trading had resulted in creating artificial hike in prices, making the possibility of building their own home an unattainable dream for ordinary Pakistanis.
Surprisingly, the real estate dealer associations have not yet come up with their official demand of charter. I wonder, what could a rational set of demands even be? Do away with fair market value or abolish the holding period of capital gains tax? Both of these do not hold merit for serious consideration in view of the fact that the provisions have been included to check “black” money and speculative trading. Hence, what could be the options at hand and what could be the possible outcomes?
1) Stay from Higher Courts: Apparently, there is no cogent reason as the bill has been passed by the National Assembly and the intention of legislature is clear – discourage black money holders and curtail speculative trading
2) Street Protests and Hold Off: Unless there is a genuine and rational agenda, it will be difficult to muster support from ordinary citizens, apart from the stakeholders which will be represented by real estate agents. The government may not be pressed for revenue loss due to halt in business considering their long term goal. Per Daily Express clipping by Shahabaz Rana dated July 14, 2016 Naveed Zafar Ashfaq Jaffery & Co, a chartered accountancy firm has revealed that there is PKR 7,000 Billion of “black money” in the real estate sector. If taxed properly, there could be one time wind fall tax collection and recurring thereafter.
3) Negotiation with the Government: Apparently, this will be the desirable and best route forward. FBR is in a strong position and it is expected it will not budge with undue demands. There could be number of suggestions but I would suggest the following:
a) Tax Amnesty: Government has announced tax amnesty schemes a number of times in the past,  the most recent one, for traders, being introduced just a few months back, but the response has always been lukewarm. However, here the situation is different wherein noose is around the neck of tax evaders and it will primarily be at their request with only available and acceptable solution. It is expected that FBR will take advantage of the situation and will not offer amnesty at any rate lower than 10% of the amount to be made white. The aforesaid is the rate which FBR has normally used as a benchmark rate for amnesties declared in the past two decades and even as recently as few months ago for traders. The impact of this would be enormous for the economy wherein huge amounts of tax will be collected once and then perennial collection would continue based on the market value. If we agree with the number quoted by Express Tribune then 10% of PKR 7,000 Billion would translate into PKR 700 Billion tax collection. It is important to mention that the current year collection of FBR was PKR 3,104 Billion and hence it would translate into 22.6% of the tax collection for current year and even FBR would not have any issue in meeting Fiscal Year 2016-17 target, which is fixed at PKR 3,621 Billion.
b) Capital Gain: Reducing the holding period from five to three years would be reasonable and acceptable to all the parties. Earlier, it was two years wherein after this period there would not be any liability under capital gains tax.
c) Giving Powers to FBR to Inquire the source of Foreign Remittance: The Protection of Economic Reforms Act 1992 debars FBR from requesting foreign exchange remitters to disclose the source i.e. who remitted the money and whether that person had the financial health to remit that money. The lack of these powers has in fact caused more damage to the FBR than any other restriction as it has robbed Pakistan of trillion of rupees in terms of tax collection ever since the act came into effect. Practically, all sophisticated investors who are fully conversant with legal implications send their untaxed money through “hawala” abroad and get it remitted to Pakistan statedly at less than 5%. This is a big loop hole in the system and has to be plugged immediately. After all, if the remitter is genuine then he should not have any issue if his financial health is probed. But apparently, due to known reasons to everyone in terms of beneficiaries, no government has ever shown willingness to give this power to FBR. In this case, if this power is not granted, even if amnesty scheme is declared and implemented, it will not meet set objectives. Just consider, if the rate for amnesty is 10% all sophisticated investors will be inclined to whiten their money at a reduced rate and hence exchequer will be robbed of the requisite revenue.
Conclusively, the changes in tax statute regarding real estate taxation is a blessing in disguise for the overseas Pakistanis who can do transactions with their “white” money freely and without any hassle. However, these measures are a nightmare for “black” money holders and speculative traders who had become used to enjoying unprecedented gains in short time frames. The government and FBR has got a golden opportunity to set things right, and with the assistance of stakeholders, they can come up with a viable solution of which a tax amnesty may be one. However, it is equally important to make amendments in the Protection of Economic Reforms Act 1992 by giving the FBR power to probe the source of remittance to distinguish between genuine and “hawala” transactions

