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Source link: http://archive.mises.org/14932/fighting-secrecy-with-more-secrecy/

Fighting Secrecy with More Secrecy

December 7, 2010 by

Governments value secrecy so highly that it often defeats the state’s other stated goals. Wikileaks’ diplomatic cable dump prompted a violent counter-reaction from various state officers, who claimed that any act compromising the secrecy of government “diplomacy” was the equivalent of terrorism. Certainly, the statists claim, one cannot expect the government to function in an environment where secrecy is not the primary value.

Many people accept this argument because they equate secrecy with “national security,” “fighting terrorism,” “American interests,” et cetera. Yet state secrecy is not limited to such areas. It is a building block of all state operations from the Pentagon to City Hall. And as I said above, secrecy is so important that it can actually contradict the government’s official objectives in a given area.

One example that I’ve documented over the years is the Justice Department’s “Corporate Leniency Program.” This is an invention of Antitrust Division lawyers who were frustrated by a perceived lack of anti-cartel prosecutions against private firms. To jump start things, the Division simply announced it would give “leniency” — amnesty from all criminal prosecution for the firm and its employees — to the first firm that stepped forward and implicated its competitors in a “price fixing” scheme.

Officially, the Division touts the Corporate Leniency Program as an unqualified success, as proven by the annually increasing amount of corporate fines (and individual prison sentences) obtained from firms that do not receive amnesty. The more capital the DOJ removes from the market, the more “competitive” it will become, or so goes the Antitrust Division’s logic.

A key component of the Corporate Leniency Program is its absolute secrecy. The Division has refused to voluntarily reveal any details about the actual amnesty recipients, including their identities and the terms of their “cooperation” with the Justice Department. This secrecy is maintained indefinitely, even years (or now decades) after the actual investigations conclude.

The absurdity of this became apparent in April 2008, when the Justice Department defended itself in a Freedom of Information Act lawsuit seeking copies of about 100 amnesty agreements authored by the Antitrust Division under its leniency program. The FOIA requester tried to meet the government halfway: The request only asked to see the terms of the agreements themselves; the Antitrust Division was free to redact the names of the companies involved. In arguments before the D.C. Circuit Court of Appeals, DOJ attorney Alisa Klein argued that redactions weren’t enough because they still might provide “clues” as to the identity of amnesty recipients. Here was part of Klein’s exchange with Circuit Judge Merrick B. Garland:

MS. KLEIN: You can tell how long the applicant’s name is. You can see on the redaction, you know, it’s long enough to cover [the applicant's name].

JUDGE GARLAND: Okay. But—

JUDGE [DAVID B.] SENTELLE: —redaction, there might be a better process.

JUDGE GARLAND: When you—

MS. KLEIN: No, there’s—I mean, there’s really not.

JUDGE GARLAND: You would be making the redaction yourself, and you could make it as long as you want.

MS. KLEIN: Well—

JUDGE GARLAND: You can play with that black Magic Marker as much as you want.

MS. KLEIN: Well, Your Honor, if we could redact everything, that might be different—

JUDGE GARLAND: No, you can’t redact—

MS. KLEIN: —but if we’re not allowed to—

JUDGE GARLAND: You can make that line longer if you wish. You could have it cover half the line if you want to.

MS. KLEIN: To cover information, the terms that the plaintiff is saying—

JUDGE GARLAND: No, to cover the word—the name—so far, you’ve told us two things. One—and I think it’s a good point which—although you did not mention it in your brief, that who was the Deputy Assistant Attorney General at a certain time tells the date. That’s a fair point. If it does, then you can just—assume for the moment you can remove that.

Secondly, that the name of the person might be revealed by the length of the black Magic Marker, and I’m saying, all right, fair enough, make the length of the black Magic Marker longer and standard.

After this exchange continued for several more minutes, Judge Garland effectively threw up his hands and told Klein, “I think the Antitrust Division is important…but this is not the CIA.” These amnesty agreements were the “plainest vanilla documents” and did not involve matter of national security. Klein protested, saying that amnesty recipients were no different than confidential FBI informants, and protecting that confidentiality was a paramount government interest.

But that makes no sense in the context of the Antitrust Division’s stated policy objectives. Remember, the antitrust laws forbid “price fixing” and “cartels” because they supposedly damage free and open markets. Thwarting so-called cartels is essential to the public good. If that’s the case, then why is the Antitrust Division openly shielding one of the cartel participants — possibly the ringleader — and preventing all public disclosure of information related to that company’s actions?

Remember, the government targets “cartels” because of their own secrecy. In the Antitrust Division’s mind, “free markets” forbid private property owners from holding private discussions about the best way to dispose of their property in the marketplace. All anti-cartel cases are ultimately attempts to suppress speech rather than aggression.

But, again, if you accept the government’s objective as legitimate, then you cannot support the extreme secrecy of the leniency program. The best way to counteract the effects of corporate secrecy is through greater transparency — exposing the “cartel” and making the details available to the public. The Antitrust Division takes exactly the opposite approach, colluding with one firm against the others and shutting the public out altogether. This happens because once one firm receives “amnesty,” the others generally enter plea agreements to avoid trial. There is rarely a public accounting, either of the underlying “cartel” or the Antitrust Division’s investigation after-the-fact.

And of course, secrecy means there’s no way to detect abuses. For example, the Antitrust Division states it will not give amnesty to “ringleaders” or firms that fail to fully disclose its cartel activities. Yet without any public knowledge of the amnesty recipient or its representations to the government, there’s no way to know if the Antitrust Division is even following its own policies. Remember, amnesties are not plea bargains. The latter are still subject to nominal judicial oversight; amnesty agreements, in contrast, are purely executive acts.

(There’s also no way to know how firms lobby for amnesty. In one case I documented, a prominent member of Congress demanded amnesty for a company in his home state — of which he was a shareholder — but this fact didn’t come out till years later, and officially, the DOJ won’t even confirm the company received amnesty.)

Ultimately, the leniency program is a multi-billion-dollar money-laundering scheme. Amnesties lead to plea bargains and checks to the US Treasury. A single anti-cartel investigation can yield over $1 billion in “fines,” which are really just backdoor taxes imposed by the DOJ. Compromising amnesty secrecy would lead to more people asking questions about the nature and benefits of these agreements, which would jeopardize this lucrative source of extra-constitutional revenue.

Incidentally, the DOJ lost its D.C. Circuit case on narrow legal grounds. Eventually, the Antitrust Division released its amnesty agreements with heavy redactions — ensuring the American people would never learn who received special favors from prosecutors.

{ 2 comments }

Vitor December 7, 2010 at 3:27 pm

This is actually scary, since it follows the same principles of what the Statsi did in East Germany, making everybody pointing fingers at everybody else.

AubreyHerbert December 7, 2010 at 6:45 pm

Very interesting.

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