Transcript Of An Interview With The Five Conservative Justices About The Recent Corporate Free Speech Case.

February 1, 2010

Transcript Of An Interview With The Five Conservative Justices
About The Recent Corporate Free Speech Case.

Your reporter recently was fortunate enough to be granted an interview by five Justices of the Supreme Court, Anthony Kennedy, John Roberts, Antonin Scalia, Clarence Thomas and Samuel Alito. The subject of the interview was the Court’s recent decision granting corporations the same free speech rights as human people. The interview was held in a secret chamber in the Court’s basement, where the conservative justices keep casks of amontillado. Justices Kennedy and Roberts did most of the talking for the conservatives, with occasional interjections from others.

It seemed to me that the best way to give the reader the full flavor of what these eminent jurists had to say would be to publish large sections of the transcript. Each Justice is identified by his initials in the transcript: AK (Anthony Kennedy), JR (John Roberts), AS (Antonin Scalia), CT (Clarence Thomas) and SA (Samuel Alito). Your reporter is identified by the initials YR (which does not stand for Young Republicans).

YR: “Good morning Justices Roberts, Kennedy, Scalia, Thomas and Alito.

Let me say first that I am most grateful for your willingness to sit for an interview about a particular case, which is never done by individual Justices, let alone a collective group of Justices. So I deeply appreciate your willingness to do this.

JR: No problem. We know you will play it straight down the right. So we know you will be fair.

May I offer you some amontillado?

YR: No thanks.

Justice Roberts, the dissent said your group of five were striking a blow against democracy. President Obama said, and I quote, “This ruling strikes at our democracy itself . . . . I can’t think of anything more devastating to the public interest. The last thing we need to do is hand more influence to the lobbyists in Washington or more power to the special interests to tip the outcome of elections.” So your group of five is charged with attacking democracy. Do you have a response?

JR: May I offer you some amontillado?

YR: No.

JR: You’re darn right we struck a blow against democracy. We think important decisions having a big effect on the country should be made by the five of us, not the louts who are elected to Congress or the Executive. We particularly think we should be the ones to elect the President. Four of us and the sainted Justice O’Connor elected George Bush and nothing bad resulted from that, did it? That guy Obama is lucky there were no hanging chads in 2008 or John McCain would be the President.

May I offer you some amontillado?

AK: My decision is a victory for free speech. In the first place, our freedom of speech prevailed, so the decision is a victory for free speech. Then too, I don’t know whether you read that rag the New York Times and read the article by Sheryl Gay Stolberg in the January 24th issue. She really knows what’s up with the Supreme Court since she so rarely writes about it. And she said “The ruling was expected to unleash a torrent of attack advertisements in the coming midterm election.” Good. That is a victory for free speech too. BANZAI!!!!

YR: Why are the coming attack advertisements a victory for free speech?

AK: Because those louts in Congress and the Executive deserve to be attacked.

May I offer you some amontillado?

JR: Anyway, I don’t know where all these people get off attacking us. The preamble to the Constitution says, “We the corporations of the United States, in order to establish a more perfect union, etc., etc., etc.” In his Gettysburg Address, Lincoln said the Civil War must continue until the North wins so that government of the corporations, for the corporations and by the corporations shall not perish from the earth. The inscription on the Statute of Liberty er Statue of Liberty, says “Give us your tired, your poor, your huddled masses yearning to work in our factories.” So what is the big deal about ruling that corporations have political and constitutional rights, just like us human people?

May I offer you some amontillado?

YR: Well, I gather from your opinion that you believe unions too, not just corporations, should have political and civil rights. How do you square that with the Preamble, the Gettysburg Address and so forth -- unions aren’t corporations, after all.

SA: Not true.

AS: Well, four of us don’t really think unions should have the same rights as corporations. But we had to say we did in order to get the fifth vote for our position. And we figured that as a practical matter it doesn’t matter, because the unions are diminishing drastically in size, power and money. Unlike corporations they no longer are able to buy Senators. Or even Representatives. So it doesn’t make any difference that unions have these rights. If unions ever become strong and rich again, we’ll simply say they don’t have the same rights as corporations, and anyone who claims we held otherwise simply didn’t understand our opinions.

YR: You know there was a day, during the gilded age or shortly afterwards, that Nelson Aldrich of New York was called the Senator from the New York Central.

AK: Exactly, we are looking forward to that happening again. Maybe we can have the Senator from Exxon Mobil, the Senator from Ford Motors, the Senator from Boeing and 97 other similar Senators.

YR: Since you have ruled that corporations have first amendment rights, do you also think they should have, for example, the right to vote?

JR: Absolutely. Absolutely. In our next case we are going to rule that corporations have the right to vote. In the case after that we’re going to rule that, since they have the right to speak and the right to vote, they also have the right to be elected. This will enable them to also speak and vote in the Senate and the House. I’m looking forward to the day when Senator Microsoft, with the CSpan cameras trained on it, can say “I yield the balance of my time to Senator Google.” And after speaking for only two minutes, Senator Google will say “I yield back the balance of the time to Senator Microsoft.

YR: Wow. Does this extend to the Presidency too?

JR: Of course. Of course. Have you ever watched ESPN Classics, those old boxing bouts from Madison Square Garden in the 1940s and 1950s, where the announcer -- I forget his name -- would introduce the fighter, then repeat his last name, and the fighter would then come out from his corner and do a little dance for the crowd? We look forward to something similar here. “Ladies and Gentlemen, in this corner, in the five-inch-thick solid gold trunks, weighing in at 75.8 trillion dollars, the challenger for the Presidency, JERSEY, JOE, GOOGLE! GOOGLE. And ladies and gentlemen, in the other corner, defending his title, dressed in the pure 105 carat diamond trunks inlaid with rubies and emeralds, weighing in at 79.4 trillion dollars, the defending President of the United States, SUGAR, RAY, MICROSOFT! MICROSOFT.”

YR: Wow. What a vision. I think I would like some of that amontillado now. Maybe a quart of it.

But wait. Let me first ask Justice Roberts something.

Justice Roberts, in the hearings on your nomination, you said your job as a Justice, like the job of an umpire in baseball, was not to make the rules, but only to call balls and strikes.

SA: (Interjecting) Not true.

JR: (Interjecting) You weren’t stupid enough to believe that bullshit, were you?

YR: Well, take the recent case. When you ruled that corporations have First Amendment rights, you weren’t just acting as an umpire, were you? Weren’t you making the rules?

JR: No! No way! We were just calling balls and strikes. Anyway, the pitch in that case was a strike. It rolled right over the middle of the plate.

May I offer you some amontillado?

YR: No. Strychnine will do.

But let me ask you some other questions.

I know that the five of you were worried that if corporations don’t have free speech rights, then even the media -- comprised of corporations -- could be stifled by government. And you were worried that our citizens would not know how and what to think if Roger Ailes and Rupert Murdoch and Bill O’Reilly were shut down and could not tell our citizens what to think. But the First Amendment also provides for freedom of the press as well as freedom of speech. Wouldn’t freedom of the press have protected the media?

There was a long silence. It grew uncomfortable. Finally, Justice Thomas said, “Freedom of the press?” Then there was another long silence, until Justice Thomas again broke it by saying, “That’s in the Constitution?” “Not true, “ said Justice Alito. The situation was getting embarrassing, so I switched the subject.

YR: Now the topic of the documentary in the case was Hillary Clinton. Did that affect your thinking at all? I mean, it’s known that you favored John McCain. Would you have ruled the same way if the movie had been an attack on McCain instead of Hillary Clinton?

AS: No. Of course not. We would have banned the movie and McCain would be President today. This would have been all to the good. We wouldn’t have this horrible problem with Afghanistan that we have today. There wouldn’t be an Afghanistan. There would only be a big hold in the ground where Afghanistan used to be.

YR: Are there any other rights that you think corporations should have in addition to First Amendment rights, the right to vote and the right to hold office?

AK: Yes, we think corporations should have the right to procreate, to have children. But they cannot have abortions.

How this is going to be worked out, I mean how corporations will procreate and have children, remains to be worked out scientifically. Maybe there will have to be a gigantic bed or something. But its only a question of time until science works this out.

I’ll bet that, if you were to phone me for an interview twenty years from now, I’ll be able to say, “Oh, I’m sorry. I can’t have lunch with you next Tuesday. I’m scheduled to have lunch at the Monocle on Capitol Hill with my granddaughter. She’s a corporation, you know.

Oh yes. The scientists will work out how to do this. But I reiterate, no abortions.

YR: Now I know that all of you believe that with rights come responsibilities. And since you are going to give corporations all these rights, are you going to impose responsibilities on them too? For instance, will it be possible to prosecute a corporation for murder?

CT: (With great enthusiasm) You bet it will! And if it’s convicted, it will get the needle! We will buy a 3,000 acre field, build a huge gurney in the field, put the corporation on the gurney, and give it the needle!!! You bet!!

JR: May I offer you some amontillado?

YR: No. How about a lesser act like libel. Could a corporation be “liable for libel,” heh, heh?

JR: You bet a corporation will be liable for libel.

