Damage Control at Facebook: 6 Takeaways From The Times’s Investigation

In fall 2016, Mark Zuckerberg, Facebook’s chief executive, was publicly declaring it a “crazy idea” that his company had played a role in deciding the election. But security experts at the company already knew otherwise.

They found signs as early as spring 2016 that Russian hackers were poking around the Facebook accounts of people linked to American presidential campaigns. Months later, they saw Russian-controlled accounts sharing information from hacked Democratic emails with reporters. Facebook accumulated evidence of Russian activity for over a year before executives opted to share what they knew with the public — and even their own board of directors.

In 2015, when the presidential candidate Donald J. Trump called for a ban of Muslim immigrants, Facebook employees and outside critics called on the company to punish Mr. Trump. Mr. Zuckerberg considered it — asking subordinates whether Mr. Trump had violated the company’s rules and whether his account should be suspended or the post removed.

But while Mr. Zuckerberg was personally offended, he deferred to subordinates who warned that penalizing Mr. Trump would set off a damaging backlash among Republicans.

Mr. Trump’s post remained up.

As criticism grew over Facebook’s belated admissions of Russian influence, the company launched a lobbying campaign — overseen by Sheryl Sandberg, the company’s chief operating officer — to combat critics and shift anger toward rival tech firms.

Facebook hired Senator Mark Warner’s former chief of staff to lobby him; Ms. Sandberg personally called Senator Amy Klobuchar to complain about her criticism. The company also deployed a public relations firm to push negative stories about its political critics and cast blame on companies like Google.

Those efforts included depicting the billionaire liberal donor George Soros as the force behind a broad anti-Facebook movement, and publishing stories praising Facebook and criticizing Google and Apple on a conservative news site.

Facebook faced worldwide outrage in March after The Times, The Observer of London and The Guardian published a joint investigation into how user data had been appropriated by Cambridge Analytica to profile American voters. But inside Facebook, executives thought they could contain the damage. The company installed a new chief of American lobbying to help quell the bipartisan anger in Congress, and it quietly shelved an internal communications campaign, called “We Get It,” meant to assure employees that the company was committed to getting back on track in 2018.

Sensing Facebook’s vulnerability, some rival tech firms in Silicon Valley sought to use the outcry to promote their own brands. After Tim Cook, Apple’s chief executive, quipped in an interview that his company did not traffic in personal data, Mr. Zuckerberg ordered his management team to use only Android phones. After all, he reasoned, the operating system had far more users than Apple’s.

Washington’s senior Democrat, Senator Chuck Schumer of New York, raised more money from Facebook employees than any other member of Congress during the 2016 election cycle — and he was there when the company needed him.

This past summer, as Facebook’s troubles mounted, Mr. Schumer confronted Mr. Warner, who by then had emerged as Facebook’s most insistent inquisitor in Congress. Back off, Mr. Schumer told Mr. Warner, and look for ways to work with Facebook, not vilify it. Lobbyists for Facebook — which also employs Mr. Schumer’s daughter — were kept abreast of Mr. Schumer’s efforts.

 

Related:

What Facebook Knew and Tried to Hide (28 min audio)

‘I like them very much:’ Trump has long-standing business ties with Saudis, who have boosted his hotels since he took office

For President Trump, Saudi Arabia is not just a political ally. It has also been a customer.

Trump’s business relationships with the Saudi government — and rich Saudi business executives — go back to at least the 1990s. In Trump’s hard times, a Saudi prince bought a superyacht and hotel from him. The Saudi government paid him $4.5 million for an apartment near the United Nations.

Business from Saudi-connected customers continued to be important after Trump won the presidency. Saudi lobbyists spent $270,000 last year to reserve rooms at Trump’s hotel in Washington. Just this year, Trump’s hotels in New York and Chicago reported significant upticks in bookings from Saudi visitors.

Saudi Arabia, I get along with all of them. They buy apartments from me. They spend $40 million, $50 million,” Trump told a crowd at an Alabama campaign rally in 2015. “Am I supposed to dislike them? I like them very much.

