FCC Seeks Rationale for Abridging Freedom of Speech or of the Press

5/24. The Federal Communications Commission's (FCC) Office of Communications Business Opportunities (OCBO) released a Public Notice (DA 13-1214) that announces that the FCC is persisting in its grasp for a rationale for regulating news media, under the guise of providing for the "Information Needs of Communities".

It has commissioned another study, and released a document [78 pages in PDF] titled "Research Design" for this study. The deadline to submit comments to the FCC regarding this "design" is July 23, 2013.

This is part of a project initiated by former Chairman Julius Genachowski and Steven Waldman. See, Waldman's report [468 pages in PDF] of July 2011, which the full Commission did not vote to approve.

See also, report [124 pages in PDF] of July 2012 prepared for the FCC by University of Southern California Annenberg School for Communication & Journalism in collaboration with the University of Wisconsin-Madison.

The FCC lacks a statutory mandate for this. Although, the just released PN cites the inapplicable requirement codified at 47 U.S.C. § 257(c). The section requires that the FCC conduct a triennial review regarding eliminating "market entry barriers for entrepreneurs and other small businesses in the provision and ownership of telecommunications services and information services, or in the provision of parts or services to providers of telecommunications services and information services". This section creates no authority to study or regulate news media. Also, it pertains to the elimination of regulations. The "Information Needs of Communities" activities of the FCC are directed towards imposing regulation.

Moreover, regulation of news media would be repugnant to the First Amendment.

Nevertheless, the FCC has just released a PN that announces that the FCC has commissioned another study. The FCC also released a document titled "Research Design for the Multi-Market Study of Critical Information Needs: Final Research Design".

The study is to be conducted by Social Solutions International, Inc. (SSII). The SSII discloses in its web site that it has no experience or expertise in communications, journalism, the news media industry, or any FCC matters.

The "Research Design" is long, employs jargon from various academic methodologies, and awkwardly attempts to appear scientific. But, it is often uninformed, and sometimes incoherent.

This "Research Design" states that the SSII will judge the quality of news reporting by up to 280 television, radio, newspaper and internet new entities.

This "Research Design" also states that the SSII will also judge the quality of the media providers. That is, the SSIII will "identify ownership characteristics", "determine who owns the broadcast stations", and identify "duopolies".

This, the "Research Design" states, is to "establish a dialogue between the findings of the content analysis of media sources and what is actually reported by news providers".

More News

5/24. The Federal Communications Commission (FCC) published a notice in the Federal Register (FR) that sets deadlines for submitting comments in response to its Public Notice (PN) regarding its proposals to conduct three limited "real-world trials to obtain data" regarding transitioning public switched telephone network technology to all internet protocol networks. The deadline to submit initial comments is July 8, 2013. The deadline to submit reply comments is August 7, 2013. This PN is DA 13-1016 in GN Docket No. 13-5. The FCC released it on May 10, 2013. See, FR, Vol. 78, No. 101, May 24, 2013, at Pages 31542-31548. See also, story titled "FCC Requests Comments on Possible IP Transition Trials" in TLJ Daily E-Mail Alert No. 2,561, May 14, 2013.

5/24. The Federal Communications Commission (FCC) published a notice in the Federal Register (FR) sets comment deadlines for its Further Notice of Proposed Rulemaking (FNPRM) regarding whether, under the Twenty-First Century Communications and Video Accessibility Act of 2010 (CVAA), a multichannel video programming distributor (MVPD') service is covered by the emergency information rules and by the video description rules when it permits its subscribers to access linear video programming on mobile and other devices. The deadline to submit initial comments is July 23, 2013. The deadline to submit reply comments is August 22. This item is FCC 13-45 in MB Docket Nos. 12-107 and 11-43. The FCC adopted this item on April 8, 2013, and released it on April 9. See, FR, Vol. 78, No. 101, May 24, 2013, at Pages 31800-31808.

