Common Law
Note: The nice folks at Business Insider wrote about the FCC closing the lead generator loophole, and quoted your humble newsletterer in the process.
Lawyers
One primary role of lawyers is to favorably interpret rules and laws to benefit their clients’ interests. If you are a criminal defense lawyer, your goal is to inject doubt into the proceedings, to convince a judge or jury that your client is not guilty. If you are a business lawyer negotiating a deal, your goal is to tilt the contracts and agreements as much in your client’s favor as possible. This is the active part of lawyering - arguing your case convincingly, to a positive outcome.
America’s system of laws is mostly written by lawyers, and interpreted by other lawyers, in the form of judges and prosecutors. Many members of Congress are also lawyers, and lawmakers will often hire lawyers on staff or consult with law firms when they are crafting legislation, because good legislation needs to stand up to legal scrutiny.
Given that the practice of law involves a lot of research, analysis, and argument, the profession necessarily attracts the sort of person who enjoys these pursuits. If you can tolerate retaining legal minutiae for a few years and take on a couple hundred thousand dollars in debt, you can earn a law degree and set yourself up for a lifetime of lawyering.
It’s indecorous but necessary to characterize some lawyers as petty, because they have to be, to be good at their jobs. Finding a tiny flaw in an argument, or an incorrect word in a legal contract, can be advantageous for a lawyer, and so they are, or become, petty and argumentative.
The problem with all of this is that, again, lawyers operate the machinery upon which rests our fragile democracy. Government lawyers ensure regulations are enforced - that our air and water are clean, our buildings and roads are safe, et cetera. Government prosecutors hold people and entities accountable. Government judges settle disputes between parties, and enforce criminal violations of the law.
Ideally you’d want the smartest, pettiest, most overconfident lawyers in those roles, but the perversities of government employment mean that failures are punished more harshly than successes are awarded. Until recently, the FTC was notoriously timid in bringing lawsuits against big firms who could hire expensive lawyers, because each loss in court not only looked bad for them, but potentially cooled future prosecution. The lawyers in charge of the other lawyers wouldn’t want to bring a series of losing cases against the lawyers defending the big corporations and rich defendants, the thinking went. This pattern exists across the government, from the DoJ taking years to bring cases against Trump to the SEC preferring settlements over trials. If it’s government lawyers versus high-paid, private lawyers, it’s the latter almost every time.
There is one type of lawyer that remains immune from these pressures - the federal judge. Appointed for life, they are supposed to be fair, and to prevent the scales from tipping too hard in one direction or another. Ideally. Their job is to adjudicate the law, to lubricate the complex machinery of government, and make sure it’s functioning properly. The intermediary group of lawyers keeping the other two at bay.
We know that’s mostly bullshit these days, right? Anyhow, there is a new ProPublica story on Clarence Thomas:
In early January 2000, Supreme Court Justice Clarence Thomas was at a five-star beach resort in Sea Island, Georgia, hundreds of thousands of dollars in debt.
After almost a decade on the court, Thomas had grown frustrated with his financial situation, according to friends. He had recently started raising his young grandnephew, and Thomas’ wife was soliciting advice on how to handle the new expenses. The month before, the justice had borrowed $267,000 from a friend to buy a high-end RV.
At the resort, Thomas gave a speech at an off-the-record conservative conference. He found himself seated next to a Republican member of Congress on the flight home. The two men talked, and the lawmaker left the conversation worried that Thomas might resign.
If you’ve read prior editions of this newsletter, you know what happened next - Thomas accepted millions of dollars’ worth of gifts over the next twenty years from a variety of billionaires and other random dudes he happened to run into at gas stations:
Thomas met Earl Dixon, the owner of a Florida pest control company, while getting his RV serviced outside Tampa in 2001, according to the Thomas biography “Supreme Discomfort.” The next year, Dixon gave Thomas $5,000 to put toward his grandnephew’s tuition. Thomas reported the payment in his annual disclosure filing.
Let’s get back to the lawyering bit, because this quote in the piece especially struck me:
George Priest, a Yale Law School professor who has vacationed with Thomas and Crow, told ProPublica he believes Crow’s generosity was not intended to influence Thomas’ views but rather to make his life more comfortable. “He views Thomas as a Supreme Court justice as having a limited salary,” Priest said. “So he provides benefits for him.”
