The Wrap reports that the Federal Communications Commission has put its review of the Comcast-Time Warner Cable merger on hold for the second time. This time, the delay is due to the refusal by ABC, CBS, NBC, Fox, Viacom and Discovery to supply the agency with details of their retransmission agreements with cable, satellite and IPTV operators. The reason that the FCC wants the retransmission information in the first place is that opponents of the merger have charged that the combined company would have too much power over program suppliers (including the broadcast and cable networks.) The networks have agreed to provide the U.S. Justice Department with the data because it will be kept confidential, but FCC rules require that the data be made available to both supporters and opponents of the Comcast-TWC deal, so that they can use it in their briefs. Only the general public is prohibited from seeing the data.
The six networks have very good reasons for wanting to keep their contracts secret, because once buyers of their content learn how much other companies are paying, they'll want to renegotiate their contracts down to the lowest price. On the other hand, four of the six companies (ABC, CBS, Fox and NBC) are granted licenses by the FCC to broadcast over-the-air. Unlike mobile carriers such as AT&T, Sprint, T-Mobile and Verizon, television broadcasters get their spectrum for free. So, they are in essence underwritten by U.S. taxpayers for the multi-billion dollar value of their airspace. (Update, November 5, 2014: The FCC has released a "price list" in conjunction with its plan to get broadcasters to relinquish their spectrum so that it can be used for other applications. The FCC values the nationwide recovery of as much as 126 MHz of spectrum at a maximum of $38 billion dollars.) In addition, whenever a retransmission dispute between a broadcaster and a cable, satellite or IPTV operator results in the broadcaster removing their signals from the video operator, the public is stuck in the middle. Therefore, I believe that there's a strong argument for public disclosure of broadcast retransmission deals, above and beyond the Comcast-Time Warner Cable case.
My suggestion is that, if broadcasters want to prohibit anyone outside a handful of government employees from seeing their retransmission deals, they should be forced to pay the full market value for their bandwidth, just as mobile operators do. If they don't want to do that, they always have the option of relinquishing their frequencies and feeding their programs directly to service providers and to consumers over the Internet. CBS threatened to do exactly that if the Supreme Court ruled against it in the Aereo case, so it's clearly an option that's been considered by broadcast networks. If they want to operate in secret using the public's airwaves, they should pay for the privilege.
Showing posts with label Justice Department. Show all posts
Showing posts with label Justice Department. Show all posts
Saturday, October 25, 2014
Tuesday, May 20, 2014
The Justice Department: Your bank balance determines its prosecution strategy
Yesterday, the U.S. Justice Department announced that it had settled a criminal case against Swiss bank Credit Suisse for helping U.S.
taxpayers to evade taxes by transferring funds to overseas locations. Credit
Suisse agreed to plead guilty to the charges and paid $2.6 billion, in the form
of $1.8 billion to the U.S. government, $715 million to the New York Department
of Financial Services and $100 million to the Federal Reserve. Only $670
million of the $2.6 billion went to the IRS for compensation of actual lost tax
revenues. A few Credit Suisse employees will be dismissed or reassigned, but no
one will spend a day in jail.
The settlement, as are most settlements of this type, was announced at a self-congratulatory press conference led by Attorney General Eric Holder. Attorney General Holder said “This case shows that no financial institution, no matter its size or global reach, is above the law.” He also said “a company’s profitability or market share can never and will never be used as a shield from prosecution or penalty. And this action should put that misguided notion definitively to rest.” Anyone who’s followed the Justice Department’s actions since the financial collapse of 2008 knows just how untrue--in fact, how hilarious--that statement is.
If the target of a Justice Department investigation has vast financial assets, the Justice Department offers or accepts a settlement that involves payment of money to the U.S. Government in return for dismissal of all outstanding charges. The vast majority of the time, the target doesn’t need to plead guilty or take responsibility for anything. Even if the Department does manage to get a guilty plea, as in yesterday’s deal with Credit Suisse, no one within the company will go to jail. (In the Credit Suisse case, the Government prosecuted not to recover any of the trillions of dollars lost by individuals due to financial manipulation and malfeasance leading up to the Great Recession. It prosecuted to recover a few hundred million dollars of lost Federal taxes.)
