Balkinization: A Deliberate Evasion of Democracy Through the Administrative Apparatus

Comments:

I too am shocked and appalled that a group of private citizens are coming together to, how shall I put it, petition the government to redress their grievances. Such behavior needs to outlawed post haste!

# posted by

Anonymous : 8:57 PM

I haven't taken admin law yet, but from my albeit limited understanding, Brian's argument seems a bit specious.

First, if an administrative agency acts contrary to the wishes of Congress, the agency can be sued.

Second, Congress can pass a statute making their position clear. Further, Brian even admitted that the current political climate is not favorable to their position. So, it reasonably follows, that if the proposed administrative enactments were so contrary to the will of the new Congress, then the Congress would do something about.

So, to conclude, Brian's little spiel seems vastly overblown.

p.s. Of course, this is based on my layman's knowledge and I could be wrong on any number of points. If so, please explain why I am wrong.

# posted by

humblelawstudent : 9:13 PM

Humble law student, you have much to learn. Point one--if an administrative agency acts contrary to the will of Congress, it can be sued. Well, it a regulation violates an authorizing statute, the regulation must give way. The problem is that statutes are not always clear and agency interpretations of statutes are often given a high degree of deference.

Second, even if Congress were to pass a statute overruling an incorrect agency interpretation or regulation, that bill is subject to a Presidential veto and President Bush has been consistently been biased toward business interests except when public outrage has made it politically impossible to do so (e.g. in the wake of scandals such as Enron and Worldcom, signing Sarbanes Oxley after first opposing it). While business lobbies may lack the legislative clout to get their program enacted by the Congress, they probably have enough influence to get enough votes in Congress to uphold a Presidential veto.

Finally, Brian, we legal academics have not done enough to support the rules and regulations that are under attack. For example, in the Corporate Law arena, the academic conversation has been dominated for years by the law and economics types with their ideological and visceral dislike of government regulations and their blind faith in the ability of markets to take care of all problems. Maybe we legal academics need to make a concerted effort to turn the intellectual tide as well as the political tide.

# posted by

Anonymous : 10:42 PM

unf,

The second group cannot be characterized as "private citizens," given the role of the Treasury Secretary. Perhaps I did not make this clear enough.

Both you and humblelawstudent missed the main thrust of my post: questioning the appropriateness of this deliberate effort to circumvent the democratic process.

Brian

# posted by

Brian Tamanaha : 10:44 PM

Brian,

The "democractic" argument is specious as well (or at least based on the facts you presented, it appears so). Here's why.

You said the groups are presenting their arguments publically next week. Wow, that sounds horribly undemocractic.

As far as I know, none of the proposed administrative changes are coming from members on the committee. So, there isn't an attempt by anyone on the committee to engage in unethical behavior (unless, perhaps you could explain what unethical back and forth is occuring between those on the SEC and the two advocate groups).

What you have explained, a group is simply making public arguments. You haven't alleged any unethical lobbying of the SEC commissioners or the like. So, what is wrong about a fair argument and debate that convinces SEC commissioners in good faith to enact adminstrative changes that are withing their mandate? If it isn't within their mandate, then the agency gets sued.

Should the SEC be prevented from hearing about public arguments over administrative law proposals?

Your argument only seems to work as an indictment of the entire administrative system as a whole, because otherwise your argument just reduces to you not liking the normal results of the administrative apparatus.

I mean, environmental groups try to get the EPA to enforce all sorts of standards without going through Congress. Would you condemn them the same?

# posted by

humblelawstudent : 11:16 PM

After the prosecutorial abuse resulting in the destruction of the Arthur Anderson accounting firm, I can easily see why the accounting industry would want to enact reforms.

The government's prosecution of the entire Arthur Anderson company rather than any specific perpetrators threw 28,000 employees on the street and destroyed tens of millions in equity owned by stockholders, nearly all of whom had nothing to do with any wrongdoing.

By the time the Supreme Court unanimously reversed the criminal verdict, all Arthur Anderson could do is ask: "Where do I go to get my company back?"

The sad thing is that the accounting industry believes that the new Congress would not be receptive to such obviously needed reforms.

