What Happened Today: May 20, 2022
Explosive fifth-district ruling; Microsoft’s transcontinental charm offensive; Embargo lifted on Biden’s laptop
The Big Story
Building on its reputation for counterintuitive and sometimes explosive rulings with far-reaching implications, on Wednesday the U.S. Court of Appeals for the Fifth District issued a 2-1 decision that challenged a core enforcement procedure used by the Security and Exchange Commission, one that could not only upend long-standing practices at the SEC but impact how all federal agencies enforce regulations. Considered to be among the most conservative federal appellate courts in the nation, the Fifth District majority ruled that hedge fund manager George Jarkesy’s constitutional right to a jury trial was violated when the SEC’s in-house judge—known as an administrative law judge—found him guilty of civil fraud. The Fifth District didn’t take issue with the SEC judge’s finding that Jarkesy made false statements to investors when he raised $24 million—its ruling was rather that, regardless of the civil violation at hand, the fraud sentence was unconstitutional because it wasn’t heard before a federal court with a jury. The difference is subtle but powerful in what it could mean for how the government enforces the rules of the land: Some 30 federal agencies currently employ about 2,000 administrative law judges, and if the Fifth District decision were to be upheld by the U.S. Supreme Court (where it could soon end up with another similar Fifth District decision about the legality of the SEC’s regulatory process), it could potentially unravel two-thirds of the federal government’s capacity to oversee regulatory disputes with in-house tribunals, forcing regulators to send their cases to federal jury courts on everything from social security benefits to insider trading to environmental protections. The larger question at stake, then, is whether these federal agencies have the jurisdiction to make and enforce rules and statutes at all—a power vested to them by Congress to act as judges outside the judiciary that has become routine but is not explicitly sanctioned by the Constitution. The rapid proliferation of bureaucratic agencies and government administrators has sparked a growing opposition in recent years by those who challenge the constitutional authority and democratic legitimacy of federal administrators—like those in the SEC and other regulatory bodies. The Fifth Circuit’s ruling is a major preliminary victory for critics of “administrative governance” and could establish a precedent for broader attacks on regulatory bodies and agencies that rely on technical experts and officials who have been appointed rather than elected by voters.
Read more: https://www.bloomberg.com/news/articles/2022-05-18/sec-in-house-hearing-ruled-unconstitutional-by-appeals-court
In The Back Pages: Your Weekend Reads
The Rest
→ The media outlets who refused to cover the contents of Hunter Biden’s laptop on the eve of the 2020 election are now rummaging through that hard drive looking for stories its readers might like. On Thursday, The Washington Post published a piece about a 2014 email exchange between Tucker Carlson and then Vice President Joe Biden, with the TV host asking Biden if he’d write a letter of recommendation for Buckley Carlson, Tucker’s son. Never mind that this story broke in 2021, was previously covered by numerous outlets, and is likely being published now because The Washington Post is envious of The New York Times’ copious coverage of Carlson in recent weeks. Nevermind, too, that this news is hardly news—did anyone think Tucker Carlson was anything other than a Washington elite? What’s noteworthy here, however, is that news media outlets appear poised to begin reporting on materials from Hunter Biden’s hard drive without mentioning the censorship of these very same materials right at the time when the coverage would have been most meaningful. Carlson, for his part, appreciated the irony. Asked by The Washington Post to comment on the eight-year-old emails, Carlson refused, “pointing to past claims by former U.S. intelligence officials that the laptop’s emergence in the final weeks of the 2020 presidential campaign had all the hallmarks of Russian disinformation.”
→ With California suffering from what NASA has called the worst “mega-drought” in 1,200 years, regulators have rejected, on environmental grounds, a desalination project that would have produced enough water for 400,000 Californians per day. Poseidon Water’s proposal to build a plant on Huntington Beach in Southern California (which has already cost the company 20 years and $100 million) was unanimously voted down last Thursday by the California Coastal Commission, which found that the desalination plant would destroy the marine life of roughly 100 billion gallons of seawater per year and that Poseidon had not planned to mitigate these environmental degradations with adequate wildlife restoration programs, as state law requires. With California sure to see worse drought as the summer approaches—and with Gov. Gavin Newsom making his handling of the drought a key issue in his reelection bid for governor this year—there are likely to be more battles between state officials and environmental regulators. In Los Angeles, meanwhile, just up the coast from Huntington Beach, residents have already been asked to reduce their water usage by 35%.
