The Daily - The $2.7 Billion Case Against Fox News

Episode Date: February 5, 2021

“The Earth is round. Two plus two equals four. Joe Biden and Kamala Harris won the 2020 election for president and vice president of the United States.” So begins the 280-page complaint filed by Smartmatic, an election software company, against the Fox Corporation.Smartmatic accuses the network of doing irreparable damage to the company’s business by allowing election conspiracy theorists to use Fox News as a megaphone for misinformation.Today, we hear from Antonio Mugica, Smartmatic’s C.E.O., and the lawyer Erik Connelly about the $2.7 billion case.Guest: Ben Smith, the media columnist for The New York Times. For an exclusive look at how the biggest stories on our show come together, subscribe to our newsletter. You can read the latest edition here.Background reading: In the latest volley in the dispute over disinformation in the presidential election, Rupert Murdoch’s Fox Corporation has been sued by Smartmatic, which accuses his cable networks of defamation and contributing to the fervor that led to the siege of the Capitol.In December, Ben Smith spoke with Mr. Mugica and Mr. Connelly about the claims being made against Smartmatic. Read the interview here.  For more information on today’s episode, visit nytimes.com/thedaily. Transcripts of each episode will be made available by the next workday. 

Do you have the filing in front of you? Give me a second. It's rather heavy, so yes. Yeah, how many pages is it? It's 280 pages. And would you mind just reading me the beginning? The earth is round. Two plus two equals four.

Joe Biden and Kamala Harris won the 2020 election for President and Vice President of the United States. The election was not stolen, rigged, or fixed. These are facts. They are demonstrable and irrefutable. Defendants have always known these facts. They knew Joe Biden and Kamala Harris won the 2020 U.S. election. They knew the election was not stolen. They knew the election was not rigged or fixed. They knew these truths just as they knew the earth is round and two plus two equals four.

Defendants did not want Joe Biden and Kamala Harris to win the election. They wanted President Donald Trump and Vice President Michael Pence to win re-election. Defendants were disappointed. Defendants decided to tell people that the election was stolen from President Trump and Vice President Pence. Defendants had an obvious problem with their story. They needed a villain. Defendants decided to make Smartmatic

the villain in their story. Having invented their story and created their villain, defendants set about spreading the word. Night after night, publication after publication, Vax News reached out to its millions of viewers and readers around the world with a story. Joe Biden and Kamala Harris did not win the 2020 election. Smartmatic stole the election for them. From the New York Times, I'm Michael Barbaro. This is The Daily.

Smartmatic, an election software company, has just filed a defamation lawsuit against Fox News over false claims spread by the network about the company's role in the 2020 election. The move follows a similar lawsuit by another election software company, Dominion. Together, the lawsuits are raising the possibility that the courts might be one of the few remaining ways to confront the country's crisis of disinformation. Today, my colleague, media columnist Ben Smith, speaks with Smartmatic's CEO and the lawyer bringing the case. It's Friday, February 5th. Where are you now, Antonio?

I'm in Boca Raton, Florida. Oh, back in Florida, back where it all began. Yeah, exactly. So a good place to start this story is in early 2000 in Florida, where Antonio Mujica had just moved from Venezuela. Okay. And how did you land in Boca, just to begin? He was a software engineer, and he just founded a digital security company, Smartmatic, mostly working with banks. But, you know, something happened that put us in the path of elections. But this was Florida in 2000. And so a few months in, he had a front row seat to the incredible debacle that was Bush-Figure.

And we just couldn't believe, you know, that the most powerful country on earth didn't know how to count its votes. And it was at that time that actually my co-founder said, why don't we apply our security tech to design a voting solution? And it seemed like a good idea. And by 2005, we were already kind of the largest provider of voting technology in the world. Okay. So let's fast forward to say October of 2020. Just give me a thumbnail sketch of your business. Where are your biggest elections? Where are your biggest customers? Well, I mean, we have customers in 25 countries around the world. The largest customers we have, I would say the largest is the Philippines. It's a pretty large country. It's 7,000 islands, has 65 million voters. We provide all the technology and support services for the election for the entire country.

