Politics, et Cetera
A publication from The Political Forum, LLC
Tuesday, January 27, 2015
They Said It:
In many ways, however, communism was less a threat to freedom and free enterprise than corruption is today….Unlike commuism, corruption is not an outside threat. Nor is it something new. Corruption is endemic to capitalism. And it is as old as humankind. Adam Smith, who first identified and explained the principles of capitalism, was acutely aware of this. Both his major book, The Theory of Moral Sentiments and The Wealth of Nations, are filled with admonitions that corruption is the greatest threat to the social and economic benefits of free markets.
And contrary to popular belief, Smith did not argue that society would be best served if each individual acted solely in his or her selfish interest. In fact, Smith believed that a high degree of respect for the rule of law and traditional moral and ethical norms was absolutely necessary to assure the natural, predatory aspects of laissez-faire commerce were kept in check….
“If honest capitalism cannot be sustained in the United States, with its long history of respect for moral and ethical behavior and the rule of law, then it will disappear from the world. And, therefore, it is incumbent on all Americans, but most especially the nation’s business community and its politicians to be scrupulously honest in their dealings, both there and abroad.”
Mark Melcher and Steve Soukup, “Challenges Ahead for Capitalism,” Lehman Brothers’ Washington Weekly, April 16, 2001.
SHELDON SILVER AND THE RULING CLASS IN THE ADMINISTRATIVE STATE.
Even with the Middle East continuing its perpetual slide into anarchy, the Greeks proving that history repeats as farce, the President of the United States promising to appropriate the college savings of middle class Americans, and – GASP! – the New England Patriots playing with saggy balls, we still think that perhaps the most important story of the week, if not the year, is one that most media outlets are treating as a mere local/community interest story, a tale with little national impact that will and should be all but forgotten in the very near future.
Those of you in New York have probably seen and read a great deal about Sheldon Silver over the last several days. Those of you not in New York . . . well . . . you probably haven’t. You’re probably aware that Silver, the Speaker of the New York State Assembly and one of the most powerful men in the state, was arrested last week on bribery and corruption charges. You may even know how the bribery scheme worked and how Silver got paid some $6 million in “referral fees” over the course of just over a decade. But unless you have a keen interest in legal/legislative bribery or a strange fascination with New York state politics, then the odds are pretty good that you haven’t found the tale of Shelly Silver to be particularly riveting. A powerful politician turns out to be a crook. So what? Dog bites man. Who didn’t know?
Well, as it just so happens, the Sheldon Silver case is a big deal, whether anyone outside of a handful of local and state reporters in New York knows it. In fact, it’s a huge deal in that it explains a great deal about what is wrong with our political system today. Interestingly – remarkably, we suppose – this tale of bribery and fraud also connects two of our old passions from the last decade – political corruption and asbestos litigation reform – making the story especially difficult for us to overlook.
Before we get into those two passions, though, we’d like to take a few minutes to explain what the Sheldon Silver scandal is not, if for no other reason than the fact that those few who are covering the story seem to have much of it backward. For starters, this was not an isolated crime, implicating one politician, one doctor, and one law firm. It is much, much bigger than that. Indeed, we’d say that this case goes to the heart of contemporary American politics and indicts much of the ruling class, in addition to Silver.
Additionally, and perhaps more to the point, this is not an indictment of our campaign finance system. Over the weekend, Zephyr Teachout, the law professor at Fordham University who challenged Governor Andrew Cuomo for the Democratic nomination last year, penned an op-ed for the New York Times insisting just that. She put it this way:
Albany is reeling, but fighting the kind of corruption that plagues not only New York State but the whole nation isn’t just about getting cuffs on the right guy. As with the recent conviction of the former Virginia governor Bob McDonnell for receiving improper gifts and loans, a fixation on plain graft misses the more pernicious poison that has entered our system.
Corruption exists when institutions and officials charged with serving the public serve their own ends. Under current law, campaign contributions are illegal if there is an explicit quid pro quo, and legal if there isn’t. But legal campaign contributions can be as bad as bribes in creating obligations. The corruption that hides in plain sight is the real threat to our democracy.
