"Death Qualified" Juries

It's interesting to read criminal defense lawyer blogs. They are State-licensed lawyers and took an oath to defend the State. They have some anti-State tendencies, because they're trying protect people from State aggression.

A criminal defense lawyer helps provide an illusion of legitimacy to the State. If you're accused of "possession of marijuana", a lawyer would argue about evidence, rather than arguing the legitimacy of the law criminalizing marijuana.

Defense lawyers are particularly interested in "death penalty" cases. A capital murder trial is a huge advertisement for the State. There was a murder. The State prosecutor is holding the criminal accountable. The State violence and justice monopoly are on display. The State is needed to protect people from murderers.

One bizarre practice is "death qualifying" a jury. During jury selection, the judge asks "Are you opposed to the death penalty?" If the juror answers "yes", then the juror is removed.

This denies the defendant his right to a jury trial. "Death qualifying" a jury introduces a pro-State bias in the jury pool.

Politicians love the death penalty. They want to be "tough on crime". They like the spectacle of a capital murder trial. It is possible that a majority would not vote for the death penalty.

Suppose that 51% of the population are opposed to the death penalty. That isn't enough to repeal the law, because politicians pursue their own agenda and not what voters want. However, a jury chosen at random would have 6/12 people opposed to the death penalty.

Jury selection eliminates that potential embarrassment. "Voir dire" is French for "jury tampering". Even if 25% of the population were opposed to the death penalty, that would be 3/12 of the jury. Via jury selection/tampering, prosecutors can enforce unpopular laws.

There's another problem. Someone who believes "The death penalty is wrong!" is also more likely to believe "The police got the wrong guy!" By excluding people with certain beliefs, that creates a pro-State bias in the jury.

Jury selection is really jury tampering. The rules favor the prosecutor/State. This is one of many unfair State "justice" practices. "Jury nullification" is nice, but you'd have to lie to get on the jury.

Bernard Madoff Congress

Here's an illustration of how bad things are. Imagine if every Congressman were Bernard Madoff, except he hadn't been caught yet.

This is the problem with the USA. Almost all the leaders are psychopaths. Almost all the leaders are criminally insane. The end result can only be complete collapse.

If most of the leaders were honest and intelligent and emotionally strong, then psychopaths would be identified and excluded. In the present, all the leaders are psychopaths, or are people that psychopaths can easily control.

Almost all Congressmen have the same personality type as Bernard Madoff. Almost all CEOs have the same personality type as Bernard Madoff. Almost all high-ranking State bureaucrats are psychopaths or parasites. The net result can only be complete collapse.

Psychopaths and parasites will protect their turf, rather than allow reform. If there's only a small handful of psychopaths, then damage could be contained. Unfortunately, almost all the leaders are psychopaths.

Psychopaths are the role model. Productive workers are abused losers. There's nobody preventing the psychopaths from stealing too much. The only result can be complete collapse.

Goldman Sachs and Facebook

This story is interesting. Goldman Sachs made an investment in Facebook, giving it a valuation of approximately $50B. They are going to package the shares up and sell them in a special hedge fund.

Those two zero hedge articles were interesting. Goldman Sachs profits from the lucrative hedge fund management fees. It makes no difference if Facebook shares go up or down. It makes no difference if the clients make money or lose money. Even if Facebook goes bankrupt in 3-5 years, Goldman Sachs might make more money off the fund management fees than they lost on the equity "investment".

A lot of hedge fund money is "stupid money". Many hedge fund investments are pension money, where the manager is wasting other people's money. A typical deal is "I'll invest in your fund if you hire my brother-in-law/friend." It's corruption capitalism.

I wonder if the "man of the year" was arranged by Goldman Sachs, so that they could have an easier time peddling Facebook shares.

Suppose I create a corporation. I issue 10 billion shares. I sell you one share for $1. Does that mean my corporation is now worth $10B?

Similarly, this deal doesn't mean Facebook is worth $50B. Goldman Sachs only paid for a tiny slice. According to what I read (but some sources disagreed), other Facebook shareholders did *NOT* have the option of selling their shares at the $50B price. Facebook employees did not have the option of selling their "units" at the $50B price. The investment went to Facebook, buying newly-issued shares.

Goldman Sachs has an incentive to overpay for Facebook. Why? Goldman Sachs is creating a special hedge fund, which will only own Facebook shares. Goldman Sachs will now sell Facebook shares to "clients" at a valuation of $50B or more!