On the other hand, if the Justice Department decides to go after someone without vast financial resources, or if it has to defend its own actions, its tactics are dramatically more aggressive. In fact, after decades of fighting organized crime, the Justice Department seems to have adopted organized crime’s tactics. It’s gotten to the point where it’s almost impossible to determine who the “good guys” are, and a scorecard doesn’t help.
If the Justice Department’s target is an individual without large financial assets, it uses intimidation in the form of threats of prosecution with trumped-up charges and the potential of decades of prison to get the subject to plead guilty to a reduced set of charges. It does that even (or especially) if it knows that it’s unlikely to get a conviction if the case goes to trial. A good example is Aaron Swartz, who downloaded a huge cache of academic journal articles, most of which had been written with taxpayer dollars and should have already been in the public domain. However, the Justice Department charged Swartz with two counts of wire fraud and 11 violations of the Computer Fraud and Abuse Act. The charges came with a maximum of a $1 million fine and 23 years in prison, which the U.S. Attorney told Swartz’s attorney that she intended to ask for in court. After two years of government harassment and two days after a plea bargain offered by his lawyer was rejected by the U.S. Attorney, Aaron Swartz committed suicide. Rather than discipline or dismiss the U.S. Attorney who refused the plea bargain, Attorney General Holder commended her.
If the target might be helpful in testifying against a bigger target, the Justice Department uses the same tactics, often stretching out the case for years in order to destroy the reputation of the target, eventually dropping the case before going to trial. The reputation and business of the target cannot be reestablished with an innocent verdict, so the individual or business is destroyed. Last week, Bloomberg reported on three previously unknown philanthropists who have created a $9.7 billion trust that’s bigger than the Carnegie and Rockefeller Foundations combined and is bigger than all of them except the Gates, Ford and Getty foundations. The three philanthropists were once part of a company called Princeton-Newport Partners, the world’s first quantitative hedge fund. Four Princeton-Newport managers were charged with racketeering and tax fraud (the three philanthropists were never charged with anything.) The Justice Department’s goal was to get the Princeton-Newport managers to testify against Michael Milkin. There’s no evidence that the Justice Department could have won a conviction against the Princeton-Newport employees if the case had gone to trial. The Justice Department eventually dropped all charges, but the reputation of Princeton-Newport was destroyed and the company collapsed.
If the Justice Department itself or the U.S. Government is the target of a civil or criminal case, it actively withholds evidence and lies to the court. A good example is the ACLU’s case last year in front of the U.S. Supreme Court to have the FISA Amendments Act ruled unconstitutional. The Supreme Court never ruled on the constitutional issues, instead ruling that the ACLU and its plaintiffs didn’t have standing to pursue the case—they weren’t affected by the Government’s actions because the Government wasn’t surveilling them. The Guardian reports that the Supreme Court came to that conclusion because the Justice Department told it “1) that the NSA would only get the content of Americans' communications without a warrant when they are targeting a foreigner abroad for surveillance, and 2) that the Justice Department would notify criminal defendants who have been spied on under the FISA Amendments Act, so there exists some way to challenge the law in court.” Both of these statements were outright lies.
In the case of #1 above, one of Edward Snowden’s revelations was that the NSA engages in what the agency calls “about” surveillance, in which it captures an enormous number (trillions) of emails and text messages between anyone in the U.S. and anyone outside the country, whether or not either party is in any way under investigation. Thus, the NSA got the content of Americans’ communications without a warrant AND without a targeted foreign party. In the second case, last July, the Justice Department admitted “that the government hadn't been notifying any defendants they were being charged based on NSA surveillance, making it actually impossible for anyone to prove they had standing to challenge the FISA Amendments Act as unconstitutional.” In most cases, the Justice Department acknowledges and alerts the court in question when it has given false statements or presented false evidence, but in this case, the Justice Department has refused to do so.
