Friday, December 12, 2008

Are Social Networks Sinking?


The air seems to be coming out of the Web 2.0 bubble, squeezed by the economic downturn and the absence of many solid short-term business plans.

Pownce is one of a few Web startups suffering in the economic downturn.
Pownce is one of a few Web startups suffering in the economic downturn.
(Courtesy MIT/Technology Review)

Dire market conditions have forced virtually all social-networking firms to scale back. In October, Hi5, the third most popular social-networking site, announced that it would cut between 10 percent and 15 percent of its staff. And in November, the business-focused networking sites LinkedIn and Jive said that they would slash their work forces by 10 percent and 40 percent, respectively.

The dominant social-networking sites are certainly better equipped to weather the storm: MySpace and Facebook have estimated revenues of $750 million and $300 million, respectively, while LinkedIn is expected to pull in between $75 million and $100 million this year. However, the overall value of these companies is still largely based on growth potential, which now seems shaky. Microsoft's investment in Facebook valued the company at a massive $15 billion. But in November, Twitter refused to be bought by Facebook for a reported $500 million of its stocks plus some cash.

The last week has also seen the demise of two prominent (and promising) Web startups: Pownce and Values of n.

Pownce, which offered a microblogging and file-sharing platform, was acquired by the blog software company Six Apart, while Values of n, which produces organizational and social-networking tools including Stikkit and I Want Sandy, was sold to Twitter.

Both new owners promptly announced that they would shut the original services down, suggesting that their acquisitions were more about acquiring talent and technology than about investing in viable new businesses.

Chris Alden, chairman and CEO of Six Apart, says that there simply isn't enough capital in the current market to sustain so many social-networking companies. "You'll see more consolidation in the next year or two," he said.

The current situation might seem gloomy, but the first signs of a coming shakeout appeared before the market took a turn for the worse. In August, for example, both the social-news site Thoof and the social music site ceased operating. Also, long before the downturn began, investors started raising concerns about how social media firms might make money.

"People don't really know how this is going to work," said Nicholas Economides, a professor of economics at New York University's Stern School of Business.

Companies are trying many different approaches, but he says that a solid business model for social networking has yet to emerge. "There's no formula for success," he said. Even Twitter, for all its notoriety, has virtually no revenues.

Charlene Li, founder of the social media consultancy Altimeter Group, based in San Mateo, Calif., says that it makes sense for smaller companies like Pownce and Values of n to be gobbled up by bigger players.

"These companies had really interesting features and services that are much stronger being part of an existing service that has a lot of people using it," Li said.

Alden declined to say which aspects of Pownce's technology are most interesting to Six Apart, but he agrees with Li that many Web startups are largely focused around one good idea.

"It's not always easy to convert that into a vibrant, self-sustaining company," he said. "When economic times are good, you have a longer runway to make that happen. When times get tougher, it dramatically decreases."

It's hard not to compare the current shakeout with the dot-com bust of 2000, but those within the industry dismiss the comparison. "That burst with a thunderclap; this'll burst with a pop," said Paul Gillin, a social media strategist based in Framingham, Mass. He believes that this will be a less violent contraction cycle, less intense than that suffered, for example, by personal-computer makers during the 1980s.

At least there has not been the same profligate investing that there was during the dot-com days. There is no counterpart to the excesses of investors who put $830 million into Webvan or $280 million into

Six Apart's Alden argues that consolidation is in the nature of the startup business. He can speak from experience: His own startup, Rojo, was acquired by Six Apart in 2006. Alden also argues that no one should confuse companies shutting down or being acquired with a lack of interest in social media.

"With the Web 2.0 or social media trend, we're still seeing very, very strong activity and behavioral trends," he said.

Copyright © 2008, Technology Review Inc. All Rights Reserved.

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Fed Refuses to Disclose Recipients of $2 Trillion (Update2)

By Mark Pittman

Dec. 12 (Bloomberg) -- The Federal Reserve refused a request by Bloomberg News to disclose the recipients of more than $2 trillion of emergency loans from U.S. taxpayers and the assets the central bank is accepting as collateral.

Bloomberg filed suit Nov. 7 under the U.S. Freedom of Information Act requesting details about the terms of 11 Fed lending programs, most created during the deepest financial crisis since the Great Depression.

