All of this took place as the Obama administration was gearing up for the 2012 election. And there were concerns that they might have trouble raising money. As the Washington Post put it in April 2011, “There were some signs that fervor for Obama in Hollywood and Silicon Valley has ebbed.”13 The Hollywood Reporter explained, “As the 2012 election fund-raising cycle heats up, the one-time darling [Obama] is finding far less enthusiasm from showbiz donors.” The “disenchantment is incredibly palpable.”14
The concern was less about Hollywood celebrities and performers—they tended to donate to candidates based on ideology or beliefs—than about the studio “suits” and their khaki-wearing, high-tech-firm counterparts who were troubled by the slow-growing economy. And enthusiasm had ebbed among the vast base of middle-class customers of these industries. There was a lot of concern within the campaign that smaller online donations might not match what had happened in 2008. The New York Times was reporting that many small Obama donors were “disgruntled.”15
The campaign needed the “suits” and the “khakis” to step up. Wall Street firms had given generously in 2008, but they too were much less motivated to give for the 2012 election. In short, online piracy presented the perfect double-milker. Pitting the suits against the khakis meant that Team Obama could extract more money from both industries at a time when fund-raising was proving to be more difficult than expected.
The Obama campaign began in April 2011 by holding fund-raising events in California, targeting those who were on both sides of the online piracy bill.
The president boarded Air Force One and headed to San Francisco for a series of fund-raisers in the Bay Area with the khakis, who were opposed to the antipiracy legislation. Along with a visit to the Palo Alto headquarters of Facebook, where he cohosted a town-hall-style meeting with Facebook founder and CEO Mark Zuckerberg, the president attended two fund-raisers.16
The next day, the president held two events at Sony Pictures, where the chairman and CEO was an Obama supporter and a huge advocate of cracking down on Internet piracy. (“I’m a guy who doesn’t see anything good having come from the Internet,” he told one conference.17) The first event was a classic merging of Hollywood and politics. One thousand people crowded into Lot 30, where the studio had just finished filming The Amazing Spider-Man (the fourth installment in the successful franchise). Actor Jamie Foxx got up onstage to rev up the crowd.18 When President Obama walked out, it was with U2’s “City of Blinding Light” blasting out of the audio system. After a speech, the president slipped offstage for a small dinner at the Sony Commissary hosted by Michael and Jamie Lynton. Admission to the dinner cost $35,800 a pop.19 Then it was off to another fund-raiser with Hollywood executives at the Tavern in nearby Brentwood. There film producer Jeffrey Katzenberg of DreamWorks introduced the president before he spoke.20 White House officials were interspersed with the studio execs. White House senior adviser David Plouffe sat next to Katzenberg. White House press secretary Jay Carney broke bread with filmmaker Steven Spielberg. Actor and producer Tom Hanks was in attendance. “Hey, this is a private event,” he quipped to the gathered media.
Thanks to that trip, April 2011 ended up being a very good month. The DNC bagged $12.4 million, largely from big checks donated to the Obama Victory Fund. It was twice what the Republicans raised.21
The timing of these April fund-raisers was perfect. PIPA, the Senate version of the online piracy bill, was being drafted in Washington at that very moment with the help of lobbyists from the MPAA. Just weeks later, on May 12, it was introduced in the Senate Judiciary Committee.22 With key support from Senate Judiciary Committee chairman Patrick Leahy and ten others, the bill gained momentum quickly. By the end of the year, the bill would boast forty cosponsors. The suits in Hollywood were pleased.
PIPA had clear bipartisan support. Some of the cosponsors were obvious: Senator Al Franken had been in show business for decades, and Senators Dianne Feinstein and Barbara Boxer represented the state of California. Republican supporters included Senator Lamar Alexander from Tennessee (home of the country music industry) and Senator John McCain. It didn’t take long for the bill to start moving. By May 26, the antipiracy bill had cleared the Senate Judiciary Committee with a unanimous vote.23
That’s when the real battle began.
