Surgery for Lexi Haas (my niece)

I have a niece who has been making medical history this week, and I do so hope that it turns out to be a story with a happy ending. Lexi Haas is a beautiful seven-year-old girl, the fifth child of Ken and Susan Haas of Charlotte, North Carolina. Susan is my wife's sister.

Lexi was born as a normal, healthy child, but because doctors missed the fact at birth that she had low thyroid, they miscalculated what would happen when she got jaundiced. By not treating it quickly, she developed kernicterus, which the Charlotte Observer describes as following:

Lexi has kernicterus. It's a rare form of brain damage caused by newborn jaundice. It gave her cerebral palsy and dystonia, a movement disorder, and because of that she cannot walk and she cannot talk.

She has been receiving deep brain stimulation, a procedure that has worked well with patients who have dystonia or Parkinson's Disease. She is the first child ever with this condition who has been given this procedure.

These are tough times for the Haas family, which is a wonderful collection of very intelligent and capable children and some of the best parents I have known anywhere. My wife, Jo, has been with them during this time, and we miss her back on the homefront (which, thankfully, has not yet descended into chaos in her absence), and I wish my in-laws the very best.

Going to Houston This Week

Tomorrow morning, I will fly to Houston to participate in a project that deals with prosecutorial abuse, especially at the federal level. I will be interviewed on camera about the Enron case and other kinds of "white collar" cases in which prosecutors took what essentially were legal activities and turned them into "crimes."

I'll have a full report after I return.

Has Paul Krugman Become an Austrian? Not Quite….

Paul Krugman has looked at Austrian Theory of the Business Cycle and found it wanting. First, he mistakenly calls it a "hangover theory" when, in fact, it is a theory of easy credit leading to malinvestments. Second, he really does not understand that government cannot sustain a boom once the financial wave has crested. Third, he has no understanding of the heterogeneity of assets, assuming that capital and other assets are homogeneous for the purposes of economic policy.

However, in his recent column, he did make a (sort of) reference to malinvestments. He does not call them as such, but does make a reference to assets that could not be sustained in the boom:

Financial firms, we now know, directed vast quantities of capital into the construction of unsellable houses and empty shopping malls. They increased risk rather than reducing it, and concentrated risk rather than spreading it. In effect, the industry was selling dangerous patent medicine to gullible consumers.

Granted, this is pretty stern stuff from someone who called for then-President Bush and the Fed to start a housing bubble (and then say later he only was kidding). However, what he said has some truth to it, as it was not just the "banksters" that were selling the snake oil, but the "elite" economists as well. (One remembers how Arthur Laffer excoriated Peter Schiff for sounding the alarm in 2006.)

The other thing to keep in mind is that Krugman actually seems to be differentiating between assets that are sustainable and those that cannot be sustained. Can he be saying that assets and capital really are heterogeneous as say the Austrians versus the belief of Keynesians that assets are homogeneous, as the Keynesians claim in their policy prescriptions? (Indeed, that seems to be a fundamental tenet of Krugman’s claim that "depression economics" changes the rules.)

Unfortunately, he never takes that statement to its logical conclusions. Instead, he uses it as a lead-in to his usual point: banks must be both cartelized and regulated:

The huge bonuses Goldman will soon hand out show that financial-industry highfliers are still operating under a system of heads they win, tails other people lose. If you’re a banker, and you generate big short-term profits, you get lavishly rewarded – and you don’t have to give the money back if and when those profits turn out to have been a mirage. You have every reason, then, to steer investors into taking risks they don’t understand.

And the events of the past year have skewed those incentives even more, by putting taxpayers as well as investors on the hook if things go wrong.

I won’t try to parse the competing claims about how much direct benefit Goldman received from recent financial bailouts, especially the government’s assumption of A.I.G.’s liabilities. What’s clear is that Wall Street in general, Goldman very much included, benefited hugely from the government’s provision of a financial backstop – an assurance that it will rescue major financial players whenever things go wrong.

All of this is (gasp!) true. Indeed, the famed "Greenspan Put" always was in the back of the minds of the banksters when they were playing the high-roller game. But, alas, Krugman does not seem to understand the logical implications of his statement (again):

You can argue that such rescues are necessary if we’re to avoid a replay of the Great Depression. In fact, I agree. But the result is that the financial system’s liabilities are now backed by an implicit government guarantee.