5/24. The Department of Health and Human Services' (DHHS) Substance Abuse and Mental Health Services Administration (SAMHSA) published a notice in the Federal Register (FR) that announces a contest for the development of web applications, mobile apps, and other information technology based products that help prevent high risk drinking among college students. The awards are $60,000 for first place, $30,000 for second place, and $10,000 for third place. The deadline to submit entries is July 8, 2013. Winners will be announced on or about September 13, 2013. See, FR, Vol. 78, No. 101, May 24, 2013, at Pages 31571-31572.

FTC Announces Ten Year Regulatory Review Schedule

5/23. The Federal Trade Commission (FTC) published a notice in the Federal Register (FR), titled "Notice of Intent To Request Public Comments", that announces, and sets a schedule for, FTC review of all FTC rules and guides over the next ten years.

COPPA. This FR notice announces that the FTC will review its Childrens' Online Privacy Protection Rule in the year 2022. These rules are codified at 16 C.F.R. Part 312.

The FTC last revised these COPPA rules in 2012. See, story titled "FTC Releases Expanded COPPA Rules" in TLJ Daily E-Mail Alert No. 2,494, December 19, 2012.

The COPPA is codified at 15 U.S.C. §§ 6501-6506. The statute bans operators of web sites and online services that are directed to children from collecting information from children under thirteen without parental consent. However, the FTC's rules exceed the statute.

HSR. The FTC will review its Hart Scott Rodino Antitrust Improvement Act coverage, exemption and transmittal rules in 2020. The HSR coverage rules are codified at 16 C.F.R. Part 801. The HSR exemption rules are codified at 16 C.F.R. Part 802. The HSR transmittal rules are codified at 16 C.F.R. Part 803.

Privacy of Consumer Financial Information. The FTC will review its Privacy of Consumer Financial Information Rule in 2020. These rules are codified at 16 C.F.R. Part 313.

ID Theft Red Flags. The FTC will review its identity theft red flag rules in 2018. These rules are codified at 16 C.F.R. Part 681.

CAN-SPAM. The FTC will review its CAN-SPAM Act rule in 2015. These rules are codified at 16 C.F.R. Part 316.

The 108th Congress passed S 877, the "Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003", or "CAN-SPAM Act", in late 2003. It is Public Law No. 108-187. The FTC immediately initiated a proceeding to write implementing rules. See, story titled "FTC Announces CAN-SPAM Act Rulemaking" in TLJ Daily E-Mail Alert No. 855, March 15, 2004. The FTC adopted its rule in December of 2004, and adopted revisions in 2008.

Standards for Safeguarding Customer Information. The FTC will review its Standards for Safeguarding Customer Information Rule in 2014. These rules are codified at 16 C.F.R. Part 314.

TSR. The FTC will review its Telemarketing Sales Rule in 2013. These rules are codified at 16 C.F.R. Part 310.

See, FR, Vol. 78, No. 100, May 23, 2013, at Pages 30798-30800.

Senate Judiciary Committee Holds Hearing on West

5/23. The Senate Judiciary Committee (SJC) held a hearing on the nomination of Tony West to be Associate Attorney General. This is the number three position at the Department of Justice (DOJ). The hearing went well for West. And, he briefly touched on cyber security.

West (at right) is currently the nominal Assistant AG in charge of the DOJ's Civil Division. He has held that position since 2009. However, he has been the acting Associate AG since March of 2012. President Obama formally nominated West to be Associate AG in September of 2012. See also, stories titled "Tony West Named Acting Associate Attorney General" in TLJ Daily E-Mail Alert No. 2,348, March 7, 2012, and "Obama Nominates Tony West to be Associate Attorney General" in TLJ Daily E-Mail Alert No. 2,454, September 22, 2012.

