Photograph by Andrew Harrer/Bloomberg

Steve Ballmer, chief executive officer of Microsoft Corp., speaks about the Xbox 360 system during his keynote address at the 2011 International Consumer Electronics Show (CES) in Las Vegas, Nevada.

By Susan Decker

Microsoft could see the end of its almost three-year trade fight with Google’s Motorola Mobility unit over technology used in the popular Xbox video-gaming system.

A U.S. International Trade Commission judge in March cleared Microsoft of a claim it infringed a Motorola patent for a way to establish communication between the Xbox and accessories. The full commission is scheduled to announce Friday whether it will let those findings stand, thus ending the case, or conduct a further review with a final decision issued by July.

Should a violation be found, the commission has the power to stop the China-made Xbox from entering U.S. borders. It’s the nation’s most popular game console, beating out Sony’s PlayStation and Nintendo’s Wii in a market projected to expand to $70 billion in 2017 by DFC Intelligence, a market researcher.

Microsoft has argued that, even if it did violate the Motorola patent, banning the Xbox would be an extreme remedy that would reduce consumer choice and hurt game developers.

Microsoft’s entertainment unit, which includes the Xbox, generated $9.6 billion in sales last year, or 13 percent of the company’s revenue, according to data compiled by Bloomberg.

There is a single patent left in the case. Two patents that were part of the original complaint were on widely used technology for video decoding, and led to accusations by Microsoft and regulators that Motorola Mobility was misusing patents to thwart competition.

Motorola Mobility dropped those two after Google reached an agreement with the U.S. Federal Trade Commission over the use of standard-essential patents. Two other patents were dropped because they are expiring this year.

No matter how this case ends, it won’t close out all the patent fights between the two companies, who have accused each other of infringement in cases in Germany and Washington state.

A federal judge in Seattle last month said the Motorola Mobility patents on video-decoding and wireless technology standards were worth about $1.8 million, far less than the 2.25 percent of the retail price that Motorola Mobility had initially demanded.

The patent in the ITC case, like some of the others asserted against Microsoft and Apple don’t relate to any industrywide standard and so aren’t part of that broader debate on standard-essential patents.

Original post is A Microsoft-Google Patent Case May Actually End? by Political Capital.

Photograph by Greg Johnston

Cayman Islands

Social welfare nonprofits, which can keep their donors secret, are a lot like Russian nesting dolls: Open one, and you’ll find a smaller version inside.

That’s what courts in California discovered last year when they tried to figure out who paid for TV ads attacking Gov. Jerry Brown’s tax increase plan. The courts forced an out-of-state nonprofit to reveal its donors only to find out that the ad money came from … another out-of-state nonprofit. That’s where the trail ended.

Prompted by a revelation last week that the Internal Revenue Service improperly targeted Republican-leaning nonprofit applicants, Congress is plunging  into the thicket of tax rules governing those entities. Hearings continue next week.

Campaign-finance watchdogs such as the Sunlight Foundation, Democracy 21, Common Cause and the Campaign Legal Center are imploring lawmakers to look broadly at whether politically active nonprofits are misuing their tax-exempt status. A Bloomberg story today highlights two groups — one Democratic and one Republican — that appear to be gaming the system by buying campaign-style ads and doing most of their work in election years.

There’s yet another way social welfare nonprofits participate in politics: They move dark money, Cayman Islands style. Sometimes a nonprofit gives money to a political committee that can more freely spend on politics, in effect keeping the real donors hidden. Bill Allison, editorial director of the Washington-based Sunlight Foundation, has called that phenomenon a “campaign-finance haven.”

Those tactics can bump up against stricter state campaign-finance laws, as was the case in California with the Americans for Responsible Leadership.

Two days before the November 2012 election, a California Supreme Court judge ordered the nonprofit based in Phoenix to reveal who gave it the $11 million that it in turn contributed to a business group opposing Brown’s California tax initiative.

Americans for Responsible Leadership reported that it received its money from the Center to Protect Patient Rights — another nonprofit with secret donors.

An October 2012 Bloomberg News investigation of the Center to Protect Patient Rights, also based in Phoenix, revealed that it raised $62 million for the 2010 elections and parceled out most of its money to other nonprofits.

The center’s donors remain a secret.

Original post is Nonprofits: Cayman Islands of Political Money by Political Capital.

