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Saturday, July 31, 2010

Stockman: We're Turning Greek

Former Reagan Administration budget director David Stockman outlines four cogent theories for the nation's looming fiscal crisis in this op-ed column to appear in the Sunday, August 1st New York Times..
The column harkens back to a philosophy -- if not a time -- when fiscal conservatism could be boiled down to two simple theories:  Don't spend what you don't have, and don't borrow from future generations.
Stockman writes:  "The nation's public debt — if honestly reckoned to include municipal bonds and the $7 trillion of new deficits baked into the cake through 2015 — will soon reach $18 trillion. That's a Greece-scale 120 percent of gross domestic product, and fairly screams out for austerity and sacrifice."
My other favorite phrase from Stockman's article: "borrowed prosperity."
The fiscal recklessness of the federal government -- and really, government at all levels -- will be accelerated by the moral hazards that have increasingly coursed through our economy and society during the Great Recession.  We have seen government bailouts of failing businesses.  We have seen irresponsible corporate managements rewarded with bonuses, funded through TARP.  
Perhaps most distressingly, we have seen an erosion of the belief in the sanctity of the contract.  Courts at all levels are routinely modifying mortgages and other financial instruments, imposing haircuts on hapless creditors while bestowing an illegitimate "victim" status upon the most irresponsible deadbeats -- er, debtors -- among us.  These developments are encouraging some disreputable -- yet economically rational -- behavior, such as people rushing to exercise credit while it remains available, the strategic mortgage defaults and defaults on all manner of other business and personal loans, and others who are incurring debt with no intent to repay it on the assumption that they can outrun their creditors or deceive a judge with a victim sob story.
What will happen when creditors, lenders and financiers lose faith that their contracts with borrowers will be honored by the courts?  When this class stops trusting borrowers to repay loans or courts to enforce the most basic of financial obligations, we could see a credit crunch that will dwarf what was feared in 2008.  In fact, we could see a total shutdown of the financial system.   After all, our economy is based on trust -- and when that evaporates, look out below.
And that's no baklava.
Eric Dixon is a New York lawyer and commentator.  He specializes in investigative matters, corporate due diligence and strategic analysis.  He can be reached for comment at and 917-696-2442.

Anti-Defamation League Opposes Ground Zero Mosque

Tonight the New York Times reported that the Anti-Defamation League announced its opposition to the proposed Islamic mosque to be built at a site one block away from Downtown Manhattan's Ground Zero, at 45-47 Park Place.  
Crime, Politics and Policy believes that governmental authorities which approve the construction of the mosque will be effectuating a "preference" towards one religion by such a decision, and thereby would violate the Constitution's Establishment Clause.
One should remember that the Islamic congregation has both been in existence for more than two decades, has had a house of worship in the Tribeca neighborhood of Manhattan for a significant period of time, and had the opportunity to relocate its mosque to the World Trade Center area prior to the 9/11 attack.  It did not take these opportunities.  Now that the Ground Zero site has become a site of immense public sentiment -- and a secular, nonsectarian one at that, there is every appearance that the congregation wishes to place a mosque on the edge of Ground Zero to make a powerful, symbolic political statement -- religion or faith playing no role except as a cover, a distraction, a pretext to the true agenda.   If New York City government authorities ignore these facts in order to demonstrate their "tolerance," what in essence will be produced will be a de facto preference towards one religion over all others.  This violates the concept of separation of church and state!  Such signs of religious supremacy were anathema to the Founding  Fathers and should be appallling to all Americans, of all faiths. 
As a nation founded by apostates who fled religious persecution and were only too aware of the perils of the combination of church and state (hence the bedrock constitutional principle of separation of church and state), Americans should always be wary of special preferences granted to any religion. 
The New York City Landmarks Preservation Commission is scheduled to vote Tuesday, August 3rd, at 9:30 am at Pace University, Schimmel Auditorium for the Arts.  Crime, Politics and Policy intends to be there to cover the festivities and to speak in opposition to the mosque on Constitutional grounds.   
Eric Dixon is a New York lawyer who specializes in complex investigative matters. He can be reached for comment via and 917-696-2442. 

Thursday, July 29, 2010

Rangel and Fact Bargaining

As of this writing it appears that longtime Harlem Congressman Charles Rangel will be undergoing a trial in the House of Representatives on various ethics charges. This despite his reportedly agreeing to certain findings in connection with those charges.

This development raises the question of whether Rangel attempted to "fact bargain" on these findings. This means that he may have been willing to admit certain things like "errors in judgment" in order to avoid having to defend other mistakes or even intentional acts which may be alleged to be wrongdoing. Reluctance by the House leadership to accept such admissions may show its displeasure that Rangel's admissions were not meant to reveal the truth, but rather to conceal it. The House (and members of both parties) may also be indignant at what they perceive at Rangel's defiance.

In any event, Rangel's distinguished career is winding down ignominously. I predict Rangel will take a page from former New York State Senator and Majority Leader Ralph Marino (who quit rather than be a mere backbencher) and resign altogether from the House. He will not resign in disgrace; rather, he will resign once he can dictate who his successor is (through the committee on vacancies on his designating petition). Then he will surely go on to bigger and better things.

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Wednesday, July 28, 2010

Ground Zero Community Board OKs Mosque

Tuesday, July 27, 2010 -- Community Board 1, the board whose district includes Ground Zero, has voted to recommend that the New York City Landmarks Preservation Commission not give the site of a proposed mosque and Islamic cultural center (the Cordoba Initiative / Park51) landmark status.

The next step will be for the Commission to vote on giving the site protected landmark status. A commission vote against landmark status would pave the way -- after lawsuits that are sure to be filed -- for the construction of the center. The site of Park51 is one block away from Ground Zero.

I have previously stated (see entry from July 27th) that these agencies' approval of the mosque construction could serve as a government preference which could violate both the Establishment Clause and the Equal Protection Clause.

Tuesday, July 27, 2010

Separation of Church and State Forgotten By Ground Zero Mosque Supporters

Perhaps no topic has inflamed tensions more in New York State politics in 2010 than the proposed construction of an Islamic mosque at 47-51 Park Place in downtown Manhattan. The site of the proposed development (formerly known as the Cordoba Instituten now to be known as Park51) is one block from Ground Zero and also one block west of New York City Hall.

