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October 11, 2006, Alert No. 1,466.
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DOJ Approves AT&T BellSouth Merger

10/11. The Department of Justice's (DOJ) Antitrust Division announced its approval of AT&T's pending acquisition of BellSouth.

Thomas Barnett, the Assistant Attorney General in charge of the Antitrust Division stated in a release that "After thoroughly investigating AT&T’s proposed acquisition of BellSouth, the Antitrust Division determined that the proposed transaction is not likely to reduce competition substantially. The Division investigated all areas in which the two companies currently compete – including residential local and long distance service, telecommunications services provided to business customers, and Internet services -- and the merger’s impact on future competition for wireless broadband services."

Thomas BarnettBarnett (at right) continued that "The presence of other competitors, changing regulatory requirements and the emergence of new technologies in markets for residential local and long distance service indicate that this transaction is not likely to harm consumer welfare. The proposed acquisition does not raise competition concerns with respect to Internet services markets or `net neutrality´. The merged firm would continue to face competition from other facilities-based rivals in the provision of telecommunications services to business customers including local private line services."

He added that "The combination would not significantly increase concentration in the ownership of spectrum in any geographic area or give AT&T control over a large enough share of all spectrum suitable for wireless broadband services to raise competitive concerns. Finally, the merger would likely result in cost savings and other efficiencies that should benefit consumers."

The DOJ release adds that it "investigated whether the merger would create competitive problems in Internet services, including ``net neutrality´´ concerns regarding the merged firm’s ability or incentive to favor its own Internet content over that of its rivals. The Division found that the merger would neither significantly increase concentration in markets for the provision of broadband services to end users nor increase Internet backbone shares significantly. Although the merger would increase the number of subscribers on AT&T’s broadband network, the large majority of the nation’s residential and small business ``eyeballs´´ remain with other large broadband Internet service providers (such as Verizon, Qwest, Comcast, and Time Warner)." (Parentheses and quotation marks in original.)

It added that "The merger is not likely substantially to lessen competition in the provision of wireless broadband services. The combination would not significantly increase concentration in the ownership of spectrum in any geographic area or give AT&T control over a large enough share of spectrum suitable for wireless broadband services to raise competitive concerns."

The Federal Communications Commission (FCC) is conducting a redundant antitrust merger review. It has announced that it will consider an order regarding the AT&T BellSouth merger at its meeting of October 12, 2006. See, agenda [PDF].

BellSouth stated in a release that "We are pleased that the Department of Justice has approved the merger between BellSouth and AT&T.  We look forward to getting approval from the Federal Communications Commission in the very near future. This merger will create a communications industry leader capable of providing customers across the BellSouth region with the latest in wireline, wireless, broadband and video technologies and innovation."

Ben Scott, of the Free Press, a Washington DC based interest group that advocates network neutrality mandates, stated in a release that "The merger of AT&T and Bell South would take a big step toward the resurrection of Ma Bell, and its magnitude demands thorough scrutiny and careful review. Instead, the officials charged with protecting the public interest are rubber-stamping the deal in the most irresponsible manner imaginable. The consent decree and subsequent judicial review have been tossed out the window. It appears the fix is in."

He continued that "The public interest is not served by handing out favors to large corporations without any safeguards. We are witnessing a wave of concentration in the telecommunications market that threatens to sweep away the free and open Internet. Yet the watchdogs in Washington can't be bothered to require even the most basic consumer protections."

He concluded that "The new AT&T wants all the market power of its old monopoly without any consumer protections. The FCC must not sign off on this deal without applying serious conditions that prevent discrimination and foster broadband competition. First and foremost, this merger should not be allowed to proceed without permanent, binding protections for Net Neutrality."

DOJ Fines Oracle $98.5 Million

10/10. The Department of Justice (DOJ) announced in a release that Oracle will give $98.5 Million to the U.S. to settle the DOJ's claim that Oracle violated the False Claims Act by engaging in "defective pricing disclosures".

The DOJ further stated that its claims date back to March 17, 1997, and involved PeopleSoft. Oracle acquired PeopleSoft in 2005. Hence, the DOJ release states that Oracle "inherited PeopleSoft's liability".

The DOJ further disclosed that $17.7 Million will be paid to the PeopleSoft employee who initially made the allegations.

