- Government badly messes up pension arrangements for its own workers. So why are California and other states muscling their way into provision of private pensions? [Steven Greenhut, City Journal]
- Unconstitutional doings at the Consumer Financial Protection Bureau (CFPB) should not be ratified after the fact [Ilya Shapiro and Jayme Weber, Cato]
- Temple-Inland, Inc. v. Cook: federal court rules Delaware practices on unclaimed property unconstitutional [Alston & Bird, my recent]
- “In praise of debt” [David Henderson] “The credit card companies were there for me” [same]
- May be wrong: Prof. Bainbridge on why U.K. Prime Minister Theresa May is off base in proposals to put workers on company boards, tinker with executive pay (related here and here);
- “The Glass-Steagall Rorschach Test” [Mark Calabria, earlier]
Curbs on CEO pay, laws requiring worker representatives on company boards? Sounds as if incoming British prime minister Theresa May wants Euro policy despite Brexit [Sam Bowman, Telegraph]:
Take worker representation on company boards. It sounds fair, if worryingly European, but can backfire badly.
Volkswagen’s board turned toxic when its former chairman allied himself with workers’ representatives to block layoffs and wage cuts at the firm’s notoriously inefficient main factory in Wolfsburg, in exchange for support on other issues. In the wake of the carmaker’s costly emissions scandal, a former supervisory board member said in a newspaper interview that “it just killed the board as a place of proper discussion”.
- Trying to pressure banks to cease tax refund anticipation lending, FDIC staff crossed several lines of impropriety [inspector general executive summary via Kevin Funnell]
- Consumer Financial Protection Bureau, class action lawyers’ best friend, aims to suppress arbitration [WSJ, The Hill, earlier here, here, here]
- When CEOs campaign for their view of social justice, do they disserve shareholders’ interest? To the point of incurring liability? [Kevin LaCroix]
- “Insider Trading: The Unknowable Crime” [Thaya Brook Knight and Ilya Shapiro on Cato amicus brief in Salman v. U.S.]
- “The Number of Publicly Traded Firms Has Halved” [Alex Tabarrok; Naomi LaChance, Inside Sources, on decline of IPOs] Does SEC Chairman Mary Jo White get it? [Hodak Value]
- Tax havens and tax competition serve vital policy function, to “curtail the greed of the political class” [Dan Mitchell] Related: “The War Against Cash, Part III”
Deferred prosecution agreements and their close relatives non-prosecution agreements (DPAs/NPAs) have become a major tool of white-collar prosecution in recent years. Typically, a business defendant in exchange for escape from the costs and perils of trial agrees to some combination of cash payment, non-monetary steps such as a shakeup of its board or manager training, and submission to future oversight by DoJ or other monitors. Not unlike plea bargains in more conventional criminal prosecution, these deals dispense with the high cost of a trial; they also dispense with the need for the government to prove its allegations in the first place. DPAs may also pledge a defendant to future behavior that a court would never have ordered, or conversely fail to include remedies that a court would probably have ordered. And they may be drawn up with the aim of shielding from harm — or, in some other cases, undermining — the interests of third parties, such as customers, employees, or business associates of the targeted defendant, or foreign governments.
So there was a flurry of interest last year when federal district judge Richard Leon in Washington, D.C., declined to approve a waiver, necessary under the Speedy Trial Act, for a DPA settling charges that Fokker Services, a Dutch aerospace company, sold U.S.-origin aircraft systems to foreign governments on the U.S. sanctions list, including Iran, Sudan, and Burma. While acknowledging that under principles of prosecutorial discretion the Department of Justice did not have to charge Fokker at all, Judge Leon said given that it had, the judiciary could appropriately scrutinize whether the penalties were too low.
Now a three-judge panel of the D.C. Circuit has unanimously overruled Judge Leon. It pointed out that under well settled law, charging decisions are entrusted to the DoJ or other executive branch prosecutors, not the judiciary, and that judges may not intervene to insist that additional or more stringent charges be filed – and that is what the pattern in this case amounted to, in the appeals panel’s view.
So far so good, you might think. But the language of the appellate ruling in places might be read to suggest that courts should simply defer to the Justice Department’s judgment and green-light the DPAs it may negotiate, period. And that would be disturbing, since over-lenience is only one of the possible problems with these devices. Noting the rule-of-law concerns that scholars have voiced about DPAs, Michael Greve writes that the new Fokker Services decision “in sharp contrast, oozes with ‘trust your friendly prosecutor’ language” and speaks of dispensing with “seeking a conviction that the prosecution may believe would be difficult to obtain or would have undesirable collateral consequences.” Greve adds: “Inquiring minds might want to know whether the conviction would be ‘difficult to obtain’ for practical reasons — or because the charges are preposterous and brought for reasons bordering on extortion. …No judicial scrutiny means more than boundless prosecutorial discretion. It means mobilizing the courts to create a due process façade for highly suspect bargains.” Let’s hope the ruling isn’t read that way.
