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The Galleon Case Has It All
Sep 30, 2010
The Business Rights Watch covers a number of different issues: Overcriminalzation is one, obviously, the process of making illegal that which should be legal. It is a form of legislative malfeasance, and I would include under this heading most of the business regulations that have been imposed since the advent of Progressivism in the late 19th century, such as antitrust and insider-trading laws. But a second area of interest is one that I think of as Hyper-Criminalzation. That is the long-term trend of taking the crimes created by Over-Criminalization and treating them as ever more serious, heinous, and hateful.
As an example of Hyper-Criminalization consider how white-collar prison sentences have increased during the last fifty years. In 1960, there was a famous antitrust case: the Electrical Equipment Case. By itself, that is an example of Over-Criminalization: Antitrust laws should not exist at all. Still, they do exist and they have existed since 1890, and the businessmen involved in the Electrical Equipment case knew that they were violating those antitrust laws. Moreover, their violations extended across several years, and they worked assiduously to keep their conspiracy well hidden. Nevertheless, when the men were found guilty, America was shocked to hear that a few of them would actually be sentenced to time in prison—in fact, to 30 days. In 2003, by contrast, Jamie Olis was convicted of helping to draw up a single financial contract that was—arguably—not in strict accordance with the SEC’s required accounting procedures. He was sentenced to 24 years in prison with no possibility of parole. That is Hyper-Criminalization with a vengeance.
Today, one of the cutting-edge cases of both overcriminalization and hypercriminalization is the Galleon Insider-Trading Case. “Using Drug War Methods to Look for Insider Trading” is the title of NYT columnist Peter J. Henning’s article on the case, and it is accurate so far as it goes: The Galleon case represents the first time that wiretaps were employed to uncover insider-trading. Try to imagine where that innovation tends. One may feel scant sympathy for mafiosi or drug lords who must live in fear that their every conversation is being overheard by the police. But consider how such a suspicion will now affect every major financial trader.
Those who imagine that innocent businessmen have nothing to fear from such wiretaps have simply not followed white-collar crime during the last decade. Eliot Spitzer brought three major industries under his thumb simply by leaking out-of-context emails to the press and creating a lynch-mob atmosphere. Not until years later, when Washington Post reporter Brooke A. Master wrote Spitzer’s biography, did we learn that “even for the worst e-mails, there is an explanation that is not totally ludicrous.”
The Galleon case may also involve prosecutorial misconduct, a third area of intense interest for the Business Rights Center. On October 4, there will be a hearing to decide whether the government “recklessly or knowingly made a misleading statement or omission” to the judges who authorized the wiretaps.
Lastly, after years of following such white-collar cases, I expect that the Galleon case will soon manifest malfeasance in a fourth area that is of interest to the Business Rights Center: the vilification of business. It may come through distortions of economics or through simple defamation of character. Already, we have heard a lot of sneering at Bob Moffat (who was a damn fool, admittedly), but we have heard almost nothing about the lifetime career that brought him to the heights of IBM. Soon, I suspect, we are going to begin hearing more slanted biographies of the other participants in the Galleon case, because the “crime” of insider-trading is one that journalists love to damn and rarely if ever question.