Now the last time there was a comparable expansion of the financial safety net, the creation of federal deposit insurance in the 1930s, it was accompanied by much tighter regulation, to ensure that banks didn’t abuse their privileges. This time, new regulations are still in the drawing-board stage – and the finance lobby is already fighting against even the most basic protections for consumers.

The problem, of course, is that government regulation creates real-live cartels that, while regulated, still are not going to serve consumers in a way that free-market firms would do. As I have stated elsewhere, the "Land of Oz" banking system that Krugman so touts actually fell apart in the late 1970s because of inflation and its inability to deal with the new technologies that were waiting to have investments made. Thus, it fell to people like Michael Milken and others who operated outside the financial cartel to set the stage for the high-tech revolution.

To Krugman the Keynesian, however, all of this is gibberish. Economies grow, in his view, because people increase spending, and if people hold back and investors don’t invest, then government steps in and fills the void. It is all so easy – and all so wrong.

There is another way, called profit and loss. In the real world, profits and losses serve as the bellwethers of regulation. Furthermore, if financial firms know that they are not operating with the government covering their losses, then the investment decisions that they make will differ greatly from those made when the "put" is at their backs.

Unfortunately, Krugman and most other "elite" economists don’t come close to understanding this simple point. Instead, they really seem to believe that banking and finance are different, and must be both cartelized and protected.

So, while Krugman seems to understand, if only for a fleeting moment, that assets might be heterogeneous and that government guarantees create huge moral hazards, nonetheless in the end his Keynesianism bleeds through. Like the Bourbons of France, he learns nothing and he forgets nothing.

The former boxer Terry in "On the Waterfront" lamented that he "coulda been a contender." With some sound economic background, Krugman could have been an Austrian. Unfortunately, he has decided to swallow the same snake oil that he claims that the banksters were selling, and it turned him into a Keynesian. He may be famous, he may be a Nobel Prize winner, but he still is wrong.

Steven Greenhut on Celebrating our "Freedoms" on the Fourth

I always am of two minds about the Fourth of July. It was the day that the Declaration of Independence, a most marvelous document, was released and the Thirteen Colonies declared themselves to be an independent nation.

However, all too often, the Fourth becomes nothing more than a celebration of the federal government, which hardly represents anything the Founders wanted to exist, and it certainly is more tyrannical than the supposed tyranny of King George.

Steven Greenhut, a good friend and one of my favorite writers, has a great column advising people how to avoid pitfalls in celebrating the Fourth -- and not running afoul of the law. (Greenhut is an editorial writer and columnist for the Orange County Register in California.)

Enjoy. Especially the following:

First, you better not use fireworks, which are illegal in most local jurisdictions and highly restricted in others. If you want to rejoice in your freedoms, you need to attend a government-approved fireworks display, preferably one funded by your very own tax dollars at your city's public park. If you're not sure where that park may be, just drive around (be sure to observe the speed limit, wear your seat belt and don't talk on that cell phone), and look for a big, open field packed with people and surrounded by police cars. Before you enter the park, be sure to read the big signs listing the many things you are not allowed to do on the premises (skateboarding, playing music, drinking, smoking, running, etc.). Just remember that freedom must be tempered by order, which is why the government orders you around so much.

Free Blago!

After Democrats won control of Congress in 2006, they sent a word to firms and associations which lobbied Congress that they needed to do two things. First, these organizations needed to start sending campaign contributions to Democrats instead of Republicans, and, second, they had to hire Democratic lobbyists. Any organization that failed to follow those two simple rules would find itself shut out of any discussions regarding upcoming bills, which was a nice and clear threat that Congress would loot them or even try to destroy them altogether.

I mention this because there were no "We’re shocked, SHOCKED" editorials in the New York Times or Washington Post. Common Cause, which is trying to continue the old Progressive canard of "good government," did not file suits or issue press releases. Most important, no federal prosecutors filed criminal charges against Nancy Pelosi, Harry Reid, or Charles Schumer, accusing them of "depriving the citizens of the United States of honest government."

Lest anyone think I am being partisan, don’t forget that when the Republicans controlled the Congress, they let companies and lobbying firms know that there were certain rules to follow, to whom the financial contributions must go, and who would benefit. Granted, the New York Times and Washington Post were "shocked, SHOCKED" over that set of facts, although it seems that even the Post decided recently to get into the "pay to play" act, too.