And we provide results in a matter of hours. Smartmatic has become the multinational, multimillion-dollar company of Antonio's dreams. And then comes last November. And so tell me, when do you first hear the name Smartmatic pop up in the discussion of the election? It was, I forget the exact date. Former New York City Mayor and President Trump's personal attorney, Rudy Giuliani, is working to establish how many legal votes were actually cast. And he joins me right now.

You know, it was kind of four or five days after the election, the first time that I think. Good morning, Maria. It was Giuliani that, you know, said something. I mean, it's way beyond what people think, including a very, very dangerous foreign company. I mean, completely unexpected. The software that they use is done by a company called Smartmatic. The gist of these allegations was that Dominion,

the company whose voting machines were actually used in some swing states like Georgia, was using Smartmatic software, and that that software was flipping votes from Donald Trump to Joe Biden. And this company has tried and true methods for fixing elections. And bound up in that idea was this idea that Venezuela,

which is where Antonio is from, and which was one of his first customers, was somehow part of these shady dealings. It's a company that was founded by Chavez, and by Chavez and by Chavez's two allies who still own it. It's been used to cheat in elections in South America. You know, of course, one thing you'd never wanna see

is, you know, Fox News with a big screen saying, you know, this is the people you gotta remember. And that pattern that you have there, we have evidence that that's the same pattern Smartmatic used in other elections in which they would disqualify. And see my name there being, you know, basically pointed at as a criminal. This whole thing has to be investigated as a national security matter. When that happened, to be very honest with you, I thought, OK, this is just kind of some kind of a mistake or, you know, confusion that someone has. Because, you know, this is one guy saying one thing one time, and that's it.

You know, it's such a big fantasy, and it's so outrageous that, you know, these will have no legs. And this has to be examined, Maria, beyond this election, which I believe will get overturned. But no such luck. Wow. All right, Rudy, we're going to be following your investigation. Thank you very much for breaking all of the news on this program this morning. It didn't stop with Giuliani. Sidney, thanks very much for being here. We appreciate your time this morning.

I want to get right into it. We just heard about the software made by Smartmatic from Rudy. Sidney Powell, one of the main lawyers bringing court cases on behalf of the Trump campaign, also found a home on Fox for her allegations about Smartmatic. We have so much evidence, I feel like it's coming in through a fire hose. President Trump won by not just hundreds of thousands of votes, but by millions of votes that were shifted by this software that was designed expressly for that purpose. In the days that followed Joe Biden being declared the president-elect,

these allegations just kept exploding all over Fox. It is one huge, huge criminal conspiracy that should be investigated by military intelligence for its national security implications. And we're being spread not just by guests like Giuliani and Powell. Welcome back. The election results in several battleground states continued to be under intense focus as allegations of voter fraud are being investigated. But by Fox anchors themselves. Well, now to the widespread irregularities, anomalies and cheating in the presidential election. President Trump's legal team says potentially rigged voting machines demand a national security investigation. Rigged voting machines demand a national security investigation. You know, after a few days, it was clear that this was going to turn into something really big.

The conspiracy theories spread all over right-wing media, to places like Newsmax and One America News Network. The name Smartmatic became synonymous with the notion of a stolen election. One source says that the key point to understand is that this smartmatic system has a backdoor that allows the votes to be mirrored and monitored, allowing an intervening party a real-time understanding of how many votes will be needed to gain an electoral advantage. Are you saying the states that use that software did that? Well, I know I can prove that they did it in Michigan. But here's the real kicker. And now, just to be clear, did you have any business in Georgia this year? No, zero. Not only this year, I've never had any business in Georgia.

