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Wednesday, December 30, 2009

Bad Policy Alert: Bank Mercy Today Means Bank Pain Tomorrow


An article in today's New York Times laments the low percentage of new or modified mortgages given to holders of outstanding mortgages who are seeking modifications -- some three percent according to a cited estimate.

Readers should understand that every modification (think: a favor, or "cutting someone a break") granted by a bank, for whatever reason, altruistic or otherwise, will reduce that bank's ability to make future loans.   After all, the banks' asset bases (also known as the "borrowing base") are finite and their lending ability may become more constrained -- with or without any modifications -- if they are forced to drop their leverage ratios.   The increased leverage above traditional levels has been one prime factor in the banks' recent troubles.

The banks should not be pressured into doing any modifications.   The people really funding today's modifications are the same people who are paying their unmodified loans on time today...and who may be in dire straits tomorrow precisely because they were responsible today, and yesterday, and no one came to their rescue.

Wouldn't it be ironic that the people most at risk of eventually losing their homes will be the ones who initially kept paying their bills on time and in good faith?   After all, there will be a time when the bailouts stop.   Not everyone will get a bailout.   I predict the last ones to run out of money -- the ones who today are paying on time -- will be the losers in this perverse game of musical chairs.   Talk about a moral hazard; such a scenario will teach an entire generation that playing fairly and by the rules is for suckers.   But why talk about fairness -- that's so 20th Century!

Tuesday, December 29, 2009

Why Aren't We Bombing Yemen Yet?

The talk about Al Qaida and Osama Bin Laden began on Fox News while the Twin Towers were still standing.  (I was watching and switching around between Fox and CNN.  I remember!)  The talk about invading Iraq must have begun at the same time aboard Air Force One.
 
Obviously there is a foreign policy difference between Bush 43 and President Obama.   But if it turns out that Yemen is harboring, if not supporting, terrorists seeking to do harm to the Homeland, when do we start preparing to bomb, invade or otherwise seriously change things within the country presently known as Yemen?
 
For your consternation, check out this breaking report from Bloomberg News.

The See No Evil, Hear No Evil Border Security

The infuriating news reports about the Christmas Day Nigerian national underwear bomber continue to trickle out.   Tonight we are learning (courtesy of CBS News, click here) that the Central Intelligence Agency was tracking this guy since at least August 2009.  
 
Note one thing.   The bomber was not only successful in boarding a plane headed into our airspace (thanks to Homeland Security's failure to put him on the no-fly list).  He was not only successful in evading detection of his explosive substances (thanks to someone's decision not to employ all available technology in an international airport).
 
The bomber was able to get a visa for admittance into the United States!
 
History repeats.   The United States security infrastructure has not implemented the most basic lessons of 9/11.   However, we have this brand new bureaucracy (with as many inefficiencies as efficiencies), all manner of new and arduous regulations (with the combined efficacy of cheesecloth), and all sorts of scare tactics on the public (orange alerts, rifle-packing Marines in the New York City subways checking out the girls, etc.). 
 
We need our government to stop shuffling the deck chairs on the Titanic and actually open its eyes to avoid the icebergs.
 
Do another 3,000 Americans have to die before the incompetence stops?

Using Prosecutorial Powers to Boost One's Career


There is an excellent column online by Newark Star-Ledger columnist Paul Mulshine (click here) on the proliferation of former federal prosecutors in the most powerful positions in the State of New Jersey.   The theme of the column is that New Jersey is not likely to get the systemic reform it needs when it is going to be run (from the Governor on down) by people who made their careers by using, and expanding, government power for professional advancement (while also being able to claim they were fighting crime, which always plays well politically).

Mulshine is a bit of a paleoconservative who is so enslaved to the notion of free markets (i.e., capitalism uber alles) that he supports getting rid of government involvement even in the few areas where it is necessary to sustain a modern, civilized society.   I do not endorse his views most of the time.  However, he is steadily on the side of those who see the dangers of government power, the potential for its abuse and the expansion of these powers in various ways from the growth of the regulatory state and nanny state functions to the growth in the danger of the vague laws which can be misused by the government to prosecute the innocent or undeserving (note the use of the connector "or").   He cites the constitutional lawyer and author Harry Silverglate (whose book, "Three Felonies a Day," is a worthwhile book to buy).

Eric Dixon is a New York lawyer and strategic analyst who engages in crisis management and other matters. Mr. Dixon cautions readers that this article is not legal advice. Mr. Dixon may be contacted for further comment through edixon@NYBusinessCounsel.com, or at 917-696-2442.




Monday, December 28, 2009

Litigation As A Lagging Indicator: Jump in Lawsuits Is Old, Old News

Today's New York Times reports (click here) that the number of cases in New York State courts has never been higher.
 
The apparent rise in litigation is not really "news."   This is a lagging indicator.   The causes of the litigation, the underlying disputes, if you will, were bubbling to the surface starting in early 2008.   The behavorial changes, such as the increase in all sorts of delinquencies or outright breaches of contract, have only grown since that time.   The actual lawsuit filing began an uptick probably in late 2008 and the full year stats for 2009 now show the tangible evidence of a trend which those of us with our ears to the ground began hearing at least 18-30 months ago (yep, going back to mid-2007).   In other words, your eyes have not deceived you; you have been seeing and hearing more deadbeats and petty crooks in operation.   There has also, sadly, been an increase in meritless litigation, which sometimes requires innocent parties to hire lawyers to defend their rights and make sure there isn't a really gross miscarriage of justice.
 
There is not necessarily a corresponding litigation indicator which shows economic improvement.   A decline in new lawsuit filings may only mean that the victims are too impoverished to go to court, or that they have nothing left to take.
 
