Courtroom Tales of Martha's Lies . . . [NYT Editorial supports jury's conviction of Martha]

So summer, you seem like a nice person from your posts.

Thanks, Regulator. :)

I clicked your link and read the Rockwell essay, but my impression from the juror's remarks is that the jury actually did not buy the story that a standing agreement to sell Martha's stock at $60 existed, but, they could not convict on the "changed ink" theory of the government, due to the doubt cast on that theory by the government's own expert witness. By "changed ink" theory I mean the stockbroker's "@$60" written notation which the government claimed was LATER written by the stockbroker next to Martha's name as part of the cover up.

For me, this case simply the following: the government is trying to investigate Waksal, and as part of their investigation of Waksal, they find themselves talking to Martha Stewart, not intending to go after her.

But, because Waksal is her social friend, and doesn't want to make him look bad in any way, Martha is motivated not to cooperate with the investigation, and instead, lies to the federal officials. Big mistake on Martha's part. Because in doing so, now, Martha has committed a crime.

The feds now have this scenario before them: the opportunity to teach everyone NOT to lie to federal officials, via a lesson thanks to this well known public figure who did lie.

And, the feds seized this opportunity, because had it been Joe Blow who lied, the lesson would not have been covered in the media -- and yes, of course the feds knew that.

But, I do not blame federal prosecutors for being peeved at Martha because these cases of white collar crime are often quite complicated, and the federal government, I do believe, has the right to expect cooperation from people they are questioning.

Had Martha met with prosecutors, and her lawyer, and told prosecutors: "Here is what truly happened" and told the truth -- well, what then?

I don't think Martha would have been prosecuted for anything. But that would have required Martha to been more faithful to the law than to her social connections. It is difficult for the wealthy to do that.

I feel sorry for Martha in one sense, because she did build her company from nothing and she is not busy plotting criminal schemes, but, I also feel that when one is questioned by federal officials, one should tell the truth. I don't think that places an unfair burden on a person.

As far as going after her in "civil court", do you mean that she is being charged under SEC administrative laws or is the government actually suing her ?

Well, here's some of the quote that I got my information from, if it makes it clearer to you. The whole post is at Dispatches from the Martha Stewart Trial It's a pretty good read in its entirety, if you're interested.

As I have explained in previous dispatches, the SEC has filed separate civil insider trading charges, which carry a lower burden of proof and don't involve jail time, against Stewart for selling ImClone after learning of the Waksal sale (as distinct from the Erbitux information). Technically, the Waksal sale information is not "inside" information but a form of "market" information. The distinction? "Inside" information pertains to the operations and/or performance of the company; "market" information pertains to the demand for the company's stock. In this case, the issue is complicated by the theory that Stewart could infer inside information—the Erbitux rejection—from the Waksal sale. I would argue that, especially to a CEO like Stewart, who was used to selling stock in her own company for reasons other than impending disaster, the Waksal sale information was not as material as the government is making it out to be.

As to the insider trading question, I thought that there were federal laws against it, but that the definition was left up to the SEC. However, I do not have any references to back that up, so will concede I may not have that straight.

Drew Garrett

True to being the liberal paper of record, they have an article today speculating that some people think she was brought down for being a Democrat.

Looks like the NYT wrote the editorial before the DNC sent them the fax.

There were two other interesting articles that came out today about this matter. I'll post them on this thread.

From today's NYT:

STEWART'S FOLLY

There's a Reason Your Mother Told You Not to Lie

By ALEX BERENSON

Published: March 7, 2004

IN the end, the case turned out to be a slam dunk.

After months of debate about whether prosecutors made Martha Stewart a target because of her fame and after an apparently serious setback to the government's case only a few days earlier, jurors on Friday convicted Ms. Stewart of four counts of conspiracy and obstruction of justice. They had begun deliberating only two days earlier.

The quick conviction may not settle the public debate over whether Ms. Stewart was treated fairly. But defense lawyers for white-collar criminal cases say the focus on Ms. Stewart's celebrity misses the point. The real lesson of the case, they say, is that it once again proves the potency of a little-known federal law that has become a crucial weapon for prosecutors.