The DOJ's release does not assert that Oracle, or PeopleSoft, made a claim for goods or services that it did not provide, or that it failed to provide software or services as contracted. Rather, the DOJ's assertion is that PeopleSoft "made pricing disclosures to GSA that were not current, accurate and complete concerning the sale of software licenses and related maintenance services" prior to entering into contracts with the government.

Rod Rosenstein, the U.S. Attorney of the District of Maryland, spoke at a news conference on October 10, 2006. He stated in the prepared text of his speech that "The contract resulted in approximately $127 million of software sales and $77 million in maintenance sales before it ended in September 2005."

The DOJ and Oracle executed a 17 page document titled "Release and Settlement Agreement" on October 10, 2006. It recites that "Oracle denies all the allegations ... and denies that it has any liability for PeopleSoft's actions", and that it enters into the agreement "without admission of fault or wrongdoing".

Neither the DOJ's release, Rosenstein's speech, nor the settlement agreement disclosed whether or not the DOJ's present action, or the size of the fine, is related to, or in retaliation for, Oracle's successful opposition to the DOJ's failed attempt to block Oracle's acquisition of PeopleSoft in 2004. That legal action in the U.S. District Court (NDCal) resulted in a complete and humiliating defeat for the DOJ.

TLJ spoke with a representative of the U.S. Attorneys Office for the District of Maryland on October 11, 2006, who stated that there is no connection between the present action and the 2004 antitrust action.

On February 26, 2004, the DOJ and several states filed a complaint in U.S. District Court (NDCal) against Oracle alleging that its proposed acquisition of PeopleSoft would lessen competition substantially in interstate trade and commerce in violation of Section 7 of the Clayton Act, which is codified at 15 U.S.C. § 18. The DOJ sought an injunction of the proposed acquisition. See, story titled "Antitrust Division Sues Oracle to Enjoin Its Proposed Acquisition of PeopleSoft" in TLJ Daily E-Mail Alert No. 846, March 1, 2004.

However, while almost companies faced with the threat of legal action by the DOJ to block a merger or acquisition capitulate or negotiate a settlement, Oracle fought back. It won a prompt and decisive legal victory.

The District Court held that the government failed to meet its burden of showing by a preponderance of the evidence that the proposed merger is likely substantially to lessen competition in a relevant product and geographic market. Hence, the Court directed the entry of judgment against the government, and in favor of Oracle. See, story titled "DOJ Loses Oracle Case" in TLJ Daily E-Mail Alert No. 974, September 10, 2004.

After its 2004 defeat, the then head of the DOJ's Antitrust Division, Hewitt Pate, stated in a release that "The Department is considering its options."

The False Claims Act is codified at 31 U.S.C. §§ 3729-33. 31 U.S.C. § 3729 provides, in part, that "Any person who--
  (1) knowingly presents, or causes to be presented, to an officer or employee of the United States ... a false or fraudulent claim for payment or approval;
  (2) knowingly makes, uses, or causes to be made or used, a false record or statement to get a false or fraudulent claim paid or approved by the Government;
  (3) conspires to defraud the Government by getting a false or fraudulent claim allowed or paid;
  (4) has possession, custody, or control of property or money used, or to be used, by the Government and, intending to defraud the Government or willfully to conceal the property, delivers, or causes to be delivered, less property than the amount for which the person receives a certificate or receipt;
  (5) ..."

Oracle was represented by Everett Johnson of the Washington DC office of the law firm of Latham & Watkins.

The U.S. Constitution provides, in the 8th Amendment, that "Excessive bail shall not be required, nor excessive fines imposed, ..."

SEC Official Addresses Online Identity Theft and Securities Fraud

10/5. John Walsh, Associate Director and Chief Counsel of the Securities and Exchange Commission's (SEC) Office of Compliance Inspections and Examinations, gave a speech titled "Compliance Professionals versus Identity Thieves" at the NRS 21st Annual Fall Compliance Conference in Scottsdale, Arizona.

He spoke about identity theft in the context of accessing online accounts to commit securities fraud. He identified four main categories of fraud. There is "family fraud", where "a relative, usually a spouse, child, or in-law, uses personal knowledge of the customer to gain access to the customer's account. Most commonly, the identity thief then loots the account."

