Copyrighted material MicroSoftball Journalism

A special 404 section of under-reported news

It's not every day that a reporter asks a CEO if his behavior is "Nixonian." But then again, you don't often hear a billionaire offering his garbage to another billionaire.

These were just some of the lowlights from a June 28 press conference held by Oracle founder Larry Ellison. While Ellison wanted to describe new products, the press was more interested in grilling him over revelations that his corporation had paid investigators to snoop on advocacy groups tied to archrival Microsoft. Ellison decried the attempt by detectives to bribe janitors for a peek at wastebaskets -- although he volunteered to ship Oracle's trash to Microsoft in the spirit of full disclosure -- but he defended hiring investigators. It was his "civic duty," he said, to prove that these organizations "were misrepresenting themselves as independent advocacy groups, when in fact their work was funded by Microsoft for the express purpose of influencing public opinion in favor of Microsoft during its antitrust trial."

Microsoft and some of the orgs named as front groups reacted indignantly. "Instead of being willing to address the issues openly, Oracle has apparently felt the need to employ back-alley tactics, subterfuge and disinformation in order to achieve its aims," a statement from the Independent Institute read.

Loathsome as snooping may be, Ellison makes an important point; if he hadn't done the research on the financial ties between Microsoft and these groups and present the evidence to the press, the truth would probably not have come out. One of the dirty little secrets of journalism today is that non-profits, individuals, and business competitors like Oracle are often doing the work for them.

Two examples can be found in the Microsoft case alone. While the corporation is spending money in Washington like a drunken sailor on shore leave, (see item below), the few articles describing their lobbying and political contributions comes from data collected by the non-profit Center for Responsive Politics, which recently published its own "Money in Politics" alert on Microsoft.

And then there were the expensive, full-page newspaper and magazine ads from the Independent Institute that appeared during the antitrust hearings last fall. 240 academics signed an open letter stating that the case was harmful to consumers. But The New York Times later obtained documents -- from Oracle, presumably -- that revealed that Microsoft had paid almost $154,000 for the ads and expenses for the head of the institute to fly cross-country for a Washington press conference.

+ Microsoft and the Press   Until Larry Ellison's press conference, few readers knew about Microsoft's use of shills; only a handful of stories about Microsoft's attempts at influence have appeared in newspapers and magazines this year. So short is the list that an index is easy:

  • Business Week, May 15
  • Washington Post, May 17
  • USA TODAY May 30
  • Los Angeles Times June 8
  • New York Times, June 12
Although each piece appeared in an important nationwide journal, only one of these stories -- the piece from the NY Times -- was picked up elsewhere. Thus it's unlikely that vast majority of Americans know that Microsoft has the best friends money can buy.

But the press has always treated Microsoft gently. When U.S. District Judge Thomas Penfield Jackson ruled on June 7 that Microsoft must split itself into two, it was the top story on the evening news and in the next day's papers, with over 300 reports. Our analysis finds coverage was overwhelmingly biased towards Microsoft. Almost all media offered reaction quotes from "experts" with a vested interest in the case -- although that conflict was sometimes not described. Their voices often played up the fear of the unknown; that the Microsoft breakup would lead to additional costs to consumers and industry chaos.

Only a very few newspapers sought to balance the story with reaction from both sides. (Highest marks go to Rocky Mountain News, LA Times, Deseret News, Raleigh NC News and Observer, San Jose Mercury News.) Also give credit to the four other newspapers who sought comment from one of Microsoft's most outspoken critics, Sun CEO Scott McNealy. At least he was mentioned; only one paper (the Toronto Sun) bothered to note that Oracle had no comment on the court decision.

Here's a sample of what passed for expert comment that day:

Microsoft's great success was its great fault, in the eyes of the courts. The company made computing cheaper, easier and more useful for millions. But Microsoft was a tough player, sometimes going over the line of fair competition, and the company compounded its problem by bullying rivals. Still, splitting one of the world's most successful firms and wealth creators down the middle is a harsh remedy. And a potentially disastrous precedent.

-- NY Daily News

"It's definitely a bad deal for consumers," said John Coffey, director of strategic programs at Moss Software, which is known as a Microsoft evangelist in the developer community. "It will make our business much more difficult," he said. "One of the benefits of Microsoft's success is that everyone is writing software for a common platform. If other software platforms grab a niche, and suddenly there are 10 operating systems, our costs will increase."

-- Orange County Register

"It's like breaking up McDonald's into separate hamburger and french fry companies," said Dick Craddock, a [Microsoft] group manager. "How can you make a Happy Meal?"

-- San Francisco Chronicle

Steve DelBianco, a spokesman for the Association for Competitive Technology, a software trade group that includes Microsoft, said the judge's ruling would actually hurt consumers. Computer shoppers will see "increased complexity, less innovation and higher prices" when software developers no longer can count on having Microsoft's standardized operating system.