Think of campaign contributions as the gateway drug to bribes. In our private financing system, candidates are trained to respond to campaign cash and serve donors’ interests. Politicians are expected to spend half their time talking to funders and to keep them happy. Given this context, it’s not hard to see how a bribery charge can feel like a technical argument instead of a moral one.
This is as silly as it is trite. And you would think that a law professor would know that. If we had to guess, we’d say that this particular law professor, Ms. Teachout, does indeed know it, but chooses to ignore it for personal and political reasons.
The fact of the matter is that the business of lobbying and contributing to campaigns is NOTHING like the graft of which Sheldon Silver is accused. Campaign contributions are regulated by law – countless laws, in fact. Contributions must be disclosed, meaning that they are public record. They are capped by law. Most notably, campaign contributions must be used . . . for CAMPAIGNS! This is basic stuff. The money Silver received was not only illegal, it was never disclosed; it was not capped; and it was for his own PERSONAL benefit. He grew rich while taking money that affected his performance as a legislator, and no one – at least no one who wasn’t in on it – knew anything about it. The differences between the two are so significant and so obvious that anyone with any sense at all can see them, including, we presume, Zephyr Teachout.
Teachout tries so very hard to turn this into a question of campaign finance, which she distinguishes from “graft” only in that it is legal, simply because she wants to rail against the current campaign finance regime. That’s the axe she wants to grind, and so everything she sees is a grindstone. She thinks she could have and should have beaten Cuomo, but was denied her rightful place by the “corrupt” system. In a broader sense, she thinks that she and her fellow Progressives would do far better in their pursuit of higher office if they could just find a way around the corporatist machine that dominates American politics.
Maybe she’s right. Who knows? But it’s beside the point anyway. The fact of the matter is that lobbying and campaign contributions exist because the Constitution says they must. The First Amendment doesn’t just provide for freedom of speech and press and religion. It also provides the people with the right to “petition the Government for a redress of grievances.” And in an interest-group democracy, where the bureaucratic regime dominates the policy process, the ONLY way that the people can petition their government is through lobbying and campaign contributions. It may be an ugly and corrupting system, but it’s an ugly and corrupting system made necessary by the existence of the bureaucratic state advocated and encouraged by the likes of Zephyr Teachout. If you want to eliminate the corrupting nature of the system, you must first eliminate a government that has the power to necessitate the redress of grievances in the first place. Or . . . you can re-amend the First Amendment to eliminate the “redress of grievances” clause. Short of that, however, the system, corrupt though it may be, is the only system that passes Constitutional muster.
Of course, Teachout’s argument falls apart even more precipitously the more you know about the Silver case. She wants us to believe that this is a case of illegal money being so similar to legal money as to make any moral distinction meaningless. She wants to us to buy the notion that appearances are all that matter. And since what Silver did kinda looks like what men, women, and corporations do legally every day throughout the country, we should therefore ban the latter. This is an argument similar to those mounted in defense of gun control: criminals can’t be trusted with guns, therefore all law-abiding citizens must give up theirs – and their Constitutional rights. This is shallow and irrational, in addition to foolish. If you outlaw guns, they say, then only outlaws will have them. Likewise, if you outlaw campaign contributions, then only outlaws will have access to politicians through financial means.
More to the point, in the specific case of Sheldon Silver the corruption caused by money is so layered, so complex, and so detrimental to the state and its legitimate purview as to render the entirety of the administrative state completely and utterly hopeless. The Sheldon Silver case involves legal and illegal money working together to damage the legitimate interests of the state, to destroy a handful of particularly unfortunate industries, to deprive the people of the nation of justice, to corrupt the legal system, and, in the process, to enrich one, specific, well-connected interest group that harnessed the corrupt system to its advantage.
You see, Sheldon Silver and the law firm that paid him the $4+ million that he didn’t earn are knee-deep in asbestos. Not the heat-resistant carcinogen itself, mind you, but asbestos litigation. And as any schoolboy knows – particularly any schoolboy who has read these pages for more than a few years – asbestos litigation is perhaps the most corrupt and corrupting legal game ever to be played in this country. In a bizarrely – but not surprisingly – sympathetic piece, the New York Times explained the asbestos connection as follows:
In the criminal complaint against Sheldon Silver, he is identified simply as “Doctor-1.” But Dr. Robert N. Taub, who headed a Columbia University center dedicated to curing a rare form of cancer caused by asbestos, is no ordinary doctor. With a reputation as a devoted clinician intent on trying out innovative therapies, Dr. Taub is something of a hero in the world of mesothelioma, a devastating cancer that is nearly always fatal. Specializing in abdominal cases, a particularly horrific form of the disease, Dr. Taub, 78, attracted last-chance patients from across the country and the world.
