City Paper is not for tourists
On March 26, 1996, two dozen reporters and camera crews assembled at the National Press Club to hear Marc Klaas address the Kids Off Lists (KOL) press conference. A new coalition of child, privacy, and victims’ rights advocates, KOL seeks to prohibit direct-marketing companies from collecting and selling data on children without parental consent. Klaas, father of 12-year-old murder victim Polly Klaas, blasted U.S. data companies for marketing information on kids. “Are children little targets for making a buck?” he asked.
Marc Rotenberg of the Electronic Privacy Information Center and Evan Hendricks of Privacy Times followed Klaas at the podium and argued that the federal government must regulate the collection of data about kids. “We are asking today,” said Rotenberg, “that an industry which collects personal information on our children be held accountable.”
Scores of direct-marketing firms collect and sell data on children, but the speakers singled one out for criticism: Chicago-based printing behemoth R.R. Donnelley & Sons, and its direct-mail subsidiary, Metromail Corp. They showed a KOL public-service announcement that urged viewers to call Metromail “at 1-800-228-4571…find out what they have on your child…[and] tell them to dump it.” They displayed a KOL flyer that offered a $5,000 reward for information leading to the conviction of anyone who has used a commercially sold database—“available from companies like Donnelley and its Metromail subsidiary”—to “locate and harm a child.”
By the end of the press conference, you could easily imagine that Metromail and Donnelley were the devil’s own progeny, making a fast buck by selling your child’s name, age, and address to any pedophile in the mood.
And that’s probably what John Aristotle Phillips wanted you to think. The 40-year-old Capitol Hill businessman did not attend the press conference. He did not appear in the press advisory. Nor was he mentioned in any of the speeches. But Phillips funded the event.
No one doubts Klaas’ sincerity about child safety (although Polly Klaas’ killer didn’t use a mail list to find her) or the motives of the other speakers. But the KOL members seem to be in denial about one thing: their unwitting role in Phillips’ relentless war on Donnelley. Over the past five years, Phillips, co-founder and president of a 40-employee, $5-million firm—Aristotle Publishing—has battled Donnelley—a $6.4-billion firm with over 40,000 employees in 21 countries—in the courts, the media, and anywhere else he can stage a fight. Along the way, Donnelley has learned what almost everyone who has crossed John Phillips has learned: Phillips—a man who has run for Congress, published an autobiography, been cast in a movie about his own life, and designed an atomic bomb—knows how to play hardball.
“My mother always told me, if you must go into business, make a lot of money doing what’s right,” Phillips says. “And that’s what I think I’m doing…without trying to hide the fact that I’ve got a business interest.”
R. R. Donnelley & Sons, which prints everything from best-selling hardcovers and phone books to the National Enquirer and Windows 95 diskettes, is not used to being bested, particularly by a puny company like Aristotle Publishing. But so far, its very public brawl with John Phillips has been no contest. With one hand firmly grasping Donnelley’s throat and the other its genitalia, Phillips clearly controls this corpo-drama.
Aristotle, which Phillips and his brother Dean founded while in college, is a political software firm. The company, headquartered at 2nd and Pennsylvania Avenue SE, develops computer programs that help manage political campaigns. It also sells computerized lists of voters and campaign contributors.
Phillips’ hate/hate affair with Metromail, Donnelley’s $240-million-a-year direct-mail and consumer-information subsidiary, began in 1990. That year, Aristotle hired Metromail to append phone numbers to voter records Phillips had purchased from state and local election boards. According to Aristotle, which filed suit against Metromail for $5.3 million in March 1992, Metromail violated a contract by using some of the voter data for its own purposes.
The Aristotle-Metromail suit slogged on until 1994, when John Phillips and Aristotle lawyer Blair Richardson hit pay dirt: They found evidence, they believed, that Metromail had used restricted voter-registration data (obtained from the AFL-CIO and others) for commercial purposes, possibly in violation of state laws. A majority of states prohibits voter data from being used for nonpolitical purposes.
“[Metromail is] an outstanding example of how you do not handle personal information in the 1990s,” says Phillips.
