Posts tagged ‘fraud’

Things I Did Not Know About Compelled Testimony

Ken White at Popehat offers some useful insight to non-lawyers among us about compelled testimony (in the context of the Louis Lerner/IRS saga)

Some people have argued that Lois Lerner should be compelled to testify, either by court order or by grant of immunity. Lerner and her lawyers would love that, as it would make prosecuting her for any suspected wrongdoing incredibly difficult.

Compelled testimony is radioactive. If a witness is compelled to testify, in any subsequent proceeding against them the government has a heavy burden to prove that no part of the prosecution is derived from the compelled testimony, which is treated as immunized. This is called theKastigar doctrine:

"Once a defendant demonstrates that he has testified, under a state grant of immunity, to matters related to the federal prosecution, the federal authorities have the burden of showing that their evidence is not tainted by establishing that they had an independent, legitimate source for the disputed evidence." 378 U.S. at 378 U. S. 79 n. 18. This burden of proof, which we reaffirm as appropriate, is not limited to a negation of taint; rather, it imposes on the prosecution the affirmative duty to prove that the evidence it proposes to use is derived from a legitimate source wholly independent of the compelled testimony.

If I read this right, if the House were to compel her to testify, they might as well grant her immunity and be done with it.

Further on in the post, Ken points out an issue that I have been wondering about myself -- Those who want Lerner to testify are concerned with government arbitrary abuse of power for political purposes.  Given that, how can these same folks have any doubt as to why Lerner might plead the Fifth in front of a hostile and partisan House committee

I've been seeing a lot of comments to the effect of "why should Lois Lerner take the Fifth if she has nothing to hide?" Ironically these comments often come from people who profess to oppose expansive government power, and from people who accept the proposition that Lerner was part of wrongdoing in the first place — in other words, that there was a government conspiracy to target people with the machinery of the IRS for holding unpopular political views. Such people do not seem to grasp how their predicate assumptions answer their own question.

You take the Fifth because the government can't be trusted. You take the Fifth because what the truth is, and what the government thinks the truth is, are two very different things. You take the Fifth because even if you didn't do anything wrong your statements can be used as building blocks indishonest, or malicious, or politically motivated prosecutions against you. You take the Fifth because if you answer questions truthfully the government may still decide you are lying and prosecute you for lying.

Pardon me: if you accept the proposition that the government targets organizations for IRS scrutiny because of their political views, and you still say things like "why take the Fifth if you have nothing to hide", then you're either an idiot or a dishonest partisan hack.

If you want to get bent out of shape about something, you are welcome to wonder why Lerner is being investigated, apparently, by the hyper-partisan civil rights division of Justice rather than the public integrity section.  That, combined with President Obama's pre-judging of the DOJ's conclusions, is more of a red flag than Lerner's taking the Fifth.

Remember, Martha Stewart did not go to jail for securities fraud of any sort.  She went to jail for statements she made during the government investigation.

Arizona Corporation Commission Web Site is Criminally Insecure

Today I had to do my annual renewal of my corporate registration in Arizona.  As in most states, this involves a bit of information foreplay followed by the purpose of the exercise -- sending in a check to the corporation commission.

But here is the extraordinarily scary part -- I started the annual reporting process by just typing in the name of my company and getting started.  There was no password protection, no identity check.  They had no way of knowing I had anything to do with this corporation and yet I was answering questions like "have you been convicted for fraud."  The potential for mischief is enormous.  One would have to get the timing right (an annual report must be due before one can get in) but one could easily open the site on January 1 and start entering false information in the registrations for such corporations as Exxon and Wal-Mart.

See for yourself.  Here is their web site.  Below is a screen shot of the site letting me in to edit one of Wal-Mart's corporate registrations in Arizona:

click to enlarge

 

Again, note what I am saying.  This is not the result of hacking.  This is not lax security I figured out how to evade.  This is the result of no security whatsoever.  I simply went to the link above, clicked on the Wal-Mart Associates link, and then clicked on the annual report link.  I know from doing my own registration that there is a signature page at the end, but all you do is type in the name of an officer and a title -- data that is right there on the site.  It's like asking you for a password after the site just listed all the valid passwords.

If I disliked Wal-Mart, I could put all kinds of crazy garbage in here.  I did not go further, because I would have had to answer these questions to proceed and I had no desire to mess with another company's critical data, but if I had gone further I could have changed their mailing address, the names of their officers, etc. -- all I had to do was just pay the $60-ish registration fee for them and they would have a big mess on their hands to sort out.   If I had access to a fake or stolen credit card and a public computer, I could have done it all without any hope of being traced.

By the way, from my experience, this is not unique to Arizona.  This criminally lax behavior seems to be the norm in most states.

I have submitted this all as a complaint to the state, so far with no response.  If anyone in AZ knows how I can get someone's attention with this, let me know.

Chevron Ecuador Judgement Obtained Through Fraud and Bribery

Update:  If you want to understand how deep the fraud runs, make sure to watch the 60 second video below with the US environmentalists caught on tape plotting their fraud.

Via Bloomberg:

U.S. District Judge Lewis Kaplan in Manhattan said today that the second-largest U.S. oil company provided enough evidence that a 2011 judgment on behalf of rain forest dwellers in the country’s Lago Agrio area was secured by bribing a judge and ghostwriting court documents. Kaplan oversaw a seven-week nonjury trial over Chevron’s allegations.

“The decision in the Lago Agrio case was obtained by corrupt means,” Kaplan said in an opinion that gave Chevron a sweeping victory. “The defendants here may not be allowed to benefit from that in any way.”

Chevron, based in San Ramon, California, was ordered to pay $19 billion to a group of farmers and fishermen by the Ecuadorean court. The award was reduced to $9.5 billion on Nov. 12 by the Ecuadorean National Court of Justice, the nation’s highest tribunal. That's almost half of its 2013 profit.

The Ecuadorean villagers, and activists working on their behalf, argued the oil producer should be held financially responsible for pollution of the Amazon rainforest by Texaco Inc. from the 1960s through the early 1990s. Chevron, which bought Texaco in 2001, claims the company already paid $40 million to clean up its share of the drilling contamination....

In its racketeering case before Kaplan, Chevron alleged that a U.S. lawyer leading the Ecuadoreans, Steven Donziger, and members of his team engaged in “repeated acts of fraud, bribery, money laundering” and obstruction of justice in pursuit of a multibillion-dollar payout.

I don't think there is any doubt that Chevron owed the Ecuadorans some clean up, since even they have agreed to doing work there.  And it is not unreasonable to be skeptical that Chevron's actions were perhaps incomplete.  But the $19 billion judgement always has smelled, particularly when the judge in the Ecuadoran case publicly admitted he had been bribed.

There was deep corruption in this case from the start, corruption that never will be adequately covered in the media because it "was for a good cause."  Similar levels of corruption by Chevron would have led the front page of the New York Times for weeks.

As a reminder, let me quote from an earlier story.  Please watch the short video, it is amazing:

The clip below is an outtake from the environmentalist movie "Crude", which purported to document the environmentalist's case against Chevron in Ecuador.  Apparently, between takes of earnest and un-selfinterested environmentalists saving the world from greedy corporations, these self-same environmentalists discussed lying about the science and duping the courts in order to score a big payday for themselves.