The simple fact that governments control the game when it comes to property rights, regulation, and taxation means that politicians always will hold a Sword of Damocles over the heads of productive people, and they generally wield that sword viciously. When President Barack Obama recently chided African heads of government for "skimming 20 percent from the top" of business investment, in their countries, most people I know were stunned. I mean, when was the last time government in the USA took anything close to as small an amount as 20 percent? Would be that government took only 20 percent, given the present realities of the rapacious state.

I use this long introduction to point out that as long as politicians are properly connected, then they can engage in government as usual without being molested by federal prosecutors. However, should one fall from favor or one is too successful for the mass of Salieris that inhabit the bowels of government, then one is easily targeted. As Lavrentiy Beria, Stalin’s head of security, once stated, "Show me the man, and I will find you the crime," which seems to be the motto of the United States Department of Justice.

U.S. Attorney Patrick J. Fitzgerald, who last provided political theater in the Scooter Libby case, claiming that he did not know who leaked Valerie Plame’s name to the press when, in fact, he did, is in the news again with the indictment of former Illinois Governor Rod Blagojevich. (It is OK for federal prosecutors to openly make false statements, but if you are not a U.S. attorney, I would advise you not to try this at home.)

Appealing to the "good government" goo-goos in the press and elsewhere, Fitzgerald first released portions of secretly taped conversations of the governor in action, claiming that Blagojevich did things of which Abraham Lincoln would have been ashamed. Thus, Fitzgerald proved he was utterly ignorant of Lincoln’s record both as a legislator and as President of the United States. It is one thing, however, to be ignorant of history, as that is a common disease among government officials and their media allies; it is quite another to demonstrate ignorance of law itself, especially if one has the power to secure indictments and put people on trial. It seems that Fitzgerald’s dishonesty is not limited to his public statements, but also to the indictments that he gains against others. Let me explain.

The case against Blagojevich and five other people (including Blago’s brother, Robert), centers around the nebulous and confusing charge of "honest services fraud." According to federal law, people are entitled to "honest" services from someone, but it is up to the government to define what such a term means.

For example, when Jack Abramoff was a lobbyist, his efforts saved his Indian clients billions of dollars as he was able to head off Congressional schemes to tax the casinos owned by his clients. His record of success is clear, yet federal prosecutors forced him to plead guilty to "bilking" his clients of millions in fees, despite the fact that his fees were negotiated in the open and he did nothing that other lobbyists (including the lobbyists now favored by the Democrats) don't do every day.

Thus, Fitzgerald can claim with a straight face that Blagojevich "and a circle of his closest aides and advisors allegedly engaged in a wide-ranging scheme to deprive the people of Illinois of honest government." Furthermore, Fitzgerald and his staff redefine terms like "extortion."

For example, when Blagojevich was governor, he was in negotiations with the Tribune Company, which owns the Chicago Cubs and its famous Wrigley Field, to provide state aid for the firm, which was experiencing financial difficulties. However, the editorial staff was very critical of Blago and often lambasted him on both the news and editorial pages of the Chicago Tribune, and the then-governor demanded that the editorial board be replaced before he sign off on sending aid to the company.

Now, this certainly does not make Blago look like a nice guy, but it hardly makes him an extortionist. First, and most important, extortion as it has been historically defined is the act of unlawfully obtaining "money, property, or services" from other individuals or organizations through coercion (according to Wikipedia). Second, it is interesting how many favored groups are permitted to threaten lawsuits against someone unless that person or the organization pay up. (Environmental groups are well-known for this, yet Congress has legalized it for certain favored constituencies.)

I can find no instance in which Blago was threatening harm or demanding money or even services via coercion. Instead, he, the government of Illinois, and the Tribune Company were "conspiring" to take money from taxpayers and give it to a media company that had made some bad business moves. Note that the "aid" was not illegal, but Blago’s "threat" was criminalized. This is not extortion by any stretch of the imagination, and if one were to apply the same standard to members of Congress and even the President of the United States, one would have to construct a new set of prisons to hold the new inmates.

Of course, Fitzgerald, by charging Blago and the others under the "racketeering" statutes, is demanding huge amounts of property and financial forfeiture before trial. This is done in order to make it very difficult for the defendants to pay for competent legal representation, and it clearly goes against every sense of legal decency that used to be part of the "justice" system before prosecutors were able to completely control the process.

