Results matching “"martin act"”

Comp-trolling for Power - PointOfLaw Forum


Vinny Sidhu
Legal Intern, Manhattan Institute's Center for Legal Policy

It appears as if the 'Sheriff of Wall Street' is back with both six-shooters fully loaded. In true Wyatt Earp fashion, former governor and current NYC comptroller candidate Eliot Spitzer is planning to utilize his entire cadre of resources to strike against the renegade corporate marauders, euphemistically known as the "U.S. Chamber of Commerce." The Washington Examiner has published an op-ed by the Manhattan Institute's and Point of Law's own Isaac Gorodetski detailing Mr. Spitzer's plan to transform this typically administrative position through use of "aggressive" pension investing:

The comptroller serves as the principal auditor of city agencies and acts as the managing trustee and investment adviser of the five pension funds investing city workers' retirement assets -- currently valued at over $130 billion. As comptroller, Spitzer would sit on each of the boards overseeing these funds.


When asked how he envisions his potential role, Spitzer responded candidly. He said the position "is ripe for greater and more exciting use of the office's jurisdiction."

We've seen this play before. As New York attorney general from 1999-2006, Spitzer turned the traditionally behind-the-scenes role into a national media platform by pressuring, investigating, and prosecuting corporations under the little-known Martin Act. Any "underutilized potential" that Spitzer sees in the comptroller's office should alarm both America's corporate boards and New York City's public employees and taxpayers.

We don't have to speculate about how Comptroller Spitzer would use the office's powers. In 2009, he penned an op-ed for the online magazine Slate titled, "Chamber of Horrors: The U.S. Chamber of Commerce must be stopped. Here's how to do it."

After lambasting the U.S. Chamber as an "unabashed voice for the libertarian worldview that caused the most catastrophic meltdown since the Great Depression" and for being on the wrong side of "virtually every major public-policy issue of the past decade," Spitzer explicitly called on city and state comptrollers to "flex their political muscle" in order to combat the Chamber. Presumably, Comptroller Spitzer would target any and all groups or individuals voicing positions he finds distasteful.

Spitzer justified his call for aggressive activism by comptrollers by claiming that the U.S. Chamber spends "our money" on lobbying. By "our money," he meant the financial contributions of the Chamber's corporate members.

The shocking irony here is that Mr. Spitzer seems to be endorsing two fundamental principles opposed to the democratic chord he is trying to strike; namely, 1) that all people invested in a pension fund share the same political viewpoints (Chamber bad, pension activism good) and 2) that those people would wish to see their political ends carried out through the strong-arm tactics of an administrator charged with the singular task of maximizing the value of the funds he oversees.

Using this line of logic, Mr. Spitzer would have to acknowledge that he believes increased shareholder activism would lead to a concomitant increase in pension value. But wait, Isaac writes:

According to research conducted by the Manhattan Institute's Proxy Monitor project, which tracks shareholder activity for the largest 250 U.S. public companies, the New York City pension funds and comptroller's office have historically played an activist role, sponsoring an absolute majority of all shareholder proposals introduced by state and municipal pension funds.


Yet that activism has not added to share value for city workers: New York City's largest pension funds posted dismal 1.9 percent and 1.3 percent returns in the most recent fiscal year and have trailed their benchmarks over three- and five-year windows.

If shareholder activism has not led to increases in pension value in the past, New Yorkers have the right to ask ol' Sheriff Spitzer why he has his guns pointed firmly at the U.S. Chamber of Commerce.

Jarrett Dieterle
Legal Intern, Manhattan Institute's Center for Legal Policy

This past Wednesday, Manhattan Institute's Center for Legal Policy hosted a conference on the topic of overcriminalization, titled Overcriminalizing the Empire State? Criminal-Law Trends in New York and the Threat to Liberty and Commerce.

The conference featured a keynote speech by Hon. Robert S. Smith, an associate judge on the New York Court of Appeals. Judge Smith discussed, amongst other topics, potential overcriminalization in the realm of child pornography prosecutions; namely, should those who simply view - rather than produce or distribute - child pornography be held criminally responsible?

The event also included a panel discussion on overcriminalization trends in New York with Gerald Lefcourt (president of the Criminal Justice Foundation of the National Association of Criminal Defense Lawyers), James McGuire (former associate justice in the First Judicial Department of New York State's Appellate Division and former chief counsel for New York governor George Pataki), Mike Miller (former assistant DA in the Manhattan District Attorney's office), and Daniel Richman (the Paul K. Kellner Professor of Law at Columbia Law School). The panel was moderated by Manhattan Institute's own Jim Copland.

Thompson Reuters legal reporter Carlyn Kolker covered the event:

Among the theories that moderator James Copland of the Manhattan Institute posited during "Overcriminalizing the Empire State? Criminal-law Trends in New York and the Threat to Liberty and Commerce" is one that today's laws go beyond traditional notions of criminality (think rape, murder, assault) and into new territory, such as regulatory crimes. Many criminal laws suffer from vagueness, says Copland, which gives prosecutors broad discretion in how to apply them.

