Too many laws, too many prisoners

prison cellThe troubling overcriminalization of American life has been a frequent topic on this blog, so this excellent Economist article on the subject caught my eye.

After beginning with the example of the absurdly over-the-top local federal criminal case against local orchid importer George Norris, the article hammers home the stark statistics:

Justice is harsher in America than in any other rich country. Between 2.3m and 2.4m Americans are behind bars, roughly one in every 100 adults. If those on parole or probation are included, one adult in 31 is under correctional supervision. As a proportion of its total population, America incarcerates five times more people than Britain, nine times more than Germany and 12 times more than Japan. Overcrowding is the norm. Federal prisons house 60% more inmates than they were designed for. State lock-ups are only slightly less stuffed.

The system has three big flaws, say criminologists. First, it puts too many people away for too long. Second, it criminalises acts that need not be criminalised. Third, it is unpredictable. Many laws, especially federal ones, are so vaguely written that people cannot easily tell whether they have broken them.

In 1970 the proportion of Americans behind bars was below one in 400, compared with today’s one in 100. Since then, the voters, alarmed at a surge in violent crime, have demanded fiercer sentences. Politicians have obliged. New laws have removed from judges much of their discretion to set a sentence that takes full account of the circumstances of the offence. Since no politician wants to be tarred as soft on crime, such laws, mandating minimum sentences, are seldom softened. On the contrary, they tend to get harder.

Of course, America’s dubious drug prohibition policy fuels a substantial part of the prison industrial complex. Check out how supposedly enlightened Massachusetts handles certain drugs:

Massachusetts is a liberal state, but its drug laws are anything but. It treats opium-derived painkillers such as Percocet like hard drugs, if illicitly sold. Possession of a tiny amount (14-28 grams, or ¬Ω-1 ounce) yields a minimum sentence of three years. For 200 grams, it is 15 years, more than the minimum for armed rape. And the weight of the other substances with which a dealer mixes his drugs is included in the total, so 10 grams of opiates mixed with 190 grams of flour gets you 15 years.

And don’t think for a moment that the ubiquitous law of unexpected consequences isn’t at play with regard to this mess:

Severe drug laws have unintended consequences. Less than half of American cancer patients receive adequate painkillers, according to the American Pain Foundation, another pressure-group. One reason is that doctors are terrified of being accused of drug-trafficking if they over-prescribe. In 2004 William Hurwitz, a doctor specialising in the control of pain, was sentenced to 25 years in prison for prescribing pills that a few patients then resold on the black market. Virginia’s board of medicine ruled that he had acted in good faith, but he still served nearly four years.

Here are previous posts dealing with the sad case of Dr. Hurwitz. And it gets worse:

There are over 4,000 federal crimes, and many times that number of regulations that carry criminal penalties. When analysts at the Congressional Research Service tried to count the number of separate offences on the books, they were forced to give up, exhausted. Rules concerning corporate governance or the environment are often impossible to understand, yet breaking them can land you in prison. In many criminal cases, the common-law requirement that a defendant must have a mens rea (ie, he must or should know that he is doing wrong) has been weakened or erased. [. . .]

“You’re (probably) a federal criminal,” declares Alex Kozinski, an appeals-court judge, in a provocative essay of that title. Making a false statement to a federal official is an offence. So is lying to someone who then repeats your lie to a federal official. Failing to prevent your employees from breaking regulations you have never heard of can be a crime. A boss got six months in prison because one of his workers accidentally broke a pipe, causing oil to spill into a river. “It didn’t matter that he had no reason to learn about the [Clean Water Act’s] labyrinth of regulations, since he was merely a railroad-construction supervisor,” laments Judge Kozinski.

One of the most encouraging moments in the most recent presidential campaign was then-candidate Obama’s willingness to address the overcriminalization problem by considering reform of America’s abhorrent drug prohibition policy.

One of the most disappointing aspects of Obama’s Presidency is his abandonment of that issue.

So it goes.

Matt Simmons, R.I.P.

The Houston business community is in mourning this week over the sudden death this past Sunday of Matt Simmons, the 67-year-old investment banker, author and pundit whose views were a common topic on this blog over the years.

