The reason for the outrage—while Americans have been paying the lion’s share of the bill for Iraqi reconstruction, Iraq has been building up a budget surplus that is projected to reach $80 billion by year’s end. Since 2003 the “United States has put about $48 billion toward reconstruction.” Spending by Iraq for its own reconstruction has been significantly less. Rising oil prices have caused Iraq’s revenues to soar, yet they are spending American taxpayer money to rebuild their nation. “The export of crude oil accounted for 94 percent of Iraq’s revenues from 2005 to 2007, the GAO reported.”

The outrage is understandable. The war and reconstruction have been costly. Despite buzz that the war has been all about oil money, major oil contracts have been handed out almost exclusively to non-American companies. Additionally, Americans were told that this was a cost they would not be responsible for. “Bush administration officials said on the eve of the war that Iraqi oil money would pay for reconstruction.” Deputy Secretary of Defense Paul Wolfowitz is quoted as telling the House Appropriations committee, “We’re dealing with a country that can really finance its own reconstruction, and relatively soon.’”

With an already troubled economy, many Americans have questioned covering the cost of the war itself, let alone the costs of rebuilding. Sen. Carl Levin says, “It is inexcusable for U.S. taxpayers to continue to foot the bill for projects the Iraqis are fully capable of funding themselves.” And, while I agree that this should not be the duty of the American tax payer, I would say that it is equally inexcusable for us to push Iraqis to use government dollars for projects that should be privately funded. If Iraq is to ever have true freedom (something we don’t even have here), our focus cannot be the amount of money they do or don’t have. Our focus has to be adherence to the principles that form and guarantee freedom.

Key Points

• War and its devastations create a uniquely strenuous circumstance. The needs of the people are magnified as basic utilities, systems, and resources are rendered inoperable. Regardless of circumstance, principle is ignorant of need. God is the author of prosperity and He does not play dice with the universe. Principles govern at all times and in all conditions. When need is used as the basis for policy decisions, principle is discarded and freedom and prosperity will consequently die. It is when needs are greatest that principle must be adhered to if lasting solutions are to be found.
• For example, it would have been much more convenient for our Founders to avoid war with Great Britain and just remain subject to the crown than to stand for that which they knew to be right. Yet, had they chosen any path other than the principled one, we would not be the country we are today with the freedoms we enjoy.
• The Iraqi Government will never be able to stand and protect a free people if it is built on a flawed foundation. There are two major flaws being ignored in this foundation:
  • Encouraging the government of a prospective free nation to be the owner of oil reserves and incomes (or of any “public” property).
  • Establishing the habit of using government incomes to meet the needs of the people.
• Both of these flaws are plays taken straight out of the communist handbook. E.C. Riegel said, “When government undertakes to solve man’s problem for him it undertakes the mastery of society and it cannot be both master and servant.”

Conclusion

It is a difficult thing to perceive that the American Government can help establish a proper framework and set a proper example of freedom when we have strayed so far here at home.

Even if the Founding Fathers had chosen to enter a war like this (which they would not have chosen), they would clearly see the dangerous precedent being set here. While it has long been that oil and its revenues have been the property of the Iraqi government, this practice should be abolished in the process of setting up a free nation. Ownership of oil and its subsequent revenues should be private. James Madison said, “I cannot undertake to lay my finger on that article of the Constitution which granted a right to Congress of expending, on the objects of benevolence, the money of their constituents.” I have never had to endure the immediate ravages of war and therefore have no concrete understanding of what it would be like. Regardless of the calamities, however, I believe that if I were an Iraqi, my request would be simple: “Let freedom ring, and let it ring completely.”

Action Items

1. Recognize teaching opportunities as you hear others complain that the Iraqi Government isn’t covering the cost of reconstruction. Share how freedom can’t be achieved by creating a socialistic welfare state.
2. Ponder difficult moments of need in your life. Do you stick to principle, regardless of the gravity of the situation?
3. Consider how you offer help to others. Do you teach them to help themselves, or do you create dependence?

