Category Archives: Legal – General

Judge Easterbrook has some fun with snake oil

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QRay%20bracelet%20Gold.jpgMessage to Snake Oil salespeople — don’t expect any breaks from Seventh Circuit Judge Frank Easterbrook.
In this clever opinion, Judge Easterbrook goes after the snake oil salespeople who promoted the Q Ray Ionized Bracelet. The promoters of the bracelet contend that it miraculously relieves arthritic pain through enhancing and balancing the “bio-energies” of the wearer. According to the promoters, the bracelet is even smart — it “knows” its owner so as to prevent second-hand use of its magical qualities. Unfortunately, these magical properties wear off in after about a year, so the wearer has to buy another one to regain the magical healing properties. But $200 per bracelet is a small price to pay for pain relief, right?
After this form of snake oil had been peddled for a few years on infomercials, the Federal Trade Commission finally stepped in to enjoin the promoters and seek disgorgement of profits, which the District Court allowed to the tune of $16 million. On appeal, the promoters contend that they didn’t commit any fraud because the placebo effect of the bracelet provided pain relief for many of its wearers. Judge Easterbrook isn’t buying it:

Although it is true, as Arthur C. Clarke said, that ì[a]ny sufficiently advanced technology is indistinguishable from magicî by those who donít understand its principles (ìProfiles of the Futureî (1961)), a person who promotes a product that contemporary technology does not understand must establish that this ìmagicî actually works. Proof is what separates an effect new to science from a swindle. . .
The ìtestsî on which they relied were bunk. (We need not repeat the magistrate judgeís exhaustive evaluation of this subject.) What remain are testimonials, which are not a form of proof because most testimonials represent a logical fallacy: post hoc ergo propter hoc. (A person who experiences a reduction in pain after donning the bracelet may have enjoyed the same reduction without it. Thatís why the ìtestimonialî of someone who keeps elephants off the streets of a large city by snapping his fingers is the basis of a joke rather than proof of cause and effect.) [. . .]
Physicians know how to treat pain. Why pay $200 for a Q-Ray Ionized Bracelet when you can get relief from an aspirin tablet that costs 1¢? Some painful conditions do not respond to analgesics (or the stronger drugs in the pharmacopeia) or to surgery, but it does not follow that a placebo at any price is better. Deceit such as the tall tales that defendants told about the Q-Ray Ionized Bracelet will lead some consumers to avoid treatments that cost less and do more; the lies will lead others to pay too much for pain relief or otherwise interfere with the matching of remedies to medical conditions. Thatís why the placebo effect cannot justify fraud in promoting a product. Doctor Dulcamara was a charlatan who harmed most of his customers even though Nemorino gets the girl at the end of Donizettiís Líelisir díamore.

That’s just a taste. Read the entire opinion. H/T Robert Loblaw.

Landing the tuna rather than the barracuda

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warren_buffett.jpgAs noted here last month, Berkshire Hathaway chairman and mainstream media folk hero Warren Buffett is a key player and, as these NY Times and W$J articles report, perhaps even a key witness in the upcoming criminal trial of a former AIG executive and four former executives of Berkshire’s General Reinsurance Corp, including former General Re CEO, Ronald E. Ferguson.
Although Buffett knew about the finite risk transactions that are at the heart of the prosecution, he is exempt from prosecution under the Buffett Rule. Previous posts on this case are here, here, here, here and here.
What’s particularly interesting about all this is that the prosecution is attempting to prevent the defense from even mentioning Buffett, whose knowledge of the transactions (and the government’s election not even to include Buffett as an unindicted co-conspirator, much less a defendant) is at least some evidence of the defendants’ lack of criminal intent (Warren Buffett would not engage in any criminal conduct, now would he?). The prosecution is contending that any evidence relating to Buffett’s knowledge of the transactions is hearsay and, thus, inadmissible. But until the testimony regarding Buffett’s knowledge is propounded in court, who knows whether it is hearsay?
Of course, the prosecution is not shy about using hearsay testimony when it comes from someone who is not an avuncular media darling such as Buffett. The prosecution has fingered former AIG chairman Maurice “Hank” Greenberg as an unindicted co-conspirator in the trial, which — based on previous experience — means that the prosecution will use testimony about Greenberg’s statements that would otherwise be hearsay.
As usual, Larry Ribstein sums up the vagaries of the government’s policy of selectively criminalizing merely questionable business transactions:

