Government Spending Is Just A Fact Of Nature. Get Used To It, Peasants!

For a picture window view into the official Washington mindset, check out the editorial from the Washington Post from this past Friday titled "Republican presidential candidates' reckless anti-tax crusade." 

It seems that the majority of the Republican presidential candidates have signed on to the no-tax pledge of activist Grover Norquist (to "oppose and veto any and all efforts to increase taxes").  Something must be done to stop this foolishness!  So the Washington Post marshals all of its vast intellectual brain power to come up with the best argument it can for the other side.  Here goes:

[The Republican candidates are] kneeling before Mr. Norquist’s make-believe anti-tax theology.  Why do we say make-believe? Here are some facts for the truth-tellers. Federal spending averaged 20.1 percent of gross domestic product from 1965 to 2014. With the baby boomer generation retiring, the population aging and health costs rising, the Congressional Budget Office projects that government spending will grow to 25.3 percent of GDP by 2040.

That's right -- our opponents' views are "make-believe."   Nyah, nyah!  The "facts" are that government spending must grow by 5+ points of GDP.  These are the facts of nature!  The CBO has projected it!  It's what is absolutely necessary to provide the "things Americans expect from government."  And you thought that Congress and the President had to agree to that and actually vote to spend the money?  You have just proved yourself to be a peasant!

Meanwhile Post columnist George Will comes back with a column (in National Review Online) the next day identifying just a few of the ridiculous things that government pays for while nobody is looking.  The title is "How American Government Became Encrusted with Subsidies."  Will particularly focuses on subsidies for whaling museums ($9 million per year) and mohair ($6 million per year). 

You probably never knew of the federal funding of museums commemorating America’s long-gone whaling industry. The funding existed for nearly nine years, until fiscal 2011, because almost no one knew about it. A mohair subsidy continues six decades after it was deemed a military necessity in the context of the Cold War. The subsidy survives because its beneficiaries are too clever to call attention to it by proclaiming it necessary, which of course it isn’t. To understand these two matters is to understand how American government functions.

Will's column is fine so far as it goes, but really these issues are only illustrative and not even the tip of the iceberg in the big picture.  Dare we mention some of the things that should be gone from the federal government down to the last dollar before anyone even considers a tax increase?  How about: Department of Education, Department of Commerce, Department of Energy (except for nuclear weapons program), most of Department of Labor, agriculture subsidies, all crony capitalism, green energy subsidies, all kinds of insurance programs (flood, crop, pension, terrorism, most of bank deposit).  Ex-Im Bank should be a complete no-brainer.  How about NASA -- it's fun, but I've never understood why hard-working taxpayers have to pay for it.  Getting rid of Obamacare will save a bundle.  There's hundreds of billions to lop off before we get to anything that ought to be remotely controversial.

I guess I've marked myself as a peasant in the eyes of the Washington Post and all the really, really smart people down there in the capital.

The Regulatory State And The "Main Project" Of Government

A couple of weeks ago economist John Cochrane of the Hoover Institution had a very important blog post that I have just now seen.  It is titled "Rule of Law in the Regulatory State."   The post records and expands on a presentation that Cochrane made at a Hoover panel discussion in July celebrating the 800th anniversary of the Magna Carta.

Cochrane's post is a thorough treatment of what I have called the "main project" of the government and all of its agencies, which is to grow the government and expand the power of the agencies.  They may say that they are just regulating banks or drug companies or polluters or whomever in the public interest, but whatever actual regulatory thing they may be doing at any given moment is always secondary and subsidiary to the main project of growing the agency and the government and expanding their powers.

Cochrane asks a very important question:  Do you ever notice a major regulated entity publicly criticizing or attacking its government regulator, even for the most outrageous of conduct?  As examples, do you ever notice a large pharmaceutical company publicly criticizing the FDA -- even, for example, when the FDA instigates criminal prosecution for what is the clearly constitutionally protected free speech known as "off-label marketing"?  Or do you ever notice a big bank publicly criticizing one of its regulators or the Justice Department -- even when the regulators and prosecutors initiate one after another completely phony shakedown prosecution for things like "robosigning" of mortgage documents or "insufficient controls" over money laundering or supposedly "defrauding" Fannie and Freddie?  Or do you ever notice a large securities firm publicly criticizing the SEC -- even when the SEC regularly initiates phony non-insider insider trading enforcement actions in the unconstitutional rigged forum of its own administrative law judges?  Or do you ever notice a large mining company publicly criticizing the EPA -- even when needed permits are unjustifiably held up for years?  And so on and on for many more examples.