 The Islamic congregation that would use the new mosque has been conducting services at its current mosque since the 1980s. This fact presents a barrier to a claim that a zoning restriction or other governmental prohibition would interfere with the First Amendment right of religious expression.

I speculate whether a governmental action allowing construction - and hence the relocation of the existing congregation - amounts to an establishment of religion (thus violating the Establishment Clause of the First Amendment).

In plainer English, this gets at the concept of a de facto preference towards one faith, which we sometimes see as a result of other groups trying to appease the preferred faith in order to avoid even the accusation of intolerance which is considered toxic in many quarters without any standard of proof. If the New York City Landmarks Preservation Board declines to designate the site as historic, this would ease the way for construction to begin on the site. (In New York City, expect delays anyway, whether of the bureaucratic or litigation variety.). However, an administrative refusal to designate the site as a protected landmark may amount to a government-sanctioned preference that would violate the Establishment Clause. 

Such a state-sponsored preference (whether implicit -- or "de facto" -- or explicit -- which would be "de jure" in Latin) is a hop and skip away from a formal, or de jure, state establishment of an official religion.  This is precisely the abuse the Founding Fathers sought to prevent with the Establishment Clause, which is designed to ensure the separation of church and state.   This same principle, incidentally, is cited as the reason for banning nativity scenes on public property (and sometimes on private property) at Christmas.

This issue will not disappear. The Ground Zero site is very unique and, should an exception be required, may warrant one. There have been very few large civilian tragedies in the history of our nation. Even the epic military tragedies like Gettysburg and Pearl Harbor have been immortalized. The special, and enduring, significance of the 9/11/2001 attack should be recognized by the city and state governments. This significance, and the enduring pain, argue in favor of the governments showing a unique sensitivity to the emotions of the survivors. For those reasons, the entire Ground Zero zone should be preserved as non-sectarian so all religions and people are respected.

Allowing a mosque -- or a new house of worship of any religion to be constructed there -- will spur concerns that city government is favoring a religion, no matter which one. Such favoritism runs afoul of the Establishment Clause and the Equal Protection Clause.

It would be worth a shot to take this before the bench.

Expect updates and further analysis.

Eric Dixon is a New York lawyer. He is available for comment at 917-696-2442 and by e-mail at

Monday, July 26, 2010

In Politics, Know Your Audience

 Casual observers of politics and policy forget that there are several constituencies at work. There are different agendas and sets of responsibilities. Some parties owe legal duties (what's called a fiduciary duty) to their constituents. Beyond the fog of spokespeople's misstatements or outright lies, these duties often explain what's going on.

In New Jersey, we have seen the last six months the new Governor, Chris Christie (aka the next President of the United States), confront the teachers' union New Jersey Educational Association ("NJEA" for short). He has blamed the NJEA for the state's budget shortfall, largely due to runaway pension obligations and salaries.

Guess what? Christie is right. Sort of.

Guess something else? The union did its job.

The union is there to represent its members. Many of those members are long retired, and are not teachers. If you were to weigh all the union members in accordance with their lifetime paid union dues, you would see the heaviest weighting towards retirees, followed by longtime teachers. Hence this is the constituency the NJEA serves.

The pablum about the NJEA fighting for teachers is true...the NJEA fights for teachers who were 1975.

This explains why middle aged and young teachers, many of whom make $50-70,000 a year and who face the brunt of the firings, feel pinched by their union (which is giving them third-class treatment) and by Christie, who unfairly and illogically tarnished the entire profession at budget time.

If Christie had given the explanation just stated above, he would have preserved significant young teacher support and some "civilian" support as well. Don't forget that Christie's favorable rating in New Jersey is still under 50 percent! (How that makes someone presidential timber escapes me? But don't neglect the role of family and fundraisers. Now you see the relevance of Reform Jersey Now.)

Illogically, Christie went after the most vulnerable -- and least culpable -- segment of the NJEA constituency -- and the one segment most likely to garner public support when attacked. This was a serious error politically and policy-wise.

The problem lies with the union...which did its job perfectly well. Christie may not have an answer for the union's position (union contracts are valid contracts). That may explain the New Jersey "soft cap with holes" on property taxes, the one Christie pushed which exempts from the cap the very items which are pressuring municipal budgets and homeowners: pension obligations, debt service and health care costs.

Real confrontation -- real reform -- might involve exploring the use of the municipal bankruptcy chapter (Chapter 9). So far, we're seeing gimmicks.

Eric Dixon is a lawyer in New York and New Jersey. He can be reached at 917-696-2442.


Sunday, July 25, 2010

Do As I Say, Not As I Do

One of the purposes behind Crime, Politics and Policy is to report, analyze and comment on government waste, fraud and abuses.  Included in that sphere of negativity is the need to report on hypocrisy, double-dealing and conflicts of interest engaged in by public officials, candidates for public office and those around them.  All of these people have the potential, and many have the power, to seriously affect public policy and our lives.  And we are often the worse off for it.
In New Jersey, associates of Governor Chris Christie (old code name: Big Boy; new code name: POTUS45) formed this new advocacy group called Reform Jersey Now.  A comparison between certain comments by this group's organizers and Christie's own comments while U.S. Attorney show either a degree of rank hypocrisy or a tone-deafness to the problem of the appearance of hypocrisy.  An excellent breakdown is provided by that legendarily thin-skinned Star-Ledger columnist Tom Moran.
From a purely strategic standpoint, these seem to be mistakes.  Some politicians have prospered in New Jersey by capitalizing on New Jersey's lack of a true muckraking, tabloid newspaper to expose such errors.  However, elected officials with national aspirations should be conscious of the fact that larger news organizations (and campaign opposition researchers) will chew on these issues.  
From this corner, there has been a trend by candidate Christie and Governor Christie to do things with an apparent blindness -- or arrogant indifference -- to the appearance of hypocrisy.  The trend line goes from the current Reform Jersey Now solicitations bragging about privatization opportunities for donors (as previously reported by the Star-Ledger), back to the personal loans Christie gave to his top deputy federal prosecutor Michele Brown, and even farther back to the snafu with Christie's accident with a motorcyclist in Elizabeth. 
Should Christie stumble in his reform efforts, or have a personal indiscretion, his national prospects will be diminished.
Eric Dixon is an investigative lawyer who is admitted to practice in both New York and New Jersey.  He can be reached at  917-696-2442 and at


Thursday, July 22, 2010

This Stop-and-Frisk Supporter Is For The Birds

New York Governor David Paterson recently signed a bill preventing the police from keeping records of those whom it stops and frisks but does not arrest.  This anti-records law makes eminent sense, because it recognizes the risk to the innocent from guilt-by-association and guilt-by-implication which is present from the very existence of records which can taint people and create a harm without necessarily having any outweighing benefit.  Paterson recognizes (or seems to) that the sanctity of the reputations of innocent people are dependent upon the obedience of those in authority to applicable rules and laws, and that the more records there are, the more this dependence grows.  Such obedience can never be achieved on a 100% basis, thus resulting in at least some risk of reputational damage to the innocent. 