Against that backdrop, the panelists -- a collection of judges, practitioners and a professor -- delved into deep questions, such as whether New York state's Martin Act, which governs financial fraud cases, is overly broad. Has the law, which vests the state's attorney general with deep powers, been abused? Overly used? There were few hard conclusions.

The Center for Legal Policy will continue its efforts in the area of overcriminalization and plans to host more events on the subject in the future.

NY Prosecutors Have Too Much Power - PointOfLaw Columns

James R. Copland

In the wake of the 2008 financial crisis, New York politicians and judges have been itching to broaden the Empire State's Martin Act, which governs securities frauds. And this comes amid an explosion of criminal laws in this state.

It may sound like warranted crackdown, but don't be fooled: It's really part of a move to shift power to pols and prosecutors -- and it leaves average Joes befuddled and at risk of turning into accidental criminals.

The proliferation of criminal statutes undermines a key principle: that folks know in advance what conduct could land them in prison.

It's obvious that crimes like murder, burglary, rape will be criminally punishable. But other laws have increasingly attempted to criminalize violations of government regulations, which often span volumes, leaving the average citizen unsure of what actions might be considered criminal.

Worse, many modern criminal laws are vague or ambiguous, ensuring that we're never truly on notice of what is or isn't a crime.

Compounding this problem is the erosion of the traditional requirement of intent (what lawyers call "mens rea") -- in essence, that we can't be imprisoned for mere accident or negligence. On this front, New York fares poorly. Its modern criminal law expressly permits so-called "strict liability" offenses -- that is, you can be found guilty of a crime whether you violated the law on purpose or by accident.

In some cases, a whole book of regulations becomes crimes by default. The state Environmental Conservation Law, for instance, makes any violation of any environmental rule or order punishable by 15 days in jail for each day a violation occurs. So, if you inadvertently breach a regulation for a year, you could face up to 15 years in prison.

Moreover, many of these laws -- like the Martin Act, former Attorney General Eliot Spitzer's weapon of choice in his efforts to reshape New York's investment banking and insurance industries -- are vague, ambiguous or overly broad.

Unlike the federal securities laws and similar laws in most other states, the Martin Act doesn't require prosecutors to show that alleged wrongdoers intended to defraud, that anyone bought or sold securities relying on the alleged fraud or that anyone was even injured by the fraud.

And it makes criminal any "promise or representation as to the future which is beyond reasonable expectation or unwarranted by existing circumstances." That means that practically any forward-looking statement by any executive (including, perhaps, statements required by the federal securities laws) might be invoked as a crime.

New York law makes corporations themselves criminally liable for violations of such provisions. As such, prosecutors hold vast power to reshape corporate practices. And such reshapings may have serious consequences unanticipated by the politician-attorneys.

Consider Spitzer's deployment of the Martin Act against AIG -- at best, a distraction from the risks that would soon swamp the companies involved; at worst, a direct contributor to the risks (and consequences) themselves.

Threatening criminal action, recall, Spitzer forced AIG to oust longtime CEO Maurice "Hank" Greenberg. As Greenberg's successor, Martin Sullivan, focused on regulatory compliance and cooperation with government probes, he lost sight of AIG's financial-products group, which sold credit-default derivatives. In the nine months after Greenberg departed, AIG wrote as many credit-default swaps as it had in the previous seven years combined.

Those credit swaps ultimately brought both the company and the financial industry as a whole to its knees. It's impossible to know what would've happened had Spitzer not intervened, but UBS credit analyst David Havens maintains that the company would've never gotten into such a dire situation had Greenberg stayed in charge.

Even those who think our corporations are under-regulated should take pause at giving virtually unchecked power to government attorneys who may not fully understand the businesses they're affecting. Rather than protect the average consumer, expanding laws like the Martin Act is more likely to drive up costs, make the New York financial industry less competitive and introduce new systemic risks into the market.

In a very real sense, the expansion of our criminal law has moved us from the rule of law to the rule of prosecutors.

And if our criminal laws are too voluminous -- if we can go to jail for a mistake -- our liberty is seriously compromised.

Jim Copland, director of Manhattan Institute's Center for Legal Policy, authored an op-ed in today's New York Post warning of legislation that grants to New York prosecutors an alarming degree of discretion and authority. In particular, Copland focuses on the Martin Act, which former governor Eliot Spitzer revived and bolstered to combat purported "financial fraud."

He writes:

In the wake of the 2008 financial crisis, New York politicians and judges have been itching to broaden the Empire State's Martin Act, which governs securities frauds. And this comes amid an explosion of criminal laws in this state.


It may sound like warranted crackdown, but don't be fooled: It's really part of a move to shift power to pols and prosecutors -- and it leaves average Joes befuddled and at risk of turning into accidental criminals.

The proliferation of criminal statutes undermines a key principle: that folks know in advance what conduct could land them in prison.