The Guardian explains what Attorney General Holder’s Justice Department has instead done, which is to deny its behavior and confuse the issue:
The Justice Department has played a critical role for decades in civil rights, prosecution of organized crime and political corruption. It’s an essential part of our legal system, and I’m the last person who would argue that we don’t need it. However, we need a Justice Department that’s worthy of the people of the United States, and today, we don’t have that.
The settlement, as are most settlements of this type, was announced at a self-congratulatory press conference led by Attorney General Eric Holder. Attorney General Holder said “This case shows that no financial institution, no matter its size or global reach, is above the law.” He also said “a company’s profitability or market share can never and will never be used as a shield from prosecution or penalty. And this action should put that misguided notion definitively to rest.” Anyone who’s followed the Justice Department’s actions since the financial collapse of 2008 knows just how untrue--in fact, how hilarious--that statement is.
If the target of a Justice Department investigation has vast financial assets, the Justice Department offers or accepts a settlement that involves payment of money to the U.S. Government in return for dismissal of all outstanding charges. The vast majority of the time, the target doesn’t need to plead guilty or take responsibility for anything. Even if the Department does manage to get a guilty plea, as in yesterday’s deal with Credit Suisse, no one within the company will go to jail. (In the Credit Suisse case, the Government prosecuted not to recover any of the trillions of dollars lost by individuals due to financial manipulation and malfeasance leading up to the Great Recession. It prosecuted to recover a few hundred million dollars of lost Federal taxes.)
On the other hand, if the Justice Department decides to go after someone without vast financial resources, or if it has to defend its own actions, its tactics are dramatically more aggressive. In fact, after decades of fighting organized crime, the Justice Department seems to have adopted organized crime’s tactics. It’s gotten to the point where it’s almost impossible to determine who the “good guys” are, and a scorecard doesn’t help.
If the Justice Department’s target is an individual without large financial assets, it uses intimidation in the form of threats of prosecution with trumped-up charges and the potential of decades of prison to get the subject to plead guilty to a reduced set of charges. It does that even (or especially) if it knows that it’s unlikely to get a conviction if the case goes to trial. A good example is Aaron Swartz, who downloaded a huge cache of academic journal articles, most of which had been written with taxpayer dollars and should have already been in the public domain. However, the Justice Department charged Swartz with two counts of wire fraud and 11 violations of the Computer Fraud and Abuse Act. The charges came with a maximum of a $1 million fine and 23 years in prison, which the U.S. Attorney told Swartz’s attorney that she intended to ask for in court. After two years of government harassment and two days after a plea bargain offered by his lawyer was rejected by the U.S. Attorney, Aaron Swartz committed suicide. Rather than discipline or dismiss the U.S. Attorney who refused the plea bargain, Attorney General Holder commended her.
If the target might be helpful in testifying against a bigger target, the Justice Department uses the same tactics, often stretching out the case for years in order to destroy the reputation of the target, eventually dropping the case before going to trial. The reputation and business of the target cannot be reestablished with an innocent verdict, so the individual or business is destroyed. Last week, Bloomberg reported on three previously unknown philanthropists who have created a $9.7 billion trust that’s bigger than the Carnegie and Rockefeller Foundations combined and is bigger than all of them except the Gates, Ford and Getty foundations. The three philanthropists were once part of a company called Princeton-Newport Partners, the world’s first quantitative hedge fund. Four Princeton-Newport managers were charged with racketeering and tax fraud (the three philanthropists were never charged with anything.) The Justice Department’s goal was to get the Princeton-Newport managers to testify against Michael Milkin. There’s no evidence that the Justice Department could have won a conviction against the Princeton-Newport employees if the case had gone to trial. The Justice Department eventually dropped all charges, but the reputation of Princeton-Newport was destroyed and the company collapsed.
If the Justice Department itself or the U.S. Government is the target of a civil or criminal case, it actively withholds evidence and lies to the court. A good example is the ACLU’s case last year in front of the U.S. Supreme Court to have the FISA Amendments Act ruled unconstitutional. The Supreme Court never ruled on the constitutional issues, instead ruling that the ACLU and its plaintiffs didn’t have standing to pursue the case—they weren’t affected by the Government’s actions because the Government wasn’t surveilling them. The Guardian reports that the Supreme Court came to that conclusion because the Justice Department told it “1) that the NSA would only get the content of Americans' communications without a warrant when they are targeting a foreigner abroad for surveillance, and 2) that the Justice Department would notify criminal defendants who have been spied on under the FISA Amendments Act, so there exists some way to challenge the law in court.” Both of these statements were outright lies.
