Topic: Constitution, the Law, and the Courts

Is the Stormy Daniels Payoff an Impeachable Offense?

As you’ve no doubt heard by now, on Tuesday, Michael Cohen, President Trump’s erstwhile “fixer,” pled guilty to, among other charges, making an illegal campaign contribution in the form of a $130,000 “hush money” payment to adult film star Stormy Daniels. That payment was made, Cohen affirmed, “at the direction of a candidate for federal office”—Donald J. Trump—“for the principal purpose of influencing the election.” 

If that’s true, would Trump’s participation in that scheme rise to the level of “high Crimes and Misdemeanors”? Maybe: you can argue it both ways, so I will.

The case against the Stormy payoff as impeachable offense would characterize it as the sort of de minimis legal violation impeachment isn’t concerned with. Just as you don’t need a crime to have an impeachable offense, the commission of a crime doesn’t automatically provide grounds for impeachment. Murder is a crime and an impeachable offense—even according to Rudy Giuliani—but you wouldn’t impeach a president for, say, importing crocodile feet in opaque containers or misappropriating the likeness of “Smokey Bear,” because those offenses don’t speak to his fitness for high office.

Impeachment opponents can argue that the criminal offense alleged here depends on a contested application of the Federal Election Campaign Act. In the 2012 prosecution of John Edwards, three former FEC commissioners testified that third-party payments to Edwards’ pregnant mistress would not have been considered campaign contributions.

The president’s defenders can also—though this may be awkward for some—compare Trump’s troubles to Bill Clinton’s two decades ago: unlawful acts committed as part of a scheme to conceal a private sexual affair. Though many of them sang a different tune in the ‘90s, they can appeal to the dominant historical consensus that impeaching Clinton for that was like wheeling out the proverbial hundred-ton gun to blast a squirrel.

The case that the Stormy payoff is an impeachable offense depends on a different, but equally plausible framing. In Trump’s case, the unlawful act quite plausibly affected the outcome of the 2016 election. Cohen made the payment less than two weeks before Election Day, in what turned out to be an extraordinarily close contest. As Laurence Tribe and Joshua Matz note, the Framers repeatedly identified “corrupt acquisition of the presidency as a paradigm case for impeachment.” One of the Framers’ key concerns was the possibility of a candidate bribing the Electors—an imperfect analogy to what’s alleged in Trump’s case. But impeachment advocates might also point to our most recent impeachment case: Judge G. Thomas Porteous, removed by the Senate in 2010, in part for corrupt acquisition of his post. Article IV of the Porteous impeachment charged the judge with lying to the Senate about his past in order to secure confirmation to the federal bench, thus “depriv[ing] the United States Senate and the public of information that would have had a material impact on his confirmation.”

Jerry Ford went too far when he said that an impeachable offense is “whatever a majority of the House considers it to be at a given moment in history.” Still, the scope of the impeachment power is much broader than is commonly recognized. It covers what Hamilton described as “those offenses which proceed from the misconduct of public men, or, in other words, from the abuse or violation of some public trust.” As the legal scholar Frank Bowman sums up: “‘high crimes and misdemeanors’ are serious offenses that either endanger the political order or demonstrate an official’s manifest unfitness to continue in office.” That leaves ample room for argument and interpretation. Moreover, while legal analysis may be able to tell you when impeachment is permissible in a given case, it can’t tell you whether it’s a good idea.

The fact that Michael Cohen has potentially implicated Donald Trump in a felony violation of federal election law has increased the president’s chances of facing a serious impeachment effort after November. But if impeachment is about guarding the public from officials dangerously unfit to wield power, “broke the law to pay off a mistress” has to be pretty far down the list behind, say, “makes off the cuff threats of nuclear annihilation.” That any impeachment inquiry will likely spend more time parsing the intricacies of federal election law than examining the president’s public conduct is yet another reason to rue the “Overcriminalization of Impeachment.”

The Warren Plan and the History of Corporate Chartering

Sen. Elizabeth Warren’s proposal for drastic changes to corporate governance, which I wrote about in this space last week, continues to draw thoughtful responses from commentators. Colleague Ryan Bourne notes that one study “found that German firms were 27 percent less valuable to their shareholders” because of the workers-on-boards co-determination laws Warren would have us emulate. Moreover, the value given up was not merely transferred to the firms’ workforces but was in part dissipated through inefficiency. At National Review, Samuel Hammond discusses how co-determination undermines the overall dynamism of a national economy (for example, by discouraging the transfer of capital to risky, high-value new enterprises) and also notes some of the problems with making “stakeholder” value a subject of fiduciary duty for investors.  

