October 2004 -- There are two major cases pending before the United States Supreme Court, to be considered in the current term, which bear heavily upon sentencing in this country by challenging the Federal Sentencing Guidelines. The cases are United States v. Booker and United States v. Fanfan. These cases are consolidated for appeal, and the Supreme Court held oral arguments on them on October 4, 2004.
December 2004 -- I was thirteen when I was first introduced to Ayn Rand . I was blessed with an English teacher who saw in me the core of an emerging philosophical mind. "Write a two-page essay on your philosophy of life," Miss Price said. I responded: "My philosophy of life is that everyone has the right to their own happiness, as long as their happiness doesn't interfere with my own," and I went on for a page and a half, expanding on that premise, then turned the paper in the next day.
I first encountered Ayn Rand 's ideas in 1964. But it was five years later, after graduating from college, when I really immersed myself in her novels and philosophy.don hauptman ayn rand This was the Vietnam War period, and conscription had not yet ended. I wound up in the U.S. Navy for the next four years. Wherever I was stationed, I searched for fellow Objectivists. They weren't always easy to find. I often experienced a sense of intellectual isolation. I identified with writer Eric Hoffer, who read Nietzsche and Montaigne while toiling as a longshoreman and migrant field worker. I was assigned, not to a ship, but to a U.S. Air Force base in Bremerhaven, Germany. The accommodations were modest but comfortable, resembling a college dorm. But there was no laundry room. For that amenity, we had to traipse to another building.
I have written about the evolving seigneurial view in American politics and law--that common people ought to be able to act as though the world has been made a place safe for them, in matters of finance, food, drugs, toys, consumer prodcuts, and so on. On Monday, the Third Circuit Court of Appeals, based in Philadelphia, provided a slight check to that idea. According to the court, the case Malack v. BDO Seidman turned on the following view of the investor’s situation: “(1) ‘the existence of the security in the marketplace resulted from the successful perpetration of a fraud on the investment community’ and (2) that [he (correction by RD)] ‘purchased in reliance on the market.’ Critical to the theory’s coherency is the assumption that it is reasonable for an investor to rely “on [a] [security’s] availability on the market as an indication of [its] apparent genuineness[.]”
Earlier this week, as part of the unfolding Galleon insider-trading case, government prosecutors urged U.S. District Judge Deborah Batts to sentence ex-IBMer Robert Moffat to six months in prison for passing confidential corporate information to his mistress, Danielle Chiese, when she was an executive with the hedge fund New Castle Partners. Unquestionably, what Moffat did wronged IBM, and the company would be well within its rights to sue him. But I fail to see that Moffat’s corporate disloyalty is any business of the U.S. government. Moffat is seeking probation . He will be sentenced on September 13.
Conrad Black. Jeffrey Skilling. Government and defense lawyers submitted their briefs in the Conrad Black case today . Said the prosecutors: “The erroneous honest services instruction was harmless beyond a reasonable doubt.” Lawyers for Black said the prosecution’s use of the honest-services theory required the court to throw out the verdict.
June 2004 -- London Bridge—the London Bridge of nursery-rhyme fame—was completed in 1209 and began falling down a mere 60 years later. That was because Eleanor of Provence, who was queen consort to Henry III and was also the "fair lady" of the nursery rhyme, had been given the bridge tolls as a gift from her husband and was spending the revenue on herself rather than on bridge repairs. Fast-forward 600 years, and London Bridge was again falling down. The city of London, which now had control of the structure, decided it had to undertake major repairs. To find out what needed to be done, the city hired John Rennie. Rennie was one of the Industrial Revolution's leading engineers, along with John Smeaton and Thomas Telford. Today, sadly, these men who created so much of Great Britain's infrastructure during the Industrial Revolution are far less well known than the era's inventors, such as Richard Arkwright and James Watt.
Larry Ribstein has a penetrating blog post on the forthcoming civil and criminal prosecution of Countrywide Financial and its former CEO Angelo Mozilo. Mozilo is a key figure both for those who blame the financial collapse on “greedy bankers” and for those who blame it on government action. Thus, as Ribstein puts it, this prosecution is really an attempt to use the criminal justice system to define the ideological narrative of the financial crisis.
I’ve just run across a splendid column in Forbes by Harvey Silverglate (author of ref="http://www.amazon.com/Three-Felonies-Day-Target-Innocent/dp/1594032556">Three Felonies a Day ) on the methods federal prosecutors are usiing to wring guilty pleas out of defendants. “That almost all federal convictions come by way of guilty plea--95%, according to the most recent data available--likely reflects a shifting cost-benefit calculus, rather than an overwhelming recognition by defendants of their own culpability. With the prospect of decades-long prison terms and witnesses willing to throw former colleagues under the bus in exchange for a reward doled out by prosecutors, there's little wonder that federal criminal trials have become rarities; a guilty plea may appear to be even an innocent defendant's best option.”
I fear that this statement about Fabrice Tourre’s fate, from James Peterson’s blog “Re:Balance,” is as true as it is disheartening to anyone concerned about justice and business rights: “Tourre faces a long haul of pre-trial depositions and document production, costly in both funds and emotion. Even with Goldman footing the financial bill, the grind on an individual opposing the forces of government is eventually crushing to the spirit.