YR: Well, let me give you a specific example to see what you think. Some people claim, Justice Roberts, and it must be untrue, and therefore libelous, that you grew up in a small, wealthy town, Long Beach, Indiana, on the shores of Lake Michigan, that was known to be highly anti-Semitic, and that you managed to hide this during your confirmation. They also say that this is even more likely to be true because that general part of Indiana and Michigan, on the shores of Lake Michigan, had been a home to the Nazi Bund before the war -- you know, the war we fought in the 1940s, about fifteen wars ago -- and that anti-Semitism was a sort of national sport then. Now I know that none of this could be true because you hid nothing during your confirmation. So if a corporation were to say it, could it be guilty of libel?

JR: Yes, the sons of bitches.

YR: Would the corporation be guilty of libel even if everything it said were true?

JR: Yes, especially if it is true.

YR: Can you explain this a bit more?

JR: Sure. We are giving corporations the right to speak, to vote, to hold office because corporations are so much smarter than people. Corporations have all the experts, all the knowledge, all the facts. So, like Nino said in his concurring opinion, they are the ones that know all about the economy. As Engine Charlie Wilson said over 50 years ago, what GM thinks is good for GM is good for America.

But, especially because they are so much smarter than people, we have to be sure that corporations exercise their rights responsibly. We can’t have them doing irresponsible things like committing murder, at least not in excess of one murder for each 100 million dollars of corporate capital, or saying that I grew up in a town that was highly anti-Semitic and thus, almost by definition, reactionary. I mean, what if I did? Harvard was filled with Jews. So was my law firm. So what the hell is the point of implying that I was surrounded by reactionaries when I was young and impressionable. I’ve shown that this has had no effect on my liberal attitudes, or, as the pantywaist liberals call it lest they be tarred with the dreaded l word, my “progressive” attitudes. So we can’t have corporations acting irresponsibly by liableing me, excuse me, libeling me, by saying I grew up in a heavily anti-Semitic and therefore, almost by definition, reactionary area. Such irresponsible corporations are definitely liable for libel regardless of the truth. This is the type of irresponsible speech which we must stamp out so that corporations exercise their political rights responsibly.

YR: Well Justice Roberts, let me ask this. You say that a reason for giving corporations the rights to speak, to vote, to hold office, is that they, not human people, have all the experts, all the knowledge, all the facts. Well, if that is true, then not only should corporations have the rights, but also why shouldn’t these rights be taken away from human people? After all, they don’t have the experts, the knowledge, the facts?

Justice Roberts didn’t answer. There was a long, uncomfortable silence. Finally Justice Scalia said, “You’re damn right. These rights should be taken away from human persons because they are dummies, and we intend to eventually do just that.”

YR: “Justice Scalito,” I said to Justice Alito, you haven’t said anything yet. Would you comment on this question of taking the rights away from human people?

SA: Well, as you know I’m generally pretty taciturn, although like Chief Justice Roberts, I opened up completely during my confirmation hearings. But, yes, we are going to greatly reduce or eliminate the rights of mere human people, those dummies. This has to be done slowly, on a case by case basis, however, so that people will come to accept the ineluctable logic of it. This is called good legal strategy, and here it is a sort of 1940s, 1950s and 1960s Thurgood Marshall strategy in reverse. First we rule that corporations have First Amendment rights because they have all the experts, all the knowledge, all the facts. Then we rule that corporations have the right to vote because, as we’ve said, they have all the experts, all the knowledge, all the facts. Then we rule that, for the same reason, corporations have the right to hold office. By this time people will have gotten used to and accepted the idea that corporations have all the smarts and human people do not, so we will then be able to rule, without an outcry, that human people do not have the rights to speak, vote, or hold office because they do not have the smarts, which was at least implicit in our prior opinions saying corporations have all the smarts. If anyone disagrees that it was implicit, we’ll say they don’t understand the prior cases. All this, as I say, is what lawyers and courts consider to be long term strategy.

As a matter of fact, if you inquire you will find that a strategy very like this was what was used by a Terry Haute lawyer named Bopp to get us to where we are today, when we have already ruled in favor of corporations, and was ultimately participated in by a guy named Bossie, who heads the organization in whose favor we held. I am not making this up. It’s Bopp, as in bop human persons on the head, and Bossie, as in tell human persons what to do. Isn’t that fitting? You couldn’t make this up.

YR: Wow, your proposed legal strategy is purely brilliant. It is so thoughtful and well considered. Wow! I think I’ll have a gallon of that amontillado.

But first let me ask this. The newspapers have said that Tom DeLay’s lawyers think your decision may enable them to obtain dismissal of the prosecution against him, to get the case against him thrown out of court. Do you have any comment on that?

AS: From your mouth to God’s ear.

Let me be clear: There should be no delay in throwing out the prosecution against DeLay. The case against DeLay should be tossed without delay. If this sounds like a contradiction, so be it. No delay for DeLay. He represents what was best about the right wing of the Republican Party in the 2000s.

YR: Justice Thomas, you’re a big proponent of states’ rights. Someone in Colorado said that the Court’s decision giving freedom of speech protection to corporations has turned the Colorado constitution into waste paper. This would seem contrary to states’ rights. What do you say to the argument that the Court has turned the Colorado constitution into waste paper?

CT: Good. I hope there were enough copies of the Colorado constitution and other state constitutions -- 20 or 30 million copies perhaps -- so that they can turn all the waste paper into a few tons of newsprint. There is a shortage of newsprint, you know.

But . . . . . on second thought . . . . .

YR: Justice Roberts, Justice Kennedy, Justice Scalia, Justice Thomas, Justice Alito, I want you to know how greatly I appreciate all the time you have given me. You have been very indulgent, and I am grateful. With your permission, I will ask just a few final questions, and then we will be finished.

JR: What do you mean “we” will be finished, said Justice Roberts. Go ahead.

YR: It has been claimed by some, including dissenters, that your opinion is going to cause havoc with elections for judges. It is said that many corporations will spend huge fortunes -- scores of millions of dollars -- electing judges who will be beholden to them and will vote in their favor and therefore against all plaintiffs in personal injury cases, environmental cases, employment discrimination cases, illegal firing cases and so on. What is your response to this?

SA: Not true.

AK: So long as the corporations and a Judgeship candidate do not get together in a room and agree in advance that the candidate will do this, it is okay. There will not be what I call a quid pro quo. The candidate will not have been asked to do it, and the corporation will not have demanded he do it, so it won’t matter if the corporation has contributed ten million dollars for the candidate’s election or 100 million dollars or whether the candidate wins only because of the corporation’s dollars. It is just like with Congress. The judicial candidate or a Congressional candidate will remain free to vote as he or she pleases in a case or in Congress, and will not be affected by the fact that the corporation gave millions of dollars for his election. It’s been this way in Congress for decades, and we are confident it will be this way with courts.

Anyway, the whole question will soon become superannuated. Because, as with Congress or the Presidency, corporations will be free to run for election as judges themselves. So you won’t have to worry about the possible corrupting influence of contributions on human-person candidates. Nor will you have to worry, when a corporation wins election to a judgeship -- as they had to worry about candidates in the Gilded Age -- about whether a candidate, once he or she is bought, will stay bought, or will instead sell out to somebody else who gives him more. The corporation as judge or legislator will obviously vote for what it wants, so there will be none of this “will he stay bought?” concern.

And for the same reason, you won’t have to worry about undue influence, as the dissenters pretend you will have to. When corporations contribute to the campaign of human persons, the candidate will not allow the corporations to unduly influence them. And when the corporations themselves run for and are elected to office, there will of course be no undue influence. How can anyone be accused of having undue influence over himself? The same is true for corporations.

YR: Thank you. Justice Scalia, you are often said to be an originalist, to believe in interpreting the Constitution as the founders would have and did. How can this recent opinion be an originalist opinion? The founders never gave corporations the constitutional rights of free speech, or to vote, or to run for office.

AS: They would have if I had thought about it.

Anyway, I’m for originalism only when I’m for originalism, and not when I’m not. So the recent opinion is consistent with my philosophy.

YR: Thank you. Justice Roberts, there are some people who are claiming that your wing of the Court is prepared not only to rule that corporations have a plethora of rights such as free speech, to vote and to hold office, but is also prepared to rule that, when a corporation is President, it will be permissible for a bot to be Vice President. Is that true?

JR: Yes.

YR: Really? Why?

JR: Like corporations, bots are smarter than people.

YR: One last question if I may. I apologize for this question, because I know the topic is very sensitive. The name of the film that caused the problem in the recent case was “Hillary: The Movie.” It was a smash at former Senator Clinton, and I know how you feel about her. But there is a rumor floating around that President O’Bomber is considering appointing former Senator Clinton to the Supreme Court in order to try to thwart you in future, and more or less to rub your face in it, as one might say. There is also a rumor that former Senator Clinton might be amenable to the appointment if she can simultaneously be a Senator and a Justice, and in a few years can simultaneously be a Justice and President. Do any of you Justices have any views about this?

There was silence. It lasted awhile. Then Justice Alito said, “Not true.” Then there was more silence. Finally Justice Roberts said: “I think I speak for all of us when I say ‘No problem.’ We’ll simply invite her down here to have some amontillado.”

YR: Well again, Justices, let me thank you profusely for giving me all this time. And now I’ll be happy to join you in that amontillado. I think I’ll have a cask of it. But first let me just put my tape recorder into its case.

