Archive for category Legal
Meet the Genius Behind the Trillion-Dollar Coin and the Plot to Breach the Debt Ceiling | Wired Business | Wired.com
Meet the Genius Behind the Trillion-Dollar Coin and the Plot to Breach the Debt Ceiling
BY RYAN TATE
Photo: Kurtis Garbutt/Flickr
It was a December 2009 Wall Street Journal article that ultimately inspired the Georgia lawyer known online as “Beowulf” to invent the trillion-dollar coin.
The article, “Miles for Nothing,” detailed how clever travelers were buying commemorative coins from the U.S. Mint via credit cards that award frequent flier miles. The Mint would ship the coins for free and the travelers would deposit them at the bank, pay off their cards, and accumulate free miles.
More than six months later, during a wonky online discussion about the debt ceiling, Beowulf thought of the article and, egged on by fellow monetary-system obsessives, came up with his own clever plan to exploit the powers of the U.S. Mint. His idea to issue a single trillion-dollar coin to the U.S. Treasury, thus letting it avoid borrowing and bypass the debt ceiling, is now much discussed among Washington elites, including at the White House, where a spokesman Wednesday wouldn’t rule out the scheme.
It’s been a remarkable journey. The path of the trillion-dollar coin, as Beowulf described it to Wired, began with a “silly question” in a “pointless … online bull session” in the comments section of financier Warren Mosler’s blog. Anonymous supporters helped spread the concept to the comments of other economics blogs and ultimately into posts on such sites. The idea soon attracted attention from more prominent liberal economists like James Galbraith and Paul Krugman, and then from writers like Matthew Yglesias and Ezra Klein. From there it was a short hop into the center mainstream. NBC’s Chuck Todd hammered a White House spokesman about the coin possibility on Wednesday.
It’s one thing for bloggers to help bring down a senator; it’s quite another to re-engineer all federal spending.
If the president uses such a coin to bypass intransigent Republicans who refuse to raise the debt ceiling, or even if he merely uses the possibility of such as leverage in negotiations, it will underline how ad-hoc online communities, like the anonymous international band of commenters to which Beowulf belonged, are increasingly able to move their ideas from the fringes into the middle of political debate. It’s one thing for bloggers to help bring down a Mississippi senator or to embarrass a presidential frontrunner, as they have in years past; it’s quite another for commenters to re-engineer the funding of the entire federal budget.
Their initial ambitions weren’t nearly so grand, to hear Beowulf tell it. (Though Beowulf’s real name is relatively easy to discover online, he spoke to Wired on the condition that we leave it out of this story.)
“It was really a pointless conversation,” Beowulf says, referring to the discussion that unfolded underneath a post on Mosler’s blog about government debt and the differences between the U.S. and Greek monetary systems. “I think it’s funny something we were chatting about a few years ago is now in the news.”
“It was almost a contingency plan, a silly question… What would happen if the government couldn’t get the debt ceiling raised?”
Ever the lawyer, Beowulf dived into Title 31 of the U.S. Code: “Money and Finance.” That Journalarticle was still rattling around in his head. He was also inspired by ideas from attorney-turned-finance-author Ellen Brown, who in her 2008 book Web of Debt quoted a 1980s-era director of Treasury’s Bureau of Engraving and Printing as saying the government could solve its debt problems by printing large coins. He wasn’t talking about circumventing the debt ceiling, which hadn’t yet become a political football, but he may have been on to something.
A comment thread begun nine days after the original post focused on the relationship between the Federal Reserve and the U.S. Treasury and on whether the Fed can legally help the Treasury circumvent the debt ceiling by, for example, overdrafting its account with the Fed.
But Beowulf added a new wrinkle: Why not seize upon the peculiar power of the U.S. Mint to issue platinum coins at the discretion of the Treasury Secretary, an unanticipated side effect of legislation intended to provide for a miniscule trade in commemorative coins?
Beowulf, a leading contributor to the blog Monetary Realism, explained his thinking to us this way: “If you go through the Federal Reserve, you’re borrowing money. If you go through the Mint, you’re making money.” (He hastens to add that the latter is actually more expensive for the government at the moment, but it does have the virtue of getting around a debt ceiling.)
Some of Beowulf’s buddies on Mosler’s blog, whose prodding had helped him come up with the trillion dollar coin idea in the first place, then fanned out to promote the idea. For example, a commenter who goes by Ramanam – Beowulf believes he’s from India – posted the idea within a week to Bill Mitceh’s “bill blog” on Modern Monetary Theory. Another supporter, management consultant Joe Firestone, alsowrote widely about the coin idea, crediting Beowulf.
“[Joe] and Cullen Roche were out there banging the drum for it,” Beowulf says. “You say it was my idea, [but] it was a group of people – it was really a group thing… It’s fascinating that I can have a bull session with people all over the country.”