It's obvious that crimes like murder, burglary, rape will be criminally punishable. But other laws have increasingly attempted to criminalize violations of government regulations, which often span volumes, leaving the average citizen unsure of what actions might be considered criminal.

Worse, many modern criminal laws are vague or ambiguous, ensuring that we're never truly on notice of what is or isn't a crime.

Both economic and individual liberty is threatened when legislative initiatives don't comport with traditional precepts of criminal law. Collectively dubbed overcriminalization, this phenomenon is also a vehicle through which legislators and others seek to regulate by prosecution. As Copland notes in his full article, this is a serious problem with dangerous consequences.

Around the web, September 2 - PointOfLaw Forum

  • If the antitrust laws are to protect competition, rather than competitors, why is Sprint's stock surging upon news of DOJ's suit to block the AT&T/T-Mobile merger? [Wright @ TOTM; more; Manne @ TOTM]

  • The need for FCPA reform; government prosecutions show overreach. [National Law Review and Gibson Dunn via Reuters via CJAC]
  • Jon Huntsman plan proposes repeal of Dodd-Frank and part of Sarbanes-Oxley. [Huntsman; WSJ]
  • Devil's bargain: Wall Street and the Martin Act. [Olson @ NY Post via OL]

  • Iowa Supreme Court rejects proposal to keep lawyer discipline secret. [Des Moines Register; earlier @ OL]
  • "Congress Resiscitating Honest Services Fraud" [Right on Crime]
  • This "article argues that a symbiotic relationship exists between plea bargaining and overcriminalization because these legal phenomena do not merely occupy the same space in our justice system, but also rely on each other for their very existence." [J L Econ & Policy @ SSRN]
  • Erwin Chemerinsky was kind enough to represent attorney Stephen Yagman without pay in his criminal trial and appeal; now Yagman is claiming ineffective assistance of counsel. [Patterico; earlier at POL and OL]

  • What media bias? A telling Freudian slip in a New York Times story. [Mac Donald]
  • Bluetooth decision a "small blow for common sense." The "Hearing Health Matters" summary is incorrect, though: the settlement was for class members who didn't suffer any hearing injury. That's how ridiculous it was. [TMCNet; Hearing Health Matters]

Martin Act abuses - PointOfLaw Forum

In a paper for WLF, Robert A. McTamaney argues for preemption of New York's overbroad Martin Act.

One Nation Under Arrest - PointOfLaw Forum

Yesterday, the Heritage Foundation released an edited volume, One Nation Under Arrest: How Crazy Laws, Rogue Prosecutors, and Activist Judges Threaten Your Liberty.

Contibutors include the Cato Institute's Tim Lynch and former U.S. Attorneys General Ed Meese and Dick Thornburgh.

Also included is a chapter I wrote, on recent trends in New York criminal law. Topics I cover include the multiplication of regulatory criminal offenses, changes to the Rockefeller drug laws, the sweeping Martin Act, and the policing innovations that cut crime in New York City.

N.Y.: A Martin Act private right of action? - PointOfLaw Forum

Tiger Joyce of ATRA sounds the alarm in the Metropolitan Corporate Counsel, as part of a roundup on legislative proposals being advanced by plaintiff's lawyers around the fifty states:

Arguably the most onerous of several such bills are A. 8646 and S. 5768, companion bills still pending in respective Assembly and Senate committees at press time. The legislation would create a new private right of action under the state's securities law known as the Martin Act. Currently, only the state attorney general can bring lawsuits against mutual funds and other such financial entities for acts of negligence. This mind-boggling proposal would increase the statute of limitations to six years from the date of discovery but would not require plaintiffs to show "reliance" on the defendants' conduct.

The bill has been introduced by Assemblyman Richard Brodsky of Westchester County. Earlier on the notoriously broad Martin Act here and here.

Around the web, February 4 - PointOfLaw Forum

  • Lots of amicus activity in Rhode Island lead paint appeal [ProJo, Genova]
  • Trial lawyers "in complete control" of Kentucky lower house, laments president of state senate [Lexington Herald-Leader]
  • Usually it's corporate defendants tripped up by charges of failing to produce discovery docs, but look what happened to Milberg Weiss [NLJ]
  • Speaking of which, official Mel Weiss bio still lists him as vice chair of lefty Drum Major Institute, though DMI seems to have dropped him into memory hole [ShopFloor; more on Milberg-DMI connection]
  • Duck for cover, New York AG Cuomo talks of using brass-knuckled Martin Act against Wall Street [DealBreaker]
  • Some lawyers believe women on juries judge women more harshly. True? [Reed]

"Spitzer's favorite toy" - PointOfLaw Forum

Jon Macey of Yale predicts (without necessarily welcoming) a backlash against the Martin Act, New York's peculiarly strong statute assisting white-collar law enforcement (more). Larry Ribstein, who excerpts Macey's argument, is responsible for the title phrase above.

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