The video is doubly interesting because, as Anthony Watts explains, the woman in the video taking money to make up untrue findings was recently confirmed to the NAS, where there is a good bet that we will see her as the source for "evidence" that fracking is contaminating groundwater.  These three folks are all the subject of a civil suit from Chevron but all three should be subject to criminal charges for fraud and conspiracy.

Several of the environmentalists involved, including Dr. Ann Maest, have since recanted their corruption, sort of.  They claim they were "misled" in this New York Times story, but the clip above certainly belies that.  Donziger did not mislead her, he is seen convincing her that in Ecuador they can get away with lying.  All for a good cause, of course.

Dispatches from the echo chamber:  Mother Jones was on this story full force for years.  Then suddenly stopped reporting at all when it became clear that allegations of fraud were credible.  Check out the articles.

Update:  More here

Your Tax Dollars at Work

An anonymous quote from an employee at the Federal Mediation and Conciliation Service

"Let me give you the honest truth: A lot of FMCS employees don't do a hell of a lot, including myself. Personally, the reason that I've stayed is that I just don't feel like working that hard, plus the location on K Street is great, plus we all have these oversized offices with windows, plus management doesn't seem to care if we stay out at lunch a long time. Can you blame me?"

This is actually the least of the problems in the agency -- fraud appears to be rampant.  The Washington Examiner has a five part series.

This Was My Take As Well: Cut Farm Subsidies, Not Food Stamps

First, as many of you may have guessed, the "massive cuts" in food stamps over the next 10 years proposed by House Republicans are basically just a modest reduction in their rate of growth.  All attempts to slow the spending growth in any government program will always be treated by the media as Armageddon, which is why government spending seldom slows (see: Sequester).

But I have been amazed through this whole deal that Republicans want to extract a pound (actually probably just an ounce or so) of flesh out of the Food Stamp program but explicitly left the rest of the farm bill with all of its bloated subsidies alone.  Henry Olson asks the same question at NRO.

I will add one other observation about food stamps that is sure to have just about everyone disagreeing with me.  Of late, Republicans have released a number of reports on food stamp fraud, showing people converting food stamps to cash, presumably so they can buy things with the money that food stamps are allowed to be used for.

Once upon a time, maybe 30 years ago in my more Conservative days, I would get all worked up by the same things.  Look at those guys, we give them money for food and they buy booze with it!  It must be stopped.  Since that time, I suppose I never really revisited this point of view until I was watching the recent stories on food stamp fraud.

But what I began thinking about was this:  As a libertarian, I always say that the government needs to respect and keep its hands off the decision-making of individuals.  If people make bad choices, paraphrasing from the HBO show Deadwood, then let them go to hell however they choose.  And, more often than not, it turns out that when you really look, people are not necessarily making what from the outside looks like a bad choice -- they have information, incentives, pressures, and preferences we folks sitting in our tidy Washington offices, chauffeured to work every day, may not understand.

So if we are going to give people charity - money to survive on when poor and out of work - shouldn't we respect them and their choices?  Why attach a myriad of conditions and surveillance to the use of the funds?  Of course, this is an opinion that puts me way out of the mainstream.  Liberals will treat these folks as potential victims that must be guided paternally, and Conservatives will treat them as potential fraudsters who must be watched carefully.  I think either of these attitudes are insidious, and it is better to treat these folks as adults who need help.

The Inevitable Result of Government Policy on the Labor Market

Assume the following conditions:

  1. I am increasingly liable for any dumbass thing my employees say or do.  It does not matter if it is absolutely against my values and company rules, if someone, say, uses a racial epithet with a customer or another employee, I will likely at least get sued.  Given my deductibles on insurance, I am out $20,000 a case even if I win.
  2. Minimum wages have increased faster than the production value of unskilled, inexperienced laborers.
  3. Obamacare is raising the minimum cost of a full-time employee by at least $2,000-$3,000 a year, not including the as-yet-to-be-define but likely expensive record-keeping and administrative requirements 
  4. In states like California, the law increasingly gives employees the ability to make new claims on my income (e.g. fake workers comp and disability claims) or to even make themselves un-firable (by asking for a family medical leave, or claiming a disability, or claiming to be a whistle-blower).

Against this backdrop, what am I going to do?  I am going to hire more skilled and experienced workers who justify my minimum employment costs.   I am going to hire mature people less likely to get me in trouble via their immature actions.  I am going to hire people with a long work history so I can see there is not a history of scams and fraud.

In other words, I am going to hire older people.  And thus:

click to enlarge

 

Of all the issues I raised above, the first one gets the least attention but in our customer contact business is perhaps the most important.  The cost of hiring a knucklehead is immense.  And the folks that do stupid stuff in 1 are often the very same people who try to take us in 4.

Scam Alert -- US Telecom

We get literally (as they would say on the TV show Archer, literally literally and not figuratively literally) hundreds of paper bills to pay each month in our business.   We can barely keep up just with paying them all, much less vetting every one.  Which is what scam artist marketers count on when they craft fake bills they spam to businesses in hopes that some percentage, in their hustle and bustle, will pay the bills without knowing they are fraudulent.

These letters really, really tick me off.  They are sent by people who apparently cannot sell a product or service on its own merits and so must trick harried business people into accidentally sending them money.  I get these most frequently from companies that send me letters that look just like a government agency requiring yet another fee (the corporate minutes fraud).

So here is the most recent bill my accounts payable person questioned and put on my desk.   It is from a company called US Telecom, and despite the remission address on the letter it is apparently based in California.  You can click to enlarge the letter -- it is in very high resolution, which we will need to find the small print that they use to try to cover their butts.

Click to Enlarge US Telecom Scam Letter

 

Does this look like a regular bill to you for some service we have contracted for?  It did to me.  Note the "Due upon Receipt" at the top, the calculation below with previous balance and new balance and "pay this amount."  No reasonable person in this country would say it looks like anything but an invoice for service received.

But this is not a bill.  It is a solicitation for services.  If you send the money, then you are committed.  And by the way, per the terms below, once the agreement is in place, it cannot be terminated or amended (or likely refunded) without a signature from both parties, which means only if they approve it.  If they don't, congrats, you are stuck in this contract.  I have no idea if you actually paid, whether you would receive any services or not.  Since they priced this service without even knowing what assets I have that would be serviced (note no equipment or equipment location is listed in the bill, the first "tell" to me this was a fraud) I am not sure how they would ever provide any service.  (we were really saved by Quickbooks on this one, because my payables person flags any bill from a vendor not set up in our system).

They attempt to cover themselves, in the same way the corporate minutes scamsters do, with the small print in the last two lines at the bottom.   Can't read it?  LOL, I could not read it myself, even full size, without my glasses.  You can click through if you wish to see it on the high rez version.  But it says that it is not a bill, it is a solicitation, and that I am under no obligation to pay unless I accept the offer, which I do by paying.  But by the language, once paid, I have accepted the offer and cannot get out of it without a signature from an authorized officer of their company.  I bet that would be easy to get.