After one of Firestone’s blog posts about the coin, Beowulf says, left-leaning economist James K. Galraith messaged Firestone about the idea, and shortly thereafter other prominent liberal economists began discussing the coin.
Interestingly, although the coin has been embraced by liberals as a useful political hack and rejected by Republicans as absurd and dangerous, the man who came up with it voted for Mitt Romney. Beowulf says he would have advised the 2012 Republican presidential candidate to use the same trick had he been elected president.
“We’re not real political,” he says of his circle of online pals, who he likens to players in a fantasy football league, but for the monetary system. “It’s like 4chan says – we’re just in it for the – what is it? LOLs? – lulz, lulz.”
Though, when Beowulf stops laughing, he finds the whole notion absurd. “It’s more a disappointment than anything,” he says. “There’s really no reason for a trillion dollar coin, it’s kind of sad that it’s gone this far.”
It may have started as a game, but Beowulf and his pals are poised to inject an important new tactic into oversight of the government’s monetary institutions.
The coin hack even surprised and impressed former U.S. Mint director Philip Diehl, who co-authored the law that enabled the platinum loophole in the first place.
“When I first heard about the idea to mint a trillion-dollar coin, I was very surprised,” says Diehl. “But because I know that law backwards and forwards, I knew immediately that the guy who came up with the idea was right.
“It’s an ingenious use of the law to avoid a ridiculous and irresponsible situation, in which the country would be driven to default.”
(For more from Diehl, see Why Stealing a $1 Trillion Coin Isn’t Worth the Price of a Getaway Van.)
Clever though it may be, the trillion-dollar coin may not be Beowulf’s last monetary parlor trick. He described to us a borrowing scheme involving the Treasury and the Federal Deposit Insurance Corporation, which could potentially allow ready access to funds totaling “90 percent of infinity.” Congress, you may have met your match.
- Can a $1 trillion coin end debt ceiling crisis? (mbcalyn.com)
- Can We Avert The Coming Debt Ceiling Crisis With A Magic Coin? (mbcalyn.com)
- Judge Napolitano Weighs in on the Trillion Dollar Coin Proposal: ‘It Would Be Economically Catastrophic’ (foxnewsinsider.com)
- Why #MintTheCoin Is A Good Strategy (crooksandliars.com)
- Trillion-dollar coin politically alluring (upi.com)
- The #1 Mistake People Are Making About The Trillion Dollar Platinum Coin (businessinsider.com)
- The story of the $1 trillion coin (mnn.com)
- Refuses to rule out minting $1 trillion coin… (politico.com)
- Trillion dollar coin: The new nuclear option (washingtonpost.com)
- Mint That Coin (managed-futures-blog.attaincapital.com)
FTC Declares Rachel From Cardholder Services ‘Enemy Number 1′; Files Complaints Against Five Scammy Robocollers | Techdirt
FTC Declares Rachel From Cardholder Services ‘Enemy Number 1′; Files Complaints Against Five Scammy Robocollers
from the always-in-arizona-and-florida dept
A few weeks ago, we noted that the FTC was offering up $50,000 to anyone who could help stop“Rachel from cardholder services” robocalls. It appears they don’t really need that much help, as the agency has filed complaints against five such operations based in Arizona and Florida (why is it that so many scammy operations seem to be based in Florida and Arizona?). FTC boss Jon Leibowitz overstates his organization’s infatuation with robocalls:
“At the FTC, Rachel from Cardholder Services is public enemy number one,” said FTC Chairman Jon Leibowitz. “We’re cracking down on illegal robocalls by bringing law enforcement actions and pursuing technical solutions to the problem.”
Of course, I think that it’s important not to get confused about what the real problem is here. While robocalls are both annoying and illegal, the real problem isn’t the calling, but the scams behind the calls. They’re basically trying to get people to fork over money for services that are never actually delivered.
In the robocall cases announced today, the FTC alleges that the defendants place automated calls to consumers, typically with a prerecorded message from “Rachel” or someone else from “Cardholder Services.” The calls purport to have an “important message” regarding an opportunity to reduce high credit card interest rates. Consumers are urged to “press 1” to connect with a live representative, or “press 2” to discontinue getting such calls. Consumers who press 1 are connected to live telemarketers. Most consumers have no way to screen the calls using Caller ID, as the incoming number allegedly is often “spoofed,” or displayed as a false number. In many cases, the name displayed on the Caller ID is so generic, such as “Card Services,” that it provides little information about who is calling.
According to the FTC, consumers who reach a live telemarketer are then pitched allegedly deceptive offers to have their credit card interest rates substantially reduced, sometimes to as low as 6.9 or even zero percent. The telemarketers allegedly guarantee that lowering card interest rates will save the consumers thousands of dollars in finance charges in a short period of time and will allow them to pay off the balances more quickly. Some telemarketers allegedly claim that consumers will save at least $2,500 in finance charges and will be able to pay off their balances two to three times faster, without increasing their monthly payments.