→ Fundraising in the wake of George Floyd’s murder in 2020, the Black Lives Matter Global Network Foundation raised $90 million in donations, with the average donation being just more than $30; it then squandered much of that money (and much of that good will) on millions of dollars in real estate and private air travel and on paying a member of the founder’s family just under $2 million for consulting services. These revelations, which appear in filings submitted by the organization, come in the wake of previous reports that the organization purchased a lavish $6 million Beverly Hills mansion, which led supporters and critics alike to call for more transparency. Such reports of misspending have not surprised experts in nonprofit governance. Two employees oversaw a $90 billion organization with 49,275 volunteers. “That ratio pretty much tells the story right there,” according to Jacob Harold, a nonprofit industry veteran, told The New York Times.
→ For more context on the organizational framework used by the BLM Global Network when they were first founded, and how its lack of checks and balances laid the groundwork for later mismanagement of its finances, see this earlier piece I wrote on the organization, from 2020:
Read more: https://www.tabletmag.com/sections/news/articles/warren-buffett-black-lives-matter
→ By the numbers: $360,000—that’s how much ended up in the private bank account of a 24-year-old man named Sho Taguchi, when an official in his small Japanese town of Abu accidentally wired him the entirety of the municipality’s COVID-19 relief budget. When officials realized their mistake and asked for the money back to distribute to the rest of the town, Taguchi informed them it was gone—he’d blown it all away in an internet casino.
→ The push by red states to restrict abortion access continued yesterday in Oklahoma when lawmakers approved one of the three abortion bills that have been sent to the desk of Gov. Kevin Stitt, all of which are expected to be made law and to create one of the nation’s most restrictive regulatory environments for abortion action, essentially creating a complete ban on the procedure, with minimal exceptions. Following on the heels of a draft Supreme Court decision that appears to overturn the landmark Roe v. Wade decision, and similar to a Texas abortion bill that passed last year, yesterday’s legislation sailed through the Oklahoma’s Republican-led House of Representatives by a wide 73 to 16 margin; it allows any private citizen to seek a minimum of $10,000 in damages through civil lawsuits against someone who either performs or helps someone receive an abortion. With an exception for pregnant women who require the abortion because of a medical emergency or because the pregnancy is the result of a rape or incest reported to police, the new bill will likely prompt the closure of the few remaining abortion clinics that remain in Oklahoma, making it increasingly difficult for women to receive the procedure even if it would be permitted under the new legislation.
→ Chinese senior officials will no longer be able to hold significant assets abroad, as President Xi Jinping looks to insulate his country from the kinds of sanctions that have recently been leveled against Russia and its ruling class. As the West confiscated the mega-yachts and mansions of Russia’s oligarchs in a pressure campaign to end Putin’s war in Ukraine, the Central Organization Department of China’s Communist Party issued a directive in March barring its senior officials and their families from making such purchases and investments. “Leading cadres, especially senior cadres, must pay attention to family discipline and ethics,” President Xi declared in January, and must “lead by example in managing their spouses and children properly, being a dutiful person, and doing things in a clean way.” Officials will now be required to sign compliance pledges.
→ Responding to the news of a growing monkeypox outbreak in the United States, the CDC has advised that the public “should not be concerned.” Could anything be more disconcerting? While monkeypox can cause severe rash and flu-like symptoms, it is usually mild and not typically found in the United States—nor in Europe or Canada, where more than 60 cases have been reported, suggesting that there is now community spread of the virus in the West. The cases have so far occurred among gay and bisexual men and have not posed any severe health risks, but the unusual appearance of the virus outside of West Africa, where monkeypox is endemic, has raised questions about its origins and growth. And as monkeypox appears poised to become a new public health issue, countries are beginning to sign contracts with drug manufacturers to procure vaccines; the Food and Drug Administration, meanwhile, reportedly has plenty of vaccines in the Strategic National Stockpile and insists that it, along with health officials, is closely monitoring the situation. What is there to be worried about?