The tape recorder’s case was by the coat rack, which was right next to the door, which had been ajar during the entire interview. I got up, picked up the tape recorder, and sauntered over to the coat rack and case very slowly, so that nobody would suspect my intent. When I got to the door, coat rack and case, and was still carrying the tape recorder, instead of putting it into its case, I suddenly wheeled, shoved open the door, and ran like hell. I heard Justice Roberts screaming, “He’s got the tape recorder. Don’t let him escape. For the love of God, Nino, catch him.”

“For the love of God, Nino, catch him” was the last thing I heard from any of the Justices. I heard it only once. But in my mind I kept hearing, over and over, “For the love of God, Montresor.” “For the love of God Montresor.” I ran like hell and kept on running and running and running.*


*This posting represents the personal views of Lawrence R. Velvel. If you wish to comment on the post, on the general topic of the post, you can, if you wish, email me at Velvel@VelvelOnNationalAffairs.com.

VelvelOnNationalAffairs is now available as a podcast. To subscribe please visit VelvelOnNationalAffairs.com, and click on the link on the top left corner of the page. The podcasts can also be found on iTunes or at www.lrvelvel.libsyn.com

In addition, one hour long television book shows, shown on Comcast, on which Dean Velvel, interviews an author, one hour long television panel shows, also shown on Comcast, on which other MSL personnel interview experts about important subjects, conferences on historical and other important subjects held at MSL, and an MSL journal of important issues called The Long Term View, can all be accessed on the internet, including by video and audio. For TV shows go to: www.mslaw.edu/about_tv.htm or www.youtube.com/user/mslawdotedu; for conferences go to: www.mslawevents.com.

Judge Lifland's Schedules For Oral Argument On February 2nd.

January 27, 2010

Judge Lifland’s Schedules For Oral Argument On February 2nd.



In looking at the schedules approved by Judge Lifland for the oral argument on February 2nd, one fact sticks out like a sore thumb to a former litigator. The Malefactors Three (TMT) have been granted up to 130 minutes (or 2 hours and 10 minutes) for argument and rebuttal, while our side has been granted only 80 minutes to argue (or 1 hour and 20 minutes). The other side has thus received 61 percent more time than our side, with 60 of their 130 minutes, or nearly one-half their time, available for rebuttal.

In my 47 years at the bar -- as a litigator, a professor, or both simultaneously -- I have never heard of this kind of discrepancy in allotted time and have never heard of granting such a disproportionate amount of time -- 60 of the TMT’s 130 minutes -- for rebuttal. The more normal arrangement is for the opening side, for example, to receive 30 minutes, from which it will typically reserve, say, 5 minutes for rebuttal, while its opponents also receive 30 minutes, which they must use in a single block. Or the opening side may receive 60 minutes, of which it will reserve five or ten minutes for rebuttal, while its opponents receive 60 minutes to be used in a single block. Whatever the particular arrangements, I have never before seen one side formally allotted, in advance, up to 61 percent more time than the other, or such a high percentage of its total time for rebuttal. (In terms of minutes, as opposed to percentages, the other side is getting what could be considered close to almost as many minutes just for rebuttal (60 minutes), as our side is getting for its whole argument (80 minutes).) This all is, frankly, amazing.

I have no idea what this scheduling means, if anything. Many will say it shows (yet again) that the Judge favors the other side, which to date appears to have continuously gotten whatever it wants from him while our side has been treated oppositely. Or, optimists may speculate -- many would say Pollyannaists may speculate -- that perhaps it means the Judge realizes the other side’s arguments are not very good and he wants to give them full rein to develop their points so they cannot claim to have been short shrifted if they lose. (I would belong to the group which considers this possibility to be Pollyannaish, not just optimistic.) Or, perhaps it is just how the results of a judicial demand for schedules to be submitted and approved in advance “fell out” so to speak.

I know almost nothing about the judicial demand for schedules -- how it arose, what occurred in pursuit of it, etc. All that I know -- and it is precious little -- is that the judge made such a demand, met with certain lawyers to discuss it, I’m told (though I don’t know why he picked certain lawyers and omitted others, nor do I know whether he met with both sides at the same time or each side separately), and, I’ve also been told, he rejected our side’s first submitted schedule. It thus seems dubious that the imbalance in allotted time arose without judicial knowledge of imbalance, and certainly it subsequently was judicially approved with judicial knowledge of imbalance.

I do know for certain, however, that to have extensive rebuttal time is a lawyer’s dream, because it gives one ample time to try to extensively knock down the points made by the previous side and to insure that the judge’s last perceptions are favorable to your side. This is thought to be worth gold. Indeed, here is a true story that illustrates the point: The story is about brief writing, where the principle I’m discussing also holds true, just as it is true at oral arguments.

In the 1980s and 1990s I was involved in a huge antitrust case in Philadelphia in which the eventual verdict exceeded 700 million dollars, which in those days was real money, not a mere bagatelle to be casually tossed to AIG or Goldman Sachs. There were several parties on the other side. When all or only the particular relevant party on the other side was the moving party and thus wrote the opening brief(s), the lawyer for the relevant party on the other side used to write a fairly short opening brief. (The opening briefs are the written equivalent of the opening arguments at an oral argument.) Then our side would fully respond to the opening brief(s) -- this was our only opportunity to brief the issue. (Response briefs are the written equivalent of the response side of oral arguments.) Then this particular lawyer, in his reply brief -- a reply brief being the written equivalent of a rebuttal at an oral argument -- would file a major brief giving his full position chapter and verse, discussing arguments omitted from his opening briefs so that we had had no chance to respond to them (which was an especially pernicious trick when his was the only opening brief), and also assailing our own briefs. In this way the particular lawyer regularly attempted the wholly inappropriate dirty trick of trying to handicap us, in writing our responses, by saying little in his opening brief and then delivering his full arsenal after we no longer had a chance to respond in writing.

Now, I am not saying the TMT are going to pull the same kind of dirty trick. I frankly doubt it since they have put in for and received 70 minutes for their opening arguments. But my true story illustrates that having an extensive opportunity for rebuttal is regarded as extremely valuable. And it makes clear why courts, to avoid claims of unfairness and prejudice, do not permit the kind of imbalance in allotted time at oral argument, and the huge percentage of time given to rebuttal, as Judge Lifland has awarded here. Speaking frankly, I am shocked.*


*This posting represents the personal views of Lawrence R. Velvel. If you wish to comment on the post, on the general topic of the post, you can, if you wish, email me at Velvel@VelvelOnNationalAffairs.com.

VelvelOnNationalAffairs is now available as a podcast. To subscribe please visit VelvelOnNationalAffairs.com, and click on the link on the top left corner of the page. The podcasts can also be found on iTunes or at www.lrvelvel.libsyn.com

In addition, one hour long television book shows, shown on Comcast, on which Dean Velvel, interviews an author, one hour long television panel shows, also shown on Comcast, on which other MSL personnel interview experts about important subjects, conferences on historical and other important subjects held at MSL, and an MSL journal of important issues called The Long Term View, can all be accessed on the internet, including by video and audio. For TV shows go to: www.mslaw.edu/about_tv.htm or www.youtube.com/user/mslawdotedu; for conferences go to: www.mslawevents.com; for The Long Term View go to: www.mslaw.edu/about¬_LTV.htm.

Some Important Ideas Regarding Madoff That May Not Have Been Picked Up On Yet, And Comments On The Mid January Briefs Of The Malefactors Three.

January 26, 2010

Some Important Ideas Regarding Madoff That May Not Have Been Picked Up On Yet, And Comments On The Mid January Briefs Of The Malefactors Three.



This posting was originally intended to deal with a few -- nothing like all -- of the arguments made by the SEC, SIPC and the Trustee in the briefs they filed in mid January 2010. The arguments to be dealt with were the ones I thought to be of greater importance. Yet, the more I considered the briefs, the more it seemed to me that many of even the most important arguments have been amply dealt with before in many places: in briefs filed by Helen Chaitman, Brian Neville, David Bernfeld, Davis Polk, Milberg, Goodwin Procter, Schulte Zabel, Sonnenschein, and others, in blogs posted here on October 23rd and December 21st of 2009, and in a brief I filed that was posted here on November 6, 2009.

So I decided not to deal with certain of the arguments that have already been amply handled, except perhaps -- and relatively briefly -- in instances where the arguments have been particularly stressed or some sort of new twist has been put on them in one or more briefs filed in January by the SEC, SIPC and the Trustee (“The Malefactors Three,” or “TMT”). I also decided that before dealing with the arguments in the January briefs of TMT, I would make some general comments regarding the briefs, and regarding points which I think very important to our side but which I am not necessarily sure that the lawyers who will argue for us on February 2nd have yet picked up on.

* * * * *

Let me start with some generalized comments on the mid January briefs of The Malefactors Three. I don’t believe that in 47 years at the bar I have ever said that the brief of an opponent is dumb. This is both impolite and bad tactics. But given the terrible conduct of TMT towards victims, the time has now come to do what I’ve not done before.

There are parts of the SEC’s brief that are just dumb -- a view shared by others who have given me their view, incidentally. That the SEC has written a dumb paper on such important matters is hugely unfortunate. For it is yet another illustration that the incompetence of this agency continues, to the vast detriment of American shareholders. Judging by the SEC’s brief, the vaunted ascension of Mary Schapiro, in whom Congress is said to be reposing great (but some feel misplaced) confidence, has made no difference whatever.