In some cases, according to the FTC, the telemarketers claim to be calling from the consumer’s credit card company. In other cases, they use “Cardholder Services” to suggest a relationship with a bank or credit card company. If the consumer expresses an interest in the rate reduction offer, the telemarketer sometimes conducts a purported “audit” to determine whether the consumer qualifies. Consumers provide their financial and personal information, and are then put on hold while the “audit” is completed. According to the FTC, the “audit” typically is used only to determine whether consumers have enough credit available on their credit cards to pay the company’s fee.
The charges filed against the operations include both charges for making false claims and also for violating telemarketing laws, but it seems that the false claims/fraud stuff is the much bigger deal. Instead, however, the FTC seems to focus the publicity aspect on its “fight against robocalls.” I realize that may generate publicity, but isn’t the fraud aspect the bigger deal?
- FTC Hangs Up On “Rachel From Cardholder Services” (consumerist.com)
- FTC shuts down 5 robocall operations (newsnet5.com)
- FTC files suit against “Rachel from Cardholder Services” (networkworld.com)
- FTC cuts off ‘Rachel from Cardholder Services’ (csmonitor.com)
- FTC Cracking Down On Robocalls (stlouis.cbslocal.com)
- The FTC Continues Its Crackdown On Robocall Scams (fastcompany.com)
- FTC Leads Joint Law Enforcement Effort Against Companies That Allegedly Made Deceptive “Cardholder Services” Robocalls (ftc.gov)
- FTC Accuses Companies of Deceptive Robocalls (techdailydose.nationaljournal.com)
- FTC hangs up on robocalls from ‘Rachel’ (latimes.com)
- FTC Whacks “Rachel From Card Holder Services” (yro.slashdot.org)
Wisconsin Judge Strikes Down Law Against Collective Bargaining
Dane County Circuit Judge Juan Colas ruled that the law violates both the state and U.S. Constitution and is null and void. The ruling comes after a lawsuit brought by the Madison teachers union and a union for Milwaukee city employees.
Walker spokesman Cullen Werwie said he was confident the decision will be overturned on appeal.
It’s not clear if the judge’s ruling means the law is suspended. Scott Walker may have survived recall, but this fight is not over.
3:42 PM PT: To clarify, though parts of the law have previously been struck down, the majority-conservative Wisconsin Supreme Court overturned that—which may be a clue to the future of this ruling as well. One hopes that Judge Colas wrote very carefully with that in mind.
- Judge strikes down Wisconsin law against collective bargaining for public workers (dailykos.com)
- Wisconsin Judge Strikes Down Gov. Walker’s Collective Bargaining Law (colorlines.com)
- Wisconsin Law Limiting Public Worker Unions Struck Down (bloomberg.com)
- Judge tosses much of Wis. collective bargaining law (politicalticker.blogs.cnn.com)
- VIDEO REPORT: Judge Strikes Down Wis. Law Limiting Union Rights (nbc15.com)
- Judge Strikes Down Wisconsin Collective-Bargaining Law (boiseweekly.com)
- BREAKING: Scott Walker’s Anti-Union Law Struck Down by WI Judge as Unconstitutional, ‘Null & Void’ (bradblog.com)
- Judge Strikes Down Wisconsin’s Anti-Union Law (chicagoist.com)
- WI Judge Strikes Down Gov. Walker’s Collective Bargaining Law (breitbart.com)
- Wisconsin judge reinstates collective bargaining for state employees (rt.com)
Photography In Public Is Not A Crime
from the protecting-the-first-amendment dept
Sadly, we talk way too often about police arresting people for doing nothing other than taking a picture or filming them. The police officers being filmed and photographed make these arrests using various excuses, but frequently the charges get dropped for lack of merit. The reason charges rarely stick when an officer is filmed is because filming police, or anyone in a public space, is not illegal. Some people may not like it, but it is a fact.
The New York Times is waking up to this fact that photography is not a crime. In an interview with Mickey H. Osterreicher, general counselor for the National Press Photographers Association, they get down to the nitty gritty of the legalities surrounding this age old tradition. They also talk a bit about just why such arrests are happening more frequently.
Since 9/11, there’s been an incredible number of incidents where photographers are being interfered with and arrested for doing nothing other than taking pictures or recording video in public places.
It’s not just news photographers who should be concerned with this. I think every citizen should be concerned. Tourists taking pictures are being told by police, security guards and sometimes other citizens, “Sorry, you can’t take a picture here.” When asked why, they say, “Well, don’t you remember 9/11?”
I haven’t really thought of criminalizing photography as something to do with 9/11 before. I know that a lot of our rights have been eroded since that day, but the photography aspect never really clicked until now. Just as Mickey can’t make heads nor tails of this argument, I am struggling to find a connection here. I don’t recall cameras being a part of the plots to destroy the Twin Towers, Pentagon or White House.
