Monthly Archive: May 2006

7

Let Markets Help Criminal Defendants

ballandchain.jpgDan’s interesting post on plea bargaining made explicit the informational inequalities faced by criminal defendants and their lawyers. Indeed, one of the advantages public defenders have over private defense counsel is that they can more easily share information internally about the informal norms that “really” govern the system (judge sentencing practices; which cops tell what stories; which labs are sloppy; etc.) But even so, the instruments of law and order almost always will know more about the facts and the law than the defense, at least until the eve of trial and probably throughout the process.

That there are exceptions (Enron; OJ) proves the rule that informational asymmetry is a significant part of the prosecutor’s arsenal – indeed, this asymmetry justifies constitutional attempts to remedy the problem through mandatory discovery procedures. But I’m skeptical that legal rules alone are a panacea to structural problems. Why not try markets?

To be more concrete, the major decision that criminal defendants face is whether or not to plead guilty. The decision depends on a prediction about what will happen at trial. Assuming that defendants are risk averse, they will take pleas when rational actors would not, but generally will go to trial when the expected time served post-trial is less (by some margin) than the actual time proposed in the plea agreement. The problem is that (1) defendants are unsophisticated; (2) defendants’ lawyers are incented to push pleas; and (3) neither defendants nor their lawyers have as much information as prosecutors about likely verdicts.

If I were running a public defender service, I’d consider setting up an online prediction market for the conviction of my clients. Prediction markets did a fantastic job in the Enron trial. At the beginning of the trial, the odds of conviction were about 50% for each defendant; by the end, the odds were significantly higher. Now, I can understand why neither defendant would have pled facing a coin-flip’s chance at conviction. As I argued at the beginning of the trial:

I’d guess that the reason Skilling and Lay have not pled and Fastow has is demographics. Fastow is a young(ish) man, who can serve significant time and still emerge with earning power. Lay and Skilling don’t have the years left to do the time that the government (apparently) would find appropriate.

But for most criminal defendants, 50% odds would translate into a pretty hefty expected sentence that might make a plea more attractive. And, assuming that such markets would be sufficiently liquid, the predictions generated by traders ought to be both more accurate and less prone to bias than defense counsel’s odds. I imagine that the result would be a net decrease in pleas, and in the long term, as prosecutors reacted, less net jail time. That is, the current system is biased by risk aversion and agency problems – as others have observed – toward more jail. This effect may serve the forces of law and order, but it doesn’t necessarily serve the search for truth. Why not try something different?

Obvious objections: (1) the idea is “”utterly repugnant to a civilized society“; (2) thin markets are prone to manipulation; (3) incentives would increase to violate the attorney-client privilege; (4) it would look like public defenders are selling out their clients. Of these objections, I’d be most worried about #3.

Incidentally, if you are interested in thinking more about criminal law and the Enron trial, the Conglomerate is hosting what promises to be a great forum on the topic for the next two days. Check it out!

4

Whistleblowers and Stereotyped Cultural Norms

I’m a little slow to weigh in on this issue, but I just received the latest edition of the ABA Journal. This month, they have a story, “Culture Clash,” by John Gibeaut describing how Sarbanes-Oxley’s whistleblower provisions are causing trouble for foreign cross-listed companies. Ideoblog and Conglomerate have already provided some commentary about the article, which begins as follows:

Americans like to elevate whistleblowers to near folk-hero status, from Daniel Ellsberg, who leaked the Pentagon Papers to Sherron Watkins, who exposed the Enron Corp. financial scandal that in 2002 moved Congress to pass the fraud-busting Sarbanes-Oxley Act. Indeed, Watkins shared Time magazine’s Person of the Year honors in 2002 with World Com Inc. whistleblower Cynthia Cooper and FBI agent Collen Rowley, who accused the bureau of mishandling information on suspected hijacking plotter Zacarias Moussaoui before the Sept. 11 terrorist attacks.

Say whistleblower in Germany, however, and the term most likely conjures up memories of the Gestapo, Adolf Hitler’s secret police. In France, the term evokes images of the Vichy regime’s collaboration with the Nazis and of neighbors ratting out one another.

I think that the beginning of the article relies on some flawed cultural stereotypes of both Europeans and Americans. Be that as it may, I would question the author’s proposition that American whistleblowers enjoy some sort of elevated status. About a year and a half ago, I wrote an article about (American) whistleblowers and the Sarbanes-Oxley Act. In the article, I argue that whistleblowers are not being given enough protection. Not under state employment law, and not under Sarbanes-Oxley either. Studies – cited in my article – show in graphic detail that American whistleblowers end up unemployed, broke, divorced, and depressed.

