This Friday Bruce Kobayashi and I will be presenting some thoughts at the University of Maryland on What's So Bad about Paying Plaintiffs? We explore the basic policies at stake in the related issues of paying off plaintiffs and witnesses involved in the Milberg indictment. We ask, what's the difference between Andy Fastow and Howard Vogel?
Andy Fastow, of course, is the former Enron CFO who got six years for helping engineer the Enron house of cards, a fraction of what Skilling is likely to get. Fastow pled and testified. Howard Vogel is the frequent Milberg plaintiff whose plea deal figured prominiently in the indictment in the Milberg case involving paying plaintiffs and witnesses.
Both cases involve paying somebody for the effort and other costs involved in bringing facts to a court to establish claims that society thinks are worth bringing. Anyone who questions these payments should check out Eisenberg & Miller's data on incentive awards to class action plaintiffs. They show that these payments are more consistent with reimbursing effort than with serving the plaintiff's lawyer's self interest. Plaintiffs' effort and costs are analogous to those expended by plaintiffs' lawyers in bringing suits – for which they are, and arguably should be (see Bruce and my Class Action Lawyers as Lawmakers) well compensated.
To be sure, the alleged Vogel payments violate specific criminal statutes dealing with payments to witnesses and plaintiffs and common law duties. The basic question is whether these laws are justified. (The various legal rules and cases are detailed in the slides linked in the first paragraph of this post).
As for paying witnesses, note that the law specifically allows payments to expert witnesses, recognizing the need to reward effort. But lay witnesses expend effort as well as risking social stigma and punishment. To be sure, the law has means other than payment of compelling appearance by fact witnesses. But the law has to identify relevant fact witnesses before it can compel their appearance. And while paying lay witnesses can encourage bad conduct, such as lying, the same is true for expert witnesses and for witnesses such as Fastow. Again, why distinguish these situations?
This question of how to distinguish the "payment" to somebody like Fastow and payments like those to Vogel arose in U.S. v. Singleton, 165 F.3d 1297 (10th Cir. 1999), which ultimately determined, en banc, that government lawyers weren't a "whoever" prohibited from giving "anything of value" for testimony. Why not? The least persuasive argument is that we can trust the government. Oh yeah? Anybody who thinks that should check with Judge Kaplan.
The most persuasive argument for the Singleton position is that the Sentencing Guidelines and other rules explicitly contemplate "paying" witnesses with leniency. But these rules arguably only create the currency – they don't trump the statutory prohibition on paying for testimony. After all, under the court's interpretation, the statute would allow prosecutors to pay money, and not just time.
The better rule, we think, is to allow payments both in civil and criminal cases, but make sure that judges supervise the payoff in the sentencing or settlement hearing, and that rules are in place to constrain extortive or other misbehavior by both government and private lawyers.
The current system perversely forces witness and plaintiff payments underground, preventing effective supervision. Since we allow the lawsuits we create incentives to cheat to collect the rents.
Maybe it is, after all, these rents that are questionable. In other words, there is the suspicion that the suits Milberg was filing were not socially valuable. But the right way to address that problem is not to allow or encourage these claims in the first place – in other words, reduce the rents from the litigation. This would get to the heart of the problem, rather than creating bogus distinctions between fundamentally similar types of conduct.
Many people have focused on the outrage of Milberg suing for kickbacks while paying its own kickbacks to plaintiffs. There is truth in that outrage, but it's not the whole truth. While the government was prosecuting Milberg for making payments, it was making its own payoff in the form of the plea deal with Vogel. Of course the government's conduct wasn't illegal. But, again, why is one form of conduct legal while the other is not?
This is no mere technical pursuit of logical purity. Unless we can soundly distinguish between legal and illegal conduct, we risk undercutting the very conduct norms the criminal justice system is supposed to be creating.
Anyway, this is a work in progress that is just beginning in Baltimore on Friday.
Comments