Archive for the ‘Corruption’ Category
Faculty and staff
posted by Aaron Saiger
The proximate cause of Danielle’s inviting me to guest-blog at Concurring Opinions was a celebration we had at Fordham of my colleague Robert Kaczorowski‘s publication of “Fordham University School of Law: A History,” the publication of which she had blogged here. The first half the book analyzes decanal administrations prior to those of Dean John Feerick, who remains an illustrious and beloved member of the Fordham faculty. This section of the book is remarkable for being the very opposite of “law porn“: it tells the story of several decades of a law school’s decline. This decline, Kaczorowski convincingly argues, was driven largely by the insatiable voraciousness with which the central university plundered the law school’s revenues (read student tuition) for its own, non-law purposes. Today, we call that plundering the “central services charge.” At many universities, not just my own, central charges are a major driver of law school costs.
The central services charge is related to the explosive growth of the administrative sector within universities. Read the rest of this post »
April 9, 2013 at 9:40 am
Posted in: Book Reviews, Corruption, Law School, Law School (Teaching)
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“The Creditor Was Always Right”
posted by Frank Pasquale
What would a world of totally privatized justice look like? To take a more specific case—imagine a Reputation Society where intermediaries, unbound by legal restrictions, could sort people as wheat or chaff, credit-worthy or deadbeat, reliable or lazy?
We’re well on our way to that laissez-faire nirvana for America’s credit bureaus. While they seem to be bound by FCRA and a slew of regulations, enforcement is so wan that they essentially pick and choose the bits of law they want to follow, and what they’d like to ignore. That, at least, is the inescapable conclusion of a brief but devastating portrait of the bureaus on 60 Minutes. Horror stories abound regarding the bureaus, but reporter Steve Kroft finds their deeper causes by documenting an abandonment of basic principles of due process:
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February 19, 2013 at 8:47 pm
Posted in: Consumer Protection Law, Corruption, Cyberlaw, Sociology of Law, Technology
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Prosecutors, Gambling and Dead Horses
posted by Lawrence Cunningham
Should federal prosecutors who settled a tax fraud case with the New York Racing Association back in 2003 (amended in 2005) be kicking themselves? Besides commitments typical of criminal settlement agreements (called deferred prosecution agreements), to improve internal control and governance, this one required the NYRA to continue its best efforts to install gambling machines at the track. It finally did so last year and the results have included the deaths of 21 horses during the winter meet.
Gambling is a controversial topic and New York State politicians had in 2003 just begun a push to expand the kinds of gambling that are legal in the state, starting with video gaming machines at horse racetracks. Why federal prosecutors settling a criminal tax suit should have anything to say about the NYRA’s role in advancing this agenda is not clear. Prosecutors did not explain their reasoning when signing the DPA.
In any event, the NYRA worked earnestly to move its gambling program along amid growing political and legal controversy in the state over gambling. It finally prevailed, opening a gambling emporium at the Aqueduct track in Queens in October 2011. In the ensuing season, an astonishingly high number of horses — 21 — died while racing.
In March, Governor Andrew Cuomo formed a task force to investigate and in May took state control over the track from the NYRA. The task force released its report last week identifying numerous causes for the deaths and prescribing extensive reforms of the NYRA and Aqueduct operations. Among the culprits: casino funding was allocated to massively increase awards to owners of winning horses in lower-level claiming races. Read the rest of this post »
October 2, 2012 at 6:09 am
Posted in: Contract Law & Beyond, Corruption, Criminal Law, Criminal Procedure, Culture, Current Events
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Nordstrom on Global Outlaws
posted by Frank Pasquale
I was recently listening to a podcast by Carolyn Nordstrom of her 2008 Franke Lecture in the Humanities, Emergent(cies). Nordstrom discusses the extraordinary power wielded by those in control of an underground economy of weapons, drugs, and human trafficking. Paul Farmer attested to Nordstrom’s extraordinary dedication to ferreting out the transactions that knit together so many imperiled and privileged lives. I look forward to reading her book Global Outlaws. This excerpt describes her aims in it:
I am interested in the intersections of crime, finance, and power in activities that produce something of value: monetary, social, and cultural capital, power, patronage, survival. . . . Public media focus on . . . aggressive individuals under the sensational banner of “crime,” yet this interpersonal violence constitutes a small percentage of the universe of criminal actions. Smuggling cigarettes brings in far greater profits and economic repercussions. Robbing an entire country or controlling a transnational profiteering empire is the gold standard of crime.
