The latest wave of corporate malfeasance has arrived, but this time it’s about more than simple greed – and the response may be a whitewash instead of reform.  

For more on pruning back executive power see The Pruning Shears.

Starting in the late nineties there was quite a bit of turbulence in the business world.  There was the tech bubble bursting, multiple scandals in wide-ranging businesses and the occasional multibillion dollar meltdown of a hedge fund.  You were especially hard hit if you worked for Enron or lived in California but it wasn’t a good time for just about anyone in the market.  In the aftermath of the corporate scandals in particular there was pressure for reform and it came in the form of the Sarbanes-Oxley Act.  Many people lost money and some who were forced into common-stock rich 401(k) plans lost substantial portions of their retirement savings, but those most severe losses were relatively few in number (not that it makes you feel any better if you are one of them).  In aggregate it was bad but not catastrophic, and at least we got some reforms out of it.

We may now be looking at a much more significant scandal, but this time around it’s about more than simple greed – and instead of reform we’re looking at a whitewash.  The telecommunication companies have become gatekeepers to the information age.  We seem to be in the midst of a fundamental transition where almost all common communication – digital phone, email, voice over IP, cell phone, etc. – are provided by one of a handful of companies.  In theory the internet is wide open and we can make connections with just about anyone, but in practice it isn’t shaping up that way.  We already have suppression of political speech, a preemptive censorship clause in a license agreement and one company has even created a domestic surveillance menu for the government.  They are doing lots of lobbying behind the scenes, and the fact that it doesn’t always succeed is no comfort.  These companies are trying to lay the physical and intellectual groundwork for a system where the most common forms of speech go through them first and they have the peremptory right to shape it as they wish.  It is at least as big a scandal as anything that happened in the heyday of Adelphia and WorldCom.  These companies deserve to be as decisively repudiated as their predecessors, and the symbols of their influence similarly dismantled.

The Enron of this new corruption could well be AT&T, and its general counsel Wayne Watts the new Ken Lay.  This week he came up with not one but two outrageous rationalizations for his company’s criminal behavior.  After AT&T admitted to illegally turning over tens of thousands of phone records to federal authorities without a court order he said “[t]elecommunications carriers have a part to play in guarding against official abuses, but it is necessarily a modest one.”  The issue is not their role in guarding against official abuses but their role in breaking the law.  It’s very simple: If a federal agency wants some of their records it goes to court, obtains the warrant, presents it to AT&T and they in turn provide the records.  No warrant, no records.  There is no burden on AT&T adjudicate on the legality of the search, the merit of the warrant or in any other way guard against abuse, it is simply to obey the law.  I play the same “necessarily modest” role by not robbing liquor stores at gunpoint.

His second contribution is just as bad.  After DNI Mike McConnell invoked the state secrets privilege to prevent AT&T from providing more information on the extent of their cooperation with the Bush administration he wrote “[o]ur company essentially finds itself caught in the middle of an oversight dispute between the Congress and the executive relating to government surveillance activities.”  Actually, AT&T threw in its lot with the executive branch several years ago and is desperate to keep the illegal activity they pressed for quiet.  They are furiously lobbying to keep lawsuits against them from proceeding because (one can only imagine) they know that the best possible outcome is a tsunami of bad publicity no amount of warm and fuzzy commercials can counter, while the worst is that plus massive punitive damages.  The only thing they are in the middle of is a terrible quandary of their own making, and any cooperation with the legislative branch only promises to make it worse.  They are one hundred percent invested in the executive prevailing, and that is why they have made zero attempt to cooperate with Congress.  

AT&T may not be the worst of the Police State Telecoms, they just had the same spokesman make obviously false arguments this week.  All of them appear to be involved at some level, and in an ironic twist the closest thing to a hero among them may well be a white collar criminal straight out of the last era of scandal.  Regardless of their stories, though, they should be judged by their actions.  If they ought to have known better they deserve to be found guilty and no amount of self-serving protestations can justify it.