Why Jeff Sessions scares tech companies - Axios
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Why Jeff Sessions scares tech companies

Susan Walsh / AP

As the new attorney general, Jeff Sessions has the power to create some major headaches for technology companies.

Sessions has gone after the tech industry for hiring high-skilled foreign workers and resisting law enforcement surveillance requests. Pile on Donald Trump's populist disdain for big companies and suspicion of some dominant tech platforms, and antitrust experts also say Silicon Valley has reason to be worried.

Encryption and privacy:

  • Sessions has been at odds with Silicon Valley over law enforcement's access to encrypted data and pushed back on surveillance reforms.
  • A year ago, Sessions took Apple to task for refusing to help the FBI access encrypted data on an iPhone linked to the San Bernandino attack. The government eventually backed down, but the industry is bracing for increased pressure from law enforcement as surveillance debates heat up.
  • The DOJ will also be involved in crafting policies around cross-border data sharing, an increasingly important issue for American tech companies doing business abroad.

Immigration:

  • Sessions has hammered Silicon Valley companies using H-1B visas to hire foreign workers for engineering jobs.
  • He and Trump share the general view that hiring American workers should be prioritized. The tech industry's long-standing goal of raising the annual visa cap is dead in the water — its goal now is to prevent the program from being gutted.
  • Sessions will be in the position to call for changes to the lottery system that divvies up the visas in ways that could discourage tech companies from using the system at all.

Mergers:

  • Front-runners to lead the DOJ's antitrust division include Joshua Wright (member of Trump's transition team) and Makan Delrahim (deputy White House counsel). They're known in antitrust circles as having traditional Republican pro-business leanings.
  • The real question is whether Trump will try to turn merger reviews into business negotiations. Antitrust experts fear Trump could use the merger review process to extract political promises, like creating jobs. (Mergers, of course, typically end up eliminating jobs.)
  • Take the proposed AT&T-Time Warner merger, which has drawn fire from Trump. Since the two companies don't directly compete against each other, the legal case to block the deal is seen as relatively weak. Still, Sessions could take the cue from his boss to intervene.

Competition:

  • The Justice Department can investigate the behavior of dominant companies if they are accused of engaging in anti-competitive practices (recall the case the DOJ brought against Microsoft in 1998). Typically Republican administrations don't go after companies on competition grounds, but as one antitrust attorney put it, "this isn't your typical Republican administration."
  • Trump has indicated he thinks some tech companies have grown too big and powerful. On the campaign trail, he said Amazon has "a huge antitrust problem." He told Axios he'd "like to create more competition," for companies like Facebook with rapidly expanding size and reach.
  • That means dominant tech companies like Apple and Google could also have targets on their backs, experts said.
What to watch: Immigration and visa program reform is top-of-mind for most tech companies, who've been increasingly vocal in speaking out about Trump's immigration order. But it's the antitrust division that keeps them up at night: Big tech firms know Sessions will have to bless any mergers coming down the pike and an activist department could even look at coming after tech companies the administration thinks have gotten too big. "Trump's a deal-maker," said one D.C. antitrust lawyer. "It's generally been frowned upon, but there's nothing illegal about the White House telling antitrust agencies what to do."
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At least 104 killed in Mexico City earthquake

A woman in Reforma Avenue after an earthquake in Mexico City, Tuesday Sept. 19, 2017. Photo: Rebecca Blackwell/AP

At least 104 people were killed by a 7.1 magnitude earthquake that struck Mexico City on Tuesday, per the Associated Press.

This comes less then two weeks after another powerful earthquake struck Mexico, and exactly 32 years after the catastrophic 1985 Mexico City earthquake.

  • The earthquake occurred 76 miles southeast of Mexico City, per the AP.
  • Mexico City's international airport has suspended operations.
  • Washington Post reports it came a couple of hours after an annual earthquake drill.
  • The New York Times reports an entire office building collapsing in the neighborhood of Roma Norte, possibly trapping people inside.
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Alexander: No consensus on bipartisan health care bill

Sen. Lamar Alexander said there's currently no bipartisan health care deal. Photo: Alex Brandon/AP

Senate HELP Committee Chairman Lamar Alexander said in a statement this evening that there's no consensus on how to move forward on his bipartisan health care effort with Democratic Sen. Patty Murray. "During the last month, we have worked hard and in good faith, but have not found the necessary consensus among Republicans and Democrats to put a bill in the Senate leaders' hands that could be enacted," he said.

Why this matters: It could put wind in the sails of the GOP's repeal effort. Then again, for holdouts, doing nothing may still be the better option than the partisan Cassidy-Graham bill.