And of course the answer is that with extremely limited exceptions the large regulated companies in these and many other industries do not and cannot publicly criticize the regulators because the regulators hold sway over innumerable discretionary approvals and actions that the regulated companies need to operate.  The regulators are supposed to be disinterested, neutral experts just looking out for the best interest of the public.  But what they care about far and away above everything else is that they should never be criticized publicly.  If you want their go-ahead on any one of a hundred things you want to do, the price is that you must support their political agenda, at the top of which is that the agency and its power must grow.  And if you make the mistake of criticizing them publicly, they have infinite ability to harm or destroy your business -- the FDA can delay the approval of your next three drugs for years; the bank regulators can disapprove your next merger or design a "stress test" that you cannot pass; the EPA can shut down one of your mines or never let you open one in which you have invested millions; etc., etc., etc.

This rule of law always has been in danger. But today, the danger is not the tyranny of kings, which motivated the Magna Carta. It is not the tyranny of the majority, which motivated the bill of rights. The threat to freedom and rule of law today comes from the regulatory state. The power of the regulatory state has grown tremendously, and without many of the checks and balances of actual law. We can await ever greater expansion of its political misuse, or we recognize the danger ahead of time and build those checks and balances now. . . . 
We’re headed for an economic system in which many industries have a handful of large, cartelized businesses— think 6 big banks, 5 big health insurance companies, 4 big energy companies, and so on. Sure, they are protected from competition. But the price of protection is that the businesses support the regulator and administration politically, and does their bidding. If the government wants them to hire, or build factory in unprofitable place, they do it. The benefit of cooperation is a good living and a quiet life. The cost of stepping out of line is personal and business ruin, meted out frequently.  
Cochrane then goes through a litany of no fewer than thirteen instances where individuals and industries are systematically coerced to do the political bidding of regulators due to some combination of vague or endless (Dodd-Frank, Obamacare) statutes and regulations and unbounded discretion given to the regulators.  The examples range from bank regulation (Cochrane cites the "stress tests" -- that can be engineered to destroy any bank in regulatory disfavor -- and the "robosigning" shakedowns); the SEC (he cites insider trading actions brought before SEC ALJs); the FDA (approvals held up for as long as 20 years for the politically disfavored); campaign finance (the Scott Walker "John Doe" investigations); Education (the retaliatory investigation against Laura Kipnis for criticizing the DOE's made-up policies for how colleges should deal with allegations of sexual abuse); and many more.  There is this quote from EPA Region 6 head Al Armendaris caught on tape discussing how to deal with some oil companies who were pushing back against an EPA initiative:

The Romans used to conquer little villages in the Mediterranean. They’d go into a little Turkish town somewhere, they’d find the first five guys they saw and they would crucify them. And then you know that town was really easy to manage for the next few years. . . .  we do have some pretty effective enforcement tools. Compliance can get very high, very, very quickly.

A remarkable thing about all of this is the extent to which these highly discretionary and therefore lawless regulatory regimes are extremely recent.  This is not how the American government has traditionally operated.  Sure some bank regulation existed going back to before World War II; but the real explosion is just in the last five years with Dodd-Frank.  The EPA only goes back to the 70s, and their gigantic mission expansion, including the currently-attempted takeover of the entire energy sector of the economy, is again in the last few years.  Obamacare only dates from 2009.  Most so-called "money laundering" regulation only started in the 70s, with a big expansion in the Patriot Act of 2001.  And so forth.