2

Andy Warhol’s Electric Chair

My colleague Bennett Capers (Hofstra) has written a fascinating, and rather disturbing, article at the intersection of law and art. Writing about Andy Warhol’s Electric Chair paintings, he asks a series of probing questions – about who the viewer imagines in the chair, and about death as a public spectacle. In this excerpt, he talks more about presence/absence in the paintings:

ReSizedWarholElectricChair.jpgIn Warhol’s Electric Chair series, just as the condemned is both absent and present, so is the State – and this is comforting. Complicity is shared. No one is to blame. Our system of capital punishment thrives partly because of this (joint) presence and absence. The state is present in the very bureaucracy of execution, from the legislative decision to authorized capital punishment to the judicial sanctioning of death-authorized juries. At the same time, the state creates its own absence in diffusing authority among the cast of participants: legislators, prosecutors, jurors, trial and appellate judges, governors with their ability to grant clemency, the executioner himself. And this is what I mean by absence. To borrow from another commentator, the diffusion allows everyone to say, “I’m only doing my job. I’m just a cog in the wheel. I didn’t kill him.” The room is empty, even though it is full.

The article was recently published by the California Law Review.

Photo Credit: Andy Warhol, Electric Chair I (1971), Warhol Family Museum of Modern Art

5

European Court of Justice Strikes EU-US Agreement on PNR Data

The European Court of Justice dealt a blow yesterday to European Union and U.S. policymakers, with two important judgments on privacy and transatlantic relations. Back in 2004, the European Union and the United States signed an agreement guaranteeing the privacy of European airline passenger data when that data was transferred to the U.S. government. In European Parliament v. Council of the European Union and European Parliament v. Commission of the European Communities, the Court of Justice found that the Europeans did not have the power, under their constitutional rules, to enter into the agreement. Luckily for the airlines and the governments, the Court delayed the effect of its decision until September 30, 2006. Until then, European airlines will keep on being able to transfer their passenger data—and keep on being able to fly into American airports–without having to worry about breaking European privacy law. Afterwards, it could get complicated.

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7

Six Flags Syndrome: Price Discrimination In Plea Bargaining

Six Flags.jpg Price discrimination occurs when any seller charges two different buyers a different price for the same product. Coupons are one obvious method of price discrimination. Airline advance purchase requirements are another. The term sounds ugly, but it’s basic marketing. One major area of price discrimination occurs between sophisticated and unsophisticated consumers. Uninformed car buyers often pay more for their autos than those who arrive with the newest pricing data from Edmunds. And while many web buyers routinely pay full price, others of us consult Coupon Cabin, Mom’s View, or XP Bargains before ordering online. We don’t do anything special for the discount; we just know enough to check for coupons.

In a blunt admission of price discrimination based on consumer sophistication, Six Flags’ VP for ticketing, Steve Brown, stated) “any guest paying full pirce at our parks is probably not doing their homework.”

Perhaps all is fair in love and sales, but what about plea bargaining? Would we feel OK if US Attorney Patrick Fitzgerald announced that “anyone pleading to ten years on a marijuana charge probably didn’t do his homework”? As a public defender, I often discovered that a DA’s “best” offer wasn’t on the table initially. I had to request it. Sometimes I provided good reasons for a better deal – I cast the client in a new light, for example, or discussed an extenuating circumstance. But often I simply scrunched up my face and said “come on, you can do better than that”…and he or she would serve up a better offer. I understood the game; as a public defender, I played it every single day.

But it turns out that clients – and more importantly lawyers – are often surprisingly unsophisticated in the negotiation process and will not demand the best posible offer. I’m reminded of a friend who was handling his first serious felony. His client faced a mandatory 6 year bid for the gunpoint robbery, but the DA was offering 10 years. My friend planned to ask for seven years. After we talked, I explained that in my jurisdiction (we were in different states), a first time offender facing these charges would usually receive the mandatory minimum. I encouraged him to ask for six years. And that’s exactly what his client got. But if he’d asked for seven years – his initial plan – the client would have served an extra year.

So should prosecutors “take advantage” of unsophisticated opponents by jacking up offers?

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3

Filling Ken Lay’s Chair

The Department of Economics at the University of Missouri-Columbia has an opening: the Kenneth L. Lay Chair in International Economics. The Chair was endowed in 1999 but so far there have been no takers. With Ken off to the Big House, the odds of filling the Chair have dropped even further.