Photograph by Andrew Harrer/Bloomberg

Steven Miller

Speaking of the truth vs. the whole truth, House Republicans did some selective editing of an inspector general’s report during today’s hearing on the Internal Revenue Service.

Steven Miller, the acting — and outgoing — commissioner of the Internal Revenue Service, denied today that the agency had targeted small-government groups for tougher scrutiny of their applications for tax-exempt status.

Republicans at a Ways and Means Committee hearing pushed back on that, noting that the inspector general’s report used the word “target” 16 times.

“It’s a common understanding of the word,” said Rep. Peter Roskam, an Illinois Republican. “And so I would just suggest that it’s a well-settled doctrine and we not waste a lot of time parsing on it.”

The count of 16 mentions is true — on a simple word search.

Each of those 16 references describes the allegations the inspector general researched, which themselves came from congressional Republicans.

None of the uses of the word “target” in the report describes the inspector general’s findings.

What did the report say? That the IRS used “inappropriate criteria” to screen applications.

Original post is IRS: Republicans’ Own Selective Examination: ‘Targets’ by Political Capital.

Photograph by Andrew Harrer/Bloomberg

The Internal Revenue Service (IRS) headquarters in Washington, D.C.

Written with Peter Cook

The scandal at the Internal Revenue Service is emboldening the chief congressional proponents for rewriting the tax code, they said in an interview with Bloomberg Television.

“This actually leads to new momentum for tax reform,” said Senate Finance Committee Chairman Max Baucus in a joint interview with House Ways and Means Committee Chairman Dave Camp.

The pair spoke in the Capitol today in an interview with BTV’s Peter Cook for the “Capital Gains” program airing May 19.

Camp, a Michigan Republican, will lead the first legislative hearing tomorrow into the IRS’s selective scrutiny applied to small-government groups applying for tax-exempt status.

Groups with “tea party” or “patriot” in their names got tougher questions and experienced longer delays than others in a practice that the IRS admitted May 10.

“Now we understand the fear the IRS can put into people,” Camp said.

Baucus, a Montana Democrat, will follow with a hearing May 21.

Steven Miller, acting commissioner of the IRS, resigned yesterday. Today, President Barack Obama named Danny Werfel, controller of the Office of Management and Budget, as acting commissioner.

Camp and Baucus have been working together on rewriting the tax code to broaden the tax base and lower marginal rates. They’re cooperating even though they disagree on whether a tax rewrite should generate more revenue. Baucus says some tax changes should pay for deficit reduction; Camp disagrees and wants rate reduction only.

Original post is IRS Scandal Good for Tax Reform: Baucus, Camp, in Interview by Political Capital.

Photograph by Tom Williams/CQ Roll Call/Getty Images

Danny Werfel, federal controller, Office of Management and Budget, testifies before a Senate Appropriations Committee hearing in Hart Building on the impacts of the sequestration on his agency.

Updated at 3:25 pm EDT

President Barack Obama has picked Danny Werfel, controller of the Office of Management and Budget, as acting commissioner of the Internal Revenue Service.

Werfel, 42, will replace Steven Miller, who was forced to resign yesterday amid revelations that the agency had targeted Tea Party-related groups for scrutiny of their tax exempt status. Werfel will start May 22 and serve through the end of the fiscal year, which ends Sept. 30, the White House announced today.

“Throughout his career working in both Democratic and Republican administrations, Danny has proven an effective leader who serves with professionalism, integrity and skill,” Obama said in a statement. “The American people deserve to have the utmost confidence and trust in their government, and as we work to get to the bottom of what happened and restore confidence in the IRS, Danny has the experience and management ability necessary to lead the agency at this important time.”

An acting commissioner doesn’t require Senate confirmation, though Werfel has been through that process before. He was confirmed by the Senate in October 2009 as controller at OMB.

At OMB, the White House says, he has been “responsible for coordinating OMB’s efforts to initiate government-wide improvements in all areas of financial management, including financial reporting, improper payments, real property management, financial accounting standards, grants management, and financial systems. More recently, Mr. Werfel has taken on an expanded role within OMB, leading the coordination of OMB’s efforts in the areas of Federal procurement, information technology, and personnel policy and performance management. ”

He has served as deputy controller, chief of the Financial Integrity and Analysis Branch, budget examiner in the Education Branch, and Policy Analyst in the Office of Information and Regulatory Affairs.  He also served as a trial attorney in the Department of Justice’s Civil Rights Division.