The Senate did not confirm West last year, in part, because Senate Republicans held up his nomination as a means to compel the DOJ to produce records regarding a quid pro quo agreement between DOJ and the City of St. Paul, under which the DOJ agreed to assist St. Paul in obtaining dismissal of a qui tam whistleblower action (U.S. ex rel. Newell v. City of St. Paul, U.S. District Court for the District of Minnesota, D.C. No. 09-1177) that pled violations of the Housing & Urban Development Act of 1986 by the City of St. Paul, in exchange for dismissing an unrelated case.

See also, story titled "Tony West Nomination for Associate AG Delayed in Senate" in TLJ Daily E-Mail Alert No. 2,477, November 28, 2012.

Much of the May 23 hearing addressed the City of St. Paul deal. While the DOJ's action on the qui tam case fell within the purview of West's Civil Division, and West claimed credit for the DOJ's decision, there is little dispute that Thomas Perez, AAG in charge of the DOJ's Civil Rights Division, and President Obama's nominee to be Secretary of Labor, was the architect of the deal. And despite West's claims, Congressional Republicans assign blame to Perez, and seek to block his confirmation as Secretary of Labor. In contrast, West is on track for confirmation as Associate AG.

Sen. Dianne Feinstein (D-CA) spoke in support of West, a fellow Californian. Sen. Barbara Boxer (D-CA), who is not a member of the SJC, did not participate, but submitted a statement for the hearing record urging confirmation of West. Sen. Sheldon Whitehouse (D-RI), who presided at the hearing, also spoke in support of West.

Sen. Charles Grassley (R-IA), the ranking Republican on the SJC, made no opening statement. However, he said to West, "I have no questions about your qualifications". He then asked numerous questions regarding the City of St. Paul deal, qui tam suits, and whistleblower protection generally. No other Republican members of the SJC participated.

Sen. Al Franken (D-MN) asked West solely about the DOJ's case against Standard & Poors. See, DOJ's February 5, 2003 release.

DOJ and Cyber Security. Sen. Whitehouse used the hearing, in part, to address the DOJ's role in promoting cyber security.

He said that the U.S. is "on the losing end of  biggest transfer of wealth in the history of humankind through the cyber attacks that penetrate our private sector corporations and steal wholesale by the terabyte their intellectual property".

Sen. Whitehouse asserted that "part of the problem with the cyber situation is that botnets swarm over the internet", and are "used to attack private corporations".

He said, "I want your pledge that if confirmed you will sit down with me and any other interested member of this committee, to discuss how to improve the Departments' enforcement through civil means of riding the internet of these botnets".

West said, "Mr. Chairman, you have that pledge".

Sen. Whitehouse's grasp of cyber security issues, and the relevant activities of the DOJ, is limited.

Botnets and theft of intellectual property are primarily handled by units of the DOJ that are not supervised by the Associate AG. For example, the Criminal Division, and its Computer Crimes and Intellectual Property Section (CCIPS), are overseen by the Deputy Attorney General.

West said that "dealing with the cyber threat" is "a top priority for the Department",  but "much of how we deal with that threat" does not lie within the "managerial responsibility" of the Associate AG.

Obama Picks Sepulveda for Telecom Post at State Department

5/23. President Obama nominated Daniel Sepulveda to be Deputy Assistant Secretary of State for International Communications and Information Policy and U.S. Coordinator for International Communications and Information Policy. See, White House news office release and release.

He went to work for the Department of State (DOS) in April, following his previous employer, former Senator, now Secretary of State, John Kerry, who was a senior member of the Senate Commerce Committee (SCC). His current position is Deputy Assistant Secretary of State for International Communications and Information Policy.

He worked for former Sen. Kerry from late 2009 through early 2013. He worked on, among other things, spectrum matters, including the spectrum bill enacted by the 112th Congress just over one year ago. See, HR 3630, [LOC | WW], the "Middle Class Tax Relief and Job Creation Act".

In 2009, he was Assistant U.S. Trade Representative for Congressional Affairs. And before that, he worked for former Sen. Barack Obama (D-IL) and Sen. Barbara Boxer (D-CA).