The law, which lawyers usually call 1001, for the section of the federal code that contains it, prohibits lying to any federal agent, even by a person who is not under oath and even by a person who has committed no other crime. Ms. Stewart's case illustrates the breadth of the law, legal experts say.

Ms. Stewart was convicted of obstruction of justice and making false statements to F.B.I. agents and investigators from the Securities and Exchange Commission who were investigating her for insider trading. (Her former broker, Peter E. Bacanovic, was convicted of four out of five counts of conspiracy and obstruction of justice.)

But Ms. Stewart was never charged with criminal insider trading, suggesting that if she had simply told investigators the truth she would not have faced criminal charges. The only counts the jury considered related to her behavior during the investigation.

"This was a classic case of the cover-up being worse than the crime," said Seth Taube, a white-collar defense lawyer at McCarter & English, a law firm in Newark. "It's an easy case to prove a lie."

That disturbs civil libertarians, who say that 1001 charges typically criminalize behavior that most people would not recognize as illegal.

"This 1001 law is really a remarkable trap," said Harvey Silverglate, a criminal defense lawyer in Boston.

People lie all the time to colleagues, friends and family, Mr. Silverglate said, and unless they are legal experts they probably do not know that lying to any federal investigator is illegal even if they are not under oath.

And F.B.I. agents and other investigators usually do not tape-record their conversations, so people can be convicted of making false statements based only on an investigator's notes, which may not exactly reflect what was said.

"Any casual conversation between a citizen and a person of the executive branch is fraught with the possibility that you can be convicted of lying," Mr. Silverglate said. If the government wants to make sure it is being told the truth, he added, it should put people under oath. "That's why we have perjury laws - because we tell people this time you're under a special formal obligation to tell the truth," he said. "And by the way, you'll notice it doesn't run in both directions, so a federal agent can lie to you, can trick you, in order to get information."

But prosecutors, and even some defense lawyers, say that 1001 charges are an essential tool that allow the government to punish witnesses or defendants who mislead investigators. Even if the prosecutors eventually decide not to bring criminal charges for the actions that initially prompted their investigation, lying should be taken seriously, Mr. Taube said.

"The fact that lying to the government can be a crime when the government doesn't charge the underlying offense doesn't bother me," he said. "You have an absolute right in this republic not to talk to the government, but it makes sense if you open your mouth that you should choose your words wisely."

Mr. Taube said Ms. Stewart's conviction offered an important lesson to anyone being interviewed by the F.B.I. or other federal agencies. "Fundamentally, if they make an appointment with you and sit down, you've got to know you're on the record," he said. "With the government, you're always on the record."

BTW, I did not realize this, from above artivcle: Ms. Stewart was convicted of obstruction of justice and making false statements to F.B.I. agents and investigators from the Securities and Exchange Commission who were investigating her for insider trading

I thought the initial reason for questioning her only concerned finding out if she could be a witness against Waksal. But, if she herself was the target of the investigation, I can see why people on this thread said it would have been better if she had said nothing from the start.

artivcle = article

how about reporters and editors ?

Article #2 is from today's NY Post:

STEWART JURY TEACHES WALL STREET SOME LESSONS

By TERRY KEENAN

March 7, 2004 -- THE jury has spoken in the Martha Stewart case. Stewart rolled the dice in Federal Court and lost big time. Here now, a few lessons from the Trial of the Decade on Wall Street:

* Celebrity doesn't trump the law. Jurors in this case say they weren't swayed by Martha's fame and fortune. In fact, the real diva (and not in the pejorative sense) in Courtroom 110 was Judge Miriam Goldman Cederbaum who captivated the jurors' attention and respect. No doubt, the eight women and four men on the panel followed Cederbaum's instructions on the law to the letter and were more concerned about disappointing Cederbaum than they were Stewart.

* Celebrity friends do not make good courtroom accessories. Ironically Stewart, whose affinity for socialite scientist Sam Waksal got her into this mess in the first place, thought quick cameos by friends like Rosie O'Donnell and Bill Cosby would sway the jury. After the verdict, jurors said the celebrity visits had, if anything, a negative effect.

