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Record Companies on the DefensiveNew York Times by Matt Richtel February 1, 2002
SAN FRANCISCO, Jan. 30 The major record companies, which two weeks ago surprised analysts by seeking a temporary suspension in their copyright lawsuit against Napster, were about to face potentially damaging inquiries into their own behavior on maintaining copyrights.
According to transcripts made public today, the judge in the case said on Jan. 16 that she intended to grant a request by Napster to explore whether the record companies might have colluded to prevent Napster and other online music competitors from licensing music to sell on the Internet. The judge, Marilyn Patel of the Federal District Court in Northern California, also said she would allow Napster to explore whether the record companies might not control all the copyrights they claimed to own.
A day later, before Judge Patel issued an order to grant the requests, the record companies asked her to suspend the lawsuit for 30 days, and she complied. The companies' request came after they had vigorously pursued the case for three years.
When the record companies sued Napster, they asserted that its online music service, which was explosively popular, abetted copyright infringement by letting users freely exchange songs over the Internet. In a preliminary injunction issued last year, Judge Patel agreed with the companies, saying Napster was guilty of assisting in "wholesale" infringement. She ordered Napster to prevent users from exchanging unlicensed copyrighted files.
Last week, the record companies said they had sought the suspension because they were nearing a settlement with Napster and did not want to be distracted by the lawsuit.
Today, Cary Sherman, general counsel for the Recording Industry Association of America, which represents the record companies, said the companies wanted to resolve the case quickly because Napster could run out of money soon and be unable to pay the millions of dollars the record companies sought. Of the issues invoked in Judge Patel's order, Mr. Sherman said, "Our companies aren't worried about these claims."
But several experts copyright lawyers and an analyst who closely follows the case said the transcript suggested that the recording industry might be more concerned over the copyright issues.
Mark Radcliffe, a copyright lawyer in Silicon Valley, said that if Napster was permitted to seek evidence about copyright questions, such evidence could provide the basis for a viable defense in trial. And it could challenge how much control over music copyrights the labels were entitled to have, he added.
"The labels are deathly afraid these ownership issues will come up in court," Mr. Radcliffe said. Others went further, saying the record companies had been disingenuous in saying they had suspended the lawsuit to expedite a settlement.
Aram Sinnreich, a music industry analyst with Jupiter Media Metrix, said the industry was "lying" about its motives. The companies are facing a Justice Department investigation into antitrust issues with respect to their approach to licensing music to Internet companies, and Mr. Sinnreich said they were seeking to preserve "the secrecy they've enjoyed."
"They're already on the grill," he said. "The last thing they need is anyone throwing more charcoal on it." Napster had no comment on the release of the transcript. The company joined the record labels on Jan. 17 in asking Judge Patel to suspend the litigation. Napster, based in Redwood City, Calif., took its service down in July. Since then, the company has been building a subscription- based service that would charge users a monthly fee to download music files, and it recently began a test version of the service.
Concurrently, the company has been negotiating with the record companies to settle the lawsuit and license their music for sale, but it is also continuing to defend the lawsuit in hopes of avoiding having to pay damages. No trial date has been set in the case.
For their part, the five major record companies, which control 80 percent or more of the music sold in the United States, have recently begun their own commercial services through two joint ventures. One venture is Pressplay, jointly owned by Sony Music and Vivendi Universal; the other is MusicNet, owned by Bertelsmann, the EMI Group, AOL Time Warner and RealNetworks, an Internet company that runs the service.
Napster has said that the joint ventures are anticompetitive and that Napster should be allowed to seek evidence about their formation and about whether they preclude Napster from competing on an even playing field. In her ruling on Jan. 16, Judge Patel agreed to let Napster pursue the area. She wrote, "I decided there are some significant issues with respect to misuse that defendants ought to be able to pursue." Judge Patel also said she planned to allow Napster to gather evidence to support its claim that the record companies did not necessarily control the Internet distribution rights to all the copyrights they claim to own.
If the two sides do not settle the case within the 30-day time frame allotted for settlement, Judge Patel may choose to issue her order allowing Napster to seek such evidence, people close to the case said.
Power Plant Pollution SettlementAssociated Press by John Heilprin January 26, 2002
The government and a New Jersey utility reached a settlement Thursday in which the company agreed to pay $1.4 million in penalties and spend more than $340 million to reduce air pollutants from two power plants by tens of thousands of tons annually.