Why does this matter? Facebook is *NOT* a public corporation. Partially due to Sarbanes-Oxley compliance costs and other costs, Facebook remains private.

However, the SEC has a rule "Any corporation with 500 or more shareholders must make a SEC filing, even if its shares are not listed on an exchange." Facebook and Goldman Sachs are exploiting legal loopholes and technicalities.

Facebook no longer gives its employees share grants or stock options. Instead, employees get "performance units". These units track the share price. However, they don't have the same rights as shareholders. They are only convertible to shares when/if there's an IPO. Employees can't sell the "units" like they could sell shares. (If you own shares in a pre-IPO corporation, you may sell them. You can't sell them on an exchange, but you can make an OTC sale to anyone. Facebook "units" aren't real shares, so the employees can't do this.)

Goldman Sachs is creating a special hedge fund that will invest in Facebook shares. Legally, this counts as only *ONE* Facebook shareholder, no matter how many hedge fund shareholders there are. The hedge fund is the legal owner, and not the hedge fund investors. Goldman Sachs can sell these hedge fund shares to 1000+ people, and Facebook still isn't breaking the "500 shareholder" rule. It's a legal technicality.

Facebook's "units" and Goldman Sachs' special hedge fund are explicitly designed to dodge SEC rules. Unfortunately, the SEC is a "captured regulator". Facebook got an SEC waiver, for their "units" arrangement. Goldman Sachs probably also got legal permission.

Here's another story that illustrates how sleazy Mark Zuckerberg and Facebook are. Some early Facebook employees hit the jackpot on their options. Rather than let the options vest, Facebook fired them and hired cheaper replacements. Those replacements also had equity grants waived in their face! Facebook had a much higher valuation by then, and the grants were smaller.

This illustrates the fallacy of getting paid equity/options instead of cash. Suppose a Facebook employee was hired when Facebook had a valuation of $50M. Suppose that, eleven months later, Facebook had a valuation of $500M. With one year cliff vesting, that employee can now be fired and the options were worth $0. Even if some options did vest, firing the slave means you don't have to pay out the rest of them.

If you own options that are somewhat in-the-money, the value of the unvested options gives the employer less incentive to offer you a raise. Suppose I work at a startup, and I have unvested options worth $100k over two years. I don't have the leverage to ask for a cash raise, because I give up $50k/year if I quit.

As a minority shareholder, there's too many ways to get cheated. Eduardo Saverin made an early cash equity investment in Facebook, and was cheated. Mark Zuckerberg re-incorporated Facebook, moved the IP, and left Eduardo Saverin with nothing.

You don't get to be the CEO/owner of a large corporation, without being a sleazy character like Mark Zuckerberg. He's the role model. The people he robbed were clueless losers who deserved it. Does Mark Zuckerberg really have awesome business skills? Or, was his best skill that he cheated his early partners out of their share of the business? I haven't met him, so I can't be sure, but he's probably a psychopath.

Facebook and Goldman Sachs are using legal loopholes to avoid SEC rules. Unfortunately, the SEC is a captured regulator. The people disadvantaged are Facebook "units" owners, Facebook minority shareholders, and Goldman Sachs' "special hedge fund" customers.

The "special hedge fund" customers have less rights than shareholders of a public corporation. They can only sell their hedge fund shares if they find someone else dumb enough to buy them. They have to pay a hefty management fee to Goldman Sachs.

Facebook shareholders and "units" holders were not allowed to sell at the $50B valuation. (I read different opinions on that. I'm pretty sure that all Facebook shareholders and employees didn't have the option of selling at the $50B valuation.) The hedge fund shareholders probably won't be able to convert their investment to Facebook shares, until an IPO.

Facebook probably isn't really worth $50B. Goldman Sachs had an incentive to overpay. They can trick customers into buying at even-higher prices. Goldman Sachs makes money off the lucrative management fee, even if the underlying Facebook investment tanks.

Suppose that I believe that public XYZ corporation is overvalued. I can short-sell or buy put options. Suppose that I believe that Facebook is overvalued. I can't short sell. In fact, Goldman can now short sell Facebook! They can sell more "hedge fund shares" than they own Facebook shares! They can bet against their own hedge fund! It's like "The Producers"!

