ThePopTort

How Do You Solve a Problem Like John Stossel?

Remember in the Sound of Music, when the nuns sing, “How do you solve a problem like Maria?” … “How do you find a word that means Maria?  A flibbertijibbet! A will-o'-the wisp! A clown”? 

I’m not quite sure what a flibbertijibbet exactly is, but I do know a will-o'-the wisp clown when I see one.  That would be the Fox Business Network's new Thursday night start, John Stossel.  John Stossel is a problem that clearly needs solving.

Take his latest weird diatribe last night (“Parasitic Tort Lawyers”) and accompanying column, which he begins with the words, “Tort lawyers lie.”  And he then goes on to trash the entire profession of attorneys who try to hold corporate wrongdoers accountable in court on behalf of injured people.  I suppose that might be believable coming from a guy who once said “Enron is an example of how well the market worked for people.”  Except well, turns out, like all good hypocrites, he has no problem running to court himself when he feels like it, like when he once sued a pro wrestler who hit him after Stossel implied pro wrestling was fake, and he got $200,000 for his pain and suffering.

So I guess Stossel’s problem isn’t himself.  It’s everybody else who uses the court - and their attorneys who “say their product liability suits are good for us. But their lawsuits rarely make our lives better.” OK let’s see. 

How about lawsuits that have saved thousands of womens’ lives?  How about just children?  Communities living around toxic pollution?  Food safety?  (Even CNN’s Sanjay Gupta came through on this one.)  Cars, airplanes, cleaning products, we could go on – and on – and on.  And actually we did, a few years ago, here.

When he says all the fun of playgrounds and such were “taken away” because of lawsuits – that’s a lie. 

And when he says lawsuits are stifling innovation, that’s a lie.

And when he suggests that without lawsuits, savings due to “defensive medicine” would be anything more than 0.2% of health care costs, that’s a lie.

I know we keep using the term "tone deaf" to describe these people, but really now? 

Secrets of Magic Revealed: Keep Your Eye on AIG’s Disappearing Act

Don’t look now, but AIG is in the middle of a great magic trick. As it tries (and mostly fails) to generate the billions needed to pay back its vast TARP loans, the enormous conglomerate corporation has been trying to teleport its more successful subsidiaries out from under its personal cloud of bad press (see CNN's 10 Most Hateable Companies Not Named BP). It's now working to stash them away under a nice new name that doesn’t scream bailouts, bonuses or bad, bad management.

In the process they hope to make everyone forget all about the blatant mismanagement that almost destroyed their company (and the economy as a whole), the four bailouts totaling a reported $182.3 billion in taxpayer-financed loans, and the approx. $265 million in bonuses that would be given out between 2009 and 2010, according to the New York Times.

In March 2009, after announcing a $61.7 billion(!) loss for their fourth quarter, AIG decided that it might have to change things up a bit. They were helped along when the government made AIG’s reorganization a prerequisite if the company wanted an additional $30 billion in taxpayer aid and a reworking of old loans. The company therefore took its property and casualty business, and severed it from the AIG name, placing it under the leadership of Mr. Kristian P. Moor.  Moor wasn’t exactly an outsider – he ran AIG’s property-casualty business as executive vice president.

The “new” company was temporarily called AIU Holdings. Id. But apparently those first two initials conjured up some bad memories because, last year, AIU transformed itself again, this time into Chartis (the Greek work for “map.”  Talk about a non-sequitur.) again run by Mr. Moor, who told Bloomberg at the time:

“It was an overwhelming response that we should change our name further,” Moor said. “It just keeps people focused purely on our organization.”

And it should keep people away from focusing on his $10 million compensation package in 2009 ($2,400,000 bonus, $915,385 salary, $6,691,640 in restricted stock awards, and $37,229 in other forms of compensation for 2009.)  Turns out the new executive pay restrictions, which the President ordered for all TARP recipients in early 2009, didn’t kick in for Mr. Moor until November of that year.  But he clearly won’t be struggling in 2010.  His cash salary stands at $700,000, his stock salary rings in at $5,000,000, and his incentives (although in the form of unvested TARP RSUs) amount to $1,900,000, all adding up to a paltry $7,600,000, not counting the inevitable bonus.

Unraveling the tangled and mismanaged mess that AIG became is already the subject of several books, and the corporate sleight of hand just keeps getting more and more complex. A review of this tangled mess of companies that almost toppled the economy even further into recession led Elizabeth Warren, Chairman of the Congressional Oversight Panel on TARP to comment recently:

“The company was a corporate Frankenstein, a conglomeration of banking and insurance and investment interests that defied regulatory oversight.”

Now this corporate Frankenstein is trying to shuffle up its parts anew in an effort to make itself presentable to consumers and stockholders alike.  Chartis is still 100% owned by AIG, though you certainly couldn’t discern any connection between the two by glancing at Chartis’ homepage. And figuring out what’s become of all the more than 200 AIG subsidiaries reported to be in existence as of 2008 is quite the task. Many appear to have been sold or given new names.  For example, a search for the original American Home Assurance Co. reveals that the company no longer has its own functioning website and doesn’t appear on AIG’s website. This is the same company where two executives pled guilty to illegal conduct in 2004 after profiting from a contingent commissions scheme, and which was also one of the subsidiaries named in a 9-state antitrust suit settled by AIG in April 2010. Only careful searching reveals that American Home Assurance was itself a subsidiary of another AIG subsidiary, AIG Commercial Insurance Group, which was included in the creation of AIU/Chartis.