# posted by

Bart DePalma : 8:52 AM

i try to stay on the sidelines, but once in a while...

ok bart, if the "sad" thing is that the accounting industry believes that the only way to get around accountability is to petition administrative agencies, rather than a congress that is not believed to be receptive to tort reform, ("where do i go to get my company back?"), then by the same token, where does the public go when their lives are shattered by insider trading, fraudulent accounting schemes, corporate greed, etc., if they are granted shields from private citizens seeking legitimate redress?

the "sad" part is not that corporations and industry have to bear the burden of regulation, but that there is no potential redress for the millions effected by their illegal actions. it's true that not all of the employees of arthur anderson were in on the enron schemes, and who knows what else, but when it comes down to it, who should bear the burden, the innocent employees of enron who also lost their jobs, stock options, pensions, etc. when arthur anderson looked the other way? how about the people of california who ended up paying skyrocketing energy prices when enron tried to manipulate the market while arthur anderson looked the other way? how about the people in the communities where enron and arthur anderson maintained offices who were uprooted and had their local economies tailspin because these companies went belly up when arthur anderson looked the other way?

yes, not every employee, certainly not "28,000" of them were involved, but the true "sad" story, is that without proper regulation and oversight with teeth to it, there is no incentive for corporations or industry to act in a manner that benefits the greater public good rather than simply line their own pockets. if that requires regulation, even regulation the corporation or industry deems to be harsh, then so be it.

... my disclaimer... i am the son of an accountant, who was the finest man i have ever known.

# posted by

phg : 9:27 AM

"Dafting" = Freudian slip?

# posted by

adaplant : 9:44 AM

phg...

ok bart, if the "sad" thing is that the accounting industry believes that the only way to get around accountability is to petition administrative agencies, rather than a congress that is not believed to be receptive to tort reform, ("where do i go to get my company back?"), then by the same token, where does the public go when their lives are shattered by insider trading, fraudulent accounting schemes, corporate greed, etc., if they are granted shields from private citizens seeking legitimate redress?

There are law firms who are more than happy to bring class action civil suits on behalf of employees and shareholders of companies who have allegedly been defrauded in some way. This is a thriving part of the legal industry.

Furthermore, I have no problem with the criminal justice system dealing with individuals within companies who are guilty of criminal acts.

Where I do have a problem is criminally punishing entire entities, their employees and their owners for the criminal acts of a few.

Destroying Arthur Anderson did not provide a remedy for those who had been allegedly defrauded. Indeed, destroying Arthur Anderson arguably dried up the revenue stream for any civil remedy to recover damages.

# posted by

Bart DePalma : 1:02 PM

profhsg: Maybe we legal academics need to make a concerted effort to turn the intellectual tide as well as the political tide.

Hear hear! For starters, how about a repudiation of the "Right Makes Might" gloss the Social Darwinists made of natural selection? After that we (well, "y'all"; I'm only a 2l) could teach folks like Coase the difference between affirmative harms and prohibitive harms and that equating same is illegitimate (I'm thinking of the confectioner and the physician early in "The Problem of Social Cost".) Likewise for worship of "the market" as if it were somehow separate or divisible from "the government." A dose of systems theory might make such folks rethink their (opportunistic) definitions of "externality" as well.

The hard part, of course, will be to avoid the intellectually bankrupt legacy of Marx, a guy who would divide by zero (leastways in what little I've read he never seems to account for the possibility that capital could lose money on the exploitation of labor. And let's not forget the self-sealing premise of "false consciousness," itself very close to the "eternal values" worshiped by the Social Darwinists.)

We are indeed in need of solid conceptual grounding if we want to see a resurgence of the values of Liberty, Justice, Equality. Right now the dominant power is corporate money, which in turn knows no criteria but shareholder return. What if corporations were sworn to uphold and defend the Constitution and its ideals as well as serving shareholder return? Is there any logical, intellectually sound reason not to require as much from our fictitious entities?

# posted by

Robert Link : 3:32 PM

Bart: Where I do have a problem is criminally punishing entire entities, their employees and their owners for the criminal acts of a few.

Bart, when you give your dollar to Dow for a can of scrubbing bubbles with which to clean your toilet, and Dow fouls a water table causing children to die from horrible birth defects, you are complicit. If you *work* for Dow you are that much more complicit. If we are going to create fictional entities which are in reality aggregates of complex relationships of real people, then those people who stand to benefit from the acts of the "entity" they "are part of" must likewise share its downs as well as its ups. Nothing less is just.

Ah, but there is no room for justice in your creed. "...destroyed tens of millions in equity..." That's really the issue, isn't it. "The Market." As if it could ever be separated from people. For you and yours the corporation is a means to maximize profit while minimizing responsibility, and we needn't worry about anything so mundane as human values of responsibility or justice. Either the market will provide them or they weren't really so important in the first place, eh?

# posted by

Robert Link : 3:44 PM

Robert Link said...

Bart: Where I do have a problem is criminally punishing entire entities, their employees and their owners for the criminal acts of a few.

Bart, when you give your dollar to Dow for a can of scrubbing bubbles with which to clean your toilet, and Dow fouls a water table causing children to die from horrible birth defects, you are complicit. If you *work* for Dow you are that much more complicit.

Nonsense. Criminal liability almost always requires intent to commit the crime.

If we are going to create fictional entities which are in reality aggregates of complex relationships of real people, then those people who stand to benefit from the acts of the "entity" they "are part of" must likewise share its downs as well as its ups. Nothing less is just.

That is what a civil suit is for. Do you know the difference between criminal and civil liability?

Ah, but there is no room for justice in your creed. "...destroyed tens of millions in equity..." That's really the issue, isn't it. "The Market." As if it could ever be separated from people. For you and yours the corporation is a means to maximize profit while minimizing responsibility, and we needn't worry about anything so mundane as human values of responsibility or justice. Either the market will provide them or they weren't really so important in the first place, eh?

Spare me the socialist screed. Over half of the nation are now owners of stocks. The vast majority depend on earnings from those investments for their retirements as do many of those who post here.

Destroying Arthur Anderson helped no one. Instead, 28,000 employees were unemployed and millions in retirement savings were destroyed along with the company. Those are the real people who were victimized in this case.

# posted by

Bart DePalma : 6:06 PM

Bart,

I think I agree that destroying Authur Anderson probably hurt more than it helped, but what about an argument that it was institutionally corrupt. Basically, the entire company was systematically corrupt and therefore, rehabilitation of the company couldn't really be acheived. Much better to break it apart, and let the individuals then join other organizations become part of new corporate cultures.

# posted by

humblelawstudent : 6:11 PM

Bart: Over half of the nation are now owners of stocks.

You really are a hoot. I bet you eat up that "Ownership Society" nonsense. What's funny is how your claim actually fits the socialist ideal of "the workers owning the means of production" pretty darned well, yet you accuse me of socialist thought. wtf?

As for the rest of your attempted dodge, I wasn't specifying civil or criminal liability, son; I'm talking morals. Certainly you've at least heard of those. If you are going to create "entities" and let individuals profit from participation therein, well, isn't it the case in a free market that profit goes hand in hand with risk? And complicity with liability?

While I'm here, props to Chris for making a much more articulate, and legal, case.

# posted by

Robert Link : 7:03 PM

humblelawstudent said...
Bart,

I think I agree that destroying Authur Anderson probably hurt more than it helped, but what about an argument that it was institutionally corrupt. Basically, the entire company was systematically corrupt and therefore, rehabilitation of the company couldn't really be acheived. Much better to break it apart, and let the individuals then join other organizations become part of new corporate cultures.

What about this argument? Do you have any evidence to back it up? I have never seen evidence that the entire company of Arthur Anderson was systematically corrupt.

# posted by

Bart DePalma : 8:36 PM

Robert Link said...

Bart: Over half of the nation are now owners of stocks.

You really are a hoot. I bet you eat up that "Ownership Society" nonsense.

I live it.

I come from a blue collar family. That didn't keep me from starting my own law firm and investing in my own stocks.

If you want to depend on SS or a pension, good luck to you. I will probably meet you as a Walmart greeter when we retire.

What's funny is how your claim actually fits the socialist ideal of "the workers owning the means of production" pretty darned well, yet you accuse me of socialist thought. wtf?

Socialism is the state owning the means of production. Capitalism is about people owning their means of production.

