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DBE Fraud

December 19, 2014 at 12:06 pm

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U.S. Attorney Preet Bharara's handling of insider trading cases has come in for caustic criticism here, but when he does something right, he deserves a cheer. We're glad to see the fraud case he brought and settled against a Port Authority construction contractor who brought in a "Disadvantaged Business Enterprise" — DBE — solely to help win the contract, but not to do any useful work. From the press release from the U.S. Attorney's office:

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A New Low For Anti-Bank Activists

December 19, 2014 at 11:20 am

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Union and "occupy" activists in America have occasionally picketed the homes of corporate executives, board members, or government officials. In Israel, these tactics were taken to a new low when someone — police suspect "anti-bank activists" — targeted a school attended by the daughter of a bank CEO, scattering the schoolyard with leaflets including the student's name and the words "It's not your fault your mother [the bank CEO] is a criminal." The Israeli daily Ha'aretz (registration required) has the story.

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A Bad Month for the Press

December 17, 2014 at 2:09 pm

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New York magazine's story about a high school student making tens of millions of dollars trading stocks turns out to be phony. Rolling Stone magazine's story about a rape at the University of Virginia story turns out to be, if not phony, at least so flimsy that the editor of it has no confidence that it is true. President Obama cuts a deal to normalize diplomatic relations with Cuba and no one in the press, other than the New York Times editorial page, seems to have had any advance inkling that it was underway. The New York Times publishes a fake front-page story about Pope Francis saying dogs can go to heaven.

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Meanwhile, In Ann Arbor

December 17, 2014 at 1:35 pm

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The Kellogg Professor of Communications Studies at the University of Michigan and chair of the Communications Studies department, Susan Douglas, has published an article, "It's Okay To Hate Republicans":

A series of studies has found that political conservatives tend toward certain psychological characteristics. What are they? Dogmatism, rigidity and intolerance
 of ambiguity; a need to avoid uncertainty; support for authoritarianism; a heightened sense of threat from others; and a personal need for structure. How do these qualities influence political thinking?

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A Bad News Day

December 17, 2014 at 1:20 pm

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At the risk of grouping together three unrelated items...

1. President Obama has struck a deal with communist Cuba to ease American sanctions there, which will have the likely effect of enriching and further entrenching the Castro brothers. It's not that Mr. Obama doesn't believe in sanctions; he just tightened them on Russia. It's that he doesn't support them on Cuba. The key, in my view, to understanding this came in his remark in his speech: "let us leave behind the legacy of both colonialism and communism." This relates to Dinesh D'Souza's article on Obama's father's post-colonialism. Now, you can argue that American policy hasn't freed Cuba. On the other hand, America's policy of trade and diplomatic relations with Communist China hasn't freed China, either. A lot of the sanctions on Cuba are entrenched in law that President Obama can't waive without Congressional action. It will be interesting to see whether that action is forthcoming. I can see the arguments on both sides of it.

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Cass Sunstein's Latest

December 16, 2014 at 10:13 am

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Harvard Law School professor Cass Sunstein's paper suggesting more discretion for executive branch technocrats as a cure for "partyism" is the topic of my column this week. Please check it out at the New York Sun (here), Reason (here), and Newsmax (here).

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Questions of the Day

December 12, 2014 at 9:24 am

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With respect to the insider trading cases brought by the U.S. Attorney for the Southern District of New York, Preet Bharara, against Todd Newman and Anthony Chiasson (and Michael Steinberg and who knows who else, too), the ones that a panel of federal judges on the Second Circuit described as displaying a "doctrinal novelty" for being "increasingly targeted at remote tippees many levels removed from corporate insiders":

1. Is there a faculty member at any of the top law schools — Yale, Harvard, Stanford, Columbia, NYU, the University of Chicago — who raised questions about the constitutionality or fundamental justice of these prosecutions? If not, what does that say about these institutions?

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More on the Insider Trading Opinion

December 11, 2014 at 10:31 am

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Some interesting passages from the New York Times news article about yesterday's Second Circuit opinion on the insider trading case:

Judges wield unusual sway in shaping insider trading law, in part because the act of insider trading is not explicitly prohibited in a federal statute. In its place, a patchwork of legal opinions and regulations define the law. ...

The dismissal of the case also raises questions about the November 2010 raids of Level Global and Diamondback Capital Management by the Federal Bureau of Investigation. Soon after the raid on Level Global, the hedge fund, which was started by Mr. Chiasson and David Ganek, shut down, in part because of requests by investors to redeem their money after the raid. Mr. Ganek was never charged with any wrongdoing by federal authorities.