* Don't attack the Attorney General in Federal Court. Stewart's attorney Robert Morvillo took pot shots at Attorney General John Ashcroft in both his opening and closing arguments to the jury, asking them to send a message that the Stewart prosecution was overly aggressive. The jurors sent a message, alright. Juror No. 8 said the verdict "sends a message to bigwigs in corporations they have to abide by the law"

* Jury consultants can get it wrong. Stewart reportedly spent upwards of $1 million on jury and image consultants. In the end, her so-called dream jury dominated by older upper-middle-class women weren't so sympathetic after all.

* It wasn't all about the star witness. Stewart's and Peter Bacanovic's lawyers spent the bulk of their time attacking the credibility of key government witness Doug Faneuil, whom they called "the living example of reasonable doubt." But in the end, juror Chappell Hartridge said, it was the testimony of Stewart's teary-eyed assistant, Ann Armstrong, that was the most compelling.

* When putting on a defense, at least look like your trying. Stewart's big-bucks attorney delivered only a 20-minute defense for the domestic defendant. Jurors who devoted seven weeks of their lives to the case said Stewart's one-witness defense made a "joke of the jury." Dennis Kozlowski are you listening?

* Even high-priced lawyers can make mistakes. Martha Stewart's legal team was supposed to be the best defense money can buy, but Morvillo's closing arguments backfired. His argument that Stewart and Baconovic were "too smart to have done something so dumb" was, in fact, the very definition of most white-collar criminals.

* Watch out what you ask for. In his summation, Morvillo asked jurors not to compromise by convicting Stewart on some felony counts and not on others. In his all-or-nothing bid for full acquital, Morvillo got a clean sweep, alright - convictions on all counts.

TERRY KEENAN is senior business correspondent and anchor of Cashin' In, an investing program that appears on Fox News Channel on Saturday mornings at 11:30. E-mail terry.keenan@foxnews.com.

Thanks for the link to the article. Leave it to the NYT to represent any prosecution/conviction of a democrat as a partisan witch-hunt, citing only hearsay from anonymous "sources." According to them, such prosecution/conviction couldn't be the just result of criminal offense by said democrat.

Not a bad summary by the NYP, although they're a bit harsh on Morvillo (who is at a distinct disadvantage here since he can't reveal details of his advice to her and her reluctance to accept it). It's not easy to represent a client like Stewart. She dug a deep, deep grave for herself, jumped into it, pulled the earth over her, then insisted that Morvillo undo all that.

For corrections to the rest of your mistaken notions about insider trading

The mistaken notions appear to be mostly on your part, as you still don't seem to understand the difference between agency rules and criminal codes. Title 18 of the United States Code defines crimes, and so far, in all of the links you have left me, I find only oblique reference to "insider trading" as a crime. Specifically, it appears to be something that is a violation of Rule 10b-5. Note the label "Rule", not "law".

Your securities link even had a laughable comment that the SEC is allowed to "impose criminal sanctions..." - there is no agency of the Executive branch which has the legal ability to impose any criminal sanction. That's what the Judicial Branch is there for.

Even the 1984 Act and the ITSFEA appear to mainly increase civil penalties for 'insider trading'. Where the criminal component comes in is here: Willful violations of the Regulations . Title 15 creates the regulatory structure, and 78ff defines a crime as a willful violation of the regulations that SEC might promulgate. Note that this does what I previously said: it allows an agency rule to have the effect of law, even though it is not in fact a law itself. So you can be administratively charged and fined by the Admin law court of the SEC, and criminally charged for the willfullness of the violation, or other components of a specific set of acts that might violate Fraud or Misrepresentation.

So here's your assignment, Napoleon:

Civil Penalties for Insider Trading under Title 15 - show me the criminal penalty imposed here. There aren't any.

Title 15 - Have at it, Big Guy. This is all of Title 15. Find the criminalizing component for a violation under 78u-1, other than 78ff. Good Luck.

"... the difference between agency rules and criminal codes."

authorize

rules

authorized

"...there is no agency of the Executive branch which has the legal ability to impose any criminal sanction. That's what the Judicial Branch is there for."