People who believe they have been victimized should certainly pursue their options in county Small Claims courts, or in New York City, within the Civil Court which generally handles disputes involving amounts of under $75,000.    Litigation can be time-consuming, and as it consumes a lawyer's time that has to be factored into the equation as well.   There are lawyers (such as myself) who will also try to negotiate or mediate a dispute in order to get a client a favorable resolution without going into the court system.   Litigation is not "fun" and it is a process which favors the persistent and the patient.   Many people do not have the "stomach" for litigation -- which is perhaps the strongest reason to hire a lawyer.
 
In litigation, patience is not just a virtue.   It is a strength.
 
If you find yourself in a delicate or undesirable situation, feel free to contact me (e-mail me) regarding your situation. 

Saturday, December 26, 2009

Homeland Insecurity: The Christmas Day Plane Bomber and More Government Incompetence

It appears -- at least from the press reports in the first sixteen hours after the incident -- that a man of Nigerian origin tried to blow up a jetliner en route from Amsterdam to Detroit.  See this New York Times link.
 
More relevant:  It is emerging that our federal government had this man on its "watch list."   Yet he was still able to board a flight to America, with some substances strapped onto his skin or clothing, and (as we are told right now) pose a deadly threat.
 
There you have it.   More than eight years after 9/11, and it seems that would-be bombers are as able to get onto our planes and bring them down over our landscape as the twenty Al Qaida bombers were on September 11, 2001. 
 
Of course, since 9/11, we have seen a massive growth in government bureaucracy, the creation of a new agency called the Department of Homeland Security (which, in fairness, has absorbed pre-existing agencies such as the Immigration and Naturalization Service), the shocking reduction of basic constitutional and civil liberties (apparently no one has taken lessons in Colonial History) and the implementation of ridiculous protocols such as shedding one's shoes at airport check-in gates so that high-school-level-educated men and women making little more than minimum wage can tap their soles to "inspect" them for deadly, dangerous substances.  
 
Here's the point for today:  There has been great emphasis on changing the government structure.   However, the same people -- or the same caliber of people -- infect the government and are likely the cause of the continuing ineffectiveness.   The only apparent differences are the greater intrusions and interference with Americans' rights, and the number of people employed by the government. 
 
Former President Reagan used a famous line during his 1980 presidential campaign:  "Are you better off now than you were four years ago?"   Can we now fairly ask, "Are you safer than you were nine years ago?"    The latest "shoe bomber" incident indicates the answer is emphatically "NO" -- but we're paying through the nose in the form of higher taxes, budget deficits and government intrusions into liberty. 
 
 

Wednesday, December 23, 2009

Pete Rose and Goldman Sachs

There is a story in the Wednesday, Christmas Eve 12-24 edition of the New York Times (link here) about certain prominent investment banks like Goldman, Sachs (ticker: GS) selling financial instruments called "collateralized debt obligations" while simultaneously betting against them for their principal trading accounts (meaning Goldman, Sachs could profit if it sold short the very same securities it created and sold to others).  
 
Talk about playing both sides of the fence.   This is apparently being investigated.  
 
The article speaks for itself and I need not repeat, paraphrase or even comment on it further.   However, it made me think of a prolific baseball hitter, Pete Rose, who was banned from baseball for life for betting against the Cincinnati Reds while he managed them!  
 
Rose must be thinking he missed his true opportunity to cash in, as an investment banker.
 

Tuesday, December 22, 2009

Extortion Of Lawyers From the Bench Lands Bush Election Lawyer in Federal Prison

A sad case from upstate New York.   Former state judge and Bush election lawyer for the 2000 Florida recount --  and without dispute a top New York State election lawyer --, Thomas Spargo was sentenced to 27 months in prison for trying to extort lawyers appearing before him in court in order to finance his own legal fees in connection with a long-running disciplinary matter.
 
Today's Albany Times-Union (www.timesunion.com) covers it, but here's a link to the federal court docket
 
One note:  The judge declined to "enhance" the sentence due to Spargo's role.   The government was represented by attorneys from the main Department of Justice Public Integrity division in Washington, D.C. and one wonders whether the sentence may be appealed by a DOJ which appears to have made this case a priority.  (Conspiracy theorists could also wonder if Spargo being a prime Republican lawyer-operative might have something to do with it.)
 

Statistical Limitations

As we approach the end of another calendar year for those following the Western calendar (those following the Eastern Orthodox calendar get to celebrate Christmas in a few weeks) we will start to see the "year end" statistics come out on all sorts of things.
 
Statistics are useful, both for what they reveal and for what they conceal.
 
Methodologies matter.  So do footnotes, if there are any.   I urge everyone to delve into the real statistics and look at the original sources, to get at the methodologies and find, read and understand the exceptions, generalizations and qualifications which put the few alert readers and scholars out there on notice that, well, the stats may end up being "way off" and there are plenty of reasons why.
 
The stats should be particularly interesting when looking at lagging economic indicators.   While the nominal unemployment rate (what is called "U-3") appears to be levelling off (perhaps wishful thinking? or political manipulation for the coming 2010 elections?), the wider "U-6" measures and the "underemployment" measures both have "more real" unemployment measures approaching or even well over 20 percent of the workforce.   Also consider that the stats finally show that the average duration of unemployment has increased during the recession by something like nine weeks; this indicates that not only has unemployment increased significantly, but that those suffering unemployment are being hurt far, far worse than anything in decades.
 
An analogy:  The number of sick in the current period has doubled when compared to the earlier "base" period.   But in the current period, the sick have pneumonia, versus the common cold in the earlier period.  
 
The severity and depth of this recession will have, in my opinion, major implications for the labor markets, capital markets, banking system and real estate markets -- and our wealth -- which have yet to unfold.
 