Of course there could be more reasons for this increase in arresting photographers. Mickey suspects that part of the reason is the proliferation of the camera. Pretty much everyone with a smart phone has a camera capable of taking some very high quality pictures. Prior to this boom, the police had some modicum of control over the press. They knew the press wasn’t going to be everywhere and were used to not being under constant recordable surveillance by the public. Now that anyone could be filming them or taking their picture, they are more on edge and more prone to lashing out.
When this happens, it is important for those accused to know their rights. However, it is also important for the police to know the public’s rights as well. While you, as a photographer, may know that you have the right to take pictures or film in a public space, some officers may not know or may have forgotten that fact. That is why the Mickey and others have been working with police to keep officers reminded of that right.
Q. After photographers were stopped from photographing the police clearing Occupy Wall Street protestors from Zuccotti Park, you and representatives of a media coalition including The Times, met with the police commissioner Ray Kelly. What happened at that meeting?
A. It was on Nov. 23. I asked the commissioner if he would reissue the “finest message” from 1999 that dealt with the police cooperating with the press. He did that. It was read at 10 consecutive roll calls in every single station house and precinct.
The finest message is a policy statement on police interactions with the press. It states that officers are not to interfere with videotaping and photographing in public places. It also reminds officers that they have an obligation to assist the press whenever possible. This is very similar to the recent news when the DC police chief laid down the law on filming of officers.
Hopefully, continually repeating this message will help slow down this barrage of arrests for photographing the police. As more officers are reminded of the rights of the cameras-wielding public, we will hopefully start to see fewer future incidents. It would be great if other police departments across the nation follow the lead of NY and DC police in proactively spreading the word about the rights of the public to record and photograph the police.
- Pre-Conventions, Photographers Know Your Rights (reason.com)
- “The War on Terrorism Has Somehow Morphed into an Assault on Photography” (petapixel.com)
- Don’t Take A Picture In Public (crooksandliars.com)
- Veteran NYTimes Photographer Arrested & Allegedly Beaten by NYPD [Interview] (chasejarvis.com)
- Photojournalist group urges NYPD to ‘do the right thing’ (capitalnewyork.com)
- Photographer Arrested After Fight With Police (huffingtonpost.com)
- Weekly Photo Challenge: Fleeting Moment (mikehardisty.wordpress.com)
- Sebastien Zanella – Photography (wevelostcontrol.com)
- Times Photographer Roughed Up by NYPD Just Wants His Stuff Back (nymag.com)
- New York Times fights NYPD after photographer brutally arrested (rt.com)
Should Making A Threat On Facebook Be A Crime?
from the determining-real-vs.-fake dept
There have been a few instances lately of various mass killings around the world (though certainly not all of them) where those responsible have either left strong hints via their online presence, or have even been pretty direct about their intentions. Of course, at the same time, you have stories like Paul Chambers’, where a joke was over-inflated by some law enforcement officials to pretend that it was a threat. Ditto the story of Joe Lipari, who quoted a line from Fight Club on Facebook, and got arrested for his trouble.
So, I find it somewhat troubling that police in Canada seem to think that any threat online or off is a criminal offense. There’s been an increase in people charged in Canada for merely making a threat, and some are reasonably concerned that many of those threats are idle chatter on social networks. The article seems to think that there’s no good way of dealing with this other than to change the law so that online threats are treated differently than offline threats:
Section 264.1 of the Criminal Code says a person who knowingly utters, conveys or causes another person to receive a threat of death or bodily harm can receive a prison term of up to five years. A person who threatens to damage property, or kill or injure an animal, can receive a prison sentence of up to two years.
Cpl. De Jong said under the Criminal Code “a threat is a threat is a threat,” regardless of how it’s made.
But Bentley Doyle, of the Trial Lawyers Association of B.C., said some sort of distinction should be drawn between online threats and those made in person.
“The more specific you get, the easier it is to actually follow through and charge somebody specifically,” he said.
Of course, rather than separating out online and in-person speech, what’s wrong with just looking at the details of the situation, and making a reasonable assessment as to whether the threat is legitimate or just someone saying something stupid? In the cases of Chambers and Lipari above, law enforcement should have quickly realized that neither individual was likely to do anything violent. But if someone is legitimately planning to shoot at a group of people and talking about it online, it seems that, at the very least, that could be worth investigating. The problem is criminalizing the statement, rather than using it as evidence to see if there’s actually any real intent to follow through.
