Commentary

Before the federal government starts handing out multimillion-dollar awards to corporate wives who turn in their husbands for violating one of the SEC’s 10,000 commandments, we need to get rid of this self-congratulatory term “whistleblower.” I am not one who opposes naming names where there are real crimes or real threats. I believe with Thomas Jefferson that: “A prejudice prevails too extensively among the young that it is dishonorable to bear witness against one another.” But the metaphor of “whistleblower” as currently used by business journalists is offensive to anyone who respects English.

Aug 5, 2010

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April 2004 -- The controversy last year over whether to withdraw a feeding tube from a 39-year-old Florida woman with severe brain damage has thrust questions regarding end-of-life decisions into the limelight once again. That debate has been intensified by divergent opinions about the woman's possibility of rehabilitation and by doubts raised about her husband's motivation in wishing not to prolong her life. The complexities of that case, however, should not be allowed to bias public response to a somewhat different but no less urgent ethical question: What is the most humane way to treat individuals who, at the end of a long life, express a clear-minded wish to die? As a society with an increasingly aged population, we need to confront this question head on.

Aug 5, 2010

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NYT, August 4, 2010: U.S. Finds Most Oil From Spill Poses Little Additional Risk . It's a shame we can't have dramatic film of the intellectual blowout that sent millions of gallons of anti-capitalist hysteria into the cultural environment. But I do hope some think tank has assigned a staffer to assemble a permanent record of the statements and actions that followed the Deepwater Horizon explosion.

Aug 4, 2010

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The Nationalization of Insider Trading. Reuters reports that the SEC is “investigating whether people may have illegally profited from trading on nonpublic information at BP Plc in the weeks and months following” the Deepwater Horzion oil spill.” Interestingly, the same story reports: “The U.S. Securities and Exchange Commission is also investigating whether BP properly disclosed information on risks related to its deepwater oil operations in the Gulf of Mexico.” So, the U.S. wants business employees to disclose all information relating to corporate risks. Indeed, it has shown a willingness to use multimillion-dollar payoffs to so-called whistleblowers . But the greatest collator of knowledge ever devised, the free market, is to be crippled by strict rules that prevent people who have secret information from profiting by it. Think of it as the nationalization of insider trading.

Aug 3, 2010

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The Wyly Insider Case. Peter J. Henning of the NYT (and Wayne State University Law School) explains at greater length why the insider-trading accusation against Sam and Charles Wyly looks so dubious to legal experts.

Aug 2, 2010

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Reporters like to quote Washington Post publisher Donald Graham as saying that journalism is the first rough draft of history. But that is nothing to celebrate. For as everyone knows who has ever been involved in a newsworthy event: Journalists always get it wrong. The truth of that cynical sentiment came home to me yesterday, when I ran across a book review of Randall Smith’s The Prince of Silicon Valley, a biography of Frank Quattrone. As I noted in my blog posting concerning the review, the author (Stephen Wolfe) misstated the one absolutely central fact about the prosecution of Quattrone: It was not Quattrone who sent out the email suggesting that people “clean up those files.” Thus, it is absolutely impossible that Quattrone could have written the email in question so that colleagues would purge documents incriminating to him. When reading Wolfe’s review, I thought his error especially surprising, because the matter is accurately portrayed in the book and because Wolfe says that he attended the summation of Quattrone’s trial.

Aug 2, 2010

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Defaming Frank Quattrone--Again. Someday, I should like to assemble a book comprising nothing but the libels and slanders against capitalists that have become a permanent feature of our history books. Among them would be: that J.P. Morgan sold flawed rifles to the Union Army, that John D. Rockefeller cheated the Widow Backus--and that Frank Quattrone ordered his subordinates to "clean up those files." The latest instance of this last falsehood comes in a book review, published in the Summer 2010 Exeter Bulletin, of Phillips Exeter Academy. It is a review of the biography of Frank Quattrone , The Prince of Silicon Valley, written by Randall Smith (Exeter '68), and it is penned by Phillips Exeter grad Stephen Wolfe (Class of '99).

Aug 2, 2010

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What Are the Wylys Up Against? Peter J. Henning. though a former SEC enforcement lawyer, writes reasonably objective analyses of business law for the NYT. Here is his analysis of the Wyly case. Notice how completely false are many media reports on this story. For example, the headline at NPR is "SEC Cites Brothers In $550 Million Insider Scheme." Well, it's actually a charge of $31.7 million, but who's counting?

Jul 31, 2010

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SEC Sues Sam and Charles Wyly. Fishing: A Paleolithic "Industry." The SEC has launched another headline-grabbing suit . All the right catch phrases are in the mix, bound to be repeated by harried journalists trying to pump up anti-business government press releases:: "Dallas billionaires," "six-year investigation," "Congressional hearings," "cloak of secrecy," "complex web" "sham system of trusts" "tax havens." Really, the SEC should construct one of those automatic phrase generators. When the rhetoric is stripped away, the accusations seem to be two: (1) The Wylys failed to announce that they hald more than 5 percent of the stock in certain companies. (2) They arranged to profit from the forthcoming sale of a company of which they were Chairman and Vice-Chairman.

Jul 31, 2010

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Jeff Skilling has requested that he be granted release on bail while his case is being considerate by an appeals cout, just as Conrad Black was released on bail while his case is being considered by an appeals court. The Supreme Court ordered that the convictions of both executives be reconsidered in light of the same decision, namely, the high court’s decision that the doctrine of “honest services” fraud had been applied in an overbroad manner.

