The Economics of Blind Justice

Primeape's picture
Rank: Baboon | 106

When I opened Tuesday's (June 19th) Journal, I was struck by an interesting dichotomy between two articles. The front page profiled a picture of "The Rocket", front and center, (Clemens Acquitted in Perjury Case) and his perjury trial victory. Flipping ahead a few pages (well actually clicking - I find reading a physical newspaper on the subway during rush hour traffic virtually impossible) to the popular 'Money and Investing' section, I came across an article describing the guilty verdict that had been passed in the Rajat Gupta insider trading case. (Rajat Gupta - Guilty)

Save for what mass media told me, I cannot speak eruditely or with certainty to the validity of the two jury's decisions. However, I am perfectly capable of formulating an opinion based on the information conveyed. Presented below is an overly simplified and perhaps bias tinged (although I tried to avoid this) synopsis of the two cases:

  • At stake in both cases: A man's freedom
  • Defendant 1: Rajat Gupta; an orphan from India, who attended Harvard on scholarship and rose to be head of Mckinsey and Co. Accused of passing insider information gleaned from his position as a director on Goldman's board, to head of Galleon Group, Raj Rajaratnam(convicted last year)
  • Defendant 2: Roger Clemens; one of MLB's most successful and dominant pitchers, with over 350 wins and career ERA of 3.12. He also won 7 Cy Young awards and was an 11 time MVP. Identified by former trainer Brian McNamee as being on the Mitchell Report for taking performance-enhancing steroids. Indicted by the DOJ on several charges, including perjury and obstruction of justice.
  • Quality of Evidence submitted in both cases (now here is where personal opinion and bias may warrant a difference in opinion): Circumstantial at best. According to the WSJ on the Gupta Case

    The deliberations--in one of the most important cases on insider trading in Wall Street's history, involving a particularly prominent defendant--were challenging for jurors because the government's case was built almost entirely on circumstantial evidence.

    And on the Clemens trial,

    Marc Mukasey, a former federal prosecutor who once handled steroids cases, said he wasn't surprised by the outcome, given the prosecutors' struggles with their chief witnesses' credibility. "I think the government's case had a lot of proof problems [...]."

  • The Verdicts: Gupta was convicted on three counts of securities fraud and one count of conspiracy. Clemens was acquitted on all charges of lying to Congress.

Now comes the time to play devil's advocate (pun somewhat intended I suppose). On the face of it, two jurys comprised of the defendants peers (jury selection is entirely different can worms, best discussed in a separate forum) had relatively circumstantial evidence to decide the fates of two wealthy, high profile men in cases of fraud and perjury. For arguments sake, let us suppose they were both guilty. In reference to the Clemens case (but wholly applicable to either situation), Hall of Famer Goose Gossage captures the sentiment perfectly -

O.J Simpson, did you believe he didn't kill those two people?

. So if justice is blind and one is innocent until proven guilty - how can two similar cases, yield such dramatically different results?

I don't want to point to the vilification and ostracism of Wall Street and it's more powerful, wealthier titans. I'm sure that there is strong negative sentiment towards the 1% (especially those who have made their money on the street). I don't want to insinuate that the adoration with which the masses view celebrity athletes (who often make an equally ungodly amount of money) and put them on a pedestal, often allows them greater leeway in the eyes of the law. While these are all questions a rational, curious individual might ask or assert - I'm trying to take as neutral a stance on the subject. I want to turn it over to all the monkey's out there: the one's who have made it and will one day be as baller as Rajat Gupta (monetarily anyway), the one's struggling to make ends meet at school (with aspirations of making it) and the one's who've already run their race and are wiser for it - everyone, the entire spectrum: what happened? Do you think there is credence to the argument that a significant bias may have been the cause of such diametrically opposite outcomes in what seem like similar situations(to me anyway)? Or on the flip-side, is Wall Street just so used to being portrayed as the villain that me/we/whoever can't see the outcome of two uncorrelated cases in anything but a prejudiced light? Just curious?

