Category Archives: Legal – General

National Security Wisdom from the Joker

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Security TheaterCato’s Julian Sanchez brilliantly sums up the logic behind the national security policy that leads our government to impose this kind of absurd abuse on its citizens:

Batman’s archnemesis the Joker–played memorably by Heath Ledger in 2008‚Ä≤s blockbuster The Dark Knight–might seem like an improbable font of political wisdom, but it’s lately occurred to me that one of his more memorable lines from the film is surprisingly relevant to our national security policy:

“You know what I’ve noticed? Nobody panics when things go ‘according to plan.’ Even if the plan is horrifying! If, tomorrow, I tell the press that, like, a gang banger will get shot, or a truckload of soldiers will be blown up, nobody panics, because it’s all ‘part of the plan.'”

There are, one hopes, limits. The latest in a string of videos from airport security to provoke online outrage shows a six-year-old girl being subjected to an invasive Transportation Security Administration pat down–including an agent feeling around in the waistband of the girl’s pants. I’m somewhat reassured that people don’t appear to be greatly mollified by TSA’s response:

“A video taken of one of our officers patting down a six year-old has attracted quite a bit of attention. Some folks are asking if the proper procedures were followed. Yes. TSA has reviewed the incident and the security officer in the video followed the current standard operating procedures.”

While I suppose it would be disturbing if individual agents were just improvising groping protocol on the fly (so to speak), the response suggests that TSA thinks our concerns should be assuaged once we’ve been reassured that everything is being done by the book–even if the book is horrifying. But in a sense, that’s the underlying idea behind all security theater: Show people that there’s a Plan, that procedures are in place, whether or not there’s any good evidence that the Plan actually makes us safer.

And this is not all about civil liberties, either. As David Henderson points out, citizens who throw up their hands in disgust with the TSA’s security theater and elect to drive rather than take a short-haul flight risk a fatality rate that is 80 times higher per mile than travelers on a commercial airliner face.

In short, the TSA is killing people.

As with the overcriminalization of American life, the TSA is an ominous reflection of a federal government and major political parties that are increasingly remote and unresponsive to citizens.

Is it too late to change? That would be a good question for someone to ask President Obama, who was famously elected on the slogan of “change we can believe in.”

 

So, Why No Pound of Flesh?

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That’s essentially the question that this Gretchen Morgenson/Louise Story/NY Times article asks.

Why have there been so few criminal prosecutions in regard to the 2008 meltdown on Wall Street that prompted a huge federal government bailout that citizens will be subsidizing for decades?

Yet, the intrepid NY Times reporters can’t quite bring themselves to recognize that whether the government pursued and obtained a criminal conviction of a businessperson over the past decade has had much more to do with chance and politics than prosecution of truly criminal conduct.

Could it be that federal prosecutors are finally realizing that old-fashioned greediness really is not be a crime?

Of course, the rationalization for the lack of villains now as compared to earlier crises has never been particularly compelling.

What the NY Times reporters refuse to confront is that business prosecutions over merely questionable business judgment is fundamentally bad regulatory policy.

Such prosecutions obscure the true nature of business risk and fuel the myth that investment loss results primarily from criminal misconduct.

Taking business risk is what leads to valuable innovation, wealth creation and – most importantly these days – desperately needed jobs for communities. Throwing creative and productive business executives such as Michael Milken and Jeff Skilling in prison may placate NY Times reporters, but it does nothing to educate investors about the true nature of risk and the importance of diversification.

Ignorance about business risk is one of the underlying causes of the the criminalization of business lottery. Basing criminal prosecutions on the luck of the draw breeds cynicism and disrespect for the rule of law.

Isn’t it about time that dubious policy be put to permanent rest?

Update: Larry Ribstein — who maintains an entertaining archive of blog posts that he wrote over the years on Morgenson’s misfires — comments on Morgenson’s latest posse-gathering effort here.

The Fifth Circuit punts on the Skilling case again

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skilling 040711The Fifth Circuit Court of Appeals has not exactly distinguished itself in regard to the appeals emanating from Enron criminal matters.

First, there was the appellate court’s affirmation of the U.S. District Court’s ludicrous conviction of Arthur Andersen. That gem was subsequently overturned by a unanimous U.S. Supreme Court.

Then, a Fifth Circuit panel affirmed the District Court’s brutal conviction of former Enron CEO Jeff Skilling. That pearl of judicial wisdom was disassembled by a largely unified the Supreme Court last year.

As if on cue, a Fifth Circuit panel has predictably produced another clunker, this time affirming Skilling’s convictions on conspiracy and securities fraud counts because the erroneous reliance of the prosecution on Skilling’s honest services wire fraud amounted to harmless error.

In short, the Fifth Circuit rationalizes that the prosecution really didn’t rely all that much on all that honest services stuff in convicting Skilling, so his convictions on the other charges should stand.

