Inside the Data Mine

Inside the Data Mine

Posted on Aug 9, 2007

By Onnesha Roychoudhuri

On April 20, 2007, former Qwest telecommunications CEO Joseph Nacchio was found guilty on 19 of 42 counts of insider trading. “For anyone who has ever made a call in Qwest territory, the term ‘convicted felon Joe Nacchio’ has a nice ring to it,” U.S. prosecutor Troy Eid told the press. The mood was fairly universal. One securities lawyer pitched in: “The government has another notch in their belt. They’ve had a tremendous winning streak in these corporate crime cases.”

But it would have been more accurate to qualify the statement by saying that the government has had a tremendous winning streak in the corporate crime cases it chooses to pursue. We now know that the Securities and Exchange Commission has chosen not to pursue charges of insider trading in the case of a Wall Street executive named John J. Mack because of his “political clout.” And while former U.S. Attorney William Leone led the case against Qwest, he was one of the unfortunate attorneys on the Department of Justice’s “purge list,” replaced by none other than Bush-nominated Troy Eid, a former co-worker of Jack Abramoff at the firm Greenberg Traurig.

In the wake of the Enron scandal, Nacchio’s verdict could be seen as the continuing triumph of an efficient and unbiased judicial system—one working to protect the people’s interests against unbridled business tycoons. But the insidious environment of purges and selective prosecution based on cronyism necessitates a more critical view.  To celebrate Nacchio’s verdict in such a simplistic light would miss a far more interesting story about what telecommunications success and failure signify in a post-September 11th world.

Delving into Joseph Nacchio and Qwest’s story reveals a company with close ties to the White House—ties that appear to have been temporarily severed when, according to Nacchio and his legal team at Qwest, the company refused to participate in the government’s data-mining program—making it the only big telecommunications company that didn’t take part. Nacchio claims that secret government contracts he was expecting were never delivered after his refusal to participate in the National Security Agency program, resulting in skewed profit claims.

While currently under new leadership, wooing back government contracts, and finally turning a profit, Qwest will have to struggle to maintain a competitive edge in an industry of telecommunications giants. These giants have received favorable treatment from the Department of Justice and the Federal Communications Commission. Parallel to this success have come news reports that these ever-merging entities—notably AT&T, BellSouth and Verizon—are participating in domestic data-mining programs.

In an amoebic dance, SBC, AT&T, Bell South, Cingular, MCI and Verizon have all coupled and re-coupled, forming a terrain redolent of the days of Ma Bell. Comedian Stephen Colbert, with deadpan delivery, traced the acrobatics in his January 2007 TV primer explaining why Cingular changed its name to AT&T:

As you no doubt remember, Cingular was co-owned by BellSouth and SBC, which had been Southwestern Bell and Ameritech, which before that had been Illinois Bell, Wisconsin Bell, Michigan Bell, Ohio Bell, and Indiana Bell. … A couple of years ago Cingular bought AT&T Wireless and renamed it Cingular, but then SBC bought AT&T and changed its own name to AT&T. Then that new AT&T bought BellSouth, changing its name to AT&T, making it only logical to change Cingular into AT&T.

These mergers are even more conspicuous due to the number that have been approved in just the past three years. 2005 alone saw enough mergers to leave Americans with only two major telecommunications companies: Verizon and AT&T. Colbert cites the most recent and highly contested AT&T/BellSouth merger that combined the country’s two largest telecommunications companies. Despite the massive scope of the merger, when the Department of Justice conducted its regulatory analysis it concluded that there were no major antitrust issues.

In contrast to companies such as AT&T, BellSouth and Verizon, Qwest has encountered significant roadblocks in its expansion efforts, causing telecommunications experts to ask pointed questions about differing treatment from the Department of Justice, the FCC and the SEC. Specifically:  Is there government retribution? The question gains clout in light of the recent U.S. attorney scandal and the selective prosecution that the Bush administration has been practicing.

The ties between the telecommunications industry and the White House have grown even deeper since the Sept. 11 attacks, making it impossible to understand data mining or the telecommunications industry without exploring this relationship.