As to all of the briefs of The Malefactors Three, their tune has been named by Marshall Krause. They all use whatever argument or factual slant comes to hand in order to try to defeat the victims. Truth, accuracy, or objectiveness of the argument appear to play little or no role. It is a pluperfect example of bad aspects of the lawyer’s so-called “art.” That the three organizations arguably are each supposed to further the public interest but are actually defeating it, only heightens the misfortune. (The Trustee, of course, falsely claims to be pursuing the public interest with regard to the latest investors, but he is helping them by screwing over the now-impoverished long term and mid length investors who for years took out monies from Madoff in order to live, now have little or nothing, and live with fear of attempted clawbacks of blood from a stone under the Trustee’s supposedly “holistic” but actually exceptionally narrow, lawyerish, purely dollars driven, Wall Streetish analysis that, like much of what Wall Street has done, destroys the public interest rather than furthering it.)

And what, one may ask, underlies the dubious conduct represented by the January briefs and the prior briefs of The Malefactors Three? Well, as said in this space before, and as even cautious lawyers and other cautious types are finding it ever more acceptable to say, what underlies it is a desire to protect SIPC and its management from accountability for incompetence and worse -- incompetence and worse that caused SIPC not to build up a sufficient fund to cover the bankruptcy of a major broker even though Congress and the GAO warned SIPC about this the best part of a decade ago. One can only wonder what would have happened if one or more brokers that conceivably might each have scores of thousands of accounts had gone down, as Merrill almost did. It is obvious (i) that this -- SIPC’s lack of sufficient funds due to malperformance and worse -- has driven everything, (ii) that this is why SIPC and the Trustee vigorously fought this lawyer’s effort to obtain discovery of the reasons why they chose the cash-in/cash-out method (a fight by SIPC and its Trustee that was slavishly rewarded by the judge in a very brief opinion (if it can even be called an opinion) of a paragraph or two -- an opinion which was a joke), and (iii) that this is why SIPC and the Trustee will do everything they can to persuade Congress not to hold hearings into the performance and actuarial assumptions over the years of SIPC, its management, and its politically appointed Board members, into its relationships with Wall Street, and into the slavish adherence to its dictates of Trustees, whom a federal judge has called its “puppet[s].” (Trustees make extremely lucrative careers for themselves by puppetishly doing whatever SIPC wants, and (including Irving Picard) have therefore made a practice for decades of finding alleged reasons why huge percentages of investors -- up to 90 percent or more -- are supposedly ineligible for the relief Congress intended -- reasons (including ones given by Picard) that federal judges have simply excoriated.) No, you can bet your last farthing that SIPC wants no Congressional inquiry or judicial discovery into any of these matters, and will fight to the last ditch against any such investigation or discovery.

Let me acknowledge that there is a point of view which holds that, under the numbers released by the Trustee as to the number of Madoff accounts of one kind and another, SIPC, by use of its fund, and by drawing on its lines of credit, could nearly satisfy its obligations to Madoff victims under SIPA (obligations which, in this scenario are posited as being something over $2.5 billion, I believe). The burden of this view, if I understand it correctly, is that SIPC and the Trustee did not adopt cash-in/cash-out because of an inability to pay Madoff’s victims. Rather they adopted it because they considered the Madoff circumstances to be propitious for changing the whole nature of SIPC’s obligations regarding net equity.

I have to respectfully disagree with this viewpoint. I believe that, at the inception, and for many months afterwards, SIPC and the Trustee did not know the extent of SIPC’s monetary obligations in the Madoff case under the final statements method -- or, perhaps more appropriately, the “final confirmations” method -- but they feared the worst since they knew Madoff had a huge number even of direct investors and they knew that paper losses were said to be in the 50-65 billion dollars range. If even 10,000 people each had a right under the final confirmation method to SIPC advances of only $400,000 on average (not $500,000), which is likely quite a lowball estimate of monetary rights under the final confirmation method of calculating net equity, SIPC would have been on the hook for four billion dollars. Change some of the assumptions and it might have been on the hook for five or six billion dollars or more. Early on it couldn’t know the extent of its liability. But it certainly could, and I believe did, fear the worst. And even if it was on the hook for “only” $2.5 billion or somewhat more, which would wipe out its reserves and one or more lines of credit, etc., it certainly didn’t want this to happen, with the concomitant huge hassles that would arise with Wall Street and with Congress -- which would demand to know how such a result could have come to pass. So SIPC had to find a way to drastically limit its liability to victims -- as it has done for decades, to the vast detriment of injured investors -- and it therefore settled on use of cash-in/cash-out.

Am I right about all this? Well, one cannot at this point know for sure because there has as yet been no discovery, and no Congressional investigation, into the matter. But I personally am likely to remain convinced I am right unless and until discovery in law cases or a Congressional investigation shows me wrong. I believe judicial discovery or a Congressional investigation would likely prove me right, not wrong, and that this is the real reason why SIPC and the Trustee raised holy hell when this lawyer sought relevant discovery on why cash-in/cash-out was used, discovery which was denied by the judge in a farcical “opinion” even though the Trustee has such an army of lawyers that there was no possibility that putting one or a few lawyers to work gathering the documents requested in discovery could materially delay the accomplishment of other work.

* * * * *

Let me now turn, as previously said, to some points that I consider very important but that, as near as I can tell, have not necessarily been picked up on yet by the lawyers who will argue for the victims on February 2nd. Now, the lawyers for the victims have written a sensational set of briefs; as one who has spent significant parts of my career writing briefs in the U.S. Supreme Court, where briefing is generally much better than in lower courts, I would nonetheless have to say that the set of briefs submitted by lawyers for Madoff victims is the equal of, or better than, any set I have seen elsewhere in nearly 47 years at the bar. But this is a very complex case, all of us are constantly picking up new ideas and facts, and it is not possible, I should think, for the lawyers to be totally abreast of everything all the time. So I shall set down some new ideas that have surfaced relatively recently and that I think are important, and shall hope lawyers for the victims are made aware of them and use them. If the lawyers are already aware of the ideas, then I apologize to them for my ignorance of their knowledge.

The first of the new ideas is this: If SIPC uses cash-in/cash-out instead of the November 30th statements as the measure of net equity, under the former method it will be able to obtain from many victims monies (alleged preferences they received over and above the principal they put in) that it could not obtain if it used the latter method. In this way SIPC and the Trustee will be able -- very perversely -- to euchre, from many victims, monies they receive via theft deductions and refunds of taxes on phony profits (taxes to which the government never had any statutory or constitutional right), monies that many will need to escape impoverishment. It is utterly perverse for SIPC and the Trustee to have even a theoretical right to obtain money given back to victims by the IRS -- money often needed, as said, to escape poverty.

The excuse for this perverse result given in the Trustee’s brief is that the result is permissible because two different bodies with two different statutes are involved, SIPC and the IRS. But that is no excuse. I know it has been common in Washington for decades for different agencies to each regard themselves as individual fiefdoms that need have no concern for and need not follow what other agencies are doing. But common or not, this view is dead wrong. There is still only one United States Government. Its differing agencies and quasi agencies cannot permissibly adopt and implement inconsistent views to the disadvantage of citizens. Thus, the Office of Solicitor General spends (much) time forcing reconciliation of differing agency views into a single governmental view for presentation to the Supreme Court. I can to this day remember a Justice of the Supreme Court and Solicitor General Archibald Cox agreeing with the point being made here at an oral argument as far back as the early or early-mid 1960s. The Supreme Court often demands reconciliation between differing fields of law -- e.g., regulatory and antitrust law. The idea that SIPC (a quasi governmental agency) and the Trustee (an officer of the Federal government’s court system) are perfectly free to alter the rules heretofore prevailing under their governing statute, SIPA, in a way that nullifies or counterminds another agency, here the IRS, which is necessarily acting with the implicit or explicit approval of the Treasury -- is pure bovine defecation. SIPC and the Trustee must instead continue to follow the heretofore prevailing interpretation of their statute so that the government’s position is consistent.

A second idea is this. A truly major prop of the argument of The Malefactors Three has from the beginning been, and still is, that everything was fictitious. The briefs of TMT have covered page after page with descriptions of the fake ways in which purchases and sales were manufactured, the fake statements were produced, the methods by which everything was done, etc. Because it was all fake, they say, the normal rules of net equity do not apply (and they are free to break the normal rules as they choose). The huge long descriptions of what Madoff and DiPascali did amount to saying that this wasn’t a common garden variety fraud. Rather, it was a highly sophisticated fraud carried out by deeply unusual and sophisticated means. And it was that. Indeed, the fraud was so sophisticatedly done that the SEC didn’t catch it in 16 years and five or six inspections, leading investors like James Simons’ Renaissance Technologies invested in it, and so forth.

The question which arises from TMT’s desire to use cash-in/cash-out rather than the final confirmation rule to measure net equity in what they themselves correctly portray as a sophisticated fraud, is this: how can it be -- isn’t it exceptionally perverse to say -- that the victims of a highly sophisticated fraud that drove a broker into bankruptcy receive far less protection from SIPA than victims of a simple-minded, garden variety fraud that drives a broker into bankruptcy? How could Congress have intended that? How is that consonant with Congress’ desire to protect investors in order to build confidence in markets? Under TMT’s point of view, people know that their danger from investing has increased, not, as Congress desired, diminished, and that their protection, contrary to Congress’ intent, has decreased, not increased. For the more sophisticated the fraud, and the harder it is for the SEC, prosecutors, financial mavens and investors to detect it, the more likely it is that investors will receive diminished protection. This destruction of protection and confidence because something is sophisticated is certainly not what Congress intended.