The settlement is only the second of its kind under new environmental rules adopted in the mid-1990s and could prompt similar agreements to resolve lawsuits seeking pollution reductions at aging coal-fired plants throughout most of the eastern United States.
It requires Public Service Enterprise Group Fossil LLC to install new pollution controls to curb sulfur dioxide and nitrogen oxide emissions from coal-fired plants in Jersey City and Hamilton, N.J.
Attorney General John Ashcroft said the accord reflects a "continuing commitment to enforce vigorously the Clean Air Act" to protect public health and the environment.
Environmental Protection Agency Administrator Christie Todd Whitman, a former governor of New Jersey, said the settlement "will improve the air quality for those who live around the Mercer and Hudson plants."
She called it "an excellent example of how effective federal and state partnerships in enforcement actions can greatly benefit the environment and assure public health protection."
Frank Cassidy, president of PSEG Power, which includes the PSEG Fossil subsidiary, said the 10-year program for cutting reductions at the two plants resulted from talks the company initiated with EPA more than a year ago.
"We are investing in advanced emissions control technologies that will deliver significant results in a reasonable timeframe," he said in a statement. "Coal has been, and will continue to be, the backbone of affordable energy in this country. But technologies exist to burn coal cleanly."
The settlement followed by eight days a Justice Department announcement that it would pursue lawsuits begun during the Clinton administration against the owners of 51 coal-burning power plants.
Those suits had effectively been on hold since President Bush took office. The Bush administration, as part of its energy policy unveiled last spring, had ordered a review of how the EPA was enforcing the Clean Air Act, including the suits filed in 1999.
Officials said PSEG Fossil will be required to annually cut its emissions of sulfur dioxide from the two plants by 36,000 tons, an amount equal to a fifth of all that pumped out by all sources, including cars and trucks, in New Jersey.
It also will have to cut nitrogen oxide emissions by 18,000 tons -- equal to 5 percent of all sources in that state.
The settlement still has to be approved by a federal judge in Newark, N.J.
Along with spending $337 million on scrubbers for reducing sulfur dioxide pollution and catalytic converters to cut nitrogen oxides, PSEG Fossil agreed to pay a civil penalty of $1.4 million and to spend $6 million on three pollution-cutting projects.
The settlement is the first since February 2000, when the EPA reached a $1 billion agreement with Tampa Electric Co. in Florida to cut tens of thousands of tons of pollution annually from two power plants there.
The Bush administration is still reviewing the EPA's interpretation of the Clean Air Act during the Clinton administration, under which the suits were brought. Whitman met Wednesday with attorneys general from seven East Coast states and promised a decision within several weeks.
The Clean Air Act requires utilities to install expensive pollution control measures when older plants are modified to produce more electricity with less coal. Utilities have argued that the modifications to the older plants are maintenance measures that don't require new pollution controls.
Enron: The Political ScandalSalon by Scott Rosenberg January 24, 2002
Jan. 18, 2002 - The collapse of Enron, we now hear, is not a "political scandal" -- it's a "business story." A fine distinction! So far, no one possesses evidence that government officials lied, goofed around with interns, ran guns from the White House basement, burglarized opponents' campaign offices or accepted bags of unmarked bills. And so a growing chorus in the media now chants that the Enron affair should not be considered in the same class as Whitewater, Watergate, Iran/Contra or any of the other previous brouhahas that have consumed Washington and brought presidencies to their knees.
This tells us that the scandal yardstick our political and media culture currently uses is bent like a pretzel. You say your president may have finagled a real estate deal many years ago? Time to name a special prosecutor! He lied about his sex life? Draw up the articles of impeachment! But tell us that a high-profile corporation donated millions of dollars to legions of politicians, including the president; bent the government to its will; lined the pockets of its executives while dodging all taxes; then went bankrupt, vaporizing thousands of employees' retirement accounts? Nah, that's no "political scandal." Come on -- where're the bimbos?