This blanket dismissal of the concepts of bribery and corruption is such a perfect encapsulation of lawyerbrain I couldn’t have scripted it any better. It is a lawyer’s - or a professor at one of the nation’s most prestigious law schools - job to twist facts and reality to more closely resemble their own way of thinking. This is how you pervert the operation of government, in the open, on the record.
You can imagine George Priest in court, defending a Manhattan property developer who made a building inspector’s life ‘more comfortable’ by paying for renovations on his vacation home, or helping him with the down payment on his son’s fishing boat. City inspectors are so underpaid, he might argue, and they’re such important civil servants and, your honor, my client’s building didn’t fall down so it was clearly up to code!
If we needed further evidence of the literal influence of two decades’ worth of largesse, Thomas abruptly changed his tune on whether Justices were underpaid, despite not having received a meaningful raise in the intervening years:
That June [2019], during a public appearance, Thomas was asked about salaries at the court. “Oh goodness, I think it’s plenty,” Thomas responded. “My wife and I are doing fine. We don’t live extravagantly, but we are fine.”
A few weeks later, Thomas boarded Crow’s private jet to head to Indonesia. He and his wife were off on vacation, an island cruise on Crow’s 162-foot yacht.
Thomas complained to anyone who would listen that he wanted more money, and when Congress couldn’t pass raises or lift the speaking fee ban on Justices, conservatives found another way to keep him comfortable. If any non-Supreme Court judge in this country accepted a single trip or loan or cash donation from a stranger, both they and the donor would be immediately indicted. But, when you’ve made it to nation’s highest tier of lawyer, rules quite literally no longer apply to you. There is something perverse about a system created and run by lawyers carving a little perch way up at the top where all the rules they’ve spent so much time meticulously debating no longer apply. Playing the lawyer game long enough to level all the way up and discovering that, if you’re lucky, you unlock the secret dungeon where crime is legal.
Circling back, the same people who feel comfortable openly soliciting bribes in public are the ones who now apply their flexible ethical standards to interpreting the nation’s laws. Is it a surprise that in a few short years the Court has dramatically rewritten the country’s charter? Racism is over, abortion access is decided by state legislators, federal agencies can’t exercise the discretion clearly given to them by Congress, bribery is cool now, the list goes on.
Let’s say you spent your career lawyering as hard as you could, and your politics were correctly calibrated to unlock the secret lawyer dungeon. Sure, you can accept cash and RVs with impunity now, but more pertinent to your specific, perverted lawyer interests, you’re granted an additional lawyer superpower - you cannot be wrong. Whatever banal bullshit passes your lips becomes the actual law of the land. If you can craft a weird, tortured argument about how the US should operate based on 17th century British Common Law, go off! No one can stop you! Hell, you don’t even have to read the rulings you sign on to.
The Supreme Court has a long and checkered history of being very wrong, very racist, and its appointees pushing political agendas over the will and needs of the people. What feels different about this moment is that the Court has dispensed with the idea of contributing to the general function of government, of keeping the wheels spinning at all, and is leaning towards letting the whole thing fall apart. If it guts the SEC and EPA and FDA and CFPB, we’ve no longer got a way to ensure the food we eat or air we breathe is clean, or that our banks aren’t stealing our savings to gamble away on derivatives. If it decides election-rigging is legal, we’ve got no recourse to fix an increasingly broken and unfair system. If it consigns women to chattel, they can’t all flee to states with reasonable governors and reproductive rights.
Much of this rightward lurch is the byproduct of the The Federalist Society and other right wing groups seeking the weakening or outright dissolution of the administrative state. Some of it is down to the greed of one (or two) men, whose beliefs find themselves open to auction. But most importantly, it exposes the glaring weakness in our system - a code of laws written by lawyers can be twisted and horribly perverted by a different set of lawyers, if they are properly committed to the cause. Especially, and perhaps only when those lawyers are free of oversight or consequence.
Congress could, in theory, do something about this, but it is blindingly obvious they will not. The President could maybe do something, but Biden’s codgerly insistence on clinging to a form of politics that hasn’t existed in this country in a decade means we’re marching into an election year with a rogue Court that has decided to dispense with decorum in favor of wielding unadulterated power.