There is more in Fitzgerald’s faux indictment. Witness the following passage:

The RICO conspiracy count alleges that Blagojevich personally, the Office of the Governor of Illinois and Friends of Blagojevich were associated and, together, constituted the "Blagojevich Enterprise," whose primary purpose was to exercise and preserve power over Illinois government for the financial and political benefit of Blagojevich, both directly and through Friends of Blagojevich, and for the financial benefit of his family members and associates. Blagojevich and Kelly, the only RICO conspiracy defendants, allegedly conspired with Monk, Cellini, Harris, Robert Blagojevich, Rezko and previously convicted cooperating defendant Stuart Levine, to conduct the Blagojevich Enterprise through a pattern of multiple acts of mail and wire fraud, extortion, attempted extortion and extortion conspiracy, and state bribery.

While this sounds onerous, it describes absolutely nothing, at least when one looks at criminal activity from an historical perspective. The secretly-taped telephone calls found Blago telling someone that if a person wanted the U.S. Senate seat, he or she would have to come up with future financial favors for the governor and his family. Now, the "good-government" types want us to believe that the mechanism of government is pristine by nature and that people like Blago and those who "peddle influence" ruin it.

Right. First, in Blago’s defense, the guy was talking big, which is not unusual when it comes to elected officials. Second, nothing specific was laid out, no plans, no nothing. The guy simply was talking.

Third, when we see "crimes" like "wire fraud" and "mail fraud" thrown about, please remember that these are not real "crimes" but simply are the acts of mailing a letter or making a telephone call. The "fraud" statutes do not exist to protect individuals; they exist solely to provide prosecutors with leverage in pursuing criminal indictments. That is because if a person is found guilty of one charge, then the other charges automatically kick in, so there can be multiple crimes that are derived from the same act. That is why Candice E. Jackson and I have referred to them as "derivative crimes" in many of our articles.

I add that while these charges fall into the category of what the noted attorney Harvey Silverglate has called "giant garbage pails," they do carry real-live penalties that could put these people into prison for many years. Furthermore, given that Blago’s brother, Robert, had a long career in business and was well-regarded before taking a temporary job to head up Blago’s campaign fund, I doubt that the man (or any of the others) were involved in any "wide-ranging conspiracies" to do anything except get Blago elected, which generally are what political campaigns are geared to do.

I now turn to the behavior of Fitzgerald himself. Prosecutors and other "officers of the court" are supposed to refrain from making public statements that demonize defendants, make judgments about their guilt, or attack other officers of the court. Michael B. Nifong, the infamous prosecutor in the Duke Lacrosse Case, was disbarred by the North Carolina State Bar in part because he made a number of inflammatory remarks against the lacrosse players prior to obtaining indictments. (The Bar also found him guilty of withholding evidence and lying to the court, which is one of the few times in U.S. History that a prosecutor has paid any price at all for breaking the law.)

Not only did Fitzgerald make inflammatory statements, but he also selectively released material that clearly made Blago look bad. (Notice that U.S. attorneys don’t release information or transcripts of their "negotiations" with defense attorneys when it comes to making plea deals, nor do they ever release any transcripts of conversations they have among themselves. This probably is smart, given the sorry record of lies that is fundamental to the federal "justice" system, something exposed more than a decade ago by journalist Bill Moushey. Notice that no U.S. attorney ever has been charged with "honest services fraud," which is too bad, given that it is rare that people receive any honest services at all from federal prosecutors.)

According to the law, once Fitzgerald had openly declared Blago to be a criminal suspect, he had 30 days in which to secure an indictment. One would think that with this supposed "criminal" behavior that he had "exposed," it would not be difficult getting a grand jury to hand down indictments, but that was not the case.

No, even after making inflammatory public statements and releasing selected information to the media, Patrick J. Fitzgerald had to scrape and scrape to find anything worthy of "indictment." It is instructive that he decided to unleash the horrible RICO statutes and to reach into the muck of "honest services fraud" to make his case.

Now, I would like to say that the outright fraudulence of these charges would be clearly seen by juries and judges, but think again. Federal juries regularly convict people of nonsense charges and judges sign off on abominations every day. Federal criminal courts are little more than the playthings for U.S. attorneys, who I would say are pretty much in the same category as the "prosecutors" who worked for Stalin in his "show trial" heyday. Perhaps we should not be surprised that federal criminal law has much more in common with the old Soviet "law" and its "crimes of analogy" than anything this country received in its English heritage.