With this and other damaging information in hand, Phillips commenced what he calls a “public shaming” of Metromail. He almost certainly leaked the story to the Wall Street Journal, which slammed Metromail’s practices in a Dec. 23, 1994, article.
Phillips also took the ingenious step of buying shares of his nemesis’s stock. “I became convinced,” he explains, “that as a [Donnelley] shareholder, I could effectively pursue my interest in getting to the bottom of this scandal through avenues which were closed to me as
By his own account, Phillips amassed more than $1 million worth of Donnelley stock by the end of 1994. This gave him “the ability to demand” that Donnelley’s board of directors finance an outside audit of Metromail’s data-handling practices. When the audit was complete, Donnelley held a press conference to announce the results, as well as the resignation of Metromail president James McQuaid, who would receive a very generous severance package and stay on with the company as a consultant.
In early 1995, a besieged Metromail agreed to settle Aristotle’s lawsuit for $2.7 million. But Phillips didn’t loosen his choke-hold on the rival firm. “There are legal and ethical issues here about which I care a great deal,” he explains.
After he won the civil suit, he talked with federal investigators about Metromail’s practices. Why spread the word? So that Aristotle might assume Metromail’s contracts with federal law enforcement agencies, lawyer Richardson explains. “Even if it’s just a few million dollars, we would like to cut into that.”
“It is in my business interest to have the sheriff visit this, you know, dusty outpost on a frequent basis,” Phillips says, explaining his fixation with Metromail. “And when the sheriff finds a cattle rustler, string him up by the neck.”
Now Phillips is turning the screws again with a PR offensive against the company. Early this year he enlisted the support of Klaas, who gained a horrid sort of fame in 1993 when his daughter was kidnapped from a slumber party and murdered. As both an advocate and victim, Klaas lends a moral cachet and urgency to every cause he backs.
Together, Phillips and Klaas founded Kids Off Lists, which is focusing much of its criticism on Metromail. “If there are other companies that are doing this, I’m interested in knowing who they are,” said Phillips when asked why KOL was not, as of a Feb. 14 interview, attacking other companies that collect data on minors. “But the fact is that [getting kids off Metromail’s database] is one of the goals that I have set.”
Phillips hired two public relations firms to coordinate KOL’s Feb. 8 kickoff press conference in Chicago, where Donnelley is headquartered. He has since helped fund four more KOL press conferences.
By March 7, Phillips had won his biggest victory: Donnelley announced its intention to sell off a majority stake (approximately 58 percent) in Metromail. Spokesperson Steve Bono insists that the KOL campaign had nothing to do with the decision. “This would have happened with or without Phillips,” Bono argues. Somehow, though, the statement does not seem entirely candid.
Documents filed by Donnelley with the Securities and Exchange Commission on March 7 declared, “No assurance can be given that Mr. Phillips will cease [his] efforts or that governmental investigations or regulation or adverse publicity that adversely affect the Company’s business will not result from his efforts.”
Under the terms of the sale, Donnelly will likely retain majority control over Metromail’s board for years, so Phillips’ attacks are not likely to abate. On March 28, he and Klaas attended Donnelley’s annual shareholders’ meeting in Chicago and peppered the board of directors with unfriendly questions about Metromail and children. “Will Donnelley permanently renounce the practice of providing personal information about children?” Klaas asked.
Even as KOL continues to thrash Metromail, its credibility within the privacy and children’s movements is growing fast.
“I think KOL stands on its own merits,” says member Evan Hendricks.
Last month, Klaas persuaded Sen. Dianne Feinstein (D-Calif.) and Rep. Bob Franks (R-N.J.) to co-sponsor a bill that regulates the sale of children’s data and establishes parental rights over such data. KOL members helped draft the bill. “We must act now to protect information about our children,” said Franks at a May 22 press conference on the Capitol grounds, “before a real murderer or child molester buys a list of potential victims.”