MRFC Principles: 1 (1, 3, 13)

Sources

CNN, Iraq’s oil-fueled surplus could hit $80 billion, report says, CNN.com, August 6, 2008

Robert H. Reid, US officials defend Iraqi budget surplus, Associated Press, August 6, 2008

E.C. Riegel, Private Enterprise Money, a Non-Political Money System, 1944 (For more of Riegel’s writings, click here).

James Madison, speaking on the house floor, concerning a $15,000 appropriation for French refugees from San Domingo, 1794.

(Matthew Pilling is a member of the FreeCapitalist movement known as the Canadian Capitalist. Despite his time in the Great White North, Matthew loves America and all that it stands for. He lives with his wife and two children in Taylorsville and works in finance.)

Key Points

• Collective Action has no unique moral authority.Every irate neighbor in Canton, Ohio should asking him/herself this sobering question: If I do not like how my neighbor keeps his grass, do I have the right to march over there and put a gun to that person’s head and threaten to shoot if he/she does not mow the lawn? If this is absurd individually, then it is also absurd to pass a law that allows government officials to do the same. Consider: if the city submits citations and the owner still does not comply how does the city enforce the law it just passed? Eventually, it must send an armed police to the premises where that officer can force the property owner into compliance—at the point of a gun. This is immoral behavior by the citizens of Canton, collectively.
• Agency implies stewardship. Property owners often argue, “It belongs to me, I can keep the grass as long as I want to.” Yet, this is a mistaken statement. While, yes, as owner, an individual does have the right to decide how he takes care of his stewardship, it is also a portion of that agency that shows that a stewardship ill-kept is soon a lost stewardship. Last week’s news story and the responses to it provide the cases in point for this story. Typically, an unkempt yard is indication of an owners inability to maintain and retain the property. Many of the current violators of the city’s ordinances are banks, corporations, and “the poor.” Some residents have argued that they prefer the longer grass because it reflects the natural state of the earth. While this may be a matter of choice for a few, most people who do not take care of their yards, allow the overgrowth because they can’t afford to purchase a mower or a yard maintenance team, or do not have the time because they are overstretched in other areas of their lives. Thus, if they do not take the initiative to make some changes in their lives, they will soon find themselves “relieved” of this particular stewardship.

Conclusion

Our Founding Fathers took property ownership and stewardship very seriously. It was a major factor in their break with Great Britain at the time. John Adams explained, “Our Constitution was made only for a moral … people. It is wholly inadequate to the government of any other.” Further, Benjamin Franklin explained, “As nations become corrupt and vicious, they have more need of masters.” Both Cantonese sides of this argument are based in falsehoods. Because the nation has lost sight of such morals or virtues as the proper care of property, and the proper role of government, the people find themselves continually relying upon tyrannous solutions to their problems.

Action Items

1. Control your life so no one else will. Learn how a person in the Abundance Paradigm maintains his stewardships and resolve to act in such ways. Strive to improve where you see necessary.
2. If your neighbor is struggling to keep his yard up to your standards, resolve not to resort to tyrannical measures to get him to comply, whether personally or collectively. Rely upon rational persuasion to help him/her change perspective.
3. Encourage those in city and county leadership positions to refrain from the same tyrannical opportunities. This may require first establishing meaningful relationships with those leaders in order to invite them to rational discussions on the matters, rather than just being another shrill voice in the crowd.

MRFC Principles:   (3, 4, 11, 12, 13)

Resources

Ed Balint, Canton Council proposes jail time for tall grass, CantonRep.com, May 20, 2008.

Associated Press, Mow your lawn…or risk jail time in Canton, Ohio, Yahoo! News, June 3, 2008.

John Adams quote as printed in 5000 Year Leap, by W. Cleon Skousen, 1981, seventh printing 2006 by National Center for Constitutional Studies, p. 56.

Benjamin Franklin quote as printed in The Real Benjamin Franklin, published by NCCS, 1982, p. 497.