September 27, 2012 at 11:21 am
Posted in: Accounting, Corruption, Criminal Law, Cyberlaw, Trade
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The Partisan Foundations of Judicial Campaign Finance
posted by Michael Kang
The Center for American Progress has just issued a report on judicial campaign finance that documents the increasing costs of campaigning in judicial elections and raises alarm that “[i]nstead of serving as a last resort for Americans seeking justice, judges are bending the law to satisfy the concerns of their corporate donors.” Jeffrey Toobin followed up in the New Yorker that “the last thing you want to worry about is whether the judge is more accountable to a campaign contributor or an ideological group than to the law. . . . [b]ut it’s clear now that in many states you should worry—a lot.”
My colleague Joanna Shepherd and I study judicial campaign finance and argue that what is regularly missed in this simple narrative is the crucial role of the major parties. In our empirical work, we find a very real relationship between contributions to judges and judicial decisions favorable to contributors, but the intuitive narrative of direct exchanges of money for decisions between individual contributors and judges is too simplistic to describe the larger realities of modern judicial elections. The Republican and Democratic Parties broker connections between contributors and their candidates, and we argue that parties, not elections, seem to be the key to money’s influence on judges.
In a new paper still in progress, The Partisan Foundations of Judicial Campaign Finance, we identify broad left- and right-leaning political coalitions, allied with the Democratic and Republican Parties, whose collective contributions exercise systematic influence across the range of decisions by judges who receive their money. The parties appear to coordinate judicial campaign finance under partisan elections where their investment and involvement is greatest, and what is more, we find that the robust relationship between money and judicial decisions largely disappeared in our data for judges elected in nonpartisan elections where parties are relatively less involved.
In addition, we go on to find a striking partisan asymmetry between Republicans and Democrats in judicial campaign finance. Money from conservative groups in the Republican coalition, as well as from the party itself, is associated with more conservative judicial decisionmaking by Republican judges, even controlling for individual ideology. However, decisionmaking by Republican judges is not responsive to money from liberal sources. Decisionmaking by Democratic judges, by contrast, is influenced by campaign support from both liberal and conservative sources and thus cross pressured in opposite directions. The result is that judicial campaign finance reinforces party cohesion for Republicans while undermining it for Democrats. Campaign finance thus predicts judicial decisionmaking by judges from both parties in some sense, but is much more successful in serving partisan ends for Republicans, netting out in a conservative direction between the two parties.
August 15, 2012 at 3:34 pm
Posted in: Constitutional Law, Corruption, Courts, Economic Analysis of Law, Election Law, Politics
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Penn State Scandal: Could a Corporate Compliance Model Have Prevented It?
posted by Frank Pasquale
The Penn State scandal has become ever more shocking with each new revelation. My colleague Kathleen Boozang argues that it is time for higher ed to learn from other large enterprises about the importance of compliance:
It appears that even now, Penn State lacks a compliance program, the creation of which Special Investigative Counsel Freeh’s Report recommends. Previously limited to financial fraud and HR issues, a June 21, 2012 posting by Penn State’s internal auditor announces a poster redesign advertising its hotline number, to which any ethical or legal concerns can now be reported. Important will be training throughout the university regarding the law’s protection of whistleblowers, about which, according to Freeh’s Report, top university leaders were unaware.
While it is stunning that, even now, Penn State has not advanced further in setting up these protective measures, it is fair to say that much of higher ed has been slow to adopt compliance best practices common to the healthcare sector and most business entities.
In related news, the Institute of Internal Auditors met in Boston last week. It looks like they will need to play an increasing role in the higher education setting, especially if internal compliance methods are not mere “rituals of verification.”
July 17, 2012 at 3:57 pm
Posted in: Accounting, Corruption, Criminal Law, Education
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Stanford Law Review Online: The Money Crisis
posted by Stanford Law Review
The Stanford Law Review Online has just published an Essay by former U.S. Senator Russ Feingold entitled The Money Crisis: How Citizens United Undermines Our Elections and the Supreme Court. Senator Feingold explains how the Supreme Court decision in Citizens United threatens the integrity of our political process:
As we draw closer to the November election, it becomes clearer that this year’s contest, thanks to the Supreme Court’s 2010 Citizens United decision, will be financially dominated by big money, including, whether directly or indirectly, big money from the treasuries of corporations of all kinds. Without a significant change in how our campaign finance system regulates the influence of corporations, the American election process, and even the Supreme Court itself, face a more durable, long-term crisis of legitimacy.
[In Citizens United,] the Court was presented with a narrow question from petitioners: should the McCain-Feingold provision on electioneering communications (either thirty days before a primary election or sixty days before a general election) apply to this movie about Hillary Clinton? The movie, of course, was not running as a normal television commercial; instead, it was intended as a long-form, “on demand” special.
Yet Chief Justice Roberts clearly wanted a much broader, sweeping outcome, and it is now clear that he manipulated the Court’s process to achieve that result. Once only a question about an “on-demand” movie, the majority in Citizens United ruled that corporations and unions could now use their general treasuries to influence elections directly. Despite giving strenuous assurances during his confirmation hearing to respect settled law, Roberts now stands responsible for the most egregious upending of judicial precedent in a generation. As now-retired Justice John Paul Stevens wrote in his dissent to the majority in Citizens United: “[F]ive Justices were unhappy with the limited nature of the case before us, so they changed the case to give themselves an opportunity to change the law.”
He concludes:
The Court has a clear opportunity. A new challenge from Montana could allow the Supreme Court to reconsider its decision in Citizens United, and at least two justices have hinted that the 2010 ruling is untenable. In granting a stay of a Montana Supreme Court decision upholding that state’s anticorruption laws, Justice Ginsburg, writing with Justice Breyer, found the pulse of the chaos Citizens United has wrought: “Montana’s experience, and experience elsewhere since this Court’s decision in Citizens United v. Federal Election Commission, make it exceedingly difficult to maintain that independent expenditures by corporations ‘do not give rise to corruption or the appearance of corruption.’”
Justice Ginsburg is correct. Today’s framework for corruption cannot stand.
Read the full article, The Money Crisis: How Citizens United Undermines Our Elections and the Supreme Court by Russ Feingold, at the Stanford Law Review Online.
Note: corrected for typos
June 14, 2012 at 7:30 am
Tags: campaign finance, citizens united, Politics, Supreme Court
Posted in: Advertising, Corruption, Jurisprudence, Law Rev (Stanford), Politics
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Did Spitzer and Levitt Stoke the Financial Crisis?
posted by Lawrence Cunningham
Many are to blame for the financial crisis and plenty of reports and analyses have been written detailing assorted causes and assigning responsibility. Overlooked in accepted versions of events are two fateful decisions and their context: Eliot Spitzer’s overzealous drive to oust Hank Greenberg from heading AIG, and Arthur Levitt’s governance reforms implemented at AIG shortly thereafter.
The ouster of Greenberg and transformation of AIG are pivotal events because before the ouster and reforms, AIG wrote few of the credit default swaps that became the centerpiece of the crisis, but wrote increasingly risky and unhedged swaps thereafter. Many informed people consider it extremely unlikely or nearly impossible to imagine that, had AIG still been run by Greenberg under its traditional governance structures, the swap business at AIG could have gotten so out of hand.
In that telling, Spitzer’s aggressive tactics to have Greenberg ousted and Levitt’s ambitious reforms were at least indirect contributing causes of the crisis and its severity. The actions and ideas therefore deserve greater scrutiny than they have been given.
In Spitzer’s case, it’s important to highlight how he took many steps that were at least dubious as a matter of prosecutorial ethics; in Levitt’s case, the reforms were extreme departures from traditional corporate governance. Potential lessons include the importance of prosecutors not overstepping their bounds and the value of adhering to some traditions in the development of corporate governance. Read the rest of this post »
February 20, 2012 at 2:09 pm
Posted in: Corporate Law, Corruption, Courts, Criminal Law, Criminal Procedure, Culture, Current Events, Legal Ethics
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The Poor Get One Strike; Banks Get Thousands
posted by Frank Pasquale
Most readers of this blog are already familiar with draconian treatment of the poor by various law enforcers and state bureaucracies. Here’s yet another example:
[A] one-strike clause . . . allows the public housing authority to evict [the tenant] if any member of her household or any guest engages in certain kinds of criminal activity. . . . Stories abound about the one-strike policy being wielded in seemingly egregious ways to evict “innocent tenants,” such as a disabled elderly man in California whose caretaker was caught with crack. . . .The Chicago Reporter wrote in September that 86 percent of Chicago’s one-strike evictions last year did not arise from criminal activity by the person named on the lease.