The only section of Cochrane's post that I find disappointing is the last one, dealing with what to do about this situation.  Given the fundamental threat to our democracy and constitutional government posed by the metastasizing administrative bureaucracies, some fundamental changes are in order.  Cochrane has some good suggestions, like giving the people more rights to appeal and to challenge regulatory decisions in court.  But I'm not sure that would make much difference.  Here are my proposals:

• The courts, and particularly the Supreme Court, need to do their fundamental duty and enforce the number one provisions of the Constitution, which are that only the Congress has legislative powers and only the courts have judicial powers, and all legislative powers and judicial powers currently residing in administrative agencies are unconstitutional and done.  And only the President has executive powers, so all executive powers residing in the so-called "independent" agencies (like SEC, FTC, FCC -- where the President cannot fire people) are unconstitutional and done.
• And then Congress needs to shrink the U.S. Code by about 80%.

Being the optimist that I am, I actually think that we may see some progress on these fronts within my remaining life time.  But of course the agencies will use all of their powers to prevent any push back from ever gaining traction.

 

The Latest Scam From The New York Times -- Part II

There it was, splayed across fully half the front page of the print edition of the Sunday New York Times, and continuing onto a full interior page as well -- another one of those big feature expose Pulitzer-Prize-bait articles that the Times is so famous for.   I previously covered one of these things back in May ("The Latest Scam From The New York Times").  That one involved the supposedly horrific working conditions in the New York nail salon industry.  It was exposed by the Manhattan Contrarian as a total hoax.  This one is titled "A Year After Ferguson, Housing Segregation Defies Tools to Erase It."  Byline is John Eligon.

So is it just another scam?  Absolutely.

The thesis of this article is that African Americans are prevented from achieving success in America because they lack access to "good jobs, high-performing schools, and low-crime neighborhoods."  The reason for that lack of access is "barriers," including discriminatory housing and lending practices, that keep black people out of "prosperous, mostly white communities."  Benevolent government programs bravely seek to break down the "barriers" but the government programs are frustrated at every turn by evil communities and landlords that use every trick and device to forcefully steer the blacks into the segregated neighborhoods:

Questions about whether minorities have access to good jobs, high-performing schools and low-crime neighborhoods have been fiercely debated. And for many, one question informs all those others: Can the barriers that keep blacks out of prosperous, mostly white communities be toppled?

This, coming from the New York Times, located at 40th Street and 8th Avenue in Manhattan.  Really, is it possible to believe this narrative and work in Manhattan?  Only if you sit completely confined in your office blinded by your Ivy League indoctrination and willfully refuse ever to go out and walk around the streets.

So Mr. Eligon, if you were ever to leave the Times' office in Manhattan and go out and walk around, what would you observe?  You would see that Manhattan is far and away the wealthiest county in the United States, with by far the highest concentration of high-paying jobs in any one small place.  And you will see that the New Yorkers have gone to truly extraordinary lengths to assure that poor people, most black, have full access to living in Manhattan, including locations in or adjacent to some of the most prosperous precincts on this wealthy island.  Thus low-income housing has been built on the Upper West Side (including next door to Lincoln Center), in West Midtown, in Chelsea, along miles of the Lower East Side waterfront, on Upper Broadway right next to Columbia University, along a big stretch of Park Avenue, and so forth.

Probably the most expensive and wealthy of all of Manhattan's sub-neighborhoods is the approximately 1.5 mile stretch of Park Avenue running from the East 60s to about 95th Street.  Apartments in the old-line co-op buildings lining that stretch go for multiple thousands of dollars per square foot, easily $5 million for anything that could house a family.  And then, at 99th Street and Park, no more than 0.2 miles away, we have the Carver Houses:

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So, Mr. Eligon, is that close enough to meet your definition of "access" to prosperous communities and good jobs?  If it isn't, nothing is.

But of course Manhattan's vast estates of low income projects have done nothing to transform the lives of their poor and black inhabitants.  The opposite.  These are poverty traps that only make it harder, if not impossible, for the poor to rise up, and it doesn't make the slightest bit of difference how close they may be located to the wealthiest sections.  For our huge investment in subsidized housing immediately adjacent to the wealthiest neighborhoods in the country, what we have gotten is the highest income inequality in the country and the embarrassment of a poverty rate well above the national average in the very wealthiest county.  Mr. Eligon's entire thesis is completely refuted by the evidence right under his nose, and he seems totally unaware of it.

