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ANNALS OF COMMUNICATIONS
The New Yorker - January 15, 2001

FINAL OFFER

What kept Microsoft from settling its case?

By KEN AULETTA

The first time Microsoft’s team of lawyers entered the courtroom of Judge Thomas Penfield Jackson, of the U.S. District Court in Washington, in 1995, they had good reason to believe that he would side with them. Jackson, with a cloud of white hair and a tan acquired from sailing, certainly looked like the sort of judge who makes businessmen feel comfortable. He had been President Reagan’s first judicial appointment to the District Court in Washington, and his record suggested that he disliked government efforts to encroach on business.

Yet, as Microsoft learned, Jackson, who is now sixty-three, is no country-club Republican. Both his grandfathers were civil servants, and he was reared in a home where F.D.R. was revered. His contemporary heroes, he told me, during one of four lengthy interviews in 1999 and 2000, are two Republican mavericks, Barry Goldwater and John McCain. Working as a junior attorney for Richard Nixon’s reëlection committee during the Watergate scandal, he discovered that prominent people sometimes lie.

The 1995 case was a preliminary bout in what has become one of the most important antitrust fights in nearly a century—the government’s suit against Microsoft for using its ninety-per-cent market dominance of P.C. operating systems to stifle competition. And the 1995 case contained many of the elements that became central to the later trial. The Justice Department’s Antitrust Division petitioned the federal court, asserting that when Microsoft merged its Internet browser with its operating system, Windows, it violated a 1994 consent decree, and thereby unfairly attacked a rival browser, produced by Netscape. Microsoft insisted that it was only helping consumers—after all, the browser had become an integral part of its software and, furthermore, was free. Jackson subsequently ordered Microsoft to separate its browser from Windows; the corporation promptly appealed the ruling, and it was eventually reversed by an appeals court.

The appeal ruling disappointed Jackson, but not nearly as much as Microsoft’s insistence that the only way the company could separate its browser from Windows was to ship a flawed or outdated product to consumers. In 1998, the government broadened its charges. Microsoft was accused by the Justice Department, along with nineteen state attorneys general, of violating the nation’s antitrust laws, and the browser-Windows question became the focus of that case. When Jackson was assigned to preside over it, Microsoft executives and lawyers were concerned that he would be unsympathetic.

Microsoft’s suspicions were not unfounded. Last spring, Jackson, looking back on the trials and speaking candidly about his impressions, told me that he had indeed come to mistrust the company: “My past experience with Microsoft, dating from the consent decree, was that I don’t think that its proffer of some minimal conduct modification during the appellate proceedings could be trusted.”

In some ways, Jackson told me, the Microsoft case reminded him of the Nixon era. “I’m not so much in awe of people and power,” he said. “I think I’m a lot more cynical about motivation.” Jackson believed that the power held by Bill Gates and his company should not bring Gates any special consideration, and during the trial, which started on October 19, 1998, and lasted for more than eighteen months, Jackson became irritated at what he privately called Microsoft’s “obstinacy”—in particular, Gates’s twenty-hour videotaped deposition, which struck Jackson as arrogant, and Microsoft E-mails that seemed to contradict the testimony of its witnesses—and he went as far as to compare the company’s declaration of innocence to the protestations of gangland killers. He was referring to five gang members in a racketeering, drug-dealing, and murder trial that he had presided over four years earlier. In that case, the three victims had had their heads bound with duct tape before they were riddled with bullets from semi-automatic weapons. “On the day of the sentencing, the gang members maintained that they had done nothing wrong, saying that the whole case was a conspiracy by the white power structure to destroy them,” Jackson recalled. “I am now under no illusions that miscreants will realize that other parts of society view them that way.”

Jackson believed that Gates & Co.’s “crime” was hubris—a refusal to acknowledge that the nation’s antitrust laws applied to them. He was only half joking when he told me, “If I were able to propose a remedy of my devising, I’d require Mr. Gates to write a book report.” The assignment, Jackson said, would be a recent biography of Napoleon, and he went on, “Because I think he has a Napoleonic concept of himself and his company, an arrogance that derives from power and unalloyed success, with no leavening hard experience, no reverses.”

In Microsoft’s view, Thomas Penfield Jackson was a technological caveman. There was a personal computer on his desk, but he rarely used it, nor did he send or receive E-mail. Microsoft had reason to believe that neither Jackson nor the government’s chief attorney, David Boies—who, like Jackson, did not use E-mail—would comprehend the technological complexities of its defense. But Jackson and Boies didn’t need an engineering degree to understand Microsoft’s alleged intent to harm competitors or to punish companies that did business with rivals.

