The Conservative Nader’s Raider

Robert Fellmeth was one of the more prolific of the young law students who joined Ralph Nader’s crusade for consumer protection in the 1960s and 1970s.

And one of the more conservative.

He’s currently a Professor at the University of San Diego School of Law.

In what sense is he conservative?

“In the sense that conservatism has merit,” Fellmeth told Corporate Crime Reporter in an interview last week. “And only to that extent. I believe the free market is an efficient mechanism for allocating resources. It is bottom up. It has a natural selection process. It has all sorts of advantages that anyone who has ever been in a socialist country or one of the Communist regimes will appreciate. You don’t appreciate what we have unless you experience another nation that is different. And then you realize that we have a lot of things going for us that they do not have.”

“That is not to say, though, that I agree that the market is God and that the utopia is achieved simply by the removal of the state. It’s quite different. The market depends upon a number of prerequisites. It can’t function without five or six major preconditions. And if those preconditions are absent, the state must intervene to restore them as a first priority. As a second priority, it may want to compensate for those failures. You have to look at the market. You have to look at what the failures are and what the absent prerequisites are carefully and be like a surgeon who operates only to the extent necessary.”

“The first Nader report we did after the report on the Federal Trade Commission was on the Interstate Commerce Commission. Our thesis there was that much of the regulation that was occurring was cartel pricing controlled by the industry. And that is true in regulatory systems all over the country at state levels. It’s not consumer protection. It’s not restoring the market. It’s not even ameliorating problems in the market. It’s simply exacerbating flaws that already exist and not addressing them.”

“So, I am a conservative in that sense. I want to rely on the market. But I am aware that that doesn’t mean you do nothing. That doesn’t mean you don’t ask questions. If you have a monopoly, you have to regulate. Ideally, you would break it up so you don’t have to regulate. But you have to regulate whatever element is controlled in a monopolistic fashion. That’s obvious.”

Fellmeth spent nine years as a prosecutor — he served as a deputy district attorney for San Diego County and as an assistant U.S. attorney for the Department of Justice in San Diego.

He was a conservative prosecutor, too.

“My pattern was to use pre-filing discovery,” Fellmeth said. “Most of the cases were civil. You can’t put a corporation in jail. I wrote much of the unfair competition statute in California when I was a deputy DA during this period in the 1970s. I gave the prosecutors pre-filing discovery powers because I did not want them to file a case and embarrass themselves and others with accusations that discovery might later prove were not accurate.”

“I was very much in favor of pre-filing discovery. And I have been consulting with DA offices to this day on that pre-filing discovery exercise. I was involved in the pre-filing discovery in Enron. That enables you to see what was going on. You get to see emails. You can depose people pre-filing — all confidentially. You can do it civilly or criminally. And I have done them both.”

“It’s all confidential. And when you have a case, you go to the defense counsel and say — here’s my case, here is what I have, and now I want to see your defense. I may contest it. I may explore it. But what is it? And then I get an idea about what it is.”
“And a couple of times I say — I’m wrong. I’ve filed 22 cases and won 21 of them and that’s one of the reasons. So, when I say I’m wrong in a case, I’m embarrassed. But also it’s unfair to a defendant. When the people file a major white collar crime case, there are very serious repercussions involved — for the corporation, for their stockholders, for their officers.”

“A public prosecutor is a very powerful position. I thought I was a brilliant attorney until the left the DA’s office. And I filed some cases as private civil cases. I learned then — hey, it wasn’t me. It was — ready for the people, your honor — that gave me enormous cache.”

What does Fellmeth make of the debate over the failure to criminally prosecute the big Wall Street banks and their executives?

“There should have been a grand jury impaneled,” Fellmeth said. “There should have been 200 to 300 prosecutors on the case. They would have divided up the industry, done the pre-filing discovery. It should have been aggressive. All emails should have been examined. It should have been a sweep the earth investigation because of what happened. What happened was unconscionable.”

Was it a failure of leadership, or resources, or political conflicts?

“All of the above,” Fellmeth said. “I have written a law review article about what happened. Congress failed. Everybody failed. A colleague of mine here at the law school — Frank Partnoy — predicted it. I was predicting it. I said — this is ridiculous. It was a huge balloon. Anytime you have a balloon like that, this is going to happen. Buying on margin in 1929? This is much worse when you are involved with derivatives. It’s a much higher ratio than buying puts and calls in 1929. Whenever you have that, you are going to have a pop — obviously.”