Mr. Eligon embellishes his article with the stories of numerous struggling African Americans, each living in a segregated area around St. Louis, and each according to his account trapped in a poor existence by the "barriers" erected around them.  But one after the other the stories are so full of holes that they are insulting to the intelligence of the reader.  I'll consider just one, the story of one Crystal Wade:

With violent crime common in her neighborhood, Ms. Wade said she looked over her shoulder when she walked in the house. Her rambunctious and curious 2-year-old daughter, Crystian, once rambled toward the window when gunshots popped outside. Ms. Wade and her boyfriend, Bryant Goston, 26, also have a 7-month-old daughter, Ava. Mr. Goston’s 7-year-old daughter from a previous relationship, Tamia, stays with them occasionally.  Five days a week, Ms. Wade takes a 30-minute drive with her best friend to their jobs at a Verizon call center in St. Charles County, where they work eight-hour shifts. She clocks 40 hours a week, but her roughly $10-an-hour salary has not been enough to afford housing in the area where she works.

Can we just parse this a bit?  Ms. Wade struggles to make ends meet on her $10 per hour job, which would be about $20,000 for full time work for the entire year.  Well, how about this Goston guy?  He's the "boyfriend."  He has at least three kids by two different women, but hasn't bothered to marry either of them.  Does he recognize any responsibility for contributing to the family?  Somehow Eligon doesn't even ask the question.  Really?  If Goston could trouble himself to get one of those $10 per hour jobs, that would make the family income $40,000.  A couple of paragraphs down, Eligon reports the median family income for the St. Louis area as $35,000.  So all Goston needs to do is join the family and get a job -- literally any job -- and instantly they are out of poverty and indeed above the median income.  Then they can walk into any neighborhood where other people around the median income live -- and most of those people are white -- and get themselves a place.  Remember, housing discrimination is illegal!

Of course, if Mr. Goston got a job and joined the family, that would undermine Ms. Wade's eligibility for her housing subsidy.  A fair inference is that Goston and Wade prefer the housing subsidy, and the very inexpensive "bad" neighborhood that it comes with, to the hard work needed to move up in life.  OK.  That's just one more example of how segregation, like income inequality, is caused and worsened by the very well-intentioned government policies that were supposed to alleviate it.  And anyway, in what sense is acceptance of a housing subsidy a "barrier" imposed on Goston/Wade by somebody else?  

The Weekend In Phony Prosecutions -- Part III

The third big piece of news this week in the area of Phony Prosecutions came on Friday from Southern District of New York Judge Paul Engelmayer.  The good judge enjoined -- yes, enjoined -- the FDA from enforcing its so-called "off-label marketing" restrictions against a company called Amarin and its drug Vascepa.  Here is a copy of Judge Engelmayer's decision.    The injunction is preliminary, so the case will continue.  However, Judge Engelmayer took the time to write up a very careful 71 page decision.  This one may actually throw the FDA back on its heels.

I have previously covered the subject of the FDA's so-called "off-label marketing" restrictions here.  That article, back in 2012, reported on the Second Circuit's then-new decision reversing on First Amendment grounds the criminal conviction of a guy named Caronia for promoting a drug for uses that had not been specifically approved by the FDA.  Yes, the poor guy had to suffer years in criminal prosecution hell and a conviction in order to vindicate First Amendment rights that should have been obvious to everybody.  My 2012 article also linked to an article I wrote way back in 1999, called "Top Ten Federal Government Efforts To Suppress Free Speech."  The 1999 article gave the number one ranking to the FDA's restrictions on off-label marketing of drugs that had been approved as safe and effective.  Here are some of my prescient words:

No agency can top the FDA when it comes to imposing bureaucratic control over free speech, even at the expense of human life. The FDA believes it has an absolute veto power over all speech concerning anything consumed by human beings. . . .   On February 16, 1999, after years of litigation, Judge Royce Lamberth of the U.S. District Court of the District of Columbia enjoined [a] particular [FDA] rule as contrary to the First Amendment, and ordered that the FDA could not prevent manufacturers from circulating articles just because they described new uses of a drug that the FDA had not yet approved.  But Judge Lamberth's decision is just one small victory against the FDA's massive efforts at speech suppression. Even as a few formerly suppressed articles begin circulating, the FDA wages an aggressive, multi-front campaign to regulate and squash prescription drug advertising. . . .  The agency may lose in court in the end, but the FDA is unlikely to learn from yet another defeat in court and does not appear willing to curtail what it views as the righteous fight to suppress free speech. Do the bureaucrats at the FDA have any idea what the United States is all about?