A Tap Without a Wire

Following the collapse of the Soviet Union, the NSA was significantly downsized and defunded. Seeking a new raison d’être and a new way to remain financially relevant, the NSA decided to go commercial. Back in June of 2000, the agency released a statement announcing that it was pursuing a “government-industry partnership for information technology infrastructure services.” Or: outsourcing. On Sept. 1, 2001, just 10 days before the terrorist attacks, Government Executive magazine investigated the transformation in an online article:

Beginning in November, hundreds of National Security Agency technology specialists will walk out the doors … ending their careers as federal workers. But nearly all will return the next day to do the same jobs they did before, as contractors under the largest outsourcing ever conducted by an intelligence agency. … One of the largest IT outsourcing pacts in government, … NSA’s Project Groundbreaker contract reflects a growing recognition by agencies that private companies can provide better IT support at lower prices than federal workers can.

With the recent communications revolution and the downsizing of the NSA, former NSA Director (now Director of CIA) Michael Hayden made it his goal to “get the technology of the global telecommunications revolution inside this agency.” To do that, Hayden brought new executives into the NSA, including Harry Gatanas, a military and intelligence veteran turned business executive. Gatanas told the press: “Really, nothing is sacred. If it’s not a core competency, then we’ll look at the potential of outsourcing it.”

That sentiment echoes the NSA’s December 2000 “Transition Report”, unveiling “Groundbreaker,” which refers to “the decision to outsource routine information technology functions.” The NSA mission is said to require the agency to “live on the network.” Almost a year before Sept. 11, the report stated that “NSA will be a legal but also a powerful and permanent presence on a global telecommunications infrastructure where protected American communications and targeted adversary communications will coexist.”

Even back in 2000, the NSA recognized the possible conflicts with Fourth Amendment rights. “The Fourth Amendment is as applicable to eSIGINT [electronic signals intelligence] as it is to the SIGINT [signals intelligence] of yesterday and today. The Information Age will however cause us to rethink and reapply procedures, policies and authorities born in an earlier electronic surveillance environment. …”

By December 2000, the NSA had already claimed that its new mission was “well under way.” In a statement reminiscent of Vice President Cheney’s nostalgia for the days of broader executive power, the NSA proclaimed, “This new model for eSIGINT … in the Information Age may require a restatement and endorsement of the policies and authorities that empowered NSA in the Industrial Age.” After the 9/11 terrorist attacks, concerns about Fourth Amendment violations were swept aside with the “national security” argument, providing a broad-spectrum justification for any possible constitutional violations. 

Data Mining Begins

Upon reading an article in USA Today alleging government spying on American communications, Philadelphia resident Norman LeBoon wondered if communications on his Verizon land line were being shared with the government. After a string of e-mails, LeBoon says he finally reached “Ellen” in customer service, who had this to say: “I can tell you, Mr. LeBoon, that your records have been shared with the government, but that’s between you and me. … They [Verizon] are going to deny it because of national security. The government is denying it and we have to deny it, too. Around here we are saying that Verizon has ‘plausible deniability.’ ”

LeBoon is part of a class-action suit against the major telecommunications companies brought by lawyers Bruce Afran and Carl Mayer. Their case is remarkable not only in that it references such blatant admissions by Verizon employees, but also because the two lawyers claim to have evidence that AT&T was approached by the National Security Agency before 9/11 as part of the aforementioned Project Groundbreaker, which gave the government access to an unprecedented amount of the personal data of American citizens.

The data-mining program has been aided in no small part by the recent spree of telecommunications mergers that have gone through with little or no regulations thanks to cursory reviews by the Department of Justice.

