AG Watch

NY AG Eliot Spitzer has just settled with Waddell & Reed, Inc., a Kansas City-based mutual fund manager. The press release notes, “The Waddell & Reed agreement is the 19th settlement since the Attorney General’s Office began the probe of improper mutual fund trading activity in July 2003. To date, these settlements have resulted in more than $3.4 billion in restitution for investors.” [low whistle] It’d be hard to deny that Mr. Spitzer accomplishes what he sets out to do. But what is it he sets out to do, exactly, and how does he get it done?

Brooke A. Masters of the Washington Post has written a book about Mr. Spitzer, Spoiling for a Fight: The Rise of Eliot Spitzer, which addresses these questions and more…and we’re gonna have a BOOK FORUM! Ms. Masters and Federalism Project director Michael Greve will discuss the book and Mr. Spitzer’s redefinition of the role of attorney general. The Honorable William H. Pryor Jr., of the United States Court of Appeals for the Eleventh Circuit, and a former attorney general of Alabama, will moderate.

Mark your calendar: August 7, 2006; 2-4 p.m.

See you there!

For several years, the U.S. DOJ has prosecuted and settled antitrust lawsuits against several international DRAM computer chip manufacturers. The DOJ’s Thomas O. Barnett, Acting Assistant Attorney General in the Antitrust Division, emphasized that the suits “prosecute and deter cartels that harm American consumers.” In other words, when it comes to international antitrust, the United States Department of Justice has got your back. So far, settling individual DRAM makers have paid more than $730M in total fines.

Yesterday, a Wall Street Journal editorial (”When the Chips Are Down,” July 18, 2006) described the AGs role in the DRAM cases: “Enter the state AGs, who have now ridden in on their taxpayer-funded horses to shoot the wounded.” 34 state AGs, you see, have taken it upon themselves to form a “class” of in order to recoup damages. A consumer class action already exists.

We don’t question the guilt of the DRAM cartel, but three suits against the same companies for the same crime worries us. Are three bouts of litigation necessary or desirable?

Perhaps a big book about international antitrust would help us puzzle this stuff out.

The AG Sue’n'Settle Scheme would not be complete without the public relations imbalance—the suing state AG looks like law while the sued firm appears criminal.

New Mexico AG Patricia Madrid has taken the PR leverage much much further. Here are the steps that she added to the scheme:
1. Sue Microsoft.
2. Take big settlement money from Microsoft.
3. Use MS settlement money to buy “consumer awareness” fliers for mass mailing.
4. Choose a consumer topic unrelated to Microsoft.
5. Prominently display [insert Attorney General’s name] on the flier.
6. Wait until election time.
7. Run for office.
8. Send those fliers.
9. Say that your opponent does it too.
10. Drive AG Watch bonkers.

The 4th of July is a traumatizing time to be in DC; watching people cheer as the government literally blows up their tax dollars can’t count as a holiday, can it?

This year, we got an early taste of the Confiscate-Waste-Repeat cycle when Robert Farr, the challenger in the Connecticut AG race, released an ad on July 3 that criticized sitting AG Richard Blumenthal for his “silly suits.” In the ad, Mr. Farr suggested that Mr. Blumenthal’s lawsuits have cost Connecticut more in litigation fees than they have won the state in settlement receipts.

In response, Blumenthal said “Money is hardly the only criteria as far as fighting for the public interest” but then estimated that his lawsuits brought in 13 times as much as was spent on the suits.

The AG race boils down to this perverse question: How efficiently can the Connecticut Attorney General’s office fleece the average American citizen? And, efficiency aside, the money these two are bickering about goes either to lawyers or to politicians. So even Conn men and women lose out. When the effectiveness of the Attorney General is measured by lawsuits, state legislators and attorneys (General and generally) are the big winners. Citizens, as per usual, lose out.