Perhaps when they look back at this slice in time, historians will wonder why we put a bunch of lawyers in charge of everything.
Tesla
The big Tesla news last week was the recall of the company’s Autopilot software in 2 million of its vehicles. At the time, NYT journalists framed it thus:
Tesla’s reputation for making technologically advanced cars suffered a blow on Tuesday when the company, under pressure from regulators, recalled more than two million vehicles.
Tesla’s ‘reputation’ for making good cars is, as we’ve discussed before, mostly a byproduct of Elon Musk’s outsized persona and a fawning tech press. Tesla has repeatedly overstated the capabilities of its Full Self-Driving and Autopilot systems, and spent years lying about the range of its cars.
Now, yet another Reuters report details just how unreliable and outright dangerous Teslas actually are:
Tesla owners have filed about 260 complaints with NHTSA over suspension and steering problems this year, compared to about 750 for General Motors and 230 for Toyota. That makes Tesla’s complaint rate far higher when considering the number of GM and Toyota vehicles on the road. GM has a 21% share of U.S. cars in operation; Toyota, 15%. Tesla’s share: less than 1%, according to data analytics firm Experian.
For years, according to the company’s own internal records, Tesla suspensions and steering columns failed at rates far higher than any other car company. Despite repeated redesigns, the company has been unable to fix the issues. Teslas were often delivered already broken, with suspensions shearing off after a handful of miles or steering systems breaking under acceleration.
In the US, the company addressed the issues the same way it handled complaints about driving range - lying to customers:
Tesla told U.S. regulators the failures were caused by “driver abuse.” The company also instructed service centers, in a February 2019 “talking points” memo, to use the same explanation with customers experiencing aft-link failures. They were told to blame “vehicle misuse,” such as “hitting a curb or other excessive strong impact.”
The primary driver of the company’s aggressive obfuscation was cost - Tesla does not operate a traditional dealership model, and has to pay to repair each of its vehicles. The costs were not a small line item, either - by 2019 they threatened to bankrupt the company:
During the fourth quarter of 2018, Tesla paid nearly $500 for repairs, on average, for every Tesla in operation at the time, service engineers were told in a series of memos. In total, an April 2019 memo noted, Tesla’s repair business lost $263 million in the quarter because of the high volume of warranty and goodwill repairs. For comparison, that was nearly double Tesla’s quarterly profit of $139 million.
Facing nearly a billion dollars a year in repairs, Tesla shifted those costs to consumers, telling its techs to classify broken suspensions as ‘misuse’ to invalidate warranty claims. One examination of how widespread the issue was pegged the failure rate at five percent:
At the time, about 5% of the 12,858 Model S and Model X vehicles on the road in Tesla’s southern Europe and Middle East markets had needed repairs because of aft-link failures, according to a Reuters calculation of the data reported by [Tesla engineer Valentin] Oetliker.
Tesla manufactures most of the components that go into its cars, which sounds great on paper until you consider that eschewing OEM parts significantly increases repair cost and, potentially, delays if the parts are not produced in sufficient quantities. Independent estimates peg Tesla repair costs at 27% higher than comparable gas vehicles.
The parts in question - steering, suspension - do not need to be made custom for Teslas, they could have used outside vendors and avoided these problems. But Musk’s hubris instead endangers thousands of drivers whose cars may literally fall apart at speed. Reuters spoke with dozens of Tesla owners who experienced failures, and whether they result in serious injury or not, it is a traumatic event to have your car suddenly fail while moving, and be stuck dealing with an intransigent company who tries to blame the accident on you.
Will the mounting pressure - the recalls, the investigations, and the internal proof Tesla knew about all of it and lied to regulators - make a difference? Has Musk’s shine finally worn off? Even if US bodies are slow to act, Tesla faces mounting pressure and costs in Europe and China, where it’s already had to enact widespread recalls to fix suspension problems. It turns out making expensive, unreliable cars while lying to investors may not be a foolproof way to run a business.
Sound of Freedom
This summer, the surprise hit movie was a name that few people outside conservative circles would recognize. The Sound of Freedom was a fictionalized tale of Tim Ballard, controversial founder of Operation Underground Railroad, an evangelical organization that purports to save children around the world from human trafficking.
