October 9, 2006 1:30PM

Amnesty? What Amnesty?

Here's an interesting and under-remarked, cert. petition involving separation of powers claims pending before the Court: Stolt-Nielsen S.A. v. USA. Stolt presents a minor key in a major symphony: the ongoing debate over the boundaries of judicial control over the executive branch. Here, the Department of Justice claims courts lack the power to enjoin the Department of Justice from breaching immunity agreements entered with corporate defendants in the cross-hairs of federal antitrust investigators.

A bit of background: The federal government operates an amnesty program, called the Corporate Leniency Program, under which DOJ covenants not to prosecute firms that cooperate with antitrust investigators, so long as a series of conditions are met.

In 2002, Stolt-Nielsen contacted the DOJ Antitrust Division with an offer to cooperate in the investigation of collusive trading practices between Stolt and two competitors. DOJ executed a conditional amnesty agreement, prompting Stolt to turn over a series of incriminating documents to DOJ attorneys, waiving, in the process, attorney-client privilege. Four months after entering the agreement, DOJ notified Stolt it was suspending the government’s obligations under the agreement because Stolt had misrepresented the termination date of its own anticompetitive practices. In 2004, the DOJ announced its intention to indict Stolt. Stolt sued to enjoin, contending it deserved an evidentiary hearing on the DOJ's claims prior to indictment.
The government argues that its leniency agreements do not offer immunity from indictment. As the Chamber of Commerce’s amicus brief in support of Stolt’s petition points out, that’s rather different from the representations DOJ has used to induce corporate cooperation:

The [DOJ Antitrust] Division defines “leniency” as “not charging such a firm criminally for the activity being reported” . . . The Antitrust Division’s Grand Jury Practice Manual expressly states that the term of art “lenient treatment” “means not indicting such a firm.” . . . . Representatives of the Antitrust Division have described the Leniency Policy as “a complete pass from criminal prosecution or total immunity for a company and its cooperating employees,” and have observed that “ . . . the grant of amnesty is certain and is not subject to the exercise of prosecutorial discretion.”

Even so, Stolt’s case faces a number of barriers: (1) the settled rule that due process does not require a pre-indictment hearing on breaches of plea agreements entered by natural persons, coupled with (2) the fact that courts (wrongly, in my view) have refused to extend Fifth Amendment protection to a corporate entity’s interests against self-incrimination. For more, see this pro-government article on the case.

It’s questionable, though, whether ordinary plea agreements are an exact analogy to indictment of a corporate entity, since indictment can literally destroy companies as a going concern: witness Arthur Andersen, which melted down upon indictment, not conviction. As such, the corporate interests at stake here arguably far greater, from a due process standpoint, than a natural person’s interests at the similar stage of proceedings.

Even so, I hold out little hope for Supreme Court attention: It has already rejected two motions to stay the Third Circuit’s order. Moreover, judicial tolerance for misrepresentation in the context of prosecutorial bargaining is, unfortunately, both wide and deep—and, alas, likely to be wider and deeper in the corporate white collar context. Cf. Donald G. Gifford, Meaningful Reform of Plea Bargaining: The Control of Prosecutorial Discretion, 1983 U. Ill. L. Rev. 37 (In the criminal plea bargain, “[d]efendants assume they are receiving substantial sentence reductions in exchange for their guilty pleas. This benefit is often more illusory than real. . . . The prosecutor's recommendations, which appear attractive compared to maximum possible sentences, may in fact only correspond with the court's typical sentencing practices. . . . [L]ike parties victimized by unconscionable contracts, [defendants] do not understand the terms of the bargain.”).

October 9, 2006 1:27PM

Was Lt. Cmdr. Charles Swift Too Zealous?

One of the nagging questions about the use of military tribunals has been the role of military defense counsel. If military lawyers report to Defense Secretary Donald Rumsfeld and President Bush (and they do), how can they zealously defend the legal rights of a person that the President has already declared an "enemy combatant" who must be punished for war crimes? Isn't that a classic conflict of interest? The response has been that the defense counsel for these tribunals would not be under any "command influence."

Lt. Cmdr. Charles Swift was among the first group of military lawyers that were assigned to represent prisoners facing war crimes charges at Guantanamo. As it happened, Swift's client, Salim Hamdan, was selected to be the first prisoner that would go before the new military tribunals.

Swift promptly challenged the legality of the commission system--and took the case all the way to the Supreme Court and prevailed. Two weeks after his high court victory, the Navy informed Swift that under its "up-or-out" promotion system, he must leave the Navy.