We are now sixteen years past that article, and the FDA just keeps fighting pitched battle after pitched battle to preserve its bureaucratic privileges.  Amarin even went through the trouble of doing a big double-blind study to support the effectiveness of its drug for uses that had previously not been part of the initial FDA approval.  But the FDA declined to "allow" Amarin to promote the results of the study.  As in all matters that relate to off-label marketing, the FDA's bureaucratic position had nothing to do with safety or effectiveness of the drug, both of which had already been established.  The FDA has a convoluted legal theory under its statute to claim the authority to prohibit the making of true statements about a drug whose safety and effectiveness have been established.  Essentially, they call off-label marketing "misbranding" of the drug.  Huh?  There's no understanding it, other than that they view defending and enhancing their bureaucratic prerogatives as far more important than things like mere lives of patients or free speech.

With no legal leg to stand on, it is truly remarkable how long the FDA can keep this game going.  Sadly, none of the big pharma companies are willing to challenge it.  They all just cave.  For that reason the decisions knocking down the FDA are few and far between, but meanwhile the FDA shakes down one pharma company after the next for what should be First Amendment-protected speech.  Judge Englemayer's opinion lists some of the recent settlements (including criminal guilty pleas) and fines paid by the big guys in obeisance to the FDA: $1 billion paid, plus a criminal guilty plea, by GSK in 2012 for alleged "misbranding" relating to Paxil and Wellbutrin; $500 million paid by Abbott Labs in 2012 for alleged "misbranding" relating to Depakote; $375 million paid by Allergan in 2010 for alleged "misbranding" relating to Botox; and so forth.  My 2012 article lists multiple others, including a settlement by Pfizer for over $1 billion.  None of the big players will take a case to trial.  Nor would any of them have brought the injunctive action that Amarin brought here.  They have too much at stake, and the FDA can kill them in a thousand other ways on a thousand other issues if the company is perceived to have "dissed" the regulator.  So it took one of the tiny players in the business (Amarin's 2014 sales were just $54 million) to pursue this case.

So how big is this decision?  In my opinion, big.  The FDA is going to lose in the end.  Having written this big opinion, there's no way that Judge Engelmayer is going to change his mind after a trial on the merits for the permanent injunction.  The Second Circuit?  They're the people who reversed in Caronia.

But I wouldn't expect the big guys to start major off-label advertising campaigns any time soon.  They're just too pusillanimous.  Not that I blame them.  It's going to take a series of victories by little guys following in Amarin's footsteps to slowly open the floodgates.  Really, it's disgusting that that's how our government works.  Keep this in mind next time you find yourself thinking that government regulators are just neutral, apolitical experts doing their best to protect the public.

The Weekend In Phony Prosecutions -- Part II

This one isn't actually that new, but just came to my attention this weekend due to an article in the New York Law Journal that appeared on August 4.  The precipitating event:  the conviction of baseball player Barry Bonds was reversed by the Ninth Circuit Court of Appeals, en banc.  The per curiam opinion of the full court actually came down in April.

You undoubtedly know who Barry Bonds is -- a famous baseball player, holder of the Major League record for most career home runs -- and you probably have the impression that he was convicted for illegal drug use.  But that would be wrong.  Actually, he was convicted for "obstruction of justice."  Whatever you may think about whether Bonds used drugs and whether or not that was OK, the circumstances of this conviction are rather outrageous.  The reversal came some twelve years  after Bonds first got caught up in the maw of the criminal justice system.

First, a little background.   Prosecutors in the Northern District of California began investigating allegedly illegal drug use in Major League Baseball as long ago as 2003, focusing on certain players whose records seemed too good to be true.  In 2003 they sought Bonds' testimony before a grand jury, and to secure it, they granted him immunity.  So from the get-go there was not going to be a prosecution of Bonds for the underlying wrong, if indeed it was a wrong.  They gave up on that in order to chase the alleged purveyors of the drugs.