Findlaw Legal Dictionary

sanction

['sa[ng]k-shen]

1: a punitive or coercive measure or action that results from failure to comply with a law, rule, or order
Example: a {h,1}sanction for contempt

2: explicit or official approval

3: an economic or military coercive measure adopted usu. by several nations in concert for forcing a nation violating international law to desist or yield to adjudication
********************************************************************

Fax.com Fined Over $5 Million by FCC

Commerce Fines Sun Microsystems For Violating Technology Export Restrictions

College Student Fined By SEC For Stock Price Manipulation

Company Fined By US Commerce Department For Exporting Encryption Software

From the SEC website (all emphasis mine, my clarifications in blue -- see linked page to verify context)...

or internally before an administrative law judge

the Commission [ie. the SEC] may bar someone from the brokerage industry in an administrative proceeding

[IOW, somebody broke a law and the SEC imposes a sanction for that crime]

, but an order barring someone from acting as a corporate officer or director must be obtained in federal court. Often, when the misconduct warrants it, the Commission will bring both proceedings.

...

Administrative action: The Commission can seek a variety of sanctions through the administrative proceeding process. Administrative proceedings differ from civil court actions in that they are heard by an administrative law judge (ALJ), who is independent of the Commission. The administrative law judge presides over a hearing and considers the evidence presented by the Division staff, as well as any evidence submitted by the subject of the proceeding. Following the hearing the ALJ issues an initial decision in which he makes findings of fact and reaches legal conclusions. The initial decision also contains a recommended sanction. Both the Division staff and the defendant may appeal all or any portion of the initial decision to the Commission [ie. the SEC]. The Commission may affirm the decision of the ALJ, reverse the decision, or remand it for additional hearings. Administrative sanctions include cease and desist orders, suspension or revocation of broker-dealer and investment advisor registrations, censures, bars from association with the securities industry, and payment of civil monetary penalties, and return of illegal profits.

****************************************************************

One last attempt to educate you and then I'm outta here...

Here are actions included under "criminal sanctions" (from the website of another federal agency, the NRC:

...criminal sanctions may include imprisonment, fines, restitution of monies, and rendering of community services.

IOW, fines are grouped along with those other remedies classified as criminal sanctions, and fines, as I've demonstrated above can be enforced by a variety of federal agencies without recourse to the court system, ie. by internal, administrative process -- a process whose recommendations an agency such as the SEC can accept or reverse.

If you still want to argue with all this (and I'm sure you do), take it up with the federal agency lawyers who wrote it.

Clay Bennett, The Christian Science Monitor, Boston

I meant to also ping you for the cartoon in post #94.

It looks like the liberals of the world have regained their abhorrence for lying, lost since their halcyon days of whine and Clinton.

Once again, you have done just the opposite from what you intended. Simply because Congress authorizes an agency and its regulations does not make the regulations part of the criminal code, Title 18.

Your Findlaw only alludes to how the the SEC can make an accusation in Federal court; it can impose no criminal sanction, i.e., find you guilty of any crime. That would be up to the Federal court and its jury (you have heard of trial by jury, right, Genius?).

All the other references are to civil penalties for violating agency law. Such a fine will not leave you or your company with any criminal record in the Federal Judiciary; there will only be a record of an enforcement action at a particular agency, such as the SEC or the FAA or the NTSB, for example. These will only affect licensure privileges, in most cases. Companies get fined all the time: go to the FAA website and look at the fines that the major airlines routinely have to pay. No one goes to jail, no has a criminal record, no jury has to sit and listen, the only thing that happens is the agency attorneys make their case in front of the administrative law judge. Same with pilots; enforcement actions happen all the time, people are found to have violated a regulation, but the only thing that happens is either a fine or loss of license. Such an action does not result in a conviction for either a misdemeanor or a felony. As such, it is not "criminal".

Fines can indeed be part of a criminal penalty, but that is not the case with agency sanctions, since by definition, violations of them are not crimes. IOW fines can be incurred under both civil and criminal cases. But it isn't the same thing.

As far as chatting with the Federal attorneys who wrote some agency rules, I don't need to bother. The guy who brought me into the world was one of those guys, and he and I have had long talks about the ALJ system and its fundamental Un-Constitutionality, even in its current state.