Key Points

• Rand teaches, “Any material element or resource which…requires the application of human knowledge and effort, should be private property—by the right of those who apply the knowledge and effort.” In other words, the person who put forth this Human Life Value should be the rightful owner of his efforts.
• The Internet exists in name only, for it is merely a system of wires, hardware, and software, no matter how high tech; all assembled by individuals and therefore individually owned, operated and maintained. The government neither owns nor controls these devices collectively.
• There are many levels of ownership involved with the Internet. For example, those who own the servers, routers, cables, etc; and those who own the intellectual property stored and transmitted on these devices.
• An individual user owns the data he created, an email for example. He is simply renting the rest. He therefore has no more right to those devices than a driver on the road has a right to owning the guardrail or the lines painted on the street.
• Though acting more like a pipeline than hauling buckets, the transmission of data through this web of communication is only facilitated by the work of human hands.
• Ayn Rand explained, “It is the proper task of the government to protect individual rights and, as part of it, to formulate the laws by which these rights are to be implemented and adjudicated. It is the government’s responsibility to define the application of individual rights to a given sphere of activity—to define (i.e., identify), not to create, invent, donate, or expropriate.” In other words, if the dispute over ISPs discriminating between pieces of data does come to government’s doors, government should ask one question: “Whose property is this?” When the owner is sufficiently found, government should then say, “Great. All the rest of you, do what the owner says.”
• However, there is a great sickness in our land. It is the sickness of collectivism. Too many people believe in the mantra what’s yours is mine. Dunbar reported beautifully on this when he quoted Justine Bateman, the TV actress, “The idea of your site succeeding or failing based upon whether or not you paid the telecom companies enough to carry your amterial or allow quick access is appalling.” A closer look at this statement reveals an entitlement attitude regarding activity on the Internet, and a lack of understanding of how the web works.
• A great way to sort this out is to return to the first statement: “Any material element or resource which…requires the application of human knowledge and effort, should be private property—by the right of those who apply the knowledge and effort.” With this it becomes understandable that individuals own the Internet and it is their agency and stewardship to manage data traffic the way they see best. If customers are dissatisfied, they have the right to seek out a more satisfying Provider and become their customer. If data traffic is handled inefficiently, the market will decide who stays in business, and who finds a different line of work. This is as it should be.

Conclusion

Just as radio revolutionized the way we communicate, the Internet has revolutionized that revolution, making the availability of information almost instantaneous around the world. It has revolutionized the way we communicate, how we do business, how we store information, how we pass time. Properly understanding the hard lines of property ownership will aid each one of us in acting appropriately in this matter. The government’s role is not to demand fairness, as seen in the eyes of those who would rob others of their hard work, but rather to insure that the lines defining ownership are clearly drawn and that those who would cross those lines are duly dealt with. Anything else is an abuse of power.

Action Items

1. Review Ayn Rand’s “The Property Status of Airwaves” (p. 122–129 of Capitalism: The Unknown Ideal). Decide how her message applies to the question of Internet use and government restrictions.
2. In questions of “Is it good to do _____” (i.e., Is it good to demand that ISPs treat each bit of data equally?), start asking, “Whose property is ______?” Then act accordingly.
3. Evaluate your own life. Identify areas where you may have misunderstood the principle of property rights. Resolve to change your perspective regarding property rights.

MRFC Principles: 13 (11, 12, 13)

Resources

John Dunbar, “Senators Debate Future of Web” AP, Yahoo! News, April 22, 2008.

Ayn Rand, “The Property Status of Airwaves,” Capitalism: The Unknown Ideal, Signet, 1967. pp. 122–129.

Readers of Atlas Shrugged by Ayn Rand will remember the account of the 20th Century Motor Company, whose heirs decided to turn the company and its employees into a communal “family”. Rand describes a Marxist society that few today would consider plausible – yet the socialist kibbutzim are the literal ideological descendants of the axiom, “From each according to his ability, to each according to his needs.” To learn the economic history and hear the personal tales from the kibbutzim is to witness Rand’s fictional community come to life (with the exception that many modern kibbutzim have chosen reform).

Kibbutz Yasur, founded in 1949, serves as an example. Though it began with high ideals, textile and toy factories, they were unprofitable, and soon closed, leaving many without a means to provide for their future. Homes eventually sat empty, as children left town and no new members joined the community. Today, those homes are nearly filled, and old farmland is being sold for new real estate development.