So, I wish Blago and the other defendants luck. Their "crime" was not doing anything criminal; instead, their crime was not having the name of Nancy Pelosi or Harry Reid. Because federal criminal law is so expansive and pervasive, federal prosecutors are able to pick their targets and selectively prosecute. If one thinks this is tyranny, one is correct.

Another Travesty from Federal Courts

In response to my recent piece on the federal criminal courts, I have received this interesting email. A reader asked an attorney the question, "Can the federal courts be this bad?" Here was the answer:

There's a bit of hyperbole in here (my article), but basically, yes, it can be.

I handled the appeal for a client who lived in a house that was owned by his aunt. His driver's license was at that address.

His aunt got cancer. He and his wife temporarily moved in with his aunt to help take care of her. His aunt temporarily rented out the other house -- the client's regular address -- without a lease, month to month, while he and his family stayed with her. After all, no need to let it stay empty. The Client's furniture and property remained, for the most part, in the garage of the house. He was going back there, after all.

He bought some guns (okay, a lot of guns.) He gave his regular address as his "residence," even though he was temporarily living with his aunt. He paid cash for the guns. Of course, this got the Fedlings' notice.

The fedlings indicted him for giving a false residence address on the application forms. He explained that, even though he wasn't living there RIGHT THEN, that the house at issue WAS his residence. The whole situation was explained.

He was, of course, convicted. The judge refused to define the term "residence" for the jury. The prosecutor told the jury that a residence is "where you live right then," and that you can only have one. Nothing in the law supported that: if I travel to Michigan for three weeks, the hotel I stay at is not my sole "residence."

The Court of Appeals refused to reverse, saying that the error was "harmless." The error was that the law on the sole issue in the case (what is a residence) was not presented to the jury. How can this be harmless?

It is, essentially, a conviction factory. I am proud of the fact that we win far more federal cases than most law firms do -- however, it is still a small, small percentage of the total. Most of the time, the best we can do is minimize the damages to the defendant.

And they wonder why criminal defense lawyers suffer from burnout???

Notice that the prosecutors and the judge managed to throw out the mens rea standard for criminal law. At very best, this would have been a "technical" violation, although it is no different than a college student putting down his or her home address as one's domicile.

The problem here also is the jury. Once upon a time, an American jury would have recognized the falseness of the charges, but no more. So, we have someone going to prison who did not commit a crime, and a jury refusing to do its duties.

As you can see, if someone can be convicted on this kind of charge, and if the courts sign off on it, then there really is not hope for the federal criminal system. It is a travesty, and an evil travesty at that.

The Wrongful Conviction of Victoria Sprouse

When Rudy Giuliani was a federal prosecutor in New York 20 years ago, his staff members used to play a game in which they would pick a high-profile and popular person like Mother Teresa and figure what federal crime they could pin on her or him. No one could escape and in the end, no person that they named was able to slide away without having committed at least one crime for which a stretch in prison was in order.

This game was immensely helpful as they sought to find ways to charge Michael Milken, the successful investment banker, and prosecutors found that leaks to the press served as a great weapon in their favor. Leaking grand jury information is a felony punishable up to five years in prison, but prosecutors don’t indict themselves, and the New York Times was more than eager to aid and abet a felony, especially when prosecutors needed all of the favorable press they could obtain.

Milken ultimately went to prison, pleading guilty to a set of six "charges of crimes" that prosecutors had never brought against anyone before, and have not again since Milken pleaded 19 years ago. (Prosecutors had told Milken that unless he would plead guilty, they would go after all his family members and imprison as many as they could.)

Most Americans never have seen a federal court, much less have found themselves in the federal dock, and they are not familiar with how the system works. Indeed, when they read of another federal guilty plea or see a federal conviction in the news, they usually assume that the person was guilty of something, otherwise, he or she would not have been charged in the first place.

Thus, it was that on April Fool’s Day earlier this year, a federal jury in Charlotte, North Carolina, convicted real estate attorney Victoria Sprouse of a number of charges related to alleged mortgage fraud. Local television reporters declared that she was convicted of "forging documents" and helping to "mastermind" schemes to defraud lenders. It was the lead story on the Six O’Clock News in Charlotte, and the triumphant prosecutor, Matthew Martens, told TV cameras that the jury had sent the message that Charlotte "would not tolerate mortgage fraud."