Obama Nominates Piwowar for SEC

5/23. President Obama nominated Michael Piwowar to be a member of the Securities and Exchange Commission (SEC) for a term expiring June 5, 2018. See, White House news office release and release.

Piwowar is the chief Republican economist for the Senate Banking Committee (SBC). Before that, he was Senior Economist on the President's Council of Economic Advisers (CEA), and Staff Economist to the Financial Regulatory Reform Working Group of the President's Economic Recovery Advisory Board.

Before that, he worked at the Securities Litigation and Consulting Group. He also previously worked at the SEC and Iowa State University.

Piwowar has been nominated for the Republican seat now held by SEC Commissioner Troy Paredes.

Obama Nominates Kara Stein for SEC

5/23. President Obama nominated Kara Stein to be a member of the Securities and Exchange Commission (SEC) for a term expiring June 5, 2017. See, White House news office release and release.

Stein is a long time staff assistant to Sen. Jack Reed (D-RI), a senior member of the Senate Banking Committee (SBC). She is currently Sen. Reed's Legal Counsel and Senior Policy Advisor. She has also been Staff Director of the SBC's Subcommittee on Securities, Insurance, and Investment.

Before her work on Capitol Hill, she worked briefly for the law firm now known as Wilmer Hale. She has also worked for the University of Dayton School of Law, Georgetown University law school, and the University of Nigeria Faculty of Law.

Stein has been nominated for the Democratic seat now held by SEC Commissioner Elisse Walter.

Obama Picks Padalino to Head RUS

5/23. President Obama announced his intent to appoint John Padalino to be Administrator of the Department of Agriculture's (DOA) Rural Utilities Service (RUS). See, White House news office release.

Paladino (at right) is currently the acting Administrator. The previous Administrator was Jonathan Adelstein, who is now head of the PCIA, also known as the Wireless Infrastructure Association.

The RUS is responsible for administration of government loans for telecommunications infrastructure. Also, HR 1 [LOC | WW], the huge spending bill passed by the 111th Congress in February of 2009, provided $3.5 Billion dollars in federal subsidies for broadband.

Paladino has worked in the Obama DOA since 2009. Before that, he worked for the 2008 Obama campaign. Before that, he worked for the El Paso, Texas law firm of Kemp Smith. Before that, he worked for H20 Consulting, Inc.

Senate Confirms Srinivasan for DC Circuit

5/23. The Senate confirmed Sri Srinivasan to be a Judge of the U.S. Court of Appeals (DCCir) by a vote of 97-0, on May 23, 2013. See, Roll Call No. 136.

Srinivasan is a consensus nominee. However, there was some last minute maneuvering over the timing of the vote that reflects the animosity between some Democrats and Republican over judicial nominations. The Senate Judiciary Committee (SJC) unanimously approved this nomination one week ago, on May 16. See, story titled "Senate Judiciary Committee Approves Srinivasan for DC Circuit" in TLJ Daily E-Mail Alert No. 2,562, May 15, 2013.

Sen. Charles Grassley (R-IA) stated in the Senate that "He was placed on the Executive Calendar 3 days ago, on Monday, May 20th. One day later, on May 21st, Republicans cleared the nominee to have an up and down vote when we return from the Memorial Day recess." But, Sen. Harry Reid (D-NV) "chose to file cloture". See, transcript.

"This is part of the Majority’s attempt to create the appearance of ``obstruction´´ where none exists. It is nonsense", said Sen. Grassley.

Obama Wants to Appoint Three More Judges to DC Circuit

5/23. President Obama released a statement on May 23, 2013 regarding the U.S. Court of Appeals (DCCir). He wrote that "The three remaining vacancies must be filled".

Sen. Patrick Leahy (D-VT), the Chairman of the Senate Judiciary Committee (SJC), backed the President during floor debate in the Senate on May 23.

The confirmation of Sri Srinivasan brings the number of active judges in the DC Circuit to eight. However, the relevant statute, 28 U.S.C. § 44(a), authorizes eleven active judges.