Friday, December 18, 2009

How To Commit Perjury: Claim You've Been Intimidated


Today the outgoing New Jersey attorney general offered up some very misguided commentary regarding a State Senate bill that allows for witnesses who claim to be intimidated by defendants charged with a narrow band of violent crimes  to offer into evidence written statements, thereby circumventing the Sixth Amendment right to "be confronted with the witnesses against" oneself. 

The way to protect witnesses is to sequester them, give them police protection and, if necessary, relocate them.   The obstacles to this are that these things cost money and require effort -- a.k.a. "elbow grease."

I suspect it's the effort -- and money -- which are the problem.   As is often the case with government, sometimes it's just "more convenient" to trample on time-honored constitutional rights enjoyed by us mere people.   Invoking "witness intimidation" is just a politically-saleable way to violate the rights of a few unfortunate people -- acceptable collateral damage in the minds of many who think it will never be "them" -- in order to appear "tough on crime" and appeal more to the "know-nothing" element of the electorate.   Remember this principle the next time you think America is that much more advanced than the Middle East. 

Instead, we have the top law enforcement officer in New Jersey pushing for witnesses to be allowed to testify without having to be "confronted" by the defendants.  As a result, some witnesses will claim they are "intimidated," and being able to avoid facing their defendant / victim will embolden them to lie.   That shouldn't be a surprise.   Anonymity gives people a false sense of security.   And society is full of gutless people who will say anything on a piece of paper.

Expect a big increase in perjury.   Soon to be followed by an increase in wrongful convictions.

True cases of witness intimidation often will get ferreted out. However, even in violent crime cases there is a big risk of false testimony, and being able to avoid a courtroom cross-examination emboldens people who want to give false testimony. This isn't just a danger in criminal cases; this can happen in civil cases as well. Imagine what can happen in divorce cases when there is a very vindictive party.

Recently a young woman from Union City, NJ just admitted that she falsely testified that she was raped, and the man she fingered -- completely falsely -- did five years in New York State prison as a result.   She is now facing prosecution and likely jail time.  How many more cases must we see before we realize that the risk of wrongful conviction based on perjured testimony is great?

 The Founding Fathers saw the abuses under British colonial rule. That's why the Bill of Rights (the Sixth Amendment) allows for defendants to confront their witnesses.

Wednesday, December 16, 2009

Good Times for Deadbeats! Bankruptcy Fraud Cases Down, Fraud Likely Up


There has been lots of anecdotal evidence since mid-2007 pointing to a serious upswing in bankruptcy abuse and other forms of "deadbeat abuse."  The official statistics are now coming out showing a drop in bankruptcy fraud cases filed; see this Bloomberg News story here.
Bankruptcy fraud is not an innocent crime.   I view it as similar to stealing.   A debtor who does not pay his bills is in essence stealing from the creditor by not paying for the goods or services received.   Just think about shoplifting.   Then, to make matters much worse, a person who fraudulently files for bankruptcy tries to get court approval to stiff the creditors even more.
Here's a brief explanation.   A bankrupt person files bankruptcy in order to get protection from creditors while a reorganization or discharge is worked out.   A filer must list his or her assets, liabilities (debts), expenses and income.    The bankruptcy court usually approves a "plan" which  discharges most unpaid debts with secured creditors generally getting a good chunk of their claim (out of listed assets) and unsecured creditors getting the rest, which could be substantial, or pennies on the dollar, or absolutely nothing.   Bankruptcy fraud often involves hiding or falsifying these records to deceive both the bankruptcy judge and the court-appointed trustee, and the creditors' committee.  Simply put, it is a way to further deceive and injure creditors.   
Think about the foregoing the next time you assume that all bankrupt parties are victims.   Many are the victims of purely uncontrollable or unavoidable circumstances like major, severe medical bills -- don't get me wrong -- but there are many others for which the bankruptcy game is just another scam.   Just because we're in a major recession doesn't mean that bankruptcy fraud and abuse should become socially acceptable. 
As a friend of mine said recently, quoting a former United States Senator, "bad money chases out good money."   We need more investigations and prosecutions of this abuse.   People who play by the rules and get victimized must have their rights depend on the rule of law, which must be upheld.   When people who play by the rules get ignored, they will stop spending money, investing, extending credit or trusting others; all of these reactions hurt the economy.   When these good people get chased out, they are replaced by the far less desirable. 

Eric Dixon is a New York lawyer and strategic analyst who engages in crisis management and other matters. Mr. Dixon cautions readers that this article is not legal advice. Mr. Dixon may be contacted for further comment through edixon@NYBusinessCounsel.com, or at 917-696-2442.


 

Federal Investigation of New York's Working Families Party: Is This Suppression of Political Speech?


Here's a story that has possibly major and adverse implications for anyone involved in American politics.

The Working Families Party (the "WFP") is under federal investigation and received a subpoena this past Monday regarding its operations and those of a for-profit organization called Data and Field Services.  (Read this New York Times story from Wednesday, December 16th here.)

There have been allegations from private parties --- political opponents and such -- that Data and Field Services charged discounted fees to candidates endorsed by the WFP.  The implication is that there has been some sort of illicit arrangement because the discounted fees provide an unfair, if not illegal, advantage to WFP-endorsed candidates.  

This is more critical than one might suspect at first glance, because of the public financing of qualifying campaigns for city offices from Mayor down to City Council.   The public financing system gives complying candidates a "match" of up to six dollars for each qualifying dollar raised from people residing within the candidate's district.   However, the system comes with some strings attached; one of these strings is a restriction on the total expenditures a candidate can make.   As a result, discounted fees would provide a benefit to a candidate.  