Not surprisingly, the TV and print journalists got it wrong. The government never charged Sprouse with forging documents, and, in fact, Sprouse herself says that she did not know that the documents that she signed were forged until one of the prosecution witnesses told the jury he had forged them. Yet, the local newsies still promoted the Big Lie that Sprouse had forged documents – even after the trial was over.

It is not unusual for journalists to get it wrong in federal crimes. Most journalists I know have no idea of the legal structure of federal law and they really don’t care, anyway. They love to get illegal leaks from prosecutors, and they enjoy covering the "perp walks" and experiencing all of the trappings of "justice" that come from covering the federal courts, and they love receiving those "leaks" from the prosecution and federal law enforcement that tell the world, "I am important. The Big Cheeses in the Government talk to Me!"

The federal courts have become an American version of the "Bread and Circuses" routine that once kept the Romans happy as the government around them became increasingly tyrannical and arbitrary. Caligula might have written his edicts in tiny print on signs placed so high that no one could read them, but as long as the gladiators were fighting in the arena and "free" wheat was available at the granary, they really did not care.

Americans today are much like the Romans, who reveled in cruelty; they are happiest when they can watch others suffer, and if they can help inflict the pain, all the better. From hapless people in Iraq to the people raped in prison, Americans enjoy the show – as long as these things are happening to others and not themselves. Let these things happen to them, however, and they cry bloody murder.

I make these comments as I revisit the Sprouse conviction. When I wrote the first time about it, I received a score of nasty"f*ck you" emails and others, while not obscene, that made fun of Sprouse. She was charged, so she was guilty. Others told me that they followed the case and also were convinced of her guilt, so I could not know of what I speak. After all, they read the Charlotte Observer and watched local TV news, so and who can argue with the Great Wisdom of a local talking head?
Given that, I am going to lay out what happened and how it happened and why I am convinced – utterly convinced – that this was a wrongful prosecution and conviction. I am not alone; real estate professionals in Charlotte supported her, and I also have heard from attorneys and other professionals intimately familiar with the case who have agreed wholeheartedly with my assessment.

However, one asks, how was she convicted? If I am inferring – "insisting" is a better word – that she was victimized by a wrongful conviction, and I did not sit throughout the trial, then how is it that I believe that jurors abandoned their duty and served as little more than a Greek Chorus for the prosecution? Am I simply listening to one side of the story and forgetting that Sprouse was accused of participating in multi-million-dollar fraud scheme? The key to understanding this case is not necessarily knowing the testimony that backed the prosecution; it is in knowing how the prosecution effectively rigged this trial.

The prosecution, led by Martens, convinced a jury that Sprouse knowingly signed forged and fraudulent documents and other legal papers that had false information which would permit the buyers of houses and property to obtain those things without having the required income or down payments or other things that the lender required one must have. The buyers were planning to "flip" the properties, that is, sell them quickly and make a profit.

In bringing these charges, Martens and his staff agreed that Sprouse had received no payoffs or other quid pro quo compensation, her office receiving only the standard $500 fee for closing (with perhaps $40 to $50 actually accruing to Sprouse as income after she paid her staff and other office expenses). However, that fact did not stop Martens from repeatedly telling the jury and the press that Sprouse "made millions" from illegal sales, although even the most optimistic prosecution math did not come close to that figure.

(I should add that the Charlotte journalists, both print and broadcast, repeated Martens’ claims as though they were ex cathedra and never once thought to question the prosecutor’s fuzzy math. When I emailed some of them about the monetary discrepancies, they reacted as though I wanted to do away with the First Amendment. How dare I question their worship of the prosecutor!)

It is important to understand, however, that the outcome was fixed long before the trial, and not by any criminal or regulatory violations on behalf of Sprouse. Martens arranged for the government to forbid Sprouse from selling, disposing, or mortgaging any of her property in order to raise money to pay for her attorney, Pete Anderson. Because all her assets were forbidden to be sold or mortgaged she did not have any other funds by which to pay, the judge declared her "indigent" and then permitted a maximum of $25,000 for her legal fees.

The prosecution’s strategy was obvious. If Sprouse could be denied adequate counsel, as $25K is not going to buy anything more than an attorney who wants to plead out right away, then a conviction was as good as done.