-- Cox News Service

Microsoft's business could be hurt in the short term, said Dr. Stanley Liebowitz, an economics professor at the University of Texas at Dallas. He said the uncertainty surrounding the company may hamper its efforts to sell Windows 2000 software to corporations, and that the judge's order is too ambiguous on which pieces of the program would go to which half of Microsoft. "You don't know which company your products are going to come from, and you don't know how well everything will work with the operating system," said Dr. Liebowitz, co-author of "Winners, Losers & Microsoft," a book about antitrust law in the digital age.

-- Dallas Morning News

The same day, CBS Evening News interviewed "consumer advocate" Erick Gustafson of Citizens for a Sound Economy for comment about the proposed split of Microsoft. Like the others, Gustafson opposed the breakup. But as happened several times that day, it was not revealed that his group had recently accepted large sums from Microsoft.

Microsoft had donated $380,000 to Citizens for a Sound Economy. Nor did Dallas Morning News reveal that "Winners, Losers & Microsoft" was produced by the Independent Institute, and Microsoft had underwritten publication cost. Nor did the Cox news wire explain that Microsoft had paid the Association for Competitive Technology at least $100,000 in dues, according to a spokeswoman quoted by the Washington Post.

+ Microsoft's Stealth PR   So who are these groups? Citizens for a Sound Economy is typical of the many advocacy/think-tanks beloved by special interests. Claiming to be an "independent" voice, they churn out newspaper op-eds and provide quotes and sound bites for a variety of pro-industry and conservative political causes. Some examples: This group attacks the Sierra Club and defend George W. Bush's environmental record as Texas governor. They advocate educational reform with a voucher systems for schools, yet fought California's 1998 Prop 10, which taxed cigarette sales to pay for early childhood development programs. And as mentioned in the item above, the group has accepted enormous donations from Microsoft and joined its battle against the antitrust court decision.

This group is just one of several tax-exempt orgs that have divided over $750,000 from Microsoft and waxed in outrage over the proposed breakup of the software giant. Other beneficiaries include the Cato Institute, Heritage Foundation, National Taxpayers Union, and about a dozen more obscure names such as Citizens Against Government Waste, Citizens for a Sound Economy, the Small Business Survival Committee, the Independent Institute, Americans for Technology Leadership, and the Association for Competitive Technology.

Together the groups wage a disinformation campaign almost identical to the attempt to debunk global warming waged by Big Oil that we described in a 404 report two years ago. The strategy requires discrediting Microsoft critics while building a sham "grassroots" movement in support of the corporation.

A publicity stunt by National Taxpayers Union created a mock $30 million bill for Netscape's ex-CEO James Barksdale "for legal services rendered on behalf of Netscape by the Department of Justice, paid for by U.S. taxpayers." The group -- which has received $215,000 from Microsoft -- has also attacked the 19 state Attorneys General that joined the federal suit, complaining that Microsoft's stock value has dropped and "stockowners investing for retirement could [thus] suffer mortal wounds." Then there were the Social Security seminars in Florida, where participants found on each chair a form letter addressed to the state Attorney General, demanding the state drop out of the antitrust suit against Microsoft. Anyone signing the letter received a free T-shirt from Citizens for a Sound Economy, according to USA Today.

Microsoft is often tied to these organizations in more than one way. While Americans for Technology Leadership includes Microsoft among its short list of founding members, also named there are three other Microsoft-supported groups. But the relationship is even more incestuous, the Post discovered:

Americans for Technology Leadership was created last fall by the Association for Competitive Technology with the help of the DCI/New Media Group, a firm whose Web site says it "specializes in using cutting-edge technology to move public opinion." Separately, Microsoft has hired DCI/New Media to do grass-roots lobbying.

Josh Mathis, the group's executive director and an ex-staffer to former representative Rick White (R - Washington), who represented Microsoft's home base of Redmond, said he works both as a contractor for Americans for Technology Leadership and as an employee of DCI/New Media. The close connections to Microsoft aren't always revealed. During the primary season, Americans for Technology Leadership commissioned pollsters Zogby and Mason-Dixon to conduct six surveys on the Microsoft case in key states. The results favored Microsoft, but the group never mentioned the Microsoft connection in news releases...

These are only the incidents known; most of the groups to which Microsoft contributes do not have to completely disclose contributions -- if The Times hadn't been slipped internal documents from the Independent Institute, it would have been impossible to debunk their claims that Microsoft had nothing to do with the full-page ads.

But Microsoft opponents don't think that the corporation has won converts with its subterfuge. Jason Mahler, vice president and general counsel of the Computer & Communications Industry Association told the LA Times, "What we find to be interesting is that very few voices are joining the Microsoft chorus that aren't either directly or indirectly paid for by Microsoft, or whose livelihood depends in good part on Microsoft."