But Bonds thought he could trust the prosecutors who had granted him immunity.  Big mistake!  Multiple years after Bonds' grand jury testimony, in late 2007, he was indicted for a collection of charges (with four thousand federal crimes to choose from, they never indict on just one charge), all of which arose out of his grand jury testimony and not out of alleged illegal drug use.  There were four charges of perjury for allegedly false statements to the grand jury, and one charge of obstruction of justice, supposedly based on some seven answers given by Bonds in his grand jury testimony.  Then the case didn't go to trial for over three years, due to pre-trial skirmishing that included an appeal by the prosecutors.  At trial in 2011, the jury hung on all the perjury charges, and convicted on the one obstruction charge, although finding only one of the seven challenged answers to be "obstructive."  The trial judge denied post-trial motions, and a panel of the Ninth Circuit affirmed the conviction.  And then finally we come to the en banc reversal in 2015. 

So what was Bonds convicted of?  Here is the statute, 15 U.S.C. Section 1503:

Whoever . . . corruptly or by threats or force, or by any threatening letter or communication, influences, obstructs, or impedes, or endeavors to influence, obstruct, or impede, the due administration of justice, shall be punished as provided in subsection (b).

And here is the one question and answer given by Bonds before the grand jury that the trial jury found to be "obstructive."  The bold portion is what was alleged to constitute the "obstruction":

Q: Did Greg[, your trainer,] ever give you anything that required a syringe to inject yourself with?

A: I’ve only had one doctor touch me. And that’s my only personal doctor. Greg, like I said, we don’t get into each others’ personal lives. We’re friends, but I don’t—we don’t sit around and talk baseball, because he knows I don’t want— don’t come to my house talking baseball. If you want to come to my house and talk about fishing, some other stuff, we’ll be good friends. You come around talking about baseball, you go on. I don’t talk about his business. You know what I mean?

Q: Right.

 A: That's what keeps our friendship.  You know, I am sorry, but that—you know, that—I was a celebrity child, not just in baseball by my own instincts. I became a celebrity child with a famous father.  I just don’t get into other people’s business because of my father’s situation, you see.

And that, my friends, is what constitutes a federal crime, at least in the eyes of these prosecutors -- not to mention the trial judge and the initial panel of the Ninth Circuit.  Could it be that maybe Bonds didn't quite hear the question clearly?  Personally, I read that and the only conclusion I can come to is that the prosecutors intended all along to charge Bonds with something -- anything -- and their grant of "immunity" was a scam from the outset and wasn't worth the paper it was printed on.  (The court's opinion doesn't reveal what the other six allegedly obstructive answers were, but given that the jury exonerated Bonds on all of them, one would have to conclude that they were even flimsier as a basis for a charge than the one that led to the conviction.)

The court's decision is a very brief per curiam statement, followed by multiple concurring opinions by several judges setting forth somewhat different bases for the ruling.  From the concurring opinion of Judge Kozinski:

Stretched to its limits, section 1503 poses a significant hazard for everyone involved in our system of justice, because so much of what the adversary process calls for could be construed as obstruction. Did a tort plaintiff file a complaint seeking damages far in excess of what the jury ultimately awards? That could be viewed as corruptly endeavoring to “influence . . . the due administration of justice” by seeking to recover more than the claim deserves.  So could any of the following behaviors that make up the bread and butter of litigation: filing an answer that denies liability for conduct that is ultimately adjudged wrongful or malicious; unsuccessfully filing (or opposing) a motion to dismiss or for summary judgment; seeking a continuance in order to inflict delay on the opposing party; frivolously taking an appeal or petitioning for certiorari—the list is endless.

And he goes on for quite a while from there.  To put it another way, if the prosecutors are going to be using the "obstruction" statute the way they used it here, you can't ever say anything safely to a prosecutor.  Grant of immunity?  Worthless.   One arguably non-responsive answer and we will tie up your life in the criminal justice system for the next twelve years.

Grants of immunity are typically used by prosecutors to overcome a witness's assertions of Fifth Amendment rights and compel testimony.  The theory is that with a grant of immunity you no longer have a legitimate fear of prosecution and can be forced to testify.  But with cases like this out there, is that theory really valid any more?

The Weekend In Phony Prosecutions -- Part I

There's lots of news this weekend in the world of phony federal prosecutions, so I'm going to break it into three separate posts.