# posted by

Bart DePalma : 8:42 PM

Bart: Socialism is the state owning the means of production. Capitalism is about people owning their means of production.

Bart, this kind of semi-literate nonsense, combined with the cheap rhetorical shenanigans of gross sentimentalism in lieu of legitimate reasoned argumentation is why I really wish the killfile script worked on the post-a-comment page.

Socialism is the people owning their means of production. You naively confuse totalitarian regimes which claimed a goal of a socialist ideal as their source of legitimacy with the ideal itself (which makes an interesting complement for the way you are blinded by the "ideals" mouthed by the PNAC to hide its rapacious greed, thus never seeing the rapacious greed itself.) Clearly it's a powerful ideal because folks like you and Professor Bainbridge are easily suckered into it, at least if the Cato Institute offers it up with a sexy name like "The Ownership Society". Capitalism, by contrast, is capitalists owning the means of production and relies, in its purest form, on a divide between the haves and the have-nots such as to provide a workforce. Add in distinctions such as "mixed economy" and collectivism and requisite specialization and the discussion rapidly becomes much more complex than your parroting can cope with.

Congratulations on busting out of "the working class," and into "the professions." A damned shame you didn't learn the difference between pandering to the audience and legitimate reasoning along the way.

# posted by

Robert Link : 10:06 PM

Bart,

I have no more knowledge that what I've gleaned from reading articles on the subject. I do not confess any expertise. I just think is a seemingly reasonable argument if AA was systematically corrupt (which I don't know one way or another).

# posted by

humblelawstudent : 12:42 AM

Robert,

Some do hold varying definitions of socialism, but from every politicial theory class I've ever had, the traditional view is that socialism is state ownership of the means of production.

Marx, who was hardly semi-literate though full of nonsense to quote, "[viewed socialism] as a transitional stage characterized by state ownership of the means of production. They see this stage in history as a transition between capitalism and communism, the final stage of history" to quote wikipedia.

Yes, there are other definitions of socialism, but Bart's and Marx's is the traditional understanding. So, you may prefer another, but it is hardly semi-literate nonsense.

# posted by

humblelawstudent : 12:53 AM

RL: Either the market will provide them or they weren't really so important in the first place, eh?

BD:Spare me the socialist screed. Over half of the nation are now owners of stocks. The vast majority depend on earnings from those investments for their retirements as do many of those who post here.

RL:
What's funny is how your claim actually fits the socialist ideal of "the workers owning the means of production" pretty darned well, yet you accuse me of socialist thought. wtf?

Insofar as we construe mass stock ownership as participation in control over specific means of production, spreading control over half of the American population could indeed be considered a weak form of socialism, as it dilutes control previously held by smaller groups of people and extends them out to the nation at large. In this way, it is parallel to state apparati in traditional socialist models, as the socialist state is presumed to represent the population in its entirety, and not favor specific interests or classes over others. Spreading the love across the entire nation can be considered socialistic whether you atomize or concentrate the particular brand of love you are spreading.

However, it begs the question of whether stock ownership does in fact allow the owner to exercise control over production, especially when decisions to pay dividends are generally made by a board of directors. If you can only extrude benefit from another person's labor by the will of a third party, chances are you're not actually in control of the means of production.

So, I'd probably opt for saying the promoters of the "ownership society" use communitarian language to disguise a set of supposedly libertarian policies that seek to make each individual (and ideally no one else) responsible for their own life. As concentrations of wealth are not likely to be trimmed (by abolishing inheritance, for example), pre-existing gaps between groups in terms of wealth are likely to be reinforced, if not widened. As such, Robert, I'm not sure I would say it fits the socialist ideal, but then I suspect that particular disconnect is the source of your amusement.

# posted by

PMS_CC : 1:25 PM

Socialism always was and always will be control over some or all of the economy by the state. The theory may have been that that state was acting on behalf of the "workers," but the reality has always been that the state acts on its own behalf.

Conversely, free markets are the antithesis of socialism and perhaps the purest form of democracy. You get to decide whether you want to spend your money investing in a business or buying that business' products. You are not saddled with majority rule on what you purchase as you are with a democratic government. You get to make the decisions yourself to get exactly the equity, goods or services you want.