Enron's dismal story simply doesn't meet the high bar of triviality the press today demands. The sums of money involved are too great; the flaws in our political system that it exposes are too vast. It's just too real to qualify
Racketeering Charges for EnronCBSMarketWatch.com by Lisa Sanders January 24, 2002
HOUSTON -- Enron employees are citing alleged violations of racketeering laws in a new lawsuit that blames company officers and fired auditor Andersen for employees losing some $1.3 billion in retirement savings.
The litigation marks the first Enron-related class-action lawsuit, among dozens, to cite the Racketeering Influences and Corrupt Organizations Act. Hagens Berman, a Seattle-based law firm, filed the suit in U.S. District Court in Houston on Tuesday.
An Andersen spokesperson did not immediately have a comment. Enron declined to comment.
In addition to Andersen, the suit names Ken Lay, Enron's chairman, Jeffrey Skilling, Enron's former chief executive, Andrew Fastow, the former chief financial officer, the Northern Trust Co., and David Duncan, the former Enron audit partner fired by Andersen last week.
The suit charges the parties with conspiring to hide Enron's true financial status by "withholding critical information."
"Now that the facts of Andersen are coming to light, it shows that Andersen was well aware of the accounting problems, and it was so bad that Andersen was destroying documents," attorney Steve Berman said in an interview.
"We have a strong basis for suing Andersen for racketeering. There is a specific provision of RICO, which makes it a crime to embezzle or convert the asset of any employee welfare benefit plan, and we're alleging that Andersen engaged in a conspiracy with Enron to do just that."
The suit also claims that Northern Trust and administrators of the Enron savings plan breached their fiduciary duty to company employees by locking down the retirement savings plan.
Judge Melinda Harmon, who's overseeing all the Enron-related lawsuits filed in Houston, has scheduled a Feb. 25 hearing to come up with a case management plan, Berman said.
Enron Employees CoalitionFinancial Times by Sheila McNulty January 23, 2002
The 4,500 employees laid off by Enron in the US are banding together in a coalition to engage outside consultants to help with such issues as retrieving unpaid severance, vacation, expenses and losses in their retirement fund.
The Severed Enron Employees Coalition, led by a volunteer group of committee members, will identify and articulate such issues for former employees and explore all alternatives to resolving them, including engaging outside legal counsel.
This will enable those retrenched to present a united front in dealing with the bankruptcy court, bankruptcy trustee, other Enron creditors and Enron. It will also keep them informed of issues stemming from Enron's bankruptcy filing.
"Numbers give us clout and a chance to win," wrote Rod Jordan, coalition chairman, in an introductory e-mail to those affected.
Taking a Bite Out of SpammersSeattle Times by Peter Lewis January 13, 2002
With spam volumes at all-time highs and its depraved content at all-time lows, it's nice to have a guy like Bennett Haselton around to do some trailblazing.
Haselton is among the handful of state residents taking matters into their own hands by going to small-claims court to combat the stream of spam junk e-mails with come-ons for get-rich-quick schemes, sex-enhancing drugs and pornography.
It's only fitting that the job should fall to a Bellevue 23-year-old who drives two beaters with personalized license plates "NERDPOWR" and "NRDVANA."
Haselton, who works as a contract programmer, has yet to collect a dime, but he is encouraged by four $500 judgments he won last month in Bellevue District Court's small-claims division. He plans to send the cases to a collection agency if the spammers don't pay up.
Haselton and a few others started gearing up last summer after the state Supreme Court revived an anti-spam law that a lower court had ruled unconstitutional.
The 1998 statute was designed to protect state residents against bulk commercial e-mails that contain misleading information in the subject line, use a third party's Internet address without permission or disguise the message's origin. Most spam falls into one or more of those categories, experts say. Under the law, recipients of such messages can go to court to try to collect $500 or actual damages, whichever is greater.
To date, Haselton has lost only one case, and that was because a judge disagreed with him over whether a particular message's subject line qualified as "misleading."
Meantime, he has more than 40 additional cases pending. He learns a bit more with each case, including the sometimes-jarring realization that judges disagree about how to handle spam cases.
"One of the problems that I kept running into was that I'd get contradictory information from different judges on different days in the same courtroom about how to handle cases that were basically identical," Haselton said.
For example, one judge told him he couldn't sue in small-claims court unless he had lost money, he said. Other judges have said otherwise.
On another occasion, a judge said that if he got more than one objectionable e-mail from the same company, Haselton could sue for damages only once. Other judges said otherwise.