For online companies Google, Microsoft, eBay, Yahoo, and others, the Senate antipiracy bill and its House counterpart posed an enormous threat. Eric Schmidt, the executive chairman of Google, warned that antipiracy bills would “criminalize linking and the fundamental structure of the Internet itself.”24 Google’s Policy Counsel told a congressional committee that the law would “undermine the legal, commercial, and cultural architecture” of the Internet.25 The tech publication CNet News declared that the bills amounted to a “death penalty” for websites.26
Now the milking could begin in earnest. Hollywood had already been squeezed. When PIPA passed the Senate, two deep-pocketed cash cows found themselves in a kind of arms race that the Permanent Political Class could only have dreamed about until then. For the extraction industry in Washington, it was boom time.
Particularly exciting for the Permanent Political Class was the fact that Silicon Valley was suddenly fully engaged. Getting tech nerds to pay tribute to Washington had always been a difficult proposition. Many in the high-tech field tend to be libertarians—they just want to be left alone. And given the intensely competitive nature of the industry and the fast pace of innovation, politics is largely seen as a distraction. “They would rather be innovating,” Bob Herbold, the former COO of Microsoft, told me. The Permanent Political Class was offended by this fact. “The [tech] industry had an attitude that government should do what it needs to do but leave us alone,” one Hill staffer told BusinessWeek. “Their hands-off approach to Washington will come back to haunt them.”27
When Microsoft emerged in the 1990s as one of America’s richest companies, it embodied this tech-nerd attitude. It had only a small group of lobbyists who worked out of Microsoft’s local sales office in Chevy Chase, Maryland, and campaign contributions from Microsoft execs were a rare occurrence. “Bill [Gates] was proud of both of these facts,” Herbold, who was COO at the time, told me.
As far as the Permanent Political Class was concerned, that simply would not do. The tech nerds needed to be put in their place. One lobbyist at the time told author Gary Rivlin, “You look at a guy like [Bill] Gates, who’s been arrogant and cheap and incredibly naïve about politics. He genuinely believed that because he was creating jobs or whatever, that’d be enough.”28 The company changed its tune when the Department of Justice brought an antitrust case against Microsoft. At the time, virtually all PC users relied on Microsoft’s operating system, which gave the company the leverage of a platform. When they used that leverage to nudge users toward their own Internet browser and away from an initially popular competitor from Netscape, the government pounced. Microsoft soon had to ramp up its lobbying and donations. “We had to set up operations in Washington, and Bill hated that sort of thing,” recalls Herbold. “So I had to do it.” They were directed to hire certain well-connected advisers and lobbyists in Washington. “You hear about bribery in China,” says Herbold. “They have nothing on us. We are just more sophisticated about it.”
Campaign contributions started to flow. Microsoft even began hosting an annual “Capitol Hill Family Game Night” for politicians and their families.29 With a fleet of Xbox 360s and a stack of the latest games, the event allowed lawmakers and staffers to learn about the latest game developments—for “educational purposes,” of course. But the event also provided another small way to keep Washington entertained and off Microsoft’s back. Not to be outdone in their attempts to entertain and influence the political class, the Motion Picture Association of America gives free screenings at its Washington headquarters for politicians and bureaucrats, arguing that these screenings were not social events but part of important intellectual endeavors for the Permanent Political Class.
“The substantive content of the movie may be relevant, while to others it might be the opportunity to see in action the latest movie making techniques, or to put into context what they are learning regarding the challenges facing the industry.”30 Of course.
With the emergence of many other high-tech firms as fat cash cows waiting to be milked, politicians started advising the tech nerds to pay attention to Washington. Senator Orrin Hatch, who was then chairman of the powerful Senate Judiciary Committee, spoke for many in Washington, D.C., when he told tech company executives at a conference, “If you want to get involved in business, you should get involved in politics.”31 When Microsoft decided it didn’t want to play the conventional Washington game, Hatch called the company “knuckle-headed and hard-nosed,” according to Wired magazine. “I have given [Microsoft] advice and they don’t pay any attention to it.”32
Getting involved in politics includes, of course, making campaign contributions, as well as hiring family members and allies in the influence industry. It means doing favors for elected and unelected government officials. To make that happen here, Congress needed to put fear in the hearts of high-tech executives. “Members [of Congress] see a high-growth industry and they automatically think we have a lot more money to give,” one lobbyist told Roll Call. “I think they are always surprised with how little money is out there for them. This is not the banks, or the pharmaceutical industry, or transportation, which are highly regulated. Tech is not highly regulated.”33
Now, with the antipiracy fight in Washington, big firms such as Google were in play. Knowing the right people in power gives key Washington players a new sense of worth. The Permanent Political Class has always had such players. Attach yourself to someone with power and make your move at the right time and you too can become a player. Vice President Joe Biden was the point man for the administration, so his aides and former aides were suddenly players. Many became hired guns on both sides.