There’s a lot going on in that sentence, but the summary is that an indie film valorizing Ballard was crowdfunded by a Mormon movie studio, and caught fire on the Christian right. The child trafficking plot created fodder for Q-anon conspiracy theorists, who at this point count a decent chunk of mainstream Republicans in their ranks.
The movie earned an astonishing $242 million dollars worldwide, largely through a viral marketing campaign to ‘pay it forward’ allowing people to buy tickets for strangers. For Angel Studios, the company with the rights to the movie, it was a coup of unprecedented proportions.
Since then, the film’s hero has been exposed as a serial sexual abuser, ‘resigned’ from OUR under a cloud of controversy, and is now facing a lawsuit from former employees alleging he manipulated them into sex on his ‘missions’ to save abused kids. A criminal complaint is also pending in Utah, where the Mormon church has also publicly condemned Ballard for lying about his relationship to church elders.
It is perhaps the least surprising thing on Earth that the hero of the Q-friendly movie about an evil cabal of child sex predators turned out to be a literal sex predator. But! He’s somehow not the only villain in the tale.
Angel Studios is not simply a studio - it is actually a web of companies run by five brothers from the Harmon family. They run Angel Studios, Angel Acceleration Fund, and a bunch of other entities that fund, produce, and collect fees to distribute and market ‘indie’ films, typically religious pieces for limited distribution.
Angel bought Sound of Freedom, then crowdfunded $5 million to distribute it and ‘put a spotlight’ on global child trafficking. It took money off the top of that campaign, and then paid its own ad agencies to promote the film. This is all not…exactly standard, but depressingly common in indie film development.
However, Angel didn’t disclose that they owned the crowdfunding site used to raise the money:
Angel Studios reported to the SEC that it has “no ownership over VAS Portal,” and the FAQ page on Angel’s website implies that VAS has no direct overlap with Angel Studios. But the portal is still owned by Harmon Ventures.
This is probably technically against the law, but it’s pennies and nickels compared to what Angel did next:
[Lawyer Lisa] Bragança thinks Angel Studios is more likely to hear from the FTC regarding their widely publicized Pay It Forward model, which was a sensational success: The studio set a target of 2 million viewers for Sound of Freedom, but estimates the film sold 30,645,695 tickets in all.
[…]
On the PayPal checkout page, for example, the word “ticket” is replaced with the word “reach” (that is, instead of guaranteeing that a $15 donation covers a ticket, it pays for the “reach” to “one person”). A disclaimer reads, “Angel Studios will make reasonable efforts to use Pay It Forward ticket sales for the audience growth of the intended film or series. However, Angel Studios becomes the owner of all funds upon receipt and may use them at its sole discretion to further the Angel Studios’ mission of amplifying light through impactful stories.”
Yup, that money got Paid Forward into the Harmon bank accounts. Angel has a history of using Pay It Forward campaigns to pocket additional cash on its indie releases, with one filmmaker saying the studio did so without her permission, and she received no proceeds from the effort.
Angel has cut a big-dollar deal with Amazon to run Freedom on its Prime service this winter, and is thriving off the (alleged) success of its probably-not-legal crowdfunding campaign. There is no way to verify the company’s outlandish claim of 30 million tickets sold, but it is clear the studio has tricked not only millions of trusting evangelicals, angry right wingers, and conspiracy theorists into vaulting it into the big time - now all of its weird reactionary films will get media attention and could end up on big streamers.
Despite the windfall, Angel hasn’t given up on its original grift:
When you click the Pay It Forward button on the webpage for the film, the default donation amount selected is $300. The website informs you that for this amount, “20 People Can Watch” After Death. Curiously, the disclaimer on the checkout page for the Sound of Freedom promotion — the small print that acknowledges not all of this money is going toward tickets, and the company can spend it however they like — is nowhere to be found when you are prompted to enter your payment information for this promotion.
There are many ways to steal money from people online, and we can now add ‘fake movie ticket crowdfunding’ to the list of schemes that, with a little luck, can be wildly successful and even celebrated by a media that doesn’t look too closely or ask too many questions.