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Wednesday, July 13, 2016

The Thing (listening device)


Replica of the Great Seal which contained a Soviet bugging device, on display at the NSA'sNational Cryptologic Museum.
The Thing, also known as the Great Seal bug, was one of the first covert listening devices (or "bugs") to use passive techniques to transmit an audio signal. It was concealed inside a gift given by the Soviets to the US Ambassador to Moscow on August 4, 1945. Because it was passive, being energized and activated by electromagnetic energy from an outside source, it is considered a predecessor of RFID technology.[1]
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Creation

The Thing was designed by Soviet Russian inventor Léon Theremin,[2] whose best-known invention is the electronic musical instrument the theremin.
The principle used by The Thing, of a resonant cavity microphone, had been patented by Winfield R. Koch of the Radio Corporation of America (RCA) in 1941. In US patent 2,238,117 he describes the principle of a sound-modulated resonant cavity. High-frequency energy is inductively coupled to the cavity. The resonant frequency is varied by the change in capacitance resulting from the displacement of the acoustic diaphragm.[3]

Installation and use

The device was used by the Soviet Union to spy on the United States. It was embedded in a carved wooden plaque of the Great Seal of the United States. On August 4, 1945, a delegation from the Young Pioneer organization of the Soviet Union presented the bugged carving to U.S. Ambassador W. Averell Harriman, as a "gesture of friendship" to the USSR's World War II ally. It hung in the ambassador's Moscow residential study for seven years, until it was exposed in 1952 during the tenure of Ambassador George F. Kennan.[4]

Operating principles

The Thing consisted of a tiny capacitive membrane connected to a small quarter-wavelength antenna; it had no power supply or active electronic components. The device, a passive cavity resonator, became active only when a radio signal of the correct frequency was sent to the device from an external transmitter. This is currently referred in NSA parlance as 'illuminating' a passive device. Sound waves caused the membrane to vibrate, which varied the capacitance "seen" by the antenna, which in turn modulated the radio waves that struck and were re-transmitted by the Thing. A receiver demodulated the signal so that sound picked up by the microphone could be heard, just as an ordinary radio receiver demodulates radio signals and outputs sound.
Theremin's design made the listening device very difficult to detect, because it was very small, had no power supply or active electronic components, and did not radiate any signal unless it was actively being irradiated remotely. These same design features, along with the overall simplicity of the device, made it very reliable and gave it a potentially unlimited operational life.

Technical details[edit]

The device consisted of a 9-inch (23 cm) long monopole antenna (quarter-wave for 330 Megahertz(MHz) frequencies, but able to also act as half-wave or full-wave, the accounts differ)—a straight rod, led through an insulating bushing into a cavity, where it was terminated with a round disc that formed one plate of a capacitor. The cavity was a high-Q round silver-plated copper "can", with the internal diameter of 0.775 in (19.7 mm) and about 11/16 in (17.5 mm) long, with inductance of about 10 nanohenry.[5] Its front side was closed with a very thin (3 mil, or 75 micrometers) and fragile conductive membrane. In the middle of the cavity was a mushroom-shaped flat-faced tuning post, with its top adjustable to make it possible to set the membrane-post distance; the membrane and the post formed a variable capacitor acting as a condenser microphone and providing amplitude modulation (AM), with parasitic frequency modulation (FM) for the re-radiated signal. The post had machined grooves and radial lines into its face, probably to provide channels for air flow to reduce pneumatic damping of the membrane. The antenna was capacitively coupled to the post via its disc-shaped end. The total weight of the unit, including the antenna, was 1.1 ounce (31 grams).
The length of the antenna and the dimensions of the cavity were engineered in order to make the re-broadcast signal a higher harmonic of the illuminating frequency. (Note that the transmitting frequency is higher than the illuminating one.)[6]
The original device was located with the can under the beak of the eagle on the Great Seal presented to W. Averell Harriman (see below); accounts differ on whether holes were drilled into the beak to allow sound waves to reach the membrane. Other sources say the wood behind the beak was undrilled but thin enough to pass the sound, or that the hollowed space acted like a soundboard to concentrate the sound from the room onto the microphone.
The illuminating frequency used by the Soviets is said to be 330 MHz.[7]

