Federal prosecutors have charged a prominent hedge-fund manager and five others with securities fraud resulting from insider trading involving some of the tech industry's best-known companies, including Intel, Google, and IBM.
Raj Rajaratnam of Galleon Group was arrested Friday in New York according to various reports and charged with 13 counts of securities fraud and conspiracy following a FBI investigation into Galleon Group's trading patterns. Also charged in the complaint, filed in U.S. District Court for the Southern District of New York, were co-conspirators Rajiv Goel of Intel and Anil Kumar of McKinsey, which provided consulting services to AMD.
A separate complaint charges two employees of New Castle Partners, another hedge fund, with insider trading along with IBM executive Robert Moffat, senior vice president and group executive for IBM's Systems and Technology Group. Danielle Chiesi and Mark Kurland of New Castle Partners allegedly exchanged information with Rajaratnam regarding the negotiation process surrounding AMD's decision to spin off its chip-making arm and receive outside investment, and obtained other insider information for the purpose of trading in Akamai and Sun Microsystems.
Galleon Group told CNBC that it was unaware of the investigation but planned to cooperate with authorities.
An Intel representative confirmed that Goel works in the treasury department of Intel's finance organization, and has been "placed on administrative leave as we look into this matter." Intel said it was never contacted by authorities regarding the investigation.
McKinsey said in a statement that it was "distressed" about Kumar's involvement in the case and was "looking into the matter urgently. AMD said it was looking at the complaints and had no further comment. IBM declined to comment.
A representative for Akamai did not immediately return a call seeking comment.
According to the complaint, Rajaratnam obtained information about strategic investments that Intel and others were about to make in Clearwire from Goel, and details about AMD's proposed fab spinoff from Kumar and Chiesi. Galleon Group and New Castle Partners then allegedly used that information to trade in shares of Clearwire and AMD, resulting in millions of dollars in profits.
Moffat is also said to have provided details about AMD's GlobalFoundries spinoff, which required IBM's approval due to an extensive technology-sharing partnership between the two companies. In addition, Moffat allegedly gave the traders information related to upcoming earnings announcements from IBM and Sun, which IBM was considering acquiring in early 2009.
Rajaratnam also had hired an individual identified in the complaint only as a "confidential witness" who has been cooperating with the FBI since November 2007 after agreeing to plead guilty to securities fraud and conspiracy. The witness had insider contacts at Polycom and a company called Market Street, which helps publicly traded companies--such as Google--prepare earnings reports.
The FBI said Galleon Group was able to learn through its Market Street contacts that Google's second-quarter 2007 earnings results were going to miss analyst expectations, which would usually send the stock down the following day. Before Google's earnings were released, Galleon Group purchased put options and sold Google's stock short in hopes of turning a profit, which, of course, they did, to the tune of $8 million.
Shares of Polycom and Hilton Hotels were also involved in the insider trading, according to the complaint. The FBI said it obtained its information by placing a wiretap on several phones--including Rajaratnam's mobile phone--as well as the participation of confidential witnesses.
Rajaratnam was named to Forbes' 2009 list of the world's billionaires, with an estimated net worth of $1.3 billion. He is a former employee of Needham & Co., an investment bank.
Mike Volpi's battle with his former employer Joost is now headed to court.
Joost announced on Friday that it has filed a lawsuit against Volpi, alleging that the former CEO used trade secrets and other confidential information in a bid to acquire a majority share in Skype from eBay.

The lawsuit comes just days after Joost relieved Volpi of his duties as chairman and a member of the board, saying that it was investigating his actions while he was chairman.
The fracas has its roots in the complicated relationship between online video provider Joost and VoIP provider Skype.
Joost was launched in 2006 by Janus Friis and Niklas Zennstrom, who also co-founded Skype. Volpi met and befriended the pair after serving on Skype's board of directors.
Once considered a contender for CEO at his former company Cisco, Volpi was tapped by Friis and Zennstrom to become CEO of Joost in June of 2007.