Apart from the instances in which Verizon employees told customers of the program’s existence, the size of the program and the number of businesses involved make it impossible for it to be completely obscured from the public. The technology installed in cooperative telecommunications companies is designed to sift through massive quantities of consumer communications. One such provider of data-mining technology to the government is Narus. The company puts AT&T at the top of its list of customers, but Narus has also been publicly connected directly to the NSA. Whistle-blower Mark Klein, a retired AT&T employee, has provided documents showing that Narus’ technology was to be installed in a San Francisco facility at the behest of an NSA agent. The vice president of marketing for the company, Steven Bannerman, notes that the technology “enables network operators to spot viruses and identify human targets, such as spammers or potential terrorists.”

While the equipment includes law-enforcement features that prevent searches in any data apart from court-approved targets, the use of those features is optional, leaving no formalized regulation of targeting.

The point of data mining is that you don’t know exactly what you’re looking for, searching instead for relationships and patterns in data. Lee Tien, an attorney at the Electronic Frontier Foundation, explains, “The idea is to take advantage of the fact that huge amounts of transactional data are produced every day in the course of our routine day-to-day lives and that each person is going to be leaving footprints.”

Despite the ominous scope of a program targeting the daily routines of everyday Americans, President Bush has assured the nation that the government is not “mining or trolling through the personal lives of millions of innocent Americans.”

In May 2006, former NSA analyst Ira Winkler wrote a heated rebuttal to Bush’s assurances in Computer World:

They claim that the NSA is not receiving any personally identifying information. Frankly, you have to be a complete moron to believe that. … By simply tying numbers together—and intelligence discipline of traffic analysis—I assure you I can put together a portrait of your life. I’ll know your friends, your hobbies, where your children go to school, if you’re having an affair, whether you plan to take a trip and even when you’re awake or asleep. Give me a list of whom you’re calling and I can tell most of the critical things I need to know about you.

When you start to understand the scope of the program, you realize why the Bush administration balked at the notion of obtaining a warrant for each individual whose information it intended to search. In order for data mining to be a thorough program, for the NSA to, as Hayden put it, “live on the network,” the government needs to have blanket access to telecommunication companies across the country. The problem for the program began when one company, Qwest, refused to comply. 

On May 11, 2006, USA Today reported that Qwest CEO Nacchio and his lawyers asked the government to take its request to the FISA court, or to get a letter of authorization from the attorney general’s office. When the government refused, Qwest refused to grant access to its customers’ records, leaving the data-mining program with a Qwest-size hole in its database—including portions of 14 states in the West and Northwest. There were bound to be repercussions. As USA Today’s Leslie Cauley writes:

The NSA, which needed Qwest’s participation to completely cover the country, pushed back hard. Trying to put pressure on Qwest, NSA representatives pointedly told Qwest that it was the lone holdout among the big telecommunications companies. It also tried appealing to Qwest’s patriotic side: In one meeting, an NSA representative suggested that Qwest’s refusal to contribute to the database could compromise national security, one person recalled. In addition, the agency suggested that Qwest’s foot-dragging might affect its ability to get future classified work with the government. Like other big telecommunications companies, Qwest already had classified contracts and hoped to get more.

This was no minor threat. In the telecommunications world, companies cannot remain competitive without the government contracts that keep them afloat. Market analysts of government business at INPUT recently released a report stating that the Department of Defense is the “leading spender on telecommunications products and services in the federal government. This situation is contrary to the general rule that civilian agencies outspend the DoD on information technology.”

Tracking Qwest

The famed ego of Joe Nacchio, not a well-liked character, has made him something of a notorious Denver personality. The tough guy from New Jersey with oversize britches was finally ousted from Qwest and subjected to a three-year-long Department of Justice investigation that ended with Nacchio facing 42 counts of insider trading. A mini-Enron of sorts, but with one substantial difference: Nacchio claims that he was anticipating secret government contracts that were never delivered.

He had reason to believe something would be coming his way.

In early 2001, President Bush appointed him chairman of the National Security Telecommunications Advisory Committee—a group that works to keep the president up to date on national security issues that involve telecommunication infrastructure. A Denver telecommunications analyst, Donna Jaegers, recalls a meeting with Nacchio in which he was “gaga” over the possibility of certain government contracts. It was while he was serving on the committee that Nacchio allegedly inflated the value of Qwest. And it was also while he was on the committee, claims Nacchio lawyer Herbert Stern, that Nacchio was approached by the government with a request to access private telephone records of Qwest customers. 

