Thursday, February 19, 2004

The Prevalence of Lies and the Martha Stewart Case

The Prevalence of Lies and the Martha Stewart Case
Nothing but Lies
Nothing but Lies?

[Update: Professors Bainbridge and Yin and TalkLeft have all posted on the allegedly damaging testimony of Stewart's "good friend" Pasternak who Stewart had told about the "tip" from her broker that Waksal was selling or trying to sell his stock. Gee, was there really any serious doubt that Stewart acted on a "tip" from her broker? If she had thought that her action was a criminal offense that could put her into prison for many years - she would hardly have told her "good friend" about it, would she? Rather, she was "showing off" about the advantages of having a good, informed broker.

The whole issue of the trial in the eyes of Law Pundit is that Stewart's actions were not insider trading under the existing laws so that the feds set her up for the obstruction of justice charge because she did not cooperate with their investigation of Waksal - where, of course, she was in fact trying to be the kind of "good friend" we all admire and respect and was being non-cooperative in order not to help the feds put Waksal in prison. Good for you, Martha.

The bad guys in this case are still unquestionably the overzealous government prosecutors who are not charging her with the crime of insider trading which she "allegedly" committed - prosecution of which would surely never lead to a conviction, but are charging her for lying to those same investigators when they were out to get her and her friend Waksal for the insider trading charges - in the case of Waksal, successfully.

People get tips from their brokers all the time - that is why they have brokers, otherwise everyone can trade directly today without the use of middle men. This is not the kind of insider trading that the insider trading law was meant to prohibit. Insider information was meant to apply to information that people had as the direct result of their position in a company - e.g. a company president buying or selling his shares due to knowledge only he could have about an impending deal that he was about to sign or not to sign, or, as in the case of Waksal, insider information regarding the government's decision on a drug. Nevertheless, it is a questionable law in many aspects, for company officers always have access to information that others outside the company do not have. Taken to its extreme, the concept of insider trading would prohibit any company executives - or even employees - from purchasing or selling company shares since someone working at IBM for example, simply has more access to information about the company than someone who does not work there and thus has an advantage in buying or selling stock.

Basically, most stocks are bought on the basis of "information" of some kind and most stocks are owned by people who have some knowledge about the company, from whatever source. Most are closer rather than farther from that source.

IN any case, if your broker finds out that others are selling their stock in a company you have stocks in, you also want your broker to tell you that fact if he has knowledge of it. You or the broker need not know why others are selling - in fact, much of the skill of making money on the market is knowing early that others are selling or buying - regardless of the reason. It is always amazing to see that good or bad news about a company is often already manifested in the stock price PRIOR to the official release of information, e.g. company annual reports. In other words, information about the economic state of a company is continuously being issued, in many ways, and in many forms.

The only reason that Martha came under the gun of the prosecutors was her failure to be cooperative with the government in getting Waksal. That is why she is on trial. It is vindictive justice. We see the same thing happening in Enron - executives being carted away in handcuffs - what is the point of this barbaric government behavior - have the authorities seen too many Westerns on TV? Handcuffs are for dangerous violent persons, not for white-collar circumstantial crimes. The whole image is terrible for the entire justice system. It is terrible for America. Land of the free? Model for the world? Hardly. Forget that myth. "Prison Justice" and the "binding of the hands of prisoners" (just look at ancient Egyptian hieroglyphs BM ) has been known since antiquity - there are better, more modern and humane solutions.]

Justice in law has something to do with our sense of proportionality. The punishment must fit the crime. For allegedly lying to federal investigators and thus allegedly committing the crime of "obstruction of justice", Martha Stewart is facing a maximum of 35 years in prison.

Cornell Study shows the Prevalence of Lies

A study at Cornell indicates that federal prosecutors can gleefully rub their hands at their prospects in the future and potentially fill the jails to bursting with new "criminals". An article entitled When Do We Tell the Most Lies? reports the study by Jeff Hancock of 30 Cornell University students who were first told to keep a communications diary for a week (e-mails, instant messages, face-to-face communication and phone calls). Afterwards, they were asked to identify lies found in any of these communications.

The results showed the following lies admitted to by the students in their communications:

14 cent of E-Mails contained lies, 21 percent of Instant Messages, 27 percent of Face-to-Face Interactions and a whopping 37 percent of Phone Calls.