The Fed responded Dec. 8, saying it’s allowed to withhold internal memos as well as information about trade secrets and commercial information. The institution confirmed that a records search found 231 pages of documents pertaining to some of the requests.

“If they told us what they held, we would know the potential losses that the government may take and that’s what they don’t want us to know,” said Carlos Mendez, a senior managing director at New York-based ICP Capital LLC, which oversees $22 billion in assets.

The Fed stepped into a rescue role that was the original purpose of the Treasury’s $700 billion Troubled Asset Relief Program. The central bank loans don’t have the oversight safeguards that Congress imposed upon the TARP.

Total Fed lending exceeded $2 trillion for the first time Nov. 6. It rose by 138 percent, or $1.23 trillion, in the 12 weeks since Sept. 14, when central bank governors relaxed collateral standards to accept securities that weren’t rated AAA.

‘Been Bamboozled’

Congress is demanding more transparency from the Fed and Treasury on bailout, most recently during Dec. 10 hearings by the House Financial Services committee when Representative David Scott, a Georgia Democrat, said Americans had “been bamboozled.”

Bloomberg News, a unit of New York-based Bloomberg LP, on May 21 asked the Fed to provide data on collateral posted from April 4 to May 20. The central bank said on June 19 that it needed until July 3 to search documents and determine whether it would make them public. Bloomberg didn’t receive a formal response that would let it file an appeal within the legal time limit.

On Oct. 25, Bloomberg filed another request, expanding the range of when the collateral was posted. It filed suit Nov. 7.

In response to Bloomberg’s request, the Fed said the U.S. is facing “an unprecedented crisis” in which “loss in confidence in and between financial institutions can occur with lightning speed and devastating effects.”

Data Provider

The Fed supplied copies of three e-mails in response to a request that it disclose the identities of those supplying data on collateral as well as their contracts.

While the senders and recipients of the messages were revealed, the contents were erased except for two phrases identifying a vendor as “IDC.” One of the e-mails’ subject lines refers to “Interactive Data -- Auction Rate Security Advisory May 1, 2008.”

Brian Willinsky, a spokesman for Bedford, Massachusetts- based Interactive Data Corp., a seller of fixed-income securities information, declined to comment.

“Notwithstanding calls for enhanced transparency, the Board must protect against the substantial, multiple harms that might result from disclosure,” Jennifer J. Johnson, the secretary for the Fed’s Board of Governors, said in a letter e-mailed to Bloomberg News.

‘Dangerous Step’

“In its considered judgment and in view of current circumstances, it would be a dangerous step to release this otherwise confidential information,” she wrote.

New York-based Citigroup Inc., which is shrinking its global workforce of 352,000 through asset sales and job cuts, is among the nine biggest banks receiving $125 billion in capital from the TARP since it was signed into law Oct. 3. More than 170 regional lenders are seeking an additional $74 billion.

Fed Chairman Ben S. Bernanke and Treasury Secretary Henry Paulson said in September they would meet congressional demands for transparency in a $700 billion bailout of the banking system.

The Freedom of Information Act obliges federal agencies to make government documents available to the press and public. The Bloomberg lawsuit, filed in New York, doesn’t seek money damages.

‘Right to Know’

“There has to be something they can tell the public because we have a right to know what they are doing,” said Lucy Dalglish, executive director of the Arlington, Virginia-based Reporters Committee for Freedom of the Press.

“It would really be a shame if we have to find this out 10 years from now after some really nasty class-action suit and our financial system has completely collapsed,” she said.

The Fed’s five-page response to Bloomberg may be “unprecedented” because the board usually doesn’t go into such detail about its position, said Lee Levine, a partner at Levine Sullivan Koch & Schulz LLP in Washington.

“This is uncharted territory,” said Levine during an interview from his New York office. “The Freedom of Information Act wasn’t built to anticipate this situation and that’s evident from the way the Fed tried to shoehorn their argument into the trade-secrets exemption.”

The Fed lent cash and government bonds to banks that handed over collateral including stocks and subprime and structured securities such as collateralized debt obligations, according to the Fed Web site.

Borrowers include the now-bankrupt Lehman Brothers Holdings Inc., Citigroup and New York-based JPMorgan Chase & Co., the country’s biggest bank by assets.