Since the evidence appeared so lopsided, Jackson often wondered why Microsoft didn’t abort the trial—and stop the damage to its reputation—by seeking a settlement. He blamed Microsoft’s chief counsel, William Neukom, saying that he should have arranged a truce before the financial markets were roiled and a judge was forced to play Solomon. One day, Jackson said of Neukom, “I don’t think he’s very smart, or at least I don’t think he has any subtlety. He’s the general counsel of this company. He should have said, ‘Look, you may think you’re doing the right thing, but there are a lot of people who don’t, and the time has come for us to be flexible.’” By contrast, Jackson considered David Boies the best attorney ever to appear in his courtroom, and called his cross-examinations “gems.”

In the fall of 1999, Jackson issued his Findings of Fact, the first part of a promised two-part ruling. This was a decision that had no immediate penalty but hinted at how he would rule in the second part—the Conclusions of Law. The facts, Jackson said, proved that Microsoft was a monopoly and had done most of what the government said it had—a finding that did not entirely shock Microsoft. The company was, however, pleasantly surprised that before Jackson issued his Conclusions of Law, which would have the force of a verdict, he tried to set in motion an out-of-court settlement. On November 18th, he announced the appointment of a mediator: Richard A. Posner, the chief judge of the Seventh Circuit Court of Appeals, in Chicago, who was a respected jurist with a pro-business reputation. In choosing Posner, Jackson hoped to reconcile the two strands of his own judicial philosophy: his conviction that Microsoft had broken the law and should be punished, and his aversion to government-imposed remedies. Only a mediated settlement, he believed, could harmonize the two.

Posner was neither a practiced diplomat nor a charmer but, rather, a man who viewed the law largely through the prism of economics. Ever since his appointment to the Seventh Circuit, by Ronald Reagan, in 1981, and, especially, his ascension to the chief judgeship, in 1993, he has been enormously influential. By 1999, Posner had written more than thirty books, including a classic on antitrust law, works on economics and contract law, on the economic and other implications of aids, on aging, sex regulations, and political and moral theory, a book about the impeachment of President Clinton (which was a finalist for a Los Angeles Times book prize), and literary criticism. Posner averaged about ninety legal opinions a year; the typical appeals-court judge produces twenty-eight.

There has been a tendency to brand Posner a conservative. The word “iconoclast” fits him better. Like other so-called conservatives, he has said that he is in favor of narrowing the scope of the antitrust laws, abolishing the Federal Trade Commission, and eliminating prison terms for antitrust violators, but he also supported the 1984 breakup of A.T. & T. In search of clues to how Posner might function as a mediator, Microsoft and government lawyers could have consulted his book “Antitrust Law: An Economic Perspective” (1976). Microsoft might have found reassurance in Posner’s assertion that “the only goal of antitrust law” should be to promote economic efficiency and thus competition, and in his belief in “good monopolies,” if they lowered prices and promoted efficiency. The government, on the other hand, would have been pleased to read in Posner’s text that a good monopoly becomes bad if its “price reduction is below long-run marginal cost and made with intent to exclude.”

Posner’s mission as a mediator was to induce Microsoft and the government to shed what he referred to as “emotionality” and come to a rational compromise. He invited both sides to attend a lunch on November 30, 1999, at a private club half a block from the federal courthouse in Chicago. In attendance were Microsoft and Justice Department lawyers, and three attorneys general, representing the nineteen states that were also plaintiffs in the antitrust lawsuit. The states had not been highly visible at the trial, but they were very much in evidence during the mediation phase—perhaps, as it turned out, too much in evidence.

At the lunch, Posner said that he would keep the talks in confidence, and he urged the others to do the same. He said that he would not tell either side that it had a strong legal case or a weak one, but he would try to deflate unrealistic expectations. He would ask each side to make detailed presentations concerning the facts and the remedies it might consider, and he promised to devote himself almost full time to the process.

To minimize “emotionality,” Judge Posner decreed that for at least the first month the parties would meet with him separately—the government each Monday, and Microsoft each Tuesday. In January, Posner turned to shuttle diplomacy and, in the meantime, sent participants a stream of E-mails, posing questions, seeking clarifications. He began, in the words of one Microsoft negotiator, “growling at the other side, growling at us.” He cautioned Microsoft to be realistic about its prospects on appeal, and warned the government to remember that the appeals court had already ruled against it, in 1995, on the important browser issue.