The last idea to be discussed in this part of this posting is one which has been brought out in at least one brief (admittedly mine), and perhaps in some others though I don’t recollect it, but which has slowly been gaining some traction with laymen. It is that the position of The Malefactors Three with regard to calculation of net equity in a Ponzi scheme will go far to destroy all confidence in investing through brokers. Instead of building confidence in the industry, as Congress desired, it will destroy confidence.

The reason is simple: it is that no investor with a broker-dealer can be certain that his investment is not part of a Ponzi scheme. After all, one cannot know that one has invested in a Ponzi scheme until after the scheme is revealed. So no investor will be able to withdraw earnings from his investment with confidence that he will not later be told that the withdrawn monies never existed, that the withdrawals might therefore diminish his net equity unexpectedly, possibly making it a negative number, that he will lose SIPC protection if it is a negative number, that he will also lose claims against customer property and the estate, and that he is subject to clawbacks.

Thus every investor with a broker-dealer will be at risk, will be threatened with potential economic disaster, if he takes out income from an investment, although taking out income to live, to pay expenses and taxes, and to make other investments is one of the main purposes people have when making an investment in the first place. Investors will have no guaranty of protection -- contrary to the purposes of Congress. They will know they have no protection and that their reasonable expectations, which Congress intended to protect, are irrelevant. Confidence in the securities markets -- another purpose of Congress -- will be vastly diminished. People will quickly realize that they might be much better off simply putting their money in a bank or splitting it among several or many banks, at lower rates of return but with assurance that the FDIC will pay them up to $250,000 for each separate account if a bank should prove fraudulent and bankrupt so that the money the depositors thought was in their accounts was not there in fact.

* * * * *

I turn now to a few of the points in the briefs filed by TMT in mid January. The more I think about those briefs, I must admit, the more I think they are mainly just reprises, sometimes with some tweaking or new twists, of points TMT made previously. So this part of this posting will be shorter than originally envisioned.

The SEC says, as have the others, that because we now know from Madoff’s books and records that he didn’t buy securities -- as if we otherwise wouldn’t know this but for the books and records -- net equity cannot be based on the final confirmations of November 30th. Net equity also cannot be based on the final confirmations, it is said, because purchases, sales and profits were all a fiction manufactured after the fact. Madoff couldn’t pay for the purported securities, victims did not pay for securities or make profits, and for these reasons Madoff did not owe victims the amounts shown in their confirmations.

This, which has been put forth by TMT in prior briefs, is one of the major props, one of the hearts, of TMT’s position. If I had to bet, I would bet that on February 2nd the TMT are going to constantly pound and pound on their claim that the fictionality of the deal, of its purchases, sales and profits, is dispositive. They are not about to give up on this argument even though their claims have been devastated time and again in briefs filed by the victims’ lawyers and in other writings. So let me say yet again that the claim is a humbug for a host of reasons. SIPC is intended to protect victims, and the victims -- at least about 99 percent of us -- did not have the least idea that anything was fictional. Our legitimate expectation was that the confirmations we received were all true. Congress knew of Ponzi schemes when it passed SIPA -- Ponzi schemes go back to the early part of the 20th Century -- yet Congress did not define net equity in the statute and then say that “this is how you define net equity except for Ponzi schemes, where you use cash-in/cash-out.” Instead, rather than say that, the legislative history explicitly makes plain that SIPC’s full protection applies even when the broker never buys the promised securities, which is a hallmark of fraud, of Ponzis in particular, and is what occurred here. What happened in Madoff is exactly what happened with regard to real securities in New Times, with the sole exception that there the purchases, holdings and amassing of profits in securities allegedly being held were fictional and here the purchases, sales and profits were fictional. If the fact that a Ponzi scheme is involved makes a difference, then why should investors in a Ponzi scheme be credited with any net equity, whether measured by final confirmations or by cash-in/cash-out; after all, all of their investments played a role in furthering the Ponzi scheme, right up through the investments of the final investors whom Picard and SIPA claim are the parties they are trying to help (rather than admitting that their true concern is to help SIPA, which would otherwise be in a huge jam). If the rule of Picard and SIPC prevails, nobody can feel safe in investing through a broker because it is impossible to know in advance that the investment is not a Ponzi that will cause one to be subject to cash-in/cash-out and clawbacks.

It is also the case that Madoff owed victims what was shown on their confirmation statements. If he did not owe this to them, where was the fraud? There is no fraud if one is unable to pay people money that one does not in fact owe them. That Madoff owed people what was shown in their account statements was confirmed by Madoff himself when he paid people the amounts shown on their statements when they asked for it.

The TMT claim he paid solely to cover up his fraud, not because he owed. Of course he paid to cover up his fraud. But he had to pay to cover up the fraud only because he owed; there is no need to cover up a fraud by paying people if you don’t owe them the money, and there would be no exposure arising from failure to pay if the money was not owed. Would Madoff, after all, in order to cover up his fraud, have sent $100,000 to an aborigine who, never before having heard of Madoff and having no account with him, one day wrote to demand payment of $100,000 from his non-existent account? The SEC’s point is just dumb.

I frankly consider that the whole position under discussion that was taken by the TMT -- that confirmation statements which one has no reason to disbelieve cannot be the measure of net equity when the investment ultimately turns out to be a (highly sophisticated) fictional one -- to be simply stupid. It is an invention, is populated by sub inventions, and would destroy Congress’ purpose. It is also a device being seized upon by TMT to supposedly justify a refusal to follow the rules -- the rules provided by the statute, intended by Congress, and followed in the past.

One of its sub inventions, however, is actually pretty clever because it has a surface ring of plausibility. The SEC and SIPC say investors cannot possibly have, in the SEC’s words, “legitimate expectations . . . [in] fabricated securities positions like those at issue in this case -- based on hindsight and designed to facilitate a fraudulent scheme -- just because those positions were shown on a customer’s final account statement.” (SEC Brief, p. 6.) This cleverly plays on our distaste for fraud -- who can believe, after all, that one can have a legitimate expectation in the proceeds of fraud?; cleverly but falsely conflates time periods; and magically causes legitimate expectations to disappear in a puff of smoke as it were.

I need not get into yet again, as has been done in blogs, so many briefs, etc., all of the reasons why people thought that what was represented on their confirmations was true, governed their lives on the basis of their belief in the truth of their confirmations, and were justified in so governing their lives. The conflation of time periods under discussion is, however, a clever, important and deeply false, reprehensibly false, method of destroying the legitimacy of what people did. The SEC’s statement is worded so as to cause one to think that there is no right now to have thought, on November 30th when one received his final confirmation, that one had a legitimate expectation then to what then appeared to be in one’s account. This is baloney, as discussed. One has every right now to think one had a right to what was shown then and to what one thought one had then. What one wouldn’t have a right to now, and what is in no way involved here, is to think that one would have had a right to more than that if -- to take a crazed hypothetical -- Madoff had issued a statement after December 11th -- when the fraud was revealed -- saying that you had yet more money in your account then was shown on November 30th. In short, one justifiably has a legitimate expectation to what was shown in the final confirmation received before the fraud became exposed, and no legitimate expectation to claimed accessions to that amount if such had bizarrely been claimed after exposure of the fraud.

To look at the matter from a slightly different angle, the TMT are claiming that the second it became known that Madoff was a fraud, all legitimate expectations held up until then evaporated instantly, no matter how appropriate they were, and were replaced by a different legitimate expectation of . . . . nothing. That is plainly nuts, would make a mockery of the statute, and would nullify Congress’ intent.

The SEC, like SIPC, makes claims designed to show that the amount received by one customer can affect the amounts available to other customers. SIPC, in fact, sets forth page upon page of complicated calculations to prove this entirely obvious point. The point is so obvious that SIPC’s complicated calculations remind one of the old lawyer’s saw, “Argue the facts. If you don’t have the facts, argue the law. If you don’t have the law, baffle them with bullshit.” I think that that is what SIPC is trying to do; I think its method of calculation is an invention it uses, instead of simpler calculations, which have been discussed previously in this space, in order to try to falsely persuade the court to its point of view; and there is even what appears to be an evident arithmetical error in its calculation. (Perhaps I should add that it seems to me, simpleton that I am, that if you have a net equity of one million dollars, if total net equity of all investors is 100 million dollars so that your own net equity is one percent of total net equity, and if the estate and the Trustee’s recoveries total 50 million dollars, then you get $500,000 from SIPC plus one percent of the 50 million dollars of the estate and recoveries, or another $500,000. If it is this simple, as I think it is, there cannot really be any excuse for SIPC trying to muck it all up with fancy calculations. If the total estate and recoveries were 75 million dollars instead of 50 million dollars, you would get one percent of the total up to $500,000, which, with your prior payment from SIPC, would make you whole. The rest of your one percent, or $250,000, would go into the pot, so to speak. (SIPC seems to claim that it would get your “excess” $250,000, because it is next in line as security lawyers term it, but under the statute, it is next in line only if it gave you securities instead of cash. (Section 78fff-2(c)(1).)