As the story goes, Nacchio refused. While the refusal may be due, in part, to an altruistic defense of consumer privacy, there also existed the very real threat of privacy lawsuits for handing over consumer information without appropriate warrants. To wit, AT&T, Verizon and a handful of other companies are currently facing some $5 billion in damage claims if found guilty of violating telecommunications laws.

After making the initial statement about his client’s refusal to participate in the data-mining program, Stern has remained mum, refusing all press inquiries.

In an interview, Cliff Stricklin, a prosecutor from Stern’s opposition, simply grins and urges me to look up a legal strategy called “graymail.”

Graymail: (n.) a maneuver used by the defense in a spy trial whereby the government is threatened with the revelation of national secrets unless the case against the defendant is dropped.

In other words: Take me to court and I’ll reveal state secrets. Nacchio’s defense team ended up making the secret contracts a minor part of his defense due to rulings from the judge in closed sessions regarding classified information. It is likely that this defense will resurface in his appeal or his upcoming defense against the SEC’s charges of accounting fraud.

Twenty-six years into a career at AT&T, Nacchio was thought to be next in line to former AT&T Chairman Robert Allen. When he was passed up, he went his own way, building Qwest into a competitor to his former employer. As former Denver prosecutor Craig Silverman told a local reporter, “Nacchio used to be part of George W. Bush’s team, but now the Justice Department is trying to take all of his money and freedom.” History repeats itself: Nacchio is once again a disgruntled former employee and he’s not going down without a fight. It’s a good old-fashioned grudge match with cocky foes threatening to air the others’ dirty laundry.

Graymail may not be a remarkably unique concept, but the sudden evaporation of this close, security-level relationship and the timing of the Justice Department’s investigation are suggestive of government retribution. Bruce Afran, one of the lawyers leading the class-action suit against AT&T and Verizon for their participation in the government’s data-mining program, has followed the Nacchio case closely. When pressed during an interview, Afran chooses his words carefully: “We can’t ignore that Nacchio has been the only one to refuse to participate in the program, and that he was then indicted.” Afran explains that, because chief executives are paid in shares or options, they’re always selling shares. “Whenever you want to take revenge on an uncooperative CEO, all you need to do is charge him with insider trading,” says Afran, referring to a strategy commonly known as “selective prosecution.” He pauses, sips from his coffee, leans in a bit, and says, “As a lawyer, I think this is clearly a pretext for punishing him for failing to go along with their [the government’s] program.”

Even if you don’t buy that Nacchio’s indictment for insider trading is payback for his refusal to participate in the president’s data-mining program, Nacchio’s former company, Qwest, has taken some hard knocks in the business world. Knocks that, given the soaring stocks and the unprecedented merger success of other companies implicated in data mining, become all the more salient. 

When I tried to meet with a legal adviser of Qwest, I encountered Qwest spokesman Bob Toevs. Toevs thanked me for repeatedly “reaching out” in my requests for an interview regarding the harsh regulations the Justice Department has imposed on Qwest deals. When I tried to sidestep Toevs by sending direct e-mails to two Qwest employees, I got another e-mail from Toevs thanking me again for my attempt to reach out to his team, again refusing, and wishing me safe travel home.

Curiously, the three Denver reporters I spoke to told me how helpful Toevs had been. “Perhaps,” one reporter told me outside of Nacchio’s hearing, “they don’t want to talk about the bad luck they’ve had.” With a new CEO leading the company slowly out of debt, it’s likely Qwest is interested in leaving the past behind—and avoiding rehashing any unpleasantries that could hurt its chances of winning government contracts. One telecommunications expert who agreed to speak only without being identified summed up the past two years of mergers like this: “It’s as if AT&T and Verizon can’t lose.” It is widely acknowledged that Qwest has not been so lucky—becoming fodder in the D.C. rumor mill. Celebrated intellectual property and trade regulation lawyer Gary Reback heard a rumor from some D.C. lawyers and lobbyists that Qwest was being disadvantaged for not participating in the data-mining program.