The balding, bow-tied oncologist would then seem to be the unlikeliest of candidates to become caught up in a criminal scheme that may lead to the downfall of Mr. Silver, the longtime speaker of the New York State Assembly and one of the state’s most powerful politicians. Dr. Taub, however, was obsessive about raising money for mesothelioma research, according to current and former colleagues.
That, it turns out, helped set off the extraordinary chain of events that culminated with Mr. Silver surrendering to federal agents on Thursday and the doctor losing his post on Friday. Prosecutors say Dr. Taub referred his patients to a law firm that employed Mr. Silver, enabling him to garner millions. In exchange, Mr. Silver secretly directed state money to the doctor’s center. . . .
For plaintiffs’ lawyers, mesothelioma patients are a bonanza, worth $1.5 million to $2 million on average per case, according to legal experts; individual cases can yield much more. The hunger for these clients is evident to anyone who has watched late-night cable television and seen the garish ads aimed at those afflicted with the disease.
Mesothelioma doctors can offer a direct path to a big payday for law firms, whose courting of such doctors can be relentless, with dinner invitations, tickets to Yankees games and offers of work as expert witnesses. Some doctors, in turn, have set up research centers and asked lawyers to contribute.
A symbiotic relationship has emerged, with lawyers financing research on the disease for doctors who send along streams of potentially lucrative clients. . . .
Soon after Dr. Taub began referring patients, Mr. Silver told him to write a letter and request state funds for his research. The doctor did so.
In 2005, just as Mr. Silver’s referral income from the Weitz firm began to balloon, records show that he directed a state grant worth $250,000 to Dr. Taub for asbestos research, ostensibly related to the Sept. 11, 2001, terrorist attacks. In October 2006, Dr. Taub wrote to Mr. Silver to request another $250,000 grant. A few months later, the money arrived.
Both times, the plans submitted by Dr. Taub’s center said the money would go toward studying the general treatment of mesothelioma, making only passing reference to those who may have been exposed to asbestos after the attacks on the World Trade Center. At the time, the grants were hidden from public view, drawn from a pool of money that Mr. Silver awarded at his discretion without having to disclose where it went, the complaint said.
Poor Dr. Taub. So desperate for funding was he that he “referred” patients to a law firm that could sue asbestos manufacturers into bankruptcy, thereby ensuring that the patients he referred got paid, while patients who didn’t file as swiftly got screwed, all the while making the partners at the law firm filthy rich. What a guy! His heart was in the right place, though, the Times tells us. All the poor schlub ever wanted was to make things right and to fund his research.
What the Times doesn’t bother to mention is the fact that the asbestos-referral trick is one of the oldest in the proverbial book. Doctors refer patients; lawyers sue; doctors provide corroborating medical testimony; manufacturer settles; everybody gets a cut, whether the patient was especially sick or not. In a 2004 piece, Stuart Taylor, the legal affairs columnist and reporter for National Journal, explained the scam and its prevalence as follows:
“Asbestos litigation has become a malignant enterprise which mostly consists of a massive client-recruitment effort that accounts for as much as 90 percent of all claims currently being generated, supported by baseless medical evidence which is not generated by good-faith medical practice, but rather is primarily a function of the compensation paid, and by claimant testimony scripted by lawyers to identify exposure to certain defendants’ products.”
So says law professor Lester Brickman, the leading scholarly critic of the 50,000 to 100,000 asbestos-related injury claims being filed each year by people who, 90 percent of the time, Brickman says, “have no discernable illness or impairment.” Rather, they and their lawyers “have cashed in on this national tragedy” by filing claims based on “specious medical evidence.”
These disturbing contentions come in a 137-page article to be published this month in The Pepperdine Law Review. They suggest at least the possibility of ongoing corruption of the civil justice system on a staggering scale by powerful plaintiffs lawyers, with the help of complaisant judges — many of whom are politically indebted to the lawyers — while the U.S. Supreme Court primly averts its eyes.