“The new kibbutz is not perfect, but economically things are improving,” said Mr. Kilon, who manages Yasur and another kibbutz nearby (many kibbutzim are now run by professional managers rather than by popular vote). “The incentive to work has gone up, and after changes in the management, we are standing on our feet.”

Boaz Varol was born on a kibbutz in the far north, but he left at 18. “My parents worked all their lives, carrying at least 10 parasites on their backs,” he said. “If they’d worked that hard in the city for as many years, I’d have had quite an inheritance coming to me by now.”

Key Points:

• In the year 2000, more than half of Israel’s 257 collective farms were bankrupt.
  In the past, kibbutz members were rewarded equally, whether they milked cows or managed a large industry.
• On the new kibbutz, members earn salaries or receive end-of-month allowances reflecting the income they bring in.
• About half the kibbutzim have moved into real estate, selling plots for luxury neighborhoods in place of the fields and orchards outside their gates.
• House buyers generally do not join the kibbutz, but pay for services like child care.
  While the major assets of the kibbutzim are still collectively owned, the communities are now largely run by professional managers rather than by popular vote.

Conclusion:

What has emerged in the social consciousness of the kibbutzim is a newfound appreciation for the principles of prosperity – if not a total embrace. After decades of reaping the starving harvest of collectivism, the kibbutzim, in an attempt at self-preservation, have re-introduced the concepts of private property and wages based on productivity. The results have spoken for themselves.

The kibbutzim have traded pure socialist collectivism not for capitalism, but for a modern mixed economy, where individuals are free to work for themselves, generating private profits that are then taxed in order to fund communal socialist programs. Many assets are still owned communally, though housing is often owned privately. Such a policy is usually termed “privatization”, though leaders prefer to call it “renewal”. Allowing people to own property, produce value and be compensated for it has resulted in a surge in productivity and profit among the kibbutz members. Finally, the prosperity promised by marxist illusions is beginning to appear where free exchange is honored.

Such a society, however, is still not a free society, but a parasitic one. The socialist strategy over the past century has evolved pragmatically from one of total collective control (which, as the kibbutzim demonstrate, has always resulted in economic failure) to a parasitic co-existence with the private producers of value. Such an arrangement has allowed the socialists to remain on life-support, sustaining their moral bankruptcy as long as they allow just enough freedom for their capitalist hosts to produce the profits they are unable to produce for themselves.

The modern residents of the Kibbutzim are enjoying some of the benefits of capitalism, and their prosperity has attracted the attention of outsiders, resulting in increased demand and waiting lists for membership. While the changes have increased incentives to work and reduced the parasitic tendencies of the past, it remains to be seen whether the people will fully embrace the ideology at the core of their newfound prosperity. Their future depends on it.

Action Steps:

1. Read Atlas Shrugged – specifically the account of the train tramp who revealed to Dagny the story of the 20th Century Motor Company after its founder had died.
2. Examine your role in your community – what determines your individual prosperity? What determines your community’s prosperity?
3. What can you do to associate with others and develop local communities based on the principles of capitalism and freedom?

MRFC Principles: (2,3,5,6,7,8,10,11,12,13)

References:

The Kibbutz Sheds Socialism and Gains Popularity
http://www.nytimes.com/2007/08/27/world/middleeast/27kibbutz.html?_r=1&pagewanted=all

Key Points:

• Ian Usher, 44, has put everything to do with his current life on the eBay auction block in a package deal.
• He is hoping to walk away with ?230,000.
• His employer said they would give the winning bidder a two-week trial at his job with permanent status if everything works out after that.
• The Telegraph reports Usher as saying, “I am looking forward to moving on, and shedding the past. I am excited about the future, and really having no idea where events might lead me. I love the adventurous nature of the project, and am excited about a new start…Everything here is connected with that past life, and as I cannot have that life any more, then I don’t want to hang on to it desperately.”
• His friends suggest it is just a mid-life crises.
• Usher has created a website to promote the sale of his “life.” www.alife4sale.com

Conclusion:

While surely everyone would like the opportunity, at times, to do as Mr. Usher is attempting, the nature of life suggests that the stewardships we engage in are not as simple as selling everything and somehow starting over. That will, indeed, get rid of the material possessions of one’s life, but it will do nothing for the memories and the relationships that person leaves behind. The stewardship of life suggests that we use our agency to learn to overcome our trials and to increase our knowledge, experience and abilities; in short, to increase our Human Life Value. Running from every trial in our lives may appear to solve the problems, but when life is over what will we be able to say about our stewardship called life? Still, perhaps one can admire the resolve of such an individual to just dump everything pertaining to the current life and disappear into another life, another identity, another stewardship, maybe even a life worth loving.