They did it absolutely in Phoenix, Arizona. How about Arizona? No. Zero. They did it in big cities where they have corrupt machines that will protect them, meaning Pennsylvania, Philadelphia, and Pittsburgh. Pennsylvania? Zero. We had no business in any of the swing states or the contested states. Actually, we didn't have any business in the U.S. outside of L.A. County. Neither directly or indirectly. That's what's so particularly crazy about this.

Aside from providing software to L.A. County for its elections, Smartmatic played no other role in the 2020 election. It's total nonsense. But the consequences have been very real. There were the death threats, which by now, sadly, we're familiar with. That pissed me off the most. And then there's the money. What was for you sort of the darkest moment of this? Look, to a certain degree, it still is. Of course, darkest moment is the moment that you started to recognize that the damage that's being done is probably impossible to recover from. And when you have basically 100% of your customers around the world and prospects around the world panicking, you know, basically everybody that works with you, either telling you they don't want to work with you anymore.

Some of them say, look, we would love to work with you, but you know, you're too toxic. We don't want the noise. Or asking for a million explanations, right? Because they're seeing this on kind of, you know, Fox News in what's the kind of the most powerful and far-reaching news channel in the world. It's very hard to know if it's going to completely wipe us out

or if it's just going to hit us very hard. And I don't know how long it would take, assuming we survive, how long it would take us to rebuild. It's hard to say. So definitely, you know, what we were expecting to be a magnificent business for the next decade, it doesn't look that way anymore. So just to the degree you can quantify it, how big a financial hit did you take? How much did this, has this cost you so far? Well, I mean, we have, we have looked at our pipeline for the next

five years and, you know, our different forecasts for the next five years and what, you know, we thought was, you know, the most accurate forecast and then how we feel that forecast has been affected. And then looked at all the, of course, revenue that we think that we're going to lose because of this and that we feel confident we're going to lose because of this. And of course, it translates into lost profit. And that's how we reached the $2.7 billion. $2.7 billion. That's a lot of money. And that's how much they decided to sue Fox News for. Oh, yeah. So, Eric, tell me, when did you first just become aware of these allegations being made against Smartmatic?

So I had heard of the allegations about Smartmatics just from watching TV. But I got contacted by Smartmatics a little after Thanksgiving. And they brought this to my attention and asked me to look into it. And when they first called me, it was obviously a very somber conversation. Eric Connolly is a lawyer in Chicago, and when Antonio decided to take action against Fox News, Eric is who he reached out to. And so after I spoke with them for about an hour,

I spent another hour just watching the news clips, the fax broadcasts, to get my head around it. And by the end of that, it was very apparent to me that there had been a campaign and that if what they were saying wasn't true, that was one of the biggest disinformation campaigns I'd ever seen. Now, why just go after Fox? There's other media outlets, notably Newsmax and OANN, who have been just as aggressive about this stuff. So we're still investigating and analyzing who to bring our lawsuits against. I think you can tell simply by the length of the complaint that we have filed that they take a long time to put together, and we do a lot of due diligence

before we file them. And so it is one step at a time. And certainly when we look at who had a microphone that could reach millions of people in the United States and billions of people across the world with this information, it's fax. You're not just going after them because they have deeper pockets and you don't want to own a small cable network? Fax has the biggest microphone. They have the biggest platform. And because of that, they can do the most damage. And now in your own career, I mean, had you been, is this something that has interested you, this kind of political disinformation?

Were you looking for a case like this? I was not looking for a case like this. You know, I first had a defamation case several years ago for a company based in South Dakota, and that was the first time I'd ever done a defamation case before, and it happened to be the largest defamation case before. And it happened to be the largest defamation case that had ever been filed.

What Eric is not fully saying here is that there's a reason he was chosen for this job. In 2017, he and his partner won the largest settlement in the history of American media defamation. And now a startling

ABC News investigation. A whistleblower has come forward to tell consumers about the ground beef a lot of us buy at the supermarket. He represented a beef production company whose product was described rather unappetizingly by ABC News as pink slime. Pink slime. Pink slime. Pink slime. We're talking about lean, finely textured beef.