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The CIA's Tax-Exempt Psychologists

December 11, 2014 at 10:00 am

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Whatever your view is of the national security questions surrounding the CIA's enhanced interrogation techniques — torture, some call it — or of the wisdom of revisiting the matter in detail a decade later, it's worth pausing for a moment to consider the whole situation as an example of big government in action. The CIA apparently paid $81 million to a contractor run by two psychologists. NBC News reports that "The deal initially provided the two principals with $1,000-a-day tax-free retainers."

I'd love to see the text and legislative history of the law, if there is one, declaring that income earned by psychologists for interrogating detained terrorism suspects is exempt from taxation. I guess it's an example of the rule that "there's always a tax angle."

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Edelman's Gruberism

December 11, 2014 at 9:30 am

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Harvard Business School professor Ben Edelman surfaced here earlier this year after the university asked him to add additional disclosures to an article he wrote that was based on research for a paying client. Now he's back in the news following a bizarre reaction he had to a price dispute with a chinese restaurant. Professor Edelman has apologized, writing, "Having reflected on my interaction with Ran, including what I said and how I said it, it's clear that I was very much out of line. I aspire to act with great respect and humility in dealing with others, no matter what the situation. Clearly I failed to do so. I am sorry, and I intend to do better in the future."

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Polling Regulation

December 11, 2014 at 9:13 am

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From a New York Times report of a telephone poll it conducted earlier this month in the U.S. with 1,006 adults:

The majority of those polled said they were more concerned about the possibility that too much regulation in Washington could stymie the economy than they were about the prospect of inequality. Fifty-four percent of respondents said that "over-regulation that may interfere with economic growth" was a bigger problem than "too little regulation that may create an unequal distribution of wealth." Only 38 percent said that too little regulation posed a bigger problem...."I don't know what you mean by an unequal distribution of wealth," said Robert Monti, a 74-year-old retired social studies teacher from Niagara Falls, N.Y., who identified himself as "a registered Democrat but haven't voted Democrat in years."

He said, "It's a proven fact that everybody can't make the same amount of money, and it's a ridiculous assumption that they can. You'll never have economic equality. Ever."

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Insider Trading Decision

December 10, 2014 at 11:55 am

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Two cheers for Judge Barrington Parker of the U.S. Court of Appeals for the Second Circuit and his fellow panelists Ralph Winter and Peter Hall for their opinion today reversing the convictions of Todd Newman and Anthony Chiasson for insider trading and conspiracy. From the opinion:

We agree that the jury instruction was erroneous because we conclude that, in order to sustain a conviction for insider trading, the Government must prove beyond a reasonable doubt that the tippee knew that an insider disclosed confidential information and that he did so in exchange for a personal benefit. Moreover, we hold that the evidence was insufficient to sustain a guilty verdict against Newman and Chiasson for two reasons.

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How Excel Beat Lotus 1 2 3 and Visicalc

December 9, 2014 at 2:31 pm

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Former Wall Street Journal tech critic Walt Mossberg's site re/code has a history of Boston's technology business, including this explanation of how the Excel spreadsheet conquered its competition:

Microsoft didn't have the best-selling spreadsheet, didn't have the best-selling word processor, didn't have the best-selling presentation-graphics database. None of (their products) were the leader in the category.

They realized you could shift the purchasing decision from "Is it the best software?" to "Is it the best decision for the company?"; bundle the products together, drop the price from $300 or $500 each to $700 for all of them combined; sell to the top of the organization. And they recognized that they could leverage their operating system.

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The New Republic's Losses

December 9, 2014 at 11:20 am

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Dana Milbank, writing in the Washington Post about New Republic owner Chris Hughes: "his spending spree caused annual losses to swell from $1 million when he bought the struggling magazine (he was its fifth owner in a decade) to $5 million."

Joe Nocera, writing in the New York Times: "Thus it was that in 2012, with The New Republic's losses rising to around $3 million, Peretz sold the magazine to Chris Hughes."

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For This We Need Republicans?

December 9, 2014 at 10:58 am

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The Republican governor of Michigan, Rick Snyder, "is calling on lawmakers to roughly double Michigan's gas tax over time, to raise more than $1 billion," NPR reports, noting that "Snyder is one of a growing number of Republicans across the country who see the need to spend big to improve infrastructure, and who are looking to increase gas taxes to pay for it."

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