A recent sting operation conducted by a Los Angeles television reporter may increase the bill’s chances of becoming law. Posing as an assistant to a fictitious children’s clothier named Richard Allen Davis, reporter Kyra Phillips (no relation to John) bought a Metromail list containing the names, addresses, genders, and birth dates of 5,000 Pasadena kids age 1 to 12. Richard Allen Davis is the name of Polly Klaas’ murderer.
The televised report drew tremendous interest, both inside and outside Los Angeles. An aide to President Clinton asked Kyra Phillips for a videotape of the report to put on the president’s desk. The sting gives credence to John Phillips’ long-held belief that Metromail shouldn’t be trusted with the names of young children.
The child of a Yale engineering professor and a schoolteacher, John Phillips demonstrated his flair for theatrics early. In 1973, he enrolled at the University of California at Berkeley “in hot pursuit of ‘the movement.’” His timing was poor. Within a year, the Vietnam War had ended, President Richard Nixon had resigned, and the student movement had disappeared into a fog of marijuana and Pink Floyd. Phillips transferred to Princeton in fall 1975.
He quickly made his mark at his new school. He signed up for Arms Control and Disarmament 452, a class that studied, among other topics, whether terrorists could design an atomic bomb. Many of his fellow students doubted that a bomb could be built without another Los Alamos project, but Phillips, a physics major, was not so sure. He decided to design one for a physics project.
Through a combination of exhaustive research, college physics texts, declassified Los Alamos papers, and guile, Phillips reached his goal: He drew a blueprint for a cheap, portable, and allegedly workable plutonium bomb. “Student Designs $2,000 Atom Bomb,” read the headline of an article in the New York Times.
Phillips’ design attracted attention from people other than just reporters. A Pakistani diplomat clumsily stalked him and offered a bribe for his drawings. Phillips reported the offer to the CIA, and a friend passed the story on to Sen. William Proxmire. Proxmire later used the incident to embarrass the French government, which was preparing to sell “peaceful” nuclear technology to Pakistan.
Even though he was still a student, Phillips handled these events with ease, demonstrating the knack for PR that has served him well ever since. When the media got wind of the Pakistan affair, for example, Phillips held an impromptu press conference at Princeton. Dumbfounded classmates watched as he skillfully fielded questions from network television reporters.
The hardcover edition of Mushroom: The Story of the A-Bomb Kid, a book co-authored by Phillips at age 21, sold nearly 30,000 copies and was excerpted in Esquire. Phillips parlayed the book into a movie deal and stunned CBS producers by demanding to play himself in the film: no role, no sale. According to Mushroom, the reluctant producers agreed to give Phillips a screen test. Improbably, his performance earned him the part, though ultimately the movie was never made.
Phillips graduated in 1978, then hit the college lecture circuit to warn of the dangers of nuclear proliferation. In 1980, the 24-year-old declared himself a candidate for Connecticut’s 4th District congressional seat. Rival politicians snickered at first, but they weren’t laughing when he out-fund-raised them and won the Democratic primary, running what he then called “the best-organized campaign this district has seen in a decade.” Phillips lost the general election by a wide margin to five-term Republican incumbent Stewart J. McKinney.
Phillips ran again two years later, this time gaining the unanimous support of local Democratic leaders. He again lost to McKinney, but Phillips didn’t leave the race empty-handed. Using skills he developed in both campaigns, he embarked on a new career as a political software entrepreneur.
In the early 1980s, most political candidates still managed their voter, contributor, and volunteer lists by hand. But Phillips had studied computer programming in college, and his campaign manager was his younger brother Dean, who had studied engineering at M.I.T. The pair designed campaign-management software for their Apple computer. Word of their program spread quickly among other candidates and political operatives. In 1983, the Phillips brothers and Aristotle Publishing (then Aristotle Industries) issued Campaign Manager, their first software product.
The market for political software has expanded exponentially since then, and now even the poorest candidate uses computers to organize a campaign. Aristotle has grown with the industry. Campaign Manager software remains a top seller, as do Aristotle’s voter lists; Aristotle also developed and sells Constituent Service, a program that helps legislative staff manage mail and casework.
