[Android Apps and Games] jago25_98:
Very good point. I can't remember where I heard that. However, there was some confusion for me since there is 2 LBE Privacy Guard Apps - one in English and one in Chinese. If I remember correctly the warning I heard was about the Chinese app.

I'm sorry I can't offer more help... I just can't find where it was I heard this. I think it was here on XDA Devs and related to a project that was trying to test and audit apps by running them in a virtual machine and then watching if and when then phone home, and then giving an approved rating to some apps. This was intended mostly for corporate IT depts needing greater security previously on Blackberries.

Here's the permissions list for the Chinese LBE:

Permissions
THIS APPLICATION HAS ACCESS TO THE FOLLOWING:
SERVICES THAT COST YOU MONEY
DIRECTLY CALL PHONE NUMBERS
Allows the app to call phone numbers without your intervention. Malicious apps may cause unexpected calls on your phone bill. Note that this doesn't allow the app to call emergency numbers.
SEND SMS MESSAGES
Allows the app to send SMS messages. Malicious apps may cost you money by sending messages without your confirmation.
DEVELOPMENT TOOLS
LIMIT NUMBER OF RUNNING PROCESSES
Allows the app to control the maximum number of processes that will run. Never needed for normal apps.
YOUR LOCATION
FINE (GPS) LOCATION
Access fine location sources such as the Global Positioning System on the tablet, where available. Malicious apps may use this to determine where you are, and may consume additional battery power. Access fine location sources such as the Global Positioning System on the phone, where available. Malicious apps may use this to determine where you are, and may consume additional battery power.
YOUR MESSAGES
RECEIVE SMS
Allows the app to receive and process SMS messages. Malicious apps may monitor your messages or delete them without showing them to you.
RECEIVE MMS
Allows the app to receive and process MMS messages. Malicious apps may monitor your messages or delete them without showing them to you.
RECEIVE WAP
Allows the app to receive and process WAP messages. Malicious apps may monitor your messages or delete them without showing them to you.
EDIT SMS OR MMS
Allows the app to write to SMS messages stored on your tablet or SIM card. Malicious apps may delete your messages. Allows the app to write to SMS messages stored on your phone or SIM card. Malicious apps may delete your messages.
READ SMS OR MMS
Allows the app to read SMS messages stored on your tablet or SIM card. Malicious apps may read your confidential messages. Allows the app to read SMS messages stored on your phone or SIM card. Malicious apps may read your confidential messages.
NETWORK COMMUNICATION
CREATE BLUETOOTH CONNECTIONS
Allows the app to view the configuration of the local Bluetooth tablet, and to make and accept connections with paired devices. Allows the app to view the configuration of the local Bluetooth phone, and to make and accept connections with paired devices.
FULL INTERNET ACCESS
Allows the app to create network sockets.
YOUR PERSONAL INFORMATION
READ CONTACT DATA
Allows the app to read all of the contact (address) data stored on your tablet. Malicious apps may use this to send your data to other people. Allows the app to read all of the contact (address) data stored on your phone. Malicious apps may use this to send your data to other people.
WRITE CONTACT DATA
Allows the app to modify the contact (address) data stored on your tablet. Malicious apps may use this to erase or modify your contact data. Allows the app to modify the contact (address) data stored on your phone. Malicious apps may use this to erase or modify your contact data.
PHONE CALLS
READ PHONE STATE AND IDENTITY
Allows the app to access the phone features of the device. An app with this permission can determine the phone number and serial number of this phone, whether a call is active, the number that call is connected to and the like.
INTERCEPT OUTGOING CALLS
Allows the app to process outgoing calls and change the number to be dialed. Malicious apps may monitor, redirect, or prevent outgoing calls.
STORAGE
MODIFY/DELETE USB STORAGE CONTENTS MODIFY/DELETE SD CARD CONTENTS
Allows the app to write to the USB storage. Allows the app to write to the SD card.
SYSTEM TOOLS
CHANGE WI-FI STATE
Allows the app to connect to and disconnect from Wi-Fi access points, and to make changes to configured Wi-Fi networks.
BLUETOOTH ADMINISTRATION
Allows the app to configure the local Bluetooth tablet, and to discover and pair with remote devices. Allows the app to configure the local Bluetooth phone, and to discover and pair with remote devices.
MODIFY GLOBAL SYSTEM SETTINGS
Allows the app to modify the system's settings data. Malicious apps may corrupt your system's configuration.
DELETE ALL APP CACHE DATA
Allows the app to free tablet storage by deleting files in app cache directory. Access is very restricted usually to system process. Allows the app to free phone storage by deleting files in app cache directory. Access is very restricted usually to system process.
CHANGE/INTERCEPT NETWORK SETTINGS AND TRAFFIC
Allows the app to change network settings and to intercept and inspect all network traffic, for example to change the proxy and port of any APN. Malicious apps may monitor, redirect, or modify network packets without your knowledge.
DISPLAY SYSTEM-LEVEL ALERTS
Allows the app to show system alert windows. Malicious apps may take over the entire screen.
CHANGE NETWORK CONNECTIVITY
Allows the app to change the state of network connectivity.
WRITE SYNC SETTINGS
Allows the app to modify the sync settings, such as whether sync is enabled for the People app.

and here's the permissions list for te English LBE:

Permissions
THIS APPLICATION HAS ACCESS TO THE FOLLOWING:
DEVELOPMENT TOOLS
LIMIT NUMBER OF RUNNING PROCESSES
Allows the app to control the maximum number of processes that will run. Never needed for normal apps.
NETWORK COMMUNICATION
FULL INTERNET ACCESS
Allows the app to create network sockets.
PHONE CALLS
READ PHONE STATE AND IDENTITY
Allows the app to access the phone features of the device. An app with this permission can determine the phone number and serial number of this phone, whether a call is active, the number that call is connected to and the like.
STORAGE
MODIFY/DELETE USB STORAGE CONTENTS MODIFY/DELETE SD CARD CONTENTS
Allows the app to write to the USB storage. Allows the app to write to the SD card.
SYSTEM TOOLS
CHANGE WI-FI STATE
Allows the app to connect to and disconnect from Wi-Fi access points, and to make changes to configured Wi-Fi networks.
CHANGE/INTERCEPT NETWORK SETTINGS AND TRAFFIC
Allows the app to change network settings and to intercept and inspect all network traffic, for example to change the proxy and port of any APN. Malicious apps may monitor, redirect, or modify network packets without your knowledge.
DISPLAY SYSTEM-LEVEL ALERTS
Allows the app to show system alert windows. Malicious apps may take over the entire screen.
CHANGE NETWORK CONNECTIVITY
Allows the app to change the state of network connectivity.

edit: They are actually from the same developer. I remember now that is why I stopped using LBE - because it's from the same dev as a more suspicious app.

Surely both apps don't need these permissions?

There's no source code for the kernel of my Chinese Galaxy Note copy (x710d) so I don't think I can install the ICS patch for PDroid?