Martha Stewart and Our Shadow Legal System

by William L. Anderson and Candice E. Jackson
by William L. Anderson and Candice Jackson

In the wake of our articles (1, 2) criticizing the guilty verdict against Martha Stewart and her broker, we have received a number of emails both for and against our position. This is hardly a surprise, as the Stewart trial was THE hot-button event, and a person like her is going to trigger strong feelings, both for and against.

Support messages have ranged from attorneys who deal with the realities of federal criminal law to feminist Democrats who believe the sole reason for her prosecution was that she was a female Democrat. (That does not explain, however, why no Democratic politician openly gave her support, including her supposed "good friend," Hillary Clinton, who gave Stewart a slap in the face by returning a $1,000 contribution she had given the Clinton senatorial campaign. We later explain why we believe that was the case.)

Excluding the most hateful of the emails (telling us to "love or leave" the United States), there seemed to be a genuine expression of surprise by those who believe the verdict was just. After all, they reason, Martha LIED! SHE BROKE THE LAW! When a number of jurors from the case appeared on NBC Dateline Sunday, March 7, their message was convincing to the average viewer.

To be honest, Stewart’s defense was convoluted, or at least what we read. Our guess is that her broker tipped her off to the fact that Waksal family members were selling their ImClone stock – and that she had better sell hers or take a small financial bath. Neither of us are convinced that there was an original "@$60" order, although the prosecution clearly did not prove that none existed (and the jury did not convict the broker, Peter Bacanovic, of the "false document" charge). In other words, we do not believe that Stewart told investigators "the whole truth" about the sale of her ImClone securities.

That being the case, it would seem to the average reader that we would be siding with the jury and the prosecutors in this situation. Moreover, our stand for Stewart would seem to be motivated (at least suggested by some respondents to our articles on the trial) by things other than Truth and Justice. Perhaps we are leftists, claim some (not true), atheists who hate conservative Christians (nope), Democrats (definitely not), feminists (try again), or just plain idiots and malcontents (matter of opinion).

While we can see why some might fault our reasoning, there is a deeper-held reason why we believe that Martha Stewart should be a free woman today. We hold that the federal criminal system that convicted her is an abomination to justice and is the destroyer of those precious "Rights of Englishmen" that this nation inherited from Great Britain (and especially the famed jurist William Blackstone) more than two centuries ago. What exists today in the federal courts is nothing less than a shadow justice system, an evil twin of the common law that served us so well for so long, a system that keeps the trappings of common law, but is more like Stalin’s Soviet Union than Blackstone’s England.

Born of political expediency and of the Progressive Era of the late 19^th and early 20^th centuries, the federal criminal system is nothing less than a mechanism that permits prosecutors to do an end run around the Constitutional protections that the framers of that document believed were the natural rights of individuals. While we know that many readers will disagree with the following statement, we hold that it is true and will demonstrate why we believe such a thing: modern federal criminal laws and policies hold much more in common with Josef Stalin’s U.S.S.R. in the 1930s than it does the Constitution of the United States.

The first thing that catches our eye is the following statistic from the 2001 Compendium of Federal Justice Statistics. According to the government’s own figures, 95 percent of all federal charges end in a conviction whether through a plea bargain or a guilty verdict at trial. These are astounding figures, made even more so by the fact that it is quite easy for federal prosecutors to obtain indictments against targeted individuals. During the famed Rudolph Guiliani Wall Street prosecutions of the 1980s, one of his assistant prosecutors bragged to the press that he "could indict a ham sandwich" if he wanted to do so.

As Paul Craig Roberts and Lawrence Stratton noted in their book Tyranny of Good Intentions, the once-prized independence of the grand jury system – both in the states and federal government – has been lost to the power of the prosecutors, who now tightly control the indictment process. Thus, in the United States today, if federal prosecutors wish to indict someone, then it is almost a certainty that the targeted person will be convicted of a crime, either by pleading out or by being convicted in court.

No doubt, the skeptical reader will reply: "Well, so what? Guilty people still are guilty. Prosecutors would not indict someone if they did not think they were a criminal. Furthermore, there are many safeguards in the system to prevent prosecutorial misconduct."

Alas, think again. Writers have found time and again that the system is utterly corrupt because there are almost no safeguards against federal investigators and prosecutors who step out of bounds. For example, while the press was fixated upon Stewart’s alleged crimes, the alleged denizens of the "free press" failed to note that someone from the prosecution illegally leaked federal grand jury transcripts to the New York Times. Such an act is a felony, yet no federal dollars were spent trying to find who committed this actual crime.