In the case of #1 above, one of Edward Snowden’s revelations was that the NSA engages in what the agency calls “about” surveillance, in which it captures an enormous number (trillions) of emails and text messages between anyone in the U.S. and anyone outside the country, whether or not either party is in any way under investigation. Thus, the NSA got the content of Americans’ communications without a warrant AND without a targeted foreign party. In the second case, last July, the Justice Department admitted “that the government hadn't been notifying any defendants they were being charged based on NSA surveillance, making it actually impossible for anyone to prove they had standing to challenge the FISA Amendments Act as unconstitutional.” In most cases, the Justice Department acknowledges and alerts the court in question when it has given false statements or presented false evidence, but in this case, the Justice Department has refused to do so.
The Guardian explains what Attorney General Holder’s Justice Department has instead done, which is to deny its behavior and confuse the issue:
” The government's response, instead, has been to explain why it doesn't think these statements are lies. In a letter to Senators Ron Wyden and Mark Udall that only surfaced this week, the government made the incredible argument that the "about" surveillance was classified at the time of the case, so it was under no obligation to tell the Supreme Court about it. And the Justice Department completely sidestepped the question of whether it lied about notifying defendants, basically by saying that it started to do so after the case, and so this was somehow no longer an issue.”In the FISA Amendments case, by any measure, the Justice Department should have at least been disciplined by the Court for deliberately lying, but nothing is going to happen. If the Justice Department can lie to the Supreme Court with impunity, it can lie to Congress, targets of prosecution and the American people with equal impunity. In fact, after looking at these cases and many others, it’s difficult to distinguish between the Justice Department’s actions and what it accuses its targets of.
The Justice Department has played a critical role for decades in civil rights, prosecution of organized crime and political corruption. It’s an essential part of our legal system, and I’m the last person who would argue that we don’t need it. However, we need a Justice Department that’s worthy of the people of the United States, and today, we don’t have that.
Monday, April 23, 2012
Apple's potential defense: The publishers didn't need us to collude on pricing
I've been wondering about Apple's apparent resolve to fight the eBook price-fixing charges leveled against it by the U.S. Justice Department, states and private individuals. Apple's defense and decision not to settle have, so far, made no sense to me. The relative cost and inconvenience of settling with the Justice Department and states would be minimal compared to the potential distraction of Apple's management and reputational damage resulting from years of litigation. So, why is Apple holding out? Keep in mind that I'm not a lawyer, but here are some thoughts:
The publishers wouldn't possibly have been stupid enough to talk directly with each other about adopting uniform agency terms and pricing. Apple would have had to serve as the "switchboard", acting as an intermediary between the various publishers. The problem is that if the Justice Department charges are correct, the publishers did meet face-to-face multiple times to discuss business issues including "the Amazon problem," and also had myriad communications between each other by phone and email. Years ago, when I took a Business Law course in college, my professor said that such contacts between competitors simply shouldn't happen. Even if all the parties do nothing more than talk about the weather, the very fact that the meetings took place can be used as evidence of collusion among competitors. That may explain why, according to the Justice Department, there were never any corporate counsel at the face-to-face meetings held by publishing CEOs in various Manhattan restaurants.
The CEOs could never agree on how to take on Amazon and force the company to increase its selling prices for eBooks; it took Apple to propose first agency terms, and then a "Most Favored Nation" clause that would guarantee that Apple would always have the lowest eBook prices. The publishers could have come up with a similar scheme and worked the details out among themselves. It was convenient for Apple to do the work for them, but Apple wasn't necessary to either create or further the collusion.
