Top 10 Articles
Business Rights Watch
Mar 03, 2014
Perhaps the plant-owners should strike, n'est ce pas?
Suppose the government claims your business was illegal. You disagree, and you’ve worked with a lawyer to build your case. But the government gets an indictment anyway, from a grand jury that hears only the government’s case, so the court freezes the money you made in your business and you can’t pay your lawyer anymore. You have to go to trial with a public defender, not the lawyer you trust and who knows your case.
In such a situation, you would probably want a chance to argue that you’re entitled to use your money to pay your lawyer because your actions weren’t a crime.
Yesterday, in the case of Kaley v. United States, the Supreme Court held that the Constitution doesn’t give you that chance. The circuit courts with jurisdiction in New York, California, Illinois, and Washington, D.C., had all held that a defendant who needed his money to pay his lawyer was entitled to argue that he hadn't committed a crime and was therefore entitled to use it. Those precedents have now been overturned. The precedents of the circuit courts that held defendants could only argue that their assets didn't come from their alleged crimes have been upheld.
Sadly, going by its own precedents, which the defendants in Kaley chose not to challenge, the Court’s 6-3 decision is legally correct. Nevertheless, the power to freeze the money a defendant needs for legal fees is a dangerous weapon to give prosecutors.
- Alexander R. Cohen, Putting Kaley in Context
- Alexander R. Cohen, Treacy: Get a Lawyer When You Become Big
- Alexander R. Cohen, Equal Injustice 50 Years after Gideon
Feb 26, 2014
A Congressman's effort to get an anti-Obamacare ad off the air reminds us what can happen when businesses depend on licenses instead of the individual right of property.
Americans for Prosperity created an ad criticizing Obamacare and bought air time for it in Michigan—but the sellers of that air time, the TV stations, don’t legally own it. They only have a Federal Communications Commission license to use airwaves. Lawyers for a Congressman who backed Obamacare have taken advantage of that fact to try to get the ad off the air.
“Failure to prevent the airing of ‘false and misleading advertising,’” the attorneys, representing the Senate campaign of Rep. Gary Peters, Democrat of Michigan, wrote, can lead to loss of a station’s broadcast license. And they pointed out that the Washington Post’s fact checker had awarded the ad, in which one cancer patient shares her health-insurance woes, two Pinocchios. (That's out of four -- and there's an argument that the Post's piece was unjust.)
That is, the lawyers said that if the TV stations continued to air the anti-Obamacare ad, they were taking a gamble with their very existence. In an America where the IRS has gone after the president’s opponents, it’s not hard to imagine broadcasting businesses being too scared to take that bet—whether they thought the ad was true or not, whether they thought they should give voters the chance to evaluate the ad for themselves or not, and even whether they thought the courts would ultimately protect the ad as free speech or not.
But while Peters’s threat may have gained force from a recent scandal, the threat was made possible by the vulnerability American TV and radio stations have always had—the vulnerability that comes with depending on a license instead of relying on individual rights.
Some people hate freedom so much, they’ll sue to get rid of it. Other people’s freedom, at least. Such is the case in Chicago, where owners of taxi medallions are suing to force the city to crack down on Travis Kalanick’s Uber and other innovative transportation businesses.
Plaintiffs’ lawyer Michael Shakman calls Uber “an exclusionary, elitist taxi system operated side-by-side with the lawful, highly regulated taxi system that our clients and their customers have engaged in, with the city’s consent and requirement, for many years.”
It’s elitist and exclusionary, you see, because Uber cars are summoned by a smartphone app and paid by credit card, so you have to have a smartphone and a credit card to use them. And only a select elite can get smartphones and credit cards.
Oh, wait. That’s not quite true, is it?
No, actually, what’s elitist and exclusionary here is the “highly regulated taxi system.” One of the regulations is that you need a medallion, and medallions are issued in limited numbers that make them, shall we say, a lot more expensive than smartphones. And unlike smartphones, which cost money because they are values produced by intelligence and hard work, medallions are expensive because if you operate a taxi without one, the government threatens to use force to stop you. Medallions get their whole value from the exclusion of those who don’t have them from the taxi market—smartphones are if anything more valuable the more people have them.
Of course, even if Uber’s services were available only to a few selected people or to the wealthy, there wouldn’t be anything about that to warrant a crackdown, any more than there’s an injustice in limo services costing more than most people can routinely spend. There’s no principle of equality that forbids offering services that some people can’t afford—or that some people can’t afford the conditions of using. And it really is the case that some people can't afford smartphones—or Uber fares, or for that matter taxi fares. That inequality of wealth doesn't make either Uber or taxis unjust.
But there is a principle of equality before the law. Medallion cab systems deny some people the freedom to operate cabs in order to help other drivers find customers. That’s the inequality that’s unjust in Chicago taxi law.