You might say say "So what? Some idiot hedge fund investor loses money. Why should I care?" Suppose the NY State pension fund invests in this turkey, and loses money. Then, I pay higher taxes to support the pensions. The pensions who make lousy investments may be later bailed out.

Facebook and Goldmans Sachs are flagrantly ignoring SEC rules. They are exploiting legal loopholes to dodge the "A corporation with more than 500 shareholders must make a SEC filing." rule. The Goldman investors are getting a worse deal than a straight equity investment in Facebook, because they have limited liquidity and they pay a hefty management fee to Goldman Sachs. Goldman Sachs makes more money off the hedge fund management fee than off anything else. In fact, Goldman Sachs (or other hedge funds) can now short sell this fund, and bet against Facebook! Goldman Sachs might maximize profits if Facebook tanks, if the "right" people short sell that hedge fund!

If the SEC wasn't a "captured regulator", they wouldn't allow nonsense like this.

Arkansas Dead Fish And Birds

This story is interesting. In Arkansas, a bunch of birds mysteriously died. Nearby, a bunch of fish mysteriously died.

State police are saying "It's just a coincidence. Move along. There's nothing to see here."

Who do they think they're fooling?

This story has been heavily covered in many blogs. Instead of ignoring the story, State comedians say "It's just a coincidence."

It was only one species of bird and one species of fish. That suggests a virus.

What are the possibilities?

1. It really was a coincidence.
2. Someone was testing a biological weapon.
3. Someone was testing another type of weapon.
4. It's some type of pollution.
5. Other?
   

If X is fatal to birds and fish, there's a good chance X could be fatal to humans.

This incident is suspicious. That isn't proof. I'm surprised that State comedians are so eager to say "Move along! There's nothing to see here!" Usually, State thugs are eager to incite environmental panic. "Save the environment!" is an excuse for State violence.

Andrew Cuomo, Ernst & Young, And Lehman

New York's now-former attorney general filed a civil fraud lawsuit against Ernst & Young. Ernst & Young was Lehman's accounting auditor. Andrew Cuomo is using the "Martin Act", a NY law. As the NY attorney general, he can't prosecute Lehman for Sarbanes-Oxley, but he can use NY-specific laws.

Corporate accountants are another example of "captured regulators". The accountants are hired by the corporation they're supposed to be auditing. The fees are ridiculously high. The incentive is for the accountants to look the other way and ignore problems. Otherwise, they risk losing the cushy auditing contract.

The partners of the "Big 4" accounting firms earn huge salaries, but perform no real work. The accountants exist to ensure compliance with State bureaucratic requirements. The accountants are there to provide the illusion of accountability, while rubberstamping whatever the CEO wants. Many CFOs and corporate accountants formerly worked for auditing firms.

Ernst & Young is accused of violating NY state laws. Lehman was located in NY, so NY law applies.

This is an interesting legal quirk. The NY attorney general can prosecute someone for violating NY state laws. He can't prosecute someone for violating Federal law. Only a Federal US attorney can do that.

Andrew Cuomo is not pursuing E&Y for violating Sarbanes-Oxley. He is using NY-specific anti-fraud laws. If there will be a Sarbanes-Oxley prosecution for Lehman Brothers, a Federal lawyer would have to do that, and not a state attorney general.

I don't understand why Lehman's CEO and CFO aren't being prosecuted for violating Sarbanes-Oxley. Sarbanes-Oxley was passed after the Enron scandal, specifically targeting this situation. The "Repo 105" transactions are almost exactly the same as the "off balance sheet partnership" trick that Enron used.

Enron used off-balance-sheet partnerships to hide losses. Lehman used Repo 105 transactions to hide losses. It's exactly the same thing! Enron's off-balance-sheet partnerships were structured as repurchase agreements. Enron agreed to buy back the assets later, using Enron common stock as collateral. When the scam was exposed, the whole thing collapsed.

Enron mentioned the "off balance sheet partnerships" in a footnote on their financial statements. Enron's CFO picked himself and his wife to be CEO of the "off balance sheet partnership", and it was listed in a "related party transactions" footnote. A clever analyst noticed the footnote. However, Enron would have imploded eventually anyway, due to the massive fraud.

Lehman didn't even mention "Repo 105" in its accounting statements anywhere, not even in a footnote. If you read their accounting statements carefully, you would not have noticed the "Repo 105" transactions. That's clearcut fraud.

