From corporation-watch at countercorp.org Tue Mar 9 14:50:25 2010 From: corporation-watch at countercorp.org (Corporation Watch) Date: Tue, 9 Mar 2010 11:50:25 -0800 Subject: [Corp. Watch] Big Content dinosaurs using monopoly tactics to fight extinction Message-ID: Inside the TV Wars The battles to watch are about what you can watch By Megan Tady (Fairness and Accuracy in Reporting, March 2010) -- Forget Conan vs. Leno, or Olbermann vs. O'Reilly. The real TV fight to watch isn't on television; it's about television itself, and the future of online video -- a fight that pits cable and content companies against consumers. Instead of being glued to our favorite shows, we'd be wise to pay attention to the various battles, mergers, and back-room deals going on between big media corporations who are trying desperately to cling to a sinking broadcast media model -- and pull the public down with them. Broadcast and cable companies see the writing on the wall, and it no longer spells "media empire." Although a majority of Americans are still watch an average of five hours of TV a day, people are increasingly switching off the tube, and using their computers to watch their favorite shows and find alternative programming. Options like TiVo and DVR have given us the blessed ability to skip over ads. Advertising companies are jumping ship, heading over to the Internet or simply not placing ads in a market that can no longer guarantee as many eyeballs. Thanks to the Internet's open platform, anyone can create and share video, meaning viewers are no longer tethered to traditional media gatekeepers who decide what's entertaining and who gets the spotlight. Consumers are also realizing that they can cancel their hefty cable subscriptions and still watch the 'Daily Show' online -- for free. It's a Pandora's box that the big media corporations are trying to sit on top of, while the public wrenches the lid up from below. These new trends threaten the old media model, and broadcast and cable TV companies are hatching various plans to keep their stranglehold on content, control, and profits -- all to the detriment of consumers. If they get their way, we'll likely see higher prices, fewer choices, worse programming and a slow stifling of online video innovation. Here are three developments worth paying attention to: 1. Time Warner Cable vs. News Corporation/Fox -- The original deal accepted by the TV broadcasters and their affiliates was that they'd get free use of the public airwaves, and in return they'd give the public free programming, and make their money by interspersing the shows with ads. With overall ad spending down in a tight economy, the networks have been looking for a new profit model -- and enviously eyeing the cable companies' ability to get audiences to pay money for the privilege of watching ad-filled TV. Accordingly, News Corp's Fox Broadcasting recently demanded that cable company Time Warner Cable (TWC) pay $1 per subscriber in exchange for delivering Fox programming to viewers. In response, TWC threatened to stop airing Fox altogether. The squabble erupted into a public showdown, with both sides hoping to pull consumers into their camps (including creating ridiculous websites KeepFoxOn[dot]com and RollOverGetTough[dot]com), and leaving viewers in TWC markets to wonder if they'd ever see 'American Idol' again. In early January, the two companies came to a quiet agreement without disclosing the details of the settlement. What does this mean for consumers? Cable providers have long negotiated deals to carry channels like ESPN and MTV -- which are largely owned by the same companies that own the broadcast networks -- by paying monthly fees that are passed on to subscribers in ever-increasing cable bills. As cable companies start to pay for over-the-air channels as well (programs that cable viewers could get for free just by hooking up an antenna), they don't want to eat those costs. The same day TWC announced its agreement with Fox, it also announced new rate increases. This once again raises the question of why viewers can't just pay for the channels they want, rather than being subjected to these types of shenanigans? An 'a la carte' cable system would allow subscribers to pay only for the channels they choose, rather than being used as pawns in corporate negotiations. But both the networks and the cable companies enjoy the profits from holding viewers as a captive audience with take-it-or-leave-it bundled cable packages. And an a la carte system would not necessarily prevent a similar situation from arising: Cable operators would still have to pay broadcasters to carry their channels, and those costs would still get passed onto consumers. However, at least those extra costs would be for channels that consumers actually choose to purchase -- not for ones they