Now NYU lawprof and Cato adjunct scholar Richard A. Epstein, a leading libertarian voice on law, tackles the Warren plan in a piece for the Hoover Institution’s Defining Ideas series. Epstein’s piece is worth reading in its entirety for his analysis of (among other topics) the “stakeholder” mystique, the efficiency-friendly role of share buybacks and executive incentive stock, and the constitutional infirmities of the overall Warren scheme (citing the unconstitutional-conditions doctrine), as well as his warning that large-scale capital flight from the U.S. could ensue if investors mistrust the whims of a new federal charter regulator.

In the passage I want to highlight, however, Epstein makes a point often overlooked in other critiques. Writing on the popular and populist Left these days often romanticizes the idea that business charters should be revocable by some central authority for misconduct (“corporate death penalty”), although it is often not spelled out whether the assets of a giant bank or oil or pharmaceutical company hit by scandal should be taken into the public sector by some sort of confiscatory state authority, allowed to revert to shareholders, or perhaps transferred to a successor entity that would maintain the same brands and facilities and headquarters as before (leaving the question of what exactly is being accomplished by charter revocation). Epstein takes the broad historical view: 

…Warren wholly misunderstands the historical role and constitutional position of corporate charters. The last thing that any country needs for economic growth is a situation in which government officials decide which firms receive charters subject to what conditions. Does she really think that some public bureaucrat should have the power to refuse to issue Apple a corporate charter unless it puts community members or union members on its board, makes gifts to the Sierra Club, or adopts minimum minority hiring set-asides? And what should be done when thousands of firms balk at these conditions? Can they go to court, or does the federal board run the corporation directly?

Lest anyone forget, the great 19th-century corporate reform was the passage of general incorporation laws that allowed any group of individuals to form a corporation, with its attendant benefit of limited liability, so long as they met certain minimum conditions relating to their capital contributions, their ability to sue and be sued, and their board structures. The new legal regime ushered in sustained economic expansion by knocking out the political favoritism that had previously given some businesses corporate charters that gave them a huge edge over direct competitors denied similar authorization. It would be unsurpassed folly to re-open the doors to these abuses today.

Indeed, a key point about general incorporation laws was that they were egalitarian: you could launch an incorporated venture even if you were obscure, new in town, or out of favor with political influentials. Supporters of plans like Warren’s should be asked whether they really want some combination of political actors – very possibly appointees of Donald Trump or another President like him – to gain power to revoke Google’s or Amazon’s or Facebook’s charter to continue doing business unless the management agrees to cut a deal, perhaps involving private understandings with officialdom, to stave off such a penalty. 

Results from the 2018 Libertarianism vs. Conservatism Post-Debate Survey

As part of a yearly summer tradition, the Heritage Foundation and Cato Institute co-host a debate in which interns at both think tanks debate whether conservatism or libertarianism is a better ideology. Following this year’s debate, the Cato Institute conducted a post-debate survey of attendees to ask who they thought won the debate and what they believe about a variety of public policy and philosophical issues. The post-debate survey offers a unique opportunity to examine how young leaders in the conservative and libertarian movements approach deep philosophical questions that may be inaccessible to a general audience.

2018 Intern Debate Survey

Despite agreement on domestic economic issues and free trade, the survey finds striking differences between conservative and libertarian  attitudes about Donald Trump, immigration, transgender pronouns, government’s response to opioid addiction, police, defense spending and national security, domestic surveillance, and religion. The survey also went further than just asking about policy and used Jordan Peterson’s 12 principles for a 21st century conservatism to examine the underlying philosophical differences between libertarian and conservative millennials. 

Windy City’s Food-Truck Regulations Are Full of Hot Air

May a city both require certain business owners to forego their Fourth Amendment rights and also enforce regulations specifically designed to advantage competing businesses in a related industry? That’s the question to be answered by the Illinois Supreme Court in LMP Services v. Chicago. The City of Chicago enacted an ordinance requiring all food trucks to install GPS trackers, in part as a means of settling disputes as to whether these vicious vehicular vittle vendors are violating yet another ordinance by operating within 200 feet of any brick-and-mortar restaurant. The lower state courts have allowed these new rules to take effect, so Cato—along with the National Food Trucks Association and the Illinois Food Truck Owners Association—has filed a brief urging the state high court to use a different constitutional recipe.

In upholding these ordinances, the intermediate state appellate court ruled that the mandatory GPS placement was not actually a “search” under the Fourth Amendment, because there was no physical intrusion by the government and as a consequence of food trucks’ operating under a revocable license. Both rationales are mistaken. While the government hired a private company to install the GPS trackers, it has long been established that the government can’t avoid constitutional scrutiny by contracting out the state-directed action.