Action Steps:

1. In a journal or a notebook, spend one hour writing everything you are thankful for and love about your life. Don’t think about the negative things or the things you don’t love at this time, unless you are truly thankful for them.
2. Write about the challenges in your life and how they, specifically can be for your good. Record some of the possible lessons you might learn from those experiences.

Reference(s):

Date: Tuesday, March 18, 2008
Source: Telegraph, “Australian Auctions Entire Life on eBay”
Author: Lewis Carter
MRFC Principles: (3, 4, 6)

Key Points:

• Gold struck a record high over the weekend at over $1,015.10 per ounce.
• The US Dollar struck a record low against multiple currencies losing an estimated 2% in value in just one week.
• Fed action like the recent action to “save’ Bear Stearns causes dollar values to drop and commodity values to rise.
• Fed action like lowering the discount rate by 25 basis points causes the value of the dollar to drop.
• The market, not the government sets “real prices” and expresses “real values.”

Summary:

Some people think of the economy as a machine and that the government is its steward. This is a dangerous and naive analogy. The econmy is more like the weather with no stewards over it. Everyone is affected by the economy just like we are all affected by the weather. The economy just like the weather is governed by certain laws or principles. The government cannot change the economy any more than it can change the weather. Oh, there can be slight modifications here and there, and the weather is definitely affected by the actions of humans. However, the weather system is so much larger and influenced by so many factors that it is impossible for one agenda of one person, group or government to control all of these factors so as to predict and control the environment. Besides, even it it were possible (technologically we can conceive of a day when it could be possible to control most variables) it doesn’t make sense. The weather works based upon certain principles so it is always more cost effective and prudent in our preparations to LEARN the principles, LEARN how to predict patterns and results, and ADJUST our behavior (and our plans) accordingly. So, it is with the eoncomy. The economy is “how” people are behaving at any given point in time, and people behave according to what they believe. Importantly, people believe what they do because of perspective. What people see (their perspective) is their experience in life. Their experience in life is governed by principle. So what does this have to do with the Fed, Gold and your savings? Well let me share with you a great quote from Alan Greenspan in 1966.

“In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holdings illegal, as was done in the case of gold. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves. This is the shabby secret of the welfare statists’ tirades against gold. Deficit spending is simply a scheme for the “hidden” confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists’ antagonism toward the gold standard.”

Action Steps:

1. Read Alan Greenspan’s Gold and Economic Freedom (The Objectivist, July 1966)
2. Research Project: Commit to researching why expanding the money supply or easing credit (lowering cost of money) causes inflation. Write your discoveries in a blog or letter to the editor.
3. Research Project: Commit to researching why the Fed offering credit or financial guarantees to a corporation such as Bear Stearns generally causes stock prices to fall and what affect falling stock prices has on the value of the dollar. Write your discoveries in a blog or letter to the editor.
4. Research Project: Commit to researching what the relationship is between the “price” or “value” of the dollar and the “price” or “value” of gold. Write your discoveries in a blog or letter to the editor.

Reference(s):

Date: Monday March 17, 2008
Source: Reuters – Stocks tumble, gold at record after Fed cut
Source: Bloomberg.com – Dollar Doomsayers Draw Signs from Bernanke Rate Cuts
Author: Miranda Maxwell & Bo Nielsen
MRFC Principles: (3, 7, 13)

“The very first amendment to our Constitution include the freedom of speech and the freedom of religion. Founders believed these unalienable rights were endowed to us by our Creator. They are vital to a healthy democracy, and we must never let anyone take those freedoms away. I mention this because there’s an effort afoot that would jeopardize your right to express your views on public airways. Some members of Congress want to reinstate a regulation that was repealed 20 years ago. It has the Orwellian name called the Fairness Doctrine. Supporters of this regulation say we need to mandate that nay discussion of so-called controversial issues on the public airwaves includes equal time for all sides.”