That last fine print may keep them out of jail or even let them sleep at night, but no legitimate business with a valuable product sells its services this way.

Update:  Apparently there is a legitimate US Telecom and they are understandably pissed.  They have set up a page on this billing fraud, and apparently the Attorneys General in a number of states are investigating.

Update #2:  Talk about waddling in late on a story!  These guys' registered corporate name is UST Development, run by a guy named David Bell.  Ken White of Popehat has been on these guys for years.  LOL, I even linked Ken's post a while back.  You sleazy folks out there can f*ck with me all you want but you do not want to mess with Ken White.

Update #3:  Good God, Ken did 14 posts on these guys.  Enjoy.

Previewing the President's College Rankings

Today, President Obama sort-of kind-of acknowledged a problem with Federal college student lending:  Federal loans are doing nothing to improve the affordability of colleges, as colleges are just raising tuition in lockstep with increased lending, thus leaving students massively in debt for the same old degree.

His proposed solution is to somehow tie the availability of Federal funds to some type of government scoring system for colleges.  The probability that this will do anything to reign in student debt is exactly zero.  But it will potentially give the Feds another vehicle for control (similar to what Title IX has given them) of even the most mundane university policies.  Why not, for example, give high scores to universities with the restrictive and politically correct speech codes this Administration favors, thus effectively denying money to students of universities that don't have Eric Holder-sanctioned speech policies?

If you think I am exaggerating, look at the recent Washington Monthly college rankings as a prototype for the Obama scoring system.  In their system, colleges are ranked higher if they have a higher percentage of Peace Corps*** graduates, if more of their Federal work-study grant money is used for jobs at non-profits rather than for-profits**, and if their school reports more community service hours.  This latter points to another issue -- a number of schools rank really low on community service hours, effectively all tied with zero.  This is obviously a reporting issue.  The Obama plan just about guarantees that universities will start to game all these metrics -- does no one pay attention to the fraud that has been found in the law school rankings?

They also have a ranking of the schools providing the best value.  The good news, I suppose, is the school my son attends is #1.  The bad news is that my alma mater Princeton is not even on the list.  I found this odd, because while the authors explicitly laud Amherst's generous program that helps fund students through grants rather than loans, Princeton actually was one of a few schools that did this first (update:  Princeton was the first school to eliminate loans from financial aid packages of low income students, and since has eliminated loans altogether from all financial aid packages.  If you can get in, you can graduate debt-free).

It says this of Amherst:

 It chose to tap its sizable $1.6 billion endowment to provide tuition discounts so generous that the annual net cost to students with family incomes below $75,000 is only $843, less than a third of the sticker price of a year at the average community college. Another elite liberal arts college, Williams, also makes our list. But instructively, none of the other prestigious, well-endowed private colleges and universities in America—not Harvard or Yale, Swarthmore or Smith, none of them—can make that claim.

Actually, we don't know if that last sentence is true because the authors left Harvard and Yale off the list entirely.   My impression is that Princeton makes is very inexpensive for families making less than $75,000 as well, so I could not understand the claim -- perhaps even without debt the tuition charges to low-income families are still unreasonably high.  But we will never know, because apparently Princeton is not even on the list -- not because it does not direct a lot of its endowment to need-based scholarships, but because it has only 10% students on Pell grants, and the authors decided that you could not be on the list unless that number was at least 20% "to make sure they aren’t just catering to the affluent."  This just points to how quickly such a system gets politicized.  What does "catering to the affluent" have anything to do with bang for the buck?  If they really trust their methodology, they would have included these schools and if they are really just over-priced rich kids' playgrounds, that should have come through in the ranking.  Instead, the author's have explicitly invented an unrelated criteria to weed Ivy League schools out, a criteria more related to admissions requirements than to financial aid requirements and affordability and value (the ostensible bases for the rankings).

By the way, if you want to get a really good laugh, this is supposed to be a value or "bang for the buck" ranking, but they only rank the costs.  There is absolutely no ranking of "bang".  Bizarre.  It is as if any degree of any type from any institution is equally valuable.  Which, by the way, is part of the problem in the student loan bubble -- just this assumption.

 

** This is EXACTLY the kind of incentive that will help pay off those future college loans -- lets make sure to encourage every student to work in non-profits rather than for-profits jobs.

*** Why the Peace Corps?  Why not a myriad of other useful and productive occupations?  If you want to have a service metric, why is Peace Corps there and, say, Teach for America not?

Zombie Earthlink Accounts

I am left to wonder today how much of Earthlink's remaining income is from zombie accounts.  I generally hate the hassle of dealing with a changed credit card number, but one advantage is that I discover some zombie accounts that I have forgotten about and keep charging my card every month.

Today I had an amazing one -- from my old Earthlink dial-up account.  I had thought I cancelled Earthlink something like 8 years ago (I certainly have not used it since about 2003).  That is several credit cards ago and so I have absolutely no idea how they were able to continue to bill me, but they were, right up to this month when my corporate card number changed due to a fraud alert.  It is kind of depressing that I spent well north of a thousand dollars over the years on a service that I would never even consider using again, but that is the danger that comes as a company gets larger and one can't personally inspect every bill that gets paid.

Of course, despite evidence that I never used the account, they would not waive the final month's billing and threatened collections, etc.  They wanted my credit card for one last charge, and then they would cancel.  Which made me suspicious that this is how they got my credit card for the last five years - by asking for it for one last charge and then continuing to bill for 5 years.  So I told them I did not trust them with my new credit card number and to send me a paper bill that I would pay by check.  As a final insult, they said they had to charge me an extra dollar for the paper bill.

If I had time, I would challenge them and give them grief, but sometimes one has to put one's ego away and just move on with the loss.

During the call, it was very, very clear that trying to collect money on zombie accounts that people had forgotten about was very, very typical for their customer service folks.  Leading me to wonder just how much of Earthlink's revenue comes from such zombie accounts.  As a funny side note, they were perfectly fine taking money from me without any identification, but would not cancel the account without an extensive account verification, a verification that is rather hard if one has not used the account in about 8 years.

Matt Yglesias is Reinventing History

Matt Yglesias and I certainly do read history differently.  He writes recently in a Salon article:

The basic economic foundations of industrial capitalism as we've known them for the past 150 years or so have an activist state at their core. Building political institutions capable of doing these things properly is really difficult, and one of the main things that separates more prosperous places from less prosperous ones is that the more prosperous places have done a better job of building said institutions. There's also the minor matter of creating effective and non-corrupt law enforcement and judicial agencies that can protect people's property rights and enforce contracts.

The point is, it takes an awful lot of politics to get an advanced capitalist economy up and running and generating wealth. A lot of active political decisions need to be made to grow that pie. So why would you want to do all that? Presumably because pie is delicious. But if you build a bunch of political institutions with the intention of creating large quantities of pie, it's obviously important that people actually get their hands on some pie. In other words, you go through the trouble of creating advanced industrial capitalism because that's a good way to create a lot of goods and services. But the creation of goods and services would be pointless unless it served the larger cause of human welfare. Collecting taxes and giving stuff to people is every bit as much a part of advancing that cause as creating the set of institutions that allows for the wealth-creation in the first place.