Leading the charge for the MPAA was Michael O’Leary, recently hired as vice president and counsel for the organization.34 O’Leary had served as a counsel to Biden when he was on the Senate Judiciary Committee.35 On the other side, Google, which was leading the opposition to the bill, made its own move. In early 2011, the technology giant hired an attorney named Katherine Oyama to be its policy counsel in Washington. Oyama came to Google from the White House, where she had served as the vice counsel to Vice President Biden.36
The battle pitted key Obama pillars of support against one another: Stephen Spielberg and Jeffrey Katzenberg versus Marissa Mayer—first at Google, then CEO of Yahoo—and Eric Schmidt of Google. Some of the media interpreted this as a problem, but they missed the point entirely. For the Permanent Political Class, this battle wasn’t a problem, it was an opportunity. As at least the Hollywood Reporter recognized, “This is a great issue over which politicians can raise funds from donors on both sides.”37
The number of companies with skin in the game was staggering. As Politico rightly observed, it was “a huge payday for lobbyists”: 145 different companies lobbied for or against the bill in the House, and 157 for or against in the Senate.38
The stakes were high. For entertainment firms, this was “either make it or break it,” said Bill Allison of the Sunlight Foundation. “It’s not surprising that they’re spending more to push these bills.”39 Cable giant Comcast alone hired nineteen different lobbying firms to fight for them. The National Cable and Telecommunications Association, in addition to its own army of in-house lobbyists, hired nine outside lobbying firms. Disney, TimeWarner, News Corporation, and others also hired their own well-connected firms.
Opponents like Google, Yahoo, and Microsoft armed themselves as well. In the fourth quarter of 2011, when the fight reached its zenith, the two sides together spent a whopping $104.6 million lobbying. In all, more than nine hundred lobbyists were paid big money.40 It was a boon for the lobbying industry, which had been having a tough year.41
Those who had family members in office or were well connected did especially well. Former senator Gordon Smith represented the National Association of Broadcasters. He was a cousin to no less than three sitting U.S. senators: Mike Lee of Utah, Mark Udall of Colorado, and Tom Udall of New Mexico, a cosponsor of the bill. Senator Mark Pryor’s brother, who lobbied for Microsoft, faced him from the other side. Senator Pryor conveniently sits on the powerful Commerce Committee.42
Dave Lugar, son of Indiana Republican senator Dick Lugar, also picked up Google as a high-paying client. (Senator Lugar was keeping quiet as to whether he supported or opposed the bill.) Dave Lugar pocketed $140,000 from Google in 2011.43 He also helped his father raise funds. On December 13, he sent out a letter urging clients to attend a fund-raiser for the senator to the tune of $5,000 per person.44
Ex-politicians and their family members also had a nice payday. Google lapped up such ex-politicians as former majority leader Dick Gephardt and former congresswoman Susan Molinari, who would become the director of its Washington, D.C., office.45 Molinari has had several interesting jobs since leaving Congress. At one point she was an anchor for CBS News Saturday Morning.46 Along with her lobbying partner Rita Lewis (a former Tom Daschle aide), she also had helped to land a $4.6 billion appropriation for Hurricane Katrina relief for the state of Louisiana.47 Her other clients have included the government of Panama. Her husband, former congressman Bill Paxon, is also a lobbyist.48
Comcast paid former congressman William Gray and his son Justin’s boutique lobbying firm $440,000 throughout 2011.49 Ex-congressman Vic Fazio represented AT&T.50 A “government relations firm” named Madison Group netted a cool $140,000 from Google during 2011.51 Michael Brown, the son of the late commerce secretary Ron Brown, worked on the Google account at Madison.52 The firm Dutko Grayling landed a $320,000 lobbying contract from Google.53 One of the managing principals at the firm is the brother of former Bush White House chief of staff Andy Card.54
Some powerful and well-connected lobbying firms even managed to walk both sides of the street—by representing both those for and against the bill. Super-lobbyist Tony Podesta, whose brother was White House chief of staff under President Clinton, was extremely well connected on both ends of Pennsylvania Avenue. A native of Chicago, Podesta was partners with Republican strategist Dan Mattoon.55 When Dennis Hastert was Speaker of the House, Podesta and Mattoon had hired the Speaker’s son to work for them.