Police records of when the innocent are stopped and searched have the potential to violate the rights -- and sensibilities -- of those innocent people.  A record of an innocent person's encounters with the police is probative of nothing about the citizen, except, perhaps, his skin color or perception of his neighborhood as a "bad area."   There is another risk from such records -- they exist and remain in cyberspace to be accessed by those with legitimate access (i.e. law enforcement) as well as hackers.  These records of innocents' encounters with the cops may severely tarnish or destroy their reputations and leave them vulnerable to future reputational extortion.  Yet these records will be predictive of little or no future criminal behavior. 
It is troubling to hear that a segment of the political / civic leadership class believes that it is the duty of the citizen to not merely be law-abiding, but to consent and submit to such random, intrusive searches by the police.  Especially troubling is that one of these people is former New York City Parks Commissioner and City Councilman Henry Stern, who penned this article expressing his willingness to submit to police stop-and-frisk procedures and arguing for the need for these records to be kept.
Henry Stern's misguided approach turns the fundamental American principle of "innocent unless proven guilty" on its head, and into the de facto principle of "guilty unless proven innocent."  He also is willing to sacrifice liberty for safety. 
As Benjamin Franklin once remarked, "Those who would give up essential liberty to purchase a little temporary safety, deserve neither liiberty nor safety."  Stern may be willing to give up his own liberty, but his perspective is warped.  Stern has to know that an elderly white man is very unlikely to be stopped and frisked by the New York Police Department, for any reason.  But a white teenager may be; Henry Stern fifty years ago may have been thrown up against a wall.  (I'm sure the younger Stern would have immediately sought a lawyer to seek redress.)  And minority adults, teenagers and even young children are routinely stopped and frisked -- and worse, if the anecdotal evidence is true -- and can quickly get the impression (and reinforced by those around them including the less than savory elements) that the police are more to be feared than looked to for help.
Paterson's new law will do much to protect the fundamental rights of New York's young, defenseless and innocent.  Above all, it recognizes the danger which random records can have, if they fall into the wrong hands.  Bravo. 
Eric Dixon is a New York lawyer.  He may be reached at 917-696-2442 or for further comment. 

Tuesday, July 20, 2010

Christie Nationalizes Atlantic City

Breaking: Governor Chris Christie will propose a massive state takeover of the casino district and various entertainment facilities in what amounts to a massive power grab by the State. Despite a $10 billion budget deficit this year and next, Christie on Wednesday will propose that the State of New Jersey take over the casino district of Atlantic City and turn it into a new city under direct state control, creating a new state authority to govern it, and that the state (through the New Jersey Sports and Exposition Authority) sell off the Meadowlands Racetrack and Izod Center.

What this means is the following:  While essential services (e.g., teachers) are cut, the administrator level public officials -- the root cause of the waste, fraud and abuse -- remain employed and keep getting their salaries and the State will create and fund a new bureaucracy to protect an arguably obsolete gaming industry which caters largely to out-of-state customers.

On Wednesday, July 22nd Christie will formally announce his plan.  I expect to access the actual plan and link to it once I get it.  Stay tuned. - E.D.

Initial thoughts: How does a state running a $10 billion deficit have the money -- or the expertise - to take over and operate a large municipal district, create a new town and a new state authority to run it? How do we cut services while creating a new bureaucracy? In fact, why is the government subsidizing or supporting gambling at all?

The Meadowlands Racetrack has been losing money consistently, but why sell it when its value may be lowest? This is the reverse of buy low sell high. Wouldn't its value only increase once football season comes and the Xanadu complex finally (one day) opens?

I have questions in the wake of the privatization task force report, and the Reform Jersey Now contribution solicitations (as reported by the Record's Charles Stile, see and look for his July 20th column) which openly listed the various services and industries which would be privatized (so contributors could figure out if they could get a piece of the privatization bounty).

There is a strong suspicion that Christie is pursuing his concept of "privatization" -- or more accurately, creating a government-sponsored oligopoly or monopoly -- to help various friends and supporters profit on the public dime. In turn, this support is expected to facilitate lots of legal issue advocacy ads to return the support to Christie -- whom I predict is already covertly running for President in 2012.

Question: If Venezuela despot Hugo Chavez seized that country's oil refineries tomorrow, we would call it "nationalization," denounce him and watch as foreign capital fled the country in horror.

If Christie wishes to nationalize the gaming industry, what other industry in the state is safe? This smacks of the same abuse we saw with eminent domain, where public authorities just declared in a self-serving way that properties were blighted and seized them in order to rehabilitate them, paying what they determined to be fair market value to the hapless owners, of course to the benefit of their new, connected owners.

All of this smacks of the conversion of public funds into private profit. Isn't this how Joe Ferriero and other insider politician wheeler-dealers got thrown in jail -- by some U.S. Attorney named Christie?

By the way, how does this proposed takeover encourage the private sector to stay in the state?

This takeover may be nothing more than using a fiscal crisis, economic recession and some municipal mismanagement (or worse, in fairness) to execute a large power grab for the State. Let's see who stands to benefit. I'll bet the taxpayer and homeowner will not be on the list.

Christie Under the Law

Many years ago, then-President Bill Clinton invited derision and scorn from some circles for giving an evasive answer to a question in his grand jury testimony in the Monica Lewinsky matter. Clinton famously remarked, "It depends on what the definition of is, is."