The Trump Organization issued a statement Thursday saying that although it has pursued new hotel deals in Saudi Arabia in the past, it has no current plans to do so.

.. Saudi royalty has been buying from Trump dating to 1995, with some of the deals coming during periods when Trump was in need of cash.

.. In 1991, when Trump was nearly $900 million in debt from failed casino projects, he sold his 281-foot yacht to Saudi Prince Alwaleed bin Talal for $20 million.

.. A few years later, the prince bought a stake in Trump’s Plaza Hotel by agreeing to pay off some of Trump’s debts on the property.

.. Tim O’Brien, a journalist who wrote the 2005 biography “TrumpNation,” said these deals were one-sided — in the prince’s favor. He said Trump was in dire financial straits, so the prince got a good price.

.. But there was no indication, back then, that Saudis wanted to curry favor with Trump by giving him a better deal, O’Brien said. “Talal saw him as a profit center,” he said, “not as somebody who he was cultivating as a future president.”

.. In 2001, Trump sold the 45th floor of his Trump World Tower, in New York, to the Kingdom of Saudi Arabia for $4.5 million.

.. More recently, Prince Nawaf bin Sultan bin Abdulaziz al-Saud acquired what would become a 10,500-square-foot triplex apartment in a Trump building on the west side of Manhattan. Nawaf sold it in February for $36 million.

.. During Trump’s presidential campaign, he also seemed to be exploring plans to build a hotel in Jiddah, Saudi Arabia’s second-largest city, part of an international expansion plan. In August 2015 — two months after he got into the race — Trump established eight new shell companies that included the name “Jeddah.”

.. The names of those corporations — four of which also included the word “hotel” — seemed to indicate Trump was planning a hotel in the city.

.. Since Trump won the presidency, Saudis have been patrons of three of his 11 Trump-branded hotels.

.. In early 2017, a lobbying firm working for the Saudi Embassy reported spending $270,000 on food and lodging at Trump’s hotel in downtown Washington. The rooms were used to house people visiting Washington to lobby against a law that the Saudi government opposed — a law that allows victims of the Sept. 11, 2001, terrorist attacks to sue the Saudi government.

.. the general manager at Trump’s hotel on Manhattan’s Central Park West

.. One major reason, General Manager Prince A. Sanders wrote: “a last-minute visit to New York by the Crown Prince of Saudi Arabia.”

Sanders told the investors that the Trump hotel’s Saudi guests did not include Crown Prince Mohammed bin Salman himself because the hotel did not have a suite large enough to suit him. But, he said, “due to our close industry relationships, we were able to accommodate many of the accompanying travelers.”

.. Saudi bookings at Trump Chicago had gone from 81 “room-nights” in the first half of 2016 to 218 in the first half of this year — an increase of 169 percent. (In the same time frame, bookings from Saudi Arabia’s rival Qatar increased 1,633 percent, from three “room-nights” to 52).

The dangerous myth we still believe about the Lehman Brothers bust

The central error in the popular post-crisis consensus was the idea that naive believers in the self-policing efficiency of markets led us over the precipice. Greenspan was painted as the high priestof this laissez-fairy-tale delusion, and people seized on a moment when he appeared to plead guilty: Under the pressure of congressional questioning, he confessed to a “flaw” in his pro-market ideology. What Greenspan meant was that all belief systems — whether pro-government or pro-market — are imperfect. But that subtlety was lost. Quoted and requoted without proportion or context, Greenspan’s purported mea culpa threatened to define his legacy.

.. Bestsellers by two Nobel Prize-winning behaviorists — Daniel Kahneman and Richard Thaler — encouraged people to see the crisis as proof that this new science had been ignored, as did contributions from the sublime storyteller Michael Lewis.