And regardless of whether the food truck industry is subject to business licensing, the GPS requirement cannot validly fall under the judicially created exception to the warrant requirement for administrative searches of closely regulated industries. The ordinance is both overly expansive—violating more privacy rights than is necessary—and its failure to limit official discretion. Indeed, it’s hard to conceive of a warrantless-search regime that does less to place proper restraints on official discretion than a mandate that food-truck owners constantly reveal their precise location as a condition of doing business.

The lower court’s ruling not only failed to appreciate these sensible limitations, it essentially gave the government carte blanche to condition the issuance of licenses—any licenses—on applicants’ agreeing to waive their Fourth Amendment rights. Carried to its logical conclusion, such judicial indulgence would permit the government to condition issuing driver’s licenses on the installation of GPS trackers, or on standing consent to random searches of the owner’s vehicle.

As for the other ordinance—the so-called 200-Foot Rule—the lower court failed to find any violation of equal protection while ignoring ample empirical evidence that this was simple economic favoritism. The city’s own admitted rationale for the rule amounts to pure protectionism for brick-and-mortar restaurants. A city is simply not allowed to advantage restaurants over food trucks—or, say, Mexican-food joints over Thai-food eateries—because it prefers the former to thrive and the latter to struggle.

Finally, even if there was a valid government interest here—maintaining a healthy economy full of legacy restaurants—empirical evidence shows that the rule not only fails to advance this purpose, but actually undermines it. Restrictions on food trucks depress the City’s potential tax revenue while having no demonstrable impact on traditional storefront businesses. If Chicago truly wants to advance the interests of its residents, abandoning these overly burdensome restrictions would be a delicious start.

The Debasement of Human Rights

Back in May I invited Aaron Rhodes to come over from his home in Hamburg, Germany, to talk about his new book from Encounter Books, The Debasement of Human Rights: How Politics Sabotage the Ideal of Freedom. The Wall Street Journal’s James Taranto was in town to interview Rhodes, which he did after our forum. The interview appears in today’s Journal. It’s a tour de force, pulling together the many threads of a huge, complex argument and presenting them in a short, readable format.

If you’ve ever wondered what’s wrong with the UN Human Rights establishment but have never quite been able to put your finger precisely on what it is, this interview will answer many of your questions—and the book will spell out the details. The origins of a world in which dictators sit of the UN Human Rights Council, immune from criticism while condemning free societies, can be found in progressivism’s conflation of natural and positive law, which Franklin Roosevelt mastered with his “Four Freedoms” and his wife Eleanor helped institute in 1948 in the UN Universal Declaration of Human Rights. With that foundation, equating rights to liberty with rights to social security, rest and leisure, periodic holidays with pay, job training, and more, it was only a matter of time before tyrants would find their immunity in their purported provision of such services, invariably at the expense of liberty, leading to the debasement of real rights.

During the Reagan administration I served for a time as director of policy for the State Department’s Bureau of Human Rights and Humanitarian Affairs where I saw human rights hypocrisy up close. During the annual meetings in 1987 in Geneva of what was then the UN Commission on Human Rights, for example, we introduced a resolution condemning Cuba’s human rights record, only to be met with objections from European nations, effectively excusing those abuses by pointing to Cuba’s health care record. With the end of the Cold War, which tended to sharpen the difference between these two kinds of rights, the distinction has become increasingly blurred, as Rhodes explains, drawing on his experience as director of the International Helsinki Federation from 1993 to 2007 and his present position as president of the Forum for Religious Freedom – Europe.

“Can anything be done?” Taranto asks at the end of the interview. “I wish that the Trump administration would talk about human rights once in a while,” Rhodes answers. “They should talk about freedom.” 

Sen. Warren’s Confiscatory Corporate Governance Proposals

Sen. Elizabeth Warren of Massachusetts has introduced legislation that would radically overhaul corporate governance in America, requiring that the largest (over $1 billion) companies obtain revocable charters from the federal government to do business, instituting rules reminiscent of German-style co-determination under which workers would be entitled to at least 40% representation on boards of directors, placing directors under a fiduciary obligation to serve “stakeholders” as opposed to owners as currently, prohibiting political expenditures by corporations unless approved by at least 75 percent of directors and shareholders, and restricting directors and officers from reselling incentive stock within five years. 

“Let’s be clear, none of these are new ideas,” writes leading corporate governance expert Stephen Bainbridge of UCLA. “They are either academic utopian schemes or failed European governance models. There are very good reasons none of these dusty relics of eons of progressive corporate thought have made it into law.” His series of posts picking it apart in detail begins here.