And judges also have disagreed on whether Haselton can sue a company that has hired someone else to spam on their behalf. One more hitch: District Court staffers have dispensed contradictory information on whether he can sue spammers located outside the jurisdiction, Haselton said.
Variety of interpretations
Judge J. Wesley Saint Clair, King County District Court presiding judge, said spam cases are relatively new.
"The law is an interesting creature," he said. "It can be interpreted a variety of ways, and the proponent of any particular issue has to convince the trier of fact of the accuracy of their position."
Besides the procedural setbacks, there are other obstacles that make the course Haselton has chosen a tricky one for most people.
Haselton, who graduated from Vanderbilt University at age 20 with a bachelor's and master's degree in math, is well-suited for the task. He likes to figure things out.
"It's a minority of the amount of spam that I get where you can actually track down the individual or corporation responsible and sue them," he said. "It's a little tricky."
Another problem: satisfying judges that he has properly notified a defendant, because the court holds plaintiffs to a "strict standard to prove that you've served the right party," he said. Among other methods, he has used registered letters.
Haselton believes that once enough judges become experienced handling spam cases or once a case goes up on appeal to set a binding precedent on how the law should work uniform procedures will be adopted that will make it relatively easy to take action against spammers.
The long-term strategy is to reach a point "where spamming becomes so expensive (for spammers) that it's just not profitable to do it," Haselton said.
That point is quite a ways down the road. And for now, the spam keeps piling up.
A spike in spamming
Brightmail, a San Francisco company that sells spam-catching software, says there has been a five-fold increase in the volume of spam in the past 18 months.
Chief Executive Officer Gary Hermansen isn't sure why that has occurred. A significant spike in the last quarter of last year could be linked, he said, to security concerns after Sept. 11 and to anthrax mail scares, which spammers may have seen as an opportunity.
At the same time, the rawness of pornographic spam seems to have plumbed new lows. Jim Kendall, president of the Washington Association of Internet Service Providers, and a promoter of the state's anti-spam law, thinks the sources for most of that have moved offshore to "Third World Internet service providers desperate for money."
Haselton thinks he receives less pornographic spam, and more "upscale" come-ons for products and services for Webmasters, because he's listed as the contact person for a well-trafficked Web site. Spam annoys him for the same reasons it irritates many it takes time to delete, and he sometimes misidentifies legitimate e-mail as junk mail, causing him to kill or ignore messages he should have paid attention to.
For Haselton, the more serious concern is that he runs an electronic "mailing list" that has become a casualty of hard line, anti-spam measures.
"A lot of places are dealing with the (spam) problem by taking extremely aggressive anti-spam measures," he said. "And they end up filtering a lot of messages, and legitimate news letters, and even sometimes just individual messages that I'm sending to people, and these paranoid spam filters end up blocking it."
Not the only fighter
He isn't the only spam fighter to turn to small-claims court to turn the tables on spammers.
Ben Livingston, 22, has made a hobby of suing telemarketers and those who send him spam. So far, he has netted $524.74, has eight claims pending (view them at www.smallclaim.info) and has published a zine called "Zen and the Art of Small Claims," which is available by sending a self-addressed stamped envelope to P.O. Box 95227, Seattle, WA 98145.
There is no charge, but Livingston, vice president of a small Internet-service provider in Ballard, wouldn't mind if people tossed in a few extra stamps.
Bruce Miller of Shoreline has four cases pending. Before plunking down his $21 filing fee in small-claims court, Miller sends out "demand letters" to companies that have spammed him.
"My typical routine is to send out a demand letter and put a deadline on it," Miller said. "If I don't hear from them, then they are fair game. Actually, they're fair game already."
Another Seattle-area man, Martin Palmer, says on his Web site that he's gone "20 for 23" in small-claims cases and had recovered $18,650 before the law was overturned in March 2000. But those winnings have been difficult to substantiate.
Haselton said Palmer told him that, in some cases, Palmer agreed to confidential settlements. That's not something Haselton is interested in, he said, "because the point is to make it a matter of public record that this can be done, and educate other people about how this can be done."
Of the four companies or individuals that Haselton obtained judgments against, the representative of only one, Bulk ISP of Nevada, would comment.