.. Contrary to myth, Greenspan himself never believed that markets were efficient. In his youth, he wrote lucidly about bubbles and crashes and regarded market inefficiencies as so obvious that he sought to exploit them by day trading

.. As Fed chairman years later, Greenspan frequently reminded his colleagues that periods of prosperity could be punctured by “irrational exuberance” in financial markets.

.. political constraints, not intellectual failures, prevented policymakers from curbing the housing mania. Nobody remembers that in 2001 the Greenspan Fed banned the most abusive subprime mortgages, for the good reason that the ban was circumvented. But why was it circumvented? The answer is that the capture of Congress by financial lobbies ensured the balkanization of regulation into an alphabet soup of agencies, many of them underfunded and ineffective.

.. Nonbank mortgage lenders, for example, came under the authority of the Federal Trade Commission, which had no resources to conduct preemptive supervision. Small wonder that the sharp practices in the industry became egregious, or that nonbanks continue to dominate today’s mortgage business.

.. The Greenspan Fed also tried to force more capital into the banks it supervised, but it soon realized that this would drive risk-taking into various “shadow banks” that lay outside its authority

.. Greenspan also pushed for tougher regulation of the Federal National Mortgage Association and Federal Home Loan Mortgage Corporation (a.k.a. Fannie Mae and Freddie Mac), the government-backed mortgage giants, presciently observing that they posed “a systemic risk sometime in the future.” Fannie’s lobbyists hit back with a TV ad warning Congress not to back the Greenspan plan. That buried it.

.. The important lesson of the crisis is not that markets are fallible, which every thoughtful person knew already. It is that essential regulations — the sort that the supposedly anti-regulation Greenspan actually favored — are stymied by fractured government machinery and rapacious lobbies.

.. Even today, the financial system has multiple overseers answerable to multiple congressional committees, because all this multiplying produces extra opportunities for lawmakers to extract campaign contributions.

.. Vast government subsidies still encourage Americans to take big mortgages; Fannie Mae and Freddie Mac still operate, despite endless talk of breaking them up. And although post-2008 regulations have ensured that banks are better capitalized, the lobbyists are pushing back. Merely a decade after the Lehman bankruptcy brought the world economy to its knees, the Trump administration is listening to them.

How Bill Browder Became Russia’s Most Wanted Man

The hedge-fund manager has offered a fable for why the West should confront Putin.

.. Putin did not speak of what is surely the true source of his animus: Browder’s decade-long campaign against Russian corruption. In 2009, Browder’s tax adviser Sergei Magnitsky testified that the Russian police and tax authorities had attempted to steal two hundred and thirty million dollars in Russian taxes paid by Browder’s Moscow-based investment firm, Hermitage Capital.
.. Since the Magnitsky Act passed, the Russian government has charged Browder with myriad crimes, and has periodically tried to lodge warrants for his arrest via Interpol. “Their main objective is to get me back to Russia,” Browder has said. “And they only have to get lucky once. I have to be lucky every time.”
.. In 2012, in Surrey, England, Alexander Perepilichny, one of Browder’s chief sources of information on the movement of the stolen funds, collapsed while jogging near his home and died. The case is still under investigation. Browder, who has taken to relating to as large an audience as possible the danger he faces, has called this “a perfect example of why you don’t want to be an anonymous guy who drops dead.”
.. Browder, who is fifty-four, with a dusting of silver hair and rimless eyeglasses, has a forceful yet understated authority and a talent for telling a coolly suspenseful tale.
.. As an anti-corruption activist, Browder has spoken out against the exploitation of offshore tax havens—for example, the ones detailed in the documents that were leaked from the Panamanian law firm Mossack Fonseca, in 2016. Many companies listed in the so-called Panama Papers were entirely legal. Still, Browder tends not to mention that Mossack Fonseca set up at least three firms for him and Hermitage.
.. His singling out of Browder in Helsinki, McFaul told me, “only gives Bill a bigger global platform—it was a huge public-relations coup, which of course Bill will use.”
.. His grandfather Earl Browder became active in socialist politics during the First World War and lived in the Soviet Union for five years before becoming the secretary-general of the Communist Party of America. Earl’s son Felix was a noted mathematician. William Browder took an interest in business while in boarding school in the seventies. “I would put on a suit and tie and become a capitalist. Nothing would piss my family off more than that,” he writes in “Red Notice.”
.. This was the peak of the chaotic post-Soviet “Wild East,” a time of lawlessness and speculation. Over the next two years, Hermitage’s portfolio grew to more than a billion dollars, but it was nearly wiped out in August, 1998, when Russia defaulted on its sovereign debt, causing widespread panic. Browder was one of the few Western financiers who chose to remain in the country. Between 1998 and 2005, the price of oil quadrupled and the Russian stock index went up by nearly three thousand per cent... Browder gained attention for publicly criticizing the management of companies in which his fund had invested as a minority shareholder, in an effort to goad them into being more efficient and transparent. He held combative press conferences outlining Russian corporate malpractice and passed along to journalists dossiers that described the way venal oligarchs engaged in asset stripping, wasteful spending, and share dilutions.