Phillips brought the skills he learned on the campaign trail to his business. In May 1987, Campaigns & Elections (C&E) magazine reviewed Campaign Manager. According to a deposition transcript, Phillips discovered in advance that the review contained negative observations that were, in his estimation, false or unfair. He badgered the editors to fix the errors, but to no avail. He concluded he was being punished because he had pulled Aristotle’s ads from the magazine and because the publisher, James Dwinell, didn’t like him. According to Phillips, Dwinell remarked upon meeting him for the first time, “I understand you are a sleazy guy.”
As former Aristotle employee Mike Shannon observes, “Once John gets unhappy about something, he stays unhappy.” Weeks after the review appeared, Phillips retaliated by starting a competing publication, Campaign Industry News. Then he filed suit against C&E on Thanksgiving Eve 1987.
Eighteen months later, a weary Dwinell settled with Phillips, paying him attorney’s fees and $100,000 cash, much of which Phillips promptly plowed back into Campaign Industry News. Phillips didn’t stop there: He stayed in the magazine business only as long as he could compete with Dwinell. Weeks after Dwinell sold C&E to current owner Ron Faucheux in 1993, Phillips struck a deal with Faucheux in which Phillips stopped publishing Campaign Industry News and transferred his subscribers over to C&E. In exchange, Faucheux gave Phillips a small amount of cash and several years’ worth of valuable free advertising.
Since he settled the C&E lawsuit in June 1989—his first as a plaintiff—Phillips has kept the clerks at D.C. Superior Court busy. Aristotle Publishing sued a competitor for mailing excerpts of C&E’s software review to current and “potential” customers, sued Metromail for using, without permission, voter data collected by Aristotle, and sued a former employee (and current competitor) for allegedly breaking a noncompete promise.
In each of these cases, the defendant agreed to settle with Aristotle rather than fight a prolonged court battle with the tireless Phillips. (The last case, over the noncompete clause, is not over, but is expected to be settled out of court shortly.)
“[Phillips] is a tough, smart competitor,” says ex-Phillips employee David Beiler, who remains friendly with his former boss. “And if I were up against him, I wouldn’t sleep well at night.”
If media relations were a martial art, Phillips would wear a black belt. Through press conferences and whispers to reporters, Phillips has buried Donnelley’s public relations staff in a stack of negative articles and televised stories on the company’s marketing practices. As Beiler points out, “He has a grasp of the media far beyond [that of] your typical CEO.”
Phillips’ political career, though brief, no doubt gave him a level of media savvy that his business peers lack. For example, Phillips tapped Beiler to help with media planning when Phillips was working for Ross Perot in 1992, and then last year used him to help plan KOL’s press conference in Chicago.
Even prior to his campaign experiences, Phillips displayed a precocious understanding of the media. “After a while, I begin to enjoy the interviews with reporters,” wrote Phillips, then 21, in Mushroom. “I learn quickly about the fast-food journalism mentality. I become adept at manipulating the reporter.”
I found out just how adept he is. Early on, Phillips and Richardson tried to turn my profile on Aristotle into an exposé on Metromail by leaking documents and tips on the company. Richardson, for example, mailed a copy of a Metromail-proposed settlement clause that he characterized as an attempt to buy his silence. Under the provision, which Phillips rejected, Aristotle would have promised that it had not told and would not tell government officials about possible Metromail violations of voter-data laws.
Both men provided names and phone numbers of people to interview, including Donnelley officials. Phillips offered to have Richardson draft a list of probing questions to ask John Walter, Donnelley’s chairman of the board. They did everything for me except offer to pay my reporting expenses and dial the phone.
In January, I received a friendly letter from Richardson that raised the possibility of my writing a book about Metromail with Phillips. Sometime after I rejected the offer, Richardson and Phillips, perhaps sensing that the article was shaping up into more than simply an exposé of Metromail, began to take a confrontational tack, complaining in a letter to a Washington City Paper editor that a set of questions recently submitted by me reflected a poor understanding of “the complicated affair involving Metromail.” The letter described my questions as “extremely troubling.”