There is the "classic account takeover", where "a stranger ... gains access to the account and then loots it. In many cases the looting is implemented by selling all the positions in the account and wiring the proceeds to a foreign jurisdiction, usually a very distant foreign jurisdiction."

There is "alias fraud", where "identity thieves play with their own money but they use the victim's identity as cover. Generally, they steal the victim's identity and use that identity to open an account. The thief then funds the account and uses it for trading or money laundering schemes." He said that this scheme makes it appear that "the victim is responsible for whatever bad conduct is going on.".

Walsh also pointed out that this and other types of fraud cause more than direct financial loss to the victims. He said that victims "may find themselves unable to engage in basic financial activities, such as opening a brokerage account, obtaining credit, or cashing checks. In some cases victims may find civil or criminal records attributed to their identity, and may suffer significant consequences, such as being prevented from obtaining employment."

Finally, he discussed a fourth type of fraud, "trading account takeover", where "a stranger takes control of an account, but removes no money. Instead, he or she uses the account to trade".

He elaborated that "In some cases the account may be used to buy securities the identity thief wants to unload. In other cases, it may be used to run a pump-and-dump manipulation; heavily trading a security to run up its price; and then, when the price gets high enough, taking profits out of a separate unaffiliated account."

Walsh noted that this type of fraud "avoids all the back-end controls you have in place to prevent funds from being improperly removed from your firm". Hence, he suggested that companies work with their IT personnel on front end security.

He also discussed a trading account takeover involving a computer hacker named Van Dinh. He said that Dinh "tricked a visitor to an investment analysis web site, who thought he was downloading a new stock-charting tool, into downloading malicious code -- a secret keystroke logging program  ..."

This program allowed Dinh "to monitor activity on the victim's home computer, including identifying the victim's on-line brokerage account, and log-in and password information", which Dinh then used to take over the victim's account. Dinh then placed "orders to buy certain options that he held that were about to expire worthless. He managed to unload the options, and in doing so he depleted virtually all the available cash in the victim's account."

The SEC filed its complaint in the U.S. District Court (EDMass) against Van T. Dinh on October 9, 2003. Dinh used the victim's account to purchase from Dinh worthless put option contracts for Cisco stock. Dinh was also criminally prosecuted, and sentenced to 13 months in prison. He also paid full restitution.

These cases are SEC v. Van T. Dinh, D.C. No. 03-CV-11964-RWZ, and United States v. Van T. Dinh, Criminal No. 03-40035-NMG. See also, SEC release of October 9, 2003, and SEC release of May 6, 2004.

Walsh said that "This is an increasingly popular variation. In fact, if you are looking for a single ``hot topic´´ in the world of identity theft, this is it."

Washington Tech Calendar
New items are highlighted in red.
Wednesday, October 11

The House will not meet. It may return from it elections recess on Monday, November 13, 2006. The adjournment resolution, HConRes 483, provides for returning on Thursday, November 9, at 2:00 PM.

The Senate will not meet. See, HConRes 483.

6:00 - 8:00 PM. The Federal Communications Bar Association (FCBA) will host a continuing legal education (CLE) seminar titled "FCC's Media Ownership Rules". Registrations and cancellations are due by 5:00 PM on October 9. The price to attend ranges from $50 to $125. See, registration form [PDF]. Location: Dow Lohnes, Suite 800, 1200 New Hampshire Ave., NW.

Thursday, October 12

9:00 AM. The Department of Commerce's (DOC) Bureau of Industry and Security's (BIS) Deemed Export Advisory Committee (DEAC) will meet. See, notice in the Federal Register, September 22, 2006, Vol. 71, No. 184, at Pages 55429. Location: main lobby of the DOC's Hoover Building, 14th Street between Constitution and Pennsylvania Avenues, NW.

9:30 AM. The Federal Communications Commission (FCC) will hold a meeting. The event will be webcast by the FCC. Location: FCC, 445 12th Street, SW, Room TW-C05 (Commission Meeting Room).

9:30 AM. The U.S. Court of Appeals (DCCir) will hear oral argument in BellSouth Telecommunications v. FCC, App. Ct. No. 05-1032. The case pertains to whether BellSouth discriminated in favor of its long distance subsidiary in violation of 47 U.S.C. § 272. However, the precise nature of either the facts or issues in this proceeding is not public information. See for example, heavily redacted brief [81 pages in PDF] of the Federal Communications Commission (FCC). Judges Tatel, Kavanaugh and Williams will preside. Location: Courtroom 20, 333 Constitution Ave., NW.