After a two-year stint, Volpi left Joost this past July to take a position as a partner at the venture capital firm Index Ventures. This same firm was part of a group that made a deal to buy a 65 percent share of Skype from eBay.
The question of Skype ownership between eBay and Friis and Zennstrom has been a dicey one. Though they sold Skype to eBay in 2006, Friis and Zennstrom kept certain rights via a company they formed called Joltid, and claim they still own the core technology and source code behind Skype. A licensing issue between the two companies triggered a suit that's set to hit a U.K. courtroom next summer. And a separate copyright suit was filed by Joltid this week in Northern California alleging Joltid's technology is being infringed on by Skype users "in the United States at least 100,000 times each day."
Joost's lawsuit filed against both Volpi and Index Ventures alleges that Volpi accessed and used confidential information while at Joost to help his group's bid for Skype. It alleges breach of fiduciary duty against Volpi and Index Ventures, aiding and abetting breach of fiduciary duty against Index, interference with prospective business advantage, misappropriation of trade secrets, breach of contract against Index, breach of confidence, and civil conspiracy.
Joost is looking for an injunction requiring Volpi and Index Ventures to return all confidential documents and files that were allegedly taken from Joost. The suit also is seeking to prevent both defendants from using the alleged misappropriated trade secrets.
Among the specific claims in the suit:
"This action arises out of the acts of a faithless fiduciary, who has taken advantage of the trust and confidence placed in him to steal confidential, highly proprietary information relating to an extremely popular Internet-based technology...Using that misappropriated information and in utter disregard for his fiduciary obligations, Volpi, acting in concert with other participants, put together a successful bid for Skype that has shocked the investment community."
"Numerous sophisticated strategic bidders (including, among others, Google and Microsoft) who initially expressed an interest in Skype could not get comfortable proceeding with formal bids. The reluctance of these sophisticated parties is hardly surprising given that intellectual property that is essential to Skype's business currently hangs under a cloud of litigation. Yet somehow the successful bidder, led by Volpi, was able to get comfortable with the enormous risks of proceeding with a Skype transaction. That comfort level could have been obtained only with knowledge of and an intent to use confidential information that had been misappropriated by Volpi..."
A phone call placed to Index Ventures for comment was not immediately returned.
Joost was launched more than two years as another portal for online videos but has struggled to gain a foothold in the market against competitors such as YouTube and Hulu.
Note: CBS, which owns CNET News, is investor in Joost.
One California state senator is trying to crack down on inmates using cell phones while serving time.
California State Senator John Benoit discusses cracking down on cell phones in prison during a press conference.
(Credit: Senator Benoit's staff)Prison inmates in California aren't really permitted to have cell phones. They have to forfeit their devices before being locked up. But that hasn't stopped thousands of phones from being smuggled into prisons each year. In fact, officials say that the number of cell phones confiscated in California prisons has doubled in the last year from 1,400 devices in 2007 to about 2,800 in 2008. And the problem appears to be getting worse this year.
Currently, being in possession of a cell phone or smuggling it in for someone else is only a rules violation. But California State Sen. John Benoit wants to make it a misdemeanor crime with a maximum penalty of a $5,000 fine for a prisoner to possess a cell phone in any state prison.
Benoit and representatives from the California Department of Corrections and Rehabilitation held a press conference Tuesday to discuss the new bill he is introducing called SB 434.
Allowing prisoners to access cell phones is a huge problem, because many inmates use them to plan escapes, plot violent crimes both inside and outside of the facility, and to conduct drug deals, officials said.
"Cell phone smuggling into California's prisons is a very serious and growing problem," Matthew Cate, secretary of the California Department of Corrections and Rehabilitation, said during the press conference. "Public safety officials in prisons and prosecutors on the outside need additional tools to combat cell phone smuggling to inmates."