While we have linked this page before, we remind readers of the powerful 10-part 1998 Pittsburgh Post-Gazette series on federal prosecutorial misconduct written by Bill Moushey. One of us spoke on the telephone recently to one of the prosecutors named in the series (who allegedly tried to frame one of his targets), and it was clear from our conversation that he believed he could do what he wanted, when he wanted, and that he was above the law. (Jurors complained that they thought Stewart to be "arrogant." This prosecutor’s arrogance made Stewart’s alleged haughtiness look like the demeanor a humble peasant.)

In numerous articles, we have noted that most federal crimes actually are "derivative" in nature. That is, they are not actual criminal acts, but rather are activities that have been criminalized because of ties to other things the accused person may have done. For example, the crime of "mail fraud" actually involves the simple act of mailing a letter. However, if one mails information that prosecutors deem to be untrue, then one can be tried for mail fraud. For example, assume that one of the readers has sent in an erroneous Form 1040 to the Internal Revenue Service office. It may be an omission or even a simple error in calculation, but an error all the same.

If they wish, prosecutors can charge that person with mail fraud, no matter if there was intent to defraud the IRS or not. (The federal courts have long ruled that mens rea, which meant that acts criminal in nature had to be done with a guilty mind, does not have to be a deciding factor in determining whether or not one can be tried and convicted.) We have a laundry list of cases (too many to list in this brief article) that prove our point, and we know that every attorney who reads this article knows that to be the truth, with many having had the grim experience of representing clients being tried by the federal courts who are in the dock because of unwitting or unknowing acts.

(For those who might disagree, read the case about Edward Hanousek by Paul Rosenzweig about the current direction of federal criminal law. Hanousek appealed both to mens rea and the fact that the subordinate who committed a "criminal" act – accidentally rupturing an oil pipeline that resulted in oil being spilled into an Alaska river – was not acting according to Hanousek’s orders. The courts ignored both arguments and Hanousek went to jail.)

Following the Stewart verdict, one of the prosecutors crowed to the news cameras that anyone who "cheats the public" will face legal consequences. Keep in mind that Stewart "cheated" no one; she simply sold her stock in an open market, something that hundreds of other owners of ImClone stock were doing at the same time. Had Stewart "cheated" anyone, she could have been charged with a real "securities fraud" charge, not the overreaching charge that even the anti-Stewart New York Times editorial board agreed was ridiculous.

Stewart’s actions did not actually harm anyone; instead, she was found to have engaged in conduct that violates a vague notion of the public weal. Writes Rosenzweig:

To put it another way, an act does not have to harm anyone in order to be criminal in the federal system. In fact, the vast majority of federal crimes involve activities for which there was no harm, just a violation either of a federal rule or regulation, or something of that order. In the Stewart case, prosecutors were able to weave a series of charges around an act that the government apparently did not believe was criminal – or they would have unloaded a criminal charge of "insider trading" against her and Bacanovic, something that prosecutors knew they could not prove in court – even federal court, where rules of evidence tilt heavily toward the prosecution.

According to the New York Times, Stewart fell before the following:

Moreover, according to the Gray Lady:

At that point, most of our critics stop and say: "See, she should have told the truth, and everything would be fine." This is where I believe the issue becomes dicey, and reflects what we see as a deeper problem, that being the purpose of the law in the first place. In a post-conviction article, the New York Times quotes a strong critic of the law, Harvey Silverglate:

Thus, we find ourselves at the purpose of the crime of "obstruction of justice," of which 1001 is a part. The purpose is to trap someone under investigation who otherwise might not be prosecuted for a crime. We emphasize this point again: The purpose of this law and many others in the federal system is to create crimes (and criminals) where none might exist.

Moreover, as Silverglate has so aptly noted, the law runs only one way. Federal investigators and prosecutors regularly lie during conversations with those who are targeted. As we have pointed out in previous articles, the F.B.I. in its training manual for new agents tells them that individuals who are targeted for investigation "have forfeited their rights to the truth." Although many "law and order" Americans might like the idea of treachery being official government policy against those they might deem undesirable, it is chilling to those of us who realize that when a government has an official policy of lying, there are no bounds to the kind of evil and unethical behavior that federal agents can exhibit, since there is almost no chance of their having to pay legal penalties for their actions.

Because federal agents and prosecutors have long histories of lying, why should any juror believe anything a federal agent says in courtroom testimony? The attitude of "believe your government" seems quite silly, given the regularity of government lies at all levels.