12:30 - 1:45 PM. The Federal Communications Bar Association's (FCBA) Transactional Practice Committee will host a brown bag lunch. The FCBA states that the topic will be the "forms of financing available to communications companies -- angel, VC, mezzanine, private equity, traditional loans, public offerings". The speakers will include Tara Giunta (Paul Hastings Janofsky & Walker) and Rebecca Arbogast (Stifel Nicolaus). RSVP to Christine Crowe at ccrowe at wbklaw dot com or 202-383-3334. Location: Paul Hastings, 875 15th St.,  NW.

2:00 - 3:00 PM. The President's National Security Telecommunications Advisory Committee (NSTAC) will hold a partially closed meeting by teleconference. The open portion of the meeting will pertain to the Emergency Communications and Interoperability Task Force (ECITF). The closed portion of the meeting will include a discussion of, and vote on, the Global Infrastructure Resiliency (GIR) Report. See, notice in the Federal Register, October 2, 2006, Vol. 71, No. 190, at Page 57991.

2:00 - 5:30 PM. The U.S. Chamber of Commerce will host an event titled "The Global Fight Against Counterfeiting and Piracy: A Forum on International Enforcement". The speakers will include Chris Israel (International IPR Enforcement Coordinator at the U.S. Department of Commerce), Jorge Amigo (Director, Intellectual Property Office, Mexico), Benoit Battistelli (Director, Intellectual Property Office, France), Doug George (Director, Intellectual Property Information and Trade Policy Division, Foreign Affairs and International Canada), Ken Hansen (Director, Federal Enforcement Branch, Royal Canadian Mounted Police), and Brian Isaac (Canadian Anti-Counterfeiting Network). The notice of the event states that "Credentialed Members of the Media are Invited to Attend. For more information, or to register, reporters may ... call 202-463-5682." Location: U.S. Chamber of Commerce, 1615 H St., NW.

6:30 - 8:30 PM. The Federal Communications Bar Association's (FCBA) Legislative Practice Committee and Young Lawyers Committee will host an event title "Happy Hour". For more information, contact Paula Timmons at paula at paulatimmonsconsulting dot com or 202-255-1627 or Chris Fedeli at cfedeli at crblaw dot com or 202-828-9874. Location: Lounge 201, 201 Massachusetts Ave., NE.

Day one of a two day conference titled "Standards Bodies and Patent Pools: Key Legal and Business Developments". FTC Commissioner Pamela Harbour will give a speech titled "Standards Bodies and Patent Pools: Key Legal and Business Developments" on October 12. See, notice and agenda. Location: Wyndham Washington DC Hotel, 1400 M St., NW.

Friday, October 13

POSTPONED. 9:00 - 11:00 AM. The Progress & Freedom Foundation's (PFF) Digital Age Communications Act Project (DACA) will release a report containing recommendations of its Institutional Reform Working Group. The speakers will include Randolph May (Free State Foundation) and John Duffy (George Washington University School of Law). See, notice and registration page. See also, story titled "PFF Announces Digital Age Communications Act Project" in TLJ Daily E-Mail Alert No. 1,068, February 2, 2005. Breakfast will be served. Location: First Amendment Lounge, National Press Club, 529 14th St. NW, 13th Floor.

12:15 - 1:45 PM. The Federal Communications Bar Association's (FCBA) HLS/Emergency Communications Committee will host a brown bag lunch to plan future events. For more information contact Jennifer Manner at 703-390-2730 or jmanner at msvlp dot com. Location: Pillsbury Winthrop Shaw Pittman, 2400 N St., NW.

Day two of a two day conference titled "Standards Bodies and Patent Pools: Key Legal and Business Developments". See, notice and agenda. Location: Wyndham Washington DC Hotel, 1400 M St., NW.

Monday, October 16

6:00 - 8:15 PM. The Federal Communications Bar Association (FCBA) will host a continuing legal education (CLE) seminar titled "Client Creation, Conflicts and Confidentiality in the Administrative Process". The price to attend ranges from $50 to $125. See, registration form [PDF]. The deadline to register is 5:00 PM on October 12. Location: Wiley Rein & Fielding, 1776 K St., NW.