“These policies, the effect of them on children, families, women, families of color, were not thought through. And I think now a national conversation is beginning to rethink that,” said Ariela Migdal, a senior staff attorney with the Women’s Rights Project of the American Civil Liberties Union. Migdal pointed to a June 2011 letter from HUD Secretary Shaun Donovan to public housing directors, encouraging the directors to use their “broad discretion” to create a flexible set of standards for who will be admitted to and allowed to stay in public housing.
Certainly the Obama administration has ample experience deploying “discretion” and “mercy” in other areas. For example, consider Barry Ritholtz’s summary of a shocking Reuters report by Scott Paltrow on foreclosure fraud:
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December 26, 2011 at 12:26 pm
Posted in: Corruption, Criminal Law, Financial Institutions, Law and Inequality, Tax
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Resisting Elites’ Resistance to the Rule of Law (Review of Glenn Greenwald’s With Liberty and Justice for Some)
posted by Frank Pasquale
(Glenn Greenwald is having a fundraiser; link here. I think his work is well worth supporting.)
There are few (if any) “free markets” in the largest sectors of the US economy. The health care industry is a labyrinth of public and private payers. Sectors known as “guard labor” are also larded with subsidies. The Departments of Defense and Homeland security contract with thousands of companies. The communications industry enjoys various government “givings.” And at this point, everyone knows that our largest financial institutions are taxpayer supported entities. Without the implicit backing of the federal government, they would collapse.
Government subsidy to large industries is not, in and of itself, a bad thing. When wages are stagnant and capital gains are mainly enjoyed by the top thousandth of the population, some entity has to spend for common provision. But the price of that spending should be higher standards for the propped-up industry. In health care, for instance, Medicare Conditions of Participation (and laws like the 1986 EMTALA) require many hospitals to provide care regardless of patients’ ability to pay. Tough fraud and abuse enforcement subjects providers’ bills to rigorous audits; privacy law will soon require audit-capability for digital medical records. Legislation passed in 2009 and 2010 creates many other requirements to channel private provision of health care toward more public ends. It’s certainly not a perfect system, but regulation is serious and purposeful. There are real consequences for many lawbreakers.
Glenn Greenwald tells a very different story about three other heavily subsidized industrial sectors. He gives us serious reason to doubt that law has constrained banks, telcos, and the security sector when they posed critical threats to our economy, privacy, and liberty. His book With Liberty and Justice for Some is a passionate indictment of four distinct trends:
1) elites who violate laws with impunity,
2) retroactive immunity for acts unlawful at the time they were committed,
3) lobbyists’ power to influence legislators to render bad conduct lawful or even subsidized, and
4) a radical increase in punishment of those who fall outside the charmed circle of political and economic elites.
Greenwald has examined each area in his blog, as have other, lonely voices in corporate law (and a more robust chorus in communications & cyberlaw troubled by telecomms’ sweetheart deals). The vital contribution of With Liberty and Justice for Some is to show how the four trends mutually reinforce one another, contributing to a politics of wealth and privilege defense commonly known as oligarchy.
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December 9, 2011 at 8:51 am
Posted in: Book Reviews, Corruption, Criminal Law, Financial Institutions, Law and Inequality
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AALS “Hot Topics” Program: Russia’s “Dictatorship of Law”
posted by Jeffrey Kahn
I am glad to announce that the AALS Committee on Special Programs selected my proposal as a “Hot Topics” panel for the 2012 AALS Annual Meeting in Washington D.C. next month. The program is called: “The Dictatorship of Law: The Khodorkovsky Case, Human Rights, and the Rule of Law in Russia.” William Pomeranz, Deputy Director of the Kennan Institute for Advanced Russian Studies at the Woodrow Wilson International Center for Scholars, will chair a panel that includes Kim Lane Scheppele (the University of Pennsylvania and Princeton), Bruce Bean (Michigan State University), Christopher Bruner (Washington and Lee University), Alexei Trochev (Nazarbayev University) and me. The program will begin at 10:30 on Friday morning, January 6.