.. “I don’t think Bill started out with a passion for corporate governance. He found it to be an instrument that helped him and his investors make a lot of money. Ultimately, it became a sincere crusade.”

.. Steven Dashevsky, then the head of research at a Russian investment bank, Browder’s anti-corruption stance was a kind of “free marketing” for Hermitage.

.. Regulators had instituted a dual price structure for the company’s shares: one class of shares, priced relatively cheaply, could be held only by Russian citizens and firms; the second class, priced much higher, could be purchased by anyone. Hermitage got the cheaper price by buying Gazprom stock through companies it registered in Russia. It was a work-around used by a number of Moscow-based investment funds that, as Dashevsky put it to me, “fell into a gray zone: it was clearly against the spirit of the law, but never prosecuted or pursued.”

.. Browder also minimized how much Hermitage paid in Russian taxes. The government, in an effort to stimulate regional investment, had established a special zone in Kalmykia, a republic north of the Caucasus, that offered a lower tax rate. The rate went down even more if disabled workers made up a majority of a company’s employees. To take advantage of this, Hermitage hired disabled people for its companies in Kalmykia. A banker who managed a number of Russian funds said, “We’re not generally disciples of Mother Teresa, but Bill was singularly bottom-line focussed.” Other investors, the banker said, considered tax-avoidance measures like Hermitage’s hiring of disabled people “too risky, and borderline illegal, with the possibility of too much danger if revealed.”

.. Browder received a British passport in 1998 and, rather than become a dual citizen, renounced his U.S. citizenship. He has explained that he had been motivated by the discrimination that his grandparents faced in America during the McCarthy era as a result of their political activism for the Communist Party: his grandfather was forced to testify in front of the House Un-American Activities Committee, and his grandmother was threatened with deportation to Russia. “This type of thing could never happen in Britain, and that was the basis of my decision to become British,” he recently told an audience in Colorado. But those I talked to who knew Browder in the nineties assumed that the reasons were financial

.. “If there has been a consistent passion in Bill’s life over the last twenty or thirty years, it is not wanting to pay taxes.”

.. Vladimir Putin assumed the Presidency in 2000, and at first Browder was an ardent supporter

.. In 2003, when the billionaire head of the Yukos oil company, Mikhail Khodorkovsky, was arrested and charged for fraud and tax evasion, many saw it as evidence that Putin was becoming uncompromisingly authoritarian. But Browder welcomed the prosecution of Khodorkovsky, with whom he had clashed in the past. In 2004, he told the Times, “We want an authoritarian—one who is exercising authority over mafia and oligarchs.” He added that Putin “has turned out to be my biggest ally in Russia.”

.. He was told that his Russian visa had been annulled on national-security grounds.

.. “Logic dictates that it’s not in the national interest to ban the biggest investor in Russia and one of the biggest supporters of the government’s policy.”

