How AT&T’s Desperate Hunt for Trump Insight Led to Cohen Fiasco
(Bloomberg) -- With its future on the line as a media company after the 2016 election, AT&T Inc. turned to the president-elect’s personal lawyer for help, desperate for insight on the incoming administration’s approach to a range of policy issues, particularly its high-stakes takeover of Time Warner Inc.
That proved to be a “big mistake,” Chief Executive Officer Randall Stephenson now acknowledges, according to a memo made public Friday.
The $85 billion merger is snarled in court, awaiting a decision from a federal court judge after the Trump administration sued to block on antitrust grounds. And AT&T is scrambling to contain the fallout from being ensnared in the brewing scandal swirling around Michael Cohen and hush payment he gave to adult-film actress Stephanie Clifford, known professionally as Stormy Daniels.
“Our company has been in the headlines for all the wrong reasons these last few days and our reputation has been damaged,” Stephenson said in the memo. “The fact is, our past association with Cohen was a serious misjudgment. In this instance, our Washington D.C. team’s vetting process clearly failed, and I take responsibility for that.”
Investors didn’t appear too bothered by the reputational damage AT&T is facing. Shares rose 1 percent to $32.20 at 11:36 a.m. in New York Friday. Still, the stock is down 18 percent this year as of Thursday.
While it now acknowledges it was a mistake to hire Cohen, AT&T probably didn’t want to leave any stone unturned as it tried to read the signals from the new president who had repeatedly attacked Time Warner’s CNN and said his administration wouldn’t approve the deal.
Stephenson has staked the company’s future on the Time Warner acquisition. He argues that AT&T needs Time Warner’s media assets, including HBO and Turner Broadcasting, to help it compete in the age of Netflix and Amazon -- especially as viewers drop costly pay-TV packages for cheaper options.
Getting sued over the Time Warner deal wasn’t the first time AT&T misread the regulatory environment in Washington. In 2011, the Justice Department sued to block the $39 billion takeover of T-Mobile USA, a deal the company was forced by regulators to abandon. In addition to an eye-popping $7 billion breakup fee AT&T had to pay T-Mobile in the form of cash and airwaves, Stephenson’s pay that year was docked $2 million for failing to complete the deal.
‘Select Few Companies’
Cohen was paid $50,000 a month under a one-year contract after he approached AT&T following the 2016 election, according to the company. Cohen said he was going to do consulting for a “select few companies” that wanted his opinion on Trump and his administration, AT&T said. Cohen was one of several consultants the company said it hired to get advice on the administration’s approach on antitrust enforcement, as well as a corporate tax overhaul and other regulatory issues.
AT&T’s relationship to Cohen came to light this week when Daniels’s attorney, Michael Avenatti, cited AT&T as one of the parties that made payments to Cohen’s firm. Cohen paid $130,000 to Daniels just before the election not to discuss an alleged tryst with Trump.
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