Part of the problem seems to stem from prison guards who are often part of the smuggling ring. According to the Sacramento Bee, sworn and civilian correctional employees are suspected of smuggling in more than half of the cell phones that end up in prisons. And it's not difficult to understand why, when some inmates are willing to pay up to $1,000 per phone. One prison employee admitted to the newspaper that he made up to $100,000 in one year smuggling phones into the prison where he worked.
The recently appointed federal chief information officer returned to work Tuesday, after temporarily stepping down in response to the arrest of one of his former employees on bribery charges.
Vivek Kundra took a leave of absence from his position as federal CIO last week after an FBI raid of the District of Columbia's office of the chief technology officer. The FBI raid coincided with the arrest of two individuals charged with conspiracy to commit bribery, including one man who worked in the government office while Kundra served as D.C. chief technology officer.
The defendant Yusuf Acar allegedly attempted to exploit his responsibility for government contracts in the CTO office to defraud the city government. Kundra is not a target of the ongoing investigation.
President Obama appointed Kundra as federal CIO earlier this month. In his role as D.C. chief technology officer and also as the federal CIO, Kundra has emphasized the need for transparency in government information technology procurements.
The White House confirmed to CNET News on Tuesday that Kundra has returned to his position as CIO, following various news reports.
"Mr. Kundra has been informed that he is neither a subject nor a target of the investigation and has been reinstated," said White House Spokesman Nick Shapiro.
WASHINGTON--President Obama's economic stimulus plan has already spurred activity in at least one online industry, though not one the administration was hoping to encourage.
Deceptive Web sites, advertisements, and e-mail campaigns have cropped up across the Web in recent weeks, luring consumers into scams by promising them federal grant money from the stimulus package, the Federal Trade Commission said Wednesday.
The FTC is investigating these scams and is reaching out to the private sector for help. Google on Wednesday morning committed to investigating stimulus-related ads that violate its anti-scam policy, and Facebook has pulled ads for stimulus funds from its site, in accordance with a new advertising policy it implemented this week.
The deceptive sites and ads "have literally mushroomed up almost overnight," Eileen Harrington, the acting director of the FTC's Bureau of Consumer Protection, said Wednesday.
Web sites fraudulently offering ways for consumers to receive stimulus funds often use pictures of President Obama.
(Credit: Screenshot provided by the Federal Trade Commission)Scammers have created sites with domains like PresidentObamaGrants.com and OfficialStimulusGrants.com, Harrington said, and include pictures of President Obama and Vice President Biden. The sites prompt consumers to enter a credit card number to pay a small fee in return for a list of grants supposedly available for things like mortgage payments. Those small fees, however, are often nothing more than a down payment on a "negative option" agreement that could cost someone thousands of dollars over the course of a year if not canceled.
"These Web sites tout free money for you," Harrington said. "But as the saying goes, the devil is in the details. Buried deep within the Web site is the fact that they'll charge you a lot of money."
Advertisements for these sites have started on appearing on social-networking sites, video-streaming sites, and search engines. While Google and Facebook have been cooperative, Harrington said not all sites have been responsive to the FTC's request for help, though she declined to name any such sites. She also said the FTC has been in communication with network advertising groups about the problem, though she once again declined to name which ones.
"We've spent a lot of time educating advertisers how to screen for ads and this one should be a no-brainer for them," she said.
Facebook started noticing the suspect stimulus-related ads on its site about four to five weeks ago, before the FTC contacted the company, said Joe Sullivan, senior counsel for Facebook. Through Facebook's own ad screening and the "thumbs down" function that lets users give feedback on ads, it was able to identify the problem. Facebook launched a new policy this week to prohibit ads on its site with any obscure recurring billing schemes.
Spammers are also targeting consumers through e-mails that encourage consumers to click on a link within the message or to fill out attached forms to find out more about receiving stimulus funds. Clicking on the links or the attachments, however, can result in identity theft or in harmful software being downloaded to one's computer.
The FTC will not discuss ongoing investigations publicly, but Harrington said the deceptive negative-option marketing campaigns found on many of the fraudulent stimulus sites fit the profile of scams the FTC has already challenged in many law enforcement actions.