- Outspoken Blog TechDirt Will Let Anyone Shut It Down For A Day — For A Price (businessinsider.com)
- Techdirt and the value of the velvet rope approach to media (gigaom.com)
- Police grapple with how to handle threats online (theglobeandmail.com)
- Government Is Now Issuing Takedown Requests Of YouTube Videos (webpronews.com)
- Gym Allegedly Threatens To Call Police On Blogger For Blogging That Its Prices Were A Bit High | Techdirt (mbcalyn.com)
- Police Send SWAT Team, Break Into Wrong House (With TV Film Crew) In Response To Internet Troll | Techdirt (mbcalyn.com)
- Day of the Facebook assassin (infocult.typepad.com)
- 1st Amendment Violated As Facebook Assists Police In Pre-Crime Investigations (alexanderhiggins.com)
- Victoria police probe online threats against mosque (ctvnews.ca)
Sad But True: Corporate Crime Does Pay
Almost daily we read about another apparently stiff financial penalty meted out for corporate malfeasance. This year corporations are on track to pay as much as $8 billion to resolve charges of defrauding the government, a record sum, according to the Department of Justice. Last year big business paid the SEC $2.8 billion to settle disputes.
Sounds like an awful lot of money. And it is, for you and me. But is it a lot of money for corporate lawbreakers? The best way to determine that is to see whether the penalties have deterred them from further wrongdoing.
The empirical evidence argues they don’t. A 2011 New York Times analysis of enforcement actions during the last 15 years found at least 51 cases in which 19 Wall Street firms had broken antifraud laws they had agreed never to breach. Goldman Sachs, Morgan Stanley, JPMorgan Chase and Bank of America, among others, have settled fraud cases by stipulating they would never again violate an antifraud law, only to do so again and again and again. Bank of America’s securities unit has agreed four times since 2005 not to violate a major antifraud statute, and another four times not to violate a separate law. Merrill Lynch, which Bank of America acquired in 2008, has separately agreed not to violate the same two statutes seven times since 1999.
Outside the financial sector the story is similar. Erika Kelton at Forbes reportsthat Pfizer paid $152 million in 2008; $49 million a few months later; a record-setting $2.3 billion in 2009 and $14.5 million last year. Each time it legally promised to adhere to federal law in the future. Each time it broke that promise.
The SEC could bring contempt of court charges against serial offenders, but it doesn’t. Earlier this year the SEC revealed it has not brought any contempt charges against large financial firms in the last 10 years. Adding insult to insult the SEC doesn’t even publicly refer to previous cases when filing new charges.
We know that CEOs of big corporations never go to jail. We probably didn’t know they often benefit financially even when the corporations under their control violate the law. GlaxoSmithKline CEO Andrew Witty recently received a significant pay boost to roughly $16.5 million just four months after Glaxo announced it will pay $3 billion to settle federal allegations of illegal marketing of many of its prescription drugs. Johnson & Johnson Chairman and CEO William Weldon received a 55 percent increase in his annual performance bonus for 2011 and a pay raise despite a settlement J&J is negotiating with the Justice Department that could run as high as $1.8 billion.
What level of penalty might deter corporate crime? The Economist magazine recently addressed that question. It used the common sense framework proposed by University of Chicago economist Gary Becker in an influential 1968 essay. Becker proposed that criminals weigh the expected costs and benefits of breaking the law. The expected cost of lawless behavior is the product of two things: the chance of being caught and the severity of the punishment if caught.
Purdue Economics Professors John M. Connor and C. Gustav Helmers examinedthe market impact of over 280 private international cartels from 1990 to 2005 and the fines imposed on them by various governments. They estimated these criminal conspiracies in restraint of trade raised prices by $260-550 billion. The median overcharge was about 25 percent of affected commerce.
Thus a fine about 25 percent of revenue would repay the damage done. But that’s assuming wrongdoing is caught every time. The Economist suggests that catching one in three violations would constitute a good track record for regulators. That would mean a fine of 75 percent of revenue would be needed to deter future violations. But the study found that actual fines ranged only between 1.4 percent and 4.9 percent.
Last year’s SEC settlement regarding Citigroup’s fraudulent mortgage investment practices fits that pattern. The settlement was for $285 million, less than 4 percent of Citigroup’s $76 billion in revenues.
Often federal penalties are so low they might be viewed as an invitation to break the law. According to the Times, Citigroup had cheated investors out of more than $700 million, more than twice what it paid in penalties.
As for Glaxo’s $3 billion settlement, George Lundberg, for 17-years Editor-in-Chief of the Journal of the American Medical Association writes, “The penalty sounds like a lot of money but that company made probably 10 times that much from its illegal actions.”
What can be done? A first step might be for the media to stop reporting simply the gross settlement figure and instead give us the information that allows us to decide whether the punishment fits the crime. A few days ago a brief story in theNew York Times business section admirably achieved this goal.
The Times reported that in 2006 Morgan Stanley entered into a complex swap agreement with the New York electricity provider KeySpan that gave it a stake in the profits of a competitor. This enabled the two companies to push up the price of electricity. Morgan Stanley broke the law. On August 7 a federal judge approved the settlement between the Justice Department and Morgan Stanley.
