Charities supporting AT&T’s buyout of T-Mobile have financial incentive

Introduction

At first sight, it’s hard to understand why the Shreveport-Bossier Rescue Mission, a homeless shelter and clinic in Louisiana, would lobby the Federal Communications Commission.

“It is important that we, as Christians, never stop working on behalf of the underserved and forgotten,” the Rev. R. Henry Martin, director of the clinic, wrote to FCC Chairman Julius Genachowski in June. “It might seem like an out-of-place endorsement, but I am writing today in order to convey our support for the AT&T/T-Mobile merger.”

Martin went on to praise the potential expansion of wireless broadband service that AT&T Inc. has said the purchase of its smaller rival will enable. “People often call on God to help the outcasts and downtrodden that walk among us,” Martin wrote to the FCC. “Sometimes, however, it is our responsibility to take matters into our own hands. Please support this merger.”

Not included in Martin’s letter to the FCC was the fact that his organization had received a $50,000 donation from AT&T just five months earlier. Indeed the Shreveport-Bossier Mission is one of at least two-dozen charities that were recipients of AT&T’s largesse and have written in support of the T-Mobile buyout, which will cut the number of national wireless companies from four to three.

They include a Dollars-for-Scholars program outside New Orleans; an agency that helps special-needs adults find work in Michigan; and a Habitat for Humanity chapter in South Carolina.

Influence peddling?

Earlier this year, merger endorsements by the National Association for the Advancement of Colored People and the Gay and Lesbian Alliance Against Defamation made headlines after it was revealed they had received AT&T funds. GLAAD’s executive director and several board members resigned following the revelations.

An investigation by iWatch News shows the effort to get groups that receive AT&T charitable donations to write letters supporting the transaction went far beyond civil rights groups to include charities so small they have only a single staff member.

“This is taking influence peddling to a whole new level,” says Craig Holman, a lobbyist with Public Citizen, a consumer advocacy group. “It’s sort of breathtaking that these groups are allowing themselves to be used this way.”

AT&T’s plans suffered a major setback on Aug. 31 when the Justice Department, which has also been reviewing the merger, sued AT&T in federal court to block the acquisition. In response, AT&T said it would “vigorously contest” the matter.

The marriage of AT&T’s lobbying and charitable efforts is reflected in the company’s organization. James Cicconi, AT&T’s chief lobbyist and a senior executive vice president of the company, is also chairman of the company’s charitable arm: the AT&T Foundation.

AT&T distributed $148 million in 2010 through its corporate, foundation, and employee-giving programs, according to the company’s website. Most of those grants were under $25,000, according to a document, which is no long on the company’s website. The company’s charitable program has helped it win a number of awards, including a ranking in Corporate Responsibility magazine’s “100 Best Corporate Citizens” and a ”Do Good” designation from Ladies Home Journal.

Testimonials from organizations that have received funds from AT&T, such as the American Foundation for the Blind — known for its 44-year affiliation with Helen Keller — are linked from a special website AT&T created to support the merger: www.mobilizeeverything.com.

Cicconi, a former aide to Presidents George H.W. Bush and Reagan, did not respond to interview requests. The company also did not respond to emailed questions about the merger and its lobbying campaign or return phone messages.

Cicconi’s dual role of corporate executive and director of a foundation isn’t unique within the company. AT&T executives also sit on the boards of the Asian and Pacific Islander American Scholarship Fund, the Urban Corps of San Diego County, and the Mercy Health Center in Athens, Ga., all of which wrote to the FCC to tout the benefits of AT&T’s acquisition of T-Mobile.

Cash had no effect on position

Many of the charities, including the Shreveport-Bossier Mission, say that while they take AT&T’s money, it in no way affected their decision to lobby the FCC. “Their money that they gave was in no way connected with what we did,” said Martin, in a phone interview. “We endorsed the merger because we think it’s a good thing for rural people.”

Paul Schroeder, a vice president for the American Foundation for the Blind, says AT&T gives about $10,000 to $15,000 annually to his group. “We would have written the letter regardless,” he says, citing AT&T’s support for blind-accessible phones.

Neil Horikoshi, president of the Asian Pacific Islander American Scholarship Fund, said his organization’s ties to AT&T, which is listed on the fund’s website as a donor of between $25,000 and $49,999, weren’t the only reason he wrote to the FCC. “No one leveraged me or anything,” he said. “There are a lot of people who support AT&T.”

To be sure, generating letters of support from charities is only the most unusual aspect of a mammoth effort by a company with $114 billion in annual revenues to gain government approval for the deal. Through the first half of this year, the company has hired 99 lobbyists, including seven former members of Congress, according to the Center for Responsive Politics. It has spent $11.7 million, ranking behind only General Electric Co. and the U.S. Chamber of Commerce in lobbying spending during the period.

That doesn’t include bills for at least 50 lawyers and 15 consultants who have handled AT&T’s regulatory filings with the FCC and the Justice Department’s antitrust division. Lawyers for AT&T and T-Mobile pushing approval of the deal know the key agencies well: the legal teams include a former chairman of the FCC, two former deputy assistant attorneys general in the antitrust division, and a former FCC deputy general counsel.