A similar type of nuance-drawing is apparently being followed by New Jersey Governor Chris Christie. In recent weeks the 501(c)(4) group Reform Jersey Now has been revealed to be encouraging its donors to give freely with the lure that they will be subject to no contribution limits and no restrictions on pay-to-play. (The latter practice is widely seen as a leading cause of political corruption across the country.).

Hat tip to the Record's Charles Stile for his column this morning in which he quotes Christie as saying:

"My position is when (sic) it was under U.S. Attorney. People have to operate under the law. If they operate under the law, then that's the way it goes."

Interestingly, several lawyers used the argument that their clients -- like Joseph Ferriero, Wayne Bryant and so on -- operated under the law (that is, state law), but these people were still investigated, indicted, prosecuted and convicted.

This nuance-drawing is not necessarily wrong or illegal. It simply leads to an appearance of impropriety and hypocrisy -- things which led Christie, earlier in his professional life, to launch investigations against other public officials. At the very least, Christie fails here to set a standard for model, moral behavior.

Chris Christie has left himself open - again - to charges of hypocrisy. His stance on the technically-legal but seemingly-not-quite-right circumvention of the pay-to-play restrictions diminishes his claim to moral authority. Politically, this is treacherous territory, and it weakens his ability (in this observer's view) to push for the structural government reforms New Jersey needs.

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Whistleblowers Want Jail For Top Fraud Inspector Under Bush - "The Fox Murdering the Chickens"

Former Bush Administration head of the Office of the Special Counsel, Scott Bloch, faces sentencing this Friday before a District of Columbia federal judge on one count of withholding information from Congress.  Bloch's duties included the protection of government employee whistleblowers and investigating reports of fraud, waste and other abuses within the federal government.  See this Legal Times blog post
Bloch's tenure was troubled by many accounts and he was accused of ignoring whistleblower complaints, retaliating against whistleblowers, making discriminatory remarks and other actions.  His record may have signified in some corners the Bush Administration's lax enforcement of the law -- or tacit approval of government waste, fraud and other illicit behavior.  Allegations of hostility and retaliation towards whistleblowers, if true, would suggest an effort to "sweep under the rug" certain matters.  In other words, attempts to cover up embarassing events.  Consider this comment from Steven M. Kohn, Executive Director of the National Whistleblowers Center:
The person responsible for upholding and enforcing the whistleblower protection laws, the person in charge of the Office of Special Counsel (OSC) during the Bush administration, has now pleaded guilty to a serious crime.
This is not a case of the fox guarding the chicken coop. This is a case of the fox pleading guilty to murdering the chickens. Scott Bloch's actions have cost taxpayers billions of dollars in the misuse of monies, and have cost countless whistleblowers their reputations and careers.
Now, President Obama has a unique opportunity to fix the problem. He has still not appointed a Special Counsel, and the NWC repeats our call for the immediate appointment of an aggressive, competent, independent whistleblower advocate who will have the courage to take on the bureaucracy and demand accountability.  Now is the time for the appointment of someone who will change the culture of the OSC and stand behind the whistleblower.
Watching the Special Counsel plead guilty to a serious crime is the lowest point in the history of the rights of federal employee whistleblowers. President Obama has the ability to restore the faith in this office by appointing a true whistleblower advocate. 
The full release from the NWC is available here
One may speculate as to whether the Bush Administration's seeming hostility towards those who tried to investigate, expose and fix waste and fraud in government also extended to the private sector of the economy, and in particular, the financial markets. Whatever is the true story behind Scott Bloch and the Office of Special Counsel under President Bush, the specter of whistleblower retaliation has to have been troubling.  Government fraud and waste have been serious, endemic problems.  Hostility and retaliation towards whistleblowers -- especially if these attitudes were part of an unofficial policy of hostility -- give aid and comfort to those who abuse power and have the ability to execute cover-ups.  Depending on the context in which these actions occur, such cover-ups are not merely wrong or illegal.   If within our federal government, they can be patently dangerous to national security. These calls to make the government safe for whistleblowers are overdue and cannot be acted upon soon enough.
Eric Dixon is a New York lawyer who handles investigative matters using his background in securities compliance and corporate law.  He can be reached for comment or consultation at 917-696-2442 and 212-386-7632, or at 

Monday, July 19, 2010

Lynne Stewart - Virtually Life

Last week Manhattan federal district judge John Koethl lengthened the jail term of New York criminal defense lawyer Lynne Stewart (whose crimes arose from her defense of the blind terrorist Sheik Abdul Rahman) from 28 months to ten years. Stewart, 70 and a cancer survivor, was essentially given a life sentence -- if Koethl followed the same analysis that fellow judge Jed Rakoff (also sitting in Manhattan) gave disgraced lawyer-turned-felon Marc Dreier.

In the Dreier sentencing, Rakoff and counsel debated Dreier's expected life expectancy at age 59 and concluded his "number" was 79. That would be shortly after he's expected to get out.

For Stewart, who already has served eight months, she faces about 88 more months (assuming time off for good behavior and a halfway house stint). She will be about 78 when (or if) she emerges.

One wonders if some of the older convicts are "getting a break" at sentencing due to their advanced age. If so, this is unwarranted disparate treatment. And it should be challengable by counsel for younger defendants.

If Stewart were 40, would she have gotten the 25-to-30 years prosecutors were asking for?

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Sunday, July 18, 2010

Christie's Privatization: Tomorrow's Corruption?

