Two Koch Insiders Are Creating a New Office Inside the FCC

In TYT Investigates, Uncategorized by TYT Investigates0 Comments

Federal Communication Commission Chairman Ajit Pai at the Conservative Political Action Conference (CPAC), February, 2018. Photo by Chip Somodevilla/Getty Images.

By Alex Kotch

Two recent employees from key groups financially supported by billionaire industrialists Charles and David Koch are creating a new office within the Federal Communications Commission (FCC) that will provide economic data and analysis relating to FCC policy initiatives. The office could provide FCC Chairman Ajit Pai with analytical justification for slashing regulations.

The two officials launching the new office both have ties to George Mason University (GMU)—which has been funneling academic conservatives into government roles since becoming a major beneficiary of Koch money. Both have either been employed by or had their academic work funded by the Kochs and by the telecommunications industry. And FCC records obtained by TYT show that one of them met with and corresponded with telecom industry representatives, one of whom was his wife. An email obtained by TYT showed that one of them explicitly hoped to recruit officials for the new office at a telecom industry event.

FCC Chair Ajit Pai last year announced plans to form the Office of Economics and Analytics as a central hub to work with each FCC bureau, describing a market-based approach to communications regulation. “The FCC should have the economic experts it needs to identify market failures and study whether the benefits of Commission action would be warranted given the costs,” said Pai in April 2017. The FCC has not specified when the office will officially open.

FCC Deputy Press Secretary Will Wiquist denied an interview request and did not respond to specific questions over email before publishing time.

Despite the new emphasis on economics, the FCC was established by the Communications Act of 1934 to serve the “public interest, convenience, and necessity.” However, the definition of “public interest” is “a pretty malleable concept,” according to former FCC Chairman Tom Wheeler. Depending on the roster of commissioners, the FCC has approached the public interest in very different ways.

“First, economic analysis plays an important role in all of our work,” wrote Democratic Commissioner Jessica Rosenworcel in a dissenting statement regarding the plan for the Office of Economics and Analytics. “But we need to be mindful that we have legal duties that can be at odds with simple cost-benefit analysis.”

In response to a letter from Sen. Catherine Cortez Masto (D-N.M.) asking how the Office of Economics and Analytics would serve the public interest while prioritizing economic analysis, Pai wrote, “It is critical that . . . the office’s efforts yield better-informed decisions that benefit consumers,” but he offered no specifics. Critics say that Pai has abandoned the public in favor of big business.

To create the office, Pai enlisted Wayne Leighton, the current chief of the FCC’s Office of Strategic Planning & Policy Analysis, which will have its “existing functions” carried out by the new Office of Economics and Analytics. He was previously executive vice president of the Charles Koch Foundation and, before that, head of government affairs for Koch Industries. Leighton earned his economics Ph.D. at GMU—which accepts millions of dollars in funding each year from conservative megadonor Charles Koch for economics and other programs—and has taught at a private college, the Universidad Francisco Marroquín in Guatemala, the president of which was recently head of a Koch-funded organization of free-market academics called the Association of Private Enterprise Education.

Helping Leighton launch the office is Jerry Ellig, whom Pai named chief economist of the FCC in July 2017. Ellig, who has also worked for the Federal Trade Commission, is taking a one-year leave of absence from GMU’s Mercatus Center, an on-campus, free-market think tank heavily funded by Koch. The center, named after the Latin word for “market,” has a reputation for publishing conservative economics analysis, which is sometimes cited in the Congressional Record, occasionally making its way into GOP sponsored legislation.

On January 30, the commission approved the plan to establish the office in a 3-2 vote along party lines.

Earlier that month, a working group led by Leighton released a proposal for the Office of Economics and Analytics. The new office will house most economists currently working in the various FCC bureaus and will contain four divisions for economic analysis, industry analysis, auctions, and data.

The proposal was short on details, leaving Commissioner Rosenworcel with many questions. “I am dismayed that my most basic questions about what this office will entail have not been answered,” she wrote in her dissent. The document outlining the formation of an office of data and analytics does not contain much data and analytics. And to her questions about staffing and how the functions of existing divisions will shift, “No one will answer.”

“I think it’s irresponsible to vote on a conceptual reorganization—which is what we have here— without frank information about how we will populate this effort,” she wrote.

But Pai’s background, his staffing choices to set up the office, and FCC policy decisions so far indicate that the office will offer a corporate-friendly approach. Pai was once an associate general counsel for telecom giant Verizon. At a 2017 FCC event, Pai joked about being “a Verizon puppet” installed as FCC chairman.

As head of the agency, Pai has already done things that Verizon and other Big Telecom companies like. He repealed net neutrality rules and weakened several TV news regulations, helping conservative TV news company Sinclair Broadcast Group, which is seeking permission to merge with Tribune Media, expand its operations. (Pai’s meetings with Sinclair executives are the subject of a probe by the FCC inspector general.)