In 2003, Qwest announced that it had reached an agreement to acquire most of the assets of a small, bankrupt company called Allegiance. The Department of Justice agreed to the deal, but only if stringent conditions were met—divestiture of every single piece of Allegiance’s network that was inside of Qwest’s territory. After a long period of bidding, Qwest ended up losing the deal to another company. In 2005, Qwest tried again to expand its holdings by merging with MCI. Qwest and Verizon were engaged in a bidding war—if you can call it that—for MCI, with Qwest consistently offering MCI a higher bid—in the end, $9.9 billion to Verizon’s $8.45 billion. Yet, Verizon somehow won out.

Qwest’s CEO Dick Notebaert was irate, releasing this press statement: “Qwest maintains that it would be better for the industry to have three major telecom companies—SBC-AT&T, Qwest-MCI and Verizon. … It’s a public policy issue, I don’t think we want a duopoly.” The loss of the deal was confusing to Notebaert, who referred to the bidding process as “permanently skewed against Qwest.” MCI, for its part, did not go into detail about why it chose Verizon over Qwest, telling the press only that they were “under pressure from some of its business customers to accept Verizon” and that, apparently, “Some had requested rights to end their contracts with MCI if it merged with Qwest.” Whatever the reason, it had to be more compelling than a billion and a half dollars.

When the Department of Justice reviewed the massive Verizon/MCI merger, and the earlier SBC/AT&T mergers, it did not require divestiture of any lines. A distinct contrast with the restrictions the Justice Department had leveled on the much smaller Qwest/Allegiance deal. Indeed, Comptel, which represents competitive telecommunications policy interests, argued against the mergers in part because of the Justice Department’s failure to follow its previous ruling in the Verizon/MCI and SBC/AT&T mergers. 

Rebuilding the Telecommunications Empire

While other telecommunications companies have consolidated with a hefty push from the Justice Department, Qwest has fought an uphill battle to remain afloat. This is in direct contrast to the department signing off on the $86-billion merger of AT&T and BellSouth without so much as a single regulatory condition.

The merger created the largest company in America and one of the largest companies in the world, but when the Department of Justice conducted its regulatory analysis, it concluded that there were no real antitrust issues. This came as quite a shock to those in the FCC who were used to the Department of Justice at least paying lip service to modest regulations in order to keep the merger machinery running without undue questioning. The merger was opposed not only by consumer interest groups but other telecommunications companies that rely on the special-access circuits controlled by a vanishing number of telecom giants like AT&T. Companies like Broadwing and XO need access to shared circuits in order to support business customers and survive a situation in which they could effectively be muscled out by monopolistic control.

Larry Strickling, former chief of the FCC Common Carrier Bureau, and Broadwing executive says that the outcomes of the MCI/Verizon deal and the AT&T/SBC deal “struck people as very odd and counter to standard DoJ analysis and interpretation.” After those mergers went through, the floodgates were opened.

Says Strickling: “The company that I worked for at the time of those two mergers is Broadwing, and Broadwing was quite concerned about those mergers. We, along with a lot of other companies, were trying to push both the DoJ and FCC to perform traditional antitrust analysis and require certain divestitures as part of the deal and obviously we were not successful in convincing either agency to do its job.”

When asked about the DoJ’s differing standards for requiring divestiture of lines for Qwest but not Verizon, Strickling simply says, “It was an aberration, but we’re coming to expect more and more aberrations these days.”

Despite these concerns, the Department of Justice continues to assert that it sees absolutely no problem with the merger. While it’s no secret that there is a highly anti-regulatory administration in the White House, the fact that the DoJ has been so intractable in the face of such opposition signals that there may be more than free-market fundamentalism behind the push.

Both FCC officials (one Republican and one Democrat) I spoke with made it clear that the DoJ’s behavior in pushing through the merger had left them in a difficult position—not to mention a tense negotiation. Without a proper DoJ analysis, FCC officials have been left holding the bag.