Senate Republicans have argued that this circuit has a very light caseload, and does not need any more judges. Rather, three of its seats should be reallocated to more busy circuits, as provided by S 699 [LOC | WW], the "Court Efficiency Act of 2013". See, story titled "Future Nominees for the DC Circuit May Face Republican Opposition" in TLJ Daily E-Mail Alert No. 2,562, May 15, 2013.

Sen. Leahy argued in the Senate that Republicans urged a full compliment of judges during the Bush administration, but are now demanding elimination of three seats "now that President Obama has been reelected by the American people."

Sen. Leahy said that Senate Republicans have made "misleading comparisons to other Circuits", and that the "D.C. Circuit's need for judges will not be met by Sri Srinivasan alone. We must work hard to fill the three additional vacancies".

There is a pattern. When a Democrat is President, and making judicial appointments, Senate Democrats tend to support appointment of the full compliment of judges to the DC Circuit, while Senate Republicans tend to argue that the full number would be unnecessary. When a Republican is President, Senate Republicans argue for more appointments, while Senate Democrats balk.

And, it might easily be predicted that if a Republican were elected President in 2016, that Senate Democrats and Republicans would once again reverse positions; Sen. Grassley would discover a new need for more DC Circuit judges, while Sen. Leahy would decide that eight really is enough.

More Judicial Appointments

5/23. The Senate Judiciary Committee (SJC) held an executive business meeting at which it held over consideration of the nominations of Patricia Smith and Elaine Kaplan to be Judges of the U.S. Court of Federal Claims.

5/23. President Obama nominated Landya McCafferty to be a Judge of the U.S. District Court for the District of New Hampshire. See, White House news office release.

5/23. President Obama nominated Brian Morris and Susan Watters to be Judges of the U.S. District Court for the District of Montana. See, White House news office release. Morris has been a Justice of the Montana Supreme Court since 2005. Watters has been a Montana trial court judge since 1998.

More People and Appointments

5/23. The Senate confirmed Sri Srinivasan to be a Judge of the U.S. Court of Appeals (DCCir). See, Congressional Record, May 23, 2013, at Page S3885.

5/23. The Senate confirmed Mark Barnett to be a Judge of the U.S. Court of International Trade. See, Congressional Record, May 23, 2013, at Page S3884.

5/23. The Senate confirmed Claire Kelly to be a Judge of the U.S. Court of International Trade. See, Congressional Record, May 23, 2013, at Page S3884.

More News

5/23. The European Commission (EC) announced in a release that "decided today to ask the Member States for their agreement on a mandate to open negotiations on an investment agreement with China."

GAO Releases Report on Spectrum Reallocation Costs and Auction Revenues

5/22. The Government Accountability Office (GAO) released a report [38 pages in PDF] titled "Spectrum Management: Federal Relocation Costs and Auction Revenues". The GAO prepared this report regarding the 2006 1710-1755 MHz band auction, and forecasts for revenue from an auction of the 1755-1850 MHz band, for the Senate Armed Service Committee (SASC).

This report states that "Actual costs to relocate communications systems for 12 federal agencies from the 1710-1755 MHz band have exceeded original estimates by about $474 million, or 47 percent, as of March 2013."

However, "Although 11 of the 12 agencies plan to spend the same amount or more than they estimated, DOD expects to complete the 1710-1755 MHz transition for about $284 million, or approximately $71 million less than the original estimated cost of about $355 million." (Footnote omitted.)

The report also states that "The Advanced Wireless Services auction of the 1710-1755 MHz band raised almost $6.9 billion in gross winning bids from the sale of licenses to use these frequencies. Our analysis of auction revenue compared to actual relocation costs suggests that the auction of the 1710-1755 MHz band raised $5.4 billion for the U.S. Treasury. This number reflects the difference between the $6.9 billion auction revenue and the approximately $1.5 billion estimated final federal relocation cost."

