Punishment, when there is no crime

Continuing on the theme of overreaching government...

What if you didn't do anything wrong, but you got penalized anyway? (This feels like my hockey game the other night, by the way!) Happens all the time in government.

Consider the Valerie Plame case. Scooter Libby was prosecuted for leaking information LONG AFTER THE PROSECUTOR KNEW HE WAS NOT THE ONE WHO LEAKED THE INFORMATION. Not only that, the person who did leak the information (Richard Armitage) never faced any consequences.

Former President George Bush is opening up about this recently. From Byron York, in the Washington Examiner:
"Bush: 'I never understood' why CIA leak case went forward"
http://www.washingtonexaminer.com/politics/Bush-I-never-understood-why-CIA-leak-case-went-forward-plame-libby-cheney-108042404.html


The Martha Stewart case fit this profile as well. People talk about her "insider trading" trial, but few realize that she was never actually charged with insider trading. Prosecutors simple make and allegation in order to start investigating. And then look for any loopholes, any tricks, to try to get a conviction. Even if the underlying charge has absolutely no merit.

From USA Today, March 2004:
"Martha Stewart convicted of four felonies"
http://www.usatoday.com/money/media/2004-03-05-stewart_x.htm

"...jurors found Stewart guilty on four counts of conspiracy, obstruction and making false statements."


The following opinion pieces sum up my opinion on the Martha Stewart case, and on similar cases in general.

Cato Institute, March 9, 2004:
"Martha's Mistrial: The Insider Trading Accusation Came from a Cowardly Press Leak from a Congressional Committee"
http://www.cato.org/research/articles/reynolds-040309.html

"Despite the assertions of both jurors and journalists, Martha Stewart was not convicted of insider trading. This misrepresentation is chilling.

"Martha Stewart has been convicted of conspiring to cover-up a crime she was not accused of having committed -- insider trading. She was convicted of 'lying' but never charged with perjury.

"Martha Stewart was also convicted of 'obstructing justice' without any explanation of how the prosecution of anyone but herself could have been obstructed by her first attorney's explanation of what motivated her to make a perfectly legal sale of ImClone stock."

"Judge Miriam Cedarbaum prohibited the defence team from mentioning the fact that it was perfectly legal for Martha Stewart to sell on her broker's advice, regardless what Doug Faneuil may have said or why. Either his explanation or hers may be correct, and they are not mutually exclusive. But the jury would surely have wondered why the motive for selling ImClone stock mattered so much if they could have been told the sale itself was no crime."


Here's what Stephen Moore had to say in the National Review:
"What’s Wrong with Insider Trading? The railroading of Martha Stewart."
http://old.nationalreview.com/moore/moore200403090901.asp

"Throughout this trial, what seemed to be forgotten was that Stewart's original crime, an alleged insider-trading deal with ImClone stock, can hardly be considered a crime at all. (I know that Stewart was convicted for lying to federal investigators, but the 'lying' and obstruction-of-justice charges were all related to this one sale of stock that occurred 24 hours before the market tanked.)

"Libertarians have long argued that insider trading should not be a crime, because 1) there is no victim, and 2) because everyone who makes money in the financial markets is engaging in some degree of insider trading — some just have better information than others. Being a good stock picker involves having more information, and knowing how to get it, faster than other traders. What is the difference, really, between a hot stock tip, and insider trading? The line is so murky that it makes the enforcement of insider-trading laws inconsistent and capricious."


And, saving the best for last, we turn to the Mises Institute, with commentary both before and after the trial.


Mises Daily Article, Friday, June 21, 2002 by William L. Anderson:
"The Attack on Martha"
http://mises.org/article.aspx?control=989

"While the view that all society must be egalitarian is evident nearly everywhere, perhaps it is no more prevalent in the business world than in how we regulate capital markets. As Ilana Mercer has written, the law requires information to be socialized. If one party knows more than others regarding information about a particular firm or industry, then the SEC is perfectly able to rule that possessing--and acting upon--that knowledge is a crime."

"This sharing of and acting upon such 'inside' information, the SEC and Congress solemnly declare, is a crime, since the general public was not aware of it at the same time. Somehow, the government does not consider it to be a breach of the law when its own officials act upon 'inside' information to protect themselves. For example, after receiving warnings that terrorists might hijack U.S. airliners, U.S. Attorney General John Ashcroft began to fly on private aircraft. Some members of Congress grumbled, but no one was sent to Ashcroft's office to place him in handcuffs and chains."

"The issue of insider trading seems to be straightforward, but it is not. First, as Paul Craig Roberts has pointed out, the law is purposely vague, something the SEC says is needed since a specific law would then rob prosecutors of their ability to pursue such charges. In other words, when acting upon information in the securities markets, one cannot be sure if one is committing a crime or not. However, the local U.S. attorney--and the courts, which have upheld this legal abomination--will be happy to inform you afterward that such activity is indeed criminal.

"Second, this is a law aimed at a certain group of people. Since people like myself do not deal in large amounts of money, it is doubtful that government prosecutors are likely to care if I buy a hundred shares of Acme because someone 'in the know' gave me a good tip. The folks that prosecutors love to go after are those who are wealthy and high profile, such as Martha Stewart. No doubt, Stewart's scalp would look mighty fine on the pole of a career prosecutor seeking political fame or future legal fortune."

"Third, the principle of 'insider trading' is in itself fundamentally flawed. Information that is worth anything in a market setting at all by definition must come from 'the inside.' There is no way to make information public in the way that the government wants it to be done without making all relevant information useless for the purpose of economic decision making."