While you can make an excellent argument that free markets provide the best opportunity for the greatest number of people to control the means of production through ownership, it would be mistaken to argue that this makes free markets socialistic.

As for the issue of control, the consumers of equities have the same absolute control as do consumers of products. Companies conform their behavior to the wishes of stockholders or consumers or they can easily go somewhere else with their money. While you may not run the day to day operations of a company by purchasing a share of stock, you are casting a vote of confidence in the way that company is being managed by purchasing that stock and can cast a negative vote by selling the stock.

# posted by

Bart DePalma : 3:21 PM

Socialism always was and always will be control over some or all of the economy by the state.

This statement is incorrect. The state is not a necessary condition of socialism qua socialism. To claim such is to support a vulgar interpretation of Marx's teleology that placed socialism as a necessary phase in the transition from capitalism towards communism.

However, as humblelawstudent mentioned earlier, there is more than one kind of socialism, and with it more than one method of oversight.

While you may not run the day to day operations of a company by purchasing a share of stock, you are casting a vote of confidence in the way that company is being managed by purchasing that stock and can cast a negative vote by selling the stock.

Which returns us to the questions raised in the original post. If an investor in our theoretical free market society casts a vote of confidence (i.e. purchases stock or does not sell previously acquired stock) in a company based on reports that the company made, and those reports later are found to have contained fraudulent or misleading information about the company's strength, should the investor have recourse to sue the corporation for compensation? Similarly, if a third party corporation that has a reputation for honesty in financial oversight intentionally misrepresents the strength of a given company, should it be liable for such misrepresentation?

Or should the government place impediments in the path of the private investor seeking such recourse in favor of preserving larger business interests?

The idea that government needs to intervene to limit the liability of corporations for defrauding investors is not only repugnant in a moral sense--it would seem to abuse the very principles of neoliberalism that the proponents of such regulation claim to espouse.

# posted by

PMS_CC : 4:14 PM

PMS_Chicago said...

Socialism always was and always will be control over some or all of the economy by the state.

This statement is incorrect. The state is not a necessary condition of socialism qua socialism. To claim such is to support a vulgar interpretation of Marx's teleology that placed socialism as a necessary phase in the transition from capitalism towards communism.

I am not dealing with fiction being presented as theory, I am talking about reality.

Find me a single socialist country where the state did not control some or all of the economy in the name of the people.

I do not care what Marx wrote in his utopian tract.

However, as humblelawstudent mentioned earlier, there is more than one kind of socialism, and with it more than one method of oversight.

This is partially correct. Every version of socialism employs state control over the economy. However, the methodology does differ. Some governments owned and operated the economy. Others simply instructed the nominally private companies how to operate through regulations.

# posted by

Bart DePalma : 9:38 AM

burnspbesq said...

As is seemingly always the case, Bart refuses to let the facts get in the way of a good story.

Andersen was a partnership. It is hornbook agency law that partnerships are responsible for the acts of their partners.

I never said anything different.

I made a policy argument that Arthur Anderson should have been civilly liable but should not have been criminally liable and, thus, I supported the reforms of the criminal prosecution of companies.

The only fair reading of the Supreme Court's opinion vacating Andersen's conviction is that Andersen was guilty of the offense charged, but an overzealous AUSA submitted a non-standard jury instruction that was fatally ambiguous.

The Court did not make any judgment on the evidence.

# posted by

Bart DePalma : 9:45 AM

I am not dealing with fiction being presented as theory, I am talking about reality.

I'm talking about reality, too. You are too beholden by the modern concept of the "nation-state" to understand that socialist ideals can exist outside of that framework. Your insistence on being shown a "single socialist country" belies your reliance on the Marxist notion of socialism. In that respect, like it or not, you are a Marxist. You may "not care what he wrote in his utopian tract," but you appear to have swallowed that portion of it hook, line, and sinker!

Ethnographic and archaeological investigations of redistributive networks suggest that kinship groups (as well as other non-state polities) are quite sufficient for effecting "socialist economies." In short, as I said before, the state is not a requirement of socialism--except (and only if you believe Marx) under a model that seeks to plot a course from capitalism.

# posted by

PMS_CC : 1:13 PM