The problem for Apple is that the Justice Department appears to have evidence that the company did, in fact, act not only as a "switchboard" between the publishers, but that its role was essential to getting the five publishers on board with exactly the same terms and conditions. There's also evidence that Steve Jobs himself intervened to try to convince Random House to join the other five Big 6 publishers in implementing agency terms. That may be enough to prove that Apple was integral to the conspiracy.
The publishers wouldn't possibly have been stupid enough to talk directly with each other about adopting uniform agency terms and pricing. Apple would have had to serve as the "switchboard", acting as an intermediary between the various publishers. The problem is that if the Justice Department charges are correct, the publishers did meet face-to-face multiple times to discuss business issues including "the Amazon problem," and also had myriad communications between each other by phone and email. Years ago, when I took a Business Law course in college, my professor said that such contacts between competitors simply shouldn't happen. Even if all the parties do nothing more than talk about the weather, the very fact that the meetings took place can be used as evidence of collusion among competitors. That may explain why, according to the Justice Department, there were never any corporate counsel at the face-to-face meetings held by publishing CEOs in various Manhattan restaurants.
The CEOs could never agree on how to take on Amazon and force the company to increase its selling prices for eBooks; it took Apple to propose first agency terms, and then a "Most Favored Nation" clause that would guarantee that Apple would always have the lowest eBook prices. The publishers could have come up with a similar scheme and worked the details out among themselves. It was convenient for Apple to do the work for them, but Apple wasn't necessary to either create or further the collusion.
The problem for Apple is that the Justice Department appears to have evidence that the company did, in fact, act not only as a "switchboard" between the publishers, but that its role was essential to getting the five publishers on board with exactly the same terms and conditions. There's also evidence that Steve Jobs himself intervened to try to convince Random House to join the other five Big 6 publishers in implementing agency terms. That may be enough to prove that Apple was integral to the conspiracy.
Tuesday, July 01, 2008
Loony Advice from Our Legislators
I rarely cover satellite radio, but I've been following the Sirius/XM merger and the related governmental sideshow. I've been an XM subscriber for a long time, and I'm frankly disappointed by the merger; nevertheless, it's clear to me that XM and Sirius are probably never going to get to critical mass separately. The U.S. Justice Department has approved the merger, and the Federal Communications Commission has yet to rule, but FCC Chairman Kevin Martin has said that he's ready to approve the merger with some restrictions on the new company.
Today, three U.S. Senators (Claire McCaskill (D-MO), Ben Cardin (D-MD) and John "Snatching defeat from the jaws of victory" Kerry (D-MA)) asked Martin to impose two restrictions on the merger: First, the merged company would have to allocate no less than 20%, and preferably 50%, of its channels for leasing to minority and noncommercial information programmers. Second, satellite receivers would have to include electronics for receiving terrestrial HD Radio signals.
Today, three U.S. Senators (Claire McCaskill (D-MO), Ben Cardin (D-MD) and John "Snatching defeat from the jaws of victory" Kerry (D-MA)) asked Martin to impose two restrictions on the merger: First, the merged company would have to allocate no less than 20%, and preferably 50%, of its channels for leasing to minority and noncommercial information programmers. Second, satellite receivers would have to include electronics for receiving terrestrial HD Radio signals.
There's no question that the merger will create a monopoly in satellite radio, but the vast majority of consumers in the U.S. get their audio entertainment from terrestrial radio, CDs and digital media players such as iPods, not satellite radio. The Justice Department decided that the relevant market for determining whether or not a monopoly exists is audio entertainment, not satellite radio. Requiring the merged company to make as much as 50% of its channels available for leasing would effectively destroy its ability to reach profitability in any reasonable time. As for making the merged company's receivers also receive HD Radio, that would be like demanding that Comcast modify its set-top boxes so that they could also be used by DirecTV, or vice versa. It's up to terrestrial broadcasters, and not Sirius and XM, to make HD Radio successful.
As I said, I'm not a fan of the Sirius/XM merger; I think that it will reduce competition and consumer choice. Nevertheless, the remedy suggested by Senators Cardin, Kerry and McCaskill doesn't address these issues at all; it simply cripples the competitiveness of satellite radio versus terrestrial broadcasters.
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