He holds a Masters Degree in Public Policy from Duke University, a law degree from the University of North Carolina at Chapel Hill, and a Bachelors Degree in Industrial and Labor Relations from Cornell.

Original post is Obama Naming Werfel for IRS by Political Capital.

Photograph by STR/AFP via Getty Images

A vehicle and the surround buildings burn after they were set on fire inside the U.S. consulate compound in Benghazi late on September 11, 2012.

President Barack Obama, addressing a live television audience from the White House, said the commissioner in charge of the IRS has been removed following the agency’s targeted scrutiny of conservative groups.

“The misconduct uncovered is inexcuseable,” Obama said in a brief statement delivered from the East Room. “Americans have a right to be angry about it, and I am angry about it. I will not tolerate this kind of behavior at any agency, especially the IRS.”

“We’re going to hold the responsible parties accountable,” he said, announcing that Treasury Secretary Jack Lew had accepted the resignation of the acting IRS commissioner, Steven Miller.

The president said “new safeguards” will be put in place to ensure this doesn’t happen again, and he will cooperate with Congress in its oversight “to get this thing fixed.”

“I’ll do everything in my power to ensure that nothing like this happens again,” Obama said in remarks delivered in under three and a half minutes.

The White House has faced widespread criticism for not standing up more quickly to the questions emerging from the fatal attacks on a U.S. mission in Libya, the Internal Revenue Service’s handling of requests for tax exemptions from Tea Party-related groups and the Justice Department’s tracking of Associated Press reporters’ phone calls.

The White House rose to all three today:

– Obama faced the television cameras this evening after meeting with high-level Treasury officials at the White House today about what the IRS’s inspector general had called “ineffective management” in the screening of requests for tax-exempt status for groups organized under section 501(c)(4) of the U.S. tax code — groups that are supposed to have only limited political activity. IRS employees in Cincinnati screened for the words Tea Party in their scrutiny. The broadcast and cable networks lined up to carry his words live.

– The Obama White House this afternoon released almost 100 pages of e-mail traffic among officials at the White House, CIA and State Department. The e-mails show the Central Intelligence Agency made major revisions to administration talking points after the attack that killed the U.S. ambassador to Libya in Benghazi —as they were developed and before they were delivered to Congress and supplied to United Nations Ambassador Susan Rice. See the talking points here.

– This afternoon, the White House allowed that it had spoken with Sen. Chuck Schumer of New York about reintroducing a shield law to protect the confidential sources of reporters, following the revelation that the Justice Department had tracked the phone records of AP reporters citing an investigation into a leak with national security implications. The president supports the First Amendment, press secretary Jay Carney said today — a shield law should prove it.

In that scandal-industrial complex, that’s one busy day.

Original post is Charge of the Obama Brigade: IRS, Benghazi, Reporters by Political Capital.

Photograph by Saul Loeb/AFP via Getty Images

President Barack Obama and Attorney General Eric Holder, right, stand during the National Anthem as they attend the National Peace Officers Memorial Service, an annual ceremony honoring law enforcement who were killed in the line of duty in the previous year, on May 15, 2013.

Has President Barack Obama not made his objections about the Internal Revenue Service’s handling of conservative groups seeking tax-exempt status clear enough — as well as what he intends to do about it?

The White House is getting roundly criticized on both counts.

“I think the president made clear, based on news reports, his feelings about those reports and what he would expect if they turned out to be true,” White House press secretary Jay Carney said today. “It is entirely appropriate for a president… not to take action based on media reports, but to wait for the actual inspector general’s review to see what happened before moving forward.”

The IRS inspector general has reported: attributing the singling out of Tea Party-related groups for review of their tax status applications to administrative inefficiency. The Justice Department is investigating, to see if any laws were broken.

“The president is impatient with people who do not hold themselves to the standards that he believes employees of the federal government ought to hold themselves to,” Carney said. “He also believes it is important for him to wait for the facts before he acts, and that is what he has done here.”

Is the president as concerned about the Justice Department’s tracking of Associated Press reporters’ telephone records in an investigation of a leak of government information said to have national security implications as it is with the Internal Revenue Service’s conduct?

“What I can tell is that when there are criminal investigations undertaken by the Department of Justice, we do not have insight into or knowledge about them, and that is the way it should be,” Carney said, pointing to Attorney General Eric Holder’s statement that he expects that his deputy who authorized the phone-record tracking followed the guidelines for exhausting every other avenue in any inquiry before resorting to that. “The president is a strong believer in the First Amendment… He also has to be, as commander of chief and an American citizen” concerned about national security.

