Google's "Don't Be Evil" mantra gets more ironic by the minute. The Federal Trade Commission is reportedly due to slap the search giant and its leaders with a subpoenas this week as part of an antitrust investigation. The mere mention of "antitrust" and the FTC sparks flashbacks to the Microsoft debacle over a decade ago or even the massive lawsuit in the 1970s that led to the breakup of AT&T. Then, presumably a direct result, Consumer Watchdog sent a letter to the White House on Thursday demanding the president distance himself from Google and stop inviting Eric Schmidt to galas. Whether or not the administration is actually condoning preferential treatment for Google as the watchdog group insinuates, the swirl of accusations don't look particularly good for either party.
Consumer Watchdog points to one thing in particular: The White House invited Schmidt and Google vice president Marissa Mayer to attend the most recent state dinner, when the company was under criminal investigation by the Department of Justice. From Consumer Watchdog's letter:
As you may know, Google is under criminal investigation into allegations that it profited from selling online ads to illegal pharmacies. These illicit pharmacies may violate U.S. law by peddling expired or counterfeit prescription medication, or selling medicine without a physician's prescription. Before the State Dinner Google had begun negotiating a settlement of the charges and had filed notice with the Securities and Exchange Commission that it was setting aside $500 million – roughly one-sixth of its 2011 first-quarter revenue – to resolve the case. This is no minor matter.
Scolding the White House for "an inappropriate conflict of interest" is old hat for Consumer Watchdog, but the circumstances are especially embarrassing for Obama. Consumer Watchdog frames its complaint as an administration thing, pointing out how Eric Holder could have been more diligent in handling the prescription drug ad investigation, but the letter can also be read as an attack on Obama's longstanding friendship with Eric Schmidt.
The Google chairman served as a campaign adviser to Obama in his run for president and led a trend of big donations from the tech industry, endorsing candidate Obama on national television. (According to one rumor, Schmidt also tried to hide his donation from popping up in Google search results.) Following Schmidt's lead, companies in the communications sector gave five times as much as money to Obama--$25 million in total--than they gave to his Republican opponent, who got $5 million. In 2004, tech companies also favored the Democratic candidate, but not nearly as heavily. John Kerry garnered on $10 million, compared to George Bush's $6 million.
Eric Schmidt, a D.C. native, started spending more time in the capital after Obama won the election. In 2008, he succeeded The Atlantic's own James Fallows as the chairman of the New America Foundation, a public policy think tank, and worked closely with the president as a member of his Transition Economic Advisory Board. Schmidt later won a seat on Obama's new Council of Advisors on Science and Technology. After Schmidt stepped down as Google's CEO in March of this year, rumors swirled that Obama would appoint the Google veteran as the nation's next Secretary of Commerce. This was not too long after Obama hosted a closed-doors dinner with Silicon Valley royalty. Eric Schmidt, Mark Zuckerberg, and Steve Jobs were all in attendance.
That brings up another point: Schmidt isn't Obama's only tech friend. There's also Zuckerberg, who not only was at the February dinner, but also put on a tie to host a town hall meeting with Obama at Facebook's headquarters in April. Chris Hughes, a Facebook co-founder and Mark's college roommate, worked with Obama for two years in Chicago, masterminding his online campaign strategy. Obama was also graduating from Harvard Law at the same time as Facebook's COO and former Google vice president Cheryl Sandberg was graduating from Harvard College. We could keep going, and many people do. There's actually an entire website devoted to tracing the connections of the nation's most powerful people. Sort of a reverse, involuntary Facebook for accountability's sake.
In the ongoing investigations, Google's fate will be decided by the deciders in Washington, and it will probably take years. The process itself will reveal whether or not their apparently evil scheming and back-room dealing will pay off. But the close relationship between Barack Obama and Eric Schmidt may need some time to cool off. Obama would surely love more financial support from the tech industry, but we've seen lately how misplaced invitations from the White House can lead swiftly to a torrent of bad press.