It also states that "No government revenue forecast has been prepared for a potential auction of the 1755-1850 MHz band, and a variety of factors could influence auction revenues."

States Settle with Penguin in E-Books Antitrust Case

5/22. Texas, New York, and 31other states and territories and Penguin Groups (USA) Inc. reached a settlement agreement in the states' antitrust action against Apple and five book publishers alleging violation of antitrust law in connection with collusion to fix the prices of electronic books.

The states settled with Hachette Book Group, Harper Collins, and Simon & Schuster in August of 2012. The states settled with Holtzbrinck Publishers, which is also known as Macmillan, earlier this year. Hence, the sole remaining defendant in this action is now Apple. Trial is scheduled for June.

The just announced settlement, which must be approved by the U.S. District Court (SDNY), provides for injunctive relief, and monetary damages -- $75 Million in compensation to e-book customers.

Texas Attorney General Greg Abbott (at left) stated in a release announcing this settlement that "Unlawful collusion and price-fixing not only violates antitrust laws, it is anti-competitive and inconsistent with the free market approach that is critical to our economy. Today's agreement with Penguin provides refunds to customers who paid artificially inflated prices for E-books and prohibits Penguin from colluding with other publishers and undermining retail price competition in the E-book market."

The Texas release adds that "Texas customers comprise nearly eight percent of E-book purchasers nationwide."

New York Attorney General Eric Schneiderman stated in another release that "E-book consumers are protected by our laws and efforts to circumvent those protections will not be tolerated by my office. Today's and earlier settlements provide restitution to consumers harmed by the price fixing of E-books orchestrated by the five publishers and Apple ... The settlements provide injunctive relief designed to prevent future anticompetitive conduct by E-book retailers and to restore competition to the E-book market."

Of the most populous states, only California, home to Apple, did not join in this action.

The Department of Justice (DOJ) filed its parallel complaint in the USDC/SDNY on April 11, 2012. Texas and 14 states filed a complaint on the same day in the U.S. District Court (WDTex) against Apple, Simon & Schuster, Macmillan and Penguin. A larger collection of states subsequently filed the present action against Apple and five publishers in the federal court in New York City.

See, stories titled DOJ Sues Apple and Book Publishers Alleging E-Book Price Collusion", "Analysis of DOJ's Sherman Act Claim Against Apple and E-Book Publishers", "Outside Reaction to DOJ E-Books Antitrust Action", "States Sues Apple and E-Book Publishers", and "Commentary: Forum Selection in Antitrust Cases" in TLJ Daily E-Mail Alert No. 2,368, April 11, 2012.

This case is State of Texas, et al. v. Hachette Book Group, Inc., et al., U.S. District Court for the Southern District of New York, D.C. No. 12-cv-6625. See also, web page with hyperlinks to key pleadings in this action.

For more on the DOJ action, see TLJ stories:

• "Scott Turow Criticizes DOJ E-Books Action" and "NAF Writer Condemns Amazon and DOJ E-Books Antitrust Action" in TLJ Daily E-Mail Alert No. 2,371, April 14, 2012.
• "Update on DOJ v. Apple eBooks Case" in TLJ Daily E-Mail Alert No. 2,437, August 25, 2012.
• "District Court Approves Settlement in Apple E-Books Case" in TLJ Daily E-Mail Alert No. 2,442, September 6, 2012.
• "DOJ Settles With Penguin in E-Books Antitrust Action" in TLJ Daily E-Mail Alert No. 2,494, December 19, 2012.
• "DOJ Publishes Second Tunney Act Notice in Apple E-Books Antitrust Case" in TLJ Daily E-Mail Alert No. 2,500, December 31, 2012.
• "Holtzbrinck/Macmillan Settles with DOJ in Apple E-Books Antitrust Action" in TLJ Daily E-Mail Alert No. 2,522, February 8, 2013.

The DOJ action is U.S. v. Apple, et al., U.S. District Court for the Southern District of New York, D.C. 1:12-cv-02826-DLC, Judge Denise Cote presiding.