New Jersey Governor Chris Christie has received a privatization task force report which cites an absolute boondoggle -- the Hudson - Bergen Light Rail -- as an example of privatization's success.  (Don't believe me?  See numbered page 6 of the report -- which is the tenth page of the PDF file in the link provided above.) 
The Hudson - Bergen Light Rail is an absolute disaster by any rational criterion.  (Nice utopian concept; horrible execution.)  Anyone claiming it is a success should be questioned about an undisclosed financial agenda behind the claim -- in other words, were they paid to tout the light rail? -- or their credentials and abilities to be in any position of influence in government should be seriously scrutinized.  
The Light Rail is sparsely used, does not facilitate any commute into New York City and has cost quite a bit of money despite using existing railway lines, thus minimizing construction costs.  According to this Bergen Record article from May 16, 2010, the Hudson - Bergen Light Rail loses millions of dollars a year, generates revenue only from passenger fares which only cover about 30% of its operating costs, so taxpayers cover the balance, and despite those losses has ignored its lack of a fare collection system.  Its trolleys have no conductors on board, so payment is by some sort of honor system.  Oh, and the construction cost for the existing system has been cited in one 2008 Hudson Reporter report as $2.2 billion!
New Jersey cannot afford any more such "successes."  If Christie is going to use this light rail system as a model of success, the rest of the task force's proposals for privatization (which cover areas like automobile emissions, higher education, special education and so on) suggest the potential for multiple financial disasters -- while private companies receiving the contracts will enjoy monopoly status to protect their profit margins. 
Using objective criteria, the only way the Hudson - Bergen Light Rail has been a success is from the perspective of the contractors who profited off the contracts to build the Light Rail.  After all, that $2.2 billion of your money went into someone's pocket.  The "profit motive" you hear as being the driver behind privatization's efficiencies is really the "cost overruns" we routinely read about in connection with government contracts. 
The conversion of public funds for private benefit is the motive which has gotten many elected officials, appointed officials and contractors into legal trouble. We are troubled by the prospect that Christie's concept of privatization will be little more than the creation of "public-private partnership" monopolies which, if the light rail system is a model of success, will be financial disasters.  Should that come to pass, it will be interesting to see how the office of current U.S. Attorney Paul Fishman characterizes these arrangements. 
Eric Dixon is a New York lawyer who specializes in investigative matters.  He can be reached at and at 917-696-2442.


Friday, July 16, 2010

Sue the Negotiators!

Both New York and New Jersey face weighty fiscal issues. In New Jersey, anger over property taxes is reaching a tipping point for much of the electorate.

The pay of school superintendents has been an open secret, regularly reported on by the state's major newspapers. (Hat tip: The Record of Hackensack.). Yesterday, New Jersey governor Chris Christie (code name: POTUS 45; maybe just CC45 for short) announced plans to scale back school superintendents' salaries when their contracts come up for renewal.

Excellent idea. And one which should have been made on CC45's first day in office.

The salaries cannot be rolled back right away because of current contracts. This gets us to the crux of the fiscal problem.

Do not blame the teachers - or other public sector employees -- for the fiscal mess. They negotiated these contracts. Good job! They won those negotiations!

Especially don't blame the younger public employees. They see no benefit (or at least will see none for a long time) from any "benefit.". Health insurance is a benefit, if and only if you get sick. They care about actual net pay, as that is the only way they can buy the necessities of life or get a mortgage. I suspect many of them could care less about pensions. And the unions give them little protection; after all the unions represent their membership, many of whom have retired. There's the group that cares about the health benefits and pensions!

Here's who to blame: the elected officials and their selected appointees who poorly negotiated cushy deals with close friends and associates on the other side of the table.

These officials may have violated their fiduciary duties to their constituents with their poor performance in negotiating. It could even be professional negligence!

If they were in the private sector, someone would have sued them for sure.

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 and 917-696-2442.

Thursday, July 15, 2010

Jersey Drivers Need Lawyers

This will be very true if legislation proposed by New Jersey State Senator (and former interim governor) Richard Codey is passed.

Codey wants drivers to have their drivers' licenses suspended after their third cell phone infraction (driving while talking, without a hands-free device) within a ten year period. The fines ($100 to $250 to $500 for the third offense) are not terribly disproportionate to the offense, but they also fail to deter. Hence, the draconian license suspension threat.

Never mind that accidents are properly attributable to a variety of other driver distractions like the radio, beverage spills, people watching, daydreaming, drowsiness, and that standard but little documented cause: Dumb or uncoordinated Jersey drivers who never would have passed the New York City road test.

Given the importance of driving in a suburban state, this is sure to increase the use of lawyers -- like me -- to fight such infractions.
(Eric Dixon is a New York lawyer who is also admitted to practice in New Jersey. He learned to drive in New York City and passed its road test. He is reachable at

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Sunday, July 11, 2010

Saving Lindsay Lohan

This past week saw former child star turned beleaguered young adult Lindsay Lohan get sentenced to 90 days in jail for violating the terms of her probation.
This "train wreck," in which one embarassing moment or disaster has been followed by another, has been unfolding for years. In our opinion, what is remarkable is the apparent absence in Ms. Lohan's life (at least, recently -- as I perceive her former BFF Samantha Ronson to have been perhaps the sole beacon of maturity in her life) of anyone who actually cares about her.  It seems that her entourage have been her enablers.  These hangers-on have not been her protectors, but her parasites.
Lindsay Lohan may not need substance rehab.  She does need friend rehab.  This means she needs to evaluate, coldly and professionally, everyone around her -- literally, everyone, including her family.  She needs to determine who is a positive influence, and who is a negative influence.  Most of all, she needs to determine which of these hangers-on will be "there" for her if, in a hypothetical situation, she were to awaken one day without her looks, fame or money (all of which appear to be rapidly diminishing).  Then she has to cut bait.
If this means she will have no friends in the world after that process, she would be better off than she is right now.
What Lindsay Lohan needs is people around her who care about her and will give her candid, tough advice on a personal level.  Then, she needs to find the same type of people to handle and advise her professionally and legally.
Eric Dixon is a New York lawyer.  Mr. Dixon has previously represented some political candidates and handles crisis management, confidential investigations and other matters.  He can be reached at and at 917-696-2442.

Bob Sheppard, Voice of the Yankees

Longtime New York Yankees public address announcer Bob Sheppard has died, according to this WCBS report which quotes the Yankees public relations staff.
Sheppard was believed to be 99.  He had been the PA announcer up to 2008.
His enunciation was simply remarkable.

Special Education Students: Profit Centers Under Christie Privatization

This past Friday, a controversial privatization plan was issued by a New Jersey task force setting forth various suggestions for the still-new New Jersey Governor, Chris Christie, to follow. 
There is a small section (page 24) on a proposal for special education programs (such as developmental disorders, the developmentally delayed, autism spectrum disorders, cognitive disorders and physical handicaps).  The proposal suggests that special education be "privatized."  It promises that costs would not increase.  Absolute nonsense!  Anyone who has noticed the wild inflation in college education tuitions knows that government subsidies act as turbo rocket fuel for tuition.  This proposal would spark rampant inflation, and hurt the parents of special education children.  This is how.

