The Federal Trade Commission inappropriately pressured an independent third-party auditing firm to find Twitter had violated the terms of its settlement agreement with the FTC, a motion filed last week in federal court reveals. That misconduct and the FTC’s own repudiation of the terms of the settlement agreement entitle Twitter to vacate the consent order, its lawyers maintain.
This latest development holds significance beyond Twitter’s fight with the FTC, however, with the details providing further evidence that the Biden administration targeted Twitter because of its owner Elon Musk’s support for free speech on his platform.
I “felt as if the FTC was trying to influence the outcome of the engagement before it had started,” a CPA with nearly 30 years of experience with the Big Four accounting firm Ernst & Young (EY) testified last month. The FTC’s pressure campaign left EY partner David Roque so unsettled that he sought guidance from another partner concerning controlling ethical standards for CPAs to assess whether his independence had been compromised by the federal agency.
Roque’s testimony prompted attorneys for Twitter to seek documents from the FTC to assess whether the federal agency had repeated its pressure campaign with EY’s successors, but the agency refused to provide any details to the social media giant. Twitter responded last week by filing a “Motion for a Protective Order and Relief From Consent Order.”
That motion and its accompanying exhibits provide shocking details of an abusive agency targeting Twitter. When those facts are coupled with the report on the FTC issued earlier this year by the House Weaponization Subcommittee, it seems clear the Biden administration is targeting Twitter because Musk seceded from the Censorship-Industrial Complex.
FTC’s Pre-Musk Enforcement Actions
Thursday’s motion began with the background necessary to appreciate the gravity of the FTC’s scorched-earth campaign against Twitter.
More than a decade ago, the FTC entered into a settlement agreement with Twitter after finding Twitter had violated the Federal Trade Commission Act by misrepresenting the extent it protected user information from unauthorized access. That 2011 settlement agreement resulted in a consent order that required Twitter to establish a “comprehensive information security program” that met specific parameters. The 2011 consent order also required Twitter to obtain an assessment from an independent third-party professional confirming compliance with the terms of the settlement agreement.
From 2011 to 2019, Twitter operated under the 2011 consent order and received about 10 “demand letters” from the FTC seeking additional information. Then in October 2019, Twitter informed the FTC that “some email addresses and phone numbers provided for account security may have been used unintentionally for advertising purposes.” In investigating that report, the FTC sent Twitter another 15 or so demand letters over a two-year period before filing a complaint in a California federal court on May 25, 2022, alleging Twitter had violated the 2011 consent order and Section 5 of the FTC Act by misrepresenting the extent to which Twitter maintained and protected the privacy of nonpublic consumer information.
The next day, the court entered a “Stipulated Order” — meaning Twitter and the FTC had agreed to the terms of that order — “for Civil Penalty, Monetary Judgment, and Injunctive Relief.” That stipulated order allowed the FTC to reopen the 2011 proceeding and enter an updated consent order, which created a new “compliance structure.”
Under the 2022 order, Twitter was required to establish and maintain a “comprehensive privacy and information security program” to “protect[] the privacy, security, confidentiality, and integrity” of certain user information by Nov. 22, 2022. The 2022 consent order also required Twitter to obtain an assessment of its compliance with the terms of the court order by “qualified, objective, independent third-party professionals.”
Musk Makes Waves
Musk entered into an agreement on April 25, 2022, to purchase Twitter, effective Oct. 27, 2022, and one must wonder if that April agreement prompted Twitter’s then-management to enter the May 2022 consent decree, as Twitter’s prior management handcuffed Musk to the terms of the agreement forged with the FTC. Either way, the May 2022 consent order governed Twitter’s operations under Musk’s new management.
While the 2022 consent decree remained unchanged after Musk’s purchase became final, the FTC’s posture toward Twitter changed drastically. As Twitter’s Thursday motion detailed, “in the five months between the signing of the Consent Order on May 25, 2022, and Mr. Musk’s acquisition of Twitter, Inc. on October 27, 2022, the FTC sent Twitter only three demand letters.”
