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Trump's TikTok showdown is poised to reward his Silicon Valley political allies

TikTok and Oracle will become business partners in the US - a deal meant to satisfy the Trump administration's national security concerns, according to a person familiar with the matter. CNN's Selina Wang reports.

Posted: Sep 14, 2020 6:36 AM
Updated: Sep 14, 2020 9:30 PM


President Donald Trump last month used his office to ignite an international business crisis that's plunged into doubt the future of one of the world's most popular social media platforms — a decision that's now led to the apparent benefit of a major political backer.

As Oracle seeks US approval for a landmark partnership with the short-form video app TikTok, experts say questions will intensify over Trump's political relationship with Oracle chairman and co-founder Larry Ellison.

One of the richest men in the world, Ellison has built extensive bridges with Trump. He has vocally expressed support for the President and reportedly hosted a major fundraiser for him this year where donors who paid $100,000 were offered a chance to golf with Trump.

Nor will the scrutiny be limited to Ellison; Oracle CEO Safra Catz shares close ties with Trump as well. She has donated more than $130,000 to Trump's reelection efforts this year, according to Federal Election Commission data. Catz served on Trump's presidential transition team in 2016 and was at one point considered for a position inside the administration. Both Catz and Ellison have served on Trump's industry working groups devoted to economic revival.

Oracle didn't respond to requests for comment. The White House declined to comment.

Trump raised eyebrows last month when he publicly supported the prospect of a deal involving TikTok and Oracle. At the time, Oracle and Microsoft had been competing to acquire TikTok, with Microsoft viewed widely as the frontrunner. Oracle, experts said, lacked experience in consumer services and offers no products in the social media sphere.

But on Sunday evening, sources told CNN that TikTok's Chinese parent company, ByteDance, had sided with Oracle over Microsoft. Oracle and Treasury Secretary Steven Mnuchin confirmed the proposed deal on Monday. In a statement, TikTok said it believed the proposal would 'resolve the Administration's security concerns.'

Administration officials have complained for months that TikTok represents a risk to national security, due to its current ownership by a Chinese firm. TikTok has rejected those claims, saying it stores all US users' data outside of China and that the information isn't subject to Chinese law; cybersecurity experts have said there is no evidence that TikTok has been compromised by Chinese intelligence.

Oracle's proposed partnership with TikTok must still be reviewed by the US government. And it remains unclear if those discussions will be resolved before a Trump administration ban against TikTok takes effect on Sept. 20, though Mnuchin said the government will be studying the deal this week.

Asked directly whether Ellison's ties with Trump were a factor in the proposed deal talks, a person familiar with the negotiations insisted that it was 'a business decision, not a political one.'

But outside analysts said it is impossible to disentangle one from the other, given Trump's personality. Trump has a track record of injecting himself into ostensibly neutral public policy processes. For example, Trump appeared to intervene in a multi-billion-dollar cloud contract decision many expected Amazon to win; ultimately, and after a quiet pressure campaign by Oracle, the Pentagon awarded the deal to Microsoft. In another closely scrutinized case, Trump vowed to block AT&T's acquisition of Time Warner (which is now WarnerMedia, CNN's parent company). The announcement took experts by surprise because antitrust reviews of mergers are expected to occur independently of presidential influence.

As the Oracle-TikTok negotiations progressed, some reports highlighted how Microsoft has savvily built its own relationships with the Trump administration.

Yet Microsoft's connections were no match for Ellison's, said Eric Schiffer, chairman of the Patriarch Organization, a tech-focused private equity firm.

'Microsoft has done everything they could possibly do except show up at a rally with a MAGA hat to win this,' Schiffer said. 'There's no question that the conventional wisdom was that Microsoft was strategically positioned, having made great political inroads into the administration and having played the politics with Trump fairly well compared to most corporations. But not as well as Larry.'

Other experts said that while Ellison's ties to Trump may have given Oracle an edge, the proposal at the end of the day must still adequately resolve the US government's national security concerns.

Sources have described the proposal as stopping short of an outright sale of TikTok to Oracle, a detail that could conflict with Trump's Aug. 14 executive order that called for a full divestiture, said Harry Broadman, a partner at Berkeley Research Group and former member of the Committee on Foreign Investment in the United States, the government body that vets certain deals that could give a foreign investor control of a US business.

'Yes, Larry Ellison is friends with Trump, and maybe that will mean something, I don't know,' Broadman said. 'But there are executive orders out there, and people will be looking to see how this comports with what the executive orders say.'

Whether the Oracle deal passes security muster depends heavily on the specifics of the agreement, said Alex Stamos, the former chief security officer at Facebook.

'A deal where Oracle takes over hosting [of TikTok's data] without source code and significant operational changes would not address any of the legitimate concerns about TikTok, and the White House accepting such a deal would demonstrate that this exercise was pure grift,' Stamos tweeted.

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