By the way...

1: a punitive or coercive measure or action that results from failure to comply with a law, rule, or order

Note again that the distinction is made between a law and a rule, even here.

I'm going to give you a very brief primer on insider trading and relevant law. I truly hope this will clear up your continuing confusion.

There are two types of insider trading. One is legal, the other is not.

The legal version is when corporate insiders, such as officers, directors or employees buy or sell stock in their own companies. When corporate insiders trade in their own securities, they must report their trades to the SEC, through filings (form 4, I believe). These trades cannot be based on non-public information.

The illegal type of insider trading involves buying or selling a security, in breach of a fiduciary duty or other relationship of trust and confidence, while in possession of material, nonpublic information about the security. Insider trading violations may also include "tipping" such information, securities trading by the person "tipped," and securities trading by those who misappropriate such information.

The relevant Securities law and case law on insider trading are as follows:

The 1934 Securities Exchange Act addressed insider trading directly through Section 16(b) and indirectly through Section 10(b).

Section 10(b) makes it unlawful for any person "to use or employ, in connection with the purchase or sale of any security registered on a national securities exchange or any security not so registered, any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the [SEC] may prescribe."

(And there are other sections of the 1934 act which come into play, such as 14(e), but this is a primer, so I'll be brief.)

To implement Section 10(b), the SEC duly and lawfully adopted Rule 10b-5, which provides, in relevant part:

It shall be unlawful for any person, directly or indirectly

(a) to employ any device, scheme, or artifice to defraud,
(b) to make any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading, or
(c) to engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person, in connection with the purchase or sale of a security.

These broad anti-fraud provisions, make it unlawful to engage in fraud or misrepresentation in connection with the purchase or sale of a security. It is on the basis of those provisions that the courts have exercised their lawful authority to make US case law on insider trading.

As I've pointed out to you previously at linked pages, Congress has twice passed major legislation addressing, among other things, the penalties for this violation:

The Insider Trading Sanctions Act of 1984, Public Law 98-376 [H.R.559], August 10, 1984

and

The Insider Trading and Securities Enforcement Act of 1988, Public Law 100-704 [H.R.5133] November 19, 1988.

The substantive law of insider trading is judge-made case law which on several occasions has reached the USSC. Let that sink in. Give it a minute to register. Not all the laws dealing with insider trading are found in the US Code, only some of them. It's just a legal fact. You don't have to like it, but please stop arguing about it.

The core principles for a determination of illegal insider trading are set forth in three USSC cases (yep, there are more, but again, this is a primer for your benefit):

Chiarella v. United States, 445 U.S. 222 (1980)

Dirks v. SEC, 463 U.S. 646 (1983). This opinion establishes that the insider breaches that fiduciary duty if he acts against the corporate interest; and that the recipient of the information has an obligation to refrain from trading only if he knows the guilty circumstances under which the information was passed along to him.

United States v. O'Hagan, 521 U.S. 642 (1997). This opinion made clear that the breach of duty by which the information is obtained and its illegal use, could involve a duty of trust and confidence other than between a corporate insider and the shareholders of the corporation whose securities are traded.

If you still want to believe there is no legitimate basis for insider trading convictions in the US Code or federal case law or SEC regs, fine. Believe whatever you want. I'm sure Mr. Waksal will be glad to know that at least somebody believes his conviction on insider trading charges is a miscarriage of justice and a violation of his constitutional right to cheat his shareholders.

This is my last post to you on this subject. Say whatever you want.

It's worse than I thought. FR has turned into a place for the uninformed, the ill educated, whose emotions, instead of FACTS,are the basis for unthoughout replies.

Please keep on posting the much needed FACTS!

Well, sorry it took so long to get back to ya, Nappy. Had a lot of real work to do, couldn’t waste that much time on trivia. But now it’s time to respond.

But first…a little comment from a real lawyer:”Administrative law is an oxymoron”. You tell us what it means. I think it’s been my point all along.