During the next months, nineteen draft proposals made their way from one or the other of the parties to Posner, who would translate them into his own language, tapping them out on a laptop with a Windows operating system, edit them, and then E-mail them to either Bill Neukom or Assistant Attorney General Joel Klein, chief of the Antitrust Division. Copies also went to Tom Miller, the Iowa attorney general, a Democrat who chaired the association of the nineteen state attorneys general.

The _rst draft proposal worried Gates, for it proposed creating an independent “technical committee” that would approve or reject the integration of new features in Windows, on the basis of whether they would benefit consumers. To impose on a business where speed was crucial an outside bureaucracy that would slow things down and interfere in design decisions seemed crazy to Microsoft; Gates may not have known that the idea was Posner’s. (Gates did know that the Justice Department had proposed to Posner a more radical remedy that would have split Microsoft into three companies: one responsible for the P.C. and server operating system, Windows 98; one focussed on big corporate users, Windows 2000; and the third responsible for all other Microsoft businesses. But Gates told Posner he would not discuss such a structural remedy.)

In any case, Posner’s first attempt to sketch the outlines of a possible settlement came after he spent two months studying the court record and the technical issues. Posner says that neither then nor later did he show the draft to anyone, not even his secretary or his law clerks. (Posner, who had refused to speak about the mediation effort before, agreed through a friend to relent and talk to me. I told him that I was in possession of key documents that he had exchanged with the parties. Since I was hearing a different version from each side, and since he was the closest one could get to a neutral observer, I proposed to send him a draft of what Ihad written about the mediation. He was noncommittal. That night, I received an E-mail from him. It began, “I have now read the [material] you sent me. I would be grateful if, should you refer to my having read it and given you comments, you make clear that I have limited my comments to pointing out specific factual inaccuracies, so far as I can recall them.... Please make clear that... I was not interviewed by you, but assisted only to the extent indicated above.” Posner offered nine corrections. Other than that, he provided no objections to the essential narrative of the mediation contained here.)

Over the next two weeks, Posner circulated several new drafts, but by mid-February the mediation had stalled. Neither side believed that the other was open to a compromise, and both sides were often confused. At Microsoft, this was reflected by Bill Neukom, who said of Posner, “You keep asking yourself, ‘Is he wearing his hat as a mediator, trying to motivate people to narrow their differences and come together, or is he speaking as the chief judge of the Seventh Circuit, who’s an expert on antitrust law?’” Microsoft’s incentive to reach a settlement was, in part, a belief that Judge Jackson would rule against the company in his Conclusions of Law, and that this legal ruling would unleash a plethora of lawsuits against it. At the same time, Gates believed that Microsoft had done nothing wrong and would win on appeal. There was also a political calculation: Might a new Administration abandon this case, just as the Reagan Administration had abandoned a thirteen-year-old lawsuit against I.B.M.?

Driving the government was the certainty that Microsoft had acted unlawfully, and a belief that no appeals court was likely to overturn the core of Judge Jackson’s ruling. Still, the government, too, knew that the landscape might change with a Republican Administration, and that if Microsoft settled the government could impose an immediate remedy. And, whatever the outcome of the Presidential election, the lawsuit would not vanish without the concurrence of all nineteen states that were parties to the suit. In dealing with the plaintiffs, Posner had been talking primarily to Assistant Attorney General Klein, in part because Posner assumed that the government spoke with one voice. Yet there was a contingent among the states that was determined to place heavy restrictions on the company.

Then, there was Judge Posner to contend with. For the most part, the two sides could not be sure if the proposals they were reading originated with Posner or came directly from their adversary and were edited by Posner. Nor did they know what Posner said when he talked with Gates or Klein—unless Posner told them explicitly. In an E-mail to me, he clarified the rule he followed in the mediation: “I would not transmit proposed decree provisions without editing to make sure not that they were ‘good’ in some ultimate antitrust sense but that they were sufficiently clear to be judicially administrable and that (even if clear) they would not impose an undue administrative burden on the district court, which would have to administer the decree.”

Meanwhile, Microsoft was unsure of Posner’s position. Some Microsoft officials worried that he might favor a structural remedy, and others believed that he might support more modest, behavioral remedies. The company’s lawyers also worried that Judge Jackson was leaning toward a structural remedy. In fact, around this time Jackson told me that he saw a structural remedy as too draconian and too risky; he feared that the courts would not be able to divide Microsoft without damaging the company, and perhaps the economy.

