Unauthorized, Unregulated, Foolproof, Lawless Government Coercion

The title comes from a November 2015 opinion by Judge Posner of the Seventh Circuit in a case between the website backpage.com and Thomas Dart, Sheriff of Cook County, Illinois (the county that includes Chicago, and is the second most-populous county in the country after Los Angeles County).  Judge Posner's decision has been hailed as a landmark vindication of the First Amendment.  The problem is that the government has dozens of ways to avoid judicial review of its "unauthorized, unregulated, foolproof and lawless coercion." 

Backpage is known principally for running ads for people euphemistically known as "sex workers" (although backpage also runs numerous other types of ads).  In June 2015 Sheriff Dart sent letters to Visa and MasterCard, from which the following is the key quote:

As the Sheriff of Cook County, a father and a caring citizen, I write to request that your institution immediately cease and desist from allowing your credit cards to be used to place ads on websites like Back- page.com. . . .   [I]t has become increasingly indefensible for any corporation to continue to willfully play a central role in an industry that reaps its cash from the victimization of women and girls across the world.  

Notice that although Dart peppered his missive with legalistic sounding law enforcement talk ("cease and desist," "your institution," "willfully play a central role"), there was nothing illegal about Visa or MasterCard using their networks to facilitate payments to backpage.  (Dart did throw in a reference to the federal money laundering statute -- something he had no jurisdiction to enforce, and which was in any event inapplicable, at least in any reasonable reading of the ridiculously vague statute.)  Nevertheless, after receiving Dart's letter, Visa and MasterCard cut backpage off completely from their payments systems -- even as to the many activities of backpage that had nothing to do with the sex trade.  And now, it is Sheriff Dart who has been enjoined from taking any "actions, formal or informal, to coerce or threaten credit card companies, processors, financial institutions, or other third parties with sanctions intended to ban credit card or other financial services from being provided to Backpage.com."  

It's a good result in one case.  But of course there are hundreds of cases of the government engaging in unauthorized, lawless coercion and then maneuvering to get itself in a position where there can and will be no judicial review.  Consider, for example, the subject of so-called "corporate inversions" -- U.S. companies selling themselves to foreign entities in order to get out from under the only-in-the-U.S. rule that U.S.-based companies must pay (highest in the world) U.S. corporate income tax on income earned abroad.  Nobody can point to anything in the U.S. tax code that makes one of these inversions illegal -- it's just how the tax code works.  Indeed, I'm not the only one who thinks this.  Perhaps you may recall the interview conducted by CNBC's Jim Cramer with Treasury Secretary Jack Lew back in 2014.  Lew was complaining about the wave of corporate inversions, and Cramer asked him why the IRS did not use rulemaking to address that.  Lew responded: "We do not believe we have the authority to address this inversion question through administrative action. If we did, we would be doing more."

Yup.  Well, that was 2014.  Then Pfizer announced its $160 billion deal with Ireland-based Allergan, and suddenly the IRS came up with a rule to block the deal.  (Essentially, the new rule says that the IRS going forward will take the position that a deal like the Pfizer-Allergan deal will still subject the combined entity to U.S. corporate income tax on worldwide income.)  A few days later, Pfizer and Allergan called off their deal.  They weren't willing to subject their shareholders to the risk of having to pay a few tens of billions of dollars of extra income tax to the IRS and then fight for decades to try to get it back.  I guess there won't be any judicial review there.  Who says the government needs actual legal authority to get its way with its subjects?

For lots more examples of the government improperly attempting to coerce the citizenry, check out this article from Sarah Jeong in the Atlantic.  Jeong discusses at length the program of the Obama Justice Department known as Operation Choke Point.  The basic idea of that operation is to identify businesses designated as "high risk" and then lean on financial institutions not to do business with them.  But what is "high risk"?  Are these businesses legal, or illegal?  A list of businesses said to be "high risk" was then put out by the FDIC.  And when you go through the list, you find that some are illegal, some are just unsavory, and others are things that the government just doesn't like.  Mixed in with "ponzi schemes" and "pyramid-type schemes," we have everything from "ammunition sales" to "coin dealers" to "firearms sales" to  "tobacco sales" and on and on and on.  And, as Jeong points out, in a world of no cash and of highly-regulated financial institutions dependent for their every move on government acquiescence, all it takes is one word from the regulator to get anyone the government does not like cut off from the financial system.  Political dissidents, anyone?