Old school
The plot has thickened for investors in the spy game. OK, for investors in companies alleged to be in the spy game. As you may remember, USA Today wrote that phone companies have been providing the government with call records on millions of Americans, perhaps in violation of federal law. The USA Today list of suspects included Verizon (NYSE:VZ), BellSouth (NYSE:BLS), and AT&T (NYSE:T), with Qwest (NYSE:Q) as the lone holdout.

Even spookier were reports -- revealed as part of a lawsuit against AT&T and backed by seemingly authentic documents -- that the NSA was creating top-secret Internet-tapping "sniffer" facilities inside AT&T switching centers. Whereas the call-record flap is about government access to records of communications already undertaken, the latter charges are allegations of widespread eavesdropping on phone and Internet traffic.

New spy game
That's where we stood a few weeks ago. Things have gotten more interesting since. A recent Salon article features interviews with AT&T employees that appear to corroborate the original claims about a San Francisco spying facility. But these employees were working in the St. Louis area. In a facility in Bridgeton, it claims, there was a secret room with high-security biometric entry systems staffed by "government" personnel.

Moreover, this week, AT&T took actions that look pretty darn peculiar in light of these charges. Yesterday, this story in the San Francisco Chronicle detailed the way AT&T has just changed its privacy policy (effective today) in ways that seem to slam the door on user privacy and admit that the firm will be keeping close tabs on customers.

One major change: Your personal data is no longer yours. It's now the property of AT&T.

Another: The agreement allows AT&T to monitor your video viewing habits, something that cable providers are not allowed to do. AT&T says it can do this because it's not a cable company, but a firm that is "building an Internet protocol television network."

The folks at Comcast (NASDAQ:CMSCA) disagree. Call me a cynic, but I bet if the government were handing out tax breaks for all cable companies, AT&T would disavow that "we ain't no cable company" denial quicker than you can say "Poppy needs another house in the Hamptons."

Probably the scariest bit of AT&T's brave new world is summarized by the Chronicle story as follows:

It says the company "may disclose your information in response to subpoenas, court orders, or other legal process," omitting the earlier language about such processes being "required and/or permitted by law."

In other words: We don't care if a government request is legal or not. We're just going to give them whatever they ask for on you. If you don't like it, tough noogies. After all, this is our information, not yours.

I've said before that AT&T's cavalier attitude about privacy might be something that would backfire with consumers -- in fact, I'll be ditching my service as soon as the contract is up.

But I have a sneaking feeling that if AT&T is being used as a tool for government surveillance, it's not the only one.

Connecting more dots
A June 5 Business Week article informed me that President Bush recently gave his intelligence czar, John Negroponte, "broad authority, in the name of national security, to excuse publicly traded companies from certain accounting and securities-disclosure regulations."

Yeah, you got that right. Now, if the spy chief thinks there's a good security reason, he can wave his wand and, presto, exempt companies from the usual requirements of the Securities Exchange Act of 1934, 13(b) (2).

Sounds kind of boring when you phrase it this way, so let's boil it down. If the spy chief says its OK, companies can slink out of major reporting responsibilities such as:

"... mak[ing] and keep[ing] books, records, and accounts, which, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the issuer," and "devis[ing] and maintain[ing] a system of internal accounting controls sufficient to provide reasonable assurance ." that the books are OK.

Welcome to the new era of disclosure.

Who knows who knows?
In the past, it was assumed that these exemptions mostly covered defense contractors working on secret weapons systems, such as Boeing (NYSE:BA) or General Dynamics (NYSE:GD). In this realm, I have to say that this kind of thing would make sense. There's only so much you can tell shareholders about that new black-helicopter program before you dent its effectiveness. But with the assignment of this discretionary power to the spy chief (the first time the power has been delegated outside the Oval Office, it seems), it leaves the door open for all sorts of convenient disclosure omissions.

For instance, why not give our friends at AT&T, and other telecoms that (might) play ball with government spooks, a dispensation from revealing that fact, along with anything else that might offer hints, such as (hypothetical) costs of hosting these alleged snooping facilities?

There's just one more catch: We don't even know which companies receive exemptions, or when. In practice, both officials and companies remain completely tight-lipped about whether or when they've ever received such waivers. In other words, you'll never know whether a company you own is hiding anything -- material or not -- under this waiver.

Orwell, or what?
As scary as it sounds, short of creating a consumer backlash against communications companies thought to be doing government dirty work, I have a hard time seeing exactly how this exemption could cause real reporting problems or accounting scandals at large firms. But then, I'm not as creative as some of the CFOs out there. In the hands of some of the sketchy, fly-by-night "homeland security" stocks I follow, such a waiver would literally become a license to steal.

At the very least, I can envision non-disclosure of material operations information in the name of "national security." These lags in data could allow management to maintain the illusion that all is well, cash out their options, and leave outside shareholders with the empty bag when the problems finally reach the light of day. I can't wait for the first shareholder lawsuit against a defense of "The spy chief said we could."

If market history has taught us anything, it's that reduced disclosure rarely leads to good things. On the contrary, it can give birth to some real monsters.

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AT&T is a former Motley Fool Stock Advisor pick.

Seth Jayson spends his evenings making sure that the satellite rays being aimed at his head are neutralized by a stout layer of foil. At the time of publication, he had no positions in any company mentioned here. View his stock holdings and Fool profile here. Fool rules are here.