Key Points:

• Radio Broadcasting is already heavily regulated, with licenses (government permission slips) themselves being worth millions.
• Talk Radio as we know it did not exist BECAUSE of regulation 20 years ago.
• Radio station owners and broadcasters are self-interested and seek a profit.
• There are no “public” airwaves, their are government controlled airwaves. This is part of the problem. How the American people have tolerated government “owning” the airwaves for the people is mind boggling.
• Who decides if “all” sides of an issue are “adequately” represented. Do all “issues” have discernible sides?

Commentary:

Tribe mentality aka collectivism sees contradictory ideas as threats, their expression as assault, and force as the remedy. Persuasion is not in the mental conceptual framework of brain-off, emotionally driven lawmakers who want to “make everything fair.” Of course, they don’t have the faintest idea of what fair is. “Fair” to a collectivist means getting what they want. This is what the legislation is all about.

There is no real chance of the “fairness doctrine” coming back today, but it could happen in the near future. More than likely this is a political threat to certain broadcasters to carry more “liberal” talk shows that are desirable in the minds of certain lawmakers. The threatened financial burden on broadcasters just to lobby against the legislation is enough to change radio.

Conclusion:

President Bush’s rhetoric is nice, but the real problem here is that the FCC and congress have any control over the speech on the airwaves. Additionally, his worn out reference to the “public airwaves” is insulting to free men and women who know that this is simply modern vernacular for “government airwaves.” Thank goodness for talk radio, thank goodness for talk radio listeners.

Even conservatives get this one wrong. Its not just that the idea of the “fairness doctrine” is wrong, the government’s approach to the entire subject of broadcasting is wrong. There is no fairness in letting government bureaucrats decide what is fair speech content in any medium. Productivity, and it alone is the standard for business survival.

Recently I had a government regulator suggest that if I wanted his highly questionable, oppressive and likely illegal tactics to end, I should stop criticizing the government on the radio. Of course, this is the purpose of political speech and mediums such as broadcast, print, film, etc. Should we have a “fairness” doctrine for movies and magazines and newspapers and while we’re at it – would these same lawmakers suggest that we have a fairness doctrine in elections – making sure there is always an opponent to their re-election representing every side of every issue?

Action Steps:

1. Read Ayn Rand’s 1964 Essay, “The Property Status of Airwaves.”
2. Listen to more talk radio. Refer your friends.
3. If you are interested, post your opinion online, and while you do realize that some commissar (commie-czar) might be advocating in the near future that you ought not to be able to do that unless your adversaries are given equal time and access.

Reference(s):

Date: Tuesday March 11, 2008
Source: Austin American-Statesman – Bush: ‘Fairness Doctrine’ unfair
Author: Ken Herman
MRFC Principles: (8, 10, 11, 12)

“Ms. Giani allegedly was made aware of illegal activities taking place within the division and responded by telling employees that she didn’t care if the actions of the division were legal or not – but that employees were to perform the jobs without question.”

Some Utahans are hoping that the current controversy will allow the public to clearly separate “lip-service giving do-gooders” in government positions from authentic leaders who care about civil liberties, small business and simple concepts such as fairness. At the core of this issue the question is, “How far up the chain does the corruption go?” In recent years the State has behaved with little concern for small business owners who find themselves entangled in the Department of Commerce’s web of scandal and corruption. One of the State’s highest elected officials recently commented:

“Francine Giani is the single greatest threat to small business and personal liberty in the State of Utah.”

“The world of [regulation] is reminiscent of Alice’s Wonderland: everything seemingly is, yet apparently isn’t, simultaneously…It is a world in which the law is so vague that businessmen have no way of knowing whether specific actions will be declared illegal until they hear the judge’s verdict – after the fact.” (Greenspan, Alan. Later Chairman of the Federal Reserve. Paper given at the Antitrust Seminar of the National Association of Business Economists, Cleveland, September 25, 1961.)