Be all this as it may, the fact is that the amount available to customers depends on how much money SIPC itself has, how much is in the estate, and how much is recovered by the Trustee. If SIPC doesn’t have enough to pay everyone $500,000 (or less where one’s net equity is less), and if the estate and recoveries don’t make up the remainder of what is owed investors, then of course payment of something to one investor will lessen the amounts received by others. Does one really need to be a SIPCian arithmetical Einstein to understand this? Yet the SEC, and especially SIPC, with its complex arithmetical calculations, makes a huge deal of this in an effort to prove that cash-in/cash-out should be used in order to give more to some and less or nothing to others and to be able to claw back from them.

This exercise has inherently been carried out by SIPC and the Trustee, of course, as has been said so often by so many, in order to support the idea that later investors should receive more than people who took out more than they put in. This is supposed to be “holistic” and is supposed to be the personification of fairness. In reality it is not holistic at all, as has been discussed here before. It is, rather, a wholly dollar driven, crabbed, Wall Street/accountant/lawyerish version of fairness among victims -- a version that holds it more fair to deny money to the impoverished so that additional millions of dollars can be given to the already and still hugely wealthy. It is an imposition of what Harbeck and Picard consider fair, not what Congress has ordered. And it is supported by arithmetical examples that are so blatantly slanted as to be laughable. (The numbers one uses in arithmetical hypotheticals, of course, can make all the difference in what looks fair. Different numbers will make it appear that different results are the fair ones. SIPC’s numbers are so slanted that it is farcical.)

I mention all this, even though most of it has been commented on before, because the notion of using cash-in/cash-out to allegedly achieve fairness -- while in fact achieving only a false, money-alone-driven fairness at the expense of Congress’ intent -- is almost certain to be presented big-time by The Malefactors Three at the February 2nd hearing. After all, Picard and Harbeck have been pushing this idea since at least early 2009, and their idea has a simpletonish patina of fairness, to those who cannot see beyond dollars alone, because they claim it necessarily is fair, and achieves equality, to deny money to investors who previously took out money in order to give it to those who haven’t, regardless of their true relative economic and human circumstances. Picard and Harbeck resolutely refuse to recognize -- and most lawyers on our side seem not yet to have realized -- that instead of resulting even in monetary fairness (let alone holistic fairness), the ideas of Harbeck and Picard merely help late investors, do nothing to get back money from people who took out their entire investments more than six years before December 2008 and who thereby benefitted from the investments by people who came after them, and harm the latter people, who came in the “middle” so to speak, never pulled their principal out, had to use their Madoff income to live on, and are now impoverished. This is some idea of fairness and equity, isn’t it?

There is one admission in the briefs of the SEC and SIPC that is surprising. Few lawyers on our side seem to have made the quite relevant, and I believe quite correct, argument that SIPC owes victims the securities shown in their November 30th statements. Perhaps only Helen Chaitman and I have made the argument; it was a significant part of a brief I filed which showed that this was the remedy Congress wanted implemented whenever possible, in preference to providing victims with cash, so long as the securities could be purchased in a fair and orderly market. The argument also received discussion in Chaitman’s papers.

The SEC admitted in its brief that “conceivably, it would be possible for the trustee to purchase real securities to cover the securities position shown on the account statements” (but said this shouldn’t be done because the account statements were fictitious). (SEC Brief, p. 8.) SIPC did not go as far. It only admitted (though at some length) that providing customers with securities is Congress’ preferred method, although it too, like the SEC, said this shouldn’t be done where a securities position had been fictitious. Yet I know of nothing in the legislative history saying that securities should not be provided if the position was fictitious but was honestly believed by the investor. Instead, Congress specifically said in the legislative history that securities should be bought by the Trustee to replace securities that are “missing” -- as they are missing here -- if the purchase can be made in a fair and orderly market, i.e., a market not subject to manipulation, which can also be done here. All of this is extremely important because the securities that are missing here have gone up dramatically in value since December 11th, and obtaining them, as Congress desired, would therefore be extraordinarily important, especially for people who have been impoverished. I don’t know whether any of the victims’ lawyers intend to make the argument for requiring SIPC to acquire and deliver securities, but someone should, the more so in light of the concessions by the TMT.

Finally, I note that SIPC’s brief reiterates the truly offensive, ultra legalistic (if it even “rises” to that level) absurdity that victims are responsible for what Madoff did because he was their agent in committing fraud. Victims, SIPC says -- and I am going to quote its brief because it is hard to think people could believe it otherwise -- “are chargeable with the underlying fraud because they rely on BLMIS’s fraudulent statements as the foundation for their ‘net equity’ claims.” (SIPC Brief, p. 23.) If victims wish to “disavow” Madoff’s fraud and not be chargeable as principals of an agent, says SIPC, then the “first and most obvious step in disavowing the Debtor’s fraud would be to reject, not rely on, the fraudulent statements generated and provided to Claimants by BLMIS.” (Id., p. 25.) In short, the victims are culpably chargeable with Madoff’s fraud because they rely on confirmations which the legislative history says are the usual measure of legitimate expectations, which they had no reason to disbelieve, by which they governed their lives for years, and which have been the measure of net equity previously in SIPC cases. This is, as said, a truly offensive argument, is as stupid as anything in the SEC’s often stupid brief, and shows how desperate SIPC is. And this stupidity and offensiveness comes, I will not resist saying, in a brief that was filed by a quasi governmental body; in a brief filed by a quasi governmental body headed by a person who a few years ago was already making over $700,000 per year and in a quasi governmental brief whose lead signatory was already making somewhere around $400,000 a few years ago. With such monies going to the perpetrators of such offensiveness and stupidity, is it any wonder that the government is in continuous trouble and seems to be a general repository of incompetence?*



*This posting represents the personal views of Lawrence R. Velvel. If you wish to comment on the post, on the general topic of the post, you can, if you wish, email me at Velvel@VelvelOnNationalAffairs.com.

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President Conducts Disquisition On New Anti-Terrorist Plans.

President Conducts Disquisition On New Anti-Terrorist Plans.


President O’Bomber sat for a lengthy third exclusive interview with this reporter recently. This time we discussed the reasons why the CIA failed to connect the dots to stop Abdulmutallab from flying on a Northwest plane to Detroit. (Abdulmutallab, of course, intended to fly to Lake Huron, not Detroit.)

“It is not true that our analysts were not connecting the dots,” said O’Bomber. “There were 200 of them in Langley connecting the dots in the little books we give them. They were coloring in the pictures too after they connected the dots.

“So it is wrong and untrue for that wacko, the aptly named Dick Cheney, to claim the CIA was not doing its job. Cheney has called me privately to give me his own plan, just like he used to tell George Bush what to do. Cheney says that the way to stop terrorists from blowing up airplanes in flight is to stop people from flying. That way terrorists will have to blow up airplanes on the ground, where nobody will get hurt. He says nobody ever heard of an airplane falling out of the ground, so people will be safe.

“Cheney suggested to me that we give all people who want to be terrorists the key to the big parking lot in the Arizona desert where all the thousands of airplanes not currently in use are kept. This would enable the terrorists to blow up all the airplanes they want, with nobody being hurt. As a side benefit, we would find out who the terrorists are because they would have to apply for keys to the parking lot, and we could also track them on the parking lot to find out what particular type of plane each likes to blow up.

“Cheney,” continued the President, “wants to turn the whole country into a no fly zone. He carries this to the point where he wants to revoke the Presidential Medal of Freedom given to the Wright brothers. He said to me, ‘Anyway, Brack (he runs my first initial and middle name together like I was some foul water), that medal should never have gone to the Wright brothers. It should have gone to Alberto Santos Dumas.’ I had some of our analysts take some time off from connecting dots and filling in colors in order to check this out, and they reported back that it’s true. This broke the CIA string of 287 consecutive mistakes, but I decided not to do it anyway.

“Before announcing my final decision about this, however, I called former President Bush to get his view on it. At first I got a wrong number. The guy on the other end said ‘I think you’ve got a wrong number. This is George H.W. Bush. I think you’re looking for George W. Bush.’ But he gave me the phone number of George W. Bush and I then called him. His advice was ‘If the aptly named Dick Cheney tells you to do it, then do it.’

“I thanked him for the advice, and told him that I had already decided against it and was just calling him for fun. ‘There are so few of us ex Presidents or soon-to-be-ex Presidents around,’ I said, ‘so I thought it would be good fun to call you.’ I also thanked him for not publicly opposing any of my plans or initiatives, and he graciously replied, ‘Well, I’ve learned that people hate my guts and think I’m stupid. But you are following the same policies I did with regard to war and the economy, so you are helping rehabilitate my name in history. I’m happy about that and so there is no way I am going to speak out against what you’re doing.’”

After these discussions, I asked the President whether there was any truth to the rumor that we are going to make it harder to obtain visas, so that it will be harder for terrorists to get into the United States and even to get on planes heading for the United States. “Yes,” he said, “we are going to do that. In fact, we are also going to require Americans to get visas to get into Washington, D.C. or to get on planes headed for Washington. Unless they are lobbyists carrying brown paper bags full of cash. Or Senators or Congressmen coming to Washington to pick up the cash. People will also have to sit in their seats and not go to the bathroom for the last three hours of their flight, including before the plane takes off if necessary.