Below is a description of the panel, which will occur (as perhaps a “hot topic” should) between two central events on the Russian calendar: the surprising results of yesterday’s parliamentary elections in Russia and presidential elections scheduled for March 4 that (at least until yesterday) everyone was saying would be certain to return now Prime Minister Vladimir Putin to the presidency currently held by his protégé, Dmitrii Medvedev.
During his first campaign for President of Russia in February 2000, Vladimir Putin defined democracy as a “dictatorship of law.” This was meant to signal a shift away from the perceived lawlessness of his immediate predecessor’s governance, and to feed the nostalgia for Soviet-era stability. As Putin starts his gambit to return to the Russian presidency, this panel examines which half of that slogan will dominate the other. Recent developments in the most well-known case in the courts of both Russia and the Council of Europe present an opportunity to do so at a pivotal moment not only in that case but for the future of the rule of law in Russia.
Mikhail Khodorkovsky was the CEO of the Yukos Oil Company and the richest man in Russia when in 2003 he and his business partner, Platon Lebedev, were arrested and charged with crimes connected to Yukos, Russia’s most profitable and well-known private corporation. They were convicted of fraud, causing property damage by deceit or breach of trust, and tax evasion and sentenced to eight years in prison. Yukos was seized and sold to state-controlled companies. In December 2010, as their sentences drew to a close, Khodorkovsky and Lebedev were convicted by another court of embezzlement and money-laundering, charges arising out of the same time period and concerning the same corporate activities that were the basis for the first conviction. On the eve of that verdict, Prime Minister Vladimir Putin informed a nationwide television audience that “a thief should sit in jail,” a reference to a well-known Soviet mini-series that would have been quite familiar to viewers (the quote continues: “… and people don’t care how I put him away.”). In midsummer 2011, a Russian court upheld the verdict, extending the defendants’ sentences until 2016.
A bit more on the tension this case embodies for Russian law and human rights after the break …
December 5, 2011 at 11:33 am
Posted in: Corporate Law, Corruption, Courts, Criminal Procedure, Current Events, Law School, Uncategorized
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Unconditional Bailouts: Capitalism’s Undoing
posted by Frank Pasquale
What are we to make of Bob Ivry, Bradley Keoun and Phil Kuntz’s blockbuster report on the Fed’s bailouts? The three journalists conclude that “taxpayers paid a price beyond dollars as the secret funding helped preserve a broken status quo and enabled the biggest banks to grow even bigger.” Yves Smith argues that “banks lied” and grabbed $13 billion in profit. She also notes that their favorite water carrier, Timothy Geithner, “told Congressmen they were too stupid to be able to shrink banks, and they should leave those questions to the Basel Committee (which has no interest in making big banks smaller).”
For another perspective on the corrupt relationship between megabanks and our central bank, consider John Kay’s recent description of the “martingale” strategy among bettors:
Each time you lose, you increase your stake: to the point at which a win on the next game would recoup all your losses and leave you ahead. Since you will win sooner or later, you are certain to come home with a small profit. Provided you are infinitely rich before you start. Otherwise, if you regularly engage in martingales, you will eventually go bankrupt – and the richer you are, the larger the scale of bankruptcy.
November 28, 2011 at 9:07 am
Posted in: Corruption, Financial Institutions, Law and Inequality
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An Important Post on Egypt from Nagla Rizk
posted by Frank Pasquale
At a time of global economic crisis, the renewed centrality of two origin points of modern civilization (Greece and Egypt) is uncanny. Nagla Rizk, a professor and dean at the American University in Cairo, has courageously offered a nuanced and critical perspective on tomorrow’s elections there and the past 10 months of political turmoil. I was privileged to meet Prof. Rizk while at Yale’s Access to Knowledge Global Academy, and I highly recommend following her work and twitter feed. A few insights from her:
When we stormed the streets last January, we chanted “Aish, Horreya, Adala Egtema’eya” (“Bread, Freedom, Social Justice”). . . . Ten months down the road, yesterday we chanted in Tahrir, “Aish, Horreya, Adala Egtema’eya” (“Bread, Freedom, Social Justice”). Why? . . .
