Bloomberg: Zuckerberg, Sandberg Should Face Criminal Probe, Liberal Nonprofit Group Says

October 29, 2021 Media

A liberal nonprofit that advocates for market competition is urging federal authorities to investigate whether top executives including Mark Zuckerberg and Sheryl Sandberg broke the law, adding personal accusations to the allegations facing the company following disclosures from a whistle-blower.

The Washington-based American Economic Liberties Project is sending a letter Friday to the leaders of the Justice Department, the Securities and Exchange Commission and the Federal Trade Commission offering examples of what it identified as potential wrongdoing and calling on the agencies to open inquiries.

The allegations include that the executives inflated video metrics and misled advertisers; miscounted users and misrepresented advertising reach; failed to disclose inaccurate user counts; and lied to Congress about user control over data. The group said these allegations merit criminal investigation, but it’s unclear if the letter will spur federal authorities to act.

Facebook declined to comment on the letter and a description of the allegations it contained. The FTC and DOJ didn’t respond to a request for comment. Aisha Johnson, an SEC spokesperson, declined to comment.

For more: Facebook’s Algorithms Increasingly in Sights of Lawmakers

The left-leaning nonprofit was founded in early 2020 by advocates for more robust antitrust enforcement. The group applauded the Biden administration’s appointment of Lina Khan to chair the FTC and Jonathan Kanter to lead the DOJ’s antitrust division. It has also supported bills to target big tech companies for their dominance, acquisition strategy and treatment of competitors.

The group’s funding comes from foundations and individuals, including the Economic Security Project, the Omyidyar Network and the Nathan Cummings Foundation.

Chris Hughes, who started Facebook with Zuckerberg and has since been an outspoken critic, is the co-chair of the Economic Security Project. Other entities associated with tech billionaire Pierre Omidyar also supported Frances Haugen, the former Facebook employee turned whistleblower.

Facebook, which announced on Thursday that it was changing its corporate name to Meta Platforms Inc., has been under fire on several fronts in Washington since Haugen turned a trove of internal documents over to the SEC, Congress and journalists. Friday’s letter cites documents related to three ongoing court cases, as well as Haugen’s files revealing internal Facebook discussions.

“It is clear that Facebook’s leaders simply do not believe they will ever face meaningful sanction for lawless behavior,” according to the letter, which was obtained by Bloomberg. “Facebook’s longstanding track record of unethical and potentially illegal behavior deserves criminal sanction.”

Earlier: Facebook Changes Name to Meta in Embrace of Virtual Reality

Haugen filed eight complaints with the SEC based on her documents, and the FTC was already challenging the company’s previous acquisition of Instagram and Whatsapp. But opening new investigations to hold executives personally responsible would be a new strategy for federal enforcers.

Even after years of complaints in Washington over Facebook’s conduct, there have been few serious consequences for the social media network — which is worth almost $900 billion and has nearly 3 billion users. Years of contentious congressional hearings have yet to result in meaningful regulation, and billions of dollars worth of fines from U.S. and European regulators have done little to change the company’s business model or behavior.

The AELP letter argues that not only are fines insufficient to deter corporate wrongdoing, but that the company’s executives personally profited from criminal activity. “We’re not in favor of fines, because over the years they’ve proven to be pretty ineffective,” Krista Brown, a senior policy analyst for the group, said in a phone interview.

The SEC, which brings only civil, not criminal cases, is likely already looking into whether Facebook misled investors, given the high profile nature of Haugen’s complaints, according to David Rosenfeld, a Northern Illinois University professor who previously helped lead enforcement in the SEC’s New York office. Whether the SEC would investigate individual executives “depends on their involvement, their personal knowledge, whether they knew about the issue and a level of intent to deceive or defraud,” Rosenfeld said.

The court cases cited in the letter are DZ Reserve v. Facebook, the Employees’ Retirement System of Rhode Island v. Facebook and LLE ONE. LLC v. Facebook.