Verizon, AT&T Challenged on NSA Spying

Shareholders urge the telecom giants to be more transparent about U.S. data demands

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NSA / Reuters

The National Security Agency headquarters in Fort Meade, Md.

Verizon and AT&T, the nation’s largest phone companies, have maintained a disciplined silence about their involvement with the U.S. government’s controversial national security surveillance programs. Now, the telecom titans are facing pressure from influential shareholders to be more forthcoming about government requests for user information, including demands made by the National Security Agency (NSA) under the Foreign Intelligence Surveillance Act (FISA).

Shareholders are asking Verizon and AT&T to follow the example of the nation’s largest Internet companies, including Google, Yahoo, Apple, Microsoft and Facebook, which all publish transparency reports. These companies are currently waging a legal battle with the government to be more forthcoming about government data demands. Internet and telecom firms alike are facing intense scrutiny following the blockbuster revelations from former NSA contractor Edward Snowden, who leaked classified documents describing the companies’ participation in the NSA’s snooping programs.

The New York State Common Retirement Fund, which manages $160.7 billion on behalf of more than one million state employees and retirees, is leading the effort for greater transparency. “AT&T’s failure to disclose what customer information it shares with U.S. and foreign governments presents significant risk to shareholder value,” said New York State Comptroller Thomas P. DiNapoli, trustee of the fund. “Transparency allows investors to make informed decisions about corporate behavior. Publishing regular reports on requests for information from governments would be an appropriate response to shareholder and customer concerns about trust and privacy in the digital world.”

(MOREAT&T and Verizon Stay Silent About NSA Internet Snooping)

According to published reports, AT&T and Verizon, which control key points of the nation’s communications infrastructure, have worked with the NSA to install equipment that “copies, scans and filters large amounts of the traffic that passes through.” The telecom giants have installed the filtering equipment at more than a dozen key points throughout the nation’s communications grid. In 2006, a former AT&T technician revealed that the NSA had set up a monitoring point at an AT&T facility in San Francisco — the now-legendary Room 641A at 611 Folsom Street.

The purpose of the NSA’s surveillance programs is to collect “foreign intelligence” to prevent terrorist attacks against the United States and its allies. The systems are supposed to target people “reasonably believed” to be located outside the U.S., but recent revelations suggest that domestic communications have been collected. The NSA says that it has “minimization” procedures designed to ensure that U.S. citizens are not caught up in the government’s surveillance. But newly declassified documents show that the secret Foreign Intelligence Surveillance Court (FISC) has repeatedly criticized the U.S. for not following its own rules.

On a conference call with reporters in August, a senior U.S. intelligence official spoke in blunt terms about the cooperation of the telecom giants with the NSA surveillance programs. “The telecommunications companies are ordered to comply with this,” the official said. “That’s their role in this. As in a wide variety of other contexts, they get served with an order and they comply with the court’s order.” The official declined to either confirm or deny whether any of the telecommunications companies had ever objected to participating in the programs.

In another NSA program, authorized by the USA PATRIOT Act, the telecom giants work with the government to provide access to the phone records of tens of millions of U.S. citizens, including the number called, when the call was made, and the length of the conversation. Among the documents that Snowden leaked was a top-secret court order issued by the Foreign Intelligence Surveillance Court (FISC) — a secret court made up of 11 federal judges appointed by U.S. Chief Justice John Roberts — which requires Verizon to provide the NSA on an “ongoing, daily basis” with this so-called “metadata” on all phone calls made by its U.S. customers.

The shareholder groups are asking AT&T and Verizon to publish semi-annual reports — as the Internet companies do — “providing metrics and discussion regarding requests for customer information by U.S. and foreign governments, at reasonable cost and omitting proprietary information.” The proposals will be voted on at the companies’ annual meetings in Spring 2014.

AT&T spokesman Mark Siegel declined to address the substance of the shareholder proposal. “As standard practice we look carefully at all shareholder proposals but at this point in the process we do not expect to comment on them,” Siegel said. A spokesperson for Verizon did not immediately return a request for comment.

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Verizon is being pressured by Trillium Asset Management, a Boston-based investment firm with more than $1.3 billion under management. On its website, Trillium says that it integrates “environmental, social, and governance (ESG) factors into the investment process” as a way to identify good companies well positioned to deliver strong long-term performance. 

“Verizon and AT&T are not managing this crisis effectively,” said Jonas Kron, SVP and director of shareholder advocacy at Trillium. “Now is the time for them to proactively demonstrate that they will protect user privacy, because it is in the interest of everyone – investors, citizens, our nation and the companies. The business case is compelling – opportunities for growth may be lost – but equally important are the civil liberties that must be protected.”

Kevin Bankston, Policy Director of New America Foundation’s Open Technology Institute, urged AT&T and Verizon to join the effort to push for more transparency about the NSA’s surveillance programs. “The telcos failure to work with the privacy community to protect their users against government overreach, in contrast with the Internet companies who’ve joined our coalition, is especially disappointing considering that they are the ones who should be helping the most,” Bankston said.