On the heels of this post from last week, the Justice Department is now turning on Wall Street in connection with the federal government’s jihad on internet gambling. We can now rest easier that the scoundrels who have been helped finance this threat to the public will now be brought to justice.
Meanwhile, as noted earlier here, the Justice Department’s campaign against legitimate businesses from other countries who run afoul of an anchronistic US law is not winning the US any friends. The broad latitude that federal prosecutors are being given to criminalize business interests is generating a wave of prosecutorial abuse and waste that is far more troubling than the problem that the prosecutors are attacking. Along those lines, Christine Hurt over at the Conglomerate blog is asking all the right questions about the ominous direction that this criminalization policy is taking us.

As noted earlier here, here and here, the federal govenment’s crackdown on Internet gambling is a wasteful exercise in nanny-state futility. However, it also is damaging to foreign investment in American markets, which is also something that we should not take lightly.
Well, the modern-day Prohibition-protectors are at it again. Earlier this week, the founders of Internet payment-services company Neteller PLC — a publicly-traded London Stock Exchange company that merely facilitates payments to many online gambing sites — were arrested and charged with conspiracy in connection with the transfer of billions of dollars of Internet gambling proceeds. The Manhattan U.S. attorney’s office charged Stephen Eric Lawrence and John David Lefebvre, with conspiracy to transfer funds with the intent to promote illegal gambling, charges which carry a possible sentence of 20 years in prison. Lawrence was arrested in the Virgin Islands and Lefebvre was hauled off to jail in Malibu.
What level of waste regarding the destruction of lives, careers and wealth will it take before Congress and the Justice Department learn that enforcement of paternalistic laws criminalizing something that is not even a particularly serious problem is bad public policy? Along those lines, the Washington Post’s Andrew Beyer reports on how the prohibition-style legislation has already had a detrimental impact on American gambling consumers and an innovative company.

Remember awhile back when longtime Houston-based Nabors Industries Ltd was facing Congressional scrutiny over its efforts to minimize its tax obligations by maintaining its registration in Bermuda (or was that Barbados?)? Well, that little dust-up may be nothing in comparison to what emerged for Nabors over the holidays.
Last week, the Wall Street Journal ($) ran this article reporting that longtime Nabors CEO that Eugene Isenberg is among the highest-paid corporate executives in history, receiving more than $450 million in compensation over the past 19 years, much of which was generated through the exercise of stock-option grants whose value the WSJ contends was enhanced by certain “controversial moves” made by the company. The WSJ article alleged that the company allowed Isenberg to trade in certain worthless options for new ones with lower exercise prices and “reloaded” Isenberg with new options when he cashed in others.
A day later, Nabors announced that it was initiating a further review of its option-granting practices in light of “issues raised” in the WSJ article. This current review follows an earlier internal review of the company’s stock-option practices since 1998 that the company contends “did not suggest that there was reason to question the propriety” of its option-granting practices.
Nabors has enjoyed a meteoric rise over the past 20 years or so, similar to that of another Houston-based company that the WSJ latched its teeth into awhile back.
Stay tuned.

It all started a couple of weeks ago when Richard A. Epstein wrote the op-ed discussed in this post in which he decries the deferred prosecution racquet that coerced Bristol Myers into making a “contribution” to fund an ethics endowment at the prosecutor’s law school, Seton Hall.
Professor Epstein’s piece prompted a response from Seton Hall Law Dean Patrick Hobbs, who contends essentially that the ethics program is for such a good purpose that the school can overlook the serious breach of ethics that was involved in funding the program in the first place.
As you might expect, Professor Epstein has the last word in this WSJ ($) letter to the editor:

My Nov. 28 editorial-page commentary “The Deferred Prosecution Racket” brought forth a spirited but wholly unconvincing response by Patrick E. Hobbs, dean of the Seton Hall Law School (“Fighting the Infection of Unethical Behavior in Corporate Culture,” Letters to the Editor, Dec. 8). Dean Hobbs defends his law school’s decision to accept money for a business ethics program pursuant to the deferred prosecution agreement between the U.S. Attorney for New Jersey, Christopher J. Christie, and Bristol-Myers Squibb. It is sheer naivetÔøΩ to assume that BMS and its attorneys signed on, as Dean Hobbs suggests, because of their deep belief that “the wrong corporate culture can become a breeding ground for unethical and criminal behavior.” There’s no way that BMS would have made that donation if freed from the risk of corporate prosecution. To avoid the taint, let Dean Hobbs raise money for a worthy project from one of thousands of New Jersey firms not faced with the threat of federal indictment.
If anything, his defense of the BMS-Seton Hall gift shows just how cancerous DPAs can be. Any good course in business ethics would stress the dangerous institutional incentives put in play if DPAs can direct payments to public charities. Let’s posit that Seton Hall did nothing whatsoever to urge Mr. Christie to funnel money to it through the DPA. No matter: Once this precedent is set, it’s open season for every public institution to lobby prosecutors for a piece of the action. Worse still, nothing prevents these organizations from quietly supporting criminal investigations to increase the likelihood of such windfalls. The public should not tolerate any arrangements that introduce these third-party influences into the prosecutor’s office. Any excellence of Mr. Christie as a prosecutor or of Seton Hall in ethics reform are tainted by this gift, which the law school should return forthwith.
The systemic problems with DPAs, unfortunately, cannot be solved by Timothy Coleman’s proposal (Letter, Dec. 8) to incorporate the various mitigating elements of DPA into the underlying criminal case. That approach will only clog criminal trials with matters wholly irrelevant to guilt or innocence. And it will fail to soften the present dire consequences from the threat of prosecution. Similarly, it is unwise (and futile) to seek congressional legislation to eliminate the harsh collateral consequences of a federal indictment in other federal agencies. Even if enacted, that legislation would not keep state regulators from pulling their licenses. The downward spiral of DPAs must be stopped at its source, by insulating corporations (but not their senior officers) from criminal prosecution. The recent McNulty memorandum doesn’t shred the Thompson memorandum. But at least it is a start.

Game, set, match — Epstein.

I swear, you can’t make this stuff up.
This previous post reported on Richard A. Epstein‘s WSJ ($) op-ed that addressed a common topic of this blog — that is, the improper use of deferred prosecution agreements by prosecutors to blackmail companies into agreeing to absurd fines and “corrective” measures to avoid being prosecuted out of business.
In the op-ed, Professor Epstein used as an example the recent conduct of the US Attorney for New Jersey. The US Attorney forced Bristol-Meyers to endow a chair of “ethics” at the US Attorney’s alma mater, Seton Hall Law School, as a condition to granting a deferred prosecution agreement settlement to the company over criminal charges. Apparently, in the US Attorney’s world view, the ends of endowing an ethics chair justifies the means of utilizing dubious ethics in arranging the endowment.
Normally, you would think that the publicity surrounding such an arrangement would at least raise some ethical concerns at Seton Hall. Instead, the Seton Hall Dean used this WSJ letter-to-the-editor ($) to respond to Epstein’s disclosure of the questionable arrangement and brag about Seton Hall’s ethics program. He doesn’t even address the school’s problematic ethics in accepting the endowment from a company that was coerced to pay it by a federal prosecutor!
H’mm. I wonder if the Seton Hall Dean would have had a problem if he knew that the alum’s source of funding for his “ethics” program had come from a kickback or ransom paid to the alum? On second thought, his letter answers that question.