It is a bit peculiar for the Navy not to retain and promote Swift. After all, Swift was recently named by the National Law Journal as among the nation's top 100 lawyers. When the tribunals were first proposed, the argument was "we have to do this because otherwise Johnnie Cochran will enter the picture and muck everything up." Now it seems the feds can't have Charlie Swifts either.

Lt. Cmdr. Swift participated in a debate here at Cato on military tribunals last March. To view that debate, go here. Swift's co-counsel in the Hamdan case was Georgetown University law professor Neal Katyal. And Prof. Katyal summarized his critique of the tribunal system in this article (pdf) in the Cato Supreme Court Review.

October 9, 2006 12:25PM

A not‐​at‐​all‐​Disguised Attempt to…

New Jersey officials have filed a motion for dismissal in that state's school voucher lawsuit. The suit is seeking the creation of a voucher program for children in "failing" schools on the grounds that New Jersey has not delivered the quality education promised in its constitution.

The state attorney general's office calls this proposed remedy a "thinly disguised attempt to have the court legislate a school voucher system."

Nonsense. It is a not-at-all-disguised attempt to do that, and it should fail for that reason. A more plausible remedy that plaintiffs could ask for would be financial restitution for the wasted years of "education" to which their children have already been subjected by the state school monopoly.

If a child had been through five years of public schooling and not learned to read proficiently, the family should receive five years worth of the per-pupil cost of that education so that they could obtain effective educational services outside the government sector. The difference between this and the voucher program sought is that 1) it would apply only to the plaintiffs in the case (but there's no reason they couldn't seek class action status), and 2) it would not create an on-going program, just a one-time payment.

The plaintiffs' lawyers might think that's insufficient because they want to create an ongoing program right away, but their approach violates the separation of powers. It's also unnecessary. If the plaintiffs win this suit and the remedy is the one described above, the legislature will act quickly -- very, very quickly -- to create some sort of new educational program to forestall similar suits all over the state.

And what sort of reform might they adopt? Well, the most popular school choice reform by far in New Jersey is the education tax credit -- 74% of the public supported such programs in a recent poll.

If NJ created a large-scale version of Arizona's or Pennsylvania's schoalrship donation tax credit programs it could easily provide real public and private school choice to every low-income family in the state. While they're at it, they could add a personal use tax credit for low and middle-income families with tax liabilities, ensuring universal access to schools of choice. And that, incidentally, is the only way the state will have any hope of living up to its constitutional promises on education.

October 8, 2006 6:45PM

Medicaid & the Free‐​Market Movement

This weekend, something pretty important happened, at least with regard to how the free-market movement approaches Medicaid and medical care for the needy. 

Saturday was the final day of the State Policy Network's 14th annual meeting in Milwaukee. The State Policy Network provides guidance to 48 state-focused free-market think tanks in 42 states. Part of the annual meeting was a panel on Medicaid, the joint federal-state program originally created to provide medical care to the truly needy. 

Of course, Medicaid has swelled well beyond that goal. The program now covers 52 million people even though there are only 36 million U.S. residents below the poverty line. Medicaid also destroys private markets for health insurance and medical care, and induces low-income Americans to become dependent on government. For example, policymakers universally acknowledge that a welfare check induces dependence on government. Yet average Medicaid benefits for the program's least expensive enrollees (the non-elderly) are worth twice as much as the average welfare check. Moreover, there are 10 times as many people who receive Medicaid benefits.

For years, several market-oriented groups have advanced Medicaid reforms that, in the name of empowering Medicaid enrollees or improving their quality of care, would expand enrollment and make Medicaid's problems even worse. Principally, the reforms involve introducing health savings accounts and vouchers into Medicaid. Those groups have fed the rest of the free-market movement a steady diet of those bad ideas, often with some success. A few states have even experimented with those reforms.

On Saturday, I sat on a panel with one of the leading advocates of those proposals. We each presented our side to an audience comprised of the leaders of dozens of state-focused think tanks. I think one audience member probably spoke for many in the room when he said he felt conflicted. My paraphrase: "Part of me wants to improve Medicaid, but that would increase enrollment. And part of me wants to blow it up, but that's a tough sell politically." 

