Eric Holder Issues New Asset Forfeiture Restrictions for Structuring Offenses

Today Attorney General Eric Holder issued new guidelines to federal prosecutors tightening the rules for seizing assets for so-called “structuring” offenses.

Under the Bank Secrecy Act, structuring occurs when someone is suspected of arranging their financial transactions as to avoid triggering a report to the federal government by the financial institution.  Some of civil asset forfeiture’s most egregious abuses are the result of federal prosecutors utilizing this nebulous statute to empty the bank accounts of unwitting citizens and small businesses who are never charged with any crime or even aware that their transactions are considered illegal. 

The new rules require:

1. That structuring seizures against people for whom there is no criminal charge be based upon probable cause that the funds were either generated by unlawful activity or intended for use in anticipated unlawful activity.  Alternatively, prosecutors must procure a warrant from a court and with the approval of either the U.S. Attorney (for Assistant U.S. Attorneys) or the Chief of the Asset Forfeiture and Money Laundering Section (AFMLS) (for Criminal Division trial attorneys).

2. That when the prosecutor determines subsequent to a structuring seizure that the government lacks the necessary evidence to succeed at either a civil or criminal trial, the seizing agency must return the full amount.

3. That when a prosecutor seizes property pursuant to suspicion of structuring, the prosecutor must file either a criminal indictment or a civil complaint, or receive an exception from either a U.S. Attorney or Chief of AFMLS within 150 days or else return the seized assets.

4. That all settlements must be complete and in writing.  Informal settlements are expressly prohibited.

Over-Budget Hospitals

The Veterans Health Administration (VHA) is plagued with problems. Veterans wait months for medical care and have few options for accessing non-VHA providers. In addition to all of the issues relating to providing health care, construction of VA medical facilities is mismanaged, which burdens taxpayers with billions of dollars in extra costs.

However, the VHA might be trying to change direction. Glenn Haggstrom, the individual who oversees VHA construction, “stepped down” last week after being put under internal investigation. Hopefully, he will be replaced by a reform-minded leader. In 2013 the Government Accountability Office (GAO) found a host of problems at the four largest VHA construction projects, which are located in Denver, Orlando, New Orleans, and Las Vegas. All four projects had major cost overruns and schedule delays.

How Will the TPP Impact Vietnam’s “Nonmarket Economy” Designation?

When deciding whether to impose antidumping duties on imports from Vietnam, the United States uses what’s known as nonmarket economy (NME) methodology.  That is, instead of comparing a product’s U.S. price with the price for the same or similar product in Vietnam, U.S. authorities compare it with a fictitious price constructed using surrogate values from third countries.

The use of NME methodology is prohibited under the rules of the World Trade Organization.  But when Vietnam and China joined the WTO, they each agreed that the use of NME methodology would be permitted against them for an additional 15 years.  For China that’s until the end of 2016, and for Vietnam it’s until the end of 2018.

Vietnam, however, is also a negotiating party to the Trans-Pacific Partnership, a 12-member free trade agreement that may be concluded this year.  Last week, Vietnam’s Ambassador to the United States implied that Vietnam was seeking to have its NME status revoked as part of those negotiations.  As reported at Inside U.S. Trade ($):

“I think on the question of the market economy status, we can do it together. Vietnam has been doing it with other countries and I think about three dozen or something countries have recognized that,” said Pham Quang Vinh, Vietnam’s ambassador in Washington. Vinh added that he hopes “when we reach a conclusion of the TPP, then everything [with regard to this issue will] be resolved.”

It certainly makes sense that Vietnam would hope to negotiate the end of NME treatment.  As the Ambassador explained, they’ve already secured market economy status in other countries.  The TPP is a natural vehicle for getting a similar commitment from the United States .  But there’s no guarantee they’re going to get it:

But his counterpart, U.S. Ambassador to Vietnam Ted Osius, seem to tamp down those expectations. Speaking at the same event, Osius indicated that while TPP might put Hanoi on strong footing to make the economic reforms necessary to become a market economy, a change in its status would be likely be further down the road. Both officials spoke at March 24 event at the Center for Strategic and International Studies (CSIS).

Osius said that the U.S. Commerce Department process to determine a country’s market economy status is non-political, and that Vietnam still needs to fulfill certain requirements, such as having a convertible currency.

The U.S. official’s characterization is telling.  The U.S. government has consistently argued that NME status is a factual question.  That is, if Vietnam or China meets the criteria under U.S. law for market economy treatment, their NME status will be revoked accordingly. 

Tim Cook’s Moral Confusion—and Intolerance

Few recent battles have seized the nation’s moral compass quite as emotionally as the one going on in Indiana right now, pitting defenders of religious liberty against opponents of discrimination based on sexual orientation. But Apple’s chief executive Tim Cook brings the moral confusion surrounding the battle to a head this morning with his op-ed in the Washington Post. Lumping together both legitimate and illegitimate “religious freedom restoration acts,” he writes, “they go against the very principles our nation was founded on.”