“There is precedent [said the President] for internal visas like the ones people will need to get into Washington. They were called internal passports in the Soviet Union and the Corn Laws in merry olde England. And they are consistent with the fact that Washington is another country from the rest of America. We don’t want people from that other country coming in to D.C. and screwing things up. We are, however, giving consideration to excepting residents of the wealthy Virginia and Maryland suburbs -- Alexandria, Bethesda, Fairfax County, Montgomery County, etc. -- from the visa requirement. They belong more to Washington, after all, than to the vast foreign country of the United States.’”

The interview then turned to some of the technical reasons why security analysts had completely failed to catch Abdulmutallab before he got onto the Northwest flight, even though there were lots of warning signs. “Look,” said O’Bomber (“Look” is the expostulation he always uses when he is exasperated by the obduracy or stupidity of the person he is talking to, like John McCain or Sarah Palin.). “Look,” said President O’Bomber, “our analysts were very busy connecting dots and coloring in pictures. And what good would it have done anyway if they had been looking for hints and clues? We had a host of hints and clues before 9/11, and what good did that do? This proves that understanding hints and clues here wouldn’t have been worthwhile.

“Nor was it believable that a Nigerian banker would turn in his own son. So the analysts were certain that his coming to the embassy to tell it he feared his son had become a terrorist was an obvious ruse designed to throw us off the track. In fact, we started following the father because, if he was engaging in this ruse, he must have some connection with the terrorists. Or maybe, of course, his son had disappeared, and he just wanted the CIA to find his son for him.”

I asked the President about the report that we had known someone was flying to the United States with a name spelled only one letter differently from Abdulmutallab’s, but it turned out to be the bomber himself with his name spelled wrongly on the CIA’s lists. “Yes,” said President O’Bomber, “that’s true. Our lists showed someone scheduled to fly named Abdulmetallab, with an e instead of a u. One analyst said he thought it was odd that a metal laboratory was getting on an airplane, but his colleagues made sport of him, saying that this was of course impossible, and the spelling occurred because a computer printer ran together the name of the passenger and the name of his place of employment (i.e., Mr. Abdul of Metallab). Other CIA analysts got things wrong because they thought they were looking for a home address that was the address of the building we blew up in Yemen with a Predator missile in late December awhile after there had been a meeting there of top level Al Qaeda officials earlier in December. We subsequently learned that the Al Qaeda officials had met there early in December because they knew there would be no women and children in the building at the time and knew also that we would never fire at a building that had no women and children in it. They knew we would wait until later in December, when there would be 43 women and 92 children in the building. In fact, movies taken by our satellites that we downloaded in January showed Al Qaeda leaders dancing around on the roof of the building in early December, firing their Kalashnikovs into the air while repeatedly screaming Arabic words that our Arabic lip readers identified from satellite movies as being ‘F ck you Predator drones.’”

The President then turned briefly from the Abdulmutallab situation to the recent assassination of seven CIA agents. He said that, as sad as all this may or may not be for her, our intelligence had revealed it was not beyond human possibility that the wife of the guy who blew up himself and seven CIA people had encouraged her husband to be a radical. She had, he confirmed, written a book comparing Osama bin Laden to Che Guevara, and had said her husband, a doctor, “had said he wanted to learn more about surgery,” which consists of making holes in people, at least temporarily.

“Apparently,” said O’Bomber, “this guy had learned not only how to put holes in people, but how to make them disappear entirely, how to make them no longer incorporeal.” When I asked him what that means, he said, “Look, it means incorporeal. His wife’s views might have had some effect,” he continued. “After all, this is no different from the American South before and during our own Civil War, when southern women demanded that their husbands and sweethearts go fight the Yankees and derided men as cowards if they did not go fight them. So there is a history of this right here in our own country, and one cannot disregard the possibility that it is going on today in the Arab world because it has come to hate our militaristic actions there and our efforts to tell Arab governments what to do and to control those countries. I am taking account of this possibility every day, just as I now understand that Bush and Cheney did, and it is for that reason that I am currently fighting only two wars in the Middle East. If it were not for fear of further stoking Arab hatred, I would likely be fighting in Yemen (or Yeahman), Iran and maybe Syria too as well as Iraq and Afghanistan. I do want to deserve my NoBull Peace Prize, after all.”

Before continuing with the main thread of his discussion of clues that we missed in the Abdulmutallab case, and then of changes he is ordering in order to increase our security, the President elaborated a bit more on the question of Arab hatred for us and America’s racist, though denied, reciprocal feelings. “Look,” he said, “there is no truth at all to the claim that a woman was not allowed to sit right behind the podium,” at which he was speaking at a rally in Detroit, “because she was wearing an Arab headscarf and would be seen on television. There is no truth in that at all,” he said. “The real and only reason she was removed was that she kept screaming, ‘You tell ’em, Hussein. You tell ’em, Hussein.’ (Hussein’s my middle name, you know. That’s why Cheney thinks I was born in Kazakhstan.) Whether or not she would have been seen on television, her slogan would certainly have been heard on television, and that is why she was removed. You tell ’em, Hussein, indeed! And in fact, we later found out that underneath the head scarf she was actually a blue-eyed blonde Arizona-American planted by the McCain campaign. It was part of the sabotage program that they secretly called ‘The McCain Campaign Screws Hussein.’

“We are also seeking further cooperation with the Yemen (or Yeahman) government,” said the President, “and are asking them to cooperate in helping us eliminate Al Qaeda - - despite the increasing hatred for America in the Arab world - - because my middle name is Hussein. This is part of my basic principle that words speak louder than actions. This, of course, is the very opposite of George Bush’s principle that, since he only knows 212 English words, his stupid actions would have to speak for him. But we are running into some trouble because the southern part of Yemen hates the northern part, which, it says, gets all the better education and jobs, and wants to secede from the northern part. So the south is not eager to help us. It has a lot of advisers who are telling it to secede and not to help us. One of our top CIA guys asked the head of the southern part of the country who his favorite adviser is, and the guy told him it’s Jefferson Davis. So you can see that we have a problem. Especially since the situation of better northern education and jobs is exactly the same as before our own Civil War and for over 100 years afterwards.”

At this point, President O’Bomber turned back to the main thread of what we are doing to improve our intelligence capability and our defenses, so that there will not be future attempted bombings of airplanes, at least not while they are in the air. “First,” he said, we are buying our analysts many more books in which to connect the dots and color in the pictures. Now, there are those who say that there is so much information available to the analysts already that they already cannot keep up in analyzing what is available, and that the situation only will get worse if we make all the computers talk to each other so that there is even much more information for the analysts to connect up. I admit that this could prove true. But for political purposes, I have to be able to say we are doing something, so I have ordered the computers to be connected up, with the main server to be located in Wasilla, Alaska because you can look out the window and see the Soviet Union from there. At least that’s what Sarah said. And if this doesn’t work, we can always say it’s her fault for misleading us about what you can do from Wasilla.

“Anyway, maybe it will work. After all, it’s only eight years since we began connecting up the computers. That’s not much time, so it’s little wonder that so many of them are still disconnected (like politicians from reality), but with a crash program (no pun or double pun intended) we might succeed in connecting them up real quick now and maybe it will do some good instead of screwing things up even more.

“Second, we are going to steal an idea from our enemies. My top terrorism adviser, John Brennan, has said we did not realize Al Qaeda was already “launching individuals” against the United States. Hell, I didn’t even know they were going to launch people. I thought you only launch rockets. But we’re going to steal this idea from Al Qaeda and launch people against it. We haven’t figured out yet whether to launch them from Predators, in which case they would have to be drones. But that’s no problem because the government is filled with them. Or, alternatively, we might launch them from outer space.

“Third, we are going to require every flyer either to pay for his ticket with a credit card or to have luggage. No more of this ‘Mr. Rich Boy paying with cash and having no luggage.’ If the luggage is empty, or simply has t-shirts or whatever, that’s ok, so long as you do have luggage.

“Fourth, we are going to give a permanent vacation to Michael Leiter, the Director of the National Counterterrorism Center who went on a ski vacation instead of working on the Metallab case, er, Mutallab case. Brennan okayed this, telling Leiter ‘[y]ou deserve this vacation.’ He deserves it so much that we are going to make it permanent.

“We also are going to insist that everyone who gets on a plane in, or going to, the United States must get a full body, backscatter x-ray scan that leaves nothing to the imagination. Generally speaking, we don’t expect too much opposition to this on the grounds of privacy. We have had some opposition to it, however, from a splinter group of NOW which is claiming it will do no good and is only a plot cooked up by horny TSA personnel, usually male. NOW is working in cooperation with the League of Frenchmen With Badly Deformed Penises. There are a lot of those guys in France for obvious reasons. But we will probably be able to overcome this opposition from NOW and the League by agreeing to change our plan to post every backscatter x-ray on Facebook -- which would have had to change its name.