On February 24th, Posner and Gates spoke by telephone for two and a half hours, with Gates asking for clarifications of various proposals in what was the ninth draft from Posner. Gates did not want another vaguely worded consent decree that would impede innovation or end in a collision, as the 1994 decree had. Posner, clearly sensing that a settlement was within sight, told Gates that after he heard from Klein he would compose another draft. At the end of that conversation, Gates expressed admiration for Posner and remarked to a colleague, “So much I.Q. on such a miserable topic.” Now both Gates and Posner were said to be hopeful of a settlement.

As the talks continued, it became clear that the question of what features, such as the browser, Microsoft could add to Windows was no longer the focus; after all, Microsoft’s Internet Explorer now enjoyed a nearly eighty-per-cent market share. The government, however, was still worried that Microsoft would “bundle” new applications (such as voice-recognition technology) with Windows; the issue, therefore, was kept alive, with Microsoft maintaining that the government could not determine what should or shouldn’t be included in Microsoft’s operating system. Other issues became less important, too, among them Microsoft’s restrictive contracts and its pricing policies. But a new issue came to the fore; the Justice Department, which had been canvassing Microsoft’s business rivals, feared that the company would keep competitors’ products from working smoothly with Windows.

According to sources at Microsoft, Posner, in a phone conversation with Gates on February 28th, which ran from 9:30 p.m. until after midnight, told him that they were only “five words apart” from a new consent-decree agreement. Two days later, after state representatives protested that the proposed draft was “weak,” Posner was gloomy. He was even gloomier the following day, after receiving what a Microsoft official said were twelve additional demands from Joel Klein. (Sources in Klein’s office said that these were merely clarifications, and not new demands.)

On March 2nd, Posner told Microsoft that Klein had added a demand: that Microsoft be required to disclose to competitors Windows codes that would allow users to connect to Microsoft programs that ran on Internet servers. Posner insisted that unless Klein retreated—and unless Gates accepted most of Klein’s other conditions by noon on March 3rd—he would tell Judge Jackson that he was ending the mediation.

According to Microsoft’s account, Gates telephoned Posner and told him that if the government made a few small amendments he would, although with obvious reluctance, relent and sign the latest decree, which included this new demand. Posner then called Klein to tell him the news—that he expected Gates to sign the fourteenth draft. On the afternoon of March 3rd, Gates accepted what he knew was essentially a Justice Department proposal. Posner now gave the Justice Department and the states (which had merely been getting copies of the memos sent to the Justice Department and Microsoft) ten days to sign the proposal—or else he would abort the process. After three and a half months (at one point, Bill Neukom’s deputy, David Heiner, took an afternoon off to have four wisdom teeth extracted and joked that it was a welcome relief), Gates and Posner thought they might have a settlement.

Then, in the next week, the state attorneys general made it clear to Posner that Joel Klein did not speak for them, and that they would respond separately. Klein, it seems, realized, perhaps for the first time, that Gates really was ready to settle, and he set about looking for a formula that he thought would satisfy both the states and Microsoft and, at the same time, close any possible loopholes. After many internal meetings—and after consulting with outside experts from Silicon Valley and elsewhere—Klein again tried to refine the Justice Department’s central demand. The government believed that it understood Microsoft’s plan to extend its P.C. monopoly to other devices, particularly those connected to Internet servers. A new proposal clarified the Justice Department’s demand that Microsoft disclose the code that would enable competitors’ server software to connect to a Windows P.C. The Justice Department was worried that without that requirement consumers would abandon non-Microsoft products. Posner, who had come to admire Klein, was willing to allow the amendment. In Microsoft’s view, however, this was a way of taking its intellectual property and making it communal.

Posner soldiered on. Once again, he pushed Microsoft to bend—and drafted a fresh proposal. In it, he described what he identified as the Justice Department’s “final demands”—among them that Microsoft let others have access to more of its products’ source codes. Despite an aversion to sharing trade secrets, Gates and Microsoft had become surprisingly flexible, certainly in comparison with their earlier position. For example, they agreed to allow P.C. makers to disable access to the Microsoft browser, a concession that might have averted a trial if it had been made in May of 1998—or, for that matter, in 1995. At the same time, the company feared that the demands were too broad. A further complication was finding common definitions for technological terms, which was made even harder by the two sides’ distrust of each other.