This is counter-historical crap.  Unfortunately, my real job is taking all my time today so I can only give a few quick responses rather than the thorough beating this deserves

  1. Capitalism is not a "system."  It is an un-system.   It is an order that emerges from individuals exchanging goods and services to their mutual self-interest.  While it requires a rule of law, those rules can be exceedingly simple -- at their core they are "don't deal with other people via force or fraud."  Sure, case law can be complex - what happens to a land deed that has one boundary on a river when the river moves.  But I don't think this is what Matt is thinking of.  
  2. Yglesias is following the typical socialist-progressive line that our modern wealth creating capitalist economy was somehow created by the government.  I am sure this line works with the low information voter, but that does not make it any more true.  Industrial capitalism arose long before the government even acknowledged its existence.  The US economy was generating wealth - for everyone, rich and poor - long before politicians stuck an oar into the economic waters.  Go back even 85 years and you will not see anything in the "political economy" that would be recognizable to a modern progressive.  In other words, the wealth creation came first, and then the politics came second.
  3. Again we see this bizarre progressive notion that wealth creation is this thing apart, like a water well in the desert.  Income distribution in this model is a matter of keeping the piggy rich people from hogging all the water.  But in a free society, the economy and its gains are not separate from people, they are integral to the people.  Gains are not somehow independent variables, but are the results of individual gains by each person in the system.  People operate by mutual self-interest.  When I work for you, I get a paycheck, you get your products made -- we both gain.  Steve Jobs grew wealthy selling iPads, but simultaneously my iPad made me vastly better off.
  4. It is wrong to say that all distributions of wealth are arbitrary.  In a free society, there emerges a natural distribution of wealth based on people's exchange with each other.  And contrary to the progressive mythology, that system was floating all boats, not just the rich ones, long before the government gained the power to redistribute wealth.  Yglesias is right in saying that income distribution in a progressive political economy is arbitrary.  In fact, income in any government-managed economy is distributed arbitrarily to whoever can gain power.  I am always amazed at progressives who somehow have this vision that there will be some group of people with absolute power who wukk make sure there will be a flat and equitable income distribution.  When has that ever happened?  Name even a single socialist country where that has happened.
  5. What political decision has ever been made the grows the pie, except perhaps to keep the government's hands off pie creation?  When "political" decisions are made to grow the pie, what you actually get is bailouts of Goldman Sachs, wealth funneled to connected billionaires like Elon Musk, and Solyndra.  Politics don't create wealth, they are a boat anchor lashed to the wealth creators.  The only thing politicians can do productively is make the boat anchor lighter.

Obamacare Hypocrisy

Proponents of Obamacare and other aggressive government health care interventions often argue that government health insurance will be less expensive than private health insurance.  Ignoring the whole history of government provided services (which you have to do to accept this argument), it is entertaining to press them on what costs will go away.

First, they will argue "profits."  Health insurers "obviously" make a lot of profit, so doing away with that will amount to a lot of savings.  Several years ago, when Obama was actively demagoguing** the health insurance business, the profit margins of health insurers were all around 3-4% or less.  Which means in exchange for eliminating all private profit incentives towards efficiency and productivity, we get a 3% one time cost reduction.  Not very promising.

After profits, Obamacare supporters will point to administrative costs.  Their philosophy that private insurance administrative costs drive health inflation is built into Obamacare, which places a cap on non-care related costs as a percentage of premiums.  I would argue a lot of this cost is claims management and fraud detection that government programs like Medicare don't have, to their detriment, but let's leave that aside.  I think most Obamacare opponents are convinced that there are billions in marketing costs that could be eliminated.  This has always been their bete noir in pharmaceuticals, that drug companies spend too much marketing.

I have said for years that to a large extent, what outsiders call "marketing" in health insurance is actually customer service and information, in particular agents who go out to companies and help people understand and make their insurance choices.

Well, it turns out that when the shoe is on the other foot, Obamacare supporters suddenly are A-OK with massive health insurance marketing costs, even when what is being marketed is essentially a monopoly:

[California] will also spend $250 million on a two-year marketing campaign [for its health insurance exchange]. By comparison California Senator Barbara Boxer spent $28 million on her 2010 statewide reelection campaign while her challenger spent another $22 million.

The most recent installment of the $910 million in federal money was a $674 million grant. The exchange's executive director noted that was less than the $706 million he had asked for. "The feds reduced the 2014 potential payment for outreach and enrollment by about $30 million," he said. "But we think we have enough resources on hand to do the biggest outreach that I have ever seen." ...

The California Exchange officials also say they need 20,000 part time enrollers to get everybody signed up––paying them $58 for each application. Having that many people out in the market creates quality control issues particularly when these people will be handling personal information like address, birth date, and social security number. California Blue Shield, by comparison has 5,000 employees serving 3.5 million members.

New York is off to a similar start. New York has received two grants totaling $340 million again just to set up an enrollment and eligibility process.

** Don't be fooled by the demagoguery.  This is standard Obama practice.  In exchange for eating sh*t from Obama in public, private companies get all kinds of crony favors in private.  Remember, health insurers got the US government to mandate that everyone in the country buy their products, and got the Feds to establish trillions in subsidies to help people do so.  This may be the greatest crony giveaway of all time, and to cover for it, like a magician distracting your eye from the sleight of hand, Obama made it appear in public as if he were health insurers' greatest enemy, rather than their sugar daddy.

An Insane Theory of Product Liability

Via the WSJ today:

Can a drug company be held liable for damages caused by generic drugs it didn't produce? That's the expansive new theory of "innovator liability" on parade in Alabama, where a recent ruling by the state Supreme Court could do damage throughout the U.S. economy.

In Wyeth Inc. et al., v. Danny Weeks et al., Mr. Weeks says he suffered from side effects from taking the generic version of an acid-reflux drug called Reglan. He sued Wyeth for fraud and misrepresentation, though the company didn't make the drug he took and had exited the Reglan market in 2002, five years before he took it. The court ruled 8-1 that Wyeth could be held liable for injuries because the generic manufacturer couldn't change the warnings on the product it copied.

First, this is nuts -- being held liable for problems with a product you did not make, simply because you invented it years before.   Are we going to start suing the estate of Thomas Edison every time someone buys a bad lightbulb?

But second, note how helpless Wyeth is now.  Drug makers are used to insane law suits that drain all the profit from helping millions of people to pay off a few folks who had adverse side effects (this same process literally destroyed the vaccination business until the government gave them special liability protection).

But let's accept the court victory - perhaps the drug really has a problem that has been discovered.  If the maker was being sued, he could just pull the drug from the market (as has happened any number of times after adverse suits) either forever or until the FDA will approve new warning language.

But in this case, Wyeth can't do this.  The generic drug makers will keep on selling the product - after all, they are not getting sued, and Wyeth will keep paying.  Wyeth does not even have standing to try to get the FDA to change the warnings on the drug.  If Wyeth tries to buy out the generic maker and shut it down, and new seller will simply takes its place.    If this case stands, Wyeth can be steadily bled to death and there is nothing they can do to stop it.