This investigation raises some questions.   Should service providers be required to charge the same amount to all candidates?   Aren't there differences in the types of services that may be provided?   Some districts may be different, some races may be different, and that could affect -- by a great deal -- the type, quality and magnitude of the services.  Besides, what business is it of any state or federal prosecutor what a service provider charges a client?   And, if price discounts are considered illegal (which is the suspected premise behind the investigation, although we cannot be sure yet), aren't we moving dangerously close to a point where the prudent service provider must get some sort of "government clearance" (similar to the pre-merger clearance the Justice Department gives to certain corporate transactions with respect to antitrust laws) before rendering services to political candidate clients?  

This investigation might be moving us dangerously close to a point where the Justice Department is essentially engaging in ad hoc rulemaking to govern political players.   If indications prove correct, the use of the government's investigative and prosecutorial powers to engage in what is, at best, government oversight and, at worst, outright government intimidation, of certain political parties strikes this corner as profoundly anti-American and plainly contrary to basic Constitutional principles.  

The WFP investigation, if taken to its logical extreme, may send a message that any political consultant, mass mailing consultant, fundraiser or election lawyer (just to name a few groups of service providers) may have their operations scrutinized because of who their clients are.   How different is this from rank state intimidation of political opponents as occurs in Iran, Pakistan and a host of other non-democratic nations?   Who would blame these service providers from staying away from future political work in order to avoid the hassle of getting embroiled in a criminal investigation?   Merely complying with a subpoena is a thankless and time-consuming effort.   Many service providers will say they don't need the headache and stay away from political clients in the future.    Is it so out of this world to suspect that someone at the Justice Department doesn't have this precise desired outcome in mind? 

The investigation could chill political speech by candidates, parties and other associations.   The First Amendment implications are obvious and very troubling.   We should be very vigilant about this type of case. 

How does an innocent, politically active person avoid becoming embroiled in a criminal investigation?   What activities should the totally risk-averse person avoid?   Now, here's the problem as I see it: One cannot see where the "line" is.   Hence, the cautious approach must be to totally avoid political involvement, as no other course of action carries an assurance of personal safety.

Now do you see where the problem lies?   Is this investigation going too far?   Aren't we criminalizing politics -- or political / electoral success -- a little too much? 

By the way, if the WFP is under investigation, depending on the theory of criminality, how many other parties -- if not all of them -- also warrant investigation?  is it just the minor parties like the controversial Independence Party?   Do candidates get investigated for their contributions to political parties?   Do parties get investigated or prosecuted for their endorsements of candidates, suspiciously after receiving contributions from those same candidates?   Where is the "line" separating the permissible from the illegal?   And, who draws that line?

At this point I fail to see where the criminality is.   Perhaps time will tell -- if charges are filed -- what the theory of wrongdoing is.   However, even if there is wrongdoing (as defined by a grand jury), the supervising prosecutors at Justice and the Manhattan U.S. Attorney's Office should be very mindful of the First Amendment implications of such a case.  

Eric Dixon is a New York lawyer and strategic analyst who engages in crisis management and other matters. Mr. Dixon cautions readers that this article is not legal advice. Mr. Dixon may be contacted for further comment through edixon@NYBusinessCounsel.com, or at 917-696-2442. 


Tuesday, December 15, 2009

Slush Fund Scandal Gets Bronx Councilman Five Years

Former Bronx City Councilman Miguel Martinez was sentenced today to five years' imprisonment by Manhattan Federal District Judge Paul Crotty for three felony charges connected to the two-years-old and ongoing federal criminal investigation of the use of the City Council's discretionary spending, also known as the "slush fund" scandal.
 
Compared to the New Jersey corruption sentences -- and even the sentence handed down to former Connecticut Governor John Rowland -- this sentence seems strict.   Martinez is also significantly younger than his older and much more long-serving counterparts in neighboring states.   It's actually not that much less of a sentence than the sentence handed down to perhaps the biggest player in the most major recent corruption scandal, that being Jack Abramoff.   (However, I note that former Congressman Randy Cunningham got ten years and the Louisiana congressman who put some money in his freezer -- his name escapes me today -- got twelve years.)
 
I note:   The investigation is continuing.    I believe there is every reason to expect more people to be charged.
 
I also note that Martinez has not been a "cooperator."   Not yet.   Perhaps the sentence is -- unofficially -- a way to induce his "cooperation." 
 

How to Solve New Jersey's Budget Deficit: Get Paid to Take New York's Garbage


As New Jersey's new Governor Super-Size-Me* gets ready to tackle (or surrender to) a growing anticipated state budget deficit now stated (or feared?) to be about $9.5 billion (compare to $3 billion for New York, $2 billion for Connecticut), here is an idea for tackling the budget deficit.

Turn New Jersey into the Garbage State.   Seriously.

New Jersey already has the Nets.  There's a start.   Now, New Jersey should offer to store (for a fee, of course) all of New York City's and Philadelphia's garbage at sites in New Jersey.   This garbage is already being trucked over New Jersey highways like Route 3 by New York City Sanitation trucks driving through the Lincoln Tunnel on their way to ... Pennsylvania.   

Notice how Pennsylvania does not have New Jersey's budget problems.   They exploit their revenue opportunities.   New Jersey simply needs to do the same.   New Jersey already smells the stench, so there's not much downside.  

This proposal would also be environmentally friendly.   If the trucks dump their load in New Jersey, they are travelling only a fraction of the distance to central Pennsylvania.   This cuts down on fossil fuel emissions.   The benefits should be obvious.

Here's another advantage.  Converting currently unused land into garbage dumps will help fight unwanted suburban sprawl. 

If there are legal challenges, this is where a creative government should be able to exploit existing eminent domain powers.  