"The FTC has broad authority to challenge deceptive and unfair practices," she said.
Either through court proceedings or administrative challenges, the agency could take actions that could result in any number of consequences, such as prohibiting the use of certain ads or requesting that money be returned to consumers.
With less than a week left before the Obama administration moves in, the Bush White House was ordered Wednesday to turn over any devices that may contain e-mails from March 2003 to October 2005, a period from which millions of the executive office's e-mails appear to be missing.
In an emergency court order, Judge Henry Kennedy of the U.S. District Court for the District of Columbia directed the Executive Office of the President to search staff workstations and personal storage table files, and to preserve any e-mails from the period in question.
The court order also directed the office's employees to surrender any media devices in their possession, such as CDs, DVDs, memory sticks, or external hard drives, that may contain e-mails from that period, so they can be searched.
The emergency court order came at the behest of the National Security Archive, a George Washington University research institute that filed a lawsuit in September 2007 to compel the White House to retrieve and preserve its e-mails. A similar suit filed by the nonprofit Citizens for Responsibility and Ethics in Washington was consolidated with the Archive's suit.
"There is nothing like a deadline to clarify the issues," National Security Archive Director Tom Blanton said in a statement. "In six days, the Bush Executive Office of the President will be gone, and without this order, their records may disappear with them."
At a separate hearing Wednesday, the Justice Department told a federal judge that the White House has already located at least 14 million missing e-mails, The Washington Post reported.
Federal Communications Commission Chairman Kevin Martin ignored his responsibilities as head of the regulatory body and abused his power, according to a congressional report released Tuesday.
FCC Chairman Kevin Martin
(Credit: Federal Communications Commission)Over the course of his tenure, Martin manipulated and withheld information from the other FCC commissioners and from Congress, neglected his statutory responsibilities to produce certain information to Congress, and ignored evidence that certain national communications programs were being grossly mismanaged, according to the report issued by the House Committee on Energy and Commerce, titled "Deception and Distrust: The Federal Communications Commission Under Chairman Kevin J. Martin." (PDF)
The committee launched a bipartisan investigation in January after hearing allegations of mismanagement from current and former FCC employees, telecommunications industry representatives, and other FCC commissioners.
Typically, a congressional committee would hold hearings to investigate such matters, but the report was issued in lieu of hearings because, the report says, "due to the climate of fear that pervades the FCC...we found that key witnesses were unwilling to testify or even to have their names become known."
"Our investigation confirmed a number of troubling allegations raised by individuals in and outside the FCC," said Bart Stupak (D-MI), chairman of the subcommittee on oversight and investigations. "It is my hope that this report will serve as a road map for a fair, open, and efficient FCC under new leadership in the next administration."
Some of Martin's actions have led to higher telecommunications prices for consumers, the report finds. The commission, it says, failed to provide proper oversight of the Telecommunications Relay Service Fund, which funds special services that allow people with hearing or speech disabilities to communicate with hearing people.
The fund is financed by contributions from interstate telecommunications companies, based on a percentage of their revenues. The companies pass the cost down to consumers, who typically pay 7 cents to 10 cents per month for the fund. The fund, which compensates telephone companies for administering the program, has grown to more than $800 million.
The chairman's office, the report says, ignored evidence consumers were overcharged and providers were overcompensated by as much as $100 million a year. The neglect of that information led to a windfall of millions of dollars for the largest TRS provider, Sorenson, which covers about 80 percent of the video relay services market.
The report recommends the FCC immediately conduct a full investigation and audit of the company. The FCC earlier hired a contractor to audit Sorenson, but the company denied the contractor access to the staff and systems necessary to conduct the audit.
The report also recommends the Government Accountability Office audit the entire TRS program, including the FCC's efforts to protect the integrity of the fund.
"The FCC's apparent failure to insist on auditing Sorenson's books indicates an abdication of its responsibility to administer and protect the integrity of the TRS Fund," the report reads.