Matt founded Simmons & Company in Houston in the mid-1970’s with his brother L.E. as one of the first investment banks focusing on the increasingly important oil-field service sector of the oil and gas industry.

Simmons & Company eventually expanded into other areas of the energy industry and, by the late 1990’s, became one of the top energy mergers and acquisitions investment banks in the country.

Around 1983 or so, Matt’s firm and my law firm were on two of the floors near the top of the 700 Louisiana building in downtown Houston, so we developed a cordial friendship over the years by taking innumerable elevator rides together.

I’ve always been involved in a fair amount of oil and gas litigation, so Matt was always interested in that part of my practice.

And during the depression in the energy industry in Texas during the 1980’s, Matt was arguably the most insightful businessperson in Houston at the time on the direction of the industry and how it’s recovery should be structured.

Matt was a joy to talk with — witty, intelligent and interesting. That’s one of the reasons why, over the past decade or so, he became a media favorite for providing his provocative opinions about the energy industry.

Matt enjoyed his new role as one of the media’s energy industry pundits, but that wasn’t the best fit for the chairman of a company that was often advising companies that could be affected by his controversial opinions.

Matt retired from day-to-day management of his company in 2005 about the time his peak-oil treatise was published, but he continued on as executive chairman to help the company maintain client relationships. Matt and the company formally split ties earlier this year when he made his utterly unsurprising public comments in Fortune magazine about the probability of a British Petroleum bankruptcy.

Sadly, I didn’t see Matt again after the split, so I was never able to ask him about it. But my sense is that it was probably not that big a deal for him. He was working hard on his Ocean Energy Institute and I really think that is where his heart was as he segued into elder statesman status in the energy industry.

So, the local energy industry has lost a big part of its personality with the death of Matt Simmons. Many folks in the industry did not agree with some of Matt’s often controversial views, but that never stopped him from expressing those views and forcing energy businesspeople to think about the issues and formulate alternative viewpoints toward them. That is a resource that is vitally important to all industries, particularly one that is facing the current challenges of the U.S. energy industry.

Yes, Matt Simmons will be missed. Rest in peace, friend.

An Inspirational Story to Begin the Week

Tom MorrisClear Thinkers favorite Tom V. Morris and his family experienced a nightmare last week, one that would stop us all in our tracks.

However, as Tom relates here, this particular nightmare turned into a remarkably inspirational tale about courage, grace and humanity.

As Tom observes:

As a philosopher, it’s my job to study human nature. And it’s not always a pretty picture. But on days when things go horribly wrong, we sometimes see ordinary people take extraordinary actions for no reason except that they’re necessary. This is a simple and powerful reassurance of the basic goodness that can still be found in people. Airline agents, waiters, and regular people who see a need can sometimes do great things. I know only one of these recent heroes-on-the-scene by name. But I’m grateful to them all,  .   .  .

Amen!

Where Are All the Villains?

Could it be that folks are finally realizing that old-fashioned greediness really should not be a crime?

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

Business prosecutions over merely questionable business judgment obscure the true nature of risk and fuel the myth that investment loss results primarily from criminal misconduct. Taking business risk is what leads to valuable innovation and wealth creation. Throwing creative and productive business executives such as Michael Milken and Jeff Skilling in prison does nothing to educate investors about the true nature of risk and the importance of diversification.

Ignorance about business risk has led in part to the criminalization of business lottery. Such a lottery breeds cynicism and disrespect for the rule of law.

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

The Tiger Mike Memos

Tiger MikeThe oil and gas business in Houston has generated its share of characters over the past century. But few have been as colorful as Edward “Tiger Mike” Davis.

Tiger Mike owned an independent exploration and production company in Houston during the boom days of the late 1970’s and early 80’s, and then directed his company through a volatile chapter 11 case during the depression in the oil and gas industry in the mid-80’s. I have always thought that one of the most impressive credentials of Fifth Circuit Court of Appeals Chief Judge Edith Jones is that she represented Tiger Mike during his company’s chapter 11 case. Based on her representation of Tiger Mike alone, Edith definitely understands the challenge of representing a difficult client.