“People get blind about what’s around them. That’s why, as a child advocate, I’m concerned about the national debt. As a child advocate, one of my highest priorities is the Social Security and Medicare debt. The conservatives are right about that. The problem is that people who are screaming about that are considered nuts because almost everything else they scream about is nutty. But it’s a huge issue.”

Fellmeth was responsible for the passage in California for the Corporate Criminal Liability Law. What is that?

“That’s a Nader idea — corporate executives should be held personally liable for their decisions that injure and kill people,” Fellmeth said. “There should be some criminal liability directed at them. Not just the corporation. You can’t put a corporation in jail. That’s why most of my cases involving economic crime were civil. I could get much more of a penalty out of the civil side than the criminal side.”

“But if you have an executive doing things that injure and endanger and kill people, then I want to put those people in jail.”
But in the fifteen years or so since the passage of the law, there really haven’t been that many prosecutions under that law.

Why not?

“That is a big disappointment to me,” Fellmeth said. “Prosecutors are not oriented in that direction. They are not oriented to looking at systemic causes to crime. They look at an individual incident. They look at someone who deliberately fired the gun. Most of them come from a street crime mentality. They come from that background. They are not looking at white collar crime.”

Fellmeth has been involved with prosecuting bribery. But it seems we have a system of legalized bribery — campaign money in, favors out. There is no way to prosecute it, right?

“Campaign finance contributions can be a form of bribery,” he says. “But the essence of the criminal offense is proving a quid pro quo, and that usually requires either a very stupid defendant or a taped conversation. It has to be a specific promise or delivery of money in exchange for an official act.”

“In reality, privately financed campaigns create, on a massive scale, the very problem that prosecutable bribery in intended to address. Its effects are identical to the prohibited crime, but it is so endemic that its macro-level incidence is pervasive — a ‘king wears no clothes’ kind of dynamic.”

“Of course, most special interests are giving money with the expectation of official acts that favor them. And most represent profit stake interests in the here and now. Hence the system favors those givers who are so organized — usually as horizontal trade associations. And that means the denigration of diffuse and future interests — for example, consumers and children. The corporation is a problematic entity to have such power given its nature – the fiduciary duty of its officers is to protect capital investment and maximize relatively short term profits. That description is not meant pejoratively — that is what a proper, legal corporation is. Making it equivalent to an individual person in a democracy is a blow to its heart.”

“And it is one felt disproportionately by child advocates, who have no such source of influence. We can influence individuals to forsake immediate profit for the sake of our legacy. But a corporation cannot responsibly do that. It must bend the other way, and serve the short term profit end of the spectrum.”

“The answer, of course, is to arrange for public financing of campaigns. It does not even have to be 100% financed.”

“I helped to write Proposition 68 in California that would have done that. Small contributions would be matched 5 to 1, with agreed upon spending limits.”

“So you have to have some financial support, but it would not be dominated by narrow interests. It would have involved spending much less than one percent of public money to assure that the other 99% was based on the merits, not on who presently had assets and wants to use the state for self-aggrandizement.”

“Even Arizona is doing it somewhat, so it is politically feasible – much more so than a constitutional amendment or addressing it with limits or disclosure.”

“Proposition 68 passed in 1988, but a competing initiative — Proposition 73 — got more votes and it was not implemented.”
“It should be tried federally and in every state.”

“That would solve the problem more than reversing Citizens United would or more than contribution limits or donor disclosure would.”

“It leaps over all of them by providing a source of financing for those who do not depend much upon special interest sources.”
“And make no mistake about it, a major part of our campaign finance system is a form of bribery – just not legally prosecutable bribery.”

How does Fellmeth compare law students today to students when you went to law school?

“They can’t write,” he says. “They have an attention span that is Twitter influenced. Paragraphs elude them. But they are interested. The want to do the right thing. They want to represent the downtrodden. They want an efficient system.”

More so than his generation?

“My generation talked a lot. But my generation has not walked the walk at all. My generation is the most disappointing generation in the last 200 years in this country. It’s a fascinating issue you raise. The boomers — those born between 1945 and 1965 — are the most selfish generation in history.”

[For the complete q/a transcript of the Interview with Robert Fellmeth, see 28 Corporate Crime Reporter 20(12), May 19, 2014, print edition only.]

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