All three letters concerned a whistleblower’s claims that Twitter had violated the Federal Trade Commission Act and the 2011 consent order by making false and misleading statements about its security, privacy, and integrity. The FTC waited nearly two months after receiving the whistleblower’s complaint before serving its first demand letter on Twitter.
FTC Goes Scorched Earth
According to Twitter’s motion for relief from the 2022 consent order, “Musk’s acquisition of Twitter produced a sudden and drastic change in the tone and intensity of the FTC’s investigation into the company.” Among other things, the FTC publicly stated it was “tracking recent developments at Twitter with deep concern.” The FTC also stressed that the revised consent order provided the agency with “new tools to ensure compliance,” and it was “prepared to use them.”
And use them the FTC did: The agency immediately issued two demand letters to Twitter seeking information about workforce reductions and the launch of Twitter Blue. Those demand letters came before Twitter was even required under the 2022 consent decree to have its new programs in place. Since then, Twitter’s attorneys note, the FTC has pummeled Twitter’s corporate owner, X Corp., with “burdensome demand letters” — more than 17 separate demand letters, with some 200 individual demands for information and documents, translates into a new demand letter every two weeks.
FTC Starts Drilling Former Employees
In addition to the FTC’s flurry of demand letters, it began deposing former Twitter employees — five to date — and is currently seeking to question Musk. The FTC also deposed Roque on June 21, 2023, but the questioning backfired. Twitter learned from that deposition, as its lawyers put it in Thursday’s motion, “that the FTC’s harassment campaign was even more extreme and far-reaching than it had imagined.”
Roque was the Ernst & Young partner overseeing the assessment it was hired by Twitter to perform — an assessment mandated by the May 2022 consent decree. Twitter’s previous management retained EY in July 2022 to issue the assessment report of its security measures.
In late February 2023, EY withdrew from the engagement. Many of the FTC’s questions to Roque probed the reasoning for the withdrawal, including the high number of personnel changes and EY’s difficulty in starting the assessment because of Twitter upheaval caused by Musk’s changes.
Deposition Backfires Big Time
During the FTC’s question of Roque about EY’s withdrawal from the engagement and various emails exchanged by partners, the longtime CPA dropped a bombshell: The FTC had so pressured Roque to reach its preconceived conclusion that Twitter had violated the consent decree that Roque sought help researching the ethical standards that govern CPAs to assess whether EY’s independence had been compromised.
Roque revealed that detail when the FTC’s lawyer quizzed him on the meaning of a chat message exchange he had with fellow EY partner Paul Penler on the evening of Feb. 21, 2023, shortly before the Big Four firm announced it was withdrawing from its engagement to assess Twitter’s compliance with the 2022 consent order.
While the actual chat message was filed under seal as Exhibit 16 in support of Twitter’s motion, the transcript of Roque’s questioning was provided to the court, revealing the pertinent aspects of the conversation.
Roque began by asking Penler, “Where is the best place to confirm independence consideration for attest engagement?” About 15 minutes later, Roque followed up by asking whether specific language about an “adverse interest threat” “could work for Twitter?” Roque then commented to Penler that “EY interests are not aligned with Twitter anymore because of the FTC.”
Mild-Mannered CPA Drops Bombshell
After showing Roque a copy of his chat exchange with Penler, the FTC attorney quizzed the EY partner on why he had sent the note and what he meant by the various lines. That’s when the bomb exploded, with Roque explaining he had contacted Penler — who was with EY’s professional practice group, the internal group that was responsible for ensuring the firm adequately followed professional standards — because Roque had concerns about whether the FTC had threatened his independence.
“As we were moving forward with this engagement, we had ongoing discussions with the FTC,” Roque explained. “[D]uring those discussions,” Roque continued, “the FTC kept expressing their opinion more and more adamantly about the extent of procedures Ernst & Young would need to perform based on their expectations. And there was also expectations around the results they would expect us to find based on the information Twitter had already provided to the FTC and the FTC had reviewed.”
