Corzine Steals Billions Sans Charges, Errant Whale Watcher Faces Prison

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Justice may be blind, but who works overtime to make it deaf, dumb, and stupid?

Which would you imagine might attract more aggressive enforcement from the Justice Department: the theft of $1.2 billion from supposedly segregated customer brokerage funds, or lying about an alleged incident of whistling to attract the attention of a whale so that whale watchers could get a better peep? If you said the latter, then you appreciate the extent to which federal law enforcement priorities have run off the rails.

We know for a fact that enormous sums of money legally off limits have disappeared into the maw of disgraced Senator Jon Corzine's gambling counterparties, all of whom seem to have taken the oath of omerta. We know that Corzine personally asked employees at MF Global, the financial firm he headed until recently, to transfer the funds. We know that his underlings balked at signing false statements attesting the transfers to be legal. So how is it that the man ultimately responsible for this brazen theft and spectacular bankruptcy gets away with performing a perfunctory Sergeant Schultz "I know nothing" routine in front of his old Senate buddies, after which he is left free to walk out the door without handcuffs?

Meanwhile, marine biologist and whale watching ship captain Nancy Black faces 20 years in prison, not for "harassing" whales (which believe it or not is a crime), but because she has been charged with lying to Justice Department prosecutors investing allegations that some of her crew members whistled at a whale to keep it hanging around their boats.

You can't make this stuff up.

Title 18, Section 1001 of the United States Code is the successor to the False Claims Act of 1863, originally intended to punish crooked Civil War contractors. It has since metastasized into an all-purpose bludgeon that federal prosecutors routinely use to squeeze fines and plea bargains out of anyone unfortunate enough to become ensnared in one of the hundreds of thousands of regulations that govern everything from selling goldfish to the volume of your toilet flush.

As Supreme Court Justice Ruth Bader Ginsburg characterizes it, Section 1001 has conferred "extraordinary authority" for prosecutors to "manufacture crimes." That is because Section 1001 charges are both entirely discretionary and subsidiary to any primary charges, making every indictment an act of selective prosecution. In fact, Section 1001 prosecutions are so selective that primary charges are not even necessary, meaning you can go to jail even if there is no underlying crime. Ask Martha Stewart about that.

This is a horrendous misapplication of justice. But as long as it has become the norm in federal law enforcement whenever prosecutors are directed by their political masters to send a message about policy, why haven't Section 1001 charges been thrown at Jon Corzine? How long do we have to wait for the feds to collect evidence from the hapless employees on whom Corzine has tried to pin the blame before the big fish gets hauled in for the perp walk?

Are prosecutors even trying to get their man or have friends in high places waved them off? Why haven't Corzine's gambling counterparties been squeezed to turn over evidence in return for immunity from prosecution - as well as the first pick in next year‘s draft of who gets to rotate back out of government service to return to one of the firms they used to regulate? It's not as if prosecutors couldn't bring all manner of securities cases against companies that did business with MF Global until they found someone willing to throw the mendacious Senator under the bus.

With all the securities regulations we now have on the books - from Sarbanes Oxley to Dodd Frank - and politicians incessantly bloviating about the importance of bringing Wall Street miscreants to justice, what are the rest of us supposed to think if the befuddled whale watcher gets hauled off to prison while the Willie Sutton of derivatives brokers hops in his limo and rides off into the sunset to collect his Senator's pension?

Who has set the priorities at the Justice Department that is allowing this to happen, and why? How can an SEC that can't catch a Bernie Madoff before he blows himself up or nail a guy like Jon Corzine after his hand, arm, neck, and head are caught in the cookie jar be expected to professionally, effectively, and impartially enforce the thousands of regulations inflicted on the rest of us?

But woe to anyone who messes with the National Oceanic and Atmospheric Administration's rules on harassing marine mammals. Or runs afoul of the Environmental Protection Agency when their backyard is declared a wetland. Or gets in a Davis Bacon labor dispute with a powerful union. Or fails to file accurate Affirmative Action Plan paperwork. Yet it seems that if you‘ve got the right Washington connections you can pick your clients' pockets and even burn the economy to the ground without suffering any consequences.

This is more than just justice gone awry. It is the systematic destruction of the rule of law and its replacement by shameless cronyism.



Bill Frezza is a fellow at the Competitive Enterprise Institute, and a Boston-based venture capitalist. You can find all of his columns, TV, and radio interviews here.  If you would like to have his weekly columns delivered to you by e-mail, click here or follow him on Twitter @BillFrezza.

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