Jul 29, 2010

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The WSJ is reporting that Danielle Chiesi seeks to have the courts suppress certain statements that she made to FBI agents on the morning of her arrest, on the grounds that she was not informed of her rights. The Journal also reports that Chiesi is “running low on funds to finance her defense,” which of course is one of the government’s favorite ways of pressuring targets to capitulate. In the KPMG tax case and in the Jamie Olis case, prosecutors pressured former employers to violate their legal obligation to provide defendants with the funds they needed for defense. (Wall Street Journal “Chiesi, U.S. May End Spat on Arrest,” by Susan Pulliam and Chad Bray). In other Galleon news, Bloomberg’s David Glovin reports that “ Raj Rajaratnam’s attorney said prosecutors misled the judges who authorized secret wiretaps that formed the basis of a federal insider-trading probe.” The Galleon case represents the first time the government used wiretaps on an insider-trading prosecution, thus elevating the atmosphere of criminality around a practice that ( in most circumstances ) should not be criminal at all.

Jul 28, 2010

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These stories about the soul of Conrad Black are fairly common on the Web, and I cannot begin to relate them all. But I thought it useful to include one or two—just to give a picture of the man whom prosecurors are so desperate to imprison. In the great Rodney-King, if-they-want-you-to be-found-guily-you-will-be-found-guilty tradition, New York State attorney general Andrew Cuomo has reopened his investigation of Joseph “the man who broke the world” Cassano, after the federal government could find no basis for prosecuting him on either criminal or civil charges .

Jul 27, 2010

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If Not Joe Cassano, Then Who? This Wall Street Journal article notes that previous economic collapses have been followed by notorious criminal trials of alleged evildoers. But, so far, the collapse of 2008-2009 has not. At one point, Joseph Cassano was thought to be the most likely candidate, having been fingered by the financial story-teller Michael Lewis as "the man who crashed the world." But when the federal government decided to drop both criminal and civil charges against Cassano, it began to seem as though criminal businessmen might not be found to lie at the heart of the world's economic problems, frustrating the standard anti-capitalist narrative. (Investigations into the role of power-seeking bureaucrats are not to be expected.) For true believers, however, it should be noted that New York State attorney general Andrew Cuomo continues his Javert-like pursuit of Cassano.

Jul 27, 2010

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BP's president and CEO, Tony Hayward, has agreed to resign , probably in the fall, the New York Times is reporting.

Jul 25, 2010

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Matt Ridlley has a blog, "The Rational Optimist," to accompany his book of the same title. And the other day he wrote an interesting blog post on the resilience of nature , with particular reference to oil spills. Information on Ridley's book is here .

Jul 24, 2010

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Conrad Black. Appearing in a Chicago courtroom today, Conrad Black heard some of the terms set for his bail. Apparently, the one he finds most onerous is that he cannot travel to his home in Canada. U.S. District Judge Amy St. Eve has restricted his travel to the United States. He will be back in court on August 16th. The BBC story is here .

Jul 24, 2010

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Toyota. The indispensable Michael Fumento has posted his forthcoming Forbes column at his Web site. His survey of the database at the National Highway Traffic Safety Administration shows that it is a undigested lump of unevaluated complaints: “ Anybody can enter anything . An entry filed by someone named “Damnable Liar” claimed his car accelerated to the moon because of a child seat problem. That was mine. Many “complaints” are merely comments, and since NHTSA has no “sudden acceleration” category but rather uses “speed control,” the sudden-acceleration claims are lumped in with entries regarding vehicle sluggishness. But in the media conversion process they all become runaway Toyotas.

Jul 22, 2010

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One small step for a man: Conrad Black has been freed from prison on $2 million bail . The money was posted Roger Hertog , a New York businessman associated with many conservative causes, especially the Manhattan Institute, of which he is chairman emiritus.

Jul 22, 2010

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Goldman's Consent Decreee. Here is the consent decreee that Goldman Sachs agreed to in order to settle the SEC's suit. In it, the company does not admit or deny the allegations (standard wording) but does admit that it made "a mistake." Well, we knew that. If I take a walk on the bad side of town and get mugged, clearly I made a mistake. Goldman's "mistake" was to do something that provoked the SEC to mug it. Still, for the reasons I laid out here , I wish Goldman had fought the SEC in court. By capitulating, Goldman allows the SEC and the Obama administration more broadly to start taking us back to the mid-20th century era of feudalistic capitalism, under which companies are forced to act as the caring seigneurs of all their "stakeholders."And as for Goldman's attempt to preserve the distinction between committing a "mistake" and committing an immorality: naturally, it was quickly brushed aside by anti-capitalists such as the viciously anti-business Senator Carl Levin .

Jul 19, 2010

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The invaluable Larry Ribstein (who left his personal "Ideoblog" for the excellent group effort "Truth on the Market" ) offers the definitive first-take on the Goldman case from the perspective of a busiiness-law professor . His key conclusion is that this suit was, in effect, the governmental version of a "strike suit," the term used when priv ate individuals go after a corporation in the expectation that it will settle and they can pocket their gains without having to prove wrongdoing in court. But, as Ribstein writes: "Instead of attorneys’ fees, the SEC’s objective appears to have been purely political." And part of that political objective, as he notes, was to alter the obligations that a corporation has to others. Exactly. The purpose was to move the American economy away from the stand-alone individualism of the capitalist system to the paternalistic collectivism of a feaudalistic-seigneurial system. spiderID=679

Jul 19, 2010

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