have had foisted on them whether they want them or not. 2. "TV Everywhere" -- The unrelenting cable bill hikes, of course, only increase the attraction of online video. One way to keep consumers paying for TV content is to put barriers around it -- which is exactly what cable, satellite, and phone companies are conspiring to do. They've launched a sunny-sounding plan called "TV Everywhere", playing up the idea that consumers will get to watch their favorite shows anywhere they choose -- but only if they continue to pay for their expensive cable TV service. Companies like TWC and Comcast are making deals with content companies like TBS and TNT to "Rapunzel" their programming -- that is, lock it behind a paywall that only cable TV subscribers can access. The idea is to force consumers to keep their cable subscriptions if they want to view popular TV programming online. This also means that third-party online video companies trying to compete with the cable, satellite, and phone monoliths will be unable to provide popular programming. Not just goodbye Hulu -- goodbye to all the online video applications and original content we haven't even imagined yet. In January, on the heels of a report by the media reform organization Free Press that examined TV Everywhere, consumer groups called on Congress and federal anti-trust authorities to investigate the possibly illegal industry collusion happening to make the plan a reality. "This is a textbook anti-trust violation," said Marvin Ammori, assistant professor of law at the University of Nebraska and author of the Free Press report. "The old media giants are working together to kill off innovative online competitors, and carve up the market for themselves". "TV Everywhere is designed to eliminate competition at a pivotal moment in the history of television," Ammori said. "The anti-trust authorities should not stand by and let the cable cartel crush Internet TV before it gets off the ground." 3. The Comcast/NBC merger -- If you can't beat them, take them over. That seems to be Comcast's approach, as it positions itself to take a controlling stake in NBC Universal, giving it power over a major television network and film studio, while retaining its role as the nation's largest cable company and residential Internet service provider. This mega media merger would have disastrous repercussions for the public, giving one company the ability to determine what we watch and how we watch it. NBC Universal owns NBC, MSNBC, CNBC, Universal Studios, 27 local television stations and a handful of other properties. With Comcast controlling all of that, plus most cable and Internet service, consumers can expect higher prices, fewer program choices and far less innovation. The company will be able to prioritize its own shows, leaving local and independent programs to wither.If TV Everywhere doesn't kill online video, this merger sure will: Comcast can force subscribers to pay for cable in order to watch NBC shows online, and withhold popular content from other online video sources and innovators. But before the companies could fully ink a deal, Congress and the Justice Department announced plans to investigate the proposed merger, and the Senate and House held initial hearings in early February. Sen. Herb Kohl (D-Wis.), who chairs the Senate anti-trust committee that announced the hearing on the merger, told the press, "This acquisition will create waves throughout the media and entertainment marketplace, and we don't know where the ripples will end." Demanding change This is not to say that all online TV should be free, or that cable and content companies shouldn't be thinking about how to change with the times to stay in business. But all three of these recent developments show a disturbing trend toward stagnation and status quo. Forcing customers to retain their rising cable subscriptions in order to watch online TV, colluding to stifle video competition, and holding tight to old media models in which companies peck at each other for more profit (and pass costs down to consumers) means we're being stuck with a dying dinosaur of a system, and paying a hefty price for it. Throughout the 20th century, every democratizing revolution in media was co-opted by corporations that squelched its democratic potential in pursuit of profit. Will the same happen with online video and the Internet? Unfortunately, our media monoliths aren't ready to evolve, and they're prepared to sabotage content, creativity and innovation to avoid doing so. To get more information on these issues, visit www.freepress.net, www.consumersunion.org, and www.mediaaccess.org. From corporation-watch at countercorp.org Wed Mar 10 07:04:52 2010 From: corporation-watch at countercorp.org (Corporation Watch) Date: Wed, 10 Mar 2010 04:04:52 -0800 Subject: [Corp. Watch] 'Swelling