Spying and the abuse of data

By Christopher Caldwell | Setting up cameras and monitoring employees’ toilet breaks, as the supermarket chain Lidl did; keeping a “black money” fund for kickbacks to officials in developing countries, as Siemens allegedly did; diverting money to pay for call girls for refractory board members, as Volkswagen did … German executives have not been at their best lately. But nothing has so shocked the public as allegations over the past two weeks that Deutsche Telekom, the largest telephone group in Europe, used a private investigator to spy on journalists and board members.

Germany has had, in general, an admirable system for protecting privacy. It is crumbling not because its elite has made a few mistakes, but because of new economic and social pressures that businesses in all countries face.

What Telekom did is emerging in dribs and drabs. In January 2005 – when Kai-Uwe Ricke, its chief executive, was trying to right the company’s finances by cutting 45,000 jobs – the German business magazine Capital published an article based on top-level Telekom documents. Mr Ricke and the chairman of the supervisory board, Klaus Zumwinkel, believed the leak was coming from the board. They decided to plug it. A company called Network Deutschland was hired. It is alleged to have monitored hundreds of thousands of phone calls in an effort to find the mole. It may have traced individuals’ whereabouts with mobile phone data and even kept tabs on Blackstone, the US investment group, which bought a stake in the company in 2006.

Earlier this year, Ralf Kühn, the head of Network Deutschland, faxed an invoice for several hundred thousand euros for services rendered. He offered “a controlled termination of our business relationship protected against indiscretion”, as Der Spiegel’s account put it. The current Telekom chief, René Obermann, who took over from Mr Ricke in November 2006, contacted prosecutors. Mr Ricke, Mr Zumwinkel and six others are now under investigation. (Mr Obermann is not.) Telekom’s former security chief has said that neither the chief executive nor the chairman was informed of the means used to investigate the leaks.

The US computer giant Hewlett-Packard had a similar scandal in 2006 involving leaks from the board and private investigators hired to uncover them. Why has this one struck a nerve? For one thing, German politics has lately been focused on data security. This year Germany came into compliance with European Union directives calling for phone records to be stored for at least six months. Wolfgang Schäuble, the interior minister, has asked for broader powers to monitor telecommunications, the better to fight terrorism.

Corporate leaders have very good reasons to treat boardroom leaks as emergencies. Responsibilities to shareholders can be compromised by the loss of business plans and trade secrets. There are moral responsibilities, too. Leaks can be a sign of insider trading. If they are not curbed, the likelihood that they will lead to some kind of market manipulation will grow. Against that, what is it to take a peek at a few phone calls? If you raise freedom of the press, a hard-headed executive can reply – in good conscience – that he is not against it; he is interested only in rooting underhanded conduct out of his boardroom.

But here a line may have been crossed – because it is alleged that Telekom monitored not just its employees but its customers, private citizens. It may have done so with the help of data the company collected on them in the course of ordinary business. If that is the case, then this was less a matter of fiduciary responsibility or “quality control” than a privatised espionage operation.

After these revelations, Financial Times Deutschland reported that in 2000 its own reporter, Tasso Enzweiler, had been tailed, filmed and investigated by Control Risks, a company hired by Telekom. At one point, according to a report filed by Control Risks and cited by FTD, two teams run by a second company called Desa were tailing Mr Enzweiler around the clock, tactics reminiscent of East Germany’s secret police, the Stasi. Desa, as it happens, was founded by former Stasi agents.

That is what is unsettling. When we talk about the “power” of corporations we usually mean they have money and influence. But the allegations against Telekom describe a company exercising the kind of power we associate with states. Of course, Telekom, in which the German government still owns a 32 per cent stake, is a hybrid company.

But Telekom’s state-like power comes from its operation in telecommunications, its trade in data. The power that data offer is of a peculiar kind. Why has Facebook’s market been estimated at $15bn? Not because of any “product” Facebook “sells” to its members. The value comes from the window it offers on the consumer preferences of its millions of members. Personal data are to the new economy what oil reserves are to the old one – the core commodity. Is it realistic to expect a company that controls a lot of data to feign ignorance of their political uses forever?

Mr Schäuble would like to establish some code of self-regulation for telecom companies. Renate Künast, a prominent Green parliamentarian, does not think that is possible. She told the Frankfurter Rundschau that the only real way of protecting data is to keep as little as possible. Ms Künast’s approach would do economic harm, because it would destroy a valuable commodity. But she has a point. Maybe personal data are a man-made equivalent of what economists call the “resource curse”. Just as there is a correlation between oil wealth and autocracy, there appears to be some link – hard to define but getting easier – between the growth of our information wealth and a dwindling of our liberties.

The writer is a senior editor at The Weekly Standard