Finally, I don't want to get away without a mention of just how broken the FDA drug regulation regime is.  The original Supreme Court decision that led to the generic maker being immune to suits really turned on the impossibility of getting the FDA to change even one word on a drug's warning label.

Let Them Eat Trinkets

Steven Rattner, investment banker and former member of the Obama Administration,  is terrified that under a proposed law companies will be able to raise money without investment bankers.

Most troublesome is the legalization of “crowd funding,” the ability of start-up companies to raise capital from small investors on the Internet. While such lightly regulated capital raising has existed for years, until now, “investors” could receive only trinkets and other items of small value, similar to the way public television raises funds. As soon as regulations required to implement the new rules are completed, people who invest money in start-ups through sites similar to Kickstarter will be able to receive a financial interest in the soliciting company, much like buying shares on the stock exchange. But the enterprises soliciting these funds will hardly be big corporations like Wal-Mart or Exxon; they will be small start-ups with no track records.

This is absolutely, classically representative of the technocratic arrogance of the Obama Administration and the investment bankers that inhabit it.  I have three quick thoughts:

  1. Rattner's concern for individual investors comes rather late.  After all, he was the primary architect of the extra-legal screwing of GM and Chrysler secured creditors in favor of the UAW and other Obama supporters.
  2. God forbid investors get actual, you know, ownership in a company for their capital rather than just trinkets.  This is so bizarrely patronizing that I had to read it twice just to make sure I wasn't missing something.  But no, he is explicitly preferring that you and I get trinkets rather than ownership  (ownership, apparently, to be reserved for millionaire insiders like himself).
  3. We have truly entered the corporate state when leftish opinion makers argue that large corporations like Exxon and Wal-Mart get preferential access to capital and that smaller startups that might compete with them be shut out of the market.

I predict that over that Internet entrepreneurs running such crowd-sourcing sites would develop reputation management and review tools for investors (similar to those at Amazon and eBay).  Over time, it may be that these become far more trustworthy than current credit agency reports or investment bank recommendations.  After all, which do you trust more -- a 5-star Amazon review with 35 responses or a Goldman Sachs "buy" recommendation on an IPO like Facebook or Groupon?  Besides, it would take a very long time, like eternity, for fraud losses in a crowd-sourcing site to equal 1/100 of the investor losses to heavily regulated Bernie Madoff.

Tony Soprano Environmentalism

The Ecuadoran $18 billion court decision is turning out to be a monumental case of environmental fraud.  I am willing to believe that early critics of Texaco (now Chevron) had legitimate beefs about the company's stewardship in its drilling operations in the 1970's in the Amazon.  However, all semblance of principle has gone right out the window in a gigantic money grab.

A while back, it was reported that environmentalists (featured in the movie "Crude" were captured in the outtakes of the movie discussing how they lied about the science to the courts in order to score a big payday (bonus points for Obama appointing one of the fraudsters to the National Academy of Sciences).  See the link for the video evidence.

Past fraud revelations have cast doubt on the key scientific report submitted to the court as part of the proceedings, a report that is now known to have been ghost-written by the plaintiffs.  However, supporters of the judgement against Chevron have argued that the judge has always claimed that this study did not sway his decision in the case.  Now we know what did sway his decision:

Today new allegations of deceit and wrongdoing were leveled against the plaintiffs' lawyers bringing the already deeply troubled environmental suit against Chevron in Lago Agrio, Ecuador, which stems from Texaco's oil drilling in the Ecuadorian Amazon between 1964 and 1992. (Texaco was acquired by Chevron in 2001.)

In Manhattan federal district court this morning, Chevron filed the declaration of a former Ecuadorian judge, Alberto Guerra, who describes how he and a second former judge, Nicolás Zambrano, allegedly allowed the plaintiffs lawyers to ghostwrite their entire 188-page, $18.2 billion judgment against Chevron in exchange for a promise of $500,000 from the anticipated recovery.

Attention Lawyers, We need a Hand, Not a Brain: A Licensing Parable

Several sites have reposted this Craigslist ad, gasping in shock at it as evidence of massive foreclosure fraud

We are a collection agency/debt buyer. What we are looking for is a part time attorney to work for us as our corporate counsel, on our payroll, about 5 to 6 hours a week. This is a short term employment arrangement, no longer than 90 to 120 days.

Your job will be to sign pleadings, praecipe for entry of appearances, praecipe for writ of execution, and garnishment orders. Our paralegal will prepare all paperwork for your signature. This is very standard stuff for us.

If you are an attorney looking for challenging legal work, this is not for you. WE DO NOT NEED F LEE BAILEY- we are fee shopping. If you passed your boards with a D+, and you can sign your name, you possess all the credentials required for this job. If this opportunity interests you, please feel free to reply to this email with a brief description of who you are, when you got your law license, and what you will be needing from us in the way of compensation.

I would instead offer it as a lesson in the stupidity of state-enforced professional licensing arrangements.  Let me rewrite it:

We have all the legal knowlege we need.  We know exactly what the forms look like and mean.  We have written all the documents and tested them over time during our long presence in this business and we know them to meet our legal needs.   We have no need, in other words, for legal help.

However, attorneys have gotten together and created an attorneys guild, and, what's more, have convinced the government to pass laws that require membership in the guild to perform certain gate-keeping functions.  In our case, we need a member of the guild to sign some forms to make them legal, both because the guild has strong influence and because certain folks have convinced everyone that all mortgage pain in this country came from having a machine perform this signature function rather than a flesh and blood hand.  So we need a flesh and blood hand rather than a machine to sign foreclosure documents.  Unfortunately, that hand has to be attached to a brain that has passed the bar exam, and because the guild is pretty good at limiting its membership, we expect to have to pay an absurd amount of money for this trivial function that could be duplicated by a six-year-old (and used to be performed by a simple $100 machine).

Don't get us wrong -- if we were on trial for our lives or facing a nasty, complicated lawsuit or wanted to draft a custom contract to protect our interests, we would be very happy to consider the opinion of third party licensing groups as to the merit of a particular attorney.  Ironically, though, even then current licensing would be absurd, for in this case it would not greatly exceed our quality requirements (as it does for signing our foreclosure paperwork) but it would vastly undershoot our need due diligence needs.   Perhaps there is some legal function for which attending an ABA-accredited school and passing the bar exam is the perfect level of quality assurance, but we have not found it yet.

Bid Rigging for Municipal Asset Management

Rolling Stone Magazine has an good story on the conviction of a number of banks and brokers on charges of bid-rigging, specifically on contracts for short-to-medium term management of municipal bond cash accounts.  Apparently brokers were paid by certain banks to be given a look at all the other bids before they made their final bid.  The article focuses mainly on the ability of winning bidders not to bid any higher than necessary, though I would suppose there were also times when, given this peek, the winning bidder actually raised its bid higher than it might have to ace out other bidders.

This is classic government contracting fraud and it's great to see this being rooted out.  I am not wildly confident it is going to go away, but any prosecutorial attention is welcome.