After relatively cautious regulatory tightening on corporate inversions failed to deter a plan by Pfizer to embrace foreign domicile, the Obama administration came out with drastic new guidance that will keep accountants and lawyers busy for years with new disputes and uncertainties. Tax law is supposed to be relatively stable, predictable, and reliable for purposes of letting enterprises plan rationally, but that’s when political considerations don’t come first [Paul Caron, TaxProf citing Victor Fleischer, NYT and other links; earlier on inversions including Burger King episode] The underlying arrogance of U.S. overseas corporate tax policy: “We are unique among advanced nations in claiming taxes on global profits” [Hodak Value] Why corporate inversion makes moral sense and promotes healthy tax competition between jurisdictions [Daniel Mitchell, Cato and in January at Fortune]
Related: voters who believe in rule by executive fiat have so many choices this year, Bernie Sanders high among them [@joshgreenman on Twitter]
- “American Express Settlement Collapses Amid Charges Of Collusion” [Daniel Fisher]
- Some on Capitol Hill would like U.S. Treasury to return money seized from South Mountain Creamery in now-notorious structuring case [Washington Post, our earlier coverage]
- CEO pay shaming theory has been tried and failed twice, but why not one more try? [Marc Hodak, earlier]
- Another big courtroom reverse for SEC in use of in-house administrative law judges [Reuters]
- Judge Easterbrook on competitive federalism, Delaware, and incorporation [Robert Goddard, Corporate Law and Governance quoting Corre Opportunities Fund, LP v. Emmis Communications Corp.]
- How far will California go to tax one wealthy ex-resident? Consider saga of Gilbert Hyatt vs. Franchise Tax Board [Lloyd Billingsley, Daily Caller]
- Apparently so: “Is Securities Litigation’s Future Secure?” [Nick Goseland, Above the Law]
- Critics say by naming payment processors in massive enforcement action over debt collection practices, CFPB is implementing its own version of Operation Choke Point [Kent Hoover/Business Journals; Barbara Mishkin, Ballard Spahr; Iain Murray, CEI]
- Green sprout in Amish country: “Bank of Bird-in-Hand is the only new bank to open in the U.S. since 2010, when the Dodd-Frank law was passed” [WSJ via Tyler Cowen; Kevin Funnell on smothering of new (de novo) bank formation; Ira Stoll (auto-plays ad) on growth of non-bank lenders]
- “Quicken Loans Sues DOJ; Claims ‘Political Agenda’ Driving Pressure to Settle” [W$J; J.C. Reindl, Detroit Free Press]
- Shocker: after years of Sen. Warren’s tongue-lashings, some banks consider not giving to Democrats. Is that even legal? [Reuters] “Elizabeth Warren’s Extraordinarily Bad Idea For A Financial Transactions Tax” [Tim Worstall]
- Still raging on: Delaware debate about fee-shifting corporate bylaws as deterrent to low-value shareholder litigation [Prof. Bainbridge first, second, third posts]
- “How a Business Owner Becomes Criminally Liable for How Customers Spend ATM Withdrawals” [Elizabeth Nolan Brown, Reason]
- New York financial regulator pushes to install government monitors at firms where no misconduct has been legally established [Robert Anello, Forbes]
County in New Mexico purports to ban oil/gas extraction, assign legal rights to rivers, wetlands and other natural features, declare all water a public trust, create an enforceable legal right to a “sustainable energy future,” strip corporations of various current constitutional rights, and make the whole thing self-executing against private parties. Federal court: uh, no, guys [Eugene Volokh on decision in Swepi, LP v. Mora County, striking down ordinance on various grounds including Supremacy Clause, First and Fifth Amendments.]
In New York that’s getting to be a regular pattern in the settlement of charges against financial firms; although Eliot Spitzer, known for creative methods of corporate decapitation, may have departed office, Spitzerism lives on. I explain in a new Cato post on the state’s Ocwen Financial pact.
Related: Tactics the federal government used to seize control of insurer American International Group (AIG) away from Hank Greenberg, now made public despite years spent resisting disclosure [Gretchen Morgenson, New York Times]
Six months ago the Delaware Supreme Court upheld the right of an enterprise to include a loser-pays provision in its bylaws, specifying that losing shareholder-litigants would have to contribute reasonable legal fees to compensate what would otherwise be loss to other owners. Since then there’s been a concerted campaign to overturn the ruling, either in the Delaware legislature or if necessary elsewhere. But as I argue in a new Cato post, allowing scope for freedom of contract of this sort is one of the best and most promising ways to avert an ever-rising toll of litigation. Contractually specified alternatives to courtroom wrangling have played a vital role, and are under attack for that very reason, in curbing litigation areas like workplace and consumer arbitration, shrinkwrap and click-through disclaimers of liability, and risk disclaimers at ballparks and elsewhere. (& Stephen Bainbridge).
To the extent America has made progress in recent years in rolling back the extreme litigiousness of earlier years, one main reason has been the courts’ increased willingness to respect the libertarian and classical liberal principle of freedom of contract. Most legal disputes arise between parties with prior dealings, and if they have been left free in those dealings to specify who bears the risks when things go wrong, the result will often be to cut off the need for expensive and open-ended litigation afterward.
More on the Delaware bylaw controversy: D & O Diary (scroll), Andrew Trask on state of the merger class action, WSJ Law Blog first and second, Daniel Fisher, and ABA Journal in June, Alison Frankel/Reuters (forum selection bylaws).