Here’s the cost benefit analysis. The total cost to New Yorkers in higher utility bills because of the price fixing came to $300 million. Morgan Stanley was paid $21.6 million for handling the swap agreement. And the financial penalty imposed on Morgan Stanley? An inconceivably low $4.8 million. In addition the bank didn’t have to admit any wrongdoing. There will be no further prosecution.
Anyone who read this story had all the facts necessary to conclude that something is terribly, even criminally wrong here. The Times is to be commended for going that extra step and providing a full cost-benefit analysis. I hope it can become a template for all political and business reporters.
- Sad But True: Corporate Crime Does Pay (alternet.org)
- Encouraging Corporate Crime (ilsr.org)
- Business Groups Take Left Flank (counterpunch.org)
- 6 Things You Should Know About the $21 Trillion the World’s Richest People Are Hiding In Tax Shelters | Alternet (mbcalyn.com)
- Play Defense Against Corporate Criminals (econmatters.com)
- (Corporate) Crime Most Definitely Pays (ilsr.org)
- Links 8/20/12 (nakedcapitalism.com)
- Corporate Crime Makes Economic Sense (businessinsider.com)
- Corporate Crimes: Pharmaceuticals (insomniacanonymous.wordpress.com)
- Is crime rational? (economist.com)
Judge Raises New Questions About Facebook Advertising Tactic
Paul Sakuma/Associated PressA judge rejected Facebook’s settlement offer in response to a lawsuit that said the company violated California law by publicizing users’ “likes” of certain advertisers without paying them or giving them a way to opt out.
A judge rejected Facebook’s settlement offer in response to a lawsuit that said the company violated California law by publicizing users’ “likes” of certain advertisers without paying them or giving them a way to opt out. Facebook’s advertising efforts face a new legal hurdle at a time when the social networking giant needs to increase revenue and convince investors of its long-term prospects.
Late Friday, a federal judge in California rejected the pending settlement of a class-action lawsuit against Facebook, calling on both sides to prove that the terms of the settlement were not “merely plucked from thin air.”
The case focuses on an advertising tactic known as sponsored stories, in which Facebook users endorse brands, in some cases without their knowledge. For example, if users “like” Wal-Mart, the retailer uses their names and pictures in advertisements to their friends on the social network. Wal-Mart pays Facebook for the service.
Facebook has extolled such advertising. Executives view it as an especially valuable source of revenue on mobile phones, an area where the company has been struggling to bolster its profits.
In the class-action lawsuit filed last year, the plaintiffs argued that Facebook users were not sufficiently informed of how their “likes” translated into profits for the company. The two sides reached a tentative settlement earlier this year.
As part of the proposed deal, Facebook agreed to better inform users about sponsored stories, to limit their use and to allow people under 18 to opt out of the function. The company also agreed to pay $10 million to a dozen research and advocacy groups that work on digital privacy rights, and $10 million to cover legal fees for the plaintiffs. But the settlement did not inhibit Facebook from continuing to serve up sponsored stories.
On Friday, Judge Richard G. Seeborg of United States District Court in San Francisco rejected the draft order and asked both sides to justify how they had negotiated the dollar amounts. “There are sufficient questions regarding the proposed settlement,” he wrote.
The judge’s questions are likely to draw Facebook’s lawyers to court for the next several months.
Judge Seeborg said he wanted clarification on whether there could be relief for the millions of Facebook users whose names and photographs had already been used. He also asked about the “adequacy and fairness” of how the two sides agreed on the amount to be given to charity. And he raised concerns about the size of the legal fee payment, worrying that the plaintiffs’ lawyers “may have bargained away something of value.”
“We continue to believe the settlement is fair, reasonable, and adequate,” a Facebook spokesman said in an e-mail late Saturday. “We appreciate the court’s guidance and look forward to addressing the questions raised in the order. We are confident we can address the issues raised by the court without substantially revising the settlement.”
- Judge Raises New Questions About Facebook Advertising Tactic (bits.blogs.nytimes.com)
- Judge rejects Facebook settlement over ad feature (reuters.com)
- Facebook ‘sponsored stories’ settlement rejected by judge (electronista.com)
- Judge rejects Facebook’s ‘Sponsored Stories’ settlement (avesom.com)
- Facebook Loses Bid to Approve Sponsored Stories Suit Accord – Bloomberg (bloomberg.com)
- Judge rejects Facebook settlement over ad feature (todayonline.com)
- Judge rejects Facebook settlement over users appearing in ads (technolog.msnbc.msn.com)
- Facebook’s Proposal Over Sponsored Stories Case Rejected By Judge (thedroidguy.com)
- Judge rejects Facebook settlement over ad feature (mercurynews.com)
- Facebook ‘sponsored stories’ settlement in jeopardy (electronista.com)
George Washington: Will We Have to Wait for a 21st Century Peasants’ Revolt Before Seeing Any Real Change? « naked capitalism
George Washington: Will We Have to Wait for a 21st Century Peasants’ Revolt Before Seeing Any Real Change?