More News

5/22. The Bureau of Consumer Financial Protection (BCFP) published a notice in the Federal Register (FR) that announces, describes, recites, and sets the effective date for, its final rules amendments, and "official interpretation" thereof, implementing the Electronic Fund Transfer Act (EFTA). The effective date is October 28, 2013. See, FR, Vol. 78, No. 99, May 22, 2013, at Pages 30661-30721.

5/22. The Federal Communications Commission (FCC) published a notice in the Federal Register (FR) that announces, describes, recites, and sets the effective date (October 8, 2013) for, its rules that implement 47 U.S.C.§ 619, which was enacted as Section 104 of the "Twenty-First Century Communications and Video Accessibility Act of 2010" or "CVAA". Section 104 requires that internet browsers built into mobile phones to be accessible to individuals who are blind or visually impaired. The FCC adopted its Report and Order [30 pages in PDF] containing these rules on April 26, 2013. It released the text on April 29, 2013. That R&O is FCC 13-57 in CG Docket No. 10-213, WT Docket No. 96-198, and CG Docket No. 10-145. See, FR, Vol. 78, No. 99, May 22, 2013, at Pages 30226-30231.

Sen. Levin's Subcommittee Harasses Apple

5/21. The Senate Homeland Security and Government Affairs Committee's (SHSGAC) Subcommittee on Investigations, chaired by Sen. Carl Levin (D-MI), held a hearing titled "Offshore Profit Shifting and the U.S. Tax Code - Part 2 (Apple Inc.)". (Parentheses in original.)

Sen. Levin (at left) harangued and harassed Apple, and its CEO, Tim Cook. However, neither Sen. Levin, nor anyone else at this hearing alleged that Apple has violated any tax or other laws of the U.S. or any other nation.

In contrast, Sen. Rand Paul (R-KY), a member of the Subcommittee, apologized to Apple at the hearing for the conduct of the Subcommittee and the Senate. See, related story in this issue titled "Sen. Paul Defends Apple".

The SHSGAC does not have jurisdiction over the Internal Revenue Code (IRC) or Internal Revenue Service (IRS). The Senate Finance Committee (SFC) does. Moreover, neither Sen. Levin nor Sen. Paul are SFC members.

Nevertheless, this and similar hearings serve several purposes. First, they add rhetorical support to the defenders of the current level of federal spending. That is, this type of hearing bolsters those who argue that the government does not need to reduce spending, because greedy corporations are the problem. This type of hearing also provides politicians the argument that they are not over taxing ordinary citizens; rather, they are forced to tax citizens to make up for tax dodging multinational companies. Moreover, for some Senators, demagoguery about the evils of free markets, profit seeking companies and low taxes is an end in itself.

Also, this particular hearing, on this date, served to divert attention from misconduct by the IRS in targeting tea party groups, to alleged corporate avoidance of the IRS.

Finally, unintended consequences of this type of hearing may include disincenting foreign multinational companies from investing in the U.S., and further incenting U.S. companies to move their investments, operations, jobs and profits abroad.

See, full story.

Sen. Paul Defends Apple

5/21. Sen. Rand Paul (R-KY), a member of the Senate Homeland Security and Government Affairs Committee (SHSGAC) defended Apple, and vilified the U.S. tax system, at the hearing on May 21, 2013.

He said, "If the outcome of this committee's hearing is ``Evil Apple. Let's go get them. Let's go get companies like this and let's raise their taxes.´´ Guess what? Their corporate headquarters may no longer be in Cupertino they may be in Dublin with all their employees." (See, transcript.)

Sen. Paul continued that "They are the type of company, high-tech companies, that can relocate around the world. They aren't dependent upon large manufacturing forces. So if you want to chase them out, bring them here and vilify them. It's exactly the wrong thing to do. We should be giving them an award today. We should be congratulating them on being a great American company and hiring people and not vilifying them for obeying the law."