Our friend James Copland of the Manhattan Institute points out that Sen. Warren’s proposal would pull down three main pillars of U.S. corporate governance: shareholder primacy, director independence, and charter federalism. Each has long been a subject of extensive research and debate, and the alternatives, European or otherwise, simply do not have as good a track record of supporting a dynamic economy that generates world-beating enterprises across a wide range of business sectors (as opposed to, say, the kind of specialty manufacturing at which Germany does well.) Worker board representation, in particular, shapes incentives in ways that discourage important forms of risk-taking and reallocation of capital across sectors. 

All of which helps explain why few startups would willingly accept Warren-style rules in drafting their by-laws. But there’s a big additional problem in applying the rules, as Warren would, to existing companies that have already been capitalized under different assumptions: it would in effect confiscate at a stroke a large share of stockholder value, transferring it to some combination of worker and “community” interests. This gigantic expropriation, of course, might be a Pyrrhic victory for many workers and retirees whose 401(k) values would take a huge hit in exchange for new rights of uncertain value to install board members. Already, some early enthusiasts for the Warren plan are treating the collapse of shareholder value as a feature rather than a bug, arguing that it would reduce wealth inequality. 

Whether or not it would accomplish that, it would test the restraints the U.S. Constitution places on the taking of property without compensation. Alas, the courts have been inconsistent about the extent to which they will recognize as takings, and provide a remedy for, legislative enactments that strip away much of the value of financial instruments or other property rights without expropriating fully 100% of their value.  Cato over the years has been very much part of that legal debate, arguing for a strong interpretation of the Fifth Amendment’s language: “nor shall private property be taken for public use, without just compensation.” 

Confiscatory proposals like Warren’s make it more important than ever that we be prepared to defend this element of liberty in the courts. 

Legislators Can Commit Property Rights Violations, Too

The Constitution’s Taking Clause provides that government cannot conscript property to its own purposes without compensating the rightful owner for the value of what is taken. The most direct application of this principle is in cases of eminent domain, where the government takes title to a piece of land for some public purpose—or sometimes a not-so-public purpose. But the takings principle applies to other impositions on property rights as well, such as regulations that render a previously expensive piece of property valueless. Courts recognize that in these cases there is likewise an infringement on property rights in the name of the public good, and that such a public good should come at the expense of the public as a whole, not some particularly unlucky land owner.

The Supreme Court has repeatedly recognized the potential for these abuses and, in a series of cases beginning with 1987’s Nollan v. California Coastal Commission, it has demanded that permit requirements and development exactions bear some relationship to the actual impacts of the project. If one wishes to build an apartment building, its reasonable enough to say one should contribute to the public expense that creates when the municipality needs to build a new road to serve it. Requiring a landowner to pay for an unrelated project many miles away for the privilege of making perfectly legal improvements to their own property should be out of bounds.

But lower courts friendlier to acts of state extortion believe they have found a loophole: Nollan and its progeny dealt with specific ad hoc permitting requirements by local planning agencies. Where the legislature imposes the exaction as part of a general ordinance, however, these courts claim Nollan doesn’t apply. What principle of aggregation renders an act that is unconstitutional when applied to a specific person constitutional when applied to the public generally?

Such was the fate of William Dabbs. Anne Arundel County, Maryland required him to pay an “impact fee” to build a house on a piece of property he owned. Ostensibly, this fee was to compensate for the costs of new development on “public schools, transportation, and public safety,” but a brief glace at the ordinance demonstrates that this pretext is illusory: rather than charging, say, per unit of new development, the fee is based on the size of the house. A family living in a 3,000-square-foot house does not, on average, use more public schooling or transportation than a family in a 2,000-square-foot house (if anything, arguably the opposite), but under the ordinance it is charged more. This therefore represents an attempt to raise general revenue on the backs of disfavored individuals—precisely the evil the Takings Clause is supposed to prevent.

Dabbs has filed a petition asking the Supreme Court to hear his case and affirm that takings performed by ordinance are no less offensive to the Constitution than takings performed ad hoc. Cato, joined by the Reason Foundation, has filed a brief encouraging the Court to take the case.

New development is often opposed by a coalition of vested interests, be they governments like Anne Arundel County who demand their cut or environmental activists who live in perpetual fear of paving paradise to put up a parking lot. Thankfully, the Constitution recognizes that property rights are central to the liberty of citizens and should not be enjoyed at the sufferance of ninnying NIMBYsim.

The Supreme Court should take up Dabbs v. Anne Arundel County and reaffirm that these protections cannot be circumvented by legislative gamesmanship.