Comments (7)

Jun 24, 2012

Don't do the crime, if you cain't do the time.

Jun 24, 2012

I personally feel like the vast majority of the American people have their priorities strongly misplaced. I believe that people, such as those sitting on the jury in a case such as Rajat Gupta's, see a case involving fraud in the financial sector and immediately decide that the defendant is guilty. A trend I've noticed that is quite disturbing to me is that people in this day and age are used to flipping on the news station and hearing a brief synopsis about what happened, and these same people then assume that they know enough about the given topic to make decisions such as whether or not a person like Rajat Gupta is guilty. They feel like they can do this due to what I perceive as emotional interference with logical thinking. For people like this, losing money or defaulting on a mortgage is easy to blame on financial institutions. Even if the person doesn't consciously believe that they blame these institutions, they often do subconsciously. Inability to accept responsibility for one's actions leads to a sense of dissatisfaction with the people or institutions "responsible" for the actions.

So, as you said, there is a strong bias in most of the American public towards the people that they blame for their own fallacies. Whether subconsciously or not, those people on that jury had a much greater chance of convicting Mr. Gupta the second they were informed of the charges and his status. It is much easier for the jurors to sit there and allow everything that they are hearing to make sense strictly because of their subconscious assumptions before they even hear any of it. That's just how humans work. Everyone wants money, and when they are deciding the fate of someone who has a lot of it and may have cheated the system, that is already preconceived as corrupt and evil, to get it, it's very easy for them to see it as "guilty until proven innocent" instead of the other way around.

The Clemens trial brings me back to what I said before: I personally feel like the vast majority of the American people have their priorities strongly misplaced. Baseball provides entertainment for millions of people. Entertainment is placed very highly on most people's list of what they care about. What I mean by this is that people like to be entertained. They don't like dealing with their financial problems. Immediately, entertainment has a positive emotional connection in people. When they hear "baseball player", they think entertainer. When they hear "management consultant", they immediately connect it to the negative emotions linked to dealing with their financial life. Subconsciously or consciously, these connections are there, and they can cause the probability of a decision to be heavily weighted in one direction before they know anything about the actual content needed to logically create that decision. I find that highly emotional people are less successful because of this and similar phenomena. It also has a lot to do with the way that our society currently functions. Instant gratification in so many situations makes people more prone to do things instantly.

Jun 25, 2012
BVMadden:

I personally feel like the vast majority of the American people have their priorities strongly misplaced. I believe that people, such as those sitting on the jury in a case such as Rajat Gupta's, see a case involving fraud in the financial sector and immediately decide that the defendant is guilty. A trend I've noticed that is quite disturbing to me is that people in this day and age are used to flipping on the news station and hearing a brief synopsis about what happened, and these same people then assume that they know enough about the given topic to make decisions such as whether or not a person like Rajat Gupta is guilty. They feel like they can do this due to what I perceive as emotional interference with logical thinking. For people like this, losing money or defaulting on a mortgage is easy to blame on financial institutions. Even if the person doesn't consciously believe that they blame these institutions, they often do subconsciously. Inability to accept responsibility for one's actions leads to a sense of dissatisfaction with the people or institutions "responsible" for the actions.

So, as you said, there is a strong bias in most of the American public towards the people that they blame for their own fallacies. Whether subconsciously or not, those people on that jury had a much greater chance of convicting Mr. Gupta the second they were informed of the charges and his status. It is much easier for the jurors to sit there and allow everything that they are hearing to make sense strictly because of their subconscious assumptions before they even hear any of it. That's just how humans work. Everyone wants money, and when they are deciding the fate of someone who has a lot of it and may have cheated the system, that is already preconceived as corrupt and evil, to get it, it's very easy for them to see it as "guilty until proven innocent" instead of the other way around.

