GERMANY: Phone Giant in Germany Stirs a Furor

Publisher Name: 
The New York Times

FRANKFURT - Germany was engulfed in a national furor over threats to privacy on Monday, after an admission by Deutsche Telekom
that it had surreptitiously tracked thousands of phone calls to
identify the source of leaks to the news media about its internal
affairs.

René Obermann, chief of Deutsche Telekom, which tracked telephone calls by its board members to determine news leaks.

In a case that echoes the corporate spying scandal at Hewlett-Packard,
Deutsche Telekom said there had been "severe and far-reaching" misuse
of private data involving contacts between board members and reporters.

The
disclosure, which was prompted by a report on Saturday on the Web site
of the news magazine Der Spiegel set off a storm of protest from
privacy advocates, journalists, and labor representatives at the
company.

The German government, which effectively controls
Deutsche Telekom through a 32 percent stake, demanded a thorough
investigation, describing the spying operation as a "serious breach of
trust."

Prosecutors are looking into the case at the request of
Deutsche Telekom. In its own investigation, the company said it
discovered that its security department apparently hired an outside
firm to track phone contacts between members of its supervisory board
and several reporters in 2005 and 2006 - a tense period when the
company was shaken by waves of layoffs.

"By handing over
information to the prosecutor, we're using the sharpest knife we have
to solve the problem," said a company spokesman, Mark Nierwetberg.
"We're not in any way trying to hide anything."

With its use of
outside contractors and its focus on the communication between
boardroom and newsroom, Deutsche Telekom's case is eerily similar to
that of Hewlett-Packard, the computer equipment company based in Palo
Alto, Calif., which hired investigators to obtain the private phone
records of journalists who covered the company.

It is also the
latest in a spate of privacy scandals in Europe, ranging from the
Internet posting of the tax records belonging to 38 million Italians to
the confidential financial information on about 25 million people in
Britain, which was lost by tax authorities on two computer disks.

Privacy
issues carry a particular resonance in Germany, where people have been
zealous in guarding personal information ever since the
state-sanctioned snooping of the Nazi and Communist regimes.

The
German government has fought a lengthy battle for the legal right to
conduct surreptitious online searches of computers belonging to people
they deem suspicious during terrorism investigations. Experts said the
Deutsche Telekom case may raise new hurdles to expanded state powers.

"No
one likes to hear that people are using their mobile phone records,"
said Lutz Hachmeister, director of the Institute for Media Policy in
Berlin. "It gives one the sense that Big Brother can watch you and hear
you."

This is not the first time that journalists have been spied
on in Germany. In 2006, a Parliamentary report accused the federal
intelligence agency, the BND, of conducting systematic surveillance on
some reporters. The government of Chancellor Angela Merkel ordered the agency to stop.

The
BND came under scrutiny again recently when the government confirmed
that it had paid an informant more than 4 million euros ($6.3 million)
for a disk containing stolen bank data on hundreds of Germans who
evaded taxes by steering cash to the Alpine principality of
Liechtenstein.

In an odd link between these scandals, the most
prominent person arrested so far on allegations of tax evasion is Klaus
Zumwinkel, the former chairman of Deutsche Telekom's supervisory board.

Germany companies have suffered through a season of scandal: Siemens, the engineering and industrial electronics company based in Munich, caught up in allegations of bribery, and Volkswagen, tarnished by payoffs to union representatives.

Deutsche
Telekom's spying strikes a chord among ordinary Germans because it
remains the dominant provider of fixed-line phone service here despite
the inroads made by rivals in recent years.

"This company has
special access to the records of its customers," said Michael Konken,
chairman of the German Journalists' Association. "That means it has a
special obligation to be trustworthy."

Mr. Konken said he was
satisfied by the response of Deutsche Telekom's chief executive, René
Obermann, who referred the company's findings to the state prosecutor
in Bonn on May 14. He also hired a law firm in Cologne to do an
independent investigation.

Deutsche Telekom said it acted after
receiving a letter in April from an outsider who had been hired to
track the phone records of the 20 members of the supervisory board. By
law, the company's board is evenly split between representatives of
shareholders and employees.

It was not the first time that
Deutsche Telekom uncovered spying. In the summer of 2007, the company
said, executives were tipped off by an insider to a single case of
misuse of private data. Deutsche Telekom said it shook up the
management of its security department, bringing in a retired senior
security official from the German interior ministry to oversee it.

For
Mr. Obermann, the scandal adds an enormous new challenge to an already
difficult job. He was named chief executive in late 2006, after the
spying was reported to have occurred, though he did work for Deutsche
Telekom before that, running the wireless unit, T-Mobile.

Shares
of Deutsche Telekom rose slightly on Monday, which analysts said may
reflect relief that the scandal does not appear to involve the current
management. Mr. Obermann has worked to limit the damage to the company,
telling the mass-market paper, Bild, that the "personal data of our
millions of fixed-line and mobile customers was secure."

The
spying, people at the company said, did not involve listening in to
phone conversations, but rather tracking calls made by members of the
supervisory board and hunting for matches with numbers belonging to
reporters. To identify those, Deutsche Telekom hired a data-mining firm
in Berlin. For much of 2005 and 2006, Deutsche Telekom was in the midst
of a painful cost-reduction program led by its previous chief
executive, Kai-Uwe Ricke. Reports of layoffs circulated regularly on
news wires and in newspapers, often before they were announced.

"When the layoffs were leaked, which they always were, it caused huge outrage from the unions," said Theo Kitz, an analyst at Merck
Finck & Company, who follows Deutsche Telekom. "It was always
assumed the leaks were from the labor side of the supervisory board."

Labor
leaders at Deutsche Telekom did not return a call seeking comment.
Lothar Schröder, a member of the supervisory board and a leader of the
company's main union, ver.di, said in an interview with the German
newspaper Die Welt, "If the accusations are confirmed, it is an
enormous scandal."

AMP Section Name:Technology & Telecommunications
  • 185 Corruption