In addition to Leighton and Ellig, Pai’s FCC appointed a current Mercatus scholar and regulation critic, along with a number of telecom executives, to its new Broadband Deployment Advisory Committee, as the Center for Public Integrity reported. One member resigned, writing that the corporate interests on the committee would make it “a vehicle for advancing the interests of the telecommunications industry over those of the public.”

In 2017, Pai spoke at an event hosted by Charles and his brother David Koch’s flagship political nonprofit, Americans for Prosperity. The group praised Pai and the FCC for repealing net neutrality in December. More than half of the anti–net neutrality comments to the FCC’s second call for comments in 2014 came from a primarily Koch-funded group called American Commitment.

Pai also spoke an event cosponsored by the Charles Koch Institute last year.

“Pai is aligned politically with his fellow Kansans the Koch Brothers and has opened the doors of the agency to their favorite institutions like the Mercatus Center,” Craig Aaron, president and CEO of the left-leaning nonprofit advocacy group Free Press, told TYT. “They love to talk about cost-benefit analysis, but the only benefit they’re interested in is killing off public protections that hamper the expansion of companies like Charter, Verizon, and Sinclair.”

Jerry Ellig and the Koch Network

Jerry Ellig is nearing the end of his leave from the Mercatus Center, where he is a senior researcher focused on regulation. Ellig’s connections to the Koch family go back decades; according to his CV; for four years in the latter half of the 1980s, Ellig was an economics researcher, then research director, at the CSE Foundation, a branch of the conservative advocacy group cofounded by David Koch and Richard Fink called Citizens for a Sound Economy. The foundation would later morph into the Kochs’ premier political advocacy group, Americans for Prosperity. In addition to donations from the Kochs and other wealthy GOP donors, CSE received significant funding from large corporations including Exxon, Hertz, Philip Morris, General Electric, and multiple sugar interests.

Ellig left the CSE Foundation in August 1989 to direct the Center for Market Processes, the Koch-funded predecessor to the Mercatus Center at George Mason, for six years.

In June 1998, Ellig returned to the CSE Foundation, where he was a research fellow until mid-2001. In 1998, according to a Public Citizen report, “Donations totaling $1.25 million from US West coincided with CSE’s lobbying for phone deregulation that would let US West offer long-distance service.” US West, a former telecom company that was the biggest corporate donor to CSE that year, and additional phone companies contributed a total of roughly $250,000, as well.

Rodger Woock, chief of the industry analysis and technology division of the FCC’s Wireline Competition Bureau and a member of the team that wrote the Office of Economics and Analysis proposal, is a former employee of US West, having worked there from 1994 to 1998, according to his LinkedIn profile.

The Public Citizen authors called CSE “a front group for corporate lobbying interests” after The Washington Post’s exposé on the group. Post reporter Dan Morgan wrote that think tanks like CSE “provide analyses, TV advertising, polling, and academic studies that add an air of authority to corporate arguments—in many cases while maintaining the corporate donors’ anonymity.”

Although scholarship on the economic effects of deregulation has had mixed conclusions, Ellig’s findings have been consistent. In 1998, Ellig and a Brookings Institute researcher found that deregulation of industries including telecom resulted in large price decreases for consumers. In 2000, Ellig testified before Congress that “there is no rationale for price regulation or forced unbundling in the broadband market” and argued for “Bell companies to carry data across Local Access and Transport Area (LATA) lines.”

In 2006, Ellig wrote a paper critiquing the costs of telecom regulation. And since then, Ellig has expressed his opposition to net neutrality; in 2011, Ellig wrote that the FCC’s net neutrality rules “have virtually no analysis of a systemic problem that actually exists, and no data demonstrating that the problem is real.”

While Ellig was a Mercatus scholar, the Internet & Television Association (NCTA)—the main trade group for broadband and cable television companies—consistently donated to Mercatus, according to tax filings. From 2010 to 2015, the NCTA contributed $750,000, much of it earmarked for Mercatus’ Technology Policy program.

To prepare the proposal for the new office, staff met with Ellig and Mercatus director of federal outreach Robin Bowen, who was previously a legislative aide to Sen. Mitch McConnell (R-Ky.). The proposal planning group also met with US Telecom, a major telecommunications lobbying trade group that represents companies such as AT&T, Frontier, Oracle, and Verizon.

The proposal cites a 2016 paper written by Ellig and Rosemarie Fike, an alumna of the Mercatus M.A. Program and the economics Ph.D. program at Florida State University, which has accepted millions in donations from the Koch Foundation for its economics department. Fike studied under James Gwartney, a key figure in Koch-funded academics.

Wayne Leighton and a ‘Goldmine Relationship’

Leighton’s positions at GMU, CSE, the Koch family business, and the Charles Koch Foundation make him a veteran Koch insider.