tide of money' funds corporate effort to tilt elections Message-ID: U.S. Chamber of Commerce Grows into a Political Force A swelling tide of money could put the business group in a better position to sway elections By Tom Hamburger (L.A. Times, March 8) -- The U.S. Chamber of Commerce is building a large-scale grassroots political operation that has begun to rival those of the major political parties, The Chamber has signed up some 6 million individuals who are not chamber members, and has begun asking them to help with lobbying and, soon, with get-out-the-vote efforts in upcoming Congressional campaigns. The organization's expansion into grassroots organizing -- coupled with a large and growing fundraising apparatus that got a lift from recent Supreme Court rulings -- is part of a trend in which the traditional parties are losing ground to well-financed and increasingly assertive outside groups. The Chamber is certainly better positioned than ever to be a major force on the issues and elections it focuses on each year, analysts think. The new grassroots program, the brainchild of Chamber political director Bill Miller, is concentrating on 22 states. Among them are Colorado, where incumbent Democratic Sen. Michael Bennet is vulnerable; Arkansas, where Democratic Sen. Blanche Lincoln faces an uphill re-election battle; and Ohio, where the Chamber sees opportunities in numerous House races and an open Senate seat. The network, called Friends of the U.S. Chamber of Commerce, has been used to generate more than a million letters and e-mails to members of Congress, 700,000 of them in opposition to the Democratic healthcare plan. That is an increase from 40,000 Congressional contacts generated in 2008. What makes the initiative possible is a swelling tide of money. The Chamber spent more than $144 million on lobbying and grassroots organizing last year, a 60% increase over 2008, and well beyond the spending of individual labor unions or the Democratic or Republican national committees. The organization is expected to substantially exceed that spending level in 2010. The Chamber's expanding influence is worrisome to top officials in the White House -- including Chief of Staff Rahm Emanuel, who has expressed concern about the Chamber in the past, and senior advisor Valerie Jarrett, who tried to build direct contacts with company executives last fall when the Chamber was fighting the administration's legislation to regulate carbon emissions. Several companies, including Pacific Gas & Electric and Apple, left the Chamber over its stance on climate policies, but since then many more firms have joined and made substantial contributions, Chamber President Tom Donohue said. Amassing cash Two major factors are driving the chamber's growing success in fundraising. First, President Obama and Democratic majorities in both houses of Congress have alarmed a widening circle of business leaders with their calls for greater government involvement in healthcare, tighter federal regulation of the financial industry, and legislation to help unions organize workers, among other issues. Second, the recent Supreme Court ruling that corporations have a free-speech right to spend money to help elect or defeat candidates not only struck down a century of laws limiting such spending, but it also made many business executives feel more comfortable about using corporate money for political purposes. Industries that are the most directly affected by Washington policies and regulations -- pharmaceuticals, for example -- have always spent lavishly on lobbying and politics. But many others have held back, deterred by concern over violating the complex laws on campaign spending, and by a general sense that putting money into politics might open companies to criticism. The Supreme Court decision appears to have allayed those concerns, according to corporate lawyers and others involved in the process. "In the past, a lot of companies and wealthy individuals stood on the sidelines," said Robert Kelner, who heads the Election and Political Law Practice Group at Covington & Burling, one of Washington's most influential corporate law firms. "In just the last election, we had the spectacle of John McCain threatening to prosecute his own supporters if they spent their money on outside groups that ran advertising in the presidential race. That cloud has been lifted," he said. Anonymity Using trade associations such as the Chamber as the vehicle for spending corporate money on politics has an extra appeal: These groups can take large contributions from companies and wealthy individuals in ways that will probably avoid public disclosure requirements. The Chamber has developed that into something of a specialty: Under a system pioneered by Donohue, corporations have contributed money to the organization, which