It was a deft play. Sow doubt about a reporter with his editor while rattling the saber and implying there may be legal trouble down the road. Unlike most people who quake when a reporter calls with tough questions, Phillips seems energized by the process. A quote from Mushroom sums up Phillips’ understanding of the symbiosis between reporter and subject. “I discover that the interview…is a mutual use: I am using the journalist to get across my message about [nuclear] proliferation. He in turn is using me to make a living.”
Phillips is not the type to inspire tepid feelings in people: Many fear him, some revere him, and most get a kick out of him. Phillips’ larger-than-life persona has nothing to do with his height (average) or frame (wiry); it has everything to do with his unusual intelligence, his guts, his tenacity, and the ease with which he seems to file lawsuits.
Phillips’ brother Dean provides Aristotle with needed balance. Dean is “a good technician. He’s very, very bright, in a technical sense,” says friend and former colleague Beiler. “John’s very bright in more of a broad-picture sense…so they make a pretty good team.” Dean recently moved out of the Capitol Hill house he and John bought together in 1987. John remains there with his family.
Phillips’ competitors and detractors generally refuse to speak on the record about him, fearing that the slightest slip-up will bring subpoenas. James Tobe’s brief comments are typical: “The Phillips brothers are aggressive, litigiously,” he says. “Nobody wants to say much [about them].” Efforts to get Donnelley and Metromail to respond in kind to Phillips’ assaults yielded little.
Beiler acknowledges that people in the industry are “leery” of Phillips and thinks Phillips’ intelligence is partly to blame. “Part of this stems, I think, from his reputation for being this genius with the ‘Mushroom Kid’ thing,” says Beiler. “People think he’s smarter than they are, but he doesn’t come across as some geek, so they don’t really see any vulnerability….It puts them on the defensive.”
Richardson admits to holding his boss in awe. “He [gives] you this impression like you’re playing Kasparov in chess,” he marvels, “like he’s 15 moves ahead of you.”
Phillips’ motivations are another source of speculation. What, for example, is behind his crusade against Metromail? The money? The publicity? The principle? Vengeance? The safety of children? Phillips himself doesn’t mind fueling the speculation: “As my motivations have been a constant source of interest to the Company,” he wrote in a letter to Donnelley’s board chair last February, “you may therefore choose to view my comments as those of a shareholder, a competitor, a citizen, a publicity seeker, or a whistle-blower. It really does not matter to me.”
In Washington, where even the appearance of a conflict of interest can end a career—and where one is supposed to pursue either personal gain or social good, but never both at the same time—Phillips admits to wanting it both ways. “I believe that if I can do something that is in my business interest that is also what is right, that’s the ideal thing to be doing.”
Graft a Berkeley heart and a Princeton brain onto a marathoner’s frame, and you might create a corporate vigilante like John Phillips. But Phillips is more than a product of his era or his alma maters. He is blessed with extraordinary confidence in his own integrity, abilities, and vision. He appears to fear nothing and no one. And whether designing an atomic bomb or plotting the demise of a competitor, John Phillips plays to win. And he plays very, very hard.
Even as he wallops Donnelley and Metromail, Phillips has been orchestrating his brother’s presidential campaign. Dean Phillips declared himself a candidate for president in June 1995. Soon after, he loaned his campaign $5,010, which he placed in a Signet Bank account. But he did not apply to get on the Democratic primary ballot in New Hampshire. And according to an April 1996 statement he submitted to the Federal Election Commission (FEC), his campaign had not yet spent a dime on advertising, literature, or travel.
Dean probably won’t win many votes on Election Day, but then again he probably never expected to. Plain and simple, his candidacy is a business tool. Dean says his candidacy is helping Aristotle keep track of its competitors by putting him on their mailing lists. Aristotle is learning which products and services its rivals are pitching to presidential candidates, as well as the prices they are quoting.
Another reason for running, Dean says, is to enhance Aristotle’s access to voter data, the backbone of its voter lists on CD-ROM. For privacy reasons some states and counties prohibit nonpolitical entities from purchasing such data. Virginia law, for example, provides that: “The State Board of Elections shall furnish to candidates, elected officials, or political party chairmen and to no one else, on request and at a reasonable price, lists…of persons who voted at any primary or general election held in the two preceding years.” Doors that might have shut in the face of Dean Phillips, business owner, might now swing wide open for Dean Phillips, presidential candidate. Richardson says he knows of no “instance where Dean’s candidacy was used…to get access to data we are not supposed to have.”