First, let’s let one of the issue sites make a comment (“Let this sink in”): "Although properly speaking, regulations are not law, rules and regulations have the full force and effect of the law" -

Original Intent

Nice website. But they go a little overboard towards the end there. But the point remains…..Federal rules are not Statutes. Period. Case law since the late 1930’s has basically clarified that the Statutes can make a rule have the same weight as a Statute, but…they still cannot convert the one into the other. Sort of legal entropy if you will. You can’t go backwards.

And so there are two questions that pervaded our little back and forth…

You assert that violations of Federal Regulations are crimes, and that agencies, like the SEC, can mete out criminal punishment.
You assert that “Insider Trading” is a crime by virtue of case law and SEC Rules, specifically.

To answer both of these, let’s take a little walk through the website that you linked to:

SEC

So, if they just have crimes to pursue, how come they have a law court? This isn’t a federal court:

SEC Enforcement

Funny, huh? All they have is references to their Civil litigation actions they have brought, Administrative law court decisions (that’s what the ALJ Initial Decisions and Orders line is about), and other civil actions.

It appears that they do precisely what I said they do:

More from Enforcement

Note that enforcement "actions" are only against "regulated persons".

That is: "In proceedings against regulated persons, the Commission is authorized to order the payment of civil penalties as well as disgorgement"

NOTHING ABOUT IMPOSING CRIMINAL SANCTIONS. THOSE ARE REFERRED TO THE DOJ FOR PROSECUTION IN THE FEDERAL COURTS. (Let that “sink in”).

So just how do we get to a criminal court? Well, we’d have to violate a law, right? How in the world could violating a Rule be criminal – after all, I just showed you the SEC’s own enforcement division web page…and they said nothing about things like how you get to prison. Just things like how they can fine you, or take away your license…oops, all the things I said they do about 5 posts ago. So where oh where does the law come in – and not by the back door of case law like Chiarella or O’Hagen.

That’s easy. Through the United States Code – NOT the Code of Federal Regulations. You keep alluding to the 1934 Securities and Exchange Act? That is precisely what 15 USC Chapter 2B is: 15 USC 2B

If you’re reading O’Hagen or whatever, and you read someone say something like “This was a violation of the 1934 Securities Act”, well, what they really meant was 15 USC 2B. The long version is just how the chapter can be cited. So don’t get confused and think that the Securities Act is something special, and standing alone all by itself. It isn’t. It’s an ordinary chapter in the USC. Again, NOT the CFR.

The whole chapter is listed here:

All of it

So all of the authority for the SEC and the declarations of what is lawful and unlawful in relation to the 1934 Act therefore are contained in this chapter. All SEC regulations and case law derive their legitimacy from this Chapter. If violation of an SEC rule is to somehow be transformed into a crime, it has to come from here, because no place else does it say that in general, “rules is crimes”.

That occurs here, in a rather general way: 15 USC 78j

Didja get that part? "Insider trading" is not a Statute, but is in fact left specifically to the SEC to define as a rule! Therefore:

"Insider trading" is only "unlawful" by inference of the operation of 15 USC Chapter 2B Sec. 78j, which says that it's unlawful to violate the fraud or deceptive device or insider trading rules so adopted by the SEC under their authority.

Let’s stop right there. Didja really, really get that subtlety? The Statute says it’s against the law to violate the regulation. The regulation by itself has no authority. All of it derives from………the Statute. By itself…the rules are civil matters. When you violate Rule 10b-5, it’s only a crime because….you’re really violating 15 USC Chap. 2B Sec. 78j.

Is this really difficult for you to understand?

Note that the Civil Liability for "insider trading" is actually here: 78t-1

And here is the actual penalty that is all the SEC can "impose" by itself, spelled out: 15 USC 78u-2

Note that it requires "willful violation". WILLFUL VIOLATION is the ONLY way it can ever be extended to a Criminal court, and that is spelled out here:

The Willful Part

Note that a defense is "not having knowledge" or not "willfully" violating a regulation authorized under the act. In fact, here’s a little tidbit from the journalists that you like to quote:

“This factor may also suggest that Waksal had no criminal intent at the time of his sales and that it all might have been handled as a civil SEC matter”

This time the journalist got close to being right. Rules are not laws; the only time a Statute operates is when a Rule is willfully violated – i.e., intent is provable.