Parents of special education students who are dissatisfied with their child's progress would have the ability to move their child to another school within the student's school district, an "eligible" school in an adjacent district "that has space," or a private school.  If the latter option is chosen, the parents would receive a "scholarship" in the amount of the lesser of (a) the cost of educating the student in the home district, or (b) the tuition at the private school.

This set-up seems geared to move these students to private schools.  There are several unanswered questions, however.  

First, we have the effect of the scholarship.  The "scholarship" has a cost that is almost guaranteed to be equal to the previously incurred cost; with state-funded scholarships the private schools will have every incentive to raise their tuition to at least the level of the public schools' cost, as the tuition would be funded 100 cents on the dollar by the state.  There is absolutely no incentive for the school to reduce its tuition, especially as its financial success depends on maximizing its income and having the highest tuition price post it can bear and remain competitive in the marketplace. 

As examples, consider what happens if a private school is charging $10,000 (and I'm just using round numbers -- these are not actual figures) for tuition for a given period.  Assume the local public school cost is higher -- an unlikely event -- and we'll use a figure of $12,001.   The student would be eligible for a $10,000 scholarship under the task force proposal.  If the school raises its tuition to $12,000, the scholarship goes up to $12,000 because it's still less than the public school cost.  This means the private school can raise its tuition and have the state -- that is, all you taxpayers -- fund that raise, dollar for dollar. And if the private school tuition were higher (say, $15,000) than the $12,000 public school cost, the private school would have most of its tuition covered by the $12,001 scholarship.  That private school would have no incentive to drop its tuition when 80% of it will be paid by the state.  It is simple rational behavior; one receiving a subsidy will act to increase that subsidy whenever possible. 

The second question is the source of funds of the scholarship.  (The report conspicuously avoids any mention of this.  Hmmmm.)  One wonders if state aid to schools will be cut every time a special education student decides to leave a district.  Theoretically, that money would go to the scholarship.   However, as schools have a good chunk of their budgets represented by fixed costs, any aid reduction -- from whatever source -- threatens to diminish services to special education students even more. 
I see a death spiral here.  This means that the aid reduction (which I have to presume, because there's absolutely no mention of a funding source for the scholarships) would impair the district's ability to further serve the remaining special education students.  This death spiral would result -- almost as if by design -- in more students going "out of district" or to private schools.  This process could continue and accelerate until the public schools cannot -- or at least not easily -- maintain special education programs.  When this happens, there would be the equivalent of a private school cartel for special education.  At that point, when the only perceived "quality" is in the private sector, those schools would have the power to raise their tuitions unchecked, with parents then forced to choose between a partially-subsidized private education (with the unsubsidized part possibly still being unaffordable) or a deliberately-stripped-down public school program.
The effect on taxpayers: At least a small increase.  The amount of the scholarship for this "privatization" proposal cannot be less than the public system cost unless private schools' tuition is less than the public school cost.  But, as explained above, the private schools will take advantage of the scholarship subsidy to narrow or eliminate any spread between their tuition and the public system cost.  There will be no savings in the real world, only theoretically.  And that is before factoring in the transaction costs of calculating, collecting and disbursing these scholarship monies.  An increase in actual cost to taxpayers is unavoidable.  Any claim to the contrary is simply untrue.
The effect on parents of special education students -- a class of particularly "at risk" and disadvantaged children -- will be inflationary.  State subsidies of scholarships will induce sharp tuition inflation.
The effect on the at risk, disabled children will be speculative and could run the full gamut of scenarios.  But here's one fact:  There can be no assurance that special education services will improve, and no guarantee that these services will not diminish in quality.  In essence, this vulnerable class of children is being put at risk.   Why?
Here's why.  The effect on private schools:  Tuition revenue will increase.  So will profits.  That is not the problem.
Here's the problem.   Your tax dollars are going to fund all the state-subsidized scholarships that will drive those profits.  Taxpayers will see no benefit from this "privatization."  And the children will be placed at risk.
This privatization proposal will turn the most vulnerable among our children into profit centers.
New Jersey can do better than to exploit its handicapped and disabled children.
Eric Dixon is a New York lawyer who is currently researching some special needs / special education funding issues.  He can be reached at and at 917-696-2442. 

Friday, July 9, 2010

Jersey Drivers Fear Privatization Costs (or, Christie's Monopoly)

In New York you can go to a gas station and get your emissions sticker in ten minutes. In New Jersey, drivers have to go to a handful of emissions centers, often in the middle of nowhere, and risk losing half a day of work waiting hours for substandard, surly service that makes us pine for the DMV.

New Jersey Governor Chris Christie is considering a task force's proposal for the privatization of numerous state services. Drivers beware! 

Many conservatives endorse the theory behind privatization. That theory posits that government spending is wasteful and inefficient and that such spending, if made by a private company, is automatically more beneficial. But the practice is often something else entirely.

Democrats are criticizing the proposal. (There's a surprise!). They claim that Christie will be replacing government services (theoretically reducing costs) with services provided by private entities which can charge all sorts of fees. But there's more.

In New Jersey, car owners remember the disaster from privatization of emissions testing. It resulted in long delays and malfunctions from testing computers run by a private company not as accountable as the state is to the people. That's because the private company is essentially a state-licensed monopoly. Therein lies the danger.

As a for-profit entity its mandate is not to serve the public. Its mandate is to serve its shareholders -- that is, to make a profit!

Nothing wrong there. But then remember that the company will not be in the free market, where supply and demand tend to regulate prices and quality. This company will be a state-selected monopoly, in which case it will be shielded from free market checks and balances...and drivers will be the worse for it.

The combination of monopoly power with the profit motive has been recognized by our federal government as harmful ever since the Sherman Antitrust Act was enacted in 1890. The savings to the taxpayer are illusory, as taxes are replaced by even higher fees and services which, combined with less or no accountability to the public (taking advantage of its monopoly status), are destined to be substandard.

One wonders if the proponents of privatization, in practice, realize that Christie-style capitalism boils down to a few principles, as follows:

Payments you are required by law to make to government are called taxes and are bad; however, payments you are required by law to make, in order to drive your car, are not taxes because they go to a private company with government-granted monopoly power, so they're called "fees" and "retail prices."

A slavish adherence to conservative orthodoxy will have Republicans sanctifying these privatization proposals as something akin to sacraments. Never mind that drivers will pay more and have less.