* - This budget deficit is so big that it evokes the image of the Austin Powers movie trilogy villain Dr. Evil (played by Mike Myers) sticking his pinky to his mouth and uttering an amount of money.   Hence, if we can have "Mini-Me," we must have the gargatuan counterpart in recognition of the gargatuan deficit and corresponding pain that is going to be felt by residents, employers and employees of and in the State of New Jersey.

** - Some of you corrupt Democrats would have preferred the moniker "Fat Bastard" but that is not being nice.

Your New Jersey Budget Deficit is Now $9.5 Billion...That's $9.5 Billion



The Christie transition team now reports that the anticipated budget deficit for the upcoming state fiscal year is now $9.5 billion.   (Say that to the same cadence as the lottery ads with the nebbishy-looking announcer..."The New Jersey budget deficit is now nine-point-five-billion dollars...That's nine-point-five-billion dollars."

That's up from a reported estimated $8 billion during the campaign.

Somewhere, Mike Myers (think Dr. Evil from the "Austin Powers" James Bond parody trilogy) must be sticking his pinky to the corner of his mouth and repeating those dollar figures. 

Conservatives are already warning that Governor Super-Size-Me will not be keeping his campaign promises about no new taxes, no new state borrowing, etc. etc.


New Jersey's New Attorney General


Multiple reports today (link here at http://www.politickernj.com/editor/35477/christie-nominate-dow-ag) that the new New Jersey Attorney General will be former federal prosecutor and current Essex County prosecutor Paula Dow.

Earlier reports -- from several weeks ago -- identified Christie's former second in command Ralph Marra as the incoming Attorney General.   It was under Marra's stewardship of the United States Attorney's Office in Newark that the arrests of the several dozen defendants in the huge "Bid Rig" political corruption / kidney selling / money laundering scandal occurred, back in July 2009.   (Browse my archives for various stories on some of the individual cases.)

This site awaits word from the new AG as to what the AG office's priorities will be in the upcoming term.   Will the Jersey AG take an activist role like her former and current equivalents across the Hudson River in New York? 

The initial indications are that Ms. Dow is not a political hack and the initial thought -- from this corner -- is that she will be the type of person who will not let political considerations get in the way of an important job.   If that holds true, that is an excellent sign.

Monday, December 14, 2009

Protecting Indiscretions: D.C. District Court Upholds Privacy of Prosecutor's Personal E-Mail


Do you have a right to privacy regarding an e-mail you send using your employer's e-mail account?

A District of Columbia federal district court decision has ruled that you do.   See this link here; note that the party requesting the data is a self-described whistleblower former Assistant United States Attorney Richard Convertino, who was fired for alleged prosecutorial misconduct in an anti-terrorism case in Michigan in 2004.

I think this case misses the point.   Why aren't responsible adults be discreet enough to communicate in a truly private way, using their own servers and machines?   Why are adults using others' machines and permitting their private affairs to be revealed? 

Sometimes, maybe the issue just isn't whether someone else is prying.   Maybe the issue is a total lack of awareness and discretion.  

If you want to keep something private, as a practical matter, isn't it the most prudent action to do whatever you can -- within your own control -- to keep it private?   I suspect the people complaining about the prying eyes of others don't realize that by focusing on what others are doing, we lose control of our own destiny.  

It is the difference between you being able to have control -- by exercising judgment and discretion in order to prevent an invasion of your privacy -- and being able to seek only "post-injury" relief in the courts by complaining about the invasion that has already occurred.  It is the difference between preventing the injury, and trying to get damages after you've suffered it.

If we're talking about a broken arm, isn't it better off to prevent the broken arm in the first place?

With privacy issues, we are just not talking about accidents.   Many "invasions of privacy" can be prevented.   It just takes some effort and mature judgment.   Just because we live in a society where many of us -- and especially the young -- do not hesitate to share "too much information" with everyone else does not change the fundamental equation.

As I've written before, we are the best defenders of our own privacy.   Not the Constitution.   Not the courts.   Not the Electronic Frontier Foundation.   It's us.  

New York Post Trying Hard to Stay in Business


This Sunday the New York Post introduced its newest distinguished columnist:   Former alleged call girl Ashley Dupre.

This young woman's claim to fame is (as she claims) having had as a client the infamous "Client #9" -- then-New York Governor Eliot Spitzer.


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This young woman may be depriving a trailer park of its trash.   However, she is merely the latest to cash in on infamy, generated entirely by exploiting the fame and notoriety of those around her or paying her.   This is almost identical to the posse of never-will-bes clamoring "hey-look-at-me" and offering sordid tales (many of which will turn out to be false, I suspect) regarding Tiger Woods.

But there's another point.   If you were already ready to castigate the New York Post for gutter journalism, think about this.  The newspaper business has been hit very hard and actual newspaper readership is declining.   (The web is another story.)   The Post -- which has been hemorraghing money ever since I can remember, even going back to Rupert Murdoch's first term as its owner -- is trying to stay alive.   And some people may be stupid enough to buy the Post to read this woman's assuredly ghost-written column.  

(What?  You mean you don't read the Post for John Crudele?  Now there's a column worth reading.)

The business of newspapers is to be read.   It is not "to tell the truth" -- although that's a nice sound bite.   The broadsheets of yesteryear were a mishmash of ads from snake oil salesman, astrology, lurid and sensationalist claims the National Enquirer wouldn't print today as a parody, and scorching rhetorical opinion columns taken as news in a time when no one cared or thought there was a difference.

The Post is doing what it can to stay in business.   Don't blame them.   Blame your neighbors for not reading newspapers any more.

Saturday, December 12, 2009

Cutting Bad Loans Now Will Ease Credit Later


Last week we heard that the Obama Administration had a new initiative to convince banks to give more low-interest or even reduced documentation loans to small businesses.