What Democrats offered Alexander:

  • Allowing people on exchanges to enroll in "copper" plans, or catastrophic coverage. Currently this is an option only for people under 30.
  • Democrats also offered to make some changes to the process for state innovation waivers, but the two parties didn't agree on the extent of those changes.
  • Creating a "menu" of state waiver options to expedite the approval process.
What Democrats wanted in return, according to a GOP aide:
  • $500 million to fund enrollment outreach
  • Federal "seed"funding to help states start reinsurance programs, which would offset the costs of the most expensive enrollees — which was a "nonstarter," the aide said.
What happened on waivers:
  • A Democratic aide close to the negotiations said they offered to amend the "affordability and comprehensiveness guardrail" of the waiver process.
    • How the aide described the waiver amendment (details are crucial in these kind of negotiations): "Change cost-sharing and benefits to encourage the use of high-value services – This would allow states through a waiver to change how much a certain service would cost the consumer (through co-pays or other cost sharing) to steer people towards specific services. For example, if a certain heart procedure costs more than another a state would be allowed to increase cost sharing for the more expensive procedure to try and steer people towards the lower cost one."
  • A GOP aide, however, said that description of Democrats' offer is "generous at best. They didn't change anything, which HHS says is needed, but moved in a good direction to start a conversation on how to make the guardrails work."
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Maria 'potentially catastrophic' for Puerto Rico and U.S. Virgin Islands

Photo: NOAA

Hurricane Maria will be "potentially catastrophic" as it hits Puerto Rico and the U.S. Virgin Islands as a "likely" Category 5 storm over the next 24 hours, according to the National Hurricane Center.

The biggest threats: Maria currently packs sustained winds of 165 mph and is forecast to deluge the islands in its path with about a foot of rain and seven to nine feet of storm surge. In its latest update, the NHC branded the storm as "life-threatening," and urged those in its path to "rush to completion" any remaining preparations prior to landfall.

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Lawmakers vet trafficking bill that worries tech

Individuals associated with Backpage.com are sworn in earlier this year at a hearing about the site and trafficking. Photo: Cliff Owen / AP

A key Senate committee spent hours on Tuesday hearing testimony on an anti-sex trafficking bill that is widely opposed by Silicon Valley. Tech companies argue it could strip the protections that ensure that Google, Facebook and other online platforms aren't legally liable for user generated content.

Reality check: Tech and its allies have steered clear of a compromise for some time. If that's where this ends up, it won't get there overnight.

The details:

  • Some Democrats who don't yet support the bill seemed to be looking for areas of compromise. Sen. Brian Schatz asked whether it would be enough for lawmakers to clarify in an additional statement "that the law is intended to apply to those actors that enable sex trafficking and not to those who promptly act in good faith to address a violation.”
  • California Attorney General Xavier Becerra, a former member of Congress who supports the bill, was skeptical that the line would hold up in court. "I would tell you it's always a roll of the dice when you try to rely on report language or legislative history," he said.
  • Much of the conversation at the hearing focused on the standard the bill lays down for whether a website can be held liable. It says it includes "knowing conduct by an individual or entity, by any means, that assists, supports, or facilitates" trafficking, which Internet Association General Counsel Abigail Slater says is too broad.

What's next?: The question now is whether Senate Commerce Committee Chairman John Thune will move the bill forward, which could be helped if a compromise is reached that makes the bill less controversial.

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Social Capital changes leave investors frustrated

Social Capital's Chamath Calihapitiya
Photo: TechCrunch Disrupt

Two years ago, venture firm Social Capital raised $600 million for its third fund. Today, many of the fund's limited partners tell Axios they are upset – and it has little to do with that unicorn-hunting SPAC. Instead, investors don't believe they're getting what they bought into, when it comes to both strategy and personnel.

Backstory: Social Capital was founded in 2011 by former Facebook exec Chamath Palihapitiya and U.S. Venture Partners vets Mamoon Hamid and Ted Maidenberg. Investments would include Box, Slack and Wealthfront. By last year, however, Palihapitiya had grown disenchanted with traditional, early-stage venture capital, saying both publicly and privately that the model needed to be severely disrupted (including at an annual meeting where he compared his firm to past expanders like Blackstone Group and Berkshire Hathaway). So he continued to manage a side hedge fund, and earlier this year recruited Marc Mezvinsky (Mr. Chelsea Clinton to you) as vice chairman to expand into other financial products. Then came the addition of ex-GoPro exec Tony Bates to run a growth equity unit. Somewhere along the way, Palihapitiya also retitled himself CEO.

While Hamid was on paternity leave this past summer, Palihapitiya basically told Maidenberg that he wanted the venture fund to go in a different direction, with a much greater emphasis on data. The pair did not see eye-to-eye, and reached an agreement whereby Maidenberg would remain for two years to help manage out the portfolio (he and Hamid each have nearly a dozen board seats). What Palihapitiya didn't realize, however, was that Hamid – viewed by most LPs as the fund's major rainmaker – was already deep into discussions to leave for Kleiner Perkins. In other words, the backup plan was bailing. When Palihapitiya told Hamid about Maidenberg's quasi-departure, Hamid disclosed his plans (before having the opportunity to inform Maidenberg). Soon after, the Hamid-to-KP news was announced. Maidenberg continues to manage his portfolio companies, but is no longer hanging out at the Social Capital office, and multiple sources say the lines of communication between him and Palihapitiya are effectively severed.