Discovery

The existence of the bug was discovered accidentally by a British radio operator at the British embassy who overheard American conversations on an open radio channel as the Soviets were beaming radio waves at the ambassador's office. An American State Department employee was then able to reproduce the results using an untuned wideband receiver with a simple diode detector/demodulator,[8] similar to some field strength meters.
Two additional State Department employees, John W. Ford and Joseph Bezjian, were sent to Moscow in March 1951 to investigate this and other suspected bugs in the British and Canadian embassy buildings. They conducted a technical surveillance counter-measures "sweep" of the Ambassador's office, using a signal generator and a receiver in a setup that generates audio feedback ("howl") if the sound from the room is transmitted on a given frequency. During this sweep, Bezjian found the device in the Great Seal carving.[8]:2
The Central Intelligence Agency set about to analyze the device, and hired people from the British Marconi Company to help with the analysis. Marconi technicianPeter Wright, a British scientist and later MI5 counterintelligence officer, ran the investigation.[8] He was able to get The Thing working reliably with an illuminating frequency of 800 MHz. (The generator which had discovered the device was tuned to 1800 MHz.)
The membrane of the Thing was extremely thin, and was damaged during handling by the Americans; Wright had to replace it.
The simplicity of the device caused some initial confusion during its analysis; the antenna and resonator had several resonant frequencies in addition to its main one, and the modulation was partially both amplitude modulated and frequency modulated. The team also lost some time on an assumption that the distance between the membrane and the tuning post needed to be increased to increase resonance.

Aftermath

Wright's examination led to development of a similar British system codenamed SATYR, used throughout the 1950s by the British, Americans, Canadians and Australians.
There were later models of the device, some with more complex internal structure (the center post under the membrane attached to a helix, probably to increase Q), and some American models with dipole antennas. Maximizing the Q-factor was one of the engineering priorities, as this allowed higher selectivity to the illuminating signal frequency, and therefore higher operating distance and also higher acoustic sensitivity.[8]
In 1960, The Thing was mentioned on the fourth day of meetings in the United Nations Security Council, convened by the Soviet Union over the 1960 U-2 incidentwhere a U.S. spy plane had entered their territory and been shot down. The U.S. ambassador showed off the bugging device in the Great Seal to illustrate that spying incidents between the two nations were mutual and to allege that Nikita Khrushchev had magnified this particular incident out of all proportion as a pretext to abort the 1960 Paris Summit.[9]


THEREMIN’S BUGHOW THE SOVIET UNION SPIED ON THE US EMBASSY FOR 7 YEARS


The man leaned over his creation, carefully assembling the tiny pieces. This was the hardest part, placing a thin silver plated diaphragm over the internal chamber. The diaphragm had to be strong enough to support itself, yet flexible enough to be affected by the slightest sound. One false move, and the device would be ruined. To fail meant a return to the road work detail, quite possibly a death sentence. Finally, the job was done. The man leaned back to admire his work.
The man in this semi-fictional vignette was Lev Sergeyevich Termen, better known in the western world as Léon Theremin. You know Theremin for the musical instrument which bears his name. In the spy business though, he is known as the creator of one of the most successful clandestine listening devices ever used against the American government.
The creation of Léon Theremin’s bug can be attributed to the success of his instrument. Theremin, the man, was a scientist by training. Theremin, the instrument, uses the player’s hand proximity to a pair of antennas to generate electronic sound. As a young student, Theremin was an aspiring physicist. World War One saw him enter military engineering school for radio operations. After the war, he worked on experiments as diverse as a device to measure the dielectric constant of gases and hypnosis.  Léon even did work in Ivan Pavlov’s lab.
In 1920, while working on his dielectric measurement device, Theremin noticed that an audio oscillator changed frequency when he moved his hand near the circuit. The Theremin was born. In November of 1920 Léon gave his first public concert with the instrument. He began touring with it in the late 1920’s and in 1928, he brought the Theremin to the United States. He set up a lab in New York and worked with RCA to produce the instrument.
Theremin’s personal life during this period was less successful than his professional endeavors. His wife, Katia, had come to America with him and studied medicine at a school about 35 miles from the City. For much of this time, Léon and Katia lived apart, seeing each other only a couple of times a week. While at school, Katia became associated with a fascist organization. The Russian Consulate caught wind of this and summarily divorced Léon from Katia. They couldn’t risk their rising star being associated with the Nazis.
Theremin eventually remarried, this time to Lavinia Williams, a ballerina. Lavinia was African-American and the couple faced ridicule in American social circles due to their mixed race. However, the Soviet Consulate did not have a problem with their relationship. In 1938, with the Nazi threat growing stronger, Theremin returned to Russia. He expected to send for his wife a few weeks after his arrival. Unfortunately, that wasn’t to be the case. Léon and Lavinia never saw each other again.
Upon arrival in Leningrad, Theremin was imprisoned, suspected of crimes against the state. He found himself working in a laboratory for the state department. This was not an unusual situation. Aircraft designer Andrei Tupolev and missile designer Sergei Korolyov were two of many others who faced a similar fate.
It was during this time as a prisoner that Theremin designed his listening device.