- Walter Donway, Crony Capitalism versus "Making" Money
- Alexander R. Cohen, Cronyists Fight to Defend Cosmetology Licensing
- Alexander R. Cohen, Was UberTAXI Unwelcome in New York?
Did Preet Bharara make $4 billion for the federal government last year?
He seems to think so. As U.S. attorney in Manhattan, he runs an office that collected almost $4 billion in asset forfeitures in the 13 months that ended with January 2014, the Wall Street Journal reports. Almost half of that came from JPMorganChase, which forfeited $1.7 billion for not being a good enough cop in the Bernie Madoff case. (JPMorganChase is a bank, not a cop, but that’s another matter.) A smaller chunk came from SAC Capital, which was enmeshed in an insider-trading case; still smaller amounts came from other people.
“The Asset Forfeiture Unit’s work, simply in connection with JPMorgan and SAC, would be enough money (if the money came to us, which it doesn’t) to fund everything my Office does for 58 years,” Bharara complains in the Journal's account. “And I’m still unable to hire somebody.” That’s because, on the one hand, federal law doesn’t allocate all forfeited money to the U.S. attorney’s office that seizes it, and on the other hand, the Department of Justice had a hiring freeze on and off since 2011.
There are quite a few cases where one might want to defend a dynamic executive whose moneymaking organization can’t hire anyone because of federal laws and regulations. But, sorry, Mr. Bharara, you don’t qualify.
New York University law professor Jennifer Arlen may not see why. “This is one of the only areas of law enforcement that make a profit,” she told the Journal. “Every corporate crime prosecutor you hire, their salary is more than made up for by the sanctions the DOJ and the SEC recovers.”
The latter part may be true, but the former is not. Profits come from making money, not taking it. JPMorgan, presumably, made the $1.7 billion Bharara’s office took from it. The same is presumably true of many of the other people and businesses Bharara forced to hand over money. And even if some of them took the money rather than making it, that wouldn’t change the fact that Bharara’s office didn’t make the money: some victim a prosecutor is supposed to help protect did.
In fairness, Bharara's formal statement puts the forfeitures in the context of removing incentives for lawbreaking and returning money to victims; there, he expresses pride in where the money goes rather than irritation that his office doesn't get more of it. But even there, he speaks as if he'd made a profit for the government: "It is fair to say the taxpayers have gotten a great return on their investment – almost 8,000% – as this $4 billion represents nearly 80 times the Office’s annual budget."
If Bharara’s organization had made $4 billion, and most of that money had been taken away by people who hadn’t made it, he’d have grounds for a complaint in justice. But in fact, taking money away from people who made it is something his office does. It’s not what the federal budget process does to him.
- Walter Donway, Crony Capitalism versus "Making" Money
- James J. Treacy, Feds Blame JPMorgan in Failure to Catch Madoff
- Alexander R. Cohen, Putting Kaley in Context
A little more than a year ago, this blog noted that the Institute for Justice had won a victory over the Internal Revenue Service. The federal district court in Washington, D.C., had struck down the IRS’s attempt to regulate people who prepare tax returns. But the federal government appealed.
This week, IJ won again. It defeated the government’s appeal of that victory. The government may yet appeal to the Supreme Court.
Like the lower court’s ruling, the D.C. Circuit’s opinion is something less than a ringing affirmation of an individual’s right to do business without permission. It’s an interpretation of a federal statute giving the Treasury Department (which includes the IRS) the power to regulate those who “practice before” it. The court rejected—for six different reasons—the government’s interpretation of that power as extending to tax preparers. “In light of the text, history, structure, and context of the statute,” the court said, “it becomes apparent that the IRS never before adopted its current interpretation for a reason: It is incorrect.”
The case should remind us of something important: As powerful as regulatory agencies may be—and even though their interpretations of the laws they apply carry weight—they still have limits. They have only the power Congress gives them. And Congress, of course, has to answer to the public.
There’s something else worth noting here: H&R Block, which claims to prepare one out of every six tax returns in the country, condemned the decision. It wants to be regulated, and it may now ask Congress for a new statute so that it can be. Why? “All consumers should have access to the protection that our clients receive when working with our highly trained tax professionals,” its CEO said in a statement.
But of course, any consumer who wants H&R Block’s services is free to choose H&R Block. What regulations would do is deny consumers access to some competing services—those provided by people who couldn’t afford the fees or continuing education required by the regulations. Maybe those are inferior services (and maybe they’re not), but consumers have the same protection whether they choose H&R Block or a competitor: the protection of making their own choice in light of the evidence, including the reputations of the various firms. By backing these regulations, H&R Block is trying to deny customers alternatives. Perhaps it hopes that if you can’t choose your favorite tax preparer anymore, you’ll “choose” H&R Block.