6:00 - 9:15 PM. The DC Bar Association will host a continuing legal education (CLE) seminar titled "How to Protect and Enforce Trademark Rights: A Primer". The speakers will include Shauna Wertheim (Roberts Mardula & Wertheim) and Steven Hollman (Hogan & Hartson). The price to attend ranges from $90-$135. For more information, call 202-626-3488. See, notice. Location: D.C. Bar Conference Center, 1250 H Street NW, B-1 Level.

Deadline to submit comments to the European Commission (EC) in response to its public consultation regarding possible regulation of "the use of mobile phones by children and young people". The EC seeks comments "linked to content and behaviour, such as access to harmful or illegal content, bullying (e.g. distribution of abusive or compromising messages and photos amongst children), grooming (e.g. strangers “making friends” with children with a view to meeting them), risks to the privacy of children, and the risk of unexpectedly high expense." See, EC release.

Tuesday, October 17

6:00 - 8:15 PM. There will be a brown bag lunch titled "Deploying IP-based Services in Rural Areas". The Federal Communications Bar Association states that this event is hosted by Common Carrier Committee and IP-Based Communications Practice Committee will host a brown bag lunch. For more information, contact Andy Morentz at amorentz at gci dot com. Location: Federal Communications Commission (FCC), 6th Floor South Conference Room, 445 12th St., SW.

Wednesday, October 18

6:00 - 8:15 PM. The DC Bar Association will host a continuing legal education (CLE) seminar titled "Introduction to Export Controls". The speakers will include Thomas Scott (Weadon & Associates) and Carol Kalinoski (Kalinoski & Associates). The price to attend ranges from $90-$135. For more information, call 202-626-3488. See, notice and notice. Location: D.C. Bar Conference Center, 1250 H Street NW, B-1 Level.

Day one of a two day meeting of the Department of Labor's (DOL) Bureau of Labor Statistics' (BLS) Business Research Advisory Council (BRAC). See, notice in the Federal Register, October 2, 2006, Vol. 71, No. 190, at Pages 58013-58014. Location: Conference Center, Postal Square Building, 2 Massachusetts Ave., NE.

Day one of a two day conference hosted by the National Institute of Standards and Technology (NIST) titled "Moving Towards Interoperability -- Technologies for Affordable, Accessible Healthcare". See, notice. The price to attend is $195. Location: NIST, Red Auditorium, 100 Bureau Drive, Gaithersburg, MD.

People and Appointments

10/11. Courtney Reinhard was named staff counsel for the House Commerce Committee (HCC). She will work on internet, broadcast decency, and other telecommunications issues. She previously worked for Sen. Jim DeMint (R-SC), a member of the Senate Commerce Committee (SCC). She has also worked for Sen. Sam Brownback (R-KS) and Rep. John Shimkus (R-IL). She worked on Rep. Shimkus' DOT KIDS Act, the Broadcast Decency Enforcement Act, and the just enacted WARN Act. Several staff members have left the HCC in recent months, including Kelly Kohl, who went to the National Association of Broadcasters (NAB), Jaylyn Jensen, who went to Lenovo, and Will Nordwind, who went to the law firm named Venable.

10/10. Pete Leon joined Comptel as VP of Legislative Affairs. He previously worked as legislative director for Rep. Eliot Engel (D-NY). See, Comptel release.

More News

10/11. The Federal Trade Commission (FTC) announced in a release that it now hosts a web site titled "Tech-ade Blog", which pertains to the FTC's hearing titled "Protecting Consumers in the Next Tech-ade", to be held on November 6 through 8, 2006, in Washington DC. See also, event web site and schedule.

10/10. The Federal Trade Commission (FTC) released a report [61 pages in PDF] titled "Municipal Provision of Wireless Broadband". The report describes wireless internet technologies that are currently in use or being developed, summarizes the legal status of wireless internet, and describes operating models being used to provide wireless internet service. It also summarizes arguments in favor of municipal wireless internet provision, including its commercial and noncommercial uses, and arguments for limiting or prohibiting municipal wireless internet provision. It also covers competition policy issues. See also, FTC release.

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