The pressure only increases as the number of telecommunications companies has dwindled. 2005 saw the unions of SBC/AT&T and Verizon/MCI. With the BellSouth/AT&T merger, consumers are left with AT&T, Verizon and the comparatively tiny Qwest. Government contracts with telecommunication companies are a multibillion-dollar business with both telecoms and politicians eager to remain in each other’s good graces; it’s a tightknit old-boys network of governmental officials and telecom executives.

It comes as no surprise, then, that two of the companies implicated by the USA Today article for participation in data mining were AT&T and Verizon, headed by (recently retired) Ed Whitacre and Ivan Seidenberg, respectively. The two have close ties to the White House and contributed heavily to Bush’s re-election campaign. The timing of the contributions is important as both Whitacre and Seidenberg sought substantial mergers during Bush’s second term, for which Whitacre raised at least $200,000 and Seidenberg at least $100,000—far outstripping their year-2000 contributions.

Since Bush’s re-election, the telecommunications industry has experienced a scale of mergers and consolidation that hasn’t been seen since the days of Ma Bell. The Department of Justice (headed by longtime Bush ally Alberto Gonzales) has fallen into line, taking an increasingly hands-off position on antitrust reviews (except, of course, for Qwest). Indeed, more than hands-off, the DoJ antitrust division has been working to promote legislation that would make it easier for the newly merged AT&T to control various markets. In an April 30, 2007, letter, the DoJ antitrust division contacted Wisconsin state Sen. Jeffrey Plale (though it spelled his name incorrectly as “Pale”), expressing support for a bill that would make it easier for AT&T to enter the market with its new video service—effectively eliminating municipal cable franchises and putting the approval process in the hands of the state.

As mentioned before, government contracts provide critical telecommunications revenue. Barry Steinhardt, director of the ACLU’s technology and liberty program, says it is through government contracts that the White House is able to throw its weight around. “I presume that there’s some payment that’s being made for the construction of facilities providing connections between the offices and the NSA. But the more important money here are these huge contracts with the federal government.” It seems that, in addition to contracts, pushes for favorable litigation are also afforded.

Spy Consolidation

While it’s clear what telecoms get out of this cozy relationship, the real story is perhaps what the Bush administration is getting in return—apart from some campaign cash. With the president’s favored companies gobbling up the competition, the government’s spy program has access to a substantial amount of the telecommunications backbone—cable that is shared by multiple companies. As Steinhardt explains, “That means that the government can get access to the communications of customers from many different companies.” What Americans are facing is not only consolidation of telecommunications companies, but a consolidation of the government’s ability to spy on communication records.

In FCC Chairman Kevin Martin’s press release announcing the merger, he cited national security as one of the critical justifications for approval: “The merger … will enhance national security by creating a stronger and more efficient U.S. supplier of critical communications capabilities.” Martin peppered his release with references to national security, conspicuously avoiding details. Another excerpt from the document states that “Broadband deployment to all Americans remains one of the highest objectives for us at the Commission. This deployment is critical to our nation’s competitiveness in the global economy and to our national security.” Neither of the Democratic commissioners, Michael Copps and Jonathan Adelstein, mentioned national security in their press releases regarding the merger.

Despite public concern about the security of consumer information, Martin emphasized that the merger will enhance national security “through the creation of a unified … network capable of providing efficient and secure government communication.” It’s notable that in a public FCC press release, Chairman Martin all but put the seal of approval on the new AT&T serving as the government’s secure network.

National security has been a recurring theme throughout these mergers. Lawyer Bruce Afran has studied the merger documents that Verizon, AT&T and BellSouth have exchanged with the FCC. He says, “All used national security concerns as a basis for justifying these mergers. It looks like they [the telecommunications companies] are signaling that this is the quid pro quo—we’ve done what you need for security purpose. Now you do what we need.”