LP frustration: The issue for LPs is twofold: First, the team they backed is no longer really there. Second, the strategy they backed (i.e., fairly traditional VC) is no longer being employed. Fund III remains less than 70% called, and there continue to be questions about future portfolio monitoring, and whether junior members of the investment team – folks who partially joined to be mentored in venture by Hamid and Maidenberg -- will stick around (a headhunter tells me some resumes are out). "I'm really disappointed in the whole thing," one longtime Social Capital LP tells me. "Chamath is a smart guy, but he's really gone off the rails." Another adds: "It's one thing to want to be Blackstone or Berkshire, but not before putting point on the board in your original business, which we and others underwrote without worrying that the strategy would drastically shift mid-fund."

But... There isn't too much LPs can really do. Fund III doesn't have a no-fault divorce clause, and Palihapitiya is the only key-man listed ("We blew it on key-man," a third LP says). Some LPs would prefer Maidenberg to run the remaining money, but Palihapitiya is said to have not yet been receptive to that plan.

Social Capital statement: "We want to build a modern, scalable organization capable of supporting entrepreneurs and startups all the way from inception to their life as a public company. We are excited about what we are building, and the largest investors in Social Capital are behind our approach."

Social Capital did not make Palihapitiya available for an interview. Hamid and Maidenberg also declined comment.

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Mexico City earthquake, in photos

People briefly celebrate after rescuing two people from a building that collapsed. Photo: AP / Rebecca Blackwell

Mexico City was hit on Tuesday with a 7.1 magnitude earthquake, two weeks after another powerful earthquake and exactly 32 years after the catastrophic 1985 earthquake.

Patients lie on their hospital beds after being evacuated following an earthquake in Mexico City, Tuesday, Sept. 19, 2017. Photo: Rebecca Blackwell/AP

A woman reacts as people evacuate along Paseo del la Reforma Avenue.Photo: Marco Ugarte/AP

Rescue workers and volunteers search a building that collapsed in downtown Mexico CityPhoto: Rebecca Blackwell/AP

A bulldozer removes debris from a partially collapsed building.Photo: Rebecca Blackwell/AP

A boy with his face covered due to a gas leak holds a man's hand as people gather in Reforma Avenue.Photo: Marco Ugarte/AP

A woman in a wheelchair is evacuated from a clinic as people gather along Paseo de la Reforma Avenue.Photo: Marco Ugarte/AP

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Trump reportedly using campaign, RNC funds for Russia legal fees

Trump at the White House in August. Photo: Alex Brandon / AP

President Trump is using money from both his reelection campaign and the RNC for legal fees incurred as a result of the Russia investigation, according to a new Reuters report. Past presidents have used these funds for routine legal expenses related to their campaigns, but Trump would be the first modern president to use them for a criminal matter. Asked how Trump's bills were being paid John Dowd, his chief lawyer, told Reuters, "that's none of your business."

How it's legal: Trump, using a precedent set by Barack Obama in 2008, turned down public funding for his campaign, allowing him to utilize privately donated cash with fewer restrictions. The exact amounts may become clearer when the RNC files a financial disclosure statement later this week, with a similar disclosure for Trump's reelection campaign due next month.

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Senate Republicans have a tentative deal on $1.5 trillion in tax cuts

Majority Leader Mitch McConnell. Photo: J. Scott Applewhite/AP

Top Republicans have decided on a tentative budget plan that would grow the government's $20 trillion debt by $1.5 trillion over the next decade, according to AP congressional sources. Bob Corker, a senator who had been against increasing the deficit, said the talks have "potentially gotten to a very good place."

Why it matters: The $1.5 trillion would "allow deeper cuts to tax rates than ...if Republicans followed through on earlier promises" not to add to the deficit, per the AP. Agreeing on a budget plan is the first step in getting a tax bill through Congress. Republicans are expected to release more specifics on tax policy next week.

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Trump admin. rejects report that refugees add billions in revenue

Donald Trump makes his way through diplomats at U.N. headquarters. Photo: Seth Wenig/AP

The Trump administration rejected a Department of Health and Human Services report that showed refugees brought in "$63 billion more in government revenues over the past decade than they cost," per the New York Times, arguing it was "delivered by someone with an ideological agenda," and refugees from war-torn countries "are not a net benefit to the U.S. economy."

Why it matters: Chief policy adviser Stephen Miller has reportedly encouraged Trump to cap the number of refugees allowed into the U.S. well below 50,000 due to concerns about terrorism and the belief that refugees are "too costly."

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Trump toasts the UN's "great potential"

President Trump gave a toast to the United Nations General Assembly on Tuesday. He greeted the world leaders in the room and raised a glass of red wine to the "great potential of the United Nations."