This is not good news for small businesses.   This "solution" will increase the number of likely-bad loans on the banks' books.   As their lending capacity is both finite (capped by leverage limits, meaning they can lend only a set multiple of their assets) and likely to decrease in the future (as the leverage multiple is likely to decrease due to government regulation), the number of bad loans given now, combined with the bad loans given during the money-for-nothing fueled real estate bubble, will hobble the banks real soon.

The loser:  The rest of us who want to get loans for anything next year or thereafter.  

Encouraging banks to loosen certain restrictions on some loans in order for them or the government to "look good" is going to restrict the banks' ability to lend to the good risks.   Only so many loans can be made or kept on the banks' books.   The securitization market decline also means the banks cannot easily "off-load" these loans anymore.  

Delaying the "pain" of the bad loans of the last decade will only make more people suffer the pain, and for a longer period of time.  

Hopefully we will see fewer -- or none -- of these short-sighted bad policy moves in 2010.   Otherwise we will never have a true economic recovery.




A Cure for Political Corruption? Pay Them More!

This is a serious policy suggestion.

After a busy week which saw the former New York State Senate Majority Leader Joseph Bruno get convicted on two corruption charges (the jury hung on six others), and while various investigations including the New York City Council slush fund and the "Bid Rig" super-investigation in New Jersey continue to make reading the papers interesting, here's a solution to the corruption.

Pay these elected officials more. Maybe much more.

There is a common denominator with all of these accused, or convicted, public officials. They are all working part-time.

If elected and appointed officials are required to be full-time, and prohibited from having outside income or any outside interests except purely passive ones, the ability to have the conflicts will be largely removed.
The greed factor can be minimized with a compliance regime requiring full disclosure upon entering the position and at periodic intervals thereafter. Allow officials to make disclosure submissions and compliance regulators to scrutinize the submissions and make additional requests for information, findings of delinquency or non-compliance, and requests for curing or amending prior filings as necessary. This serves the purpose of full disclosure to the public, compliance with the spirit as well as the letter of the principle of full disclosure, and reduces if not removes the danger and unfairness of the "gotcha" mentality which is rarely more abused than in politics.

One hammer on the non-compliant should not be jail. It should be a long-time bar from any public employment. Now there's an incentive for compliance!

Finally, we need to pay elected officials more. They need to be paid in accordance with full-time responsibilities where their interests lie solely with their constituents and with no private interests. By increasing salaries, we should attract a higher caliber of candidate. We should look forward to the days when our citizen-legislators are of a higher caliber than many in the current crowd, who seem incapable of holding any position in the private sector requiring competence, intelligence or integrity.
CHri

Litigants: Show up...or Shut Up!

The courts give litigants much latitude to assert their procedural due process rights.   (This is a principle for which I am thankful I had Owen Fiss as a professor many years ago at Yale.)   But litigants should be willing, and available, to show up in court for their cases.

I have had the recent experience of suing some professional deadbeats -- lawyers, in fact -- who have pulled every trick short of fleeing the country in order to avoid their day of reckoning.  After many delays, I obtained a judgment against these people.   But that hasn't stopped them.   Now they have submitted a pleading -- if you can call the pathetic sheaf of looseleaf papers they mailed me that -- but waived their right to appear in court to argue on their behalf.   

Due process is meant to protect people's rights.   It is despicable when due process rights are abused so some people can just delay their day of reckoning.  

Fortunately, the courts often allow for sanctions and other relief, such as post-judgment interest.   The scoundrels sometimes win...but many times they do not.  

The lesson:   Be persistent. 

Thursday, December 10, 2009

Lawsuit Abuse vs. Due Process


I recently received one of those blast e-mails from a national chamber of commerce about the latest in meritless lawsuits.  It got me thinking -- again -- about how to balance the rights of plaintiffs to have their day in court against the rights of putative defendants who arguably should not be burdened with any lawsuit.    The costs of defending a purely nonsensical suit (drafting a motion to dismiss or summary judgment) can still be substantial and the defendants faced with these suits are justified in claiming "abuse."   However, I fail to see how barring altogether certain classes of suits can be done without also barring or unfairly hindering some very legitimate lawsuits, or without having some of those very legitimate lawsuits characterized as "abusive."

I am certain that, several decades ago, certain cases alleging a link between absestos and cancer were considered abusive.

We need to recognize the due process rights of all litigants.   The meritless cases can be addressed by the courts, which may want to consider entertaining more motions for sanctions (such as under Federal Rule of Civil Procedure Rule 11) against the parties who bring such actions.    While many parties are accorded deference to their right to have their say, perhaps some judges need to get more aggressive at the initial stages of a lawsuit, such as at the calendar call and before the first formal hearing, and "knock some heads together" when they (or their clerks or staff attorneys) see that there is a pretty baseless case or claim in front of them.

Another problem with the meritless lawsuits is that they do detract from, and unfairly tarnish, the legitimate suits.   I wonder if every time a nonsense suit gets heard, the real victim / loser is the next credible case for which the "bar" of reasonableness gets raised as a result of the baseless suit or claim which preceded it.  

However, the various chambers of commerce seem too eager to just use a broad brush and block all manner of suits.   I am sure that there are many "real" suits that they would like to have "go away."   Readers, be suspicious of the siren calls for tort reform.

Wednesday, December 9, 2009

Honest Services Statute In Jeopardy at Supreme Court


The Supreme Court on Tuesday heard two cases (one involving newspaperman Conrad Black, the other involving some obscure Alaska state legislator) raising the issue of the use of the federal "honest services" statute in criminal prosecutions.  