Legend has it that Tiger Mike was born in Lebanon, had no formal education and eventually emigrated to the US, where he was a cabbie in Denver. He was hired by wealthy Helen Bonfils’ husband and remained her chauffeur after his death, which eventually led to his marriage with the 70 year-old widow. After her death, Tiger Mike inherited a part of her fortune, which he invested in several drilling rigs that he later sold at a substantial profit. That was his stake into the exploration and production business, where he proceeded to drill 50-odd dry holes and spiraled into bankruptcy.

The stories of Tiger Mike resonate in Houston oil and gas circles to this day. At one point, Tiger Mike was allegedly carrying on a torrid affair with one of the McGuire sisters (a popular singing group from the 1960’s) at the same time as Ms McGuire was the mistress of Sam Giancana, the notorious Chicago Mafia boss. No one was ever quite sure whether Tiger Mike had Sam’s consent to that arrangement.

Another time, during a particularly difficult work-out negotiations over a botched drilling project, Tiger Mike waltzed into a conference room filled with creditors and their lawyers in his trademark one-piece khaki polyester leisure suit with white shoes and belt. He proceeded to throw his briefcase on the conference room table, grabbed a 45 caliber pistol out of the briefcase and slammed it on the table to the astonishment of everyone in the room.

“Now,”ù exclaimed Tiger Mike. “It’s time to deal!”ù

All of which is a prelude to the the always-observant Letters of Note‘s posting of the hilarious Tiger Mike Memos,ù a series of 22 interoffice memos that the “incredibly amusing, painfully tactless, and seemingly constantly angry”ù Tiger Mike sent to his employees over the years.ù

To those of us in Houston who remember Tiger Mike, none of them are surprising in the slightest. But they are fun. Enjoy!  

Jeff Skilling requests his release from prison

skillingDuring my unexpected absence from the blogosphere last week, the Seventh Circuit Court of Appeals released Conrad Black from prison pending his re-trial on various business fraud charges.

That got me to thinking about what was going on in Jeff Skilling’s case on the same issue, so I checked in at the Fifth Circuit and found that Skilling has also requested his release from prison. That motion — as well as Skilling’s memorandum of law on why all remaining counts against him should be reversed and the entire case remanded for retrial — are below.

These two documents arguably provide the best description yet of the unjust nature of the criminal case against Skilling. In short, the government knew that it had a flimsy case against Skilling on conventional securities fraud (he simply believed in and touted his company like any other CEO) and wire fraud charges (he didn’t steal a dime from Enron).

So, the government relied on the defective honest services wire-fraud theory to convict Skilling of crimes based on amorphous, non-criminal acts such as not acting in the best interests of the company or promoting an unhealthy culture at Enron. Having relied heavily on the now-discredited honest services wire-fraud theory in obtaining convictions against Skilling on the more conventional charges, the government simply cannot prove beyond a reasonable doubt (it’s burden on remand under such circumstances) that the jury did not rely on the acts relating to the honest services wire-fraud charges in convicting Skilling on the other charges.

It looks to me as if this case should be going back to the District Court for re-trial on all charges. Skilling and the government have agreed to an expedited briefing schedule on the issues and Skilling has requested that the Fifth Circuit review the matter on an expedited basis. Thus, look for a decision sometime next month.

Jeff Skilling’s Motion to the Fifth Circuit Court of Appeals for Release Pending Retrial

Jeff Skilling Opening Merits Brief on Remand

I’m back

computer frustration.gifNo, I really didn’t intend to take almost a week off from blogging without letting you know.
But as I noted on Twitter a few days ago, when you think it’s about time to change the company that hosts your blog, it’s already too late. But more on that later.
The good news is that with the help of the trusty and multi-talented Deji Osinulu, HCT is back up and running. Some of the old images won’t show for awhile and we’ll be making some technical tweeks over the next few days. But the new host company (Arvixe) appears to be quite capable and responsive, so I do not anticipate any further problems.
Thank you for all the emails and social media messages during my brief absence from blogging. And thanks most of all for reading HCT.