Banks oppose any release of information because that might signal weakness and spur short-selling or a run by depositors, Scott Talbott, senior vice president of government affairs for the Financial Services Roundtable, a Washington trade group, said in an interview last month.

‘Complete Truth’

“Americans don’t want to get blindsided anymore,” Mendez said in an interview. “They don’t want it sugarcoated or whitewashed. They want the complete truth. The truth is we can’t take all the pain right now.”

The Bloomberg lawsuit said the collateral lists “are central to understanding and assessing the government’s response to the most cataclysmic financial crisis in America since the Great Depression.”

In response, the Fed argued that the trade-secret exemption could be expanded to include potential harm to any of the central bank’s customers, said Bruce Johnson, a lawyer at Davis Wright Tremaine LLP in Seattle. That expansion is not contained in the freedom-of-information law, Johnson said.

“I understand where they are coming from bureaucratically, but that means it’s all the more necessary for taxpayers to know what exactly is going on because of all the money that is being hurled at the banking system,” Johnson said.

The Bloomberg lawsuit is Bloomberg LP v. Board of Governors of the Federal Reserve System, 08-CV-9595, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporters on this story: Mark Pittman in New York at;

Original here

Santa's Not Coming: All KB Toys Stores To Be Liquidated And Closed

By Meg Marco

KB Toys has returned to Chapter 11 bankruptcy, says the Wall Street Journal, and will be liquidated by its parent company — Prentice Capital Management.

"Going out of business" sales will begin quickly at the chain's 277 retail outlets, 40 larger KB Toy Works stores, 114 outlet stores and 30 temporary "holiday stores."

The WSJ says the liquidation was prompted by a 20% decrease in sales in the second half of this year.

The article had no information about the fate of KB Toys gift cards (though KB Toys website says they have suspended sales of gift cards for the 2008 season) — a detail that is up to the bankruptcy court. Generally, gift card holders are considered "unsecured creditors" unless provisions are made for the store to continue redeeming the cards.

Know anything about KB Toys gift card policy during liquidation? Email us at

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Dollar Devaluation To Fix The Great Recession

A quick dollar devaluation would work wonders for submerged borrowers. Don't kid yourself: It could happen.


What began as government social tinkering--with implied threats to banks and mortgage companies to extend home loans to even the most marginal of borrowers--led to a greed-blinded mortgage banking business and the meltdown we are experiencing today. Now we are asked by the same congressional leadership to go along with taxpayer-funded bailouts of the very banksters who, while making millions, created the mess.

Beware the bear market rally. Click here for Gary Shilling's toolkit for navigating through the financial crisis, yours when you try Insight.

Despite the trillions of dollars already expended recapitalizing banks, there is very little, if any, progress to show. Will a few trillion more do the trick? That seems to be the consensus among Congress and the banks. "They are simply too big to let fail," or are they really just too big to save? We can go back to "Plan A" and buy the toxic assets. If so, at what price? What if a few trillion does not remove enough toxic waste from the system or doesn't get credit flowing again and the economy bustling?

Some argue that it is time to help Main Street, not Wall Street. So, we should "forgive" some of the mortgages for those who are 90 days or more behind on their payments. Have you quit paying yet?

If we are to save bankers, shouldn't we at least distinguish between those who possess the intelligence to renegotiate their loans to workable terms? If we are to save homeowners, should not we first define the term "homeowner?" Perhaps it is not only someone who agreed to and signed a mortgage and is living in a house. Just perhaps, it should also include the stipulation that this individual paid some amount of a down payment: 20%, 5%, a dollar. I can tell you who is not a homeowner. It is not someone who paid zero down and ridiculously low payments for two years; that, my friend, is a renter.

Special Offer: Larry Kudlow may tease Gary Shilling about being bearish, but Gary is the guy who was right! The housing market crashed, banks went under and now the government is here to save the day. Think the problems have passed? Think again before you invest. Click here for advice to keep your wealth with Gary Shilling's Insight.

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Senate report: Rumsfeld to blame for detainee abuse

Former Defense Secretary Donald Rumsfeld and other members of the Bush administration "conveyed the message that physical pressures and degradation were appropriate treatment for detainees," claims a Senate Armed Services Committee report issued Thursday.