"Hancock found that when people knew the conversation was being recorded in any way--and could be replayed or re-read at a later date--they were much less likely to lie. This has far-reaching implications...."

You can say that again. The Law Pundit is absolutely stunned that any of the figures are above 10 percent. It is amazing that there is that much lying even at a topnotch college. Just imagine then what it is like elsewhere in the real world.

Lies as a "Criminal" Offense - What Next ?

Just be careful when talking to federal investigators, where any lie can potentially put you behind bars for a LONG time.

The unfortunate lesson of the "obstruction of justice cases" is that any lawyer advising clients in any similar case has only one piece of advice to any client, guilty or not guilty. "Say NOTHING". Is this the kind of society we really want to have?

Why are the DA's not going after the Dangerous Criminals

The Stewart case is hard to understand when one sees that many people committing serious, violent dangerous crimes are

1) either not getting caught at all - it is easier for authorities to go after normal citizens rather than dangerous criminals,


2) the real criminals are getting off scot-free - because law enforcement is concentrating on easier to catch white-collar infractions,


3) the really dangerous lawbreakers are back on the streets again after serving minimal sentences - because the jails are full anyway and once people are put away behind bars, who really cares about them - i.e. the entire rehabilitation system is a farce.

Along this same line of prosecutorial witch-hunting against celebrities, no one doubts that Michael Jackson is eccentric as a great entertainer - and perhaps he is a bit whacko in addition. But he is surely not dangerous - unless we keep pushing him in the Muslim direction, in which case he may start playing Pied Piper to Mekka. Frankly, the Law Pundit just does not see Michael Jackson as a great criminal danger to society so what is the point of this entire prosecution? Do the prosecutors have nothing better to do than push questionable circus cases such as this one?

They already failed miserably on the OJ Simpson case where about the only people who had any reasonable doubt about the actual guilt of the accused were the jury. Here, in the opposite case, where very few really reasonably believe Jocko to be a dangerous sex offender, the DA's office will probably fail again. What the prosecutors seem not to understand is that they are greatly undermining public respect for the law everywhere.

A legal system which lets brutal "real" criminals run around scot-free to potentially endanger the civilian population - already armed to the teeth with weapons and building alarm systems - but instead goes after more-or-less harmless celebrities such as Jackson or Stewart as criminals for cases of "circumstantial" crimes is not looking forward to a rosy future, by any means. The amount of respect they get will be less and less, not more. For example, the Law Pundit reads in the newspapers that people are being forcibly pulled out of their cars when stopped in traffic - in part being badly injured in the process - and the cars are being stolen by lawless criminals in California. Why have these criminals not been found and put out of commission for the duration? Where are the resources of the criminal law being focused? The Law Pundit is sure that they are being focused incorrectly - but are they EVER focused correctly?

In my days in college, the authorities went after harmless marijuana plant growers in their residences and let the big fish pushing the hard drugs such as heroin go free, because it was easy to arrest and convict harmless young people and very tough to fight organized crime. What percentage of police force manpower is simply devoted to traffic control? - i.e. keeping tabs on John Q. Citizen. Generally, it is easier to give out a citation for a traffic violation rather than to bring in violent criminals. The Law Pundit realizes that traffic control is an essential part of law enforcement, but where is the proportionality to dangerous crimes and dangerous criminals?

The Law Pundit urges - again - that everyone read Herbert Packer's Limits of the Criminal Sanction. Not everything should be the realm of criminal prosecution. When we look at cases such as those of Martha Stewart or Michael Jackson, do these cases in any significant way further the classic justifications of the criminal sanction: i.e. either specific or general deterrence, retribution (i.e. punishment) or rehabilitation. No, these cases go back to the primitive justification of "vengeance" and "humiliation" - and our criminal law should be beyond that.

Media Law Newsletter from David Price Just Out

Media Law Newsletter from David Price Just Out
Media Law News

Media Law Newsletter from David Price

David Price (Solicitors & Advocates - Specialists in Media Law) has/have just turned out the new edition of their Media Law Newsletter.

They write:

"This is our monthly newsletter containing reports and comment on media law. We aim to cover all cases in the High Court and Court of Appeal as well as decisions of the European Court of Human Rights on freedom of expression and relevant adjudications of the Press Complaints Commission and the Broadcasting Standards Commission. Occasionally we may refrain from reporting or commenting on cases involving our own clients."

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