The report also says Martin manipulated information given to his fellow commissioners and Congress. For instance, upon becoming chair in 2005, the report says, Martin ordered FCC staff to reverse the findings of a study, which initially said that "a la carte" cable programming would not benefit consumers. He also demoted the Media Bureau chief, who had been in charge of the study.
The reversal led to suspicion inside and out of the FCC that the study sent to Congress was not based on objective analysis, the committee report says.
Moreover, Martin's personnel management style, the report says, has led to a decline in morale and an environment of distrust at the FCC.
"Chairman Martin's heavy-handed, opaque, and non-collegial management style has created distrust, suspicion, and turmoil among the five current commissioners," it says.
Other allegations investigated by the House committee proved to be founded on inconclusive evidence, although the report recommended the committee further investigate some claims. For instance, the FCC allegedly threatened to suspend action on the Liberty Media-DirecTV acquisition that was pending before the commission until DirecTV added certain local stations to the White House's satellite service.
"After a year of investigation, the committee's primary criticism of the chairman is that he spent too much money to ensure that deaf Americans have equal access to communications services," FCC spokesman Robert Kenny said in response to the report. "The chairman makes no apologies for his commitment to serving deaf and disabled Americans and for fighting to lower exorbitantly high cable rates that consumers are forced to pay."
The report says Martin has taken steps since Congress began its investigation to make the commission more transparent, such as holding regular press conferences.
WASHINGTON--A federal judge decided on Thursday not to impose a prison sentence on the senior directors of E-Gold, an Internet-based digital currency firm, who had previously pleaded guilty to violations of money laundering and running an unlicensed money transmitting business.
The three directors of E-Gold, in addition to its Gold & Silver Reserve parent company, were indicted in April 2007 after federal prosecutors accused the online payment site of being a haven for criminal activity like processing investment scams and payments for child pornography. They said its loose verification standards for users' identity attracted criminals.
The three men and the companies pleaded guilty to the charges in July 2008.
U.S. District Judge Rosemary Collyer said the men deserved lenient sentences because they did not intend to engage in illegal activity. Even though, Collyer said, the U.S. Justice Department wanted to use the cases to show "this new day of Internet crime is going to be...vigorously prosecuted," that alone was not enough reason to incarcerate the defendants.
Gold & Silver Reserve CEO Douglas Jackson was sentenced to 300 hours of community service, a $200 fine, and three years of supervision, including six months of electronically monitored home detention. He had faced a maximum sentence of 20 years in prison and a $500,000 fine.
Jackson was spared a heavier fine because, according to his attorney, he's deeply in debt. "Dr. Jackson has suffered, will continue to suffer, and may never be successful with E-Gold," the judge said.
Reid Jackson, Douglas Jackson's brother, and E-Gold director Barry Downey were each sentenced to three years of probation, 300 hours of community service. They also were ordered to pay a $2,500 fine and a $100 assessment fee each.
The defendants were also ordered to obtain licenses to do business in the states in which a license is required, something the company had already begun doing. In September, E-Gold hired KPMG to aid its development of an anti-money laundering program; it has already contacted every state to determine whether a license is needed.
E-Gold and Gold & Silver Reserve faced a maximum fine of $3.7 million, but because neither company could pay that much, they were fined $300,000 with the condition that $10,000 be paid on Monday, with further monthly payments to start in May 2009.
Many of E-Gold's users turned to it as an alternative to a bank account denominated in U.S. dollars, which lose money due to inflation especially when interest rates are low. By contrast, gold has zoomed upward from roughly $300 an ounce in 2002 to around $750 an ounce today.
Supporters of E-Gold and gold-denominated accounts have suggested that enabling nearly anonymous transfers of money in and out of the banking system is what led the feds to target the company. For his part, Jackson initially blasted the feds, saying the Secret Service "deceived" a judge with "bogus testimony" so they could conduct a raid on E-Gold designed to put it out of business.