For Part I, the government last week finally filed its cert petition in the case of U.S. v. Newman and Chiasson.  Here is a pdf of the cert petition.  U.S. v. Newman and Chiasson is the case where non-insiders were convicted of "insider trading" in one of U.S. Attorney Preet Bharara's one-time unbroken string of 80+ "insider trading" convictions.  Problem was, lots of the defendants, including Newman and Chiasson, were not insiders at all.  Most of those non-insider defendants had pled guilty and thus couldn't appeal, but Messrs. Newman and Chiasson took their cases to trial and then appealed to the Second Circuit Court of Appeals.  Last December the Court of Appeals reversed those convictions, and further directed that Newman's and Chiasson's cases were not to be retried because what they were accused of was not a crime.

You are probably asking, how does it come about that the government only files its cert petition at the end of July when the reversal was way back in December?  Easy -- if you're the government, you can play out the string for a long time.  First they asked the Second Circuit for a rehearing en banc (denied in April), and then they used up all their allowed time to file for cert, and then they even got a further extension from Justice Ginsburg.  Meanwhile a few dozen wrongly convicted people (nobody knows the exact number) languish in limbo.  Do they recognize any obligation to do the right thing by these people -- a question I asked back in December when the Second Circuit first reversed the Newman/Chiasson convictions?  Absolutely not.  Hey, this is the government.  

Indeed, it seems that the whole idea is to keep up for as long as possible the pretense that they have 80 good convictions out there and no bad ones.  I previously predicted that the Supremes are not going to give this one the time of day, and if cert gets denied, it will probably be sometime this fall.  On the other hand, just a few weeks ago, on July 6, in a case called Salman, a panel of the Ninth Circuit declined to follow the Second Circuit's Newman/Chiasson opinion, giving the government the opening to argue that the Supremes should take the case due to a circuit split.  Oh, the Ninth Circuit's Salman opinion was written by none other than Southern District of New York Judge Rakoff, sitting by designation.  And here's a little something that I find rather extremely fishy.  The Salman case was only argued on June 9.  The decision came out on July 6 -- rather an extraordinarily short time for a Court of Appeals to turn a decision on an important issue like this.  But it still would not have been time for the government to claim a circuit split in its cert petition -- except for that extra extension granted by Justice Ginsburg.  Could the government possibly have been tipped off on what was going on in the Ninth Circuit?  Just one more indication that you are not on a level playing field when you are up against the government.  See also, IRS.  

Anyway, read the government's cert petition, and you will see that it is all about the hubris that they can create a world of perfect fairness if only they can make up the criminal law as they go along, and nothing about whether people should be able to discern from the actual laws passed by Congress what is a crime and what is not. 

If allowed to stand, the court of appeals’ novel personal-benefit standard will restrict enforcement of Section 10(b)’s ban on insider trading, create uncertainty in the financial community about the boundaries of legitimate conduct, and produce disparate results in different circuits in the application of the federal securities laws. . . .  [T]he decision below unjustifiably impedes the government’s ability to restrain and punish tippers and tippees engaging in culpable behavior. 

I like that part about restricting enforcement of "Section 10(b)'s ban on insider trading."  Try reading Section 10(b) for yourself and see if you can find that.  All I can find is a ban on "any manipulative or deceptive device or contrivance."  Needless to say, the government doesn't quote the actual language of Section 10(b) anywhere.  I'll bet not one in one hundred people given the text of the Exchange Act could correctly identify those quoted words as the language that supposedly prohibits insider trading, let alone so-called "insider trading" by non-insiders.  

And the other good part is that supposedly it is the Second Circuit's decision that will "create an uncertainty in the financial community about the boundaries of legitimate conduct."  As far as I know -- and I am in this business -- prior to the Second Circuit's Newman opinion, nobody had a clue what the "boundaries of legitimate conduct" may be, and the Second Circuit's opinion has only made things a little better.  Even with the Second Circuit's opinion (assuming it survives this review) you are still in a position where the language of the statute gives you no clue what is legal and what is not, and you need to read multiple court decisions and lots of tea leaves to try to guess how you can hope to conduct your life without getting thrown in the clink.