Taxes
Rudy Giuliani is back at it again, and by ‘it’ I mean ‘having comically large civil judgements levied against him’. A defamation lawsuit brought by two Georgia poll workers was resolved in their favor, with a jury awarding the pair $150 million in damages. Obviously, given Rudy’s mounting legal bills, divorce settlement fines, and the baseline financial precarity of surviving entirely on a diet of hand-rolled cigars and Scotch in Manhattan restaurants, America’s Mayor is not going to pay all or probably any of the penalty (he filed for bankruptcy today).
However! A quirk of American tax law is that if Rudy ever did come into sufficient wealth to pay the plaintiffs, he could write off the payments, while the poll workers could be hit with a giant tax bill for their troubles:
Was Giuliani engaged in his business of being a lawyer for former President Trump at the time, or acting in some other business pursuit? Maybe, and that suggests he may have a good chance of viewing a verdict or settlement he might pay to the election workers as business expenses. In contrast, the plaintiffs have to pay tax on all of it, maybe even the funds going to their lawyers.
[…]
Amazingly, many legal fees can't be deducted, so plaintiffs may pay tax on monies their attorney collects, even though the attorney must also pay tax on the same money. If you are a plaintiff with a contingent fee lawyer, the IRS treats you as receiving 100% of the money, even if the defendant pays your lawyer directly.
Cool! It kicks ass living in a country where most laws are enforced by private civil lawsuits, while the government double taxes the result. It’s important to note that the reason this particular case would be subject to extra taxes is that it involves emotional distress, rather than physical. Physical injuries are tax-free, but emotional distress is taxed. Makes total sense.
We punish those who suffer emotional distress, but we reward the companies (and lawyers, apparently) who inflict such distress if it’s done in a business context. BP can write off a $20 billion dollar oil spill settlement on its taxes, but the people whose lives were ruined by Giuliani and his team of hyenas will get 1099s.
Happy Holidays
There are going to be some awkward conversations around family tables this year:
A federal judge in New York has ordered a vast unsealing of court documents in early 2024 that will make public the names of scores of Jeffrey Epstein's associates.
[…]
The documents may not make clear why a certain individual became associated with Giuffre's lawsuit, but more than 150 people are expected to be identified in hundreds of files that may expose more about Epstein's sex trafficking of women and girls in New York, New Mexico, the U.S. Virgin Islands and elsewhere.
A reminder that while Epstein’s most egregious crimes involved sex trafficking underage girls, he got his start by stealing millions in a Ponzi scheme, and then spent years running tax avoidance (fraud?) vehicles for some of America’s wealthiest scumbags. It’s a shame his case was closed under deeply suspicious circumstances!
Short Cons
AP - “Cheryl Geidner figured council members in Volant, a tiny borough north of Pittsburgh, would adopt a preliminary year-end budget despite no discussions at public meetings on the proposed financials. She never figured they’d raise property taxes by 57%.”
Atlantic - “The Texas Supreme Court unanimously sided with Paxton. With no doctors in Texas willing to chance prosecution, Cox was forced to leave the state to avoid risking her life and ability to have another child.”
NPR - “That recommendation could shrink the estimated share of the U.S. population with any disability by about 40% — from 13.9% of the country to 8.1% — according to testing the bureau conducted in 2022.”
Stat News - “This means the U.S. government spent more on health care last year than the governments of Germany, the U.K., Italy, Spain, Austria, and France combined spent to provide universal health care coverage to the whole of their population (335 million in total), which is comparable in size to the U.S. population of 331 million.”
The Nation - “The UAW regional directors all say the union’s recent foray into geopolitics is just a start. They also all recognize strong differences of opinion amongst the workers they represent.”
Streets Blog - “Federal regulators are exploring a new rule that would require cars to detect when motorists aren't fit to drive, a move that advocates say could be the most transformative standard ever issued by the National Highway Traffic Safety Administration — if it can make it past the gauntlet of regulatory hurdles and culture wars ahead.”
9to5Mac - “The FTC is investigating Adobe, after widespread consumer complaints that the company makes it too hard to cancel app subscriptions.”
NBC News - “Nationally, vaccine hesitancy and school exemptions reached record highs in the last school year, in which 3% of kindergarteners were granted a vaccine exemption…”
Guardian - “About 12% of the world’s bird species have been driven to extinction by human activity, new research has found – double previous estimates.”
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