Federal prosecutors claimed there was no doubt the directors knew E-Gold facilitates criminal activity. An analysis in January 2008 of the 65 most valuable E-Gold accounts showed that more than 70 percent were involved in criminal activity, according to Laurel Rimon, a Justice Department prosecutor.
Furthermore, prosecutors said, the funds that flow through E-Gold, which launched in 1996, are significant. At its height, the site had more than 4 million accounts and facilitated more than $5 million fund transfers a day.
Though illegal activity continued on E-Gold well after Douglas Jackson acknowledged the company was under investigation in 2004, the defendants claimed that they received bad legal counsel, which convinced them the site did not have to be licensed as a money transmitting business.
"If he had thought it needed to be licensed, he would have done everything in his power to make that happen," Federal Public Defender Michelle Peterson said about Reid Jackson.
The court also accepted the argument that Downey was unaware of the company's need for a license, even though he is a practicing lawyer.
The defendants also argued they have worked to the best of their abilities to cooperate with investigators, but the prosecutors provided evidence that the directors may have been trying to circumspect government interference.
The company was incorporated in Bermuda, for instance, even though its operations are based out of Melbourne, Fla. Barry Pollack, Downey's defense attorney, said the site's offshore registry did not impede the directors from responding to subpoenas. (If the site had been entirely overseas, as GoldMoney.com is, it wouldn't have had to worry about the feds. On the other hand, GoldMoney does demand proof of identity.)
Douglas Jackson founded the site on a philosophy opposed to government regulation, prosecutors said. "Dr. Jackson was very candid about his vision to create a version of a financial institution that didn't have regulations," prosecutor Jonathan Haray said.
Intentions and philosophies notwithstanding, the defense said, the defendants should remain out of jail so they could keep the site up and running and continue to help investigators track criminals. E-Gold's records of IP addresses and timestamps provide a trail to criminals--and proof the company had no intention of inviting criminal activity, the defense said.
The prosecution questioned how useful E-Gold's cooperation really was.
"The vast majority (of IP addresses from E-Gold) don't have good identifying information," said Rimon. "If an IP address leads to a P.O. box on a street corner in Estonia, that doesn't do us much good, and that's what we found in many cases."
E-Gold remains open for business today, though Jackson said in an announcement on November 14 that it was still figuring out how to comply with the registration process for new accounts now that it's subject to regulation as a "financial institution." New account creation is "temporarily suspended."
CNET News' Declan McCullagh contributed to this report.
Until Monday, Sen. Ted Stevens was best known in technology circles for his "series of tubes" analogy. Now he'll be known for his jury conviction on corruption charges.
A federal jury in Washington, D.C., convicted the Alaska Republican of all seven charges of accepting gifts and home renovations from a wealthy oil contractor and then lying about them on official documents.
Sen. Ted Stevens has been found guilty on all counts in a corruption case.
(Credit: U.S. Senate)Stevens is running for re-election next week. Because it's too late for the Republican Party to remove his name from the ballot and because it's not terribly likely that Alaskans will vote for a convicted felon, Stevens' conviction will aid the Democrats in assembling a filibuster-proof Senate majority. (They're also hoping to pick up seats in races in Virginia, New Mexico, Colorado, New Hampshire, and Minnesota.)
The irony is that Stevens' famous analogy of a "series of tubes" was an entirely reasonable one. Electrical engineers have long used the analogy of pipes and tubes to explain voltage (water pressure) and current (gallons per second). The Unix operating system and its progeny use the term "pipes" to describe interprocess communications.
Similarly, Internet engineers on discussion groups as august as Nanog regularly toss around terms like "fat long pipes." And an Internet RFC from as long ago as 1989 refers to "filling the pipe" so "that the sender of data can always put data onto the network." The word "tubes" has been used in antispam discussions years before anyone outside of Washington, D.C., heard of Stevens. And Princeton computer science Professor Ed Felten, to his credit, noted that the anti-Stevens criticism "seems a bit unfair."