According to the committee, prisoners were tortured in the Iraqi prison Abu Ghraib, the US prison at Guantanamo Bay, Cuba, and other US military installations. Senators Carl Levin (D-MI) and John McCain (R-AZ) were responsible for the content of the Senate's findings.

The report determined that placing the blame on "a few bad apples," as Bush administration officials attempted to do in the aftermath of the Abu Ghraib scandal, is inappropriate.

The policies were adopted after government assessments determined waterboarding and other torture techniques were "100 percent effective" at breaking the wills of US officers who underwent the military's Survival Evasion Resistance and Escape program.

The report finally claims that Rumsfeld's torture policies "damaged our ability to collect accurate intelligence that could save lives, strengthened the hand of our enemies and compromised our moral authority."

Original here

Musicians don’t want tunes used for torture

The U.S. has used loud music against those held in Guantanamo Bay, Iraq and Afghanistan, and detainees now aren't the only ones complaining: Musicians are banding together to demand the U.S. military stop using their songs as weapons.

GUANTANAMO BAY NAVAL BASE, Cuba - Blaring from a speaker behind a metal grate in his tiny cell in Iraq, the blistering rock from Nine Inch Nails hit Prisoner No. 200343 like a sonic bludgeon.

“Stains like the blood on your teeth,” Trent Reznor snarled over distorted guitars. “Bite. Chew.”

The auditory assault went on for days, then weeks, then months at the U.S. military detention center in Iraq. Twenty hours a day. AC/DC. Queen. Pantera. The prisoner, military contractor Donald Vance of Chicago, told The Associated Press he was soon suicidal.

The tactic has been common in the U.S. war on terror, with forces systematically using loud music on hundreds of detainees in Iraq, Afghanistan and Guantanamo Bay. Lt. Gen. Ricardo Sanchez, then the U.S. military commander in Iraq, authorized it on Sept. 14, 2003, “to create fear, disorient ... and prolong capture shock.”

Now the detainees aren’t the only ones complaining. Musicians are banding together to demand the U.S. military stop using their songs as weapons.

A campaign being launched Wednesday has brought together groups including Massive Attack and musicians such as Tom Morello, who played with Rage Against the Machine and Audioslave and is now on a solo tour. It will feature minutes of silence during concerts and festivals, said Chloe Davies of the British law group Reprieve, which represents dozens of Guantanamo Bay detainees and is organizing the campaign.

At least Vance, who says he was jailed for reporting illegal arms sales, was used to rock music. For many detainees who grew up in Afghanistan — where music was prohibited under Taliban rule — interrogations by U.S. forces marked their first exposure to the pounding rhythms, played at top volume.

‘Plenty lost their minds’
The experience was overwhelming for many. Binyam Mohammed, now a prisoner at Guantanamo Bay, said men held with him at the CIA’s “Dark Prison” in Afghanistan wound up screaming and smashing their heads against walls, unable to endure more.

“There was loud music, (Eminem’s) ‘Slim Shady’ and Dr. Dre for 20 days. I heard this nonstop over and over,” he told his lawyer, Clive Stafford Smith. “The CIA worked on people, including me, day and night for the months before I left. Plenty lost their minds.”

The spokeswoman for Guantanamo’s detention center, Navy Cmdr. Pauline Storum, wouldn’t give details of when and how music has been used at the prison, but said it isn’t used today. She didn’t respond when asked whether music might be used in the future.

FBI agents stationed at Guantanamo Bay reported numerous instances in which music was blasted at detainees, saying they were “told such tactics were common there.”

According to an FBI memo, one interrogator at Guantanamo Bay bragged he needed only four days to “break” someone by alternating 16 hours of music and lights with four hours of silence and darkness.

Ruhal Ahmed, a Briton who was captured in Afghanistan, describes excruciating sessions at Guantanamo Bay. He said his hands were shackled to his feet, which were shackled to the floor, forcing him into a painful squat for periods of up to two days.

“You’re in agony,” Ahmed, who was released without charge in 2004, told Reprieve. He said the agony was compounded when music was introduced, because “before you could actually concentrate on something else, try to make yourself focus on some other things in your life that you did before and take that pain away.