Lehman should be an excellent test case for Sarbanes-Oxley. If they aren't going to prosecute Lehman's CEO and CFO, then they might as well repeal Sarbanes-Oxley. Due to high compliance costs, Sarbanes-Oxley is a huge regressive tax on public corporations.

One accounting rule is "Don't look for loopholes in the accounting rules." Ernst & Young should have insisted on mentioning the "Repo 105" transactions in a footnote, or refused to sign the statement. They didn't do that, because they didn't want to lose the lucrative accounting fees. There even was a Lehman employee who complained about Repo 105, but Ernst & Young ignored the complaint. Lehman sold common stock and bonds, while performing Repo 105 fraud.

Enron was like a Ponzi scam. As long as new investors kept buying at higher prices, the scam continues. Enron could keep selling more common stock at higher prices, to keep the scam going.

The housing bubble was also like a Ponzi scam. As long as more people kept buying, housing prices kept rising, and Lehman kept making more money.

Lehman sold approximately $50B of bonds and common stock, while performing Repo 105 fraud. That's more than Bernard Madoff stole!

Sarbanes-Oxley is a huge regressive tax on public corporations. It's a huge compliance cost. It hurts the software startup market. Previously, a successful startup would have an IPO, so that early investors could cash out. Now, the only exit option is a sale to a larger corporation. There's only a handful of potential buyers. They don't have much incentive to offer a good price. The successful startup has many fewer options, due to Sarbanes-Oxley.

If there is no Sarbanes-Oxley prosecution for Lehman, they might as well repeal that law. Lehman did the exact same thing as Enron! They both used repurchase contracts to park bad assets off their balance sheet. They both used accounting tricks to hide losses.

Lehman's CEO Dick Fuld is using the Blagojevich defense. "I did what everyone else was doing. They got bailed out, but I didn't. I was unfairly singled out. The other banks were also using dirty accounting tricks. You don't know about them because they didn't go bankrupt. Lehman's books were fully exposed due to the bankruptcy." Dick Fuld might be right. Are Federal prosecutors reluctant to prosecute Dick Fuld, because they're afraid he'll accuse other banks of doing the exact same thing?

There's an interesting clause buried in the banking "reform" law. State banking regulators now have the power to seize and bailout a troubled bank, without a formal bankruptcy filing. Due to Lehman's bankruptcy, there was public disclosure. With the next big bank failure, regulators can intervene without a formal bankruptcy filing. The banking "reform" law will lead to less public disclosure.

That also occurred in the current crisis. AIG was given bailout money, but there was no public disclosure of who was AIG's creditors. The AIG bailout money went to Goldman Sachs and other banks and hedge funds.

NY's attorney general is pursing Ernst & Young for violating NY law. There really should be a Sarbanes-Oxley prosecution of Lehman. The Federal government would have to do that, and not the NY attorney general.

Snow Job Commission

Here in NYC, a lot of people are angry about the lousy snow removal job. There was a big blizzard and it took several days to get it cleaned up.

In a few weeks, there's going to be State committee hearings, regarding the problem.

Has *ANY* problem ever been solved by government committee hearings?

It's pretty predictable. Some people will angrily complain at the meeting. Someone might be scapegoated and blamed, but not fired.

They already have some good excuses. The best one is "The transit workers had a deliberate work slowdown, to protest pay cuts and benefits." Another one is "People got their cars stuck, blocking plows." It's likely that there was no money in the budget to pay for overtime.

In some areas, people plowed the streets themselves!

The State's response to any problem is "Let's have a committee hearing!" That's an excellent way to have a pretend debate. The real problem is the government police/defense monopoly. That cause is not blamed.

Do Position Limits Matter?

This article was interesting. After many rumors of commodity price manipulation, the CFTC set a position limit.

A "position limit of 20,000" means that no single entity can have a total single entity of more than 20,000 contracts long or short.

There's an obvious loophole.

If the position limit is 20k, and someone wants a 100k position, then they form 5 separate corporations, each of which takes a 20k position. This new regulation means nothing.

I never understood why people get upset about gold and silver price manipulation. If you believe that someone is manipulating the price down, then you should buy and take physical delivery. Appreciate that you're getting a discount. There might be short-term manipulation, but the long-term price should reflect true inflation.