Mises Daily Article, Monday, June 09, 2003 by William L. Anderson:
"Martha Stewart: Political Prisoner"
http://mises.org/article.aspx?control=1246&month=57&title=Martha+Stewart:+Political+Prisoner&id=60

"For all of the vows by Stewart's attorneys that Martha will 'vigorously' contest these charges, she truly faces an uphill battle. Unlike the typical set of criminal laws that exist to protect innocent people (i.e. laws against murder, assault, and theft), Stewart has been indicted under a set of laws that exist for one and only one purpose: to gain convictions. Given the hard and unpleasant facts of federal criminal law in 2003, it will be a miracle if Stewart is able to beat these charges. Too much is at stake politically for the government to back down now. To put it another way, Martha Stewart is likely to be a political prisoner."

"Furthermore, by not bringing criminal charges on insider trading, which was the original issue in this case, the government is demonstrating that it is more interested in gaining a criminal conviction—any conviction will do here—instead of having to deal with the real issues of whether or not this truly was a criminal issue in the first place."

"Further proof that the government was stretching the legal envelope in order to charge Stewart was the charge of 'securities fraud.' According to Comey, by publicly saying she was innocent, Stewart was guilty of trying to illegally manipulate the stock of her company. While observers have called this a 'new legal twist,' in reality, it is fraud of the highest order, demonstrating that the real criminal here is Comey, who is trying to manipulate the law to read that if someone tries to mount any kind of defense at all, that person has committed a crime."

"The obstruction of justice charges that Stewart faces are going to be tougher for her, and it is at this point that she is most vulnerable. In their most literal sense, laws against 'obstruction of justice' basically say that individuals, once accused by the federal government of 'wrongdoing,' cannot defend themselves. That is because by definition a defense is a claim that prosecutors are wrong, and in the modern world of federal courts, telling a U.S. attorney that he or she is wrong is by definition to engage in 'obstruction of justice.'"

"Because they have not been able to gain enough information to charge Stewart with insider trading—no doubt, in large part because she had no fiduciary relationship with ImClone—they are doing what the feds did to Al Capone 70 years ago when they were able to have him convicted of income tax evasion. The obstruction of justice, conspiracy, and fraud charges that she faces exist only as a tool by which to gain a conviction—any conviction—when the investigation into the original 'crimes' becomes a dry hole."


Mises Daily Article, Monday, February 23, 2004 by Christopher Westley:
"Martha Stewart's Surreal Ordeal"
http://mises.org/daily/1453

"So the Martha Stewart trial has come to this. Judge Miriam Goldman Cedarbaum ruled that the government cannot introduce testimony about how Stewart’s statements to the press asserting her innocence of violating insider trading law affected investors of her firm, Martha Stewart Living.

"As a result, the government has effectively lost. The New York Times reports that this development is the nail in the coffin in the prosecution’s case, noting that '[a] person involved in Ms. Stewart’s defense said the ruling "renders the securities fraud charge dead on arrival," although other material might be introduced by prosecutors themselves.'

"This statement highlights what this trial is about—not insider trading, but the right to declare one's innocence, even when the government later agrees with the declaration. Surely if others attempted a similar defense in the face of a Kafka-esque judicial machine, the bullying Justice Department would be seen for what it is, forcing it to assume a lower profile and move somewhere behind the front line of the government’s funding trough."

"Second, the notion of an independent judiciary in a democracy is a myth. The judicial system is every bit as susceptible to the corrupting influence of the power, perks, and prestige that can accrue in the private sector."

"The Stewart trial should serve as a reminder of Murray Rothbard’s criticism of the notion of an independent judiciary in Power and Market (1970, p. 195):
"If the judiciary is really independent of the popular will, then it functions, at least within its own sphere, as an oligarchic dictatorship, and we can no longer call the government a "democracy." On the other hand, if the judiciary is elected directly by voters, or appointed by voters’ representatives…then the judiciary is hardly independent. If the election [or appointment of judges] is subject to renewal, then the judiciary is no more independent of political processes than any other branch of government."

"Finally (and most importantly), the gall—the heroic gall—to fight such absurd charges is crucial for a free society. We should be thankful that Stewart, whatever her faults, was willing to stake her reputation and wealth to fight this surreal ordeal in court. We can be sure that, post-Martha, the DOJ will be more careful where it picks its fights. We can hope that the Stewart trial will be viewed as a harbinger of things to come in the fight against an activist federal judiciary."


Mises Daily Article, Saturday, March 06, 2004 by William L. Anderson:
"Wealthy Beyond a Reasonable Doubt"
http://mises.org/daily/1467

"The post-trial comments of one juror, Chappell Hartridge (Juror Number Eight), say it all: 'Maybe this is a victory for the little guys who lose money thanks to these kinds of transactions. Maybe it's a message to the big wigs.'

"Remember that this was not a trial about 'insider trading.' The judge said so, the prosecutors said so, the pundits said so. Even the New York Times declared that it was not an 'insider trading' charge."

"No, Stewart apparently committed the 'crime' of being wealthy and well-connected. Furthermore, she sometimes was short and impatient with people, which is a trait that one of us in his brief career as a news reporter found to be endemic in people who were associated with the New York Times and other 'elite' news outlets.

"Had she instead been a journalist or a politician, she would have had a chorus of supporters among the political classes. Instead, she made the mistake of being a self-made billionaire, and now the journalists and the political classes are making sure that she is railroaded into a prison cell."


Welcome to the United States. We used to be governed by the Rule of Law. We are now governed by the Rule of Men, where you may be considered guilty at any time.