Yeah, right. The prosecution didn’t rely on the honest services counts all that much? Poppycock. For example, remember the absurd amount of time that the prosecution spent during trial on Skilling’s alleged honest services violations in regard to Photofete?

What is most striking about the Fifth Circuit’s decision is its utter vacuity. For example, the decision contends that there was “overwhelming evidence” that Skilling committed securities fraud by engaging in fraudulent accounting in regard to several Enron units. But the decision fails to cite any of the supposedly “overwhelming evidence” and doesn’t even address the rather important point that the prosecution did not accuse Skilling of falsifying any of Enron’s accounting. In fact, the prosecution didn’t even put on any expert evidence that Enron’s accounting for the allegedly misleading disclosures was wrong, much less false. This tortured logic took this Fifth Circuit panel six months to generate?

Oh well, this matter is far from over. Not only is the case going back to the District Court for re-sentencing, but now Skilling finally gets his opportunity for the first time to seek a new trial on the egregious prosecutorial misconduct (see also here) that was uncovered after the conclusion of the first trial. And you can bet that the Fifth Circuit panel’s most recent rationalization will eventually be the subject of another appeal to the Supreme Court.

Meanwhile, a man who was a primary component in creating enormous wealth for investors and thousands of jobs for communities continues to sit in a Colorado prison.

Sure seems to me as if we could use more of those in the business community these days.

Update: Ellen Podgor has her typically cogent analysis of the Fifth Circuit decision here.
Fifth Circuit Skilling Decision 06-20885-CR1.wpd

The unreliable eyewitness

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Daniel Simons lucidly explains what most trial lawyers know instinctively — an eyewitness is often quite unreliable.

Why We Need to Protect Bradley Manning and R. Allen Stanford

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Glenn Greenwald has done an outstanding job of directing the blogosphere’s attention toward the U.S. Army’s inhumane pre-trial imprisonment of Private Bradley Manning, who is accused of providing classified information to WikiLeaks, which in turn published the info for the world to read.

The Manning affair has been bubbling just below the surface of public controversy for the past nine months. However, it started to become a full-blown public scandal last week when President Obama – who campaigned on the disingenuous slogan of “change we can believe in” – endorsed the military’s brutal treatment of this innocent young man while giving a feckless answer to a question about Manning’s treatment during a press conference.

Now, the Manning affair is turning into a firestorm. In addition to this scathing NY Times editorial, Greenwald’s latest post links to the international attention that our government’s abusive treatment of Manning is getting. Constitutional Law scholar Jack Balkin and his colleagues over at Balkinization have prepared and are circulating this excellent statement to the Obama Administration condemning the “degrading and inhumane” conditions of Manning’s “illegal and immoral” detention.

I applaud Greenwald for focusing attention on the gross injustice of the Manning case and for the others who are now objecting publicly to this outrageous misuse of governmental power. As with the government’s vapid security theater and overcriminalization of American life, Manning’s treatment is another powerful reminder of just how remote and unresponsive the government has become to civilized society.

Meanwhile, though, I’m wondering about something.

Why is Manning’s treatment – as barbaric as it is – generating much more outcry than the arguably worse treatment that R. Allen Stanford has received during his pre-trial incarceration?

If we are going to forego protecting the innocent because the accusations against them are serious and seemingly compelling, then – as Thomas More reminds us — “when the last law was down, and the Devil turned ’round on you, where would you hide, .  .  . the laws all being flat?”

“This country is planted thick with laws, from coast to coast, Man’s laws, not God’s! And if you cut them down, .  .  . do you really think you could stand upright in the winds that would blow then?”

“Yes, I’d give the Devil the benefit of the law.”

“For my own safety’s sake.”

The Regulatory Mindset

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regulation booksRichard Epstein is typically lucid in taking on the increasingly foreboding regulatory culture that creates barriers for entrepreneurial creation of jobs and wealth:

What is to be done about the compliance culture–a culture born in response to excessive regulation–that now threatens to compromise the technological advances that have long spurred innovation in the United States?

This sad chronicle of relative decline takes place in three separate stages.

The first involves the new mindset that too often finds harmful externalities and bargaining breakdowns in virtually all human endeavors.

The second involves the bulky remedial structures that government puts in place to respond to these newly identified perils.

The third stage involves the subtle alterations in the selection of the compliance culture: the rise government officials and key private officers and executives whose skills matter ever more in these more severe regulatory environments.

This three-fold progression is not specific to this or that industry, but applies across the board.  .  .  . [. . .]

No one should be so reckless as to claim that these forces operate in all cases in all ways. We still have our wonderful success stories. Yet by the same token, no one should be so naïve as to think that these forces have no role to play in the loss of innovation and competitiveness in this country, a loss felt in both absolute and comparative senses. This loss has become an ever-larger feature of the modern United States.

Stated another way, it’s not that rules are unnecessary for markets to perform efficiently. But what type of rules are better?