We believe that Stewart went into her interviews with government agents in good faith, although we can never know her real mindset (as readers cannot know ours, we admit). Furthermore, prosecutors at that time were talking about charging her with insider trading, and no doubt had laid down some veiled – and not-so-veiled – threats against her. A congressional committee already had illegally leaked testimony about her (yes, another felony that the government did not see fit to pursue) and the press already was baying about Martha in prison stripes.

Why, though, did we not hear Democratic politicians denouncing a Republican Administration’s witch hunt of a popular female industry giant who had made substantial contributions over the years to Democratic causes and campaigns? We believe that Democratic politicians willingly sacrificed one of their own influential supporters to reap some of the perceived benefits of this type of public lynching. So long as Martha Stewart’s prosecutors could tar and feather her with the same brush used these days to paint corporate "demons" like Fastow, Stewart’s political allies had much more to gain by using Stewart as just the next high-profile example of corporate "corruption" running rampant under George W.’s watch. Moreover, we suspect that whatever a politician’s party affiliation, the political class will rally around any set of laws designed to maintain political power at the expense of private industry. (Another recent example of this is the shameless efforts of both political parties to "crack down" on indecency over the airwaves in the wake of the Superbowl scandal. Neither party was heralding the guarantees of free speech in the face of an opportunity to haul in network executives for insulting questioning and accusations in congressional hearings.)

There is a parallel story that needs to be told. During the late 1980s, Michael Milken, the former "junk bond king," was the subject of investigation from Guiliani’s office in New York. As one of his attorneys noted later, Milken and his representatives met with prosecutors in order to explain how their financial operations really worked.

Once they were in the room with federal prosecutors, however, Milken’s attorney said later that it became clear from the outset that prosecutors did not want to hear any lessons in finance. Instead, they made it plain that what they wanted was a conviction, any conviction. Guiliani got his pound of flesh, and it has made him a very wealthy and powerful man. At the same time, Guiliani’s war against some politically-unpopular firms on Wall Street ultimately resulted in financial losses in the billions of dollars and (we believe) helped make the collapse of the savings and loan system even worse. All the while, no Republican trickle-down type politician sounded any trumpets in defense of Milken’s capitalistic endeavors, or questioned the tactics prosecutors used to nail him.

(Congress, in the wake of Milken’s guilty plea, ordered S&Ls to divest their portfolios of "junk bonds" immediately. The downward price spiral for those securities overnight made previously healthy S&Ls insolvent, thus worsening the financial crisis.)

We ourselves have received emails and letters from other people who have fallen into the federal trap. One person told us that he and his co-defendant (before they were subsequently indicted and convicted in a Roanoke, Virginia, federal court) sat down with prosecutors and painstakingly went through a Virginia statute and subsequent court decisions that explained their actions. They ultimately realized that prosecutors were not interested in the law; they were interested in finding a handle – any handle – from which to obtain a conviction.

It is almost certain that federal investigators tried the same bully-boy tactics on Stewart, and given the history of lying by the feds, we are not fully convinced that Stewart and Bacanovic were guilty as charged. Certainly, the jurors did not base all of their verdicts upon the facts; as we noted in another article on this subject, the jurors believe that Stewart and Bacanovic were "arrogant" and in their minds thought perhaps they should be punished for being who they were, as opposed to what they might have done.

Instead, we see Martha Stewart going to prison because she, like Michael Milken nearly 20 years ago – made the misjudgment of thinking she simply could sit down and talk to federal investigators. A law from which some government employees are exempt ultimately trapped her – as it is supposed to do.

In the end, we see a shadow set of laws that are written not to protect anyone, but only to improve the probability of prosecutors gaining convictions. William Blackstone, who coined the term "Rights of Englishmen," declared that the law was to be a "shield" to protect the innocent and to put firm boundaries around the workings of government agents.

Blackstone’s shield in the federal system now is a weapon that the state uses against everyone else. The "Rights of Englishmen" are now dead. The federal courts have the looks and trappings of that once-magnificent system of laws that was part and parcel to the very meaning of the United States of America. But while it may seem that the modern system is a continuation of that system we inherited from Great Britain, the system inside is rotten. It does not protect citizens from the state; instead, it gives the state all of the weapons (federal prosecutors like to call them "tools") it needs to declare everyone a criminal.

March 10, 2004

William L. Anderson, Ph.D. [send him mail], teaches economics at Frostburg State University in Maryland, and is an adjunct scholar of the Ludwig von Mises Institute. Candice E. Jackson [send her mail] is a graduate of Pepperdine Law School and is an attorney for the West Coast office of Judicial Watch.

Copyright © 2004 LewRockwell.com

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