While everyone from Tony Blair to Nouriel Roubini is debating whether or not bankers should be hung, the Wall Street Journal and Bloomberg provide some fascinating historical context.
The journal’s Jason Zweig reports:
Financial criminals throughout history have been beaten, tortured and even put to death, with little evidence that severe punishments have consistently deterred people from misconduct that could make them rich.
The history of drastic punishment for financial crimes may be nearly as old as wealth itself.
The Code of Hammurabi, more than 3,700 years ago, stipulated that any Mesopotamian who violated the terms of a financial contract – including the futures contracts that were commonly used in commodities trading in Babylon – “shall be put to death as a thief.” The severe penalty doesn’t seem to have eradicated such cheating, however.
In medieval Catalonia, a banker who went bust wasn’t merely humiliated by town criers who declaimed his failure in public squares throughout the land; he had to live on nothing but bread and water until he paid off his depositors in full. If, after a year, he was unable to repay, he would be executed – as in the case of banker Francesch Castello, who was beheaded in 1360. Bankers who lied about their books could also be subject to the death penalty.
In Florence during the Renaissance, the Arte del Cambio – the guild of mercantile money-changers who facilitated the city’s international trade – made the cheating of clients punishable by torture. Rule 70 of the guild’s statutes stipulated that any member caught in unethical conduct could be disciplined on the rack “or other corrective instruments” at the headquarters of the guild.
But financial crimes weren’t merely punished; they were stigmatized. Dante’s Inferno is populated largely with financial sinners, each category with its own distinctive punishment: misers who roll giant weights pointlessly back and forth with their chests, thieves festooned with snakes and lizards, usurers draped with purses they can’t reach, even forecasters whose heads are wrenched around backward to symbolize their inability to see what is in front of them.
Counterfeiting and forgery, as the historian Marvin Becker noted in 1976, “were much less prevalent in Florence during the second half of the fourteenth century than in Tuscany during the twentieth century” and “the bankruptcy rate stood at approximately one-half [the modern rate].”
In England, counterfeiting was punishable by death starting in the 14th century, and altering the coinage was declared a form of high treason by 1562.
In the 17th century, the British state cracked down ferociously on counterfeiters and “coin-clippers” (who snipped shards of metal off coins, yielding scraps they could later melt down or resell). The offenders were thrown into London’s notorious Newgate prison. The lucky ones, after being dragged on planks through sewage-filled streets, were hanged. Others were smeared with tar from head to toe, tied or shackled to a stake, and then burned to death.
The British government was so determined to stamp out these financial crimes that it put Sir Isaac Newton on the case. Appointed as warden of the Royal Mint in 1696, Newton promptly began uncovering those who violated the financial laws of the nation with the same passion he brought to discovering the physical laws of the universe.
The great scientist was tireless and merciless. Newton went undercover, donning disguises to prowl through prisons, taverns and other dens of iniquity in search of financial fraud. He had suspects brought to the Mint, often by force, and interrogated them himself. In a year and a half, says historian Carl Wennerlind, Newton grilled 200 suspects, “employing means that sometimes bordered on torture.”
When one counterfeiter begged Newton to save him from the gallows – “O dear Sr no body can save me but you O God my God I shall be murderd unless you save me O I hope God will move your heart with mercy and pitty to do this thing for me” – Newton coldly refused.
The counterfeiter was hanged two weeks later.
Until at least the early 19th century, it remained commonplace for counterfeiters and forgers to be put to death; between 1792 and 1829, for example, notes Wennerlind, 618 people were convicted of counterfeiting British paper currency, and most of them were hanged. Many were women.
Bloomberg provides details of one “peasant revolt” stemming from a Libor-like currency manipulation scheme:
During the “Good Parliament” of 1376, public discontent over [manipulation of currency exchange rates similar to the current Libor scandal] came to a head. The Commons, represented by the speaker, Peter de la Mare, accused leading members of the royal court of abusing their position to profit from public funds.
A particular target was the London financier Richard Lyons ….
Initially the government bowed to public pressure. Lyons was imprisoned in the Tower of London and his properties and wealth were confiscated. Other leading courtiers implicated in these abuses, such as Latimer and the king’s mistress, Alice Perrers, were banished from court.
Once parliament had dissolved and the public outcry had died down, however, the king’s eldest son, John of Gaunt, acted to reverse the verdicts of the Good Parliament. Latimer and Perrers soon reappeared at the king’s side and Lyons was released from the Tower and recovered his wealth, while the “whistleblower” de la Mare was thrown in jail. The government also sought to appease the wealthy knights and merchants that dominated parliament by imposing a new, regressive form of taxation, a poll tax paid by everyone rather than a tax levied on goods. This effectively passed the burden of royal finance down to the peasantry.