But I am left with a few questions:

  • It seems that government contracting is more susceptible to this kind of manipulation.  Similar stories have existed for years in state highway contracting, and the municipal bond world has had accusations of kick-backs for years.  Is this a correct perception, or is the rate of fraud between public and private contracting the same but we just notice more with the government because the numbers are larger, the press coverage is greater, and the prosecutorial resources are more robust?
  • If government contracting of this sort is more susceptible to fraud, why, and how do we fix it?

The latter is not an academic question for me.  I run a company that privately operates public recreation areas.  I bid on and manage government contracts.  Frequently, a major argument used against the expansion of such privatization initiatives is that past government outsourcing and contracting efforts have been characterized by fraud and mismanagement.  The argument boils down to "the government has so many management problems that it can't be trusted with contracting for certain services so it needs to operate those services itself."

The only way to reconcile this view is to assume that private actors are more likely to act fraudulently and be dishonest than public employees.  If this were true, then the public would be safer if a public management process of questionable ability were applied towards public employees rather than outside private contractors, because those who were being managed would be less likely to take advantage.  And certainly there are plenty of folks with deep skepticism of private enterprise that believe this.

However, I would offer that only by adopting an asymmetric view of what constitutes fraud would we get to this conclusion.  Clearly, banks colluding to shave a few basis points off municipal asset returns is fraud.     As the author of the Rolling Stone piece puts it several times, the crime here is that the public did not get the best market rate.  So why is, say, elected officials colluding with public employees unions to artificially raise wages, benefits, and staffing levels above market rates not fraud as well?  In both cases insiders are manipulating the government's procurement and political processes to pay more than the market rates for certain services.

This is Bastiat's "seen and unseen" of the privatization debate.   Yes, the world is unfortunately littered with examples of government procurement fraud.  This is often cited as a reason for maintaining the status quo of continued government management of a diverse range of services.  But what we miss, what is unseen, is that these government services are often run with staffing levels, work rules, productivity expectations, and pay rates that would constitute a scandal if uncovered in a division of a corporation, particularly if the workers were spending a lot of money to make sure the manager handing them this largess was able to keep his job.

Yes, the public lost several basis points on its investments when it did not get the market rate of return from cheating bankers.  But it loses as much as 50% of every tax dollar sent to many state agencies because it does not get market rates (and practices) for state labor.

Why Is No One From MF Global in Jail?

Whether crimes were involved in the failures of Enron, Lehman, & Bear Stearns is still being debated.  All three essentially died in the same way (borrowing short and investing long, with a liquidity crisis emerging when questions about the quality of their long-term investments caused them not to be able to roll over their short term debt).  Just making bad business decisions isn't illegal (or shouldn't be), but there are questions at all three whether management lied to (essentially defrauded) investors by hiding emerging problems and risks.

All that being said, MF Global strikes me as an order of magnitude worse.  They had roughly the same problem - they were unable to make what can be thought of as margin calls on leveraged investments that were going bad.  However, before they went bankrupt, it is pretty clear that they stole over a billion dollars of their customers' money.  Now, in criticizing Wall Street, people are pretty sloppy in over-using the word "stole."  But in this case it applies.  Everyone agrees that customer brokerage accounts are sacrosanct.  No matter what other fraud was or was not committed in these other cases, nothing remotely similar occurred in these other bankruptcies.

A few folks are talking civil actions against MF Global, but why isn't anyone up for criminal charges?  Someone, probably Corzine, committed a crime far worse than anything Jeff Skilling or Ken Lay were even accused of, much less convicted.   This happens time and again in the financial system.  People whine that we don't have enough regulations, but the most fundamental laws we have in place already are not enforced.

Whatever the Motives, the Results Look Eerily Like Racism

I have been reading of late some histories of Germany in the 1930's, with a particular emphasis on racial laws and policy.   Over time the expanding bans on Jewish participation in the economy and society as well as preferences given to non-Jews for government jobs led to some practical problems, including:

  • What percentage of Jewish blood made one Jewish?  The Nazis messed around with this problem a long time, in part because of Hitler's absolute reluctance to get involved in such details.  Was it one grandparent?  Three grandparents?
  • How does one test for such things?  In the thirties, there was an boom in geneology research in Germany, as everyone raced around trying to figure out what evidence was sufficient to establish someone's race

It would be nice to think we put this kind of thing to bed, but here we are in the 21st century running around trying to answer the exact same questions

This story reminded me of the 1980s case of the twin red-haired Boston firefighters who claimed to be black, based on a photo of a great-grandmother and alleged oral history. While I remembered that they had gotten fired for their alleged fraud, I didn’t remember this detail:

Under current rules, said [general counsel to the state personnel office] Ms. Dale, candidates who say they are members of minority groups are judged by appearance, documented personal history and identification with a minority community. Disputes over claims of minority status are resolved by the Department of Personnel Administration.

 And indeed, there eventually was a two-day administrative hearing, in which the hearing officer determined that the twins failed all three criteria, and thus were not black. A judge upheld the ruling, finding that the twins had claimed minority status in bad faith.I have to admit being under the impression until now that as a legal matter, minority status was an in issue of self-reporting. But at least in the Massachusetts Civil Service system, one can get fired for “racial fraud.”

  • Every year, in the name of some sort of racial harmony, I have to sit down and report to the government on the race of each of my employees.  For 364 days a year I can ignore the race of my employees, but one day a year the government makes me wallow in it.  Here are part of the instructions:

Self-identification is the preferred method of identifying the race and ethnic information necessary for the EEO-1 report. Employers are required to attempt to allow employees to use self-identification to complete the EEO-1 report. If an employee declines to self-identify, employment records or observer identification may be used.

Where records are maintained, it is recommended that they be kept separately from the employees basic personnel file or other records available to those responsible for personnel decisions.

Race and ethnic designations as used by the Equal Employment Opportunity Commission do not denote scientific definitions of anthropological origins.

I am told we are trying to create a society free of racism, but the results sure look a lot like racism to me.

Shopping for Health Care

I am exhausted with folks who have never tried to shop for health care telling me that it can't be done, despite the fact that I do it all the time and achieve substantial savings.  This is a meme developped and maintained solely to support government power by declaring that there is a market failure in the pricing mechanics in the health care industry that can only  be solved through regulation and price controls.  I wrote in response

I agree that the pricing in health care is often arbitrary and capricious.  Of course some suppliers are going to try to soak third party payers.  But I don't think simply changing the payer (from private to public) or having a government bureaucracy set prices for  millions of line items is the solution.  My diagnosis is that health care lacks the one thing we have for most every other product or service:  shopping.

Now, you try to head off this argument with a few folks who claim shopping is impossible in health care.  But that is absurd.  There is a large and growing community of us who have real health insurance, rather than pre-paid medical plans, which means we have high deductibles.  We pay all of our regular expenses out of pocket, and maintain health insurance for large, unpredictable, potentially bankrupting expenses.

I must admit that shopping for health care seemed odd and a bit intimidating at first, having lived for years in the world of gold-plated, pay-for-everything corporate health care accounts.  But it really is not that hard.  I have consistently knocked down the cost of everything from x-rays for my kids' fractures to colonoscopies by a half to two-thirds.  I am now used to doctors and providers having that second price book under the counter they go to if they know you don't have a third-party payer they can soak.  We always research and ask for generics.  We think twice before accepting the need for an expensive test, like a MRI, and price shop it if we have to have one.  I push back on my dentist who tries to x-ray my teeth every few months.  I have many friends that saved a ton of money on oncology treatments by just doing a little shopping.