Placing the bug

greatseal-frontThe date was August 4, 1945. The european war was over, and the nuclear bombing of Hiroshima was only two days away. A group of 10 to 15 year old boys from the Young Pioneer Organization of the Soviet Union arrived at the US embassy carrying a hand carved great seal of the United States of America. They presented the seal to W. Averell Harriman, the US ambassador to the Soviet Union. The seal was given as a gesture of friendship between the US and Soviet Union. Harriman hung the plaque in the study of his residence, Spaso House. Unbeknownst to Harriman, the seal contained Theremin’s sophisticated listening device. The device, later known as “The Thing”, would not be discovered until 1952 — roughly seven years later.

Discovered!

sealandbug-cutawayThe discovery of the great seal listening device is an interesting one. British broadcasters reported hearing American voices on the their radios in the vicinity of the American embassy. No Americans were transmitting though, which meant there had to be a bug. Numerous sweeps were performed, all of which turned up nothing. Joseph Bezjian had a hunch though. He stayed at the embassy pretending to be a house guest. His equipment was shipped in separately, disguised from Russian eyes. Powering up his equipment, Bezjian began a sweep of the building. With his receiver tuned to 1.6 GHz, he heard the bug’s audio, and quickly isolated the source in the great seal. Close inspection of the carving found it had been hollowed out, and a strange device placed behind the eagle’s beak. No batteries or wires were evident, and the device was not powered through the nail which had been hanging the seal. Bezjian removed the device from the great seal and was so cautious the he slept with it under his pillow that night for safe keeping. The next day he sent it back to Washington for analysis.

Theory of Operation

Bug-mountedThe great seal bug quickly became known as “The Thing”. It was a passive resonant cavity device, containing no batteries or other power source. It consisted of an antenna and a small cylinder. One side of the cylinder was solid. The other side consisted of a very thin diaphragm, obviously some sort of microphone. Passive resonant cavities had been explored before, both in the US and abroad, but this is the first time we know of that was used for clandestine purposes. In his book Spycatcher, British operative Peter Wrightclaims that the US came to him for help determining how the device worked. However he is not mentioned in other accounts of Theremin’s bug.
Regardless of who figured out the device, the method of operation is devilishly simple. The Soviets would sit outside the embassy, either in another building or in a van. From this remote location they would aim a radio transmitter at the great seal. The bug inside would receive this signal and transmit voices in the room on a second, higher frequency. It did all of this with no standard internal components. No resistors, no tubes, no traditional capacitors, or the like. There were capacitive properties to the mechanism. For instance, a capacitor is formed between the diaphragm and the tuning peg of the device.
scientific-am-bugReceive tuning (if it can be called such) was achieved by the precisely cut antenna. The RF carrier transmitted by the Russians would be received at the antenna and travel into the body of the device which was a resonant cavity. That resonant chamber was capacatively coupled to the thin conductive diaphragm which formed the microphone.
Sound waves would cause the diaphragm to move, which would vary the capacitance between the body and diaphragm, forming a condenser microphone. It is important to note that the bug didn’t transmit and receive on the same frequency. According to Peter Wright, the excitation frequency used by the Russians was actually 800 MHz. The cavity would resonate at a multiple of this base frequency, producing the 1.6 GHz output seen by Bezjian.
While bugs of this type have fallen out of favor, the idea of “illuminating” a device with an external transmitter lives on. Check out [Elliot’s] description of the RageMaster bug from the ANT catalog here. Resonant cavities have found common use as well. Every microwave oven or radar system with a magnetron uses one.