What turned Stevens into an Internet laughingstock was twofold: 1. An especially inept invocation of the "pipes" or "tubes" analogy. His additional "it's not a big truck" improvisation didn't help. 2. The fact that he dared to use the analogy to assail politically popular Net neutrality regulations. (If he had used it to call for such rules, you can be sure that the online chortling would have been muted or nonexistent.)
But poking fun at the senator, who is also known for his tantrums over the "Bridge to Nowhere," misses the chance to critique actual legislative failings. Here are some of them:
Like vice presidential candidate Joe Biden, Stevens has been a fast friend of Hollywood's content industries. Stevens said at one hearing that a broadcast flag was necessary to curb Internet piracy of TV shows. "It is a subject that requires an act of Congress, in my opinion," he said.
Stevens co-sponsored, along with Democratic senator Ernest Hollings, what's probably the most ill-conceived technology bill in recent memory (and that's saying something). It was called the Consumer Broadband and Digital Television Promotion Act and would require practically any hardware or software to include embedded copy-protection technology.
Stevens used his position as chairman of the Senate committee that writes Internet regulations to call for a crackdown on perfectly legal online porn depicting consenting adults. "My advice is you tell your clients they better do it soon, because we'll mandate it if they don't," Stevens informed a representative of the adult entertainment industry.
Stevens was no foe of Internet taxes. In 2006, he wanted to expand existing taxes on telephone systems to include all "communications" services, whatever that means. "I believe fax is a communication, I think e-mail is a communication, and I do believe they all should contribute," he said. Undaunted, Stevens suggested that idea again the following year.
In 2005, Stevens was the senator who seemed to call for resurrecting the justly reviled Communications Decency Act. "We ought to find some way to say, 'Here is a block of channels--whether it's delivered by broadband, by VoIP, by whatever it is--to a home that is clear of the stuff you don't want your children to see,'" he told reporters at the time, later saying he was referring to regulatory "tiers" like the movie "rating system."
Stevens also supported an ostensibly anti-phishing bill called the Anti-Phishing Consumer Protection Act. Earlier this year, the Electronic Frontier Foundation described it as "a bill that would expand trademark law, limit consumer access to information about competitive products, and eviscerate key protections for anonymous speech."
As CNET's 2006 tech voter guide shows, Stevens voted for the Communications Decency Act, the Digital Millennium Copyright Act, the Real ID Act--and against an effort to keep the Internet tax-free. He scored an unremarkable 53 percent overall on tech-friendly votes in Congress.
Such stances cement Stevens' true technology legacy. Sadly, the "tubes" metaphor is one of the few ventures into Internet policy he got halfway right.
The U.S. Senate is investigating allegations by two National Security Agency whistleblowers who have described widespread monitoring of innocuous telephone conversations by the Bush administration's clandestine program.
The reports fill in some details about how the NSA's program works in practice. The two whistleblowers, Adrienne Kinne and David Murfee Faulk, are former military linguists who worked for a secretive NSA operation they say routinely intercepted phone calls of U.S. military officers, American journalists, American aid workers, and others who were calling home from abroad.
The two ex-military employees came forward independently and spoke to ABC News and journalist Jim Bamford for his book on the NSA called The Shadow Factory that's due out next week.
Jay Rockefeller, the West Virginia Democrat who heads the Senate Intelligence Committee, on Thursday called the allegations "extremely disturbing" and said there would be an investigation.
If the allegations prove true, that would fly in the face of assertions by President Bush that innocent conversations would never be intercepted.
Bush said in December 2005, after The New York Times published its original article on the government's warrantless wiretapping efforts, that the NSA program would "intercept the international communications of people with known links to al Qaeda and related terrorist organizations. Before we intercept these communications, the government must have information that establishes a clear link to these terrorist networks."