It's the component in ground meat made just 90 miles north in Sioux City. You can actually trace a pretty clear line from there to here, to going after the red slime, the disinformation, in some cases outright lies coming from the conservative media world. At a moment when it's pretty unclear

how to stop that slime, and as the consequences of its spread are becoming more and more clear and feeling more and more dangerous to American democracy. Eric's approach to making it stop is to make it hurt very badly financially for the people spreading it. The way you can sometimes send a message is with damages.

And there are occasions where a company like Smartmatics has been damaged so much that the recovery that they are entitled to receive is significant even for a company as big as Fax. And I think that sends a message, and hopefully people don't want to be the next Fax. So in that way, Eric says, this lawsuit is a very tangible way of combating disinformation,

a problem which can feel so impossible. You know, Smartmatics doesn't have the microphone that Fax has. They can't turn on and put somebody on the air and immediately reach hundreds of millions of people. But what they can do is they can file a lawsuit like this. That is an opportunity for Smartmatics to correct the record in a fair way, in a way that they can't do anywhere else. Here's where I need to show my own cards a bit. Until about a year ago, I ran BuzzFeed News, and in that role, I actually was known for a pretty aggressive belief in the media's right

to publish. In particular, I decided to publish the Steele dossier, when traditional news outlets would not. The 35-page document, prepared by a former British spy, alleges the Trump campaign colluded with the Russians and includes uncorroborated, salacious allegations about Trump himself. I knew it had unconfirmed and even false information in it, and we made that clear when we published it. Ben, you made the call when this happened.

Do you have any regrets about publishing this entire document? But I also thought the public had a right to see it. The default now is if you want your audience to trust you, you don't just, our job is not to keep primarily to be gatekeepers, to decide what to suppress and keep from our audience. It's primarily to share with our audience what we've got. Major media outlets had it and politicians, intelligence officials, CNN had even reported that it existed and had been briefed to two presidents of the United States, the president and the president-elect. The American people were basically the only ones who hadn't seen it. Well, exactly one year ago tonight, BuzzFeed released the Trump dossier to the public,

even though they couldn't verify any of its content, some of which were scandalous and salacious. We blasted for them at the time. Now they're getting sued. And I was sued over that decision by people mentioned in the dossier. Like most editors, I've been on the receiving end of a number of defamation threats and lawsuits. And so in general, I've been highly skeptical and alarmed by lawsuits that try to stop media organizations from getting information out into the world.

But I have to confess the events of the past few years have started to shake my conviction a bit. As I've watched misinformation run rampant and system after system fail, I find myself hesitantly open to the idea that Eric may be onto something, that the courts may be one of the few tools available. But I'm still really wary of the implications. But I'm still really wary of the implications. Now, I have to say, you know, and as you probably know, I mean, I've spent my career as a reporter and occasionally as a defendant in these cases.

And the way companies use defamation law makes me nervous. And if you look at the Me Too movement, a lot of important stories were kept silent because of, you know, because of legal threats. And I worry that maybe journalists who think that Fox News was doing crazy stuff will cheerlead this case only to see tightened defamation laws kind of suppress all sorts of true stories. I mean, should we be worried about that? I don't think any reporter that does his or her job and pays attention to the facts and reports what they believe to be true has anything to worry about with a case like this. This is a case where we are alleging a story was simply fabricated. And when you fabricate a story and it causes great damage, then you should be worried about that. But I don't think that's something that most responsible journalists do. I certainly agree with you on that. But that huge verdict you won

against ABC News was not a, you didn't allege a kind of vast conspiracy to make something up from scratch. I think you alleged a series of errors that were, you know, allegedly damaging to your clients. And that's the kind of thing that makes me nervous, that a news operation is crippled over, you know, allegedly misrepresenting some beef processing processes. Aren't these all part of the same fabric? The burden of proof on a plaintiff bringing a defamation case is very high. And so the courts have provided a lot of protection for journalists. The responsible journalists don't have anything to worry about. They're not going to ultimately lose. The ones who are transgressing your norms, transgressing