Whether you have overt taxes or taxes in drag, the people are subject to mandates to make payments in order to drive. Fees imposed pursuant to government mandate and collected by private entities, who win government-awarded contracts, are taxes in all but name. The only difference is in the choice of how the payment is characterized. This use of the English language to deceive is worthy and reminiscent of the Clintons.

There may be a bright side. Payments to the state-chosen monopoly can be rationalized away as consumer spending that is stimulating the economy. But I digress.

If you want to discover the real reason this privatization is being pushed, just follow the money. The owners of the private companies will make money through protected monopoly status. That is the real objective here.

The higher costs to the driving public in both increased fees (a tax by any other name, also reducing real discretionary net income) and likely inferior service (thus costing us time) do not factor into the concerns here. To the extent costs are cut, those costs will be passed on -- if not increased on the way -- to the driving public.

This set-up is not capitalism. It is a cost-shifting, government-endorsed monopoly that will transfer wealth from drivers to company owners. It smells like crony capitalism, where government power is being used to compel private citizens to give their money to selected companies.

Sound familiar? Christie has shown us this crony capitalism before...with his selections as U.S. Attorney of connected law firms to act as special monitors for wayward public companies. That practice -- and Christie specifically -- were soundly criticized by Congress and even the Justice Department.  

That's the same practice by which U.S. Attorney Chris Christie selected as a corporate monitor the former U.S. Attorney in the Southern District of New York, the same office which investigated and declined to prosecute Todd Christie (yes, Chris' older brother) while bringing criminal charges against a long stream of other defendants in a major market manipulation case (all of whom were either acquitted, had their convictions tossed on appeal or had their cases dropped before trial). 

None of this is to say that Todd Christie did anything wrong; in fact, the ultimate dispositions strongly indicate that criminal conduct was not involved and that the legal theory behind the decision to even investigate these people was defective and should not have engendered any prosecutions.  (Not the first time someone at the Justice Department has tried to show off how smart they are with a new novel theory.)  But Christie went to two people -- one a fellow U.S. Attorney turned private practice lawyer, the other (John Ashcroft) the former U.S. Attorney General -- to appoint their firms as corporate monitors on multi-million dollar contracts.  There is -- at the very least -- a strong appearance of favoritism, of back-scratching, of the New Jersey quid pro quo which a certain former federal prosecutor used to go after with abandon.  (This practice will now be diminished with the recent Supreme Court cases sharply limiting the scope of the "honest services" fraud statute.)

What does prior practice say about what we can expect with future practice?  It says that Christie-style favoritism may be a new way to give favors to a whole bunch of politically-connected hacks in private industry.  It may be a Supersized form of pay-to-play.  And here's the best/worst part: once the money hits the private coffers, we won't be able to tell where it's going.  Private industry is not subject to the transparency and "sunshine" laws that government agencies must abide by. 

If these concerns are realized, Christie's privatization could be a way to reward a group of favored private-sector insiders, shielding the details from the public, and sticking the public with higher fees and worse service.

Drivers beware. It may not be a "tax," but your wallets and purses will be lighter nonetheless.  At least the tax-spend-and-borrow-us-into-oblivion Democrats are honest about that.

Eric Dixon is a New York lawyer and New Jersey driver.

Strategic Defaults by Ruthless Rich People

report in Friday's New York Times suggests that strategic mortgage defaults are rising the fastest among the rich -- a group which can afford to make the payments but chooses to default as a way of abandoning the equivalent of a failing investment.  
Data from the real estate analytics firm CoreLogic (quoted in the article) indicates that one in seven homeowners with a loan of over $1 million is in default.   That is a staggering 14-15%.
"The rich are different; they are more ruthless."
-- Sam Khater, CoreLogic's senior economist, quoted in the New York Times, July 9, 2010.
Consider this the next time someone tries to persuade you that the defaulting homeowner class is full of needy victims.  Some are victims of circumstances beyond their control -- as many have always been, stricken by catastrophic medical bills or other emergencies. (Those are the real hardship cases.  Funny no one sheds a tear for them.)  
But in the current climate, many defaulters were simply greedy homeowners to begin with.  Their greed was the genesis of the move to buy houses at obviously overinflated prices and on sometimes absurd mortgage terms.   It ought not be too surprising to see more greed -- CoreLogic's Sam Khater calls it ruthlessness -- on the back end.
Eric Dixon is a New York lawyer who has successfully sued several deadbeats.  He can be reached at and at 917-696-2442.

Thursday, July 8, 2010

Defending Closed Primaries

New York City is considering having nonpartisan elections. This would mean party primaries would be replaced with a general "first round" election followed by a runoff between the top two finishers.

This proposal threatens the people's right to association under the First Amendment. It would render largely meaningless (except for federal and state office elections) the concept of enrolling in and belonging to a political party. Parties are useful; people join parties because they identify with and feel an affinity for a party. (Whether they accurately, or should, feel that way or identify with the party are different questions.)

I sense this proposal is being floated by people who stand to gain by its enactment. There are people who cannot win in a majority-Democratic city. Changing the rules to hide their non-Democratic Party ideals is their only chance of success. The specter of most voters (including Republicans, by the way) being confused and disconnected from their traditional indication of a candidate's adherence to their core beliefs -- that is, party affiliation -- is acceptable, collateral damage.

This proposal has nothing to do with empowering the people or their constitutional right to free association, or voting rights. It is just another cynical attempt by some politicians to rejigger the system to their advantage. Once again, ambition and expediency trump democracy and transparency.

(Eric Dixon is a New York election lawyer. He has no stake in this issue. Arguably this change would increase the number of candidates. He is available for comment at

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Tuesday, July 6, 2010

New Third Parties on Deck in New York

Today is the first day that signatures may be gathered for independent candidates for public office in New York State.

Under the Election Law, a statewide candidate has approximately 45 days to collect 15,000 signatures from voters. The signers can be from any party -- or no party -- but they must not have signed a petition for any other candidate for the same office.

Several months ago Crime, Politics and Policy reported that several incipient movements were afoot to establish new parties through gubernatorial candidacies. A new party may be formed if a candidate on an independent line gets a minimum of 50,000 votes.