The White House has spoken with Democratic Sen. Chuck Schumer of New York about reintroducing a so-called shield law preventing the government from seizing information from news reporters. Obama “believes the media should have the protection that a shield law would allow,” Carney said.

As for the ongoing clash with Republicans in Congress over the fatal attacks on the U.S. diplomatic mission in Benghazi, Libya, Carney said: “This is political.”

“Republicans are fundraising off of it,” he said at the press briefing in the White House. “You have reports by your colleagues that the speaker of the House is obsessed with it.”

“It is absolutely political.”

Original post is Obama Thinks First, Acts Later: Carney by Political Capital.

Photograph by Pablo Martinez Monsivais/AP Photo

White House press secretary Jay Carney, rear, is seen on a television monitor during his daily news briefing at the White House.

In Washington, it’s often more the cover-up than the scandal that undoes a president.

“And when it’s over, we’ll be hard-pressed to remember how it began.”

So wrote Jay Carney, then a correspondent for Time magazine, in 2007, in the midst of the Bush administration’s growing second-term problems.

Carney now serves as press secretary for President Barack Obama as potentially disabling second-term crises have arisen on three fronts: The administration’s handling of the fatal attack on a U.S. consulate in Libya, the Internal Revenue Service’s handling of conservative groups seeking tax-exempt status and the Justice Department’s surveillance of reporters’ telephone records in a case of purported national security.

The White House was at the center of only one of these matters — public communication about the Benghazi attack. The IRS and Justice Department brought the other problems to the White House’s doorstep — it appears, with the administration maintaining it knew nothing of either affair at the time it was conducted. Yet the White House stands front and center on the question of what might be done about apparent over-reaching of government police power — the Justice Department, on the receiving and giving end here, has opened a criminal investigation of the IRS. And Attorney General Eric Holder is on the Hill today.

The White House, many of its own allies are saying, has been slow to learning the lesson that, in crisis management, the management is often more important than the crisis. And, as Bloomberg and others are reporting this morning, the Obama White House needs an accelerated learning curve.

“There’s an industrial-scandal complex that exists in Washington, D.C.,” says Chris Lehane, a Democratic consultant who worked as a special assistant counsel to Clinton. “You need to have some kind of entity within the building that’s capable of managing these situations.”

The administration’s response “sounded exceedingly passive to me,” Robert Gibbs, Obama’s first press secretary, said in an interview on MSNBC. “The tenor of this briefing would be different if the president had spoken about this on Saturday or Sunday and not on Monday.”

As Carney himself put it, with Time co-author Massimo Calabresi, in 2007:

In Washington, scandals metastasize, growing and changing until we can’t remember what they were about in the beginning. A bungled burglary became a cancer on the presidency, forcing Richard Nixon to resign in disgrace. A money-losing Arkansas real estate deal led to Monica, a blue dress and Bill Clinton’s impeachment. Already, the furor over the dismissal of eight U.S. Attorneys has shifted focus from the crass but essentially routine exercise of political patronage to the essential project of George W. Bush’s presidency: its deliberate and aggressive efforts to expand and protect Executive power.

Which is why divining the true motives behind the dismissals is only part of the battle under way in Washington. Bush and Vice President Dick Cheney have spent six years expanding presidential powers at the expense of Congress and the judiciary, from authorizing domestic wiretapping to limiting habeas corpus and changing bills through signing statements. Democrats, in control of both chambers of Congress for the first time in 12 years, are determined to reclaim what they can. And the U.S. Attorneys case gives them powerful new ammunition.

Just getting Karl Rove and other top White House officials to testify could be as important as anything they might say, since it would set a precedent of sorts as Democrats push to investigate internal White House deliberations on everything from Iraq-war contracting to the use of prewar intelligence. Bush is resisting, offering to give only limited interviews with lawmakers with no transcript. Anything more than that, he says, would be an infringement on presidential privilege.

Attorney General Alberto Gonzales remains a likely casualty, but the history of past scandals suggests his resignation would not be enough to end the current one. Hearings will be held, subpoenas issued, new investigations launched. And when it’s over, we’ll be hard-pressed to remember how it began.

Original post is Carney: ‘Scandals Metastasize’ — in the Industrial-Scandal Complex by Political Capital.