Rather than tackling the root of the problem or starting a dialogue with the protesters, [the post-Mubarak SCAF regime] chose to order them to go home. To add insult to injury, SCAF and its government portrayed them as the cause of instability, turning the rest of Egypt against them.
November 27, 2011 at 6:58 pm
Posted in: Constitutional Law, Corruption, Political Economy, Politics
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Starr and Greenberg FileTakings Claim in AIG Takeover
posted by Lawrence Cunningham
When the federal government seized control of American International Group at the depths of the financial crisis in 2008, officials commandeered nearly 80% of the company’s equity in exchange for what were nominally called “loans”, without ever obtaining a shareholder vote or paying shareholders compensation for the seizure. The government treated all other financial firms far more favorably, even using some of the “loans” to secretly bail out other financial institutions. The government never conducted a valuation of the assets it commandeered.
To owners of AIG stock, this amounts to a taking in violation of their Fifth Amendment rights, according to their class action lawsuit against the United States in the U.S. Court of Federal Claims. The complaint, filed by AIG’s largest private shareholder, Starr International and its CEO Maurice (“Hank”) Greenberg, was drafted by David Boies (Boies, Schiller & Flexner) and John Gardiner (Skadden Arps). The suit seeks at least $25 billion in damages.
Pivotal paragraphs from the complaint read as follows:
10. The Government is not empowered to trample shareholder and property rights even in the midst of a financial emergency. The Fifth Amendment . . . directs that the Federal Government shall not deprive any person of “property without due process of law” and forbids the Government from appropriating private property “for public use, without just compensation.”
11. [A]lthough public policy goals may justify the taking of private property to serve public ends, when the Government does so it is required by the Constitution to ensure that the property is acquired in accordance with law, that the burdens associated with the taking are not imposed in a disparate and unfair manner, and that just compensation is paid. . . . As Justice Holmes long ago admonished, “a strong public desire to improve the public condition is not enough to warrant achieving the result by a shorter cut than the constitutional way of paying for the change.”
13. The Government’s actions were ostensibly designed to protect the United States economy and rescue the country’s financial system. Although this might be a laudable goal, as a matter of basic law, the ends could not and did not justify the unlawful means employed by the Government to achieve that goal. Even in exigent times, and perhaps most especially then, the Government may not ignore basic protections afforded under the United States Constitution or disregard established legal rights.
A few additional paragraphs laying out the factual basis for the claim follow. Read the rest of this post »
November 21, 2011 at 12:45 pm
Posted in: Constitutional Law, Corruption, Current Events
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Ciara Torres-Spelliscy: American Corporate Political Transparency Is 44 Years Behind the UK
posted by Frank Pasquale
Ciara Torres-Spelliscy is an Assistant Professor at Stetson University College of Law and the co-author along with economist Dr. Kathy Fogel of Shareholder-Authorized Corporate Political Spending in the United Kingdom. I am posting her views on American corporate political transparency below [FP]:
by Ciara Torres-Spelliscy
As I told my law students in a recent class, when I was in law school, no one cared a fig about corporate political spending. I did not hear about it in Constitutional Law, Corporate Law or Fed. Tax. It was a non-issue because for the most part, it was banned. It made sense that back then, the SEC would not have a corporate political spending reporting requirement. That would have been tantamount to the agency’s asking, “have you committed any federal election crimes?” Now that such political spending is legal, the SEC should respond to the growing calls for a new disclosure rule.
Much has changed in the years since I was on the business end of a Con Law exam. In particular, in 2010, the Supreme Court did away with corporate source limits on election ads altogether in the infamous Citizens United case. The upshot of this case changed not just federal law going back to 1947, but also state laws, some of which dated back to the turn of the twentieth century.
The new normal is corporations can spend an unlimited amount of their treasury funds on independent political expenditures in local, state and federal elections. This brings us back to the SEC and its utter lack of political disclosure rules. Because of this gap, publicly-traded corporations can spend in elections without ‘fessing up. This seems odd given how passionate shareholders are about transparency.