I Sold You and You Sold Me. Law.com has the full story of David Zilkha , the man whose former wife reported him to the SEC for the so-called crime of insider trading and received $1 million dollars bounty for it. Under the Obama administration’s new bounty hunter scheme she would have been eligible for $3 million. Spouses take note!
According to an article in the San Francisco Chronicle: “ Galleon Group LLC founder Raj Rajaratnam will get a court hearing on his claim that the government filed a misleading application to wiretap him and that the evidence produced by the taps should be excluded.. "Rajaratnam has made a substantial preliminary showing that the government recklessly or knowingly misleadingly omitted several key facts" from an affidavit filed in support of the wiretap application, U.S. District Judge Rich Holwell wrote in an opinion released today.” I wish we could have a hearing on why anything Rajaratnam is said to have done is considered illegal.
March 2004 -- BOOK REVIEW: Joseph E. Stiglitz, The Roaring Nineties: A New History of the World's Most Prosperous Decade. (W.W. Norton & Company, 2003). 361 pp., $24.95. Columbia University's Joseph E. Stiglitz, who shared the Nobel Prize in economics in 2001 and who was President Clinton's chief economist, is often pro-government intervention. I, on the other hand, am pro-freedom. Yet despite our differing ideologies, I found the chapters on taxation in his 1988 textbook on public finance to be excellent. I was hoping, therefore, to find excellent sections in his latest book, The Roaring Nineties. But I was disappointed. Overall, the book is an uncritical case for more government intervention that, along the way, makes some basic economic errors.
January, 2004 -- Conservatives are up in arms. They are outraged (once again) by what the Supreme Court has been doing. In a case involving the death penalty, Justice Stephen Breyer referred to a decision by the supreme court of Zimbabwe that said it was inhumane to keep a prisoner on death row, year after year, awaiting execution. John Leo of U.S. News & World Report asked with dripping irony: "We're getting our legal cues from Zimbabwe?" It was a cute retort. But it loses force if one reads Breyer as saying that even Zimbabwe does not keep prisoners lingering on death row for decades, as the United States does.
SEC's Fraud Case against Wyly Brothers May Be Strong, Experts Say. So read the headline on a story by Eric Torbenson of the Dallas Morning News. But have these experts somehow had a chance to look at the evidence, pro and con, that will be offered up in the case. No, they have heard only one side of the story. Ah, but they know two facts about the case. First, it will not be heard in Texas, or indeed anywhere in the American South, which happens to be where the Wyly brothers live and do business. Rather, it will be heard in the Southern District of New York, the district made famous by the convictions of Michael Milken and Frank Quattrone. The rationale, apparently, is that some of the alleged insider trading took place there. But as John Coffee, a law professor at Columbia University told Torbenson: "It's an artful and legitimate attempt to avoid" going to trial in Texas. Artful, certainly. Legitimate? Regretably.
Must Reading. Ira Stoll's "Future of Capitalism" blog is always must reading for anyone interested in business rights. So, how to phrase this: MUST READING . Stoll's blog post today is a review of Christine Richard's new book Confidence Game, which reveals how investors can exploit journalists, regulators, law enforcement officials, and politicians--and the intricate web of personal friendships among them--in order to further their speculations. As an illustration of what Ayn Rand called "the aristocracy of pull," I have never seen its equal.
Public health officials in Portland, Oregon, shut down a 7-year-old's lemonade stand. I do not mean merely to sneer at the absurdity of this incident. Public health is a valid field of government activity when it is directed at combatting existing agents of harm, such as infectious diseases and posion sold as food. Government's right to act pre-emptively, however, needs to pass some standard of probable cause. But in the minds of Oregon's public health officials, it seems, the damning characteristic of little Julie Murphy's lemonade stand was that she sought to make a money from it: "When you go to a public event and set up shop, you're suddenly engaging in commerce," Eric Pippert, the food-borne illness prevention program manager for the Oregon public health department, told [The Oregonian]. "The fact that you're small-scale I don't think is relevant." Ah, "engaging in commerce"! Very suspicious, indeed. I hope they don't charge her mother with corrupting a youth.
Why Has the Financial Crisis Produced Few Criminal Cases? That is what the New York Times wants to know. And the answer it comes up with is: The financial crisis was a product of Wall Street greed, not criminality. This answer serves four purposes. First, for the notoriously leftist NYT, it strikes a note of moderation and fairness. "See, we don't think all economic problems result from criminal businessmen." Secondly, it nonetheless manages to blame businessmen for the economic crisis. "It was just a product of Wall Street greed, and Wall Street is always greedy. It's the nature of the beast." Thirdly, it obviates the suggestion that perhaps the villains were in Washington rather than New York. And fourthly, it implies that the ultimate solution to such crises must be an economic system that has no place for greed, such as, oh, an economy run by public servants. Update: Apparently, the question began with the New York Observer , so it seems that this thesis is a trial balloon that is already being floated by the leftist intelligentsia. The capitalist response must be to discover and publicize the simple and coherent story about how government regulators undermined the free-market system. Call it a first rough draft of history.