The NSA whistleblowers tell a different story -- including that phone sex conversations were intercepted, recorded, and passed around the office for laughs. "These were just really everyday, average, ordinary Americans who happened to be in the Middle East, in our area of intercept and happened to be making these phone calls on satellite phones," Kinne told ABC News. Faulk said that he listened in on American troops "calling home to the United States, talking to their spouses, sometimes their girlfriends, sometimes one phone call following another."
A pair of extraordinary articles (#1 and #2) published last month in the Washington Post indicate that Bush was kept ill-informed about much of the program by Vice President Cheney and the vice president's staff.
The articles, by Barton Gellman, were excerpted from his new book called Angler: The Cheney Vice Presidency. They describe how Cheney's lawyer, David Addington, and the vice president himself defended the surveillance program, overruled concerns from the Justice Department about the legality of the program -- and came within a hairsbreadth of sparking a mass Justice Department resignation that would have put Richard Nixon's Saturday Night massacre to shame.
What is unclear is Sen. Rockefeller's own role in staying mum about the NSA scheme after being briefed on it. So, to one extent or another, were other Democratic politicians, including Nancy Pelosi and Harry Reid.
Rockefeller wrote a two-page handwritten letter to Cheney on July 17, 2003 -- over a year before the NSA program became public -- saying he had "concerns" about the surveillance. But Rockefeller never did anything beyond that, such as contacting a lawyer, even though the Senate Intelligence committee is officially charged with "vigilant legislative oversight over the intelligence activities of the United States to assure that such activities are in conformity with the Constitution and laws of the United States."
That history could make Rockefeller less than enthusiastic about investigating what truly happened, as Salon's Glenn Greenwald has not so delicately suggested.
We've been down this road before
It should be no surprise that when the NSA (or any government agency) receives broad surveillance powers with scant oversight, they end up being used not to nab al-Qaida members, but to eavesdrop on phone sex conversations between a lonely G.I. and a paramour back home. Video surveillance cameras supposedly designed to let cops catch criminals are used for voyeuristic purposes too.
History echoes this point. In decades past, government agencies have subjected hundreds of thousands of law-abiding Americans to unlawful surveillance, illegal wiretaps and warrantless searches. Eleanor Roosevelt, Martin Luther King Jr., feminists, gay rights leaders, and Catholic priests were spied upon. The FBI used secret files and hidden microphones to blackmail the Kennedy brothers, sway the Supreme Court, and influence presidential elections.
One way that the United States finally put this era behind it in the mid-1970s was to have a Senate committee perform a true independent investigation. It was chaired by Democratic Sen. Frank Church and called the Church Committee. Here are some excerpts from its report:
* The intelligence community engaged in some activities which violated statutory law and the constitutional rights of American citizens.
* Legal issues were often overlooked by many of the intelligence officers who directed these operations.
* On some occasions when agency officials assume, or were told, that a program is illegal, they still permitted it to continue. They justified their conduct in some cases on the ground that the failure of "the enmemy" to play by the rules granted them the right to do likewise, and in other cases on the ground that the "national security" permitted programs that would otherwise be illegal.
* Internal recognition of the illegality or the questionable legality of many of these activities frequently led to a tightening of security rather than to their termination. Partly to avoid exposure and a public "flap," knowledge of these programs was tightly held within the agencies. Special filing procedures were used, and "cover stories" were devised.
* On occasion, intelligence agencies failed to disclose candidly their programs and practices to their own General Counsels, and to Attorneys General, Presidents. and Congress.
* When senior administration officials with a duty to control domestic intelligence activities knew, or had a basis for suspecting, that questionable activities had occurred, they often responded with silence or approval. In certain cases, they were presented with a partial description of a program but did not ask for details, thereby abdicating their responsibility. In other cases, they were fully aware of the nature of the practice and implicitly or explicitly approved it.
Sound familiar? Today, though, the senator heading the modern equivalent of that committee is on record opposing legislation to make it more difficult to snoop on Americans overseas, while endorsing retroactive immunity for telephone companies that illegally opened their networks to the NSA. Alas, Jay Rockefeller is no Frank Church.