Dean’s candidacy has also helped Aristotle double-check the accuracy of its Campaign Manager software. A key feature of Aristotle’s software is its ability to print financial disclosure forms that are, as a company brochure boasts, “pre-approved by all state and federal election agencies.” Since election boards aren’t actually willing to pre-approve these forms for software companies, Dean, as a presidential candidate, submits his own forms. Aristotle reviews the results of his submissions to determine whether Campaign Manager’s versions are in compliance.
The ability to purchase voter data on the cheap was, Dean says, a “big part” of his rationale for running. In some states and counties the cost of voter data varies according to who’s buying it—and candidates, it appears, sometimes pay less. (Richardson says he is “not aware of any states or jurisdictions where candidates get a discount.”)
In short, running for president was a shrewd idea. Dean’s candidacy may have helped Aristotle get free feedback from state election boards, gain access to restricted data, cut acquisition costs, and provide information on the opposition—all just for filing a few forms with the FEC.
On the other hand, the tactic is not the sort you would expect from the Pollyanna-ish John Phillips, who portrays his firm as the ethical alternative to Metromail. “I won’t use tainted data,” Phillips says with characteristic moral fervor in a January press release. “[Metromail] will.” Imagine what Phillips would say if a Metromail executive, not Dean, had registered as a presidential candidate.
The state of Virginia was not amused by Dean’s candidacy. “It was obvious from the moment he sent [his application to purchase voter data] in what he was doing,” says Jim Hopper of the state attorney general’s office; Hopper says he referred the case to the criminal investigations unit. “They’re selling [the data] for profit,” he explains, “and for whatever reason, our general assembly says, ‘No, you can’t do that.’” Even if the ultimate use of the data were for political purposes? “Macht nichts. It matters not,” Hopper says. A spokesman for the attorney general’s office refused to disclose the existence or status of any investigation.
The state of Maryland prohibits the use of voter data for business purposes, but state employees interpret the restrictions more loosely. Joan Mobley of the board of elections is aware that some vendors, like Aristotle, repackage Maryland voter data and resell it to candidates. “I don’t think there’s a problem with that,” she says. (D.C., by the way, allows its voter data to be purchased by anyone, for any purpose.)
News of Dean’s candidacy prompted a hearty laugh from John Convy, a competitor who was sued by Aristotle in 1987. “More power to ’em….I think it’s brilliant,” he says. “I’m not really opposed to finding end-runs and work-arounds.”
Asked his opinion on Dean’s candidacy, Donnelley spokesperson Bono cracked, “He can pretty well count on not getting support from our PAC.” Bono heads Donnelley’s political action committee.
KOL member Hendricks reacted coolly when I told him about Dean’s run for the presidency. He deferred comment on the issue until he had a chance to hear Aristotle’s side of the story. Two days later, Hendricks left an angry message on my answering machine: “John Phillips has done more than anyone else to shed light on the highly secretive direct-marketing industry,” said the Privacy Times editor, “and for that he is a hero in the privacy movement.” Hendricks went on to impugn my motives in reporting the story and finally wound up asking me, “Are you working for Donnelley and Metromail?”
This week is shaping up quite nicely for John Phillips, archvillain cum superhero. KOL members Rotenberg and Hendricks are participating in a Federal Trade Commission forum on children, privacy, and the Internet. Meanwhile, in Boston and then in New York City, Marc Klaas and a KOL truth squad are holding pre-emptive press briefings at the Bay Club and the Plaza Hotel. Among their goals: to disrupt lunches hosted by Donnelley’s investment bankers, who seek to tempt investors into buying Metromail’s new stock offering.
All the while, Phillips will be sitting back in his Capitol Hill office, enjoying the fruits of his cunning labor. He probably spends some time wondering which is his more ingenious creation: the portable atom bomb or Kids Off Lists. CP