The Clemens trial brings me back to what I said before: I personally feel like the vast majority of the American people have their priorities strongly misplaced. Baseball provides entertainment for millions of people. Entertainment is placed very highly on most people's list of what they care about. What I mean by this is that people like to be entertained. They don't like dealing with their financial problems. Immediately, entertainment has a positive emotional connection in people. When they hear "baseball player", they think entertainer. When they hear "management consultant", they immediately connect it to the negative emotions linked to dealing with their financial life. Subconsciously or consciously, these connections are there, and they can cause the probability of a decision to be heavily weighted in one direction before they know anything about the actual content needed to logically create that decision. I find that highly emotional people are less successful because of this and similar phenomena. It also has a lot to do with the way that our society currently functions. Instant gratification in so many situations makes people more prone to do things instantly.

This is a great post - very, very astute and fine tuned to the human psyche. I think the only caveat is that it applies to everyone in the world - not just the American people. I find it really interesting that you pointed out the source of poor/judgmental decision making - overriding, instinctual emotion. And it's definitely true that the banner of "entertainers" really lets you get away with a lot that might otherwise be considered outlandish and just plain illegal.

Jun 25, 2012

In many cases involving financial crime, it is often very hard to bring a case to court, unless you have a pretty solid case against the guy.

I haven't followed the Gupta case, but I'd imagine they will have a record of the GS meeting, the phone call from a number accessible by Gupta to one by Rajaratnam, minutes later, and then a significant number of shares traded shortly after that, in a topic discussed at the GS meeting.

I find it really hard to believe those events are unrelated. Someone in that position should know better than to call up someone with trading ability inside market hours.

You might want to consider this case when you view things like this. The US justice system is an abomination.
hhttp://www.bbc.co.uk/news/world-us-canada-18266118
Notable things in that video: 95% of cases are resolved in plea bargains, i.e. the guy doesnt admit guilt but goes to court. He was otherwise looking at life, and his own legal advice was to take the deal, as the jury would profile him and it would be a cointoss of the rest of his life.

The bitch got $1.5m compensation from his school too.....

Jun 25, 2012
trazer985:

In many cases involving financial crime, it is often very hard to bring a case to court, unless you have a pretty solid case against the guy.

I haven't followed the Gupta case, but I'd imagine they will have a record of the GS meeting, the phone call from a number accessible by Gupta to one by Rajaratnam, minutes later, and then a significant number of shares traded shortly after that, in a topic discussed at the GS meeting.

I find it really hard to believe those events are unrelated. Someone in that position should know better than to call up someone with trading ability inside market hours.

You might want to consider this case when you view things like this. The US justice system is an abomination.
hhttp://www.bbc.co.uk/news/world-us-canada-18266118
Notable things in that video: 95% of cases are resolved in plea bargains, i.e. the guy doesnt admit guilt but goes to court. He was otherwise looking at life, and his own legal advice was to take the deal, as the jury would profile him and it would be a cointoss of the rest of his life.

The bitch got $1.5m compensation from his school too.....

Yet to watch the video, but absolutely spot on in terms of plea bargains being par for the course.

I haven't followed the Gupta case, but I'd imagine they will have a record of the GS meeting, the phone call from a number accessible by Gupta to one by Rajaratnam, minutes later, and then a significant number of shares traded shortly after that, in a topic discussed at the GS meeting.

You're absolutely right - they have exactly what you mentioned. However, they do not have actual recorded conversations between Gupta and Rajaratnam in which he was passing on confidential information. I mean, it would have to be huge and horrendous consequence that Gupta was just calling his Galleon buddy to make small-talk. But if you're deciding a high-profile case based on circumstantial evidence, I think at the very least the letter of the law should be observed in it's strictest capacity. I feel like if there is leeway in the interpretation of the law (especially the all-important "innocent until proven guilty") - we have much bigger problems.

Jun 25, 2012

I don't know all that much about the Clemens case but the amount of no-hitters and perfect games these days is ludicrous. So maybe steroids weren't all that bad for the game. (Not good for the players but the guys in the NFL are willing to go through a lot more for relatively less money).

I was under the impression the Rajat Gupta case was solid. Wasn't he the one explaining that IB/Consulting money is nice but that seeing HF/PE payouts was unbearable to him?

Jun 25, 2012
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