- Alexander R. Cohen, A Victory over the IRS
- Alexander R. Cohen, Cronyists Fight to Defend Cosmetology Licensing
- William R Thomas, Myth: Ayn Rand Was Simply Pro-Wealthy and Pro-Business (or read it in the Kindle topical bestseller Myths about Ayn Rand).
Jan 24, 2014
Were you upset about today’s brief Gmail outage? Well, imagine if it had been permanent—if Gmail had just plain gone away.
And not just Gmail, but all the rest of Google’s features: Search, Maps, Drive—everything. Imagine if Google went on strike.
You probably know people whose loss of Google’s services would be a form of justice — people who supported the FTC’s antitrust investigation of Google, or support the case European antitrust authorities are still pursuing. These are people who think it’s right for their governments to force Google to give them more benefits than the people who provide those services are willing to offer. They’re not satisfied with their free choice to accept Google’s free gifts or to decline them.
And imagine if it weren’t just Google. Imagine if Apple and Microsoft, also victims of the antitrust laws, went away. Without these three companies, would the government even be able to write antitrust briefs? Or would the government's antitrust lawyers just have to turn to the product of another company they've victimized: beer maker AB InBev?
When people get used to a company’s services, they often start feeling entitled to them, as the Netflix outcry showed. But we’re not entitled to anyone else’s services, except on the terms that person is willing to offer. And in the long run, the person always, always has a choice, as Ladar Levison reminded us last summer when he closed his own, much smaller, email service.
Think about that the next time you consider forcing new restrictions on a business you depend on -- or anyone else. Today, we can assume, Google goofed. But what if Google quit?
Jan 17, 2014
Edward Snowden will respond to President Obama’s statements on the NSA next week, Julian Assange says, but the Business Rights Center is releasing an 84-minute interview with his email provider, Ladar Levison—who closed Lavabit rather than turn over all his customers’ information to the government—tonight.
In the interview, Levison calls the public's attention to Obama’s use of the rhetoric of constitutional law to attempt to defang criticism of government spying. It's a practice we saw the president engage in again today.
About half an hour into the interview, Levison relates his story to Atlas Shrugged, from which he says he drew some inspiration. The third movie in the Atlas Shrugged trilogy begins filming Monday, and you can watch live online.
But meanwhile, you can watch the interview.
Jan 15, 2014
It's easy to see Ladar Levison as a crusader for
privacy and against government surveillance.
When the federal government demanded his encryption keys, Ladar Levison shut down his private email service, Lavabit, rather than compromise his users’ privacy. Private email was the business he was in, and a new form of private email is now one of his projects.
But Levison is also a businessman fighting for the right to run his business. In our wide-ranging interview, Levison drew a parallel between his decision to shut down Lavabit and a dramatic moment in Atlas Shrugged.
For further reading:
- Alexander R. Cohen, Lavabit Founder Shrugs, Closes Snowden Email Service
- Alexander R. Cohen, When Government Demanded Lavabit's Keys
- Edward Hudgins, The Prophetic Atlas Shrugged
But now I read that US Airways is still involved in an antitrust case—as the plaintiff.
It turns out that for the past several years, US Airways has been suing Sabre, a company that provides a system travel agents use to sell tickets. The airline says, “Sabre creates barriers for competition by providing a portion of the fees it receives from airlines to travel agents.” In other words, travel agents choose to work with Sabre because it pays them. The airline also says, “If Sabre excluded US Airways from its offerings to its travel agents, those agents could no longer book US Airways tickets through Sabre. US Airways would not be able to survive the subsequent loss of revenue.” In other words, US Airways also benefits from working with Sabre.
So a victim of the anti-freedom antitrust laws is also an antitrust plaintiff. What should we say of such a thing? (Other than that bugs us crusading types.)
It’s not hypocrisy. US Airways didn’t condemn antitrust law; it defended its case, and then settled it. Nor is US Airways crusading for antitrust law now. In both cases, it’s more or less taking the law as it is and pursuing its goals within that framework.
And that, some might say, is what businesses should do. Figuring out whether a law is good or evil is a matter for philosophers like me; businessmen have more practical priorities.
One thing, though. What’s “practical” depends on what actually makes your life better. Bad laws have bad effects, as antitrust recently had on US Airways, making its merger harder to transact and (because it had to give up assets) ultimately less valuable. When you take the law as given, instead of judging it, you don’t identify the causes of those effects. And that means that even if you protect yourself from a particular bad effect—in this case, even if you successfully get your merger to go through—you don’t make progress against the long-range threat.
There’s a case to be made for taking advantage of bad laws: one suffers burdens from them either way. But that doesn’t mean it’s practical to take those laws for granted, or to ignore that they are bad. One should at least speak up, lest one seem to endorse the very laws by which one has been victimized.