One might think that the government would have been trying to ensnare Buffett, who would be a high-profile trophy. The problem is that trying a cultural icon like Buffett would raise public doubt about the legitimacy of the government’s corporate crime enterprise. So Buffett gets the benefit of a version of the Apple rule — . . . the Buffett rule. In this case, unlike Enron, it’s better for the government to land the tuna than the barracuda.
According to the WSJ, the prosecution is arguing that “[t]he defendants want to deflect the issue of their involvement, knowledge and the intent relating to … the fraudulent transaction at the heart of this case by creating a trial-within-a-trial about Warren Buffett.” Deflect? Yes, I guess, for the government, a defendant’s insistence on defending himself is a pesky nuisance.
The bottom line is that issues of defendants’ guilt, including critical evidence of whether they knew they were engaging in wrongdoing, may not be available because, ultimately, the government decides who testifies by deciding whom to prosecute. All part of the costs of the extensive criminalization of accounting and other conduct of corporate agents.

Legal schadenfreude?

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gavel.gifNow, this is interesting. The ABA Journal is running a best blawgs contest. In the voting for the best general law blog category, one of my favorite blawgs (Overlawyered), which is run by a non-lawyer (Walter Olsen) and often provides a critical point of view toward the legal profession, is one of the leading vote-getters. Voting ends today, so don’t miss your chance to send a message to the lawyers! ;^)

What’s Rusty Hardin thinking?

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Rusty and Roger.jpgAs noted earlier here, I believe the Mitchell Commission Report is deeply flawed and fails to confront squarely Major League Baseball’s long tradition of at least tolerating — if not outright promoting — the use of performance-enhancing drugs.
Moreover, Roger Clemens’ attorney, Rusty Hardin, is unquestionably one of Houston’s most talented trial lawyers.
However, I’m starting to wonder whether Hardin is out of his element in dealing with Clemens’ professional crisis of being fingered in the Mitchell Report.
The first inkling that matters are not being particularly well thought out in regard to Clemens’ problem was the announcement that Hardin had hired private investigators to assist him and attorneys in his firm in conducting “their own investigation into [Brian] McNameeís allegations” that he had injected Clemens with PED’s.
Now, maybe such a private investigation is a good idea to gather information informally that could be used to cast doubt on McNamee. But what purpose is served by announcing it publicly and making the information the target of Congressional subpoenas or discovery in a civil lawsuit, which is becoming increasingly likely? Sure, Hardin can claim that the information is privileged work product, but that’s far from clear. Why create the bulls-eye in the first place?
And, as John Royal pointed out, Hardin’s comparison of the Mitchell Commission investigation to the Army-McCarthy hearings of the 1950’s is a stretch, to say the least.
But what really has me scratching my head regarding Hardin’s strategy is this Murray Chass/NY Times interview of Hardin. Get a load of Chass’ impression after interviewing Hardin:

But what if Hardin found one or two people who could say they saw Clemens use steroids and H.G.H.? Would he immediately terminate his investigation and announce that the report was correct? I didnít ask, but based on his answers to other questions, I suspect that he would at least make it obvious that he was conceding.
Further, I believe that if he found credible evidence that Clemens used illegal substances, Hardin would convince Clemens that he had to be forthcoming and admit his use.

H’mm, that’s certainly an interesting impression to leave about one’s client. Chass goes on to make the following observation:

Finally, if Clemens did not use performance-enhancing drugs, then why didnít he accept the invitation to meet with Mitchell so that he could tell him his information was wrong? That was the time to challenge the information, not when it has already been published.
ìI donít think it would have changed anything,î Hardin said. ìThey havenít retracted anything. Thatís probably proof that if he had talked to them, it wouldnít have done any good.î

As Chass points out, what is there for the Mitchell Commission to retract? Clemens has done nothing but deny the allegations. Is Hardin suggesting that the Mitchell Commission would not have acknowledged Clemens’ denials of McNamee’s accusations had Clemens met with the Commission? Even as flawed as the Mitchell Report is, it’s highly unlikely that the authors would not have reported that Clemens denied McNamee’s allegations.
This is increasingly looking to me as a circumstance where Clemens has a first rate trial attorney working for him when what he really needs is a public relations crisis pro.
Update: At least the conversation about steroids and other PED’s is improving.

