Two Powells, One Big Merger

As consumer advocates Friday blasted the Federal Communications Commission's approval of the AOL-Time Warner merger, they focused particular scorn on one member of the commission who approved the $111 billion deal: Michael Powell.
Powell is the son of retired Gen. Colin Powell. The former general joined AOL's board of directors in Sept. 1998 and resigned Jan. 11, 2001 — the day the merger was approved. Gen. Powell, who does not sit on the board of the combined company, AOL/Time Warner, has been chosen to become Secretary of State in the Bush administration. Once he takes office, President-elect Bush is expected to name Michael Powell the FCC chairman.

The current chairman, William E. Kennard, Friday tendered his resignation, effective Jan. 19, the last day of the Clinton presidency.

All five FCC commissioners approved the merger. But in his statement on the decision, Michael Powell sharply criticized some of the conditions imposed on AOL/Time Warner by the commission.
"I believe the Majority has given in too much to their collective imaginations, rather than sound reasoning based on the record, in reaching some of the conditions on the merger," he wrote.

Powell took issue with the requirement that AOL allow rival Internet service providers access to its Instant Messaging system. He argued that the FCC based the condition on flawed assumptions. Powell also thought the conditions regarding high-speed cable Internet access were ill-advised, since the issue is being studied separately.

Powell's comments were so strong, initial press accounts reported that he had approved the merger but opposed the conditions. Powell Friday issued a clarifying statement.

"Although I have concerns that our condition … is largely duplicative of existing consent decrees by the antitrust authorities, I nonetheless concur in approval of the merger and also in the condition regarding the relationship between AT&T and TWE," Powell wrote.

Consumer groups, however, had already jumped on Powell's earlier statement. The Consumer Project on Technology, a watchdog group, said Powell "ridiculed the majority's decision," and referred to his father's one-time position on AOL's board.

An FCC spokesman said Powell did not recuse himself from the vote on the merger because he had three times sought advice from the commission's general counsel and was not told he had to.

In a statement released in September, Powell said he felt "it would be irresponsible for me to step aside from participating in a serious policy decision, such as the AOL-Time Warner merger before the FCC, in the absence of any compelling, actual financial conflict of interest."

"I have no financial interests in AOL or any other party to this proceeding," Powell continued. "In addition, my father and I have been scrupulous in maintaining a wall between our activities and we rigorously avoi any discussion of AOL or the substance of this transaction."

Corporate directors usually do not receive a salary and are compensated with director's fees. Powell's fees were in the form of stock options, says an AOL/Time Warner spokesman.

Michael Powell, a Republican, was nominated by President Clinton to join the FCC is 1997.

Gen. Powell is not the only former military man to shelve his stars for a seat at the corporate board table.

Former four-star Gen. Alexander Haig — the one-time Supreme Allied Commander Europe — served on AOL's board with Powell, and SEC records indicate he still sits on the boards of MGM Grand and Interneuron Pharmaceuticals. He has also had a relationship with United Technologies Corporation.

Former Chairman of the Joint Chiefs John Shalikashvili sits on the board at Boeing. Former NATO commander Gen. Wesley Clark is a consultant at the Stephens Group, an investment company.

Retired generals are also active in leadership roles in the nonprofit community. Powell and Clark have been involved with the Boys & Girls Clubs. Desert Storm commander Gen. Norman Schwarzkopf is a director at the Starbright foundation, a group that works to find technology to help children who are ill.

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