Ty Lee, who described himself as a company director, at first contended that the state law under which Haselton sued was "stricken."
Reminded that the state Supreme Court revived the law last summer, Lee asked, "Do you think we're going to pay the $500?"
Company's Lawsuits BackfirePublic Citizen Press Release - January 10, 2002
WASHINGTON, D.C. -- Hollis-Eden Pharmaceuticals has paid $107,887 in attorney fees and agreed to dismiss two cases against stockholders who posted critical messages about the company on an Internet message board.
In both cases, the trial court earlier had agreed with the critics, who were both shareholders represented by the Public Citizen Litigation Group, that the suits were improper SLAPPs (Strategic Litigation Against Public Participation) - lawsuits intended to deter them and others from exercising their First Amendment right to criticize the company.
In the first case, filed in December 2000, Hollis-Eden, a drug development company based in San Diego, sued 10 individuals, claiming they had posted defamatory messages on a Yahoo! message board devoted to discussion about the company. Public Citizen represented two of the posters and asked the court to dismiss the complaint against them on the ground that the suit was an unlawful attempt to chill the exercise of their constitutional right to speak freely about the publicly held company.
California's anti-SLAPP law is based on the recognition that the lawful exercise of First Amendment rights is threatened by the financial and emotional cost of defending against a frivolous lawsuit. The law offers defendants a mechanism for seeking prompt dismissal of meritless lawsuits that challenge speech about a public issue or speech made in connection with an official proceeding.
In March 2000, the trial court agreed with Public Citizen that the postings of the two shareholders concerned a matter of "public interest" within the meaning of the anti-SLAPP statute and that the statements were not defamatory. The court dismissed the case against the two and awarded the defendants attorney fees and costs of approximately $72,000. Hollis-Eden appealed. Both parties had filed briefs and were awaiting a date for oral argument when they agreed to settle the case.
Soon after the trial court dismissed the first case, Hollis-Eden again sued one of the two original defendants, this time for a single message he posted in March 2001. Public Citizen again invoked the anti-SLAPP statute, and the court again dismissed the case. Hollis-Eden's appeal and a motion for attorney fees in the trial court were both pending when the parties agreed to a settlement.
Under the terms of the settlement, the two defendants accepted $107,887 in attorney fees and costs in the two cases, and Hollis-Eden agreed to dismiss both appeals. Both defendants retain their First Amendment rights to speak about the company.
"Hollis-Eden tried for a full year to use the court system to intimidate its critics into silence," said Allison Zieve, a Public Citizen Litigation Group lawyer who represented the two individuals. "Better late than never, the company seems to have realized that frivolous lawsuits were not going to suppress criticism and, in fact, were creating more ill-will for the company among its stockholders."
Public Citizen worked on the case with local counsel Charles A. Bird of Luce, Forward, Hamilton & Scripps LLP, based in San Diego, Calif.
Supreme Court Defines DisabilityForbes by Dan Ackman - January 10, 2002
NEW YORK - In late 1996, an auto assembly-line worker, citing pain and inflammation in her shoulders and neck, stopped showing up for work, and her employer, Toyota Motor, fired her. Yesterday, the United States Supreme Court indicated the employer's action was legal, despite the employee's claim that she was disabled and therefore entitled to a different, less-taxing position.
The Supreme Court's unanimous decision is seen as a victory for employers because it allows them some leeway in determining what special treatment they are required to extend to workers who suffer partial physical disabilities such as carpal tunnel syndrome. But the court left for another day deciding on whether a person who can do part of her job might be too disabled to do the rest of it.
The case arose under the Americans with Disabilities Act (ADA), a 1990 law that has been vexing courts with the question of determining whose pain is a "disability" and should be afforded "reasonable accommodations."
On one side is the pure slacker, an employee who functions well in life generally, but who claims pains or injury that prevents or inhibits performance. On the other side is the worker bee who suffers from a physical ailment, and who cannot do one job, but who seems eager and able to do another.
Disability under the ADA, the Supreme Court ruled, cannot be measured solely on the ability to do tasks on the job. To be "disabled" means the worker must also be unable to perform "activities that are of central importance to most people's daily lives, such as walking, seeing and hearing."