your responsibilities, are the ones that are in the crosshairs for these types of lawsuits. There's already some evidence to be found that these lawsuits are having a real impact, long before they've come close to being decided. Fox dialed back its claims about the election late last year after threats from Smartmatic. And then this week, a video went viral. Joining us now to discuss is the founder and CEO of MyPillow and the author of the book, What Are the Odds, Mike Lindell. Mike, thank you so much for joining us and welcome. So what happened with your Twitter account and the company page? It showed the CEO of a company called MyPillow in an appearance on Newsmax. He'd been invited to come on to discuss cancel culture and deplatforming. He'd just been

kicked off Twitter for spreading false claims about election fraud. Well, first, mine was taken down because we have all the election fraud with these Dominion machines. We have 100% proof. And then when they took it down, a few weeks ago, and then I'm going to back up. But all he wanted to talk about

was his belief in the fraud itself. Mike, thank you very much. Mike, you're talking about machines that Newsmax have not been able to verify any of those kinds of allegations. And a clearly terrified Newsmax anchor literally pulled out a document. Let me read you something there. While there were some clear evidence. And began reading what was obviously a corporate statement they'd been given.

The election results in every state were certified and Newsmax accepts the results as legal and final. Language to make very clear that this news organization does not believe fraud occurred. After weeks, of course, of saying it did. And weeks of saying Smartmatic was part of that. Did you see that clip of the CEO of MyPillow on Newsmax getting kind of cut off to the point where one of the hosts walks away as he tries to spread election misinformation? What did you make of that? I saw Newsmax reacting to the fact that they had received a retraction demand letter from Smartmatics and trying to take a step to make sure that they don't make the situation any worse. trying to take a step to make sure that they don't make the situation any worse.

Thank you again for taking the time. And we'll obviously be following this one closely. All right. Thanks, Ben. A lot of us are following this closely, wondering, with all our reservations, whether this lawsuit could damp down some of the insanity that sometimes seems like it's overrun American politics. But there are real limits to what lawsuits can do. There's another one making its way through the courts right now, this one against Alex Jones, the Infowars founder.

The plaintiffs are the parents of children murdered at Sandy Hook who have already forced Jones to acknowledge that their kids really did die, that it wasn't theater, as he had claimed. But that doesn't make someone like Jones vanish. If you were watching the insurrection at the Capitol last month, there he was with his bullhorn, telling the crowd, quote, we won this election. And as long as you're not defaming a person or a company, there's no law against lying. Let's go take our country back! Traps only mandatory! Let's start marching to the Capitol!

Peacefully! Notice, like Don Children said, we're not burn bowling now or ship cops. On Thursday afternoon, in a statement to the Times, Fox News responded to the lawsuit from Smartmatic, saying, quote, We are proud of our 2020 election coverage and will vigorously defend this meritless lawsuit in court.

We'll be right back. Here's what else you need to know today. On this vote, the yeas are 230 and the nays are 199. The resolution is adopted. In an unusual move, the House of Representatives voted to remove Republican Congresswoman Marjorie Taylor Greene of Georgia from the two committees on which she sits, Education and Labor and Budget, over her history of spreading extreme, bigoted, and false information. The vote was mostly along party lines. Just 11 Republicans backed the resolution. And on Thursday, lawyers for former President Trump rejected a request from House impeachment managers that he testify during his Senate trial. In a letter to Representative Jamie Raskin of Maryland, the lead House manager prosecuting the case, the lawyers called the request a, quote, public relations stunt.

The trial is scheduled to begin on Tuesday. Today's episode was produced by Rachel Quester, Nina Potok, and Elise Spiegel. It was edited by Lisa Tobin and Mike Benoit, and engineered by Chris Wood. That's it for The Daily. I'm Michael Bilbaro. See you on Monday.