What happened afterward is most important – and sealed the outcome. Anderson told the judge at a hearing in which she petitioned to have one of her properties sold so she could raise legal fees that he still wanted to represent Sprouse, given his knowledge of the case. That is where Martens dropped a bombshell.

Martens told the judge that it would take four-to-six weeks to present the government’s case. Anderson argued that since it would take his firm five months to prepare for trial with another month to six weeks in a trial would mean his firm would have to spend six months for a relatively tiny fee, which the firm could not afford. Thus, he begged off the case and the judge appointed two attorneys who then tried to force Sprouse to plea to a deal that would have given her 20 years. Sprouse, believing she had not committed any crimes and wanting her Constitutional day in court, refused, and from then on, she and her counsel were at odds.

There are a number of reasons why this development was significant, and why Martens had orchestrated it. First, and most important, when Martens actually presented the "evidence" during the trial, he took less than four days. One does not boil four-to-six weeks of material into four days; instead, Martens – an officer of the court and one who is bound to tell the truth while carrying out his duties – had not told the judge the truth.

Second, one asks why Martens was hell-bent on eliminating Anderson. The main reason was that Martens had put Rick Graves on trial two years ago on tax fraud charges, and a federal jury did something remarkable: it acquitted him. Graves’ attorney was none other than Pete Anderson, and he easily demolished Martens’ weak case.

In the Sprouse situation, Martens did not want to face a well-respected attorney who believed in the innocence of his client – and who already had bested Martens before in a case involving flimsy charges. Thus, he got rid of the competition and was able to play a role in the appointing of attorneys who clearly wanted to curry favor with the prosecution.

(Most court-appointed attorneys plead out their clients, bill hourly, and pocket the money. The key is cutting deals with prosecutors and letting the court know that the defense is not going to be a problem and will "play ball" with the prosecution. Sprouse’s court-appointed attorneys fell into that category.)

A key issue in this case was whether or not Sprouse knew the documents were fraudulent and that she was knowingly signed off on transactions that were different than what was on the paper. The only prosecution witness to declare that Sprouse "must have known" about the fraud stated in a deposition under oath in a civil case saying that he never told Sprouse about what he was doing because he believed she was honest and would have refused to sign anything she thought was fraudulent and stopped the closings.

Now, one would think that this would be a key piece of evidence in the trial, and that is correct. The key was to make sure that this document never would be presented during trial, and Martens and Sprouse’s court-appointed attorneys did just that.

First, the man who made that original statement under oath was a key witness for the prosecution. In exchange for leniency (Martens offered him a plea bargain to serve two years in prison), the man gave very different testimony in Sprouse’s trial than what he had given before. (Of course, in the earlier testimony, there was no coercion from a prosecutor, so if one is going to choose which statements to believe, instinct tells us that the first set of statements is going to be truthful.) He never said that he knew for sure, since he did not tell her as such, and he knew of no one else who had done it, but that was enough to convince the jury.

Obviously, this leads one to ask why the original deposition was not entered into testimony, as it contained vital exculpatory information. The reason, as noted before, is that Sprouse had a pair of attorneys who deferred to the prosecution. They were angry with her because she would not plead out, as neither of them was experienced in white-collar criminal trials. The extra time spent in court would be an added expense and would destroy any potential profitability they could get from their $25,000 payment.

Even though Sprouse begged to participate in her defense, her counsel said no. She wrote the judge begging that she at least be permitted to participate in her defense, as her counsel was refusing to file motions and even review the evidence, but the judge was not inclined to grant her request.

Why would the attorneys be so passive, especially in the fact of a prosecutor who clearly was railroading someone? To fight would not be to seen as "cooperative" with the prosecution, and the opportunity to gain easy money by cutting future deals with Martens and his staff.

Sprouse even pointed out the information from the deposition to her attorneys. Excited, she showed it to her counsel, but they were noncommittal, and it was clear that the document meant nothing to them. It never was presented in court or presented as defense evidence, and neither attorney cross-examined the witness as to his earlier exculpatory statement made under oath, never using material from that deposition at all.

In the end, Martens’ main piece of "evidence" was the fact that Sprouse had signed the documents, something Sprouse agreed she had done. However, Martens then claimed that because Sprouse had signed the incriminating documents, then that was proof that she must have known they were fraudulent. If one thinks this is a non sequitur, one is correct.