In a June 2006 Senate judiciary subcommittee meeting on the BellSouth/AT&T merger, Sen. Herb Kohl’s (D-Wis.) opening remarks got straight to the point: “As the market consolidates, Government eavesdropping is possible merely with the assent of fewer and fewer large phone companies than before.” The Department of Justice has been so eager to muscle the mergers through that they have garnered a fair amount of attention—and with good reason.

To explain how egregious the Department of Justice has been in selectively regulating telecommunications mergers, it’s helpful to go back to the Nixon years. In 1974, something called the Tunney Act was signed into law, a response to a backroom deal in which, in exchange for campaign contributions, Richard Nixon’s DoJ squelched antitrust investigations into a huge telecommunications company called ITT. The smoking gun came in the form of an internal ITT memo leaked to The Washington Post. It was a transgression serious enough to have been included among the articles of impeachment against Nixon.

When the SBC/AT&T and MCI/Verizon deals were approved by the DoJ and FCC, with only minor conditions to address antitrust concerns, the independent judicial review mandated by the Tunney Act became important. A former employee of the American Antitrust Institute explains, “The DoJ was so sure that the judge would rubberstamp the deals that they gave the parties license to close the transaction before Tunney review was complete.” Indeed, AT&T and Verizon had already effectively merged with other corporations, whether or not the mergers were ultimately determined to be legal. In a November hearing, a testy federal judge named Emmet Sullivan challenged a confident Verizon lawyer who claimed that the Verizon merger was already closed and pleasing customers. “If the merger is closed,” said Sullivan, “why are we here then?”

The DoJ learned from its mistakes in heeding even the semblance of law, and when the proposed BellSouth/AT&T merger was announced, instead of a formal consent decree that requires Tunney review, the DoJ simply released a press statement claiming that it found no competitive issues in the largest merger in American history. It is, as antitrust experts have noted, a complete end run around the Tunney Act.

The Tunney Act, as a former employee of the American Antitrust Institute explains, is not important if the Justice Department is being vigorous in its enforcement of the laws. “When the DoJ starts being overly lax, the Tunney Act becomes more important. That’s the idea of the Tunney Act: to not let the Justice Department decide to give the store away. They’re getting pushbacks from the court because the court perceives that they’re not being tough enough on the parties.”

Where a concerned customer, or a journalist for that matter, can locate the status of the FCC negotiations over the AT&T/BellSouth merger is something of a mystery. Neither FCC official I met with in Washington would tell me whether the government data-mining programming was even being discussed. And while Democrats have since taken control of the House and Senate, there is currently no investigation into the relationship between telecommunications companies and the White House. Hard to imagine, considering how widely the relationship has been publicized. Bob Woodward made the direct relationship amply clear in his book “State of Denial”:

Over the years, [CIA Director George] Tenet had negotiated agreements with telecommunications and financial institutions to get access to certain telephone, Internet and financial. … Tenet personally made most of the arrangements with the various CEOs of the companies. They were very secret, among the most sensitive arrangements, and based largely on informal understandings. Tenet had been very good at this, playing the patriot card and asking CEOs to help on matters of national security.

Unchecked power

The FCC’s gridlock over the AT&T/BellSouth merger ended with approval. The so-called compromise was that AT&T vowed to support Net Neutrality, though FCC Chairman Martin made clear that he did not support the decision, releasing a statement stating that the order “does not mean that the commission has adopted an additional Net neutrality principle. We continue to believe such a requirement is not necessary … although AT&T may make a voluntary business decision, it cannot dictate or bind government policy. Nor does this order.” What rules AT&T follows are, it seems, up to the corporation. As per the FCC’s merger stipulation, AT&T has started selling a $10-per-month DSL service. The catch?  AT&T hasn’t advertised it, preferring that consumers pay the higher price for the same service.

While the legality of previous mergers is under review in court, the Justice Department is pushing to further accelerate merger reviews of favored deals. A draft of a merger policy document reads: “The staff is encouraged to be as aggressive as possible during the initial 15- or 30-day waiting period in attempting to identify transactions that do not require further investigation.” That kind of brazenness is mirrored by telecommunications leadership.