.. In July, 2006, Putin was asked at a press conference about Browder. Putin said that he didn’t know the particulars of the case, but added, “I can imagine this person has broken the laws of our country, and if others do the same we’ll refuse them entry, too.” Browder instructed his Hermitage colleagues to sell off the firm’s Russian assets and moved key staff to London.

.. Actually, Magnitsky, then thirty-five, was a tax adviser who worked for the firm that had advised Hermitage for a decade.

.. police had used the impounded seals and stamps to reregister Hermitage’s companies in the name of low-level criminals, and those companies then applied for tax refunds totalling two hundred and thirty million dollars, the amount that Hermitage had paid in capital-gains tax. Two state tax offices in Moscow appeared to have approved the refunds the next day.

.. Magnitsky testified to Russian state investigators in June, 2008, after which his lawyer advised him to leave the country. He refused, and gave further testimony that October. Several weeks later, he was arrested on charges of abetting tax evasion through Hermitage, and held in pretrial detention.

.. In 2010, Browder went to Washington with a list of Russian officials he said were to blame. The Obama Administration placed sanctions on some of them, a routine procedure that barred them from entering the United States. McFaul, then in charge of Russia policy at the National Security Council, recalls, “Bill, to his credit, said, ‘That’s not enough. You didn’t make it public. You didn’t seize any assets.’ ” In “Red Notice,” Browder calls the Russia policy of the Obama Administration at the time “appeasement.”

.. “But what was unique here was Bill Browder,” he said—in particular, Browder’s ability to tell the story of Magnitsky’s suffering. “We were as outraged as he was,”

..  Browder gave testimony, said, “I think it boils down to one phrase I heard him use numerous times: ‘They killed my guy.’ He feels a responsibility and obligation to make sure Sergei didn’t die in vain, and it’s hard to argue with that.”

.. Even so, the Magnitsky Act might have languished had it not been for the fact that, in 2012, Russia was about to become a member of the World Trade Organization. In order to grant Russia what the group calls “permanent normal trade relations” status, Congress would have to repeal the Jackson-Vanik amendment, a 1975 measure aimed at the Soviet Union that penalized trade with countries that had restrictive emigration policies. Legislators did not want to rescind the law without sending the Kremlin a message about American toughness on human rights.

.. “the real question was whether Congress and the White House could find any substitute for Jackson-Vanik other than Magnitsky. The answer turned out to be no, they couldn’t.”

.. “It means his krysha doesn’t work,” Celeste Wallander explained. Krysha is Russian for “roof,” and in criminal jargon means the protection that a powerful figure can offer others. “It screws up his social contract with those inside the system,” she said.

.. But Canada, the Baltic states, and the U.K. have passed their own Magnitsky-style bills, and, last year, Congress passed the Global Magnitsky Act, which targets human-rights abusers worldwide. McFaul told me it had long struck him that “the spectre of the Magnitsky law and the noise around it are much more important than the law itself.”

.. The main evidence that the law is having an effect is how obsessed Putin is with it. I don’t get why he’s so obsessed, but the fact remains that he is, and that suggests it’s had a tremendous impact.

.. I met Veselnitskaya last fall in Moscow, at a café in the center of town; she is an imposing, glamorous woman with an exhaustive memory for dates and facts. She doesn’t speak English, is not licensed to practice law in New York, and, at the time the charges were filed, had never been to the United States.

.. She and the Baker Hostetler lawyers wanted Browder deposed as part of pretrial discovery. This would require a court subpoena; Browder had not voluntarily agreed to testify and, having given up his U.S. citizenship, was not immediately liable to the jurisdiction of a U.S. court.

.. According to multiple sources familiar with the Katsyv family’s legal strategy, the legal work on the Prevezon case and Veselnitskaya’s related lobbying carried costs of up to forty million dollars—a vast sum, considering that the U.S. government was trying to seize, at most, fourteen million dollars’ worth of property.

.. Veselnitskaya downplayed any ties she had to Yuri Chaika, Russia’s general prosecutor, but a researcher on the Prevezon case told me that she often took his calls.