A Political Pawn

lodgeThe great seal bug disappeared for a number of years. The Russians knew we had caught them, and moved on to other espionage devices. It finally reappeared in 1960 at the United Nations. During the Gary Powers U2 incident, Ambassador Henry Cabot Lodge Jr. presented the seal as concrete proof that Russia was spying on the Americans.
A replica of the great seal is on display at the NSA National Cryptologic Museum.

Afterward

thermogLéon Theremin was released from his camp in 1947. He married Maria Guschina. This time the state did not intervene, and the pair had two children. In 1964, Theremin became a professor at the Moscow Conservatory. He lost his job after an article published in the New York times was read by the assistant director of the conservatory. The assistant director stated “Electricity is not good for music; electricity is to be used for electrocution” before throwing Theremin and his instruments out of the establishment. Through the 1970’s, Theremin worked in Moscow University’s Department of Acoustics. While there he built a polyphonic version of his instrument. Stored in a back room, the instrument was looted for parts by students and professors. Meanwhile, Theremin’s instrument was returning to vogue in the western world. Electronic music was hot, spawned by instruments such as the MiniMoog, and the Arp Kitten.
Theremin finally visited the United States in 1992, reuniting with old friends. He performed in a concert at Stanfordand was interviewed by Robert Moog, who considered him to be a hero of the electronic music world. After filling in many of the blanks of his story, Theremin asked Moog and co-interviewer Olivia Mattis to be responsible when writing up their story. “But if you write that I have said something; against the Soviet government and that I have said that it is better to work elsewhere, then I shall have difficulties back home [ironic laughter]”. Even then at the twilight of his life, with the fall of the Soviet Union underway, Theremin was still looking over his shoulder, worried about what the government might do if he offended them.

Theremin passed away in 1993. The unlikely master of this spy-gadget was 97 years old.The Bugged Embassy Case: What Went Wrong