Podesta was a frequent guest in the Obama White House.56 Google paid his firm $350,000. Astonishingly, the National Association of Broadcasters also paid Podesta’s firm $320,000.57 The two clients had polar opposite views on the antipiracy bills. Google also hired firms like the FIRST Group, which featured recent chiefs of staffs of both Republican and Democratic senators.58 Who says there is no bipartisanship in Washington?
Some congressional staffers smelled the cash and jumped into the money scrum after the ball was in play. Two of the Republican congressional staffers who helped write SOPA in the House and PIPA in the Senate quit their jobs—in order to become lobbyists for the MPAA and the National Music Publishers Association. One worked for House Judiciary Committee chairman Lamar Smith, and the other as a senior Republican aide on the Senate Judiciary Committee.59
The Obama campaign was hardly the only group extorting for campaign dollars. Congresswoman Debbie Wasserman Schultz was the Democratic whip in the House and head of the Democratic National Committee. When the Internet piracy bill passed the Senate, her fund-raisers put out the word that it was time to cough up cash. She had yet to take an official position on the bill. In less than a week—from April 27 to May 2—an extraordinary wave of donations rolled in. A total of $63,500 flowed from the PACs of AT&T, Verizon, TimeWarner, Cox Enterprises, the Communication Workers of America, the Entertainment Software Industry Association, Microsoft, Disney, Viacom, Clear Channel Communications, Sony Pictures, the Directors Guild of America, the National Football League, Yahoo, and GoDaddy.60 During those same few days, checks also arrived for her leadership P
AC from the chairman of 20 th Century Fox, Microsoft, and executives from film companies like Fox Films, as well as from lobbyists at firms representing eBay, TimeWarner, the National Cable and Telecommunications Association, Google, and others. It was an extraordinary concentration of checks from parties that had a lot to win or lose from antipiracy legislation.
Congressman Lamar Smith, then-chairman of the House Judiciary Committee, continued his fund-raising as his staff was drafting the House bill.61 Smith’s former chief of staff, Joe Gibson, had gone into the lobbying business by forming the Gibson Group. He was working for broadcast giant Clear Channel, which supported the bill.62 On March 25, he received twelve checks from company executives for more than $18,000.63 “If you are a member of the Judiciary Committee, year after year after year, the content industry has been at your fund-raisers over and over,” complained Computer and Communications Industry Association president Ed Black.64 But despite grumbling, firms such as Google, GoDaddy, and Microsoft paid up.65
Smith also raked in donations through his Longhorn PAC, soliciting and receiving contributions from broadcasters, software groups, the recording industry, and lobbying firms involved on both sides of the antipiracy fight as the bill was being drafted.66 In November, after hearings were held on the bill, Smith delayed moving it to the House floor. “Congress benefits from keeping us all in suspense,” said Gabriella Schneider of the Sunlight Foundation. “Those special interests who have a stake in it are . . . contributing directly to campaigns and this gives them more time to do it.”67
Lobbyists were expected to hold fund-raisers for senators and representatives if they wanted movement on the bill. Lobbyists hired by the MPAA organized a fund-raiser for Senator Orrin Hatch, who sat on the Senate Judiciary Committee and was a cosponsor of the Senate bill.68 Some politicians played coy by not taking a clear stand on the bill. House Oversight Committee member Ed Towns of New York lined up fund-raisers from both sides.69 A lobbyist from the Podesta Group, which represented Google, TimeWarner, and the National Association of Broadcasters, hosted one, along with lobbyists representing Verizon, AT&T, Microsoft, and Comcast.70
Extortion: How Politicians Extract Your Money, Buy Votes, and Line Their Own Pockets Page 9