+ The Deepest Pockets   Microsoft has dropped enormous sums on groups that support the corporation's fight against the Justice Department, as described in the item above. But that's petty change compared to what they've spent on lobbyists and political contributions.

The company spent $4.6 million just on D.C. lobbyists in 1999. "You can't swing a dead cat in this town without hitting a Microsoft lobbyist," one competitor told USA Today. That figure doesn't include the cost of lobbyists in all 19 states where the attorneys general have joined the federal antitrust lawsuit.

The funds spent on lobbyists is just the beginning. In the 1999-2000 election cycle, Microsoft has also spent to date (all figures rounded off):

  • $1.2 million in "soft money" donations -- which puts the corporation among the top five donors nationwide

  • $1 million in PAC and traceable individual contributions

  • $1 million split between Democrat and Republican parties to underwrite upcoming conventions

Other recent gifts include a gift of $10 million for a Capitol Building visitor's building, cross-country junkets to Microsoft HQ for 130 members of Congress and staff members of both the House and Senate Judiciary Committees, and a $50,000 gift to the Congressional Black Caucus Foundation.

And then there's the unreported money spent by Microsoft to tie up Washington law firms. According to Business Week, the corporation has "spread hefty amounts of legal work -- much of it unrelated to the case -- to major firms around town. So an army of lawyers is ethically constrained from working for Microsoft's competitors."

The total spent by Microsoft in the last year is not disclosed, but it is clearly staggering. Microsoft spokesman Rick Miller will only say that estimates of up to a billion dollars are exaggerated. "I don't think there has ever been such a cynical attempt to overturn a judicial proceeding with such massive amounts of money, hundreds of millions of dollars," a spokesman for a computer industry trade group told USA Today.

+ The Microsoft-Bush Connection   According to a report from Center for Responsive Politics, Microsoft has donated nearly equal amounts to Demo/Repubs or Gore/Bush. (The split is actually closer to 55:45 in favor of Republicans.) But a closer look shows the corporation closely aligned with the same players that stand behind George W. Bush.

Directing Microsoft's "grassroots" campaign are PR mavens at Feather, Hodges, Larson & Synhorst, the same firm leading the election year charge for Bush. Other connections between Microsoft and GOP leadership include:

  • Microsoft's chief operating officer, Robert Herbold is also a Bush technology policy adviser and major fund-raiser

  • Ralph Reed, former head of the Christian Coalition, was advisor to both until questions were raised over his appeal for Repubs to let Bush know they support Microsoft

  • Michael Deaver, the genius credited with stage-managing Ronald Reagan's political career now consults on Microsoft public relations. (Ironically, Judge Thomas Jackson was also judge for Deaver's perjury trial in the mid-1980s; Deaver was convicted, but Jackson sentenced him to probation only)

Microsoft has also hired Republican heavy-hitters for lobbyists: GOP ex-chair Haley Barbour and Kerry Knot, former chief of staff for House Majority Leader Richard Armey of Texas. And although they're outnumbered, Democrat lobbyists on Microsoft's team include Al Gore's close friend former Rep. Thomas Downey and Craig Smith, former campaign manager for Gore.

Part of the myth that Microsoft presents is that the corporation was politically naive and caught off-guard by the antitrust suit. But while the amount of Microsoft donations have indeed skyrocketed, the corporation has long tried to buy favor with Washington's power core. In 1997, Microsoft hired several cronies of Speaker Newt Gingrich as lobbyists, including friend Grover Norquist, former Rep. Vin Weber, and Gingrich's one-time policy adviser Ed Kutler.

But insiders are whispering that Microsoft plans to steal Election 2000 for the GOP. As described in a May 30 article from USA Today, Microsoft has allegedly promised to bankroll massive last-minute donations:

Trade groups representing Microsoft rivals say high-level Republicans have told them that Microsoft has privately pledged to pour millions of dollars into GOP Senate campaigns on the eve of this November's elections. The contributions would be designed to ensure that the chamber -- and its power to confirm judges and the new president's attorney general -- remain under Republican control.

The same groups say the company has promised additional large contributions to the Republican National Committee, which is working to elect Texas Gov. George W. Bush to the White House. Bush has expressed misgivings about the antitrust case, saying he would "stand on the side of innovation, not litigation." Bush's Democratic opponent, Vice President Gore, has warned against "unhealthy concentrations of power" in the business world while avoiding direct opinions about the Microsoft case.

Microsoft would not confirm or deny these plans. Spokesman Rick Miller told USA Today, "We won't comment on future giving."

PREVIOUS 404 Report

Comments? Send a letter to the editor.

Albion Monitor Issue 76 (

All Rights Reserved.

Contact for permission to use in any format.