In the summer of 2011, ten corporate law professors petitioned the SEC for a new disclosure rule to rectify this situation. These professors are both conservative and progressive, yet they all agree transparency of corporate political spending is a must.
Economists have already written in support of the professors’ petition. Economist Dr. Michael Hadani of Long Island University noted that one of the reasons why shareholders should want more reporting on corporate political spending is that it can backfire. His regression analysis of over 1,100 companies over an 11 year period found political spending had a negative impact of firms’ market value.
November 16, 2011 at 11:53 am
Posted in: Corporate Law, Corruption, First Amendment
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Post-Soviet Russia: Just Like 15th Century England?
posted by Jeffrey Kahn
Yesterday I noted that I would blog a bit this month about the rule of law in Russia. Today’s Wall Street Journal carries a front-page feature article by Guy Chazan that offers a rare look into the world of Russia’s oligarchs. I’m interested in the fate of Mikhail Khodorkovsky, once Russia’s richest man, now its most famous prisoner. Chazan’s story focuses on two more oligarchs: Boris Berezovsky and Roman Abramovich.
The collapse of the Soviet Union led to a decade in which vast fortunes could be made in the chaos of the new Russia. These men (and they were all men) built empires from scratch on unstable legal foundations in the rubble of post-Soviet society. The strength or permanence of the law didn’t matter much to the oligarchs; indeed, they relied on its weakness to amass their wealth.
Now that those empires need protecting, however, it is to law that the oligarchs turn. Berezovsky, once the éminence grise behind Boris Yeltsin, now lives in luxurious self-imposed exile in London. The WSJ reports that he is worth about $750 million. Abramovich owns the Chelsea Football Club and the world’s largest yacht; his worth is estimated at about $16.5 billion. Berezovsky has sued Abramovich for $6 billion, alleging that the latter violated oral agreements about various oil and metal companies in Russia. Berezovsky claims he left his stake in them in Abramovich’s hands after he fled to London to escape the wrath of then President Vladimir Putin.
According to Abramovich’s attorney, Jonathan Sumption, there is nothing to this claim. The dispute arose, he says, in a “society without law,” and the deal the two men made was itself “corrupt.” That might seem like a strange legal defense but, as Sumption continued, “the reality was that that was how business was done in Russia at the time.”
The case is being heard at London’s High Court. To help the judge understand the millieu in which the oligarchs did business, Sumption told the court: “In our own national experience, we have to go back to the 15th century to find anything remotely comparable.”
Maybe. But the average Russian citizen observing this legal squabble might note that 15th century England had something that 21st century Russia lacks: Robin Hood.
November 7, 2011 at 11:16 pm
Posted in: Corruption, Courts, Current Events, International & Comparative Law, Uncategorized
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The Moral Authority of Occupy Wall Street
posted by Frank Pasquale
The Occupy Wall Street protests continue to grow, and to gain support from public intellectuals. Joe Stiglitz, Anne Marie Slaughter, and Paul Krugman are the latest luminaries to praise the cause. The movement has also provoked derision. Let’s consider the latest Norquist/Limbaugh memes as the protest nears the one-month mark:
1) “They’re just spoiled hippies who can’t get a job.” A quick glance at the “We are the 99%” tumblr could easily dispel this notion. The economic suffering in this country is deep and broad. As one news story put it, “one in three Americans would be unable to make their mortgage or rent payment beyond one month if they lost their job.” Even if the most down-and-out people are too poor or busy to get to Wall Street (or the hundreds of other actions now taking place), many of them think of the OWS crowd as speaking for them.
There is so much needless suffering going on now, and so much wealth accumulating at the very top. It is hard to understand how critics dismiss the protesters so cavalierly. I used to find the Biblical passage about God hardening Pharaoh’s heart one of the more mysterious parts of the Book of Exodus; now I feel like I’m witnessing it firsthand.
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October 8, 2011 at 11:13 am
Posted in: Corruption, Current Events, Financial Institutions, Law and Inequality, Political Economy, Politics, Sociology of Law
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Labor Day Links
posted by Frank Pasquale
Just a few points of interest on Labor Day:
1) Alan Hyde, The Idea of the Idea of Labour Law: A Parable.
2) Yves Smith, The Decline of Manufacturing in America: A Case Study.