As a graduate student at GMU in the early- to mid-1990s, Leighton earned a two-year fellowship at the Center for Market Processes, according to his CV. While a graduate student, Leighton was an adjunct scholar at CSE and the CSE Foundation, after which he spent a year as CSE’s senior economist for regulatory affairs.  Leighton issued comments on behalf of CSE to the FCC on several occasions. He later moved on to work for Koch Industries and then for the Charles Koch Foundation.

Leighton, like Ellig, has written papers criticizing telecom regulations.

Now a key FCC official, Leighton has a glaring conflict of interest. His wife, Elizabeth Andrion, is senior vice president for regulatory affairs at Charter Communications, a company regulated by the FCC. During the Obama administration, Andrion occupied the same job that her husband has right now: chief of the Office of Strategic Planning & Policy Analysis at the FCC. Charter Communications, the nation’s second-largest cable company, has been lobbying the FCC and Congress on a host of telecom-related issues.

“This relationship poses very real concerns about conflicts of interest,” Craig Holman, a government affairs lobbyist for watchdog Public Citizen, told TYT.

Several months after Leighton joined the FCC last year, the commission issued a favorable ruling for Charter, rolling back an Obama-era requirement that the company extend broadband service to one million households that already had access to a competitor. In January, Charter urged the FCC to limit geographic licensing as it prepares to enter the wireless market in the next few months.

Emails obtained by TYT show Leighton and Andrion communicating about industry events. In one thread, the two correspond about a March event called “Connecting All of America: Advancing the Gigabit and 5G Future,” hosted by the conservative Free State Foundation, which has received funding from major telecom trade groups. Pai and Noemi Rao, director of the White House Office of Information and Regulatory Affairs, spoke at the event. Leighton and Andrion both planned to attend, and Leighton noted, “Not sure if it will be valuable, but it might be, both for my search for an [Office of Economics and Analytics] chief and my search for long-term career tips….”

“The criminal conflict of interest statute, 18 USC 208, prohibits Leighton from taking any official actions that can have a direct and predictable effect on his wife’s financial interests at Charter Communications,” said Holman. “Leighton would have to recuse himself from matters that could directly affect Charter Communications and the financial interests of his spouse. But the email exchanges indicate that Leighton and Andrion are indeed discussing the business interests of Charter Communications.”

In another email chain, Leighton, Andrion, and Ellig talk about an April event at Charter Communications featuring Sen. Ted Cruz (R-Texas).

“Just RSVPd. Sandy’s coming too,” wrote Ellig.

“Excellent!” replied Leighton. “Great that you two will make the senator feel at home and among friends.”

“WONDERFUL news!” wrote Andrion. “Sandy can wear her campaign buttons. ?”

“I dunno if campaign buttons are appropriate, but for fun she might wear her button from a friend from Texas gave her that says ‘Honorary Texan,’” responded Ellig.

The email does not identify the individual named “Sandy” the three are referring to.

The next month, Charter expressed its support in an email newsletter for “protecting an open internet,” praising Pai for his proposal to remove internet service providers from regulation under Title II of the Communications Act of 1934—in other words, to do away with net neutrality. “The FCC’s classification of broadband under the Title II regulatory framework two years ago was a dramatic departure from the light-touch regulatory framework embraced by Republicans and Democrats under which the Internet ecosystem flourished as an open network for nearly twenty years.”

According to FCC visitor logs obtained by TYT through a Freedom of Information request, Andrion visited the FCC 24 times from 2017 to April 2018. Sometimes she visited her husband. On other occasions she met with an FCC senior economic adviser, the head of the Spectrum Enforcement Division, and a wireless legal adviser.

“Charter Communications no doubt is fully aware of the goldmine relationship the company possesses by having one of its top executives with so much influence over Leighton,” said Holman. “Even the appearance of self-serving influence in which a reasonable person may believe that Leighton’s impartiality could be unduly influenced runs afoul of the conflict of interest laws and rules.”

Rosenworcel wasn’t the only commissioner to oppose the Office of Economics and Analytics. Fellow Democratic Commissioner Mignon Clyburn wrote a dissenting statement that excoriates the new office. “What the current Administration is actually doing,” she writes, “is putting in place a mechanism to justify its own interests, while disregarding any analysis that runs counter to their views.”

She continues, “My sense, is the majority will continue to mix and bake this deregulatory feeding frenzy, with the new Office serving as icing on the cake. All the while, disrupting existing staff relationships, pulling employees from their current bureaus where they have established subject matter specific expertise, and plunking them down in a newly created bureaucratic structure.”

Clyburn’s office denied an interview request from TYT. Charter did not respond to an email inquiry.

Alex Kotch is an award-winning investigative reporter whose work has appeared in The Nation, Vice.com, and International Business Times. Follow him on Twitter.

Follow TYT Investigates on Twitter, Facebook, and YouTube to stay on top of exclusive news stories from The Young Turks.

Leave a Comment