And some pols want to make it worse, broadening the already dangerously broad Martin Act [Jim Copland, NY Post] My take on the Martin Act here.
My new op-ed at the New York Post looks at the history of Spitzer-to-Cuomo-to-Eric Schneiderman prosecutorial overreach and asks: how exactly did the New York Attorney General come to have so much power with so little constraint? (& welcome Instapundit, Real Clear Markets, Timothy Carney/Examiner, CEI readers)
More: I and others have written about the act here and at Point of Law.
Why is New York Attorney General Eliot Spitzer so feared by the state’s financial community? A major reason is a little-known piece of 1921 New York legislation called the Martin Act, aimed at financial fraud. “It empowers him to subpoena any document he wants from anyone doing business in the state; to keep an investigation totally secret or to make it totally public; and to choose between filing civil or criminal charges whenever he wants. People called in for questioning during Martin Act investigations do not have a right to counsel or a right against self-incrimination. Combined, the act’s powers exceed those given any regulator in any other state.
“Now for the scary part: To win a case, the AG doesn’t have to prove that the defendant intended to defraud anyone, that a transaction took place, or that anyone actually was defrauded. Plus, when the prosecution is over, trial lawyers can gain access to the hoards of documents that the act has churned up and use them as the basis for civil suits.” Important reading (Nicholas Thompson, “The sword of Spitzer”, Legal Affairs, May-June). Radley Balko comments (May 12), and see our Jan. 17 item. More on Spitzer’s financial enforcement: Dec. 17, 2003; Jun. 17-18 and Oct. 30-31, 2002; Mar. 31-Apr. 2, 2000.
Mike O’Sullivan at Corp Law Blog says he’s not so sure it’s a bad thing for the SEC to have a reputation as “legalistic” rather than creative in its approach to fighting market misconduct: “The SEC has a great deal of authority over the U.S. capital markets. If the SEC does not act within the four corners of the law, the SEC would inject a great deal of uncertainty into the capital markets. …
“This is one of the reasons why I think it’s inappropriate to compare the SEC to Eliot Spitzer’s operation. Spitzer feels free to use New York’s Martin Act to attack anything that strikes him as abusive, regardless of whether it’s clearly illegal. The SEC has in its arsenal nothing as open-ended as the Martin Act, and that’s a good thing for US markets. The Martin Act is, as one commentator called it (PDF), a ‘fierce sword’ of uncertainty, permitting prosecutors to stretch the definition of crimes and then engage in extensive discovery to compel their targets to capitulate. This makes the Martin Act a very useful tool for a prosecutor looking to make his mark, and a nearly useless guide to a person looking to avoid becoming the target of a prosecutor looking to make his mark.
“Beyond creating uncertainty, another interesting consequence of open-ended criminal statutes like the Martin Act is the freedom they give prosecutors to legislate on the fly.” (Dec. 29). Plus: welcome National Law Journal readers (Andrew Harris, “Waging war against Wall St. corruption”, NLJ, Dec. 22, not online, quotes me suggesting that Spitzer is “imposing a different regulatory scheme nationwide than the one imposed by the federal government,” not necessarily a good idea given that he isn’t answerable to a nationwide electorate).