“It makes you feel like you are going mad,” he said.

‘Sesame Street’ tunes used for interrogation
Not all of the music is hard rock. Christopher Cerf, who wrote music for “Sesame Street,” said he was horrified to learn songs from the children’s TV show were used in interrogations.

“I wouldn’t want my music to be a party to that,” he told AP.

Bob Singleton, whose song “I Love You” is beloved by legions of preschool Barney fans, wrote in a newspaper opinion column that any music can become unbearable if played loudly for long stretches.

“It’s absolutely ludicrous,” he wrote in the Los Angeles Times. “A song that was designed to make little children feel safe and loved was somehow going to threaten the mental state of adults and drive them to the emotional breaking point?”

Morello, of Rage Against the Machine, has been especially forceful in denouncing the practice. During a recent concert in San Francisco, he proposed taking revenge on President George W. Bush.

“I suggest that they level Guantanamo Bay, but they keep one small cell and they put Bush in there ... and they blast some Rage Against the Machine,” he said to whoops and cheers.

Some musicians, however, say they’re proud that their music is used in interrogations. Those include bassist Stevie Benton, whose group Drowning Pool has performed in Iraq and recorded one of the interrogators’ favorites, “Bodies.”

“People assume we should be offended that somebody in the military thinks our song is annoying enough that played over and over it can psychologically break someone down,” he told Spin magazine. “I take it as an honor to think that perhaps our song could be used to quell another 9/11 attack or something like that.”

The band’s record label told AP that Benton did not want to comment further. Instead, the band issued a statement reading: “Drowning Pool is committed to supporting the lives and rights of our troops stationed around the world.”

Tactics to make men go mad
Vance, in a telephone interview from Chicago, said the tactic can make innocent men go mad. According to a lawsuit he has filed, his jailers said he was being held because his employer was suspected of selling weapons to terrorists and insurgents. The U.S. military confirms Vance was jailed but won’t elaborate because of the lawsuit.

He said he was locked in an overcooled 9-foot-by-9-foot cell that had a speaker with a metal grate over it. Two large speakers stood in the hallway outside. The music was almost constant, mostly hard rock, he said.

“There was a lot of Nine Inch Nails, including ‘March of the Pigs,”’ he said. “I couldn’t tell you how many times I heard Queen’s ‘We Will Rock You.”’

He wore only a jumpsuit and flip-flops and had no protection from the cold.

“I had no blanket or sheet. If I had, I would probably have tried suicide,” he said. “I got to a few points toward the end where I thought, ‘How can I do this?’ Actively plotting, ‘How can I get away with it so they don’t stop it?”’

Asked to describe the experience, Vance said: “It sort of removes you from you. You can no longer formulate your own thoughts when you’re in an environment like that.”

He was released after 97 days. Two years later, he says, “I keep my home very quiet.”

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America arranges a peace deal with Iran

Recently, I suggested that the US Administration reached a separate peace agreement with Iran. According to the US-Iran peace deal, Iran winded down its support for Iraqi guerrillas, and the US guaranteed it won’t bomb the Iranian nuclear facilities. Iran made good on its promise, and allowed the US Administration a tactical PR victory of reduced casualties in Iraq. The US Administration waited with fulfilling its part of the game until after the Annapolis peace show. Refusing to attack Iran over its nuclear program earlier would have likely derailed Israeli commitment to the Annapolis peace parley.

Immediately after the Annapolis, in the highly unusual move the US Administration allowed for publication of unclassified summary of the US intelligence report which asserts that Iran winded down its nuclear program… in 2003, and now “only” enriches the uranium to weapons grade. The absurd report still suggests that Iran “may” produce a nuclear weapon before 2015. Still more ridiculously, the report suggests that Iran needs several more years to produce enough nuclear material for a bomb. In fact, Iran’s 3,000 centrifuges produce enough fuel for two bombs in a year, and Russian-built Bushehr reactor allows Iran to harvest enough plutonium for a nuclear bomb in just four months. Such harvesting only requires the Iranians to stop the reactor for three weeks - not something they would hesitate to do even at the expense of reducing power supply to the national grid.