Brickman’s view is disputed by most of the plaintiffs bar. The evidence that he cites has largely been ignored by the courts and other academics. And those who profit from asbestos lawsuits will be quick to point out that Brickman, a professor at the Cardozo Law School of Yeshiva University, has done paid consulting work for asbestos defendants.
But Brickman’s empirical research is so massive, his scholarship so meticulous, and his 526 footnotes so crammed with compelling evidence, that his article — together with the work of a handful of investigative reporters — should shift the burden of proof in public debate to those who defend the legitimacy of the asbestos-claims industry.
Now, to be fair, just because Dr. Taub and the Weitz law firm we’re in the asbestos game, that doesn’t mean they were necessarily doing anything fraudulent or even deceptive. In fact, the Weitz law firm does not stand accused of any wrongdoing by the federal investigation. Of course, at the same time, the Times notes that “For his part, Dr. Taub served as an expert witness for the Weitz firm as recently as a 2013 case in federal court in Pennsylvania. Legal records show that his rate for working on the case was $1,750 per hour, plus $7,500 per day for testimony when overnight travel was required.” Additionally, Taub has “received a nonprosecution agreement in exchange for his cooperation in the case. . . . ”
Again, this should not be taken to implicate either the law firm or Dr. Taub in anything illegal or fraudulent. Only Sheldon Silver stands accused of fraud.
Of course, one needn’t be involved in fraud to be on the wrong side – morally, at least – of the asbestos issue.
You see, the asbestos litigation mess dates back more than a quarter century. A handful of plaintiffs would sue large asbestos-related companies. They’d win huge settlements. The companies in question would file for bankruptcy. Only a handful of victims would get paid and the lawyers would make out like bandits. And so it went.
By 1993, the situation had grown so precarious that even some in the trial bar had grown worried and thus began to fret about the future of asbestos companies and thus about the future of the very lucrative asbestos litigation business. In January of that year, the relevant parties in the asbestos litigation mess – the plaintiffs’ bar and the defendant corporations that had used or produced asbestos – petitioned The United States District Court for the Eastern District of Pennsylvania to certify a settlement that would ensure fair payment of compensation to the victims of asbestos while maintaining the viability of the companies involved so as to allow them to continue compensation. Said agreement was produced only after years of negotiations, years of investigation and advice offered by legal panels, including one appointed by the Supreme Court itself, and years of victims bankrupting asbestos companies in tort litigation.
The agreement was also produced purely from desperation. As the United States Judicial Conference Ad Hoc Committee on Asbestos Litigation (appointed by the Supreme Court in 1990) put it:
The most objectionable aspects of asbestos litigation can be briefly summarized: dockets in both federal and state courts continue to grow; long delays are routine; trials are too long; the same issues are litigated over and over; transaction costs exceed the victims’ recovery by nearly two to one; exhaustion of assets threatens and distorts the process; and future claimants may lose altogether.”
That Ad Hoc committee acknowledged in its analysis that the only real answer to the problem was “a Congressional response.” But that response never came. And so the parties took matters into their own hands, and forged their own agreement.
The agreement was ultimately rejected by the United States Supreme Court four years later, in its ruling on Amchem v. Windsor. Not surprisingly, both the majority opinion in the case (authored by Justice Ruth Bader Ginsburg) and a concurring opinion (written by Justice David Souter) virtually begged Congress to take action, given the fact that the courts had no jurisdiction. As Ginsburg put it her opinion: “The argument is sensibly made that a nationwide administrative claims processing regime would provide the most secure, fair, and efficient means of compensating victims of asbestos exposure.” The problem, she continued, is that “Congress . . . has not adopted such a solution.”
Now, the technical justification for the Court’s ruling in the Amchem case hinged on the creation of a “settlement only class,” which, the Court ruled, violated Rule 23 of the Federal Rules of Civil Procedure. According to the Supreme Court, the judiciary could not create such a class; it required an act of Congress.