then produced issue ads targeting individual candidates without revealing the names of the businesses underwriting the ads. Chamber officials contend that rising donations are less the result of the recent Supreme Court ruling than they are of a 5-4 decision in 2007, in which the court ruled it was unconstitutional to ban issue-related advertising close to an election. As a result of that ruling, the Chamber was able to spend $1 million on so-called issue ads in the final days of the Massachusetts Senate race in January to help elect Scott Brown, the state's first Republican senator in decades. As ominous music played in the background of one of the ads, a moderator intoned: "Washington politicians continue to fail us. More spending and fewer jobs. Scott Brown ... supports measures that hold spending and cut taxes. ... Call Scott Brown. Thank him." Powerful as the effect of such advertising could be, the Chamber and its allies expect the next big expansion of influence will come in street-level organizing and voter turn-out operations. Miller, a former chief of staff to a GOP lawmaker and co-owner of a restaurant in Washington's tony Georgetown section, built up the Chamber's grassroots organization in 2008, and expanded it in 2009 with the help of consulting firms. Studying magazine subscriptions, voter registration, and consumer buying habits, the consultants built a list of potential allies in 122 key congressional districts. Individuals were invited to join the Friends of the U.S. Chamber initiative and were promised updates and special insights on Washington. They were then "activated," asked to write letters or call Congress on a particular issue or get involved in events in the districts. Miller said the so-called activation rate was "roughly equivalent" to the rate claimed by Organizing for America -- the network known as Obama for America during the presidential campaign -- which has twice as many members. The Chamber has also given its staff, especially senior leaders, incentives to push fundraising. They are now working, in effect, on a commission system: The more money they bring in, the more they are compensated. Leaning right Officially, the Chamber is a bi-partisan non-profit organization, but over the last decade it has tilted decidedly toward the Republicans. During 2008, 86% of the spending by the Chamber's political action committee went to Republicans. Far more was spent on issue ads, most supporting GOP candidates. The Chamber says it represents 3 million companies that pay dues to the national Chamber or a local affiliate, though internal documents suggest the organization's treasury is filled in substantial part by contributions from a couple dozen major corporations most affected by Washington policymakers. Tax records from 2008 show that 19 companies or individuals paid between $1 million and $15.3 million, providing a third of the Chamber's total revenue that year. Because the Chamber is a non-profit, it must disclose donations, but not necessarily the identity of the donors. (The Chamber insists that those donors remain anonymous.) Some labor-backed organizations, such as Working America, which has 3 million non-union members nationwide, have also declined to release details of their donors, which suggests a rocky road for legislation to require more transparency. From corporation-watch at countercorp.org Thu Mar 11 19:11:12 2010 From: corporation-watch at countercorp.org (Corporation Watch) Date: Thu, 11 Mar 2010 16:11:12 -0800 Subject: [Corp. Watch] Size and place matter: Small and local beats big and (inter)national Message-ID: <53554F5B-7C8F-4242-B926-4B073132349C@countercorp.org> As Big Banks Falter, Community Banks Do Fine Unlike banks on Wall Street, these smaller banks didn't invest in risky mortgage-backed securities or complex derivatives By Alexandra Marks (Christian Science Monitor, March 8) -- Despite dire headlines about the credit crunch and the shaky state of financial giants like Citigroup, the vast majority of banks in the United States are doing well. In fact, many are actually thriving and still making loans to help to grow local businesses and keep families in their homes. Think of it as a modern-day version of "It's a Wonderful Life" -- the 1940s movie in which local banker George Bailey gives up his own dreams to save his hometown from greedy businessman Mr. Potter. Today, there are more than 7,000 community banks that are small, community oriented, and determined to keep their assets local. They're the Main Street banks, which, unlike those on Wall Street, did not invest in risky mortgage-backed securities or complex derivatives. And so their balance sheets remain relatively healthy. While they account for less than 10 percent of America's total banking assets, their traditional values-based approach contains