Part of that effort to influence the federal government included Camp Diva, a Richmond, Va., nonprofit that sends inner-city teenage girls to summer camp and runs after-school programs. “I hope you will act to approve this merger as soon as possible — which will provide the girls we serve with more access to the mobile broadband connections that will connect them to the world,” Angela Patton, Camp Diva’s sole employee, wrote to the FCC in May.

Patton, in an interview, said AT&T has given her organization about $1,000 annually in recent years, allowing her to send an additional two girls on a five-week summer retreat. She wrote to the FCC after the AT&T official who handles donations to her organization briefed her on the deal.

In need of support

“When I was speaking with them about something else they told me they were interested to see what our opinions were and could we be of support,” she said in a phone interview. “We are suffering right now and we need their support.”

The Boys & Girls Club in Neshoba County, Miss., where students go for homework sessions and to play board games, also joined the effort. “When making your final decision regarding the merger, we ask that you stop for a moment and think about the Boys & Girls Club of Neshoba County,” Rae Ellen Gordon, a volunteer for the organization wrote. “Please consider all the good that an increased wireless broadband network can do for the kids, for the future.”

In an interview, Gordon said her group had received $1,500 in grants from AT&T over the past two years. She declined to say how AT&T approached the organization.

“If I was asked to write a letter it would have to be something I would believe in,” she said. “We’re still very new, we’re still struggling financially.”

“The fact that AT&T has contacted some of the people who received donations introduces pressure on those organizations to respond favorably,” says Bruce Oliver, who researches business ethics at the Rochester Institute of Technology. “I would question whether or not many of these people are in a position to make an informed judgment about whether or not this [merger] should occur.”

Consumer advocates say the deal will lead to higher prices and poorer service in an industry that already scores low marks in consumer satisfaction surveys.

In its legal filings and on its website, AT&T argues that buying its smaller rival is the fastest way to help the company improve its voice and data network reliability, reducing dropped calls and improving sound quality. It says the proposed merger will create tens of thousands of new jobs, lead to $8 billion in infrastructure investment and allow 55 million more people access to its network. It also says the wireless industry is “fiercely competitive” and that much smaller companies such as Cellular South, U.S. Cellular and Leap Wireless provide additional competition. The expansion of its next-generation data network will also help tech companies and cell phone manufacturers to introduce new technologies more quickly.

AT&T confident of passage

“We don’t believe for a moment that [a rejection] will occur. We’re a very careful and cautious company in our strategic decisions,” Cicconi, AT&T’s top lobbyist, told The Washington Post after the deal was announced. “We understand the antitrust laws … and we’ve examined all these with great care. We wouldn’t be doing this deal if we did not expect approval.”

By traditional measures of market concentration, there is abundant evidence that the merger will harm consumers, opponents of the deal say. Combining AT&T and T-Mobile would give the merged company and competitor Verizon Wireless nearly 80 percent of the wireless market.

In filing suit, the Justice Department said the deal would lead to “higher prices, fewer choices and lower quality products for mobile wireless services.” “Any way you look at this transaction, it is anti-competitive,” said Sharis Pozen, the acting assistant attorney general for antitrust, at a news conference. Following the Justice Department’s move, two of the FCC’s four commissioners issued press releases saying they shared some of the competition concerns expressed by the Justice Department. The FCC review of the merger is ongoing.

Sprint Nextel Corp., the third-largest carrier with about 12 percent of the market, has vigorously opposed the merger, arguing that although consolidation may allow it to raise prices in the short term, it will eventually be squeezed out of the market by Verizon and the combined AT&T-T-Mobile. But AT&T’s biggest competitor, Verizon, has remained neutral on the deal. That’s a sign, say critics, that it stands to benefit from the elimination of T-Mobile, a low-cost provider.

“If competitors are complaining loudly about the merger, it’s usually a sign it is competition-enhancing and will make the merged firms more efficient and able to cut prices,” says Rick Brunell of the American Antitrust Institute, a pro-competition group that opposes the deal. “If the merger is anti-competitive, they’re going to like it because it creates a price umbrella.”

Brunell says that if judged on its merits, the merger is almost certain to be blocked. AT&T’s only hope, he says, was to bring its wide-ranging “political clout” to bear in Washington.

The use of non-political charities to lobby for corporate interests is not a new phenomenon. In the 1990s, cigarette-maker Philip Morris asked arts groups that received its funding to oppose new smoking restrictions in New York City, according to The New York Times.

Some, including the Brooklyn Academy of Music, did contact the City Council about the issue.

“The charity is put in a really difficult position” when the issue it is being asked to comment on is totally unrelated to its activities, says Bruce Sievers, a lecturer at Stanford University’s Center for Philanthropy and Civil Society. “The corporation is basically saying: we’ve been friends of yours and now it’s time to help us.”

Indeed, debates about market concentration weren’t what Larry Collette, president of a group that provides aid to special needs adults in St. Clair Township, Mich., had in mind when he wrote to the FCC at AT&T’s behest. “We believe in the dignity of each and every member of our community,” Collette wrote on behalf of his group, Special Dreams Farms. “I believe AT&T is a committed partner in this endeavor.”

The organization received about $2,000 from AT&T in recent years as well as computer support. Collette says he “resents” the suggestion that he wrote to the FCC to avoid losing funding from the company. Nor does he think it’s unfair of AT&T to ask his organization for support for its corporate interests. “Obviously we like to support companies big or small if they’re supporting us,” Collette says. “Everything is a two-way street.”