Although the Deputy Solicitor General Michael Dreeben argued that previous case law limited the scope of the statute, in essence offering the argument that the moderation of case precedent offered safety from potential abuse, here's the problem: as a practical matter, the scope of the statute is determined first by the Department of Justice when it selects cases to bring and people to go after, and thereafter only by judges who determine whether to throw out indictments or convictions.   There can be no assurance -- and in fact there is none -- that the concepts of benevolence and moderation implicit in Dreeben's argument will be shared by Justice Department prosecutors, or judges.    There is always a danger in a law whose fairness (if not its efficacy) depends on the benevolence of its enforcer.   The Supreme Court seems to recognize this.

Here's a brief but interesting article which contains further useful links.

Brief question:  If the honest services statute gets stricken, how will the government go after corrupt politicians?   Mail fraud statute, perhaps?   Or does Congress take a crack at revising the honest services statute?  (That may be like asking the fox to guard the chickens.)

Monday, December 7, 2009

One Guilty, One Mistrial, etc.

Busy day this Monday. 

Former New York State Senate Majority Leader Joseph Bruno -- one of the famous "three men in the room" reputed to actually "run" New York State -- just found guilty on two of eight criminal counts in Albany federal court.    Quick link here.    If you have time, go to http://www.timesunion.com/ for the best comprehensive coverage.

The trial of the one man actually hired by the federal government in New Jersey, proving there is a stimulus package if you pretend to hate all sorts of groups Archie Bunker would love.   Of course we're talking about Harold "Hal" Turner.   Mistrial after one day of deliberations; retrial in March (tentative schedule).   Maybe next time the judge will allow for a full development of the cases by each of the prosecution and defense, instead of this abridged version.   See this recent report here.    Maybe next time the trial will be of the schmuck who hired ths guy.

"Honest Services" Theory To Be Tested at the Supreme Court

Three cases will be heard at the Supreme Court starting tomorrow. The cases don't just involve allegedly corrupt politicians like Joseph Ferriero or elected leaders like Joseph Bruno (whose trial is still in jury deliberations), but former newspaper publisher Conrad Black and Enron CFO Jeff Skilling. Hopefully the decisions will help guide lower courts, prosecutors at Justice and all manner of private citizens and their lawyers who actually have this quaint notion of wanting to stay out of trouble.

Sent from my Verizon Wireless BlackBerry

Sunday, December 6, 2009

Updates, Updates

There is another "honest services" trial going on...and this one  is in the Northern District of New York (Albany, NY) involving former State Senate Majority Leader Joseph Bruno.   The jury has been deliberating for a while and has previously indicated it was deadlocked on six of eight counts.   We will be watching the ticker to see if a verdict comes in this week.
 
In Brooklyn federal court this past week, a disappointingly brief trial involving supposed hate-blogger / federal employee Harold (Call Me Hal) Turner who was on trial for saying that three federal judges deserved to be killed.   The federal judge seemed to either want no part of this trial (gee, wonder why?) or was trying to sweep a lot of things under the rug.   Expect an appeal by all means if Turner is convicted on any of the charges.  
 
By the way, can anyone figure out how Hal Turner gets a federal paycheck, while Madoff-whistleblower Harold Markopoulos got the brushoff from the "see no evil, hear no evil, speak no evil" fellas running the Securities and Exchange Commission?  

Saturday, December 5, 2009

You Are The Strongest Defender of Your Own Privacy


Continuing a recent theme of articles on the so-called right of privacy, perhaps better known as the popular expectation of privacy, in the wake of the latest celebrity scandal.

Many believe that the Constitution is the strongest defense against invasions of privacy.   Perhaps that is the case with government-initiated invasions of privacy.   However, as recent technological advances and innovations have shown, it is third parties which may be the biggest threat.   This shift is significant.   At least a government actor is governed by the Constitution and a raft of laws and regulations -- not to mention the specter of civil rights lawsuits -- precluding its behavior and offering the opportunity and potential for redress to its victims.   Private third parties are often much freer to act in a way which can compromise the rights of other private parties. 

Today I argue that our fundamental approach to defending our privacy may be misguided.   Some of us demonstrate our utter foolishness by braying, "I have the right..." whenever we feel violated.   That is stupidity.   The existence of the right and our possession of it are not in dispute.   Here's what should be in dispute: it is what we are doing to protect our privacy, within the rights we have and within our abilities to protect it.

The basic problem with relying on an assertion of the right of privacy (or any right) is that by the time you've asserted it, you've been violated or invaded in some way, or threatened.    The damage is already done.   Let's approach the problem from the angle of preventing the damage in the first place.  

Many people reveal a great deal about themselves.   The popular acronym for this is "TMI" - too much information.   There are some people who seem to reveal everything about their daily regimen except the specific type of STD they are suffering from.   A substantial portion of the current 20-something generation is engaged in an apparent 24/7/365 marketing campaign, if not to get a job then to find a significant other, or both, among other things.   (Some argue: This is why America is in decline, we no longer produce anything, we just market ourselves and peddle our garbage to bigger fools than we.   But I digress.)   For investigative attorneys such as myself, this is a gold mine.

Indiscretions, ignorance and stupidity trip up some bad people as well as the many foolish, gullible or naive among us.   The wealth of personal information about us that is readily available and collectible (with significant effort needed to aggregate and winnow out unresponsive or noncredible information) makes many of us tremendously vulnerable to crime, whether it be identity fraud or telemarketing scams, or other types of wholly legitimate solicitations which still have the impact of separating us from our money.  

We share too much about ourselves.  This is not just the result of an overreliance on technology.   It also results from misplaced trust and blind belief that others in the private sector will respect our privacy and not ever misuse or violate the trust we have placed in them.  

If you want to find out who is the most effective defender of your own privacy, look in the mirror tonight.   It's you.  It's always been you.   There is no substitute for your own vigilance.   Stop waiting for the cavalry to arrive, riding white horses and carrying flowing copies of the Constitution.   Stop putting your fate in the hands of others.   Put it back in your own hands.