plenty of lessons for their larger Wall Street counterparts, some analysts say. Some also question the wisdom of allowing a few big banks to control large percentages of the U.S. banking sector. "Mr. Potter must be spinning somewhere in his celluloid grave," says business and financial historian John Steele Gordon. "The community banks are doing well because they were willing to adhere to sound banking principles. They didn't get caught up in the Wall Street craze, and were less driven to keep those quarterly earnings going up and up and up." Yet the community banks are interested in making a profit. Like the Connecticut River Community Bank, which had its best year ever in 2008, most do it in the traditional way: They focus on their "net interest margin" -- the difference between the interest earned from loans and investments they make, and the money paid out to depositors. But there's another component as well, says William Attridge, president of the Wethersfield, Conn.-based bank: Most community bankers know their customers. "We're lending to small businesses, and in small businesses the individual is a significant part of that," Attridge says. "There's a character component: That means we might make loans that possibly someone else wouldn't if they just looked at the financials, because we know the individual well and what their resources and talents are." "On the other hand," he says, "there are probably some [loans] that look good on paper that we wouldn't make." During the Great Depression, there were more than 30,000 banks in the U.S., and most of them were small. The majority of banks that failed were small, while the few bigger banks that existed weathered the economic turmoil better. Today, the flip side is happening. Just four large banks were responsible for half of the $26 billion in losses reported by the banking industry during the fourth quarter of 2008, according to the Federal Deposit Insurance Corporation (FDIC). "What troubles the community banks is that the whole banking industry is being painted with this broad brush as the bad guys, and they aren't: They didn't make those risky investments. They're out there playing by the rules," says Karen Tyson, a spokeswoman for the Independent Community Bankers of America in Washington, D.C. The health of smaller banks has allowed many communities to continue with business as usual despite the national credit crunch. "You wouldn't know at all there's an economic crisis at my bank," says Jeanne Morrissey, a builder in South Burlington, Vt., who uses the state-wide Merchants Bank. "We have not seen a shred of difference in terms of available money. ... All of my lines of credit have held. In fact, the bank has even offered to do more." But as the recession continues, these community banks are also coming under some pressure. Although more than one-third of community banks reported profits during the fourth quarter of 2008, according to the FDIC, just under one-third reported net losses. Several small banks in states like California and Florida that were hit particularly hard by the real estate crash have also been forced to close. But in general, community banks still have healthy balance sheets. Vermont's Merchants Bank was founded in 1849, and its motto is "Vermont Matters." For the past 12 years, it's tried to prove that by keeping most of its assets in state. "Every single loan that we make, we hold in our own books. That makes us much more risk averse," says bank President and CEO Mike Tuttle. As a result, the bank's "No. 1 priority" is to make sure the loans they make are appropriate for their customers. "We want to make sure that our customers can repay them, because it doesn't do either of us any good to put them in something that they may have difficulty with," Tuttle says. "We want them to succeed." Of the thousands of mortgage loans on Merchants Bank's books, only four are in foreclosure. Many small banks do sell mortgages on the secondary market to the Federal Home Loan Mortgage Corporation, otherwise known as Freddie Mac. But most, like the Union Bank & Trust Co. in Evansville, Wis., also retain the servicing of those loans. "So if a customer has a problem or question about their mortgage, we can answer that question from right here at our desks," says Union's President and CEO Chris Eager. Like many other community bankers, Eager is "adamantly opposed" to the bail-out of the big banks. "This 'too big to fail' is absolutely ridiculous," he says. "We know that if we lose money and manage our business irresponsibly, we have to close. ... So it tends to make you watch the expenses and be a little more careful than you otherwise would." From corporation-watch at countercorp.org Fri Mar 12 15:37:04 2010 From: corporation-watch at countercorp.org (Corporation Watch) Date: Fri, 12 Mar 2010 