Reefer madness

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Reefer_Madness.jpgIn an uncharacteristic display of coherence in the face of stifling prison overcrowding, the Texas legislature passed a law last year that took effect on September 1st that allows police to issue citations for possession of small amounts of marijuana (less than 4 ounces) instead of hauling folks off to an unpleasant and expensive experience in the local county jail. Sounds like a good idea, right?
Well, yes, except that it appears that most counties in the state are ignoring the new law. Why?:

For Greg Davis, Collin County’s first assistant district attorney, one of his qualms with the new law is the perception created by ticketing for a drug offense, instead of making an arrest.
“It may . . . lead some people to believe that drug use is no more serious than double parking,” Mr. Davis said. “We don’t want to send that message to potential drug users, particularly young people.”

Yeah, right. Those young people will certainly be safer from the “dangers” of marijuana in the local county jail, now won’t they?
Scott Henson provides his usual lucid commentary.

So Chuck, what did you plan on doing after public service?

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Rosenthal.jpgAbout the only question remaining regarding Harris County District Attorney Chuck Rosenthal is whether his holiday season was as bad as the Aggies‘?
First, there were the revelations in a civil lawsuit that Rosenthal placed his former mistress in a cushy administrative assistant position and used DA office email to send sweet nothings to her, all of which was picked up quickly by such national media outlets as the NY Times and the Wall Street Journal.
But if that were not enough, Rosenthal — in declining local GOP leaders’ requests that he step aside for the 2008 election — publicly stated that “the local Republican Party had never done much” for him in his 2000 and 2004 election campaigns and “that party leaders have become ‘Chicken Littles,’ unjustifiably fearful the scandal will damage the entire Republican roster of candidates in the county.”
Well, those remarks are certainly an interesting way of engendering loyalty among the party faithful. ;^)
Finally, Rosenthal still has some explaining to do in the civil suit regarding the apparent deletion of 2,000 emails. Was the D.A. involved in destruction of evidence? Sheesh!
I’m no political pundit, but when an elected official seeks to retain a position as hard as Rosenthal is attempting to keep his in light of the above, it’s a pretty good indication that it’s past time to replace that official.
As usual, Kevin Whited, Slampo and Cory Crow have insightful thoughts on the affair.
Update: Late on Wednesday afternoon, Rosenthal withdrew as a candidate for District Attorney in the Republican primary.

Markets in foreclosure desperation?

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foreclosures-788528.jpgI swear, you can’t make this stuff up.
A Dallas area couple who were in default on their home mortgage filed a bankruptcy case in an effort to avoid a foreclosure sale of their home. However, they ultimately were unable to fulfill the terms of an agreed order that they entered into with the lender during the bankruptcy case, so the lender posted the property for a non-judicial foreclosure sale. So far, nothing unusual.
But a few days before the date of the foreclosure sale, the lender received a fax notice from “Jason” that the Texas debtors had transferred a 1% interest in the property to an individual living in California. And, to put icing on that cake, the Californian had just filed her own bankruptcy case, although she did not list the 1% interest in her bankruptcy schedules. Inasmuch as the lender did not have time before the scheduled foreclosure sale to hire California counsel and get the automatic stay modified as to the 1% interest, the lender passed on the foreclosure sale of the debtors’ Texas home.
But this is where the story really gets interesting. The California debtor knew nothing about receiving the 1% interest from the Texas debtors and claimed no ownership interest in the Texas debtors’ homestead! As Dallas-based U.S. Bankruptcy Judge Stacey Jernigan explains in this decision, the foregoing has become a common practice of anonymous “bankruptcy servicers” that prey on debtors in bankruptcy cases who are facing loss of their homestead to foreclosure.
Here is how the scam worked in this case. The anonymous servicer (approximately 40 (!) of them contacted the Texas debtors to offer their “services”) assured the debtors that the servicers could “legally” stop the foreclosure by arranging an eve-of-foreclosure conveyance of a fractional interest in the homestead to one of their California affiliates that would then file bankruptcy to stop the foreclosure. The cost? Just $650 monthly so long as the servicer’s “services” were “needed.”
In reality, no such affiliate of the servicer existed and the servicer simply inserted the unsuspecting California debtor’s name in the deed of the fractional interest. Then, “Jason” sent his fax informing the lender that the automatic stay in the bankruptcy case of the California “owner” of the 1% interest in the Texas homestead enjoined the lender from proceeding with the foreclosure sale.
Inasmuch as this scam only delayed the foreclosure sale in this case for a month, the scammers received just two of the $650 payments before the debtors realized that they have been had. But the scam artists are apparently getting a whole bunch of such $650 payments from desperate debtors who are looking for some way to keep their homesteads. Judge Jernigan looks as if she is intent on getting to the bottom of this, so stay tuned.