This started out by me saying that agencies of the Federal government cannot write their own laws that are crimes; only Congress has that power. But, that willful violation of rules promulgated under authority given by Congress can make the violation of a rule a crime – and that this catenation is critical. Otherwise, it is a civil matter. And that is the reason all of the rule making agencies have their own court system – the Administrative Law courts, including the SEC.

Your rejoinder is that the 1934 Securities Act and Common Law is what makes “insider trading” a crime. I have shown you that 15 USC 2B contains only an indirect reference to such, and leaves it to the rule making capacity of the agency to define such a thing.

In general, agencies may propose rules only within the scope and bound of the enabling Statute. This is described in 5 USC Ch. 6 Sec. 601:

“the term ''rule'' means any rule for which the agency publishes a general notice of proposed rulemaking pursuant to section 553(b) of this title, or any other law, including any rule of general applicability governing Federal grants to State and local governments for which the agency provides an opportunity for notice and public comment, except that the term ''rule'' does not include a rule of particular applicability relating to rates, wages, corporate or financial structures or reorganizations thereof, prices, facilities, appliances, services, or allowances therefor or to valuations, costs or accounting, or practices relating to such rates, wages, structures, prices, appliances, services, or allowances; “

And that settles it as far as I am concerned. My original understanding of the status of rules and of the powers of federal agencies remains intact. You can argue all you want that the operation of Statute converts a rule into law, but nowhere does the Code of the United States say that. It says that Statutes may designate agency rules that are to be followed, but it is the Statute itself which, when a rule violation occurs, that is referred to.

Now your understanding is to some extent an understanding which has become traditional, largely through usage, case law (as you assert) and through outright usurpation of power by federal agencies which are merely trying to see how far they can push the boundaries. This whole subject is referred to as Delegation and is quite controversial. In fact, the growth and power of the CFR has led even someone like Justice Breyer to suggest that the entirety of the CFR be introduced and adopted by the Congress, so as to legitimate it as law. His proposal includes doing this in the future with any NPRM which has an impact of > $100 million. Where he gets such an arbitrary figure, who knows. But Breyer admitted that the actual threshold value should be as small as possible without drowning Congress in mountains of proposed trivial regulations.

But I would maintain that that is what Congress was sent there to do and if they can’t consider something because of their backlog, then it should never see the light of day. Convenience is not an argument for unconstitutionally handing over legislative power to the Executive. This is something that got started under the Socialist Party platforms as adopted by the Democrats in 1932 with FDR and which has snowballed ever since.

If you’d like to read some real Conservative critiques of the Adminstrative State, go here:

Constitution.org on the Administrative State

Since your foaming-at-the-mouth advocacy of the tyranny known as the Administrative State has shown you to be anything but a Conservative, I thought that this rather well known Conservative website would be a good place for you to read some the underpinnings of the notion that FDR’s arrogation of power into the hands of the unelected and unaccountable is unconscionable and the source of the opposition that we Conservatives assert. Who knows, after reading such revolutionary notions you may even decide to flee the Democrat Party, the worship of the Judiciary and the Executive bureaucracy, and realize that much of what the Federal government does these days is quite outside the Constitution and, just because they do it anyway, still doesn’t make it right. Even if they can find a Circuit Court judge or the occasional SCOTUS “Justice” to say so.

And even though I think CATO is far too doctrinaire, they do have this rather interesting piece: Cato on Regulation

All in all, I’d say your positions are the indefensible positions of the Statists who seek to rule the country through Executive fiat, legitimated by their Fellow Travelers in the Judiciary. Beats having to run for election.

And since that seems to be your outlook, what the hell are you doing on a forum like FreeRepublic? Wouldn’t you be happier at Socialist.org – where Bony wants to be…. ? Maybe you could hum the Internationale while dreaming of writing your very own punitive regulation that would justly take the unjustly gained property of the rich! Onward to victory, Comrade! You have only your chains to lose!

See ya, Commie-Parte. Your side may have the upper hand at the moment, but nothing lasts forever, especially tyranny.