I am exhausted with academics and writers who have never tried to shop for health care telling me it is impossible.  Many of us do it, and there are more and more resources out there for us.  Sure, there are certain things I am not going to have the time or ability to price shop -- if I am lying on my back having a heart attack, my wife (hopefully) is not going to check rates at the hospitals.  But it is a fraud to extrapolate from this minority of health care situations to all health care expenditures.

The other argument is used is that at the beginning of a health care interaction we may not know exactly what care is needed.  So what?  The same is true of auto repair, but I don't blithely allow the repairs to proceed at any cost just because I didn't know up front what the diagnosis would be.  I get an estimate when each new problem is found, and I have on several occasions interrupted a car repair, told them their price was too high on certain repairs, and went elsewhere for the repair or deferred it entirely.

Let's suppose there is some sort of market failure for 10-20% of health care charges where price shopping is impossible.  Then let's discuss government regulatory approaches for those situations.  But for the other 80-90%, we should be structuring a health care system where consumers provide the price regulation, as they do in nearly every other industry, by shopping.

As a note, some people are exhausted by the idea of shopping.  My first response is, so what?  Get over it.  We are not going to take over a whole industry just to free you from a bit of hassle.  The second response is that research shows that only a small percentage of buyers need to be price shoppers to enforce price discipline.  I generally trust that Amazon has low prices and don't always check them, because I know there are much, much more rabid people who do care and do check.

Over time, I have found physicians who are both sympathetic and cooperative with this approach and actively help us minimize the cost of our care.  Its just amazing -- somehow we accept this image as a doctor being above all this cost stuff, in fact with considerations of price and cost being corrupting to their mission of keeping us healthy.  Imagine a car mechanic that took that attitude -- "I'm the expert here and you will pay whatever it costs to do what I say you need to do."  Would you fire the mechanic and find a better and cheaper one, or would you suggest that what we really need is a massive new government bureaucracy to set prices for every imaginable repair a car might need.

Sometimes I suspect much of the support for government health care is from people who see shopping and taking responsibility for their own care as too much of a hassle.

Workers Comp. and Unemployment

Breaking news from California:

The Workers' Compensation Insurance Rating Bureau (WCIRB) made it official and submitted a mid-year filing for a 9.1% increase in the pure premium advisory rate that Insurance Commissioner Dave Jones approved less than six months ago. The proposed July 1 increase follows the 37% increase that Jones approved for January 1 that was hidden by the change in benchmarks for pure premium rates that was made at his request....

The Bureau insists that an increase of this magnitude is necessary to combat the continued deterioration in the claims experience, as well as an uptick in claim frequency in the 2010 accident year. Much of the increase will also go to pay for the higher loss adjustment expenses carriers are incurring fighting liens and litigating permanent disability claims. Projected ALAE costs are up to $11,403 per indemnity claim for the 2011 accident year compared to $10,698 the year before.

A 9.1% increase a half year after a 37% increase is just crazy.  This tends to confirm three issues I have written about before:

  1. People are filing workers comp claims as a substitute for or a supplement to unemployment.  Our company has seen a significant increase in people "coincidentally" suffering an injury on one of the last few days, and particularly the very last day, before they are to be laid off.  Only such fraud explains an increase in claims when economic activity is way down, particularly when more dangerous professions like construction employment fell much more than office employment in the recession.  We have also seen, by the way, an increase in frivolous labor lawsuits in CA coincident with the economic decline.  A year ago I had an employee in CA tell me that she had attended a brainstorming session the night before among several of my ex-employees trying to generate ideas for ways to sue our company.  I can't wait for an improvement in the economy when the returns of working are higher than the returns of brainstorming ways to extract money from our company via the legal system.
  2. California in general does a bad job of policing workers comp. fraud.  Woe to the employer that actually attempts to question an outrageously suspicious claim.  Last time I tried to do so in CA I got slapped with a lawsuit.
  3. All states do a terrible job policing permanent disability claims.  I hire a lot of older workers.  I can't tell you how many people show up at my door trying to be paid under the table because they don't want to endanger their permanent disability by having a record of getting paid for doing very physical outdoor work for us.  They assure me they are 100% capable to do heavy physical labor.  Since I don't pay anyone off the books, they end up finding work elsewhere.   Many of you may not believe such people exist, but I have met a number of folks who consider getting a permanent disability, or at least something a doctor will testify is a permanent disability, the equivalent of hitting the lotto.  I have even been sued by a woman for submitting testimony to the social security administration that might have harmed her chances of getting a permanent disability ruling.  The lawsuit stated that if she was denied the disability payment after I testified that I had seen no evidence of any limitations in what she could do on the job,  that I should be liable for paying her the lifetime amount she would have gotten.  So I wimped out and withdrew my testimony and let the taxpayers pay her rather than farting around with a lawsuit.

Regulation By Market

Best Buy is apparently increasing its customer return window from 14 days to 30 days.

Why?  This certainly costs them money, not just from lost revenue but from the cost of restocking and returning to the manufacture (not to mention fraud).

Are they doing this because they are good guys?  Hah.  Do you really expect goodwill out of an electronic retailer?

They did it because they felt they had to.  As the top dog in dedicated electronics stores, they are constantly under competitive assault.  They are the reference point competitors start from.  Wal-mart attacks them on price.  Amazon.com attacks them on price and convenience.  Smaller retailers attack them on knowledge and integration services.  Everyone attacks them on the niche details like return policies.

Best Buy did this not because they wanted to, but because they felt they had to under competitive pressure.  The accountability enforced by the market works faster, on more relevant variables, and far more powerfully than government regulation.

When the government does regulate variables such as this, such regulation often actually blunts the full accountability of the market.  Retail laws in many European countries set maximum hours and discount levels, protecting large retailers like Best Buy from upstarts trying to provide a better of different service.

Frustrating

This seems to represent the general MSM reaction to Peter Gleick's fraud in obtaining Heartland documents:

Peter Gleick violated a principle rule of the global-warming debate: Climate scientists must be better than their opponents....

It’s very tempting for scientists and their allies to employ to tactics of their over-aggressive critics. Yet the global warming camp must make an affirmative case for ambitious action on carbon emissions. Critics need only poke holes in the scientists’ arguments, or, as is so often the case in global warming debates, merely insist they’ve done so. Manipulation and perfidy work much better for the deniers.

Whatever the misdeeds of those who attack climate research, however braindead the opposition to climate scientists appears to be, advocates degrade themselves when they allow their frustrations to get the better of their ethical responsibilities. They lend credence to the (wrong) impression that both sides of the debate are equally worthy of criticism, that global warming is another ideological war that both sides fight deceitfully. In that context, those who want to spend lots of money to green the economy lose, and those who want to do nothing win. As Rick Santorum tours the country accusing climate activists of treachery and conspiracy, this should be only more obvious.

