Coulter's Law
by Donald Devine

Ann Coulter may go over the top sometimes but she understands today’s legal morass. “You can make 30 times more money than doctors by becoming a trial lawyer suing doctors. You need no skills, no superior board scores, no decade of training and no sleepless residency. It's only a matter of time before the best and brightest students forget about medical school and go to law school instead. How long can a society based on suing the productive last?”

It is a good question. And it is not only physicians. Come on—making the Knicks’ Isaiah Thomas pay $11 million for a basketball coach being crude? Like physicians, corporate executives do critical productive work but they are in the legal bulls-eye even more. At the fifth anniversary of the establishment of the Corporate Fraud Task Force consisting of the heads or top deputies of all the national government’s enforcement agencies, the nation’s top legal official, Attorney General Alberto Gonzales, bragged: “By May of 2007, we'd obtained more than 1,200 convictions, including 214 corporate chief executives or presidents.”

He exaggerated a bit but his Department of Justice proudly produced the precise facts. This Force, set up with concentrated powers only previously exercised against the mafia, was established in the wake of the 1990s market bubble bust with the sole mission of targeting businessmen actually convicted or plea bargained into jail 82 chief executives, 85 corporate presidents, 102 vice presidents, 36 chief financial officers, 14 chief operating officers and one thousand managers.

Mostly they were charged with “fraud” but then why did the defrauded not file the cases instead of the government? These should be civil cases. But the public was angry over the market losses (although no one complained about the billions earned before the bubble burst) and the government served up the indictments, mostly for mere “conspiracy.” Most were plea-bargained and the sentences were of a length unheard of even compared to the 1980s insider-trading and savings and loan scandals. Ordinary people simply are not sympathetic to rich people. So WorldCom’s Bernie Ebbers received 25 years, Adelphia’s John Rigas 15 years, and Tyco’s L. Dennis Kozlowski 8 to 25 years. Poor Martha Stewart received 5 months in prison and five under house arrest for conspiracy even though the prosecutors found no underlying crime to conspire about,

The only problem was that in a case against the accounting firm KPMG Federal Judge Lewis A. Kaplan found that the Force’s main weapon, its “Principles of Federal Prosecution of Business Organizations,” violated the Sixth and Fourteenth Amendments. How? Prosecutors were allowed to rule that a corporation was not “cooperating” with an investigation if it refused to waive its attorney-client privilege in regard to conversations by its employees or if a company paid attorneys’ fees for its employees. If they did these terrible things defending their employees and paying their attorney fees (for doing company business, after all), company executives were considered uncooperative and made targets of the investigation. Consequently, most firms were intimidated to “cooperate” against their employees and required them to pay their attorneys making it more difficult to defend themselves.

Either way, the prosecutors had easier targets. With millions of (often conflicting) laws on every economic activity imaginable in the dozens of agencies on the Force with the great power of the national government unified against them, the businessmen did not have a chance. Prosecutors know that if they observe any person long enough they are bound to disobey some law so when people demand action in an area like a market bubble bursting, a victim is always ready at hand, especially unpopular ones like the rich. In light of the court opinion, Justice did revise its Principles. But it was too late for the 214.

The whole legal tort system has gone wild. Towers-Perrin-Tillinghast has released its most recent update on the American tort system, this time with international comparisons. U.S. tort costs grew by 5.9 percent in 2004, the last year data are available. The total cost was $260 billion or $886 for every American that year. Torts represented 2.22 percent of total Gross Domestic Product (three times the farm economy and about the size of the trade deficit), up significantly since the 1980s. Inflation-adjusted costs per capita were almost double what they were in 1980. No other country spends nearly as much. The second most expensive, Italy, had almost one quarter lower legal overhead. American tort costs as a percentage of GDP were twice or more higher than in the rest of the world. This week the Supreme Court is deciding whether to expand those who can be sued from those thought guilty of fraud to those who only do business with those who are fraudulent. The costs will quadruple if the justices agree with the trial bar.

Why does any of this matter? Well, justice is supposed to be the purpose of government. If the law does not work fairly, government is a failure. While violent crime has its own problems in the U.S., and the number of prisoners freed by DNA tests is disquieting, white collar rules affect the productive classes that make the economy work. Prosecutors have all of the tools to dominate what should be a civil case consisting of relatively equal litigants. Jury sympathy is usually with the weaker or poorer party. Aiming at these middle class producers hits society right back in the pocketbook. If the potentially productive are intimidated by unfair rules, they will not produce. This is precisely why most of the world lags so in productivity and wealth. In fact, having a respected and fair rule of law is what differentiates a decent and successful society from a chaotic one.

The World Bank and many other studies show conclusively that rule of law is what makes societies work. Whether a country has democratic elections or not is not that important to economic success or even to stable and free government. The amount of education people receive does not help much—after all many are taught the wrong things. The amount government spends on health and welfare does not help either. In fact it retards prosperity worldwide. Open markets and trade help but by far the largest reason some nations succeed economically and politically and others do not is because the former have a rule of law and the later do not.

Rule of law does not mean there are many tough rules enforced by tougher cops. Quite the opposite in fact—all nations have tough cops and tough laws. It is the nature of the law that counts. The philosopher who inspired our Declaration of Independence, John Locke, set that standard. Law must be “established, settled, known law,” based on “common consent to be the standard of right and wrong and the common measure to decide all controversies.” They must be “promulgated, established laws, not to be varied in particular cases but to have one rule for rich and poor, the favorite at court and the countryman at plow."

Today no one knows all the laws he is subject to in the U.S. Thousands of laws are passed each year and they accumulate since few are repealed. Bureaucratic regulators pass many times more rules that have the force of law. Even lawyers need to specialize since not even the experts know the law outside one’s narrow field. The laws are not “known,” much less established or settled or based on common experience. If one cannot know the laws it is impossible to obey them, especially when there are so many and mostly vague.

On top of this, Americans by and large are individualists. Individualists do not like rules. So Americans break laws every day, although not the violent ones that are based on common experience. Even mandatory insurance laws are avoided by a quarter or more of the population. Tens of millions of otherwise innocents are made criminals by anti-gun laws. How many keep their seat belts buckled from entry to leaving the car, all the time? Do people fill the proper labor and tax forms to hire household help? Who does not go above the (too low) speed limit? Under these circumstances, everyone is guilty and there is no real law. And more such laws are created every day.

When a Stanford University professor like Robert Weisberg can say “It is hard to remember a major fraud case that went to jury trial that led to an acquittal” (actually Health-South CEO Richard Scrushy was acquitted but he is now back in court for supposedly “unrelated charges”), that the rules favor the unproductive lawyers and bureaucrats, and that over 90 percent of convictions are by plea bargains rather than trials there is something seriously is wrong with the legal system. Why is Ms. Coulter the only one talking about this scandal?

Donald Devine, the editor of Conservative Battleline Online, was the director of the U.S. Office of Personnel Management from 1981 to 1985 and is the director of the Federalist Leadership Center at Bellevue University.