The employee in question, Ella Williams, now 42, fell somewhere in the middle of the slacker-worker bee continuum. She started work at Toyota's (nyse: TM - news - people) Georgetown, Ky., plant in 1990. The use of pneumatic tools eventually caused pain in her hands, wrists, and arms--a form of carpal tunnel syndrome.
Her own doctor placed her on permanent work restrictions that precluded her from lifting heavy weights and engaging in constant flexing of her wrists or elbows. Toyota accommodated her by assigning her a different job. Nonetheless, she missed some work for medical leave, and eventually filed a claim under the Kentucky Workers Compensation Act. She and Toyota settled and she returned to work.
The fix did not last, though, and she sued her employer under the ADA. As a result, Toyota gave her a new job as a quality-control inspector. During the fall of 1996, Toyota added to her duties along with other quality inspectors. Now Williams had to wipe cars with oil, which required her to hold her hands and arms at about shoulder height for several hours at a time.
This wiping caused her pain in her neck and shoulders, due to a form of tendonitis. Toyota said she could do other parts of the job that did not include wiping. But soon she started missing work altogether, apparently under her own doctor's order that restricted her from work of any kind. At that point, Toyota fired her.
The federal district court threw the case out, saying that Williams could work despite her impairment in some "major life activities," such as lifting. An appeals court sided with Williams, saying the issue was whether she was able to perform without "substantial limitation" the manual activities of her particular job, such as gripping tools and working with arms elevated and outstretched.
Justice Sandra Day O'Connor wrote for a unanimous court, "The central inquiry must be whether the claimant is unable to perform the variety of tasks central to most people's daily lives," not just a particular job. Williams could perform household chores and could take care of her personal hygiene.
That she could not perform certain manual tasks related to her job did not make her disabled. It was not, therefore, Toyota's obligation to find her a new assignment.
The ADA is known for requiring wheelchair ramps and other accommodations at public buildings. But it also bans "discrimination" against the disabled on the job and elsewhere. In its decision, the court noted that in passing the ADA, Congress referred to 43 million Americans with physical or mental disabilities. The number would have been even higher, the court wrote, "if Congress intended everyone with a physical impairment that precluded the performance of some isolated, unimportant or particularly difficult manual task to qualify as disabled."
Along with other recent decisions, the ruling will, advocates for the disabled say, make it harder for allegedly disabled workers to win their cases.
In the past, the Supreme Court refused to decide whether "working could be a major life activity." Yesterday, it continued to refuse to decide "this difficult question." Instead it ruled on the narrow question of what evidence should be considered in an ADA case, and specifically refused to look beyond it.
Because the court decided to avoid a major function of its job--deciding not just one case but giving real guidance for future cases--the uncertainty about the ADA will continue.
White-Collar Criminals Belong in JailBusiness Week by Howard Gleckman January 6, 2002
Crooks who defraud investors deserve the same punishment as the rest of the bad guys -- and the means exist to mete it out
The collapse of Enron is the nation's biggest financial scandal since the savings-and-loan failures of the late 1980s. What should be done about it? For one thing, we need to rethink the role of auditors. And some lawmakers and investor groups are calling for a new round of securities regulation. But they're missing the point. More rules aren't the answer.
What we really need is better enforcement of the regulations already on the books. If Enron's board, its top management, or its auditors did break any laws -- and it's important to remember that there's no hard evidence so far that they did -- the best response is a simple one: Put them in prison. It will, to borrow a phrase, discourage the others.
Securities & Exchange Commission Chairman Harvey Pitt has the right idea when he says the point of investor-protection laws isn't to bust crooks after they've ripped off their victims, but to stop them from trying. To do that, state and federal authorities need to send a tough message: Whether you're working out of teak boardrooms or basement boiler rooms, if you do fraud, you'll do time. Says Indiana Securities Commissioner Brad Skolnick: "The increased likelihood of jail time is the only thing that will deter investment scams."
RARELY CHARGED. Unfortunately, this country has a long and sad history of letting hustlers, stock market manipulators, and other white-collar con artists off the hook. Unlike the lowlifes who smash windows and swipe CD players, crooks whose weapon of choice is an annual report rarely go to jail.