12:37:04 -0800 Subject: [Corp. Watch] Lehman execs, auditors engaged in accounting fraud to hide collapse Message-ID: <2F8E0E53-3A01-4C78-8640-38A9EA73180F@countercorp.org> What Killed Lehman By Grace Wong and Aaron Smith (CNN, March 12) -- Failings by Lehman Brothers executives and its auditor led to the bank collapse that unleashed the worst of the financial crisis, according to a report by a court-appointed investigator. Lehman "repeatedly exceeded its own internal risk limits and controls," and a wide range of bad calls by its management led to the bank's failure, says the report, authored by examiner Anton Valukas. Valukas, of New York law firm Jenner & Block, was appointed in January 2009 by the U.S. Bankruptcy Court for the Southern District of New York to examine the causes of Lehman's failure. Lehman's bankruptcy filing on Sept. 15, 2008 -- the largest Chapter 11 filing in financial history -- capped a 95% slide in the firm's stock price, and unleashed a crisis of confidence that threw financial markets worldwide into turmoil, sparking the worst crisis since the Great Depression. Blame the execs As a credit squeeze caused investor confidence to falter in the fall of 2008, Lehman tried to stave off collapse by painting a misleading picture of its financial condition, the report claims. The report is highly critical of Lehman's executives, who "should have done more, done better." Valukas blamed Lehman executives for exacerbating the firm's problems, resulting in financial fall-out to creditors and shareholders. The executives' conduct "ranged from serious but non-culpable errors of business judgment to actionable balance sheet manipulation," he said. The report said former CEO Richard Fuld was "at least grossly negligent in causing Lehman to file misleading periodic reports." But it says responsibility for its collapse is shared. A flawed business model that rewarded excessive risk and leverage exacerbated the bank's problems, as did government agencies. Lehman's plight "was more the consequence than the cause of a deteriorating economic climate," Valukas wrote. Repo 105 In particular, the examiner's report criticizes Lehman's failure to disclose its use of an accounting device called "Repo 105" to make its books look better. Lehman used this device to strip some $50 billion of undesirable assets from its balance sheet at the end of the first and second quarters of 2008, instead of selling them at a loss, according to the report. Accounting rules permitted Lehman to treat this transaction as sales instead of financings, "so that the assets could be removed from the balance sheet," according to the report. The examiner's report included e-mails from Lehman's global financial controller confirming that "the only purpose or motive for [Repo 105] transactions was reduction in the balance sheet," adding that "there was no substance to the transactions." The report accused Lehman of not disclosing its use of Repo 105 -- nor its "significant magnitude" -- to government regulators, rating agencies, investors, or its board of directors. The auditor Ernst & Young was aware of the use of Repo 105, but it did not challenge or question it, according to the report, which runs more than 2,200 pages. The report said there was "sufficient evidence" that Fuld knew about the use of Repo 105 before signing off on quarterly financial reports that made no mention of it. The examiner based this charge on statements from former Chief Operating Officer Bart McDade, who said he discussed the use of Repo 105 with Fuld. The report also said that Fuld denied, in an interview with the examiner, any recollection of the conversations with McDade. Fuld's lawyer, Patricia Hynes, said that her client was not aware of his company's use of Repo 105. "Mr. Fuld did not know what these transactions were -- he didn't structure or negotiate them, nor was he aware of their accounting treatment," said Hynes, in a statement. 'Unprecedented events' Ernst & Young spokesman Charlie Perkins deflected blame from his company, saying that Lehman's bankruptcy "was the result of a series of unprecedented adverse events in the financial markets." Perkins, in a statement, noted that his Ernst & Young conducted its last audit of Lehman for the fiscal year ended Nov. 30, 2007, more than nine months before the Chapter 11 filing. "Our opinion indicated that Lehman's financial statements for that year were fairly presented in accordance with generally accepted accounting principles [GAAP], and we remain of that view," he said. Fuld's attorney, Hynes, said the ex-Lehman chief "throughout his career faithfully and diligently worked in the interests of Lehman and its stakeholders." In Congressional testimony on Oct. 6, 2008, Fuld said, "I wake up every single night thinking, 'What could I have done differently?' "