At the same time, the list of demands from the states expanded, with the attorneys general insisting that Microsoft reveal not just codes for server software but also those required for handheld devices to work with Windows. The states were angry with both Posner and Klein; as one state official said, “Posner was more interested in dealing with Gates and Klein and didn’t perceive that he had nineteen other parties to the lawsuit.... He got enamored of talking to Gates. And he’s not a mediator by training, and lacked basic mediation skills.” Although Posner had urged the states to align themselves more closely with the Justice Department, they continued to insist that its remedies weren’t severe enough to prevent Microsoft from repeating its alleged predations. On March 14th, a set of “tentative” demands was sent to Posner from Tom Miller on behalf of six states. There were now three parties to the negotiations, and Posner knew they had reached an impasse.

On March 21st, an impatient Judge Jackson summoned the lawyers to his chambers. Posner had deliberately kept Jackson away from the process, but he wanted Jackson to know of his concern that the states were disorganized and could sabotage the mediation. It was the first time the lawyers had been in the same room since their November 30th lunch with Posner, and Jackson realized that both sides needed a nudge. He said that he wasn’t asking to see the settlement proposals each side had made; he just wanted a status report. He warned that he was ready to issue his legal ruling, and that it would find Microsoft guilty of at least one Sherman Antitrust Act violation. Both sides beseeched him for more time; they were making progress. Jackson granted them another week.

Posner was prepared to summon the parties to Chicago for face-to-face negotiations starting on March 24th. Accept the basic terms contained in the most recent draft, he told Microsoft, or else terminate the mediation. As the balance appeared to tip more toward the government, Microsoft, while eager to end the ordeal, became more apprehensive. But Posner’s mission was not to adjudicate the legal merits of the case; he wanted an agreement. His one self-imposed constraint, apparently, was that the agreement be enforceable by Judge Jackson’s district court; in any statutory consent-decree hearing, he would likely be summoned to testify that the agreement served the public interest.

More E-mails and drafts went back and forth. On March 23rd, Posner and Gates spoke on the telephone for four hours. According to Microsoft officials, Posner asked Gates to agree to return to the Justice Department’s proposed language on ten contested points. Gates reluctantly went along. As the weekend approached, Gates told his closest associates, “I think we’re within a few words of having a settlement.”

Although the Justice Department still did not feel that Microsoft had gone far enough, Posner, by March 26th, was sufficiently optimistic to ask Judge Jackson to stop the clock, and Jackson granted ten more days. Posner laid out an aggressive schedule, in which he effectively cut the states out of the daily give-and-take but not out of the decision-making. The E-mail and telephone discussions would take place between Posner and the Justice Department or Posner and Microsoft, and if they reached an accord the states would have a few days to ratify it.

On the evening of March 29th, Posner sent Draft No. 18 to Microsoft. A comparison of the previous draft, which was eight pages long, and represented Microsoft’s views, with the new one, a fourteen-page Justice Department counterproposal, reveals that the distance between Microsoft and the Justice Department seemed nearly bridged. Although important differences remained, the two sides agreed, among other points, that they would vacate Judge Jackson’s Findings of Fact as a basis for subsequent lawsuits; that Microsoft would not make contracts with P.C. manufacturers requiring their customers to have access to Microsoft’s browser, and would not retaliate if a P.C. maker chose competing software; that Windows would be offered to P.C. makers for a uniform price, and they would be granted more editorial control over the opening desktop screen; that Microsoft’s next Windows operating system, code-named Millennium, would free P.C. makers to remove access to Microsoft’s browser; that Microsoft would make available to competing software developers in a timely fashion the code they needed for their software to work with Windows; and that, instead of an independent technical committee, a senior executive would be appointed to report to Microsoft’s C.E.O. and assure compliance with the new consent decree. The principal gap involved technological definitions, with the Justice Department trying to narrow Microsoft’s broader terms, and often coming up with considerably longer definitions. For instance, the government’s definition of “technical information” was eighty-two words long, while Microsoft’s was twenty-eight.

Microsoft told Posner that it found the government’s technical proposals “extreme,” and by the afternoon of March 31st the Justice Department and Posner had not received the company’s response to Draft No. 18. The state attorneys general, meanwhile, sent a set of what they called “preliminary demands,” which astonished Posner, because he had asked them to withdraw some of their earlier ones. The states, however, registered opposition to parts of the Justice Department-approved Draft No. 18—which Microsoft had still not agreed to—and added further conditions.