Indeed, most white-collar criminals are hardly ever even charged with criminal offenses. The SEC focuses nearly all of its enforcement efforts on civil actions. The penalty, even for the most outrageous rip-offs, is rarely more than a fine or an order to return money to the victims. Cases that are referred to prosecutors -- and most involve crimes such as embezzlement rather than securities fraud -- are usually dropped. More than 43% of those who are busted for fraud are never prosecuted, according to Justice Dept. statistics. Prosecutors say the cases are too complicated and a huge drain on their time and resources.
And law enforcers admit privately to another reason: Because those white-collar crooks who are convicted serve little or no jail time, prosecutors have little incentive to go through the effort required to get a conviction.
SHORT STAYS. Here are some more telling numbers from Justice. Overall, convictions for white-collar crime fell by 7% from fiscal 1999 to fiscal 2000. Some 70% of those convicted of felony burglary in 1996 (the last year for which data are available), went to jail, and the average stay was about 42 months -- or three and a half years. But just half of those convicted of fraud in 1996 went to prison. And if you did go, you'd get out, on average, in less than two years.
Even more striking is what happens to repeat offenders. In 1996, state courts were twice as likely to send three-time burglary offenders to jail as three-time con artists.
That's one reason why state courts actually see a higher percentage of repeat scamsters than they do repeat burglars. By their nature, folks who do scams are masters of risk analysis. And when you look at the cost/benefit ratio, it's clear: White-collar crime pays.
LOWER PRIORITY. Post September 11, odds are that these criminals will beat the system even more easily. The few big criminal securities-fraud cases that do go to court are brought by the Justice Dept. But Attorney General John Ashcroft is aggressively shifting resources to focus on terrorism. That means fewer prosecutors will be available to bring these complex cases before judges and juries. And that's going to send exactly the wrong message to those who would rip off unwary investors.
I don't know if the certainty of prison is going to stop a kid from robbing a 7-Eleven. But I'm willing to bet it will stop a guy in a suit from manipulating a financial statement.
Researcher FreedAssociated Press January 5, 2002
HOUSTON - Weeping with joy, an aspiring author was released from jail Friday after spending more than five months behind bars for refusing to hand over her notes about a society murder.
``I'm just very grateful to be free,'' Vanessa Leggett said with her husband, Doak, at her side. ``Downtown Houston never looked so good. I feel good -- I was able to maintain my journalistic integrity so far.'' Leggett, 33, was freed after 168 days in jail because the federal grand jury that demanded her research ended its term Friday, said her attorney, Mike DeGeurin.
However, federal prosecutors have indicated they will again ask Leggett for her research. Another grand jury could be convened as early as next week and she could be subpoenaed to appear.
Leggett said she would be more than willing to go back to jail.
``If that's what it takes, that's what it takes,'' she said. ``This is not so much about me. It's about the public's right to a free and independent press.''
Kesha Handy, a spokeswoman for the U.S. attorney's office, declined to comment.
``We applaud the release of Vanessa, but still protest her imprisonment,'' said Al Cross, president of the Society of Professional Journalists. ``Her case shows how First Amendment rights belong to everyone.''
Leggett is working on a book about the murder of Doris Angleton, who was shot to death in 1997. Authorities suspect her husband, Robert Angleton, hired his brother Roger to kill his wife. Robert Angleton was acquitted in 1998 in state court, but federal agents are now investigating him.
Roger Angleton killed himself in jail 10 months after the slaying, leaving behind a note exonerating his brother. Leggett interviewed him before the suicide.
Leggett was jailed on contempt charges July 20 after refusing to answer the grand jury's questions about confidential sources and not turning over copies of her notes.
Federal prosecutors contend Leggett is not a journalist and does not fall under the First Amendment's protection of the press. Leggett, who has taught English and criminal justice courses at the University of Houston, has never published a book or news articles.
The 5th U.S. Circuit Court of Appeals upheld Leggett's incarceration. DeGeurin has appealed to the U.S. Supreme Court in hopes of protecting Leggett from being jailed again.
According to the Reporters' Committee for Freedom of the Press, her incarceration for withholding notes is a record for a journalist in the United States. Los Angeles Herald-Examiner reporter William Farr spent 46 days behind bars for refusing to disclose source material related to the Charles Manson trial in 1972.
Leggett said she looked forward to resuming work on her book and plans to incorporate her jail experience. ``To not have your freedom is to not be human,'' she said. ``To have that taken from you is devastating.''