FCC commissioners, for example, worked with AT&T and BellSouth to try to negotiate conditions for the merger, but AT&T was resistant to accepting any regulations. Ask why it’s being so obstinate and you’ll get a fairly straightforward response in Washington. As telecommunications analyst and Capitol Hill veteran Jessica Zufolo put it, “This is a company that is very accustomed to getting their way.”

So close have the large telecommunications companies grown with the White House that, in a recent legal filing in New Jersey, AT&T and Cingular (co-owned by AT&T and BellSouth) made reference to their right to maintain the state secrets privilege. “To which we answer very simply that the state secrets privilege can only be invoked by the federal government,” says Anne Milgram, recently sworn in as New Jersey’s attorney general.

When the New Jersey attorney general’s office subpoenaed telecommunications companies in the state in order to find out whether they were sharing consumer information with the federal government, rather than receiving responses from the telecommunications companies it received notice from the Department of Justice, which sued the New Jersey attorney general’s office for even posing the question. Milgram says she has never heard of this before. “Why is it OK for the phone companies to give that information to the NSA but not OK for the state to ask for the information?”

Milgram’s voice, though calm, rises in pitch during an interview: “The NSA trusts the phone companies to give them that information, but won’t trust a state attorney general to get that information.”

One of the more telling on-the-record exchanges occurred in a June 2006 Senate Judiciary Committee meeting on the BellSouth/AT&T merger. Sen. Arlen Specter asked AT&T’s Whitacre whether the company provides customer information to the government. To which Whitacre responded only with a parroted, “I will tell you that we follow the law, we don’t break the law.” When you read the transcript, you can almost hear Specter’s blood pressure rise as he pushes back.

Specter: Are you declining to answer my question, Mr. Whitacre?

Whitacre: We follow the law, Senator.

Specter: Does AT&T provide customer information to any law enforcement agency?

Whitacre: We follow the law, Senator.

Specter: That is not an answer, Mr. Whitacre. You know that.

The exchange continues for pages until Specter gets fed up, telling Whitacre, “You said that. I don’t care to hear it again,” ultimately stating for the record that the response is contemptuous of the committee. And while Whitacre insists that AT&T protects consumer information, he also has to field questions about a recent AT&T policy change whereby confidential consumer information is now deemed the property of AT&T and can be used to “safeguard others.” A former policy assured consumers that their information would be released only by subpoena or court order. Whitacre’s response: “We wanted to make our policies easier to read.” One telecommunications analyst present noted that “Specter had smoke coming out of his ears … nobody refuses to answer questions raised in that situation unless they’ve got some pretty powerful backup.”

William Rogers, former secretary of state to Nixon, once stated that “the public should view excessive secrecy among government officials as parents view sudden quiet where youngsters are playing. It is a sign of trouble.” It is arguably true that, in the digital age, certain telecommunications mergers do stand to benefit the consumer. It is also a true that it has become more important for those in national security to work closely with telecommunications companies. But to muscle through a telecommunications monopoly and eradicate the Fourth Amendment and consumer rights of Americans under the guise of “national security” is without justification. The incredible silence with which both the telecommunications companies and White House have met inquiries not just from Americans in general and journalists, but from state attorneys General and other government officials, is certainly a sign of trouble.

This past April, the White House went back to Congress to ask for a revision of FISA laws. Without addressing the ongoing data-mining scandal, President Bush requested that “unintentionally” obtained information be saved and used for intelligence purposes. The revision would also require telecommunications companies to cooperate with investigations and prevent companies from being sued by consumers for sharing information. Not surprisingly, Bush is requesting that this legal protection apply retroactively to companies that have already cooperated with the government.

Research made possible in part by a Nation Investigative Fund grant.

Onnesha Roychoudhuri is a San Francisco-based writer. A former assistant editor of, she has written for AlterNet, The American Prospect,, In These Times, Huffington Post, Truthdig, PopMatters, and Women’s eNews. She can be reached at onneshatao(at symbol)


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