It seemed as though everything had returned to business as normal and Lyons appeared to have gotten away with it. In 1381, however, simmering discontent over continuing suspicions of government corruption and the poll tax contributed to a massive popular uprising, the Peasants’ Revolt, during which leading government ministers, including Simon of Sudbury (the chancellor and archbishop of Canterbury) and Robert Hales (the treasurer) were executed by the rebels. This time, Lyons did not escape; he was singled out, dragged from his house and beheaded in the street.
If the King had followed the rule of law – and kept Lyons and the boys in jail – everything would have calmed down. The monarchy – just like the present-day government – chose to ignore the rule of law, and protect the thieves and punish the whistleblowers.
We have argued for years that the best way to avoid violence is to reinstate the rule of law.
The Bloomberg article – written by a professor of the history of finance and a professor of finance at the ICMA Centre, Henley Business School, University of Reading – ends on a similar note:
The question now is whether public outrage at the Libor scandal and other financial misdeeds will lead to fundamental reforms of the financial sector — such as the separation of retail and investment banking or legislation to regulate the “bonus culture” — or just more cosmetic changes that fail to address the structural issues.
Will we have to wait for a 21st century peasants’ revolt before seeing any real change?
- Will We Have to Wait for a 21st Century Peasants’ Revolt Before Seeing Any Real Change? (dprogram.net)
- Will the Peasants Go Medieval On Bankers? (ritholtz.com)
- Will the Peasants Go Medieval On Bankers? (washingtonsblog.com)
- Will We Have to Wait for a 21st Century Peasants’ Revolt Before Seeing Any Real Change? (sgtreport.com)
- Will We Have to Wait for a 21st Century Peasants’ Revolt Before Seeing Any Real Change? (alexanderhiggins.com)
- Will We Have to Wait for a 21st Century Peasants’ Revolt Before Seeing Any Real Change? (zerohedge.com)
- Should Crimes Of Capital Get Capital Punishment? (poorrichards-blog.blogspot.com)
- Jason Zweig ~ Should Crimes Of Capital Get Capital Punishment? (shiftfrequency.com)
- Banker-bashing Iran style: four fraudsters sentenced to death (theweek.co.uk)
- Mainstream Economist: We Might Need to Hang Some Bankers to Stop Criminal Looting (washingtonsblog.com)
Outdated Compulsory Licensing Means Australian Schools Must Pay Millions To Use Free Internet Materials | Techdirt
Outdated Compulsory Licensing Means Australian Schools Must Pay Millions To Use Free Internet Materials
from the it’s-broken,-let’s-fix-it dept
Recently we wrote about how copyright rules designed for an analog age were causing problems when transposed without modification to the digital world. Here’s another example, this time from Australia, where the Brisbane Times’ site reports on an increasingly difficult situation in education as a result of outdated copyright approaches:
Schools spend almost [AU]$56 million [US$59 million] a year under a compulsory licence to copy material such as books and journals without permission from the copyright owner. But an unintended consequence of the licence means schools also pay millions for internet material that the website owners never intended to charge for
The problem is that there are strict rules that schools must follow when teachers duplicate material — rules that were designed for a world where practically every page copied had to be paid for. However, the inflexibilities of the scheme mean that these are now being applied even when teachers print or save freely-available materials from the Internet, or ask students to do the same for homework.
A “best estimate” for the scale of the problem is around $8 million, and as the Internet becomes an increasingly important resource for schools, things are only going to get worse:
These costs were likely to increase as the national broadband network was rolled out and might ”eventually become prohibitive”, [the National Copyright Unit's director] said.
Fortunately, the Australian Law Reform Commission is holding an inquiry into copyright and the digital economy currently, so there is hope that its recommendations will include a radical overhaul of the compulsory licensing system for schools. Given copyright’s three-hundred-year-old machinery, it’s unlikely to be the only area that requires such action.
- Schools pay millions for material free on net (stuff.co.nz)
- Driving Innovation: Finding the Balance Between Fair Reward and Profiteering (scholarlykitchen.sspnet.org)
- Iron grip prised loose (thehindu.com)
- Compulsory licensing and access to medicines (dawn.com)
- Natco Not Satisfied with One Compulsory License (thebigredbiotechblog.typepad.com)
- Techdirt, Reddit & others congregate for “Declaration of Internet Freedom” (itproportal.com)
- Will China Finally Pull the Trigger on a Compulsory Pharma License? (businessinsider.com)
- Patent waiver: US goes online to placate India (donttradeourlivesaway.wordpress.com)
- From outlier to trendsetter (donttradeourlivesaway.wordpress.com)
- Obama admin actively opposes Nexavar compulsory license (spicyipindia.blogspot.com)