Those conversations, Roque testified, made him feel “as if the FTC was trying to influence the outcome of the engagement before it had started,” so he was attempting to assess whether EY had an “adverse threat,” meaning “somebody outside of the arrangement we had with Twitter trying to influence the outcome of our results.”
FTC Spin Falls Flat
After Roque revealed his concerns about the FTC’s conduct, the lawyer for the federal agency pushed him to backtrack by asking leading questions. Rather than hedge, Roque stood firm, as these exchanges show:
FTC Attorney: “To be clear, no one from the FTC directed you to reach a particular conclusion about Twitter’s 22 program, correct?”
Roque: “There was suggestions of what they would expect the outcome to be.”
* * *
FTC Attorney: “No one from the FTC actually told you what EY’s report should say in its conclusions, correct?”
Roque: “There was a conversation where it was conveyed that the FTC would be surprised if there was areas on our report that didn’t have findings based on information the FTC was already aware of, and if Ernst & Young didn’t have findings in those areas, we should expect the FTC would follow up very significantly to understand why we didn’t have similar conclusions.”
Twitter’s Lawyer Pounces
After two fails, the FTC moved on to other questions, but Twitter’s lawyer, Daniel Koffmann, returned to the topic when it was his turn to question Roque. Koffmann asked Roque whether there was a particular meeting with the FTC in which the agency had given him the impression that it “was expecting a certain outcome in the assessment that Ernst & Young was conducting relative to Twitter’s compliance with the consent order.”
Roque mentioned two meetings. He described the first, which was in December 2022, as “interesting” and “surprising” because when EY noted that Twitter, under its new ownership, might opt to terminate its contract with the firm, the FTC was “very adamant about this is absolutely what you will do and this is going to occur, and you’ll produce a report at the end of the day.” Roque found the FTC’s stance “a bit surprising,” since the report was not due for another six to seven months and the federal agency would not know what might transpire during that time period.
Roque further explained that he found the December 2022 meeting “unusual” because the FTC provided “specificity on the execution of very specific types of procedures that they expected to be performed.”
“It was almost as if they were giving us components of our audit program to execute,” Roque said. While EY could perform such a review, it would be a different type of engagement than the one it had entered with Twitter. Rather, EY’s assessment for Twitter was to access, for instance, how security operates and how the user administration process is managed. In conducting that assessment, the firm would look at specific controls. But the FTC was giving EY very specific tests to run, which was inconsistent with a typical audit, Roque explained.
It was the second meeting, which took place in January 2022, that raised real concerns for Roque. It was then, Roque said, that the FTC “started providing areas that they were expecting us to look at.” Roque testified that the FTC “communicated that they would expect Ernst & Young to have findings or exceptions or negative results in certain areas based on what they already understood from an operational standpoint, based on information Twitter had provided, and that if we ended up producing a report that didn’t have findings in those areas, that they would be surprised, and they would be definitely following up with us to understand why we didn’t — why we reached the conclusions we did if they were sort of not reflecting gaps in the controls.”
Roque would go on to agree with Twitter’s attorney that during the January 2022 meeting, “the representatives from the FTC expressed that they believed Ernst & Young’s assessment would lead to findings or exceptions about Twitter’s compliance with the consent order.”
Twitter Takes FTC to Task
A little over a week after Roque’s deposition, Twitter’s legal team wrote the FTC a scathing letter noting that Roque’s alarming testimony “demonstrates that the FTC has resorted to bullying tactics, intimidation, and threats to potential witnesses.”
“It strongly suggests that the FTC has attempted to exert improper influence over witnesses in order to manufacture evidence damaging to X Corp. and Mr. Musk,” the letter continued, adding that Roque’s testimony also raised serious questions about whether the FTC’s bias would render any future enforcement action unconstitutional.
The Twitter letter ended by requesting documents and information from the FTC “to evaluate the nature and scope of the FTC’s misconduct and the remedial measures that will be necessary.” Among other things, Twitter asked for communications between FTC personnel and the company that succeeded EY as Twitter’s independent assessor, as well as another company Twitter considered but did not select to replace EY.