Eric Dixon is a New York lawyer and strategic consultant for businesses, political campaigns and individuals. Mr. Dixon is available for comment or consultation at edixon@NYBusinessCounsel.com and 917-696-2442.

Friday, December 4, 2009

Privacy, Technology, Tiger Woods and Uncommon Common Sense


Unless you live under a rock and have been depriving some village of its idiot, you have heard about the Tiger Woods car accident / rumored infidelity.

This scandal would likely never have seen the light of day were it not for the availability and accessibility of technology to record and distribute information in virtual real-time.   It seems that at least one person created a recording of various voice mails, and possibly other conversations, pictures or other events, purportedly from or involving Woods.  

This may be the latest and biggest case to illustrate the advantages -- and the perils -- of technology.   On the other hand, as someone who engages in the occasional investigation, there is a wealth of information "out there" and multiple ways to access all sorts of things that are clearly within the public domain.   If anything, the problem is sifting through the "noise" to determine what is useful, in order to recognize the "pattern" of facts you need among the incredible clutter. 

From the plaintiff's perspective, technology allows you to exploit the indiscretions of others.   There are some people who do incredibly foolish things.   Among those things is believing that they will "never get caught."  

From the defendant's perspective, there is the claim of an invasion of "privacy."   But that raises different questions:  what exactly is privacy, and what are the limits of that so-called "right of privacy"?

When wrongdoers get caught, they will complain and assert all sorts of rights.   What they really mean to say is something to the effect of: I have the right to do what I want...and hide it from someone else who has a right to know.  

To his credit, Mr. Woods does not appear to be taking this approach.   Not to condone any infidelity -- and I repeat that we have yet to hear his side of the story -- but there are indications this is a situation he is confronting.   In fact, he may have been confronting it on Thanksgiving evening, the same night when he got into the now-infamous one-car accident.

However, I find it remarkable that many people still "trust" technology.   Mr. Woods may have been spared this public embarassment if only he had avoided using cell phones and voice mail, two gadgets which we now take as routine and which leave a digital imprint that can be detected by someone else.   I contend that technology can be used to reveal, as well as conceal, confuse, hide and deceive.   (One reason why detectives and investigators, and lawyers, will never truly be replaced by machines or algorithms.)  Had Mr. Woods been a little less trusting, he would have protected himself from the exploitation by a malicious third party -- whether it be a girlfriend of some sort, or simply someone else looking for a big payday -- who seeks either to gain something (money? attention?) or inflict severe pain or revenge.  Let us not forget that in Mr. Woods' case, someone is out there who is aching to exploit his pain (however well deserved it may be) for their gain.  This leads me to my final point.

The rich, famous and highly accomplished  are different.  The "rules" are different.   These people need to take heightened precautions with everyone they encounter, because they are uniquely susceptible to exploitation and abuse.   It is critical that people take measures to guard their personal matters and inspect the people around them.   Some may criticize this state of "constant vigilance" or "war-readiness" as some sort of paranoia.   However, a reputation once lost is never quite the same.   The vigilance may be the best, if imperfect, method to ensure the best chance of preserving one's image.  

Thursday, December 3, 2009

Google and the Death of Privacy: Also, Maybe Lawyers Shouldn't Use Google


Some comments attributed to a Google executive (see the CNBC special, originally broadcast at 8 PM eastern on 12-03-09) are disturbing.  (See this New York Times preview.)   There is a portion where CNBC's Maria Bartiromo's questions whether Google's practice of saving all our searches raises serious privacy issues, and the executive responds to the effect that if we are worried about someone knowing what we are searching, we shouldn't be searching it in the first place.

Read for yourself Google's CEO Eric Schmidt's alarming comment, courtesy of this link.

These attitudes illustrate an attitude which I believe you may find deeply troubling.  It is not just the attitude of being able to invade your privacy.  It is the attitude of being entitled to know what you are doing and to commercially exploit it.

I will play devil's advocate today.   We dumb Americans are the ones who have it wrong.   We think we have privacy, or should have it, or should be entitled to it. (The related constitutional rights are not at issue; they will be addressed separately.)   Perhaps all of those thoughts are mistaken, at least for purposes of running your daily, mundane tasks and errands.  

Under the devil's advocate approach, it is most foreigners who have the correct mindset.   They assume that someone is watching.   (Who is it, or who they work for, is irrelevant; they believe that whoever it is and whatever institution they work for is simply up to no good, however they define that, and they act accordingly.)   They may have grown up in societies where "rights" were illusory, or even contradictory; therefore, they regard the Constitution as just another piece of paper that is given lip service and routinely violated.   This may result in a degree of self-censorship, and most certainly one of modesty.   We can take turns arguing the pros and cons.   My devil's advocate contention is that the foreigners' approach is better suited for dealing with a "Big Brother" society.

What I find troubling is the notion of the entitlement by other private citizens to invade your privacy, through stealth means or some sort of implied consent (which can be given by you simply using a computer, as the arguments may go).   We are not talking about law enforcement purposes or other appropriate uses of the police power of the state.   We are dealing with issues of the ability of other private citizens to abuse your personal information, with little restriction and while assuring us that they can be trusted(WARNING!!! DANGER!!!)

This brings me to a final note (for now).   Attorneys who routinely engage in the investigation of various subjects (e.g., people, companies, etc.) may use search engines as a "starting point" for some research.   Attorneys should be careful to avoid putting anything in a search which could identify or compromise a client.   Whether that is a just and proper policy can be debated within the appropriate realms of bar association committees.   As a practical matter, lawyers should try to use the maximum discretion in such matters in order to protect both their clients and themselves, as Google executives are not assuring us (and there is likely no one who can assure us with certainty) that this search information will not at some time in the future fall into the hands of an unscrupulous person.