Corruption David Rosen

Secrets of an AT&T Scandal

Photograph Source: AT&T’s Illinois – CC BY 2.0

By David Rosen / CounterPunch

On October 14th, AT&T’s Illinois subsidiary agreed to pay a $23 million fine to resolve a federal criminal investigation into alleged misconduct involving the company’s efforts to unlawfully influence former Illinois Speaker of the House Michael J. Madigan.

Madigan was a very influential political player.  The Justice Department notes that, in addition to being Speaker, he had been a congressman representing Illinois’s 22nd District; Committeeman for Chicago’s 13th Ward; Chairman of both the Illinois Democratic Party and the 13th Ward Democratic Organization; and partner at the influential Chicago law firm, Madigan & Getzendanner.  It adds, he “used these positions to further the goals of the criminal enterprise.”

The Justice Department states, “AT&T Illinois admitted that in 2017 it arranged for an ally of Madigan to indirectly receive $22,500 in payments from the company.  The company paid the money through an intermediary – a lobbying firm that performed services for AT&T Illinois.” The ally was Michael F. McClain who, the Justice noted, “carried out illegal activities at Madigan’s behest.”

A week later, on October 21st, the former president of AT&T Illinois, Paul La Schiazza, pleaded not guilty to federal charges alleging he orchestrated and approved the scheme to funnel payments to a Madigan associate. A federal grand jury charged La Schiazza with conspiracy, federal program bribery and using a facility in interstate commerce to promote unlawful activity. According to the Chicago Tribune, “the most serious counts carry up to 20 years in prison if convicted.”

Seven months before the AT&T’s Illinois revelations, Madigan was accused in a separate 22-count indictment “of leading for nearly a decade a criminal enterprise whose purpose was to enhance Madigan’s political power and financial well-being while also generating income for his political allies and associates.”

The indictment alleged that between January 27, 2014, and May 3, 2019, the Chicago utility company, Commonwealth Edison (aka ComEd), made payments totaling more than $2 million to Madigan and his close associates.  They included McClain and ex-ComEd CEO Anne Pramaggiore as well as ComEd lobbyist John Hooker and consultant Jay Doherty.

The Chicago Sun-Times reports “Doherty made $256,000 in payments to an unnamed individual identified by the Sun-Times as former Ald. Frank Olivo, $325,000 in payments to a second unnamed individual, and $144,000 in payments to a third.”  It added, “ComEd agreed to pay a $200 million fine —believed to be the largest criminal fine ever in Chicago’s federal court.”

Digging deeper, the most hidden “secret” of the AT&T Illinois bribery scandal involved a 2017 state legislature vote regarding what is known as “Carrier of Last Resort” (COLR), that “terminated AT&T Illinois’ costly obligation to provide landline telephone services to all Illinois residents.” Still more hidden, the secret involved the American Legislative Exchange Council (ALEC), one of the most important groups influencing telecom policy.  It promotes itself as a “nonpartisan individual membership organization of state legislators that favors federalism and conservative public policy solutions.”

ALEC is, formally, a non-profit group that drafts model legislation.  It has an estimated membership exceeding 2,400 state legislators from both political parties, but most are conservative Republicans.  It regularly invites members to all-expense paid private gatherings with corporate executives and lobbyists where they devise model legislation to fulfill their political agenda, many involving telecommunications policy.  These legislators, in turn, return to their home states and promote the legislation at state houses throughout the country.  Many of their initiatives are enacted.

With the adoption of the Telecommunications Act of 1996, telecom providers succeeding in having telecom services “deregulated,” allowing the internet and wireless phone services turned into what is known as ”information services.”   They also sought to end COLR obligation – the principle that a phone service must be available at prevailing rates even to customers who live in places that are expensive to serve, such as farms.  And ALEC led the campaign to end COLR obligations.

John Stephenson, former director of ALEC’s Communications and Technology Task Force, led the campaign against COLR.  “Those [old rules] were written at a time when consumers had no choice in the matter,” he said.  Going further, he insisted that fewer regulations would lead to more investment in broadband and other services. “If we were to clear the underbrush of these rules written long before the Internet was even a word,” Stephenson argued, “there would be a lot more broadband deployed to the United States, and things that are even better that we can’t conceive of today.”

Public Knowledge’s Harold Feld is concerned about the abolition of COLR protections.  “It’s been this sort of, ‘The Internet is magic and we don’t want to look too closely at it,’” Feld says. “The problem is, it’s not magic … and when you just leave this stuff to its own devices, sometimes it breaks down.”

To date, more than 29 states have adopted COLR legislation, including Illinois.  In 2020, the Oregon legislature pointed out, “Meeting the broader policy goal of universal access to broadband would effectively moot the need for a COLR obligation for voice telephony, as broadband service can provide both information and voice services.”  It then added: “More than a quarter of Oregonians live in areas that are unserved, underserved, or have older technologies that will not be able to meet the digital demands of the very near future.”

When the latest corporate scandal is revealed by the media, it important uncover the hidden factors that contributed to the public exposure.


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David Rosen
David Rosen

DAVID ROSEN is a widely published author whose books include
Sex, Sin & Subversion: The Transformation of 1950s New York’s Forbidden into America’s New Normal (2016); Sex Scandal America: Politics & the Ritual of Public Shaming (2009); Off-Hollywood: The Making & Marketing of Independent Films (1991), originally commissioned by the Sundance Institute and the Independent Feature Project. He is author of many scholarly articles, book reviews and popular pieces on media-tech, telecom, politics, sex and American life.

3 comments

  1. In the Spirit of Gratitude, Thank you, David Rosen for revealing the origins of the telecom collusion.

  2. Thank you David for doing your homework. We are more informed and can make better decisions because of your investigation.

  3. Stephenson pukes out corporate talking points: Less regulation will lead to greater investment in services and consumers will benefit! They will reap the rewards of now-unknowable benefits!

    Greater dividends, that is, for AT&T shareholders.

    AT&T is one of the most rapacious, greedy corporations in the Corporate States of America. It should be prosecuted for public corruption and smashed into pieces.

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