Fifth Circuit Judicial Council slams Judge Porteous

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balancing%20scales%20122007.gifUntil recently, it had been years since the Fifth Circuit Judicial Council had sanctioned a federal judge. As of yesterday, the Council has now sanctioned two judges in less than three months.
We already know about the case of Galveston-based U.S. District Judge Sam Kent (previous posts here) — the Council recently deferred further disciplinary action for 90 days in that case pending the outcome of a Department of Justice investigation.
And yesterday, in this strongly-worded order, the Judicial Council recommended that the U.S. Judicial Council refer New Orleans-based U.S. District Judge G. Thomas Porteous, Jr to Congress for impeachment (Peter Lattman’s WSJ Law Blog post first reported on the order). The Fifth Circuit panel’s proposed impeachment referral is based on findings that Judge Porteous engaged in the following misconduct:

Filing “numerous false statements under oath during his and his wife’s Chapter 13 bankruptcy, including filing the petition under a false name.” This copy of Judge Porteous’ chapter 13 case docket reflects that his case was ultimately administered under the name of “Gabriel T. Porteous.” However, the original petition in the case reflects that he filed the case under the name “G.T. Ortous” and then filed an amended petition about ten days after the original petition in which he corrected the name to “Gabriel T. Porteous.”
Hiding assets from his bankruptcy estate, failing to list all creditors and not scheduling in his bankruptcy case creditors holding gambling-related claims against him;
Getting short-term credit from casinos after a bankruptcy judge ordered him to obtain prior approval of the court or the chapter 13 trustee before incurring any debt;
Making unauthorized and undisclosed payments to “preferred creditors” during his chapter 13 case and engaging in fraudulent conduct with regard to the claim of Regions Bank;
Accepting “gifts and things of value” from lawyers with cases before him;
Denying a motion to recuse in a case without revealing to the parties that he had a “history of financial relationships” with at least one attorney for the movant; and
Failing to disclose gifts from attorneys on his annual judicial financial disclosure statements for 1994-2000 and failing to disclose debt that should have been on the 2000 statement.

The Council’s order was signed by Fifth Circuit Chief Judge Edith Jones, who is one of the leading bankruptcy law experts on the Fifth Circuit. The Council ordered that, for the time being, Judge Porteous will not be assigned any bankruptcy cases or appeals, or cases in which the United States is a party. He is authorized to continue handling other civil cases and administrative duties until such time as he is required to dedicate his time to the defense of any further proceedings against him.
The Judicial Council’s order is actually the culmination of at least two investigations of Judge Porteous over the past several years. The Judicial Council’s investigation was prompted by information gathered during the FBI’s “Operation Wrinkled Robe,” which was an investigation of the relationship between Jefferson Parish, Louisiana state judges and New Orleans bail bondsman, Louis Marcotte. Judge Porteous served as a Jefferson Parish state judge before President Clinton appointed him to the federal bench in 1994. Marcotte was convicted of racketeering charges as a result of the Operation Wrinkled Robe probe several years ago and is currently in prison. Judge Porteous has not been charged with a crime as a result of Operation Wrinkled Robe.
In 2003, Judge Porteous recused himself from all civil cases involving the federal government and all criminal cases after a relative of Marcotte alleged that Marcotte had paid for Judge Porteous’ car repairs and arranged other favors for the Judge. In May, 2006, Judge Porteous took a medical leave after the sudden death of his wife in December, 2005. He returned to the bench in June of this year.
Peter Henning provides this typically insightful blog post on the legal issues raised by the Judicial Council’s order.

