February 20, 2002

Microsoft's next scandal: More questions about secret DoJ negotiations

Author: JT Smith

- By Jack Bryar -

Is it really possible that when Microsoft set out to market a "Linux killer" last November it began to get itself into more legal difficulty than ever before? And could it blow up into a political scandal as well?

Perhaps the weeping Canadian figure skaters kept you distracted this week, but if you were sifting through the public comments in the Microsoft antitrust case, you'd notice that the New York Times, among others, is hinting that the sweetheart settlement proposed between Microsoft and Assistant Attorney General Charles A. James is about to blow up, big time.

The proposed antitrust settlement between Microsoft and the U.S. Department
of Justice drew about 30,000 comments, more than any business case in
recent memory. The DOJ and the court released 47 of the most substantial of
these comments. They
are worth reading

Most of them lay out the technical and legal flaws in the
settlement. A couple of comments, notably the detailed
of connectivity maven Dan Kegel, lay out the wording needed to make the settlement
an effective document.

However, several other comments focused on whether or not the
Microsoft and the DOJ have violated the Tunney Act in its first
big test since the Act was passed in 1974. At issue: the legal obligation of Microsoft and the DOJ to document exactly what was said to justice officials by Microsoft during negotiations. Was there an covert deal, generated by secret Microsoft lobbying and tons of soft money contributions?

Among the curious is none other than former U.S. Senator John V. Tunney,
the author of the sunshine legislation bearing his name. The Tunney Act
is supposed to prevent government litigators from entering into
sweetheart deals with their adversaries. One of the mechanisms of the act is supposed to be full disclosure of all contacts and all
representations made during negotiations between parties. Tunney filed
a comment
with Judge Colleen Kollar-Kotelly insisting that,
in order to comply with the Tunney Act, Microsoft must specify all
contacts between it and the government and what was said. In his
statement, Tunney said, "In my opinion, it is essential that all discussions
between the defendant corporation and the government ... that might have led to
a proposal settlement decree be disclosed."

The Senate Judiciary Committee made much the same point, stating
that "Microsoft has made no secret of the political influence it has sought
to create during this trial." The committee suggested that is was
concerned that Microsoft had engaged in precisely the sort of secret
lobbying of Justice Department officials that the Tunney Act was designed to

The New York Times has also weighed in
with an opinion
that, contrary to the Tunney Act, Microsoft has
not disclosed who attended this and other meetings. "Nor has Microsoft
described in even the most cursory fashion the substance of any
of these communications," the Times stated.

Two sets of dates are of particular interest to outside observers.
These are October 5 and October 30-31.

I earlier wrote a column about the Halloween negotiations between
Microsoft and Assistant Attorney General Charles A. James, when James
effectively left the
Justice experts advising him outside the room
. Litigators for the
states that have refused to accept the settlement are understandably curious about just what was said in those negotiations.

They are even more curious because of the possibility that James and
his staff may have been misled by Microsoft officials at an earlier
meeting, and the effect it may have had on any discussions of unbundling.

Unbundling was an idea in circulation during most of the antitrust
litigation. Part of what brought Microsoft into court was the company's bundling of
Internet Explorer (and since then, its video package) into the core of
the Windows operating system. Microsoft vehemently insisted throughout the last
several years that unbundling Explorer, in particular, couldn't be accomplished
without wrecking the integrity of the platform.

The state attorneys general could not help but notice when last
November Microsoft announced ... an unbundled Windows! Marketed as a Linux killer, Microsoft newest iteration of its codebase was
called Windows
XP Embedded
. To the holdout states' way of looking at it, here were all the components that Microsoft asserted couldn't be separated,
available at a price for developers who wanted to Windows enable their CD players
or cell phones.

It would be hard to imagine that in October, Microsoft senior management would not know about XP Embedded's pending release in November. This why observers are curious about what was said at a "technical" meeting held October 5 between Microsoft and Justice officials.

Microsoft has failed to disclose the purpose of the meeting, but its representatives there were a who's who of senior Microsoft managers most likely to be affected by any
unbundling and most likely to make a technical case for why the Microsoft code
elements couldn't be separated. Accompanied by a person listed in Microsoft
documents as "Chad Knowlton," were Linda Averett, the product unit manager for
the Windows Digital Media Platform division. Joining them was Michael
Wallent, the product unit manager for Internet Explorer, and Robert Short, vice
president for Windows Core Technology.

What they discussed has not been made public. Whatever they said
made an impression, as unbundling was taken off the table as a possible
remedy, even though it was the remedy that plaintiffs had asked for at the
beginning of litigation all these years ago. Litigators for the states are
understandably curious about just what exactly was said by these individuals. While
Microsoft is claiming that the issue is irrelevant to the plaintiffs' original
complaints, others are curious about what is being covered up, and whether
Microsoft is about enmesh itself into further legal trouble.

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