Which raises an interesting question: which endowed Chairs (if any) would law professors refuse? The Martha Stewart Chair in Business Ethics? The Fred Phelps Chair in Family Law? The Roger Taney Chair in Law and History?

Would Dan Solove, for example, take the Michael Hayden Chair in Privacy Law? What if it came with a fat salary, no teaching requirements, and a guarantee to increase blogger readership ten fold?

1

Terrorists Among Us

All of the 9/11 hijackers were foreigners, admitted into the United States on non-immigrant visas. Since 9/11, therefore, there has been substantially increased attention to policing the borders—on the theory that terrorists can’t strike here again if they can’t get in.

The British Government has just published its Report of the Official Account of the Bombings in London on 7th July 2005. Much of the report emphasizes how the young suicide bombers who struck the London transit system last summer were second-generation British citizens. They had lived their entire lives in Britain, in ethnically mixed neighborhoods, and attended British schools. One of the bombers had worked as a government bureaucrat and done volunteer work with disadvantaged youth. Another worked with special needs children at a local primary school. A third was an avid sportsman and worked in his father’s fish and chip shop. The men were not well off but nor were they destitute. Their Muslim communities provided them with resources and support.

“Why did they do it?” asks one major section of the government report.

There are no clear answers—nothing in the report that explains why one morning these British men blew themselves up and killed dozens of commuters and injured hundreds more.

According to the report, the men were serious about their religion—but then so are thousands of other members of the very same community. The men spoke out about politics at times but, of course, plenty of people do that.

Some evidence suggests that a local gym the young men attended attracted people with radical views. A local bookstore was rumored to stock radical writings and DVDs. The men liked to go on camping trips—leading to speculation that the trips were training programs. The report finds little significance in any of these things. The men had visited Pakistan with their families. Again, though, many Britons make the very same trip.

The report reaches some chilling conclusions. “The case demonstrates,” it says, “the real difficulty for law enforcement agencies and local communities in identifying potential terrorists.” There was “little in the backgrounds” of the London bombers to “mark them out as particularly vulnerable to radicalization.” On the whole, the men were “well integrated into British society.” While they may have experienced moments of “instability” there was nothing “extraordinary” about their life circumstances.

7

Sex change and inmate rights

And now, from the Department of Most-Likely-to-Make-Your-Conservative-Cousin’s-Head-Explode, comes this one. The headline pretty much says it all: “Convicted Killer Asks Judge to Force State to Pay for Sex Change.” The news story delivers on the promise of the headline, too:

A man serving a life sentence for the murder of his wife is asking a federal judge to order the state to pay for a sex-change operation for him, saying that denying him the surgery amounts to cruel and unusual punishment. . . . Kosilek sued the Department of Correction for the second time last year, saying that numerous psychiatrists who had examined him — including two of the DOC’s own experts — had determined that a sex-change operation is “medically necessary.” “We ask that gender identity disorder be treated like any other medical condition,” said Kosilek’s attorney, Frances Cohen.

What do we think of these kinds of accounts? As someone who considers himself a left-leaning moderate, I haven’t yet arrived at any consensus on this story.

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1

This Post Will Be Barely Illuminating

Thanks to a reader of my recent paper on puffery, I recently came across the work of Andrew Ward and Lyle Brenner, Accentuate the negative: The positive effects of negative acknowledgment (forthcoming 2006; presentation link here). It is a neat paper, that examines the extent to which we credit messages that contain obvious warnings of their fallibility, and like messengers who introduce themselves with self-deprecation. Obviously, the study of deflation is less developed that that of optimism – and puffery – but it is an odd finding nonetheless that we seem to want any sales message except the unvarnished truth. I wonder if how the law can best take into account this psychological part of consumption. If we feel less cheated by, say, the purchase of stock which has been exposed as partly susceptible to a downturn through strategic pessimism, should the anti-fraud regimes of the ’33 and ’34 Acts account for this feeling?

More generally, it strikes me on first glance that the negative attribution effect may help to explain otherwise strange corporate events like the success of the self-deflating google IPO. (For Vic F’s branding theory, see this post; Ribstein’s comments here.)

It also helps to explain the odd persistence of the “shameless self-promotion” tag to law article announcement posts, even when the promotion benefits friends. Bill S., at TOTM, recently lamented this phrase, and said that “I don’t feel at all ashamed of doing this nor do I feel it is unseemly. Hence, I propose we drop the custom of including a “shameless self-promotion” reference when engaging in self-promotion.” I think Bill is leaving some money on the table here. Deflation, like puffery, moves flawed products.