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WASHINGTON, Nov. 14— In 1969, after years of tortuous negotiation, the Nixon Administration signed an agreement with the Soviet Union providing for new embassy complexes in Washington and Moscow.
The American project was to be the most elaborate and expensive United States embassy ever, a testament to American wealth and power.
Today, the eight-story American chancery in Moscow stands useless, infested with spying systems planted by Soviet construction workers, a stark monument to one of the most embarrassing failures of American diplomacy and intelligence in decades.
Over the years, the United States has spent $23 million on the building, but more than twice that amount in an attempt to figure out how the Soviets used eavesdropping devices to transform it into a giant antenna capable of transmitting written and verbal communications to the outside.
After a saga of suspicious behavior by Soviet work crews, electronic devices buried in concrete and investigators hanging like rock-climbers from the roof, a secret cable to the American Ambassador resulted, finally, in a halt to what a 1987 Senate committee described as ''the most massive, sophisticated and skillfully executed bugging operation in history.''
The Bush Administration will have to decide whether to follow President Reagan's advice that the building be torn down.
What went wrong is a spy story full of confusion, compromise and bureaucratic conflict. A Tale of Two Hills, And the Better Deal
The embassy saga dates back to 1934, when William C. Bullitt, the first American Ambassador to the Soviet Union, asked Stalin for a new embassy. But negotiations did not begin in earnest until the early 1960's.
Although the United States was offered a site high atop the Lenin Hills overlooking Moscow, it opted for an 85-year-lease on a site more accessible and centrally located: a 10-acre parcel overlooking the Moscow River and within walking distance of both the Ambassador's residence and important Soviet Government buildings.
Although neither side could have guessed it in 1969, when the site agreement was signed and eavesdropping techniques were less dependent on microwave telephone transmissions, the Soviets got the better deal, an elevated site on Mt. Alto, a hill overlooking Washington, tailor-made for espionage.
For four years, American and Soviet negotiators labored unsuccessfully over the terms of the construction. But in 1972, during the heady days of detente, President Nixon ordered a reluctant State Department to reach an agreement. In what would later be recognized as a crucial blunder, the United States gave the Soviets control of the design and construction of the mission in Moscow.
''I didn't favor it because it was a one-sided deal,'' recalled William P. Rogers, who signed off on the deal as Secretary of State in the Nixon White House. ''But I was carrying out the orders of the White House.''
But Dr. Henry A. Kissinger, Mr. Nixon's national security adviser at the time, declines to accept blame, saying the State Department did not voice strong objections. ''I don't exclude I said to somebody, 'See what you can do to get it done,' '' he said. ''But that isn't the same thing as saying, 'Go ahead, cost what it may.' ''
The Soviets proceeded to build pre-cast concrete pieces for the embassy building in their own factories, out of view of American security experts. In signing the accord, Washington miscalculated that inspection of the pieces as they arrived at the site would be sufficient to enable security personnel to detect eavesdropping devices. Since the United States had the right to do all the finishing work - from inside walls to windows and doors - there was little concern that the Soviets would be able to implant bugs that could not be detected. Security Slips Between the Cracks
From the outset, the project was beset by clashes within the Washington bureaucracy which delayed decisions on security matters. The chain of command was never clearly defined, as security, construction, diplomatic and intelligence functions were carried out by different offices with different agendas.
At the time of the groundbreaking in 1979, there was still no clear American plan for the on-site security needs or what the specialists were supposed to look for. American intelligence officials in Moscow warned that they would not have the necessary equipment and personnel to handle the problem of Soviet bugging once construction began.
By late 1979, several thousand precast elements of at least 7,000 pounds each were arriving on the building site. All of them had to be inspected. ''We started getting technical security people saying, 'Hey, guys, you have problems,' '' said a State Department official who was in Moscow at the time. ''They weren't listened to.''
Meanwhile, the State Department's Office of Foreign Buildings Operations, already under pressure from Congress because of cost overruns and poor results in construction projects in other capitals, was pushing to move the job along.
Instead, they found that the Soviet idea of efficient construction was vastly inferior to American standards, and they quickly lost patience with Russian absenteeism, drunkenness on the job and sloppy work habits.
''We treated this as a cost-driven operation and it became critical to move as quickly as possible,'' said Joseph S. Hulings 3d, the State Department's current coordinator on the embassy project.
Not until early 1982 was a specially trained team of security experts dispatched to Moscow. Armed with experimental X-ray scanning machines that could inspect construction elements without destroying them and cold-weather gear from Eddie Bauer, they invented inspection procedures as they went along.
The specialists were trained rock-climbers who worked through Moscow's winter nights in temperatures that fell to 40 degrees below zero, hanging off the side of the building to get from floor to floor.
The team was stunned when over the course of a few months, they discovered that the Soviets had put permanent eavesdropping systems into the actual structure of the building.