Photographer: Andrew Harrer/Bloomberg

Joe Biden

Was Vice President Joe Biden showing his hand — and thus the administration’s — on the Keystone Pipeline?

A Sierra Club volunteer in South Carolina says Biden appeared to indicate his opposition to TransCanada Corp.’s Keystone XL in a brief conversation with her last week — and that’s not all he indicated.

Elaine Cooper, an environmental activist with the state’s Sierra Club chapter, said in a blog post that she asked Biden if
the administration was serious about addressing climate change and if President Barack Obama would reject the pipeline, which would carry diluted bitumen from Alberta to refineries along the U.S. Gulf Coast.

“He looked at the Sierra Club hat on my head, and he said ’Yes, I do – I share your views – but I am in the minority,’ and
he smiled,” Cooper wrote in the blog posted on the Sierra Club’s website.

Cooper said she talked briefly to Biden at a Friday night fish fry sponsored by Rep,James Clyburn, a South Carolina
Democrat, in Columbia, the state capital. The conversation took place as Biden was shaking hands with supporters along a rope line. The exchange was previously reported by website BuzzFeed.

Erich Pica, president of the Washington-based environmental group Friends of the Earth, said in a written statement, “Vice President Biden is to be commended for his blunt talk.”

Michael Brune, executive director of the San Francisco-based environmental group, also issued a statement and said that Biden’s comments were encouraging.

Critics contend that Keystone will exacerbate climate change by promoting development of the Alberta oil sands, which releases more greenhouse gases than production of more conventional crude oil.

Biden’s office referred to a March 2012 interview in which he said the decision “will be made in an environmentally
sound basis” after a process is completed. “The vice president has made his views known on this issue and his views haven’t changed,” according to a statement from his office.

A State Department draft environmental analysis calls the climate risks  minimal because the development in Alberta
would happen with or without Keystone. Supporters of Keystone say it will create thousands of construction jobs and improve U.S. energy security. The State Department has jurisdiction over the pipeline because it crosses an international border.

Original post is Biden Showing White House’s Hand on Keystone? by Political Capital.

Photograph by Douglas Graham/CQ Roll Call/Getty Images

Sen. Robert Menendez, D-NJ., walks to a classified briefing.

Sen. Robert Menendez contacted the U.S. Justice Department in an effort to delay a proposed merger opposed by one of his biggest campaign contributors, according to a letter obtained under the federal Freedom of Information Act.

Menendez and two House colleagues urged then-Attorney General John Ashcroft in September 2002 to postpone any decision “until a complete review of the merger can be done,” according to the letter.  It followed an identical letter sent to  Federal Communications Commission Chairman Michael Powell, which Bloomberg reported on here.

Menendez, then a U.S. representative, was aligned with Spanish Broadcasting System Inc. in objecting to a merger between Univision Communications Inc. and Hispanic Broadcasting Corp. At the time, Menendez owned from $1,000 to $15,000 in SBS stock.

The lawmakers argued that the merger would result in consolidation in Spanish-language media market. In testimony before the Senate Commerce Committee in July 2003, the New Jersey Democrat said the deal would “create unacceptable market power in Spanish-language media.”

In the end,  both the Justice Department and FCC approved the union. In its Sept. 22, 2003 decision, the FCC said Spanish-language media competes with English-language broadcasters and listeners and viewers have access to both.

Since Menendez’s first race for the House in 1992, SBS employees and their families have given $113,700 to his congressional races, making them his 10th-largest source of campaign contributions, according to the Center for Responsive Politics, a Washington research group that tracks donations.  They also donated $38,000 to Menendez’s leadership PAC — a fund that pays travel costs and makes donations to other candidates’ campaigns — from 1999 to 2012, according to a computer-assisted analysis of Federal Election Commission data.

A Menendez spokeswoman, Tricia Enright, said in March that the contributions and holdings had nothing to do with the lawmaker’s actions.

“Senator Menendez — and many others — opposed the Univision-HBC merger because he has long believed media consolidations can lead to the shrinking of community voices, and his investment in SBS, which was fully disclosed publicly at the time, had nothing to do with that position.”

Attention has recently been focused on Menendez’s activities on behalf of donors as he faces questions about actions he took for a wealthy Florida donor and friend, doctor Salomon Melgen.

Original post is Menendez Asked Justice to Delay Merger Opposed by Donor by Political Capital.