The US intelligence on nuclear developments is laughable: it missed the crucial developments in Pakistani, North Korean, Libyan, and Syrian nuclear programs. Israel intelligence estimates that Iran will have nuclear bomb by the late 2008 or 2009. Iran has nuclear-able ballistic missiles, and all the technology for producing nuclear warheads from Pakistan and North Korea.

The US Administration tolerated Pakistani nuclear weapons. The US-North Korea’s nuclear arrangement amounts to scam: North Korea merely shut down its reactor, transferred the technology to third countries, and remains ready to revamp its nuclear program at any moment. The US Administration similarly has no problem with Iran obtaining nuclear weapons. The US stand-off with Iran over the nuclear issues meant only to push Iran to negotiate on Iraq. America will continue pushing for the empty sanctions against Iran, but not attack its nuclear facilities. The US Administration sold Israeli security for Iranian help in Iraq.

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India announces security overhaul

The interior minister said India 'cannot go back to business as normal'

The Indian government has announced a number of steps to strengthen internal security after the Mumbai attacks.

Interior Minister P Chidambaram said a national investigative agency would be launched, anti-terror laws beefed up and coastal security strengthened.

It is the government's first detailed response to the public outcry over the attacks which left at least 173 people dead, including nine of the 10 gunmen.

India says militants had Pakistani links and has urged Pakistani action.

Pakistan denies any involvement in the attacks, but has promised to co-operate with the Indian investigation.

It has been under tremendous Indian and American pressure to act.

The new Indian security plans were announced on the day a magistrate extended policy custody of the lone surviving gunman, Mohammed Ajmal Amir Qasab, until 24 December.

Challenge of terrorism

"We cannot go back to business as usual. We have to take hard decisions and prepare country and people to face the challenge of terrorism," Mr Chidambaram, the newly appointed Indian interior minister, told parliament.

Mohammed Ajmal Amir Qasab

He said a number of steps would be taken to bolster internal security.

• a national investigation agency would be set up

• vacancies in the country's intelligence agencies would be filled and they would be equipped with advanced equipment

• a coastal command would be set up to secure India's 7,500km-long coastline

• a total of 20 "counter-insurgency, anti-terrorism" schools would be set up in various parts of India to train to train police and security personnel

• commando forces to be set up in the states

• laws relating to terrorist acts would be beefed up

• money laundering laws to be strengthened

"We cannot go back to business as normal," Mr Chidambaram said.

The BBC's South Asia correspondent Chris Morris says India's security system has not been properly reformed in decades and is in urgent need of repair.

Communication between state and federal level is poor and the whole structure is under-resourced and under-staffed, he says.

But while few will argue with the need to overhaul the security system, the proposal for tougher anti-terror laws will be more controversial, our correspondent adds.

There will be political disagreements between the government and the opposition about how tough they should be and how they should be targeted, he adds.

UN ban

India's interior minister also reiterated the government's view that "the finger of suspicion unmistakeably points to the territory of our neighbour Pakistan" as the source of the attacks.

Named militants. Mumbai police website
Nasir, alias Abu Umar (Nariman House)
Abu Ali (Taj Palace)
Soheb (Taj Palace)
Fahad Ullah (Oberoi)
Mohammed Ajmal Amir Qasab (survived)
Bada Abdul Rehaman (above left, Taj Palace)
Abdul Rehaman Chota (above right, Oberoi)
Ismal Khan (CST station)
Babar Imaran (Nariman House)
Nazir, alias Abu Omer (Taj Palace)

Original here

Evidence gathered from the bodies of the dead gunmen and the boats they travelled to Mumbai indicated they were Pakistani nationals belonging to the militant group the Lashkar-e-Taiba, he said.

Foreign Minister Pranab Mukherjee told parliament Pakistan needed to demonstrate its commitment to root out militant groups in the country.

He said Pakistan's raid on the main Lashkar-e-Taiba camp in Pakistan-administered Kashmir on Sunday needed to be followed up "with the complete dismantling of the infrastructure facilities".

But he said attacking Pakistan was "no solution".

The UN Security Council has added four leaders of Lashkar-e-Taiba to a list of people facing sanctions for links with al-Qaeda and the Taleban. They face an assets freeze, travel ban and arms embargo.

The Security Council panel also said that the charity Jamaat-ud-Dawa was a front for Lashkar-e-Taiba and subject to sanctions.