Posner was angry—and he needed more time—but the clock had almost run out. He realized that he might now have to negotiate with the nineteen attorneys general, and that he would have to choreograph what Klein could not: a single set of government proposals. And even if Posner could find common ground between the states and the Justice Department there would still be a divide between the government and Microsoft. Now Posner saw no way out. That evening—before Microsoft faxed Posner its Draft No. 19, which attempted to respond to his compromise pleas—Posner telephoned Microsoft and Klein and announced that his mediation effort was over. He told Microsoft that he had not even studied its new draft, since the parties were so far apart on the technical issues, and since the states had weighed in with a fresh set of demands.

On Saturday, April 1st, Posner notified Judge Jackson that, after four months of negotiations, an agreement could not be reached. He also issued a statement to the press, but before doing so he sent to the Justice Department and Microsoft a draft of the statement, which included a denunciation of the state attorneys general. Posner was persuaded—Joel Klein refuses to confirm or deny Microsoft’s suspicion that it was he who did the persuading—to remove this paragraph. In any case, Posner’s April 1st statement graciously praised the Department of Justice, Microsoft, and Judge Jackson. It pointedly avoided mention of the states. “We certainly noticed we were left off,” Iowa’s Tom Miller told me.

According to a source at Microsoft, Posner had complained to the company that the states had acted like “assholes.” Posner is not sure that he used that word, but in an E-mail to me he said, “I can’t swear that I didn’t say this...but it is very unlikely that I did. Not that I don’t use such language, but although the mediation was informal I tried to maintain some minimum decorum, and I doubt that I would have used such a word to any of the people I dealt with in the mediation, and I am sure I would not have said it to someone not involved in the mediation—I have been very careful to avoid discussing the mediation publicly or privately (though in a sense I’m doing this in this email!).”

Later, lawyers on both sides wondered whether Posner had made a mistake in keeping the principals apart throughout the mediation effort. With little personal contact, it was hard for Gates and Klein and their lieutenants to think of their adversaries as flesh-and-blood human beings, and not demons. Perhaps Posner’s dry, intellectual approach to legal issues ruled out the human factor, which can build trust, as well as erode it.

Front-page stories about the failed negotiations appeared in that Sunday’s newspapers. What the stories didn’t capture was how eager Microsoft had been to settle—so eager that Bill Gates had been willing to abandon endlessly touted principles to achieve an armistice. And it was now clear that Microsoft could have settled earlier, on much less onerous terms.

Two days after Richard Posner ended the mediation effort, Thomas Penfield Jackson issued his Conclusions of Law, which found that Microsoft’s actions had harmed both competition and consumers. On June 7th, Jackson accepted the government’s proposal to split Microsoft in two.

Several weeks later, Jackson sat in his chambers and discussed the criticism he had encountered, especially from conservatives. “People talk about knee-jerk liberals,” he said, fidgeting with an unlit pipe. “There’s a faction of the conservative movement in this country which is equally knee-jerk.” Such conservatives, who equate “commercial success” with conservative principles, complained that Jackson had “done a disservice” by treating Microsoft “like a common criminal.” Not for one moment did Jackson believe this. “They broke the law,” he insisted.

Nor could Jackson quite believe that Microsoft had allowed the case to spin so out of control. He wasn’t sure whether to blame Microsoft’s legal team, Bill Gates, or Steve Ballmer, Gates’s best friend and his successor as C.E.O. Had the company been more honest in court, “it might have helped,” Jackson told me. “It would have dispelled, to a large extent, any inference of malevolent motive. It would have disclosed that they were genuinely concerned that there might have been some merit to the allegations of improper conduct on their part....It would have gone largely to the matter of motive. In one sense, you have to give Microsoft credit for consistency. It has maintained, and continues to maintain, that it has done nothing amiss.”

It was, almost certainly, lack of trust in Microsoft that led Jackson to overcome his aversion to a structural remedy. His mistrust had been reinforced when, nearly three months earlier, on April 19th, he picked up the Washington Post and read of a visit Steve Ballmer had made to the newspaper the previous day. To reporters and editors, Ballmer had declared, “I do not think we broke the law in any way, shape, or form. I feel deeply that we behaved in every instance with super integrity. I’m not saying we don’t talk tough, that people don’t get a little ‘grrr’ in their E-mail and all that.” Microsoft’s problem was bad manners, not bad behavior, Ballmer maintained. On the morning the story appeared, Microsoft executives were pleased with the interview, thinking it showed a measure of contrition.

“They don’t act like grownups!” Judge Jackson said to me that afternoon. He interpreted what Ballmer had said this way: “‘We’re a little rough around the edges, but you have to be tolerant.’” Ballmer’s statement proved that “to this day they continue to deny they did anything wrong.” To Jackson, this denial of reality was perhaps the greatest violation of all. ©

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