Really? Let’s see if that claim stands up. We find those principles in the nation’s founding document, the Declaration of Independence. And Cook himself invokes them: freedom and equality. Rightly understood, they hold that we’re all born free, with equal rights to remain free. That means—to cut to the chase—that we may associate with anyone who wishes to associate with us; but we are equally free to decline to associate with others, for any reason, good or bad, or no reason at all. That right to discriminate is the very essence of freedom. That’s why people came to this country, to escape forced associations—religious, economic, political, or otherwise.

Cook turns those principles on their head. He says religious freedom bills “rationalize injustice” by, for example, allowing a baker to decline to bake a cake for a same-sex wedding. He would compel the baker to accept that request, by force of law. That’s the very opposite of the freedom of association—the right to be left alone—that the nation was founded on.

Colorado Pushes Back against Oklahoma and Nebraska Marijuana Suit

In 2012, the people of Colorado voted to legalize marijuana through a state constitutional amendment, which went into effect in January of 2014.  Two of Colorado’s neighbors, Nebraska and Oklahoma, subsequently filed a lawsuit urging the U.S. Supreme Court to prohibit the state of Colorado from constructing a regulatory regime for the marijuana industry.  Last Friday, Colorado filed its response.

The Nebraska/Oklahoma argument: because the federal government, through the Controlled Substances Act, has banned marijuana, states are not allowed to contradict that ban by creating a regulatory framework for legalization.  Further, Colorado’s official regulation of recreational marijuana imposes a nuisance burden on surrounding states due to an alleged increase in drug trafficking.  While Nebraska and Oklahoma disclaim any intent to force Colorado to “re-criminalize” marijuana, the suit argues that Colorado’s official efforts to regulate the legal marijuana industry bring the state into conflict with federal and international drug laws.

Colorado’s response: there is no conflict.  Federal marijuana prohibition is still in effect, and the decision not to prioritize enforcement in states that legalize marijuana came from the federal government, not Colorado.  If Nebraska and Oklahoma object to the manner in which the federal government is discharging its law enforcement duties in Colorado, they should be suing the federal government.  Colorado’s regulation of the marijuana industry is within its prerogatives under the CSA. As to the nuisance claim, Colorado argues that mere policy differences between states that don’t directly injure the sovereignty of other states are not actionable nuisances.

The legal basis for the lawsuit has been questionable from the beginning, with legal commentators both challenging its merits and pointing out the irony in two of America’s “reddest” states taking a legal posture that overruns state sovereignty in favor of federal power.

And, of course, if prohibition states are concerned with the costs, they could always legalize and regulate marijuana themselves and spare their justice systems the immense costs of prohibition.  

While some notable conservatives appear to be coming around in favor of a federalist experiment on drug legalization, it is a testament to the unfortunate power of the drug war that two state governments that routinely invoke the merits of federalism would abandon it in favor of federal prohibition.  As discussed previously, federalism would hardly be the only cherished principle to be left in the drug war’s wake.

If Poor Nations Want Economic Convergence and Capital Accumulation, They Need Good Policy

There’s a “convergence” theory in economics that suggests, over time, that “poor nations should catch up with rich nations.”

But in the real world, that seems to be the exception rather than the rule.

There’s an interesting and informative article at the St. Louis Federal Reserve Bank which explores this theory. It asks why most low-income and middle-income nations are not “converging” with countries from the developed world.

…only a few countries have been able to catch up with the high per capita income levels of the developed world and stay there. By American living standards (as representative of the developed world), most developing countries since 1960 have remained or been “trapped” at a constant low-income level relative to the U.S. This “low- or middle-income trap” phenomenon raises concern about the validity of the neoclassical growth theory, which predicts global economic convergence. Specifically, the Solow growth model suggests that income levels in poor economies will grow relatively faster than developed nations and eventually converge or catch up to these economies through capital accumulation… But, with just a few exceptions, that is not happening.

Here’s a chart showing examples of nations that are – and aren’t – converging with the United States.

Disagreement over Chile’s National School Choice Program

A week ago, the Atlanta Journal Constitution published an on-line op-ed critiquing Chile’s nationwide public-and-private school choice program. In a letter to the editor, I objected to several of the op-ed’s central claims. The authors responded, and the AJC has now published the entire exchange. A follow-up is warranted, which I offer here:

Comment on the Gaete, Jones response to my critique:

Their response consists chiefly of “moving the goalposts”—changing the issue under debate rather than responding to the critique of the original point. The first claim in their original op-ed to which I objected was that “there is no clear evidence that [Chilean] students have significantly improved their performance on standardized tests.” In contradiction of this claim I cited the study “Achievement Growth” by top education economists and political scientists from Harvard and Stanford Universities. That study discovered that Chile is one of the fastest-improving nations in the world on international tests such as PISA and TIMSS—which were specifically designed to allow the observation of national trends over time. It is hard to conceive of clearer evidence that Chilean students “have significantly improved their performance”, contrary to the claim of Gaete and Jones.

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