3) Mark E. Anderson, $500 a Month Less.
4) John Bowe, Nobodies: Modern American Slave Labor and the Dark Side of the New Global Economy.
5) Liza Featherstone, Selling Women Short: The Landmark Battle for Worker’s Rights at Wal-Mart.
6) Robert Reich on the great regression.
7) Kyle Leighton, Less Fruits Of More Labor.
8. Andrew Leonard, The Big Squeeze on Labor.
9) Washington Post, Breakaway Wealth.
10) But don’t worry, CEOs are doing something to stanch the flow of such disheartening news:
Here’s one financial figure some big U.S. companies would rather keep secret: how much more their chief executive makes than the typical worker. Now a group backed by 81 major companies — including McDonald’s, Lowe’s, General Dynamics, American Airlines, IBM and General Mills — is lobbying against new rules that would force disclosure of that comparison.
The lobbying effort began more than a year ago. It involved some of the biggest names in corporate America and meetings with members of both parties on the House Financial Services Committee and Senate banking committee. The companies and their Republican allies in Congress call comparisons between the chief and everyone else in the company “useless.”
But some Democrats and investors say the information should be issued to highlight the growing income disparity in the United States. They add that opponents of disclosure merely want to hide the outrageous scale of executive pay packages.
Opaque pay is a big problem in the UK, too. In pay-without-performance world of corporate titans, expect a lasting war against disclosure.
September 5, 2011 at 5:07 pm
Posted in: Corporate Law, Corruption, Employment Law
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More Secret Money Went to Goldman
posted by Lawrence Cunningham
Kept secret by the U.S. government until today, Goldman Sachs borrowed $15 billion from the U.S. Federal Reserve on December 9, 2008 to stay afloat.
That was the largest sum taken that day by a coterie of 19 favored Wall Street and foreign banks in a furtive $80 billion capital infusion to the banks that created the crisis.
Today’s astonishing disclosure, and the strenuous efforts of officials to keep it quiet for nearly three years, raises still more questions about the integrity of the government kingpins who called the shots during the financial crisis of 2008.
Especially compromised are Henry Paulson, Goldman’s former CEO who ran the U.S. Treasury at the time, and his chief lieutenant, Tim Geithner, who has run the U.S. Treasury since. Read the rest of this post »
July 6, 2011 at 2:43 pm
Posted in: Corruption, Current Events
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Geithner Wistful for Goldman Sachs
posted by Lawrence Cunningham
Treasury Secretary Tim Geithner is eyeing the exits from his wonky Washington post. Rumors about what he’ll do next swirl on Wall Street.
Heavy betting is on Goldman Sachs, though taking a job there would cut very close to the bone of revolving door piracy in the Washington-New York corridor. After all, Goldman owes its existence to Geithner.
In late 2008, when Geithner was President of the New York Federal Reserve Bank, he co-engineered, along with his Treasury predecessor and former Goldman CEO, Henry Paulson, the clandestine bailout of Goldman that rescued the investment bank from oblivion.
Earlier that year, Paulson and Geithner provided billions of government money to rescue Goldman’s peer, Bear Stearns, but took enormous heat for doing so; late in that year, the duo capitulated to the pressure by allowing Lehman Brothers, another Goldman peer, to disintegrate in bankruptcy. They promptly took heat for that too.
To avoid both fates in the case of Goldman Sachs, Paulson and Geithner decided to nationalize American International General. They bought 80% of that company with $85 billion in government money.
They then furtively transferred nearly $20 billion of that money to Goldman, and other banks, to prop them up. The transfers settled financial contracts between AIG and Goldman the two companies had been renegotiating for months.
Rather than complete those negotiations, in which both sides would have taken losses, the government-appointed leadership at AIG paid them out one-hundred cents on the dollar. That injected badly-needed liquidity into Goldman in a way that did not hurt its balance sheet. Of course, it killed AIG.
Geithner and Paulson hid these details from the public for months, until the press and Congressional committees unearthed the truth.
Geithner might love to land a job at Goldman, and senior folks there may welcome this chance to repay their man in Washington. But given this background, it may be too shocking even for a man who did such things to take such a job.
July 1, 2011 at 3:56 pm
Posted in: Corruption, Current Events
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