Mitchell Report redux

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Mitchell Report cover.jpgFollowing on my post on the Mitchell Report, the following are a few interesting observations from the past several days:

Art DeVany agrees with me that MLB didn’t get it’s money’s worth and provides a rather interesting and simple test to evaluate whether a player was likely to have used steroids;
Malcolm Gladwell asks “So what, exactly, is wrong with an athlete–someone who makes a living with their body–taking medication to speed their recovery from injury?”
The New York Times Murray Chass picks up on one of the observations from my post — that is, there is not much original work product in the Mitchell Report.
Former Florida Marlins and Cincinnati Reds trainer Larry Starr, who was a trainer in the big leagues for 30 years, describes how MLB management and the MLB Players’ Association soft-pedaled the PED problem even after being advised in 1988 that use of PED’s was becoming commonplace among players.

Finally, Richard Landau and Louis H. Philipson, who are both Professors of Medicine at the University of Chicago Medical School, wrote the following letter to the Wall Street Journal explaining why the risks of taking human growth hormone in an effort to improve athletic performance and endurance, or recover from a non-live threatening injury, is a quintessential example of taking a flyer with too much downside risk:

While some stories noted the many negative effects of androgenic steroids, we have not seen any explanation as to why taking “natural” human growth hormone is also a really bad idea. While growth hormone is necessary for children in particular, athletes are tempted to take growth hormone without a demonstrated positive result on performance. They should note what happens in the disease called acromegaly, a condition of too much growth hormone. In this disease, excess growth hormone causes growth of hands, lips, tongue, feet, nose, chin, forehead and liver. In short, most tissues and organs in the body will enlarge, including the heart, sometimes to the point of heart failure. Diabetes, decreased interest and ability in sex, fatigue, excessive sweating, and disordered sleep are also part of this syndrome.
The only important FDA-approved indications for giving growth hormone are failure to grow due to lack of growth hormone and the HIV-associated wasting syndrome. Despite the relative rarity of these problems, there are nine formulations of growth hormone on the market today, and all list diabetes, leukemia, muscle aches and pain, headache, weakness, stiffness and swelling of male breasts as potential side effects, as well as insomnia, nausea, hypothyroidism and increased blood fats. Also mentioned are pancreatitis and fatigue. Every manufacturer recommends periodic safety monitoring of blood sugar, thyroid blood tests, skin and heart exams. We could easily name quite a few drugs that have been withdrawn from the market with less potential for harm than growth hormone.
Not a single clinical trial has effectively demonstrated that the metabolic effects of growth hormone, even including a temporary increase in lean body mass, have resulted in improved performance. The view of some athletes that a few injections of the hormone might have beneficial effects on sore arms has never been rigorously tested, but is very unlikely to be effective. The risks clearly outweigh the benefits. Our young athletes need to be warned that large muscles are not good muscles, and that these problems are not rare “side effects” but the natural consequence of excess growth hormone, a hormone that affects almost every tissue, not just muscles — and usually not for the better. Taking any form of growth hormone in the hope of improved athletic performance is misinformed at best, and any mention of this practice should explain why.

An appropriate sentence in an inappropriate case

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innocent%20man.jpgThis earlier post reported on the troubling case of Connecticut criminal defense lawyer Phillip Russell, who pled guilty to assisting the commission of a felony by failing to report it while representing a church in connection with a child pornography/child predator investigation. Yesterday, Russell was sentenced to six months of home confinement, a $25,000 fine and 240 hours of community service. Russell has voluntarily agreed to a suspension of his law license and will likely be disbarred.