The FTC refused Twitter’s request. In its letter denying Musk access to any documents, Reenah L. Kim, the same attorney who allegedly made the statements to Roque, claimed Twitter’s accusations of so-called “bullying tactics, intimidation, and threats to potential witnesses” by the FTC “are completely unfounded.”
Lots of Legal Implications
Following the FTC’s refusal to provide Twitter the requested documents, Musk’s legal team filed its “Motion for a Protective Order and Relief From Consent Order” with the California federal court where the 2022 consent decree had been entered. In this recently filed motion, Musk’s attorneys argue the FTC “breached” the consent order when it attempted “to dictate and influence the content, procedures, and outcome” of the court-ordered assessment, which the consent decree required to be both “objective” and “independent.”
To support its argument, Twitter highlighted the FTC’s own language in an earlier letter the agency had sent to Twitter’s prior management team discussing the importance of the same “independence” requirement from the first consent decree. That order was clear, the FTC wrote, that “Twitter must obtain periodic security assessments ‘from a qualified, objective, independent third-party professional.’”
The “assessor must be an independent third party — not an employee or agent of either Twitter or the FTC,” the letter continued, adding that if the auditor were indeed an agent of Twitter, “Twitter would be in violation of the Order’s requirement that it obtain a security assessment from an ‘independent third-party’ professional.” The FTC then stressed: “The very purpose of a security or privacy order’s assessment provision is to ensure that evaluation of a respondent’s security or privacy program is truly objective — i.e., unaffected by the interests (or litigation positions) of either the respondent or the FTC.”
The FTC’s interference with EY’s independence thus constituted a violation of the 2022 consent decree, Twitter’s legal team argued, justifying the court vacating that order — or at a minimum modifying it. Twitter also argued in its motion that as a matter of fairness, the consent decree should be set aside given the FTC’s outrageously aggressive demands for documents, compared to its posture toward Twitter prior to Musk’s purchase.
That motion remains pending before federal Magistrate Judge Thomas Hixon, with a hearing set for next month.
Connection to the Censorship Complex
While Twitter’s Thursday motion does not directly connect to the Censorship-Industrial Complex, the FTC’s posture toward Twitter changed following news that Musk intended to purchase the tech giant to make it a free-speech zone. And when Roque’s testimony is considered against the backdrop of evidence previously exposed by the House Subcommittee on the Weaponization of the Federal Government, it seems clear the Biden administration sought to punish Twitter for exiting from the government’s whole-of-society plan to censor supposed misinformation.
The House subcommittee’s March 2023 report, titled “The Weaponization of the Federal Trade Commission: An Agency’s Overreach to Harass Elon Musk’s Twitter,” established the FTC had requested the names of every journalist Musk had provided access to internal communications, which had led to the earth-shattering revelations contained in the “Twitter Files.” Many of the FTC’s other demands, the House report concluded, also “had little to no nexus to users’ privacy and information.” The report thus concluded that the “strong inference” “is that Twitter’s rediscovered focus on free speech [was] being met with politically motivated attempts to thwart Elon Musk’s goals.”
Know-Nothing Khan
House Judiciary Chair Jim Jordan, R-Ohio, attempted to question FTC Chair Lina Khan on Thursday about the agency’s apparent interference with EY’s independence and its connection to the federal government’s efforts to silence speech.
“The FTC has engaged in conduct so irregular and improper that Ernst & Young (‘EY’) — the independent assessor designated under a consent order between Twitter and the FTC to evaluate the company’s privacy, data protection, and information security program — ‘felt as if the FTC was trying to influence the outcome of the engagement before it had started,’” Jordan said.
But Khan claimed she knew nothing about Roque or his deposition testimony.
That doesn’t change the fact that the FTC has been laser-focused on Twitter since Musk revolted against the Censorship-Industrial Complex. Whether Twitter will convince the California federal court that the FTC’s conduct justifies tearing up the consent decree, however, remains to be seen.