Rules that politicians enact and governmental officials enforce generally are far less efficient than rules that emerge as a result of the voluntary interactions of millions of individuals and companies. The successes and mistakes of those individuals and companies pursuing their own interests create rules that are the product of competition and personal responsibility. When those rules become sufficiently important in the fabric of a market economy, they become formalized as common law and precedent by courts.

The distinction between inefficient government-imposed rules and the decentralized rules that facilitate productive market economies is an important one to understand as we wade through the carnage of this current era of increasing governmental regulation.

What are we doing to ourselves?

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man_in_prison Overcriminalization of life in America has been a frequent topic on this blog.

Mark Perry’s post places the topic in perspective.

A truly civil society would find a better way.

What’s the Difference?

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The NY Times Joe Nocera notes that Countrywide Financial’s Angelo Mozilo is the latest winner of the criminalization of business lottery.

Meanwhile, Charles Gasparino explains why those who made faulty business decisions that led to a major U.S. banking crisis really shouldn’t be prosecuted for crimes.

Yet, the reality is that there is no discernible difference between what Mozilo did at Countrywide or what Dick Fuld did at Lehman Brothers with what Jeff Skilling did at Enron.

Yet, Skilling continues to serve a 24-year prison sentence and endure the immense collateral damage of his fate.

On the other hand, Mozilo and Fuld deal with civil litigation and move on with life.

Neither Mozilo nor Fuld should be prosecuted for trying to save their companies. Any responsibility that they have for the demise of their companies can be allocated in the civil justice system among all the responsible parties.

But that Jeff Skilling remains in prison – particularly given the despicable way in which he was put there – remains a serious blot on the American criminal justice system.

A truly civil society would find a better way.

Trying to right the NatWest Three wrong

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Natwest Three - Copy.jpgIn the universe of unjust Enron-related criminal prosecutions, the NatWest Three case was particularly pernicious.
Three bankers from the United Kindom, who did nothing other than to have the misfortune of entering into a deal with the CFO of one of the largest public corporations in the U.S., were indicted by a federal grand jury in Houston, uprooted from their jobs and homes in the U.K., extradited to the U.S. under a post-9/11 law that was enacted to facilitate the extradition of terrorists, and forced to endure a four-year ordeal before they were able to return home to their families in the U.K. Two of the NatWest Three — David Bermingham and Gary Mulgrew — describe the barbaric treatment that they experienced in this series of interviews on the Ungagged.Net website.
Now safely back in the U.K., Bermingham is trying to do something constructive with his horrifying experience — that is, change the absurd U.K. statute that allowed the U.S. to extradite Bermingham and his colleagues without even the protection of an evidentiary hearing in the U.K. to determine whether there was evidence of a true crime.
Below is Bermingham’s testimony before the Joint Committee of Human Rights in the U.K. Not only does he provide a lucid and compelling argument for modification of the extradition statute, he also touches on several of the troubling aspects of the U.S. criminal justice system that have been often discussed here, such as draconian plea bargains, prosecutorial misconduct, witness intimidation, and the trial penalty, just to touch on a few.
After watching this video, ask yourself this question — just how have we gotten to the point where we are wasting our governmental resources on prosecuting people such as Bermingham?

A Self-Righteous Delusion

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skilling_201.jpgSo, the Wall Street Journal is reporting that a court aide to the judge in the trial of former OAO Yukos chairman and CEO Mikhail Khodorkovsky has admitted that the judge was forced to render a verdict in the case that was different from the one that he had drafted.

As the WSJ article notes righteously:

“Everyone in the judicial community understands perfectly that this is a rigged case, a fixed trial,” said [the aide],adding that she had decided to go public with her allegations because she had become disillusioned with the judicial system.

[The aide’s] claims support the widespread view that the latest trial of Mr. Khodorkovsky, once Russia’s richest man and the former owner of oil giant OAO Yukos, was politically motivated. Kremlin officials have repeatedly denied those allegations.

But courts in several countries in Europe have ruled in related cases that the prosecution of Mr. Khodorkovsky and the court-ordered breakup of Yukos appeared driven by the Kremlin’s desire to scotch Mr. Khodorkovsky’s political ambitions and nationalize his company.

Bad stuff, indeed.

However, is what happened to Khodorkovsky really all that much different than what happened to former Enron CEO Jeff Skilling right here in the good ol’ USA? At least Khodorkovsky is scheduled to be released from prison in 2017. Skilling is currently scheduled to be released around 2030!

And let’s just say that the WSJ was a healthy tad less righteous in its reporting on the misconduct that took place in Skilling’s trial than it is with regard to the hijinks that went on in Khodorkovsky’s.

Frankly, I don’t know what is sadder. That the Skilling case makes the U.S. justice system look much like the kangaroo court that convicted Khodorkovsky in Russia, or that the U.S.’s leading business newspaper still doesn’t recognize the similarity.