And yet, as the Ad Hoc Committee on Asbestos Litigation noted in its 1990 report, a “settlement-only” class was absolutely necessary in order to end distortions of the process and ensure that ALL victims would receive compensation. If victims were allowed to continue to proceed with their cases outside of the class, then their attorneys would continue to prey upon hand-picked juries and would continue to be awarded disproportionate settlements, thereby bankrupting the liable companies. And this, in turn, would prove disastrous for the unlucky victims not yet compensated. The lawyers would get rich; the companies would get knocked around; and the victims would get screwed. All of which is to say that a legislative solution was the only possible answer, the only possible way to prevent victims from taking it in the shorts so that a handful of trial lawyers could get rich.
And indeed, in the years immediately following the Supreme Court’s Amchem ruling, companies such as Babcock & Wilcox, G-I Holdings, W.R. Grace, and Owens Corning were forced into bankruptcy because of their exposure to asbestos litigation. Others, notably Georgia-Pacific, 3M, and Halliburton, were gravely threatened for the same reason. Without the liability guarantee provided by the Amchem settlement-only class, too many of these companies were simply unable to continue. And, not coincidentally, too many of their former employees and other plaintiffs were simply unable to recover damages.
Also in the years after Anchem, Congress did indeed try to reform the asbestos litigation mess. Always, however, there were a handful of holdouts – mostly in the Senate – who had the ability to forestall legislation and thus to preserve the status quo, which favored a small handful of plaintiffs’ lawyers. In 2000, for example, asbestos litigation reform legislation was introduced in both houses of Congress, but died a swift death in the Senate, when Senate Majority Leader Trent Lott announced – early in the session – that his august body simply would not have time to address the bill. It is worth noting, we think, that at that time, one of the most successful asbestos litigation lawyers in the country was Dickie Scruggs, the so-called “king of torts,” who made a mint on asbestos and a mint on tobacco, and who later went to prison for attempting to bribe a federal judge. Scruggs is also Trent Lott’s brother-in-law.
Throughout the Bush administration, Congress made several more attempts to enact a legislative solution to the asbestos problem. In 2005, just after his re-election, Bush announced that his three priorities for the year would be tax reform, Social Security reform, and tort reform – with a special emphasis on asbestos torts. That year, as in previous years, the effort failed. And they always failed for the same reason. As a big time Wall Street brokerage house report noted at the time:
Democrats have ideological and practical reasons to oppose a legislative solution at this point . . . Congressional Democrats have a vested financial interest in the current status quo. The current asbestos tort system has been a financial boon to trial lawyers, who contribute heavily and overwhelmingly to Democratic political candidates. In supporting asbestos legislation, Democrats would run the risk of crossing one of their most generous and most consistent constituencies.
If you ask us, this report, pulled its punches a bit on the Democrat-trial lawyer connection. The Democratic Party is, was, and ever shall be a wholly owned subsidiary of the plaintiffs’ bar. Of course, this report could only hint at that because big Wall Street firms can’t be as honest as independent firms can be. And how do we know this? Well, mostly because the above report was written by yours truly, back in a previous incarnation. We knew then that the trial lawyers would never let an asbestos litigation reform bill pass and we said as much, as delicately as our now-defunct firm insisted. And indeed, asbestos litigation reform legislation has never even come close to passage.
Given this, the bankruptcies, the fraud and the enrichment of the trial bar have all continued apace. Just last week, for example, Reuters reported the following:
U.S. personal injury lawyers allegedly concealed evidence and induced clients to commit perjury to drive up asbestos-related settlements and garner bigger fees, according to lawsuits unsealed on Tuesday in the bankruptcy of a gasket maker.
The unsealed racketeering complaints alleged that four law firms sued Garlock Sealing Technologies, which made asbestos-lined gaskets, while hiding evidence that their clients were exposed to asbestos products made by other companies.
The evidence was allegedly hidden because the other companies were bankrupt, making Garlock a much more attractive target for an asbestos lawsuit, according to the complaints. . . .
The unsealed complaints cite many examples of alleged fraud, including the Shein Law Center’s handling of a lawsuit by Vincent Golini, who was diagnosed with deadly mesothelioma in 2009.
Golini allegedly told Philadelphia-based Shein he was exposed to 14 asbestos products made by bankrupt companies including Owens Corning and Armstrong World Industries. But when Golini sued Garlock he denied exposure to any products made by a bankrupt manufacturer, according to the complaint.