There were other incidents of outright incompetence and worse. The counsel did not interview their own witnesses until just before trial, they rarely objected to anything, and they pretty much let Martens run the proceedings. During the breaks, Martens’ investigators harassed defense witnesses and threatened them, but Sprouse’s attorneys did not object or tell the judge.

Martens clearly enjoyed himself. During one session, he asked his investigator how she felt about investigating Sprouse. The transcript said she "enjoyed it," and that exchange drawing a rebuke from the judge.

Then there was the jury. One elderly juror slept much of the time and it was clear that many did not understand the complexities of the case. Federal "crimes" are like that in that most of them are "derived" from other acts. Unlike in state courts, where jurors are aware that a law clearly has been broken and that the person charged is accused of having committed the crime, in federal court, all parties generally agree with what was done, but the jury is supposed to interpret the law as to whether or not the act or acts were criminal.

This clearly favors the prosecution, as it does not take long for the jurors’ eyes to glaze over and for them to assume that the person on trial has to be guilty; otherwise there would be no charges in the first place. Thus it was with Victoria Sprouse.

In summary, the prosecution managed to make sure that Sprouse could not have the representation she wanted, an attorney who saw through the tactics of the prosecution and believed strongly in the innocence of his client. Martens falsely told the judge that the presentation of the evidence would take four-to-six weeks when it did not even take six days.

Martens used a witness who had testified under oath in a civil case that Sprouse did not know that the documents in question that she signed were fraudulent. To get past this obvious problem, Martens was able to use the prospect of a lighter prison sentence to entice the witness to change his testimony. To put it another way, Martens suborned perjury and the jurors swallowed the lies whole, as did the local media.

Lest anyone think I am too hard on Matt Martens, perhaps it would be helpful for the readers to know that his mentor in the federal government was Michael Chertoff, who served as the secretary of the Department of Homeland Security. Chertoff is a man who favors the use of torture and other "enhanced interrogation techniques" in order to pry words out of recalcitrant prisoners and is not concerned with anything as "trite" as "legal ethics."

When she learned she had been indicted, she and her first attorney, Anderson, made arrangements with the U.S. Marshals Service to turn herself in at 9 a.m. At 6 a.m. on the morning she was to turn herself in, Martens sent heavily-armed federal agents to her house and they pounded so hard on the door that they almost broke it. Included in the government’s Big Show arrest to grab an unarmed person who already was getting ready to turn her in were two Mecklenburg County police, two federal marshals, two FBI agents, the IRS investigating agent, the postmaster investigating agent, and the North Carolina Department of Insurance investigating agent.

After the trial, Sprouse asked to be free on bond pending her sentencing and appeal. Martens objected, telling the judge, "Your honor, she is going to spend a better part of the rest of her life in prison, so she should start serving her time now." He also declared that she was a risk to flee because her boyfriend had a German passport, and that perhaps she might even commit suicide, given that she had wept on the stand and had the temerity to say that the government had "ruined her life."

Chertoff’s star student has learned his craft very well. Unfortunately, most Americans today do not care that people who practice such cruelty are in positions of power. Perhaps most Americans don’t realize – and maybe they really don’t care – that men like Matt Martens and his mentor, Michael Chertoff, would gladly have prosecuted the late Mother Teresa herself had they believed they could have benefited from their actions.

Giuliani’s lieutenants were playing a simple parlor game, but it enabled them to find ways to prosecute people on Wall Street who had not committed crimes. Today’s federal prosecutors, however, have gone even one step beyond that, and one can be sure that because they are immune to any legal challenges, their quest to incarcerate innocent people will proceed unencumbered, as federal prosecutors seek political and personal gain and to maintain the all-important "numbers" in their offices.

The prosecution of Victoria Sprouse was a "selective prosecution." As the prosecutors’ parlor game demonstrated, the name of the game is selecting beforehand who to prosecute and convict and then manipulate the law and juries to give them what they want.

Harvey Silverglate, one of the country’s finest civil libertarian attorneys, has noted in his forthcoming book Three Felonies a Day that much of current federal criminal law much more closely mirrors the law of the former Soviet Union than it does anything we have inherited from Great Britain. Indeed, one wonders why Martens and Chertoff don’t have busts on their desks of Stalin’s secret police head, Laverty Beria, who famously declared: "Show me the man, and I will find you the crime."