It appears right now that Carl Paladino will be circulating petitions, as will a Republican Party sponsored candidate (maybe Steve Levy). Each seems to be an effort to supplant the Conservative Party as the "right wing" party in the state and hence deny it of its influence in cross-endorsing Republican candidates -- while an insurgent Conservative Party candidate (Ralph Lorigo) is assured of a primary against Republican Rick Lazio. Lorigo may be intent on driving the current Conservative state leadership out of the party, angling for either a takeover of the party or to end its existence altogether.

The removal of the Conservative Party from official status in New York could be accomplished if its nominee fails to get 50,000 votes in the general election.  It is possible at least four "conservative" candidates could be on the November general election ballot: the Republican nominee (Lazio is the Republican convention's designated candidate but Paladino will try to force a primary through petitioning), the Conservative nominee (both Lazio and Lorigo are on the primary ballot thanks to the party convention vote), and independent lines for each of Paladino and Levy.   -- or both -- can run in the general election as one of several "conservative" candidates, theoretically splitting conservative support among several candidates: Lazio, Lorigo, Levy and Paladino (each of whom may have a general election line when all is said and done). 

The danger to the Conservative Party is two-fold.  It currently has "Row C" on all ballots because its 2006 candidate got the third-most votes of any line, ahead of other minor parties.  If all right-of-center candidates run and split the vote, the Conservative Party candidate could theoretically run sixth (for example) and that party could become "Row G."  It would lose its patronage and virtually all of its cross-endorsement power and leverage, and hence its influence in state politics.  So the stakes are high.
(Eric Dixon is a New York election lawyer. He is not working on behalf of any of the aforementioned parties or candidates. He may be reached at and at 917-696-2442.)

Monday, July 5, 2010

Espada's Right to Party

Today's New York Post reports that troubled state senator Pedro Espada may be facing official "disenrollment" proceedings by the Bronx Democratic Party (if it acts at the request of state party leaders, as indicated in the report).  The Post report states that the draft letter (which will go from state leaders to the Bronx County Committee Democratic Party chair) will cite Espada for not being "in sympathy" with the party's principles.
Some background: Espada publicly flirted with changing his party enrollment from Democratic to Republican in the summer of 2009.  At the time, state senate membership was equally divided and Espada's switch threatened to tip the balance in the chamber. Due to a hyper-long "deferred enrollment" period under New York State Election Law, Espada did not have to make the enrollment change official until last October (it would not have taken effect until 2010 anyway).  By such time, he reconciled with the Democratic Party -- being named Senate Majority Leader -- or failed to see any further advantage in courting the Republican Party.
In any event, the disenrollment provision is surprisingly not used more often by parties.  There are constitutional implications to such a provision, as voters do have the right to choose and belong to a party.  (See the 1970 United States Supreme Court case, Rockefeller v. Rosario.) A man who is denied membership in a party of his choosing may be effectively denied membership in any other party, on the same basis of not being in sympathy with party principles.  In fact, being a recent convert to a party or publicly considering such a move could threaten one's current enrollment.  Should the Espada disenrollment movement cite his legal troubles, then it would advance the principle that any public office holder who is under investigation or indictment would risk losing his First Amendment "right to association."  
If being under criminal indictment is an appropriate trigger for disenrollment proceedings, how come another former Bronx state senator, Efrain Gonzalez, was not threatened with disenrollment or expulsion from the chamber?  (Gonzalez was just sentenced to a long federal prison sentence for fraud stemming from the misuse of funds from a few non-profit organizations.) 
If considering switching parties makes one persona non grata in the party in which one is and remains enrolled, there would be no shortage of people in violation and at risk of expulsion. 
Of course, such standards can be expected to be applied selectively.  This opens up a can of worms legally.  I would think that political parties, as intertwined as they are with government, could have certain actions give rise to civil rights claims.   That means the Espada disenrollment movement could lead to a really interesting constitutional rights case.
One final note.  The New York State Election Law inherently involves politics.  Petitioning is coming to a close in the Bronx and Espada probably will have a challenge or two.  The Democratic primary is in a little over two months.  Draw your own inferences.
Eric Dixon is an election lawyer in New York.  While a student at Yale Law School, Mr. Dixon extensively researched the practice of deferred enrollment in all fifty states and concentrated on New York's deferred enrollment period which was and remains the most onerous in the nation.  Mr. Dixon has also studied the practices and theory behind party switchers.
Mr. Dixon is not representing, at this time, any party, faction or candidate referenced in this article.
Mr. Dixon is available for further comment at 917-696-2442.  


Friday, July 2, 2010

Google, Technology and the Danger of Trust

There are some breaking stories about international investigations into Google's unannounced access to and capture of wi-fi data in the process of its collecting photos for its Google View product.   See this  Reuters report and this Telegraph report.   Kudos to the British press.  
All of this boils down to a technology whose use and application by a company --- Google -- potentially imperils the privacy of vast segments of our information-driven society.  Google management, led by CEO Eric Schmidt (previously criticized on this blog, please search our archives), seems to feel that the populace should trust it.   But therein lies the problem.  A judgment or demand that one be trusted is by its nature not benevolent, but rather one of a command for obedience, or at the very least it is one of a command to refrain from criticism or resistance.  From a psychological level, it is indistinguishable from a threat to do harm if one isn't compliant -- something on the order of, "do as I say, or else."
Somewhere I sense a tremendous business opportunity in lawful "cloaking" devices to intentionally defeat third-party commercial "tracking" devices such as cookies, malware and the like.
Eric Dixon is a New York lawyer.  He can be reached for comment at 917-696-2442 and at

Thursday, July 1, 2010

President Christie? Get Serious.

There is a provocative column this morning by one of the few people whom I admit to reading regularly (irrespective of whether I disagree or agree with him): Paul Mulshine of the Star-Ledger in Newark.

See his post here:

I think this talk of the new New Jersey governor being presidential timber after just five months in office is premature and shows the baseness of the appeal -- to the rubes in the "heartland" -- of anyone who appears "tough.". That is, by being publicly confrontational (which I've contended before is a long term strategic mistake) and boisterous.

A chief executive should be -- has to be -- a statesman. And real toughness, when it must be shown or mustered, is best used not for show, but for actual impact.

(Eric Dixon is a New York lawyer who engages in strategic analysis and consulting as part of his professional practice. He can be reached at 917-696-2442 and at

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