"No one is accusing them of breaking the law. They're doing what their shareholder's ask which is to maximize profit", said Sen. Paul.

Sen. Paul also wrote in a piece published in Rare on May 21, 2013 that "I think the federal government owes an apology to Apple. Instead of Apple, Congress should be on trial for having the crummiest tax code imaginable; for having a byzantine tax code that runs into the tens of thousands of pages; for creating a tax code that simply doesn't compete with the rest of the world."

He continued in his piece for Rare that "The Senate subcommittee admitted that Apple had not broken any laws. Yet, they are forced into a public trial at the whims of politicians, when in fact, Congress should be on trial for chasing the profits of great American companies overseas."

Sen. Paul also stated at the hearing that "I am offended by an IRS that bullies tea parties".

Senate Subcommittee Investigates Apple's Strategies for Avoidance of US Corporate Taxation

5/21. The Senate Homeland Security and Government Affairs Committee's (SHSGAC) Subcommittee on Investigations released a memorandum [40 pages in PDF] titled "Offshore Profit Shifting and the U.S. Tax Code - Part 2 (Apple Inc.)". (Parentheses in original.)

This memorandum states that Apple "has used a variety of offshore structures, arrangements, and transactions to shift billions of dollars in profits away from the United States and into Ireland, where Apple has negotiated a special corporate tax rate of less than two percent."

It continues that "One of Apple's more unusual tactics has been to establish and direct substantial funds to offshore entities in Ireland, while claiming they are not tax residents of any jurisdiction. For example, Apple Inc. established an offshore subsidiary, Apple Operations International, which from 2009 to 2012 reported net income of $30 billion, but declined to declare any tax residence, filed no corporate income tax return, and paid no corporate income taxes to any national government for five years. A second Irish affiliate, Apple Sales International, received $74 billion in sales income over four years, but due in part to its alleged status as a non-tax resident, paid taxes on only a tiny fraction of that income."

The Subcommittee will hold a hearing on May 21 at 9:30 AM on this matter in the huge hearing room of the Dirksen Building, Room 106. See, notice.

Sen. Carl Levin (D-MI), the Chairman of the Subcommittee, stated in a release that "Apple sought the Holy Grail of tax avoidance. It has created offshore entities holding tens of billions of dollars, while claiming to be tax resident nowhere. We intend to highlight that gimmick and other Apple offshore tax avoidance tactics so that American working families who pay their share of taxes understand how offshore tax loopholes raise their tax burden, add to the federal deficit and ought to be closed."

Sen. John McCain (R-AZ), the ranking Republican on the Subcommittee, stated in this release that "Apple claims to be the largest U.S. corporate taxpayer, but by sheer size and scale, it is also among America's largest tax avoiders ... A company that found remarkable success by harnessing American ingenuity and the opportunities afforded by the U.S. economy should not be shifting its profits overseas to avoid the payment of U.S. tax, purposefully depriving the American people of revenue."

Representatives Reintroduce Password Protection Act

5/21. Rep. Ed Perlmutter (D-CO), Rep. Peter Welch (D-VT), and others introduced HR 2077 [LOC | WW | PDF], the "Password Protection Act of 2013", a bill that would amend 18 U.S.C. § 1030 to bar employers, under certain circumstances, from compelling the disclosure by their employees or job applicants of passwords for their own computers, e-mail accounts and social media accounts.

Rep. Welch (at right) stated in a release that "Employees have a legitimate expectation of privacy when using Facebook or Twitter. This legislation will prevent fishing expeditions into employees' private lives. While an employer may have a valid concern about the business impact of an employee’s online activity, demanding passwords and unfettered access to private accounts is an over-the-top solution."

See, full story.

People and Appointments

5/21. Federal Communications Commission (FCC) Chairman Mignon Clyburn released a statement regarding her designation as Chairman until the Senate confirms Tom Wheeler.

Go to News from May 16-20, 2013.