“This plan to make everyone undergo a backscatter x-ray,” continued President O’Bomber, “has been warmly welcomed by Jockey Brand underwear. The Jockey Company had been giving serious consideration to the possibility of having to get out of the underpants manufacturing business because Al Qaeda was turning underpants into a weapon of mass destruction. That would have left the underpants manufacturing business to manufacturers in the Arab countries and sweat shops in China. The Jockey people were sick about this, and it would have hurt our balance of payments too. But now that we are taking steps to prevent underpants from being a weapon of mass destruction, the Jockey people do not feel they have to leave the business. They are delighted. In fact they are so happy that they have promised to contribute 50 million dollars to my 2012 presidential campaign and to themselves contribute as much money to the foundation I will start after I leave the Presidency as Honest Bill Clinton amassed in toto in his foundation after he left the Presidency. That’s over 100 million dollars, I think. The Jockey people have even gotten a so-called advisory opinion from John Roberts, Samuel Alito and Nino Scalia that they can do this because it is free speech.

“So, you see,” said the President, “we have a host of meshugganer plans that are certain to work. We are developing a system so foolproof that even Mother Theresa couldn’t get on an airplane if she was wearing an explosive belt, or even a chastity belt.

“There are those who say the reason we and the Bush Administration failed previously, as did all other administrations going back at least to the mid 1960s, is that people in government and politics are stupid. Or if they are not stupid when they join government, or begin politics, for some reason they quickly become stupid thereafter. There is no truth to that point of view. What we have lacked previously is not brains, but the appropriate plans. And the lack of appropriate plans was not due to the lack of brains. Anyway, now we have the appropriate plans, so we expect to get rid of Al Qaeda. And the aptly named Dick Cheney.”





R:\My Files\Blogspot\Blogltr.PresConductsDisquisitonTerror.doc

The CIA Blows It Again, This Time In Connection With The Gilbert Arenas Affair

January 8, 2010

The CIA Blows It Again, This Time In Connection With
The Gilbert Arenas Affair.


In his second exclusive interview with this reporter, President B. Rack O’Bomber (aka Anti-Afghan Man) disclosed that the CIA had blown it again, for the 238th consecutive time (as revealed by Tim Weiner in his classic Lagacy of Ashes. The CIA, said O’Bomber, completely missed the fact that the dreaded Stern gang had manufactured the Gilbert Arenas incident as part of its continuing war on its rival, the equally dreaded UrGUN. The UrGUN has been attempting to take over professional basketball from the Stern Gang as part of UrGUN’s war to further rot the minds of the American public, media and politicians. It is trying to do this by causing them to focus yet again on the inessential and meaningless, this time on the subject of professional basketball, instead of on crucial matters such as whether Kraft will take over Cadbury as part of the infamous Chacolate War.

Speaking in his usual Golden Glossalalia, the President disclosed that Gilbert Arenas had brought unloaded pistols to Gilbert’s Arena in violation of the Supreme Court’s ruling in the Washington gun control case. Under that high court ruling, it is not lawful to carry unloaded weapons in Washington, D.C. It is lawful only to carry loaded weapons. “That damn fool, Arenas,” said the President, “could have avoided the whole problem if only, like so much of the rest of Washington, he had loaded the pistols before he had taken them out of his house. Hasn’t he ever heard of the Supreme Court?”

Arenas’ misconduct in later pointing his fingers at his teammates in Cleveland and saying “Bang,” said the President, has forced the head of the Stern Gang, King David, to blow up. King David declared that this act of pointing fingers and going “Bang” makes Arenas “not currently fit to take the court in an NBA game.” Such declaration was exactly correct, said the President, “because Stern is running a league populated by girl scouts.” As evidence, the President pointed to the incident in which Latrell Sprewell had choked his coach, P.J. Carlesimo. The player’s union, pointed out O’Bomber, had “properly defended Sprewell’s action, on a successful appeal to an arbitration panel, as an act of peaceful protest. But the union will not touch Arenas’ case with a fork,” said the President, “because his guns were unloaded.

It is far worse to have unloaded guns than to choke your coach,” declared President O’Bomber, “since what kind of a protest is it to have unloaded guns? Or to simply get on your knees, point your fingers and say “Bang”? Nobody pays attention to that kind of so-called protest. As we are proving every day, the only kind of protest people understand is the kind we are using in Iraq and Afghanistan, when we are using loaded guns that go bang. The CIA, however, completely missed this sure-fire sign that the whole Arenas deal was a put-up job manufactured by the Stern Gang in its battle with the UrGUN for control of American basketball.”

The President completely dismissed Arenas’ defense that he intended to load the weapons for possible use on defense in a forthcoming one on one game he had scheduled against Kermit Washington. Or was it Ron Artest? “Anybody can claim anything,” said the President. “The only actual facts on the ground were that the guns were unloaded, and, in the exact words of the statute, it is a crime to ‘transport or stash’ unloaded weapons in Washington, D.C. It is little wonder that Javaris Crittenton threatened to shoot Arenas in his previously devastated, surgically repaired knee.”

“If I have any bone to pick with David Stern,” said the President, “it is that the punishment of suspension, with a loss in pay of about $147,000 or $148,000 per game, was too light. What Stern should have done instead of suspending Arenas with a loss of pay is to make him play without being paid. Now that would hurt. This is evidenced by the fact that bankers, insurance executives, hedge fund managers and other Wall Street types beloved by Larry Summers, Tim Geithner, Ben Bernanke and Robert Rubin are complaining bitterly that we are making them work without 25 million dollar annual bonuses and 10 million dollar salaries. Stern should have thought of Arenas as simply another Washington/New York-axis financial power player and treated him accordingly -- after all, under his contract he was scheduled to make about $111 million in just six years. Even Lloyd Blankfein or Larry Summers wouldn’t necessarily sneeze at that.”

The President also dismissed the statement by Ernie Gunfeld, nee Grunfeld, the President of Arenas’ team, that Arenas’ conduct and the conduct of some of his teammates was unacceptable. “Gunfeld’s statement is of a piece with Stern’s press release, all political statements, all corporate statements, and my personal press releases and statements,” said O’Bomber in a burst of near British candour. “It is complete bovine defecation designed to sound good, but actually completely meaningless, the kind of statement which it has for decades been customary to put out in the belief, which everyone knows is wrong, that it will fool the public. But then, as Lincoln said, you can fool all the people some of the time and some of the people all the time. And it gives the mass media something to talk about.”

The President admitted, however, that suspending Arenas from playing did accomplish one successful goal on behalf of the overall fortunes of the Stern Gang’s NBA. “Arenas’ team, under his leadership, was posing a serious threat to the Boston Celtics, the Cleveland Cavaliers and the Los Angeles Lakers,” said the President. “This threat to their dominance had to be nipped in the bud on behalf of the NBA, and the best way to do that was to suspend Arenas. If he can’t play, the threat to the Celtics, Cavaliers and Lakers is over.”

When queried about the fact that Javaris Crittenton, the “little used” other player involved in the gun scandal, had not been punished even though he too had possessed a weapon and some reports claimed he loaded a clip into it, the President said, “I know this seems like rank favoritism -- or favoritism contrary to basketball rank. But I can’t talk about it for reasons of national security. You see, the CIA has plans to infiltrate Crittenton into Al Qaeda, and then use him as a suicide bomber to blow up Al Qaeda’s leadership. But due to our respect for the sanctity of life, I assure you the CIA is going to have him wear a full suit of American body armor over the bomb. They were going to dress him in a Humvee, but they couldn’t find an uparmored one because there is a shortage of them.”

The President also disclosed that Lebron James is in on the whole gig, “but I can’t talk about this either for reasons of national security. You see, the night that Stern announced the suspension of Arenas, James attempted to take people’s mind off the problem -- attempted to divert them from focusing on the CIA’s 238th consecutive mistake -- by making a shot from behind the basket. While I at first thought this was original, people in Boston, where Larry Bird replaced both God and the Pope about 20 years ago, have emailed me that Bird once did that too. For real, not as part of the Jordan/Bird off-the-next-building, hit-the ceiling, bounce-off-the-front-row seats, into-the-basket commercials. Anyway Lebron’s shot from behind the basket was amazing. In fact, I think the NBA should install a new five point line to complement its three point line. The five point line would be behind the basket. This will create a whole new series of five point specialists to complement the ever greater number of three point specialists. The non-stop-talking TV announcers will say things like, “There are only ten seconds left and the Celtics are down by four with the game on the line. They need a five pointer to win.”

“In fact,” said O’Bomber, “I have an even more amazing idea for a new 6,000 point shot. This idea will dwarf, will midgetize, my plans for health care, financial regulation and Afghanistan put together. Here’s the idea. 6,000 points should be awarded, and his team should immediately be declared the NBA champion for that season, if a player stands directly behind the middle of the backboard with basketball in hand and, from a standing start, leaps up and over the backboard, doing a Ferschimiltbury flop to get over it, and then dives straight down head first through the basket while still holding the basketball. Now there’s an idea that will take people’s minds off important things and will cause them to focus yet again on absurdities, as they should. And its not travelling either, since it will have to be done from a standing start, not after an eight step run like the modern lay up or dunk. As an ex-basketball player, I think this shot can be done.

“Maybe we should start the ball rolling (heh, heh) with a naming contest for this shot,” continued the President. “A naming contest is how the Washington Bullets became the Washington Wizards, you know. I’ll submit the first set of possible names. How about calling the shot ‘the non-pole pole vault.’? Or maybe ‘the standing non-pole pole vault.’” Or maybe just the Ferschimiltbury Flop? Whaddaya think?”*


*This posting represents the personal views of Lawrence R. Velvel. If you wish to comment on the post, on the general topic of the post, you can, if you wish, email me at Velvel@VelvelOnNationalAffairs.com.

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