→ Brad Smith, the president of Microsoft, went on a “transcontinental charm offensive,” as Bloomberg News put it, hoping to avoid the fate that has befallen other Big Tech companies in Europe in recent years. Amazon, Alphabet, and Meta have all been fined hundreds of millions of dollars amid a strong new antitrust push in the European Union, and Microsoft was especially concerned about a complaint issued by European cloud-computing companies late last year, alleging that Microsoft’s cloud-software was violating antitrust laws. Speaking to a roomful of regulators and cloud-software rivals in Brussels on Wednesday, Smith took a conciliatory tone, insisting that “[w]e need to help regulation work,” before he made a significant concession to the group: that rival companies could run Microsoft’s software “pretty much the same way Microsoft can,” though this is a privilege exclusively reserved for the smaller European software companies and not Microsoft’s U.S. rivals. It remains to be seen, however, if this will stave off the E.U. regulators.
Additional reporting and writing provided by The Scroll’s associate editor, David Sugarman
Your Weekend Reads
→ “At the top, around the corner on Grizzly Peak Boulevard, stands a dark wooden house. For almost 20 years, the Polish poet Czesław Miłosz lived here in obscurity, descending to teach Slavic literature to long-haired students he didn’t understand—until one day in 1980, when the Nobel committee called to inform him that he’d won their prize for literature,” writes Joy Neumeyer, about the man most known to Western audiences for The Captive Mind, his 1953 study of totalitarianism and how Stalinism seduced a generation of Eastern European intellectuals. Neumeyer is interested in the early body of work Milosz accumulated long before that fateful call from Sweden, and how his years afterward, immersed in the peculiar sensibilities of Northern California, affected his own ideas about a writer’s isolation and withdrawal from the powerful social forces around him. First dismissive of the insight she found in Milosz’ early work when she read him as a graduate student almost a decade ago, Neumeyer has taken stock of the pressures now on independent thinking and discovered new reason to unpack how and why Milosz first fled the vulgarities and oppression of post-war Poland:
I returned to his work in search of answers for why so many believe in systems that they know to be destructive—and how some decide to break ranks. Instead of an artist who saw himself as above the fray, I discovered a thinker who constantly grappled with the tension between engagement and resignation, certainty and doubt. The Captive Mind does not speak with the confidence of the unconverted. Miłosz wrote it to dispel his continued attachment to Communism and to his friends who remained within its fold.
Read more: https://thebaffler.com/latest/miloszs-magic-mountain-neumeyer
→ Roberto Bolaño died young, at 50 years old in 2003, just a few years after the Chilean novelist and poet found literary fame for his 1998 hit The Savage Detectives, but before his 2004 book, 2666, launched him to international acclaim. The wild reception of that novel began what Chris Power describes as the “ posthumous Bolaño industry,” a steady production of almost two dozen publications of increasingly little value as those in charge of his estate continue the “ransacking of Bolaño’s unpublished works,” including “Cowboy Graves,” the most recent publication of a bound selection of rough-edge novellas of dubious distinction. Power wonders, how did we get here?
His sustained productivity left his heirs and literary executors with access to a large amount of unpublished material just when his global reputation was going supernova. The peak spanned 2007 and 2008, between the publication of The Savage Detectives in English and 2666 winning the National Book Critics Circle Award in the US. The collision of burgeoning reputation and a reserve of available—you could say exploitable—material has resulted in more than a decade’s worth of underwhelming novels and story collections slouching into the world, reaching its nadir (so far) in 2019 with the slight but interminable novel The Spirit of Science Fiction (written in the 1980s, when it failed to find a publisher). In the heady post-2666 period there was genuine expectation—unrealistic in retrospect—that another masterpiece might emerge. Now the hope surrounding a “new” Bolaño is that it won’t suck.
→ A poet-rabbi and a former Goldman Sachs derivative banker walk into a podcast to discuss meme stocks, the rationality of the absurd, Jacob and Esau, Machiavelli, the morality of Wall Street, and the panic of a daily deadline. That, at least, is part of the conversation between Matt Levine, Bloomberg columnist and former banker (with a background in classics), and Zohar Atkins, the writer and rabbi whose Substack writing has made a few appearances here in The Scroll.
Check out the recent conversation with Levine on Atkins podcast, “Meditations with Zohar”:
Hear more: