This is a column about impeachment, but first, a confession: I think I might be guilty of insider trading.
At this point, I would like to assure my dear friends at the SEC that I do not mean this in any actionable legal sense, but only in principle. Some time ago, I was considering making an investment in a company — not a very large one, as such things go, but a very big deal to me. I called a friend to ask his advice, knowing that he had some knowledge of the firm in question. As it turns out, he had a great deal of knowledge: His company had previously considered a substantial deal with the firm and, in the course of doing its due diligence, had concluded that the business was not financially sound. This was not publicly available information. Again, this transaction was not something that would have been covered by the SEC, but as a matter of ethical principle, it is worth considering. People have been charged with insider trading both for buying and for selling stock, and declining to sell stock can bring up insider-trading issues, too: For example, corporate insiders whose personal wealth is made up largely of company stock (e.g., in the case of founders of companies that later have gone public) often set up schedules of regular stock sales in order to diversify their personal holdings, and changing such an arrangement in response to inside information might run afoul of the legal rules. Of course, it would be difficult to charge somebody for not making an investment, but that is more of a practical matter than an ethical one: The principle — that one should not receive financial advantage (the avoidance of loss is a kind of profit) derived from the benefit of privileged information — is the same.
U.S. courts have offered many different theories of insider trading over the years. The first — and, to my mind, most plausible — of them was based on the fiduciary duty, i.e., the obligation that corporate managers have to look out for the best financial interests of their shareholders. Under that standard, corporate managers are in a way stealing from their shareholders by using privileged information for their own benefit rather than for that of the shareholders at large. Over the years, the courts came to regard this as an inadequate theory of insider trading, because in principle it limited the restrictions to those who owe a fiduciary duty to the shareholders, meaning corporate managers, executives, board members, etc. But these parties sometimes tip off people who do not owe a fiduciary duty to the shareholders, and the SEC wants to prosecute them, too. Hence, our always innovative legal thinkers decided that spouses and brothers-in-law and golf buddies became invested with the same fiduciary duties as corporate managers when they received privileged information. The “misappropriation theory” is a slight but meaningful variation on the fiduciary theory: It holds that a company owns its private information, and that making use of that private information for personal benefit is misappropriation of property.
The cutting gets pretty fine: A 2014 court ruling held that a person receiving an insider tip must be aware both that the information is privileged and that the insider giving him the information is doing so for personal benefit. A 2016 ruling held that “personal benefit” need not be financial profit but could be the simple satisfaction that one gets from doing a friend a favor.
The fiduciary duty is a very old and generally well-understood part of business life, and using that as a rationale to regulate insider trading is reasonable. The practice is not universal: Until relatively recently, France and some other European countries took a very hands-off approach to insider trading, mostly requiring only that such trades be reported to regulators. In the U.S. context, regulators have felt the need to iterate different theories of the law in order to satisfy the moral — not legal — sensation that somebody needs to be prosecuted. Another U.S. rationale for regulating insider trading is “fairness,” that infinitely plastic, nearly meaningless standard. The courts insisted that markets must feature a “level playing field,” an idea that nobody takes very seriously. People who develop proprietary trading strategies have access to advantages that are not available to the general run of investors — as indeed do people who simply have a great deal of experience and intelligence.
Consider a hypothetical: If a corporate insider makes a trade based on inside information, that’s a crime. If a corporate insider’s spouse makes a trade based on information from the insider, that’s also a crime. If a corporate insider’s friend makes a trade based on information from the insider, that’s also a crime. But what about a friend of the friend getting the information secondhand? That’s essentially what got Martha Stewart charged: Her broker gave her a tip after getting a tip from somebody else. (Stewart, recall, was not convicted on insider-trading charges: She was on paper convicted of making a false statement to investigators; in reality, she was convicted of being rich and envied.) There are websites dedicated to insider gossip, and people make trades based on those. Ah, yes, you might say, but that’s published, and hence publicly available to anybody who wants it. Okay: What if that gossip were published by the New York Times in a paywalled article? That’s information that’s available — at a price, and hence not to everybody. Sure, that Times paywall isn’t very high: What if the gossip were published in a $50,000-a-year investment newsletter with 20 subscribers? What if it were published in a $500,000-a-year investment newsletter with one subscriber? At what point does subscribing to an investment newsletter become indistinguishable from paying for inside information? Isn’t that really what investment newsletters are for? At least in part?
Perhaps it would have been better to stick with the fiduciary standard. The law is vague where it is not overcomplicated and contradictory where it is not vague. But that’s the nature of the law: It is a magnificent achievement, like a hand grenade.
It sometimes seems — to me, and I do not think that I am alone — that the main business of lawyers is moving the goalposts. If the insider-trading statute does not empower you to prosecute someone who seems to you to need prosecuting, then you simply invent a new theory of how the statute is to be construed and — presto-change-o — the statute says what you want it to say. This is why I — and again, I do not think I am alone — often have a very difficult time taking Supreme Court arguments seriously. Roe v. Wade overturned duly enacted statutes based on a constitutionally actionable right to abortion, a word that appears nowhere in the Constitution, derived from the principle of privacy, another word that appears nowhere in the Constitution. The lawyers promise us that it’s in there, somewhere, lurking. And, my, doesn’t the emperor look fashionable today?
My good friend Andrew C. McCarthy has written many words defending our mutual friend John Yoo and others from the accusation that they authorized illegal torture while serving the Bush administration. Not so, says McCarthy: Torture is a “specific-intent” crime, meaning . . . well:
To prove torture, a prosecutor would have to show beyond a reasonable doubt not just a general intent to engage in abusive treatment, but specific intent: “the additional deliberate and conscious purpose of accomplishing” severe pain and suffering. Absent a motive specifically to torture the victim, there is no torture even if great pain and suffering result.
McCarthy, following the lead of then-Representative Dan Lungren, considers the case of U.S. military personnel who are subjected to some fairly awful ordeals in order to train them to deal with torture should they be captured. That doesn’t count as torture, everybody agrees, because the intent isn’t to commit torture, but to train military personnel to endure it. And, they argue, in the case of the al-Qaeda terrorists subjected to painful or terrifying interrogation techniques by the Bush administration, the intent wasn’t to torture them: The intent was to get information out of them.
Because my mind has not been deformed by law school, I am able to see that for the rank sophistry that it plainly is: as though the intent were not to get information out of them by means of torture, or, put another way, to torture them for the purpose of getting information out of them. “Intent” can apply to means as easily as to ends, and elite special-forces trainees are not captives.
As a legal argument, McCarthy may be on entirely solid ground. It wouldn’t surprise me, since he is one of the best thinkers and writers on legal questions I know. If he is correct, then so much the worse for legal arguments.
Which brings me back around to my subject here: impeachment.
On Monday night, there was a remarkable debate at the wonderful parliamentary chamber at Old Parkland in Dallas. The resolution — “the framers designed impeachment as a political, rather than a legal process” — was debated by New York magazine staff writer and legal scholar Jeffrey Toobin, arguing for, and law professor Jonathan Turley (who testified before Congress on the legal aspects of the Clinton impeachment), arguing against. It was an excellent, intelligent, enlightening exchange, the sort of thing that some of us — probably stupidly — got into politics for in the first place.
The lawyers (moderated by Michael Gerhardt on behalf of the National Constitution Center) cut it pretty fine here, too. Toobin, to my mind, had the better end of the argument, but Turley was persuasive: After voting for Bill Clinton, he came to believe that the president should have been impeached — and, though he is in the minority of legal opinion about whether this is permissible, indicted — for perjury. Lying under oath is a serious thing, he argued, and you don’t get to decide for yourself what you can lie about and what you can’t — especially if you are the chief magistrate of the government, whose prosecutors are busily engaged in the business of putting people in prison for lying under oath. He mocked Gerald Ford (and Toobin by proxy) for insisting that an impeachable offense is “whatever the House of Representatives decides it is.” That’s an easy sentiment to make fun of, but it isn’t wrong.
As a practical matter, yes, an impeachable offense is whatever the House decides it is. As a matter of what should be considered an impeachable offense, the answer is an expanded version of the same: It’s whatever the House decides it is when the members of the House are acting in accordance with the duties they have sworn to uphold and not out of narrow, calculating self-interest. Indeed, much of the debate could have been resolved by agreeing that to say a concern is “political” is not to say that it is a matter of pure political self-interest. “Political” and “in my own political interests” are not synonyms. That this does not seem to have occurred to either of these gentlemen, or that they did not think the fact germane, says a great deal about the low place at which we have arrived as a republic.
Treason is a political crime, and the assassination of a president is a political act, but neither of these is properly understood as being properly within consideration of political self-interest. Impeachment (on this subject, McCarthy has written with great insight and eloquence) is a political consideration in the same sense that treason and assassinations are political — a question of high politics, of duty and purpose, rather than one of self-interest.
The best part of Turley’s argument is his proper insistence that perjury is a serious crime — Clinton later had his law license suspended for it — and that a president who commits a serious crime should be impeached. Perjury, especially perjury by a president, is a political matter, too: Like all forms of public corruption (for instance, that sorry little bit of theater going on down in Florida), it undermines public institutions, distorting democratic processes and democratic government. Law alone — words on paper — offers little defense against such corrosion. Indeed, as the motto above the debaters at Old Parkland reminds us: Corruptissima re publica plurimae leges. “The more corrupt the state, the more numerous the laws.”
The worst part of Toobin’s case was his stated confidence that our representatives and senators will act in their “political” capacity, properly understood. With their new majority in the House of Representatives, the Democrats already are calculating the trade-offs involved in impeaching President Donald Trump for . . . something. Toobin himself once suggested that the president could be impeached over a questionable tweet.
What’s a high crime or misdemeanor? Good question. What’s insider trading? It depends on whom you ask and when you ask — and, though this is not how it is supposed to be, whose trade it is you are asking about. What’s an impeachable offense? I don’t know: How is it that torture apparently is torture only when you’re doing it recreationally rather than for a good end? Who gets to decide when lying under oath is just a little personal matter that’s between Mr. and Mrs. Clinton?
(Talk about political.)
Ceteris are never, ever paribus, but even with that in mind, my own preference is for very strong oversight of the executive and its agencies by Congress, irrespective of the partisan make-up of Congress or the White House. And we can probably expect a form of that from the new Democratic majority. They already have scores of subpoenas at the ready, and they likely will move on impeachment if they believe it to be in their own interest. The national interest? Well . . . One of the neat tricks that one learns when one becomes a serious politician is to forget that there exists a difference between the national interest and one’s own personal political interests and ambitions. You can be sure that the question of impeachment will remain political, but not in the right sense of that.
Not every duty is a legal duty, and there are forms of discernment that are more profound than the choose-your-own-adventure games that pass for legal reasoning — more profound, and more relevant to the health and stability of this republic. What is required of us right now may not be anything as dramatic as laying down our lives in unthinkable numbers at Gettysburg or the Philippines, but surely our duty as free citizens demands of us right now — right in this moment — something more than self-interested cleverness and blind obedience to our worst tribal instincts. What we have in surplus is sophistry and cant and banal half-truths put forward for the most trite and transparent of purposes — there is a plague of cleverness upon us.
It would be good if the American people had more confidence in our government. It would be better if our government deserved our confidence. It would be better still if we did. The emperor never deceived us about his new clothes. He didn’t have to.