After Garlock settled with Golini, Shein had Golini file claims with the asbestos trusts that were set up by Owens Corning and other bankrupt makers of asbestos products.
The New York Observer also reported last week that the Weitz and Luxenberg law firm, its principals, and spouses have donated generously to politicians over the last couple of election cycles, “with over 99% of that going to Democrats.” The New York Post noted that the Weitz law firm cultivated political connections though its relationship with Sheldon Silver and that this relationship – with the erstwhile most powerful DEMOCRATIC state legislator in New York – paid off handsomely. To wit:
[Silver’s] law firm, Weitz & Luxenberg, gets its asbestos cases — and paydays — moved more quickly than those of other attorneys, and reaps a fortune from favorable rulings by friendly judges, charge lawyers and tort-reform advocates. Silver’s East Village firm handles more than half the cases in a special section of Manhattan Supreme Court called NYCAL (New York City Asbestos Litigation). So dominant is the firm, the court’s Web site refers to cases as “Weitz” or “non-Weitz.”
The chief asbestos judge, Sherry Klein Heitler — also Manhattan’s chief civil judge — has handled dozens of Weitz & Luxenberg cases. “They’ve taken over a section of the courthouse, and the people in charge of the courthouse run it for them,” said a disgusted lawyer who files personal-injury cases in Manhattan. “It pours money into the firm.” . . .
Last year, at Weitz & Luxenberg’s request, Heitler reversed a 20-year rule barring punitive damages in asbestos cases, paving the way for much bigger jury awards and putting pressure on defendants to settle. Another judge, Joan Madden, consolidated unrelated asbestos cases. Joining up to seven plaintiffs has resulted in huge increases in NYCAL jury verdicts — from an average of $7 million to $24 million per plaintiff between 2010 and 2014, data collected by Bates White Economic Consulting show.
Last year, Weitz & Luxenberg won a record $190 million in a consolidated trial for five mesothelioma victims who worked in different jobs for different employers. Of 15 mesothelioma verdicts in the last four years, Silver’s firm won $273.5 million of $313.5 million awarded by NYCAL juries. Law firms usually take a third.
We could go on, we suppose, but we think you probably get the idea. Sheldon Silver stands accused of fraud, though his personal corruption is but the tip of the proverbial iceberg. His story one of the most fascinating and revolting tales ever told in American politics. It involves influence peddling, medical deception, misappropriation of taxpayer funds, the bankruptcy of countless manufacturing companies, political shielding of a powerful interest group, the deception and manipulation of the judicial system, hundreds and hundreds of millions, if not billions, of dollars, and the explicit exercise of raw power in perverting the role and the people’s expectations of the state. In short, this is the story not just of Sheldon Silver’s personal degeneracy but of the corruption of the state itself, of its institutions and of its responsibility to those it purports to serve.
Some observers insist that the case of Sheldon Silver is one of “career politician syndrome.” Others, like Zephyr Teachout believe that it is merely a case of campaign finance mechanisms producing an awkward and distorted relationship between elected officials and their constituents. It is both, of course, but so much more as well. Our current campaign finance structure is the function not of overly powerful private interests, but of the omnipresent state. Private interests – which, in the administrative state, are also known as “the people” – have no choice but petition their government, given that government’s outsized influence on every aspect of their lives. Likewise, career politicians are troublesome, but merely part and parcel of a ruling class that both dominates and manipulates the mechanisms of the state to enhance its own power at the expense of the country class.
You may not know it, particularly given the media’s present obsession with the “killer” foot of snow bearing down on the eastern seaboard, but the real news out of New York is the story of Sheldon Silver. It is a story not just of asbestos and corruption, but of the sickness and depravity of the entire contemporary state. Silver may be the only one thus far charged in this corruption probe, but he is hardly alone. He is, indeed, the poster boy for the ruling class in the administrative state.
Copyright 2015. The Political Forum. 8563 Senedo Road, Mt. Jackson, Virginia 22842, tel. 402-261-3175, fax 402-261-3175. All rights reserved. Information contained herein is based on data obtained from recognized services, issuer reports or communications, or other sources believed to be reliable. However, such information has not been verified by us, and we do not make any representations as to its accuracy or completeness, and we are not responsible for typographical errors. Any statements nonfactual in nature constitute only current opinions which are subject to change without notice.