''We found things that didn't belong there based on shop drawings,'' said Frank Crosher, a security engineer who worked on the site from 1980 to 1982 and managed the embassy security team from Washington until 1986. ''We found cables in the concrete as well as design discrepancies, millions of bits of data.''
Along the way, they discovered interconnecting systems so sophisticated that they could not be removed from the steel and concrete columns, the beams, the pre-cast floor slabs and sheer walls between the columns. They found electronic ''packages'' where a piece of steel reinforcement in the flooring should have been, and resonating devices that allowed the Russians to monitor precisely both electronic and verbal communications.
Their job was made more difficult by decoys made to look like bugs and garbage from the construction process.
The Soviets, for their part, made every effort to thwart security efforts. In the spring of 1983, for example, after the American security team brought in new radiographic equipment to inspect structural columns, the Soviet construction workers went on a two-week strike, citing hazards to their health.
As work on the outer structure drew to a close, the Soviets suddenly became anxious to speed up construction of the top floors, where secret embassy functions were to be conducted. At the same time, an external Soviet-owned freight elevator was mysteriously disabled, which meant that Soviet workmen needed more access to the inside of the building.
But never did the American experts lose confidence that they could eventually figure out and neutralize the Soviet systems.
''Intelligence agents were saying, 'Give us a year and we'll fix it,' '' said one Administration official involved in the project. ''We had no other choice than to believe them. No one wanted to admit failure.''
Despite the mounting evidence of Soviet penetration, it took until August 1985 before the State Department ejected the Soviets from the construction site.
On Aug. 15, Mr. Lamb sent a secret cable to Ambassador Arthur A. Hartman recommending that he shut down the job. Mr. Hartman locked out the Soviets and stopped construction two days later. C.I.A.'s Confidence Plays Poorly in Congress
In late 1985, some members of Congress began to suspect that the problems might be irreparable. Following a visit to Moscow by staff members of the Senate Select Committee on Intelligence in December, the committee scheduled a series of closed briefings on the matter in the spring of 1986.
It was then that the C.I.A. admitted for the first time that the Soviets had successfully incorporated complex and impenetrable surveillance systems into the building structure.
But the C.I.A. and many technical experts still remained convinced that they could crack the Soviet systems.
A lengthy, highly classified memo from the C.I.A. to the Senate Intelligence Committee in December 1986 asserted that American intelligence analysts and engineers would be able to neutralize the building, even though they acknowledged that they were not yet able to figure out the Soviet systems.
But allegations surfaced in the spring of 1987 that Marine guards had dated Soviet women and allowed K.G.B. agents access to sensitive information. Disclosures of the electronic penetration of the new embassy followed in April 1987, and for the first time, it became publicly known that the Soviets had installed a wide variety of intelligence-gathering devices whose technology was not understood by the United States.
At about the same time, the Senate Intelligence Committee unanimously recommended razing the building.
Still, the recommendation to tear the building down was vigorously opposed by the State Department, all the way up to Secretary of State George P. Shultz. Recommendation: The Wrecking Ball
Expert studies followed.
The President's Foreign Intelligence Advisory Board recommended in July 1987 spending about $80 million to use existing technology and develop new methods to clear the new chancery of eavesdropping devices. A report by James R. Schlesinger, a former Director of Central Intelligence, recommended destroying the top floors of the chancery and constructing a six-story annex at a cost of at least $35 million.
Finally, a study commissioned by the State Department concluded that razing the building and constructing a new one in its place would cost less, be less physically dangerous and take less time than neutralizing the listening systems in the uncompleted building. Mr. Shultz recommended to Mr. Reagan that the building be destroyed.
In the absence of Congressional objections, the State Department will begin a $3 million architectural and design plan for a new chancery next week. The Bush Administration will have to decide whether to accept Mr. Reagan's recommendation to raze and reconstruct the building, a project that could cost half a billion dollars and take another decade, according to some State Department estimates. President Reagan has made it clear that the Soviets, meanwhile, will not be allowed to occupy their new Washington embassy building, which is ready for use, until the United States moves into its own new quarters in Moscow.
In retrospect, the experts say, the embassy fiasco is a reflection of the American way of conducting diplomacy - the arrogance of negotiators who regarded treaty-signing as loftier than security matters, the hubris of intelligence experts who firmly believed that they could neutralize any system the Soviets could develop, and the bureaucratic inertia of American policymakers who ignored danger signs along the way.
''The culprit,'' Mr. Schlesinger said, ''is American complacency, the tendency to assume that the Russians are technically inferior to us and that we can handle them.''
Robert E. Lamb, Assistant Secretary of State for Diplomatic Security, put it more bluntly. ''We knew the Russians were going to bug it, but we were confident we could deal with it,'' he said. ''Obviously, we were wrong.''
Photo of the new U.S. Embassy in Moscow (NYT/Paul Hosefros)

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