He's right. That is a tough political sell. But it would be substantially easier were the free-market movement to abandon the fool's errand of trying to improve the program and instead educate the public about the full range of harms Medicaid causes:

  • A per-capita tax burden that is currently over $1,100 and growing
  • An annual deadweight economic loss of some $70 billion
  • Crowd-out of private efforts to provide medical care for the poor, including private insurance, private charity, and self-help
  • Increased dependence on government
  • Higher prices for private health coverage and medical care, which makes Medicaid dependence more likely
  • Lower-quality care than is provided through private markets
  • The indignity of states having to beg Washington for permission to spend their own money as they wish

(For what it's worth, free-market think tanks should acknowledge that Medicaid does a lot of good: it provides medical care to many who desperately need it. Yet that fact will hardly carry the day, considering that researchers have difficulty finding where Medicaid has any positive overall effect on health.)

Only after we prepare the ground will we be able to achieve serious reform, which should emphasize three things: block grants, block grants, and block grants. Replacing Medicaid with a system of block grants was a component of the 1996 welfare reform law until President Clinton insisted on its removal. Nowadays, no politicians are talking about block-granting Medicaid, largely because free-market groups have abandoned the field. (Until we get block grants, state-level reforms will not make much difference, though free-market groups should oppose those that make Medicaid more attractive and support those that make it less attractive.)

In short, this emperor has no clothes. If the free-market movement does not carry that banner, no one will. 

This weekend's SPN meeting should be the start of a debate within the movement over how to approach Medicaid. (More details on my approach can be found here.) Thanks to Tracie Sharp of SPN and Mary Katherine Stout of the Texas Public Policy Foundation for getting the ball rolling.

October 8, 2006 6:38PM

Who Shall Live? Who Shall Die?

DETROIT–Over at Cafe Hayek, Russell Roberts looks at the ethics of distributing flu vaccines amid an artificial shortage and does a good job of cutting to the core question: why the hell is there a shortage? Roberts lays the blame at the feet of politicians — particularly state attorneys general — who have interfered with the market's ability to make vaccines (like shoes, oranges, etc.) plentiful.

The ethical problems created by the artificial shortage of vaccines are like those created by the artificial shortage of transplantable organs (also a creature of government interference).  Once the shortage exists, and the state controls distribution, there's really no good way — no "most ethical" way — to decide who should receive them. In other words, there's no good way to decide who shall live and who shall die. If it's ethics you're interested in, try this: Don't interfere with the market's ability to supply vaccines and transplantable organs.

But as long as we've got these artificial shortages, my two cents is this: the politicians should be last in line.

October 8, 2006 6:36PM

Electing Women

A new study says that women are most likely to be elected to office in New York City, San Francisco, and Los Angeles. "At the other end are Gadsden, Ala., and Paducah and Bowling Green, Ky."

Well, I grew up 25 miles from Paducah, and I wondered about that. Paducah had a woman mayor — no, Dolly McNutt was not a character in a Donald Duck comic book. That's something that neither Los Angeles nor New York has had. In 1983, Kentucky elected Martha Layne Collins governor, only the third woman in American history to be elected governor without succeeding her husband. Neither New York nor California has yet had a woman governor. Collins carried McCracken County, home of Paducah, by a large margin over baseball star and future senator Jim Bunning. She also heavily carried Warren County, where Bowling Green is the county seat.

It sounds reasonable that, as the Washington Post reports,

Districts that elect women, according to [study coauthor Dennis] Simon, tend to be "upscale — more degrees, more professionals, urban." Those less likely, he added, are "more rural, lower-income and more traditional."

But I'm not sure. Aside from the above comparisons of Kentucky, New York, and California, I note that the first woman elected to the U.S. Senate who did not succeed her husband in Congress was Nancy Landon Kassebaum of Kansas. Kansas was also the first state where a woman defeated an incumbent governor, and it was the second state to have two female senators. Simon may be largely right, but it's not a slam-dunk.

October 8, 2006 6:33PM

Andrew Sullivan in Multimedia

Andrew Sullivan gave a cogent and provocative speech this week at Cato based on his new book The Conservative Soul: How We Lost It, How to Get It Back. Prodded by a critique from David Brooks, he sharpened and clarified his argument during the question-and-answer session. Together, Sullivan and Brooks produced the kind of vigorous and intelligent discussion that think tanks strive for. You can catch the debate in RealAudio, RealVideo, or MP3 here.

Or if you prefer shorter bites on YouTube, you can find the first part of Andrew's opening remarks here, the second part here, a closing back-and-forth with Brooks on conservatism, limited government, and the failure of the 1994 Republican Revolution here, and a short colloquy on same-sex marriage here. Finally, watch for the whole thing to appear on C-SPAN's Book TV soon.