The whole thing starts to seem like some great big corporate nesting doll, at the very bottom of which is AIG’s reputation. The problem, of course, is that this kind of corporate sleight-of-hand makes it increasingly difficult for government to regulate and for everyday people to hold big corporations accountable. So you’d better look real close at what happens over these next few months with AIG. Or else, you might miss the trick entirely.

Specter Pushing Laws to Reverse U.S. Supreme Court’s Rulings in Stoneridge and Iqbal

We wanted to bring your attention to a couple of news items detailing some pretty exciting legislation in the works from U.S. Senator, Arlen Specter (D-PA).  The bills address two pretty bad U.S. Supreme Court decisions, both of which we’ve blogged about, and both of which, if allowed to stand, will continue to have devastating consequences on consumers everywhere—namely, the Stoneridge, and Iqbal decisions.

Stoneridge, you may recall, denied shareholders the right to hold so-called “secondary actors” (such as investment bankers, white-shoe corporate lawyers or high-priced accountants) responsible when they participate in a scheme with a public company to defraud shareholders.

Specter’s bill “would allow civil suits against anyone who ‘knowingly or recklessly provides substantial assistance’ to someone engaged in fraud.” 

Meanwhile, the interesting development on the Iqbal front (the case which created an across-the-board, unprecedented increase of what ANYONE bringing ANY KIND of lawsuit must initially show in order to avoid having his/her case tossed) is that the bill Specter introduced to reverse it last July, is gathering momentum from legislators (the House may introduce its version of the bill this week), academics, and other prominent advocates.

Here are some notable recent quotes:

Lisa Bornstein, senior counsel at the Leadership Conference on Civil Rights: “Under Iqbal, ‘the person filing the suit has to get inside the head of the employer’ before being given access to any documents—a Catch-22 that will thwart valid suits…’It's really a padlock on the courthouse door.’"

Arthur Miller, New York University School of Law professor and recognized expert on civil procedure: "I have spent my whole life with the federal rules, and this is one of the biggest deals I have ever seen….I see serious problems with democratic values here, with access to the courts, with resolution of disputes with a jury of peers."

Elizabeth Schneider, Brooklyn Law School professor “who has written extensively on federal civil procedure.”:  “Iqbal is forcing trial judges to go ‘line by line’ through pleadings, using subjective factors to decide what parts are factual and which statements are conclusory. ‘If that's not an open door to judicial bias, I don't know what is.’" 

Anyway, you get the idea—lots of cool stuff is happening, thanks in large part to the efforts of Senator Specter.  Here’s hoping his efforts pay off.

The Civil Justice Sheriff May Soon Be Headed to Wall Street

We’ve talked about how the civil justice system provides a crucial compliment to the criminal justice system before, but today’s lead story in the New York Times has us thinking about it in a slightly different context, so we thought we’d throw in our two cents.

The Times reports about a potential “surge” of criminal prosecutions in the wake of the Wall Street Meltdown, but points out that the actions may not always succeed.  For one thing, “recent history suggests that the government’s odds of winning drop when they go after Wall Street executives,” like several of the “Enron-related prosecutions and some cases brought by Eliot Spitzer when he was New York’s attorney general.”  Then there’s the problem that not all reckless behavior is actually criminal.

So civil cases may actually do a better job holding some of these companies accountable, and certainly do better at helping victims get compensated.  Consider the case of former Worldcom CEO, Bernie Ebbers. In that case, old Bernie (Is it just me, or are corporate shysters disproportionately named “Bernie?”) was sentenced to 25 years in jail after being convicted of fraud in a criminal prosecution.  But it was the shareholders class action suit that provided real relief for victims. That case settled for $54 million, much of it coming directly from WorldCom directors.

While there may be some restitution for victims in criminal cases, the direct benefit to victims in civil cases can be much more substantial.   So for those of you injured by the fraudulent misconduct of Wall Street bad guys, mosey on over to the courthouse and order yourself a tall glass of justice—tell’em ThePopTort “sheriff” sent you.

Obama - A New Day

While there a many important civil justice issues in the news today, we’ll take a break from reporting on them just to recognize the obvious: that the most consequential, momentous civil justice development in eight years is happening today – the final moments of President George W. Bush’s administration.
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“Tort reform” was a Karl Rove-generated issue for Bush (e.g. here and here).  To anyone who would like to review how poorly Bush treated victims who sought justice in the tort system and our civil courts, here are a couple examples ranging from callous treatment of medical malpractice victims (here), to the abandonment of defrauded Enron shareholders and pensioners (here).

While we don’t know exactly what the new Administration will bring, we hope that President Obama's message of compassion, hope, and responsibility has meaning for all the sick and injured, including those hurt by the reckless wrongdoing of others. 

All in all, it’s a very very good day.