In other words, shame on Gleick for stooping to the level of those corrupt and evil skeptics.  A sentence or two of denunciation of Gleick for an actual crime, accompanied by 500 words of unsubstantiated ad hominem attacks on skeptics.  Nice.  I try to have a "let's play nice" response and this is what comes back in return?  Very frustrating.

Public vs. Private Privacy Threats

I am always fascinated by folks who fear private power but support continuing increases in public / government power.  For me there is no contest - public power is far more threatening.  This is not because I necesarily trust private corporations like Goldman Sachs or Exxon or Google more than I do public officials.  Its because I have much more avenues of redress to escape the clutches of private companies and/or to enforce accountability on them.  I trust the incentives faced by private actors and the accountability mechanisms in the marketplace far more than I trust those that apply to government.

Here is a good example.  First, Kevin Drum laments the end of privacy because Google has proposed a more intrusive privacy policy.  I am not particularly happy about the changes, but at the end of the day, I am comforted by two things.  One:  I can stop using Google services.  Sure, I use them a lot now, but I don't have to.  After all, I used to be a customer or user of AOL, Compuserve, the Source, Earthlink, and Netscape and managed to move on from those guys.  Second:  At the end of the day, the worst they are tying to do to me is sell me stuff.  You mean, instead of being bombarded by irrelevant ads I will be bombarded by slightly more relevant ads?  Short of attempts of outright fraud like identity theft, the legal uses of this data are limited.

Kevin Drum, who consistently has more faith in the state than in private actors, actually gets at the real problem in passing (my emphasis added)

And yet…I'm just not there yet. It's bad enough that Google can build up a massive and—if we're honest, slightly scary—profile of my activities, but it will be a lot worse when Google and Facebook and Procter & Gamble all get together to merge these profiles into a single uber-database and then sell it off for a fee to anyone with a product to hawk. Or any government agency that thinks this kind of information might be pretty handy.

The last part is key.  Because the worst P&G will do is try to sell you some Charmin.  The government, however, can throw you and jail and take all your property.  Time and again I see people complaining about private power, but at its core their argument really depends on the power of the state to inspire fear.  Michael Moore criticizes private enterprise in Capitalism:  A Love Story, but most of his vignettes actually boil down to private individuals manipulating state power.  In true free market capitalism, his negative examples couldn't occur.  Crony capitalism isn't a problem of private enterprise, its a problem of the increasingly powerful state.  Ditto with Google:  Sure I don't like having my data get sold to marketers, and at some point I may leave Google over it.  But the point is that I can leave Google .... try leaving your government-enforced monopoly utility provider.  Or go find an alternative to the DMV.

A great example of this contrast comes to us from Hawaii:

There may be some trouble brewing in paradise, thanks to a seemingly draconian law currently under consideration in Hawaii's state legislature. If passed, H.B. 2288 would require all ISPs within the state to track and store information on their customers, including details on every website they visit, as well as their own names and addresses. The measure, introduced on Friday, also calls for this information to be recorded on each customer's digital file and stored for a full two years. Perhaps most troubling is the fact that the bill includes virtually no restrictions on how ISPs can use (read: "sell") this information, nor does it specify whether law enforcement authorities would need a court order to obtain a user's dossier from an ISP. And, because it applies to any firm that "provides access to the Internet," the law could conceivably be expanded to include not just service providers, but internet cafes, hotels or other businesses.

Americans fed up with Google's nosiness can simply switch email providers.  But if they live in Hawaii, they will have no escape from the government's intrusiveness.

Crony Capitalism? Blame the Progressives

That is the purposely inflammatory title of my article this week at Forbes.com, finding the roots of crony capitalism not in capitalism itself, but in progressive legislation.  An excerpt:

The core of capitalism has nothing to do with, and is in fact inherently corrupted by, the exercise of state power.  At its heart, capitalism is one simple proposition -- free exchange between individuals based on mutual self-interest.  There is no room in this definition for subsidies or special government preferences or bailouts.  The meat and potatoes activities of crony capitalism are corruptions rather than features of free markets.  Where state power to intervene in economic activity does not exist, neither does cronyism.

Believe it or not, the Occupy movement reminds me of nothing so much as 1832.  Flash back to that year, and you will find Federal officials with almost no power to help or hinder commerce... with one exception: the Second Bank of the United States, a powerful quasi-public institution that used its monopoly on government deposits as a source of funds for private lending.  The bank was accused of using its immense reserves of government cash to influence elections, enrich the favored, and lend based on political rather than economic formulae (any of this sound familiar?).  Andrew Jackson and his supporters, the raucous occupiers of their day, came into office campaigning against the fraud and cronyism at the Bank.

Jackson, much like the current OWS folks, was a strange blend of sometimes frontier anarchist and sometimes tyrannical authoritarian.  But in the case of the Second Bank, the OWS movement could well learn from Jackson.  He didn't propose new and greater powers for government officials to help check abuses of the existing powers -- he proposed to kill the Bank entirely.  Eliminate the source of power, and men can no longer tap it for their own enrichment.

Unfortunately, the progressive Left which makes up most of the OWS movement has taken exactly the opposite approach over the last century or so, expanding government powers and economic institutions (such that today the scope of the second bank seems quaintly limited) and thus the opportunity for cronyism.   In fact, most of the interventions that make crony capitalism possible are facilitated and enabled by the very progressive legislation that the progressive Left and the OWS protesters tend to favor.  Consider some examples...

Blaming the Phone Book

Local Conservative Greg Patterson blames the death of several sex workers in Detroit on the Backpage, because the killer may have targeted them based on their ads in that periodical.

The killers are the ones who should be held responsible, but what about parties whose negligent actions facilitate the killing?  How about the example of a school with poor lighting, or the business with lots of bushes in which bad guys can hide?  There are plenty of cases that show the property owner would be liable for the intentional torts of others.

So New Times knows that Adult ads are used by bad guys...even to the point of murder.  Craigslist stopped accepting these ads after a similar incident and New Times picked up the business...at a considrable profit.  So can they be held accountable for the deaths in Detroit?  I would argue that they can be.  What about future deaths?  What happens if New Times continues to accept adult advertising and someone else gets killed?  Actionable?  I would say yes.

This is exactly the sort of spurious liability logic Conservatives tend to mock, except of course when it involves a target it does not like.  In this case free market Conservatives really hate Backpage for accepting freely placed ads for free exchange involving consensual sex.  I responded in the comments:

Why do you cast so far afield for an analogy in your third to last paragraph [the one above about schools with poor lighting]? Why not take a directly parallel example - what if some killer were stalking Starbucks barristas whose work places he identified through ads in the Republic or via Google Maps? Would you really run around in circles blaming Google? This is like saying that a serial killer is facilitated by the phone companies because they publish the phone book the killer used.

We are talking about ads placed via free exchange for consensual sex. Yes, in our bizarre society, Conservatives who nominally support all other types of free exchange have had this one sort banned. But it is ironically the very fact that this sort of consensual commerce is illegal that makes this work so dangerous. Escorts/hookers are vulnerable to abuse, crime, fraud etc. precisely because they have less ability to access the legal system for redress.

If you want to discuss who facilitated the death of these women, let's talk about those who drove their profession underground.