Quiet whisperings have become all too common in Salt Lake City among government employees, elected officials, and community leaders about this rogue agency stealthily persecuting small businesses. Over the last 12-15 months Ms. Giani’s commissars in the State’s Division of Securities have come under the most serious scrutiny.Allegations of corruption, incompetence, mismanagement and “too many unfair prosecutions“under a cloud of controversy are growing relentlessly frequent and more substantial. Last week, apparently in an effort quell the unraveling of her department – Giani reportedly pressured Securities Director Wayne Klein to resign

“They obviously haven’t told me the results of the audit but I’ve heard words like [the division is in] ‘disarray’ and the ‘deeper we [the auditors] go, the deeper we need to go,’ “ (Representative Bird testimony last week during the Utah Legislature’s meeting of the House Business and Labor Committee.)

Klein’s resignation, however, is not likely to insulate Ms. Giani (or several other employees involved in this mismanagement such as Securities Enforcement head Mr. Michael Hines who is also suspected of official wrongdoing in the Department) from the political and legal fallout yet to come. Apparently hoping this will all blow over quickly, Ms. Giani has tried to appear disconnected recently asserting, absurdly, of Klein;

“He has been a good director, and in terms of his background in the securities industry, there is no one better.”

Utahns can only hope Ms. Giani is simply posturing here. Wayne Klein is not only personally vindictive but has a fairly well known reputation in the legal community from his previous positions both in the Utah Attorney General’s office as well as with the State of Idaho for being a loose cannon, an unjust prosector, and having contempt for legal restrictions on his own activities. It makes one wonder, in light of all the information that is now coming out, how Mr. Klein was appointed with the approval of the Governor and the legislature in the first place. According to Ms. Giani’s recent statements to the press, Klein is precisely is the “type” of regulator she strives to appoint in her department. Yet, Klein is quite simply a commissar (listen to the Free Capitalist radio broadcast archives from August 31, 2007 for elaboration). Specifically, he has increasingly become an embarrassment to government and legal professionals. He and his staff routinely fail to demonstrate even basic familiarity with the A-B-C’s of securities law. Reportedly, his own agenda is more important than the letter of the law and he is known to stammer and hesitate when trying to describe even the most basic federal standards for simple concepts such as what constitutes an accredited investor.One of Klein’s former government employers recently remarked that he, and a number of other government officials are not surprised at the recent discoveries about Klein and Giani’s philosophy of government.

“Mr. Klein is the worst kind of loose cannon. He’s often going after someone who’s offended him, regardless of the law. He’s really only effective if someone with very strong supervisory skills watches his every move and Francine is not that capable.”

Securities attorneys in Utah should not only be alarmed and offended at Ms. Giani’s defense of Klein, especially given his track record, but extremely diligent in working to ensure that there is serious reform in the Department. With Ms. Giani still at the helm she’ll likely just pick another “Wayne Klein” to run the Division. As reported by a notable Salt Lake City attorney recently,

“It has become common practice in Utah for knowledgeable, reputable, and highly educated attorneys to have to grovel to Giani, Klein (and their heretofore behind the scenes bulldog Mr. Michael Hines, Director of Enforcement in the Division of Securities). None of whom have shown much if any appreciation for the details of the law. It’s embarrassing.”

In 2007 a group of private citizens and business owners, fed up with the egregious behavior of an entire section of state government, began a private investigation on their own to look into the State’s activities. So far, the investigation has uncovered a remarkable cache of written documents and audio recording. The evidence includes recordings and transcripts of private meetings, official and unofficial conferences, lunch meetings, early morning meetings (as early as 6:30am at the home of one resident) and late night investigative activities (with government workers showing up to the homes of some “witnesses” as late as 10:00pm). The mounting evidence shows a disturbing pattern of Giani, Klein, and Hines each engaging in deception, incompetence, misstatement of the law, and abuse of the legal processes. Perhaps even more telling, the evidence is beginning to show a growing rift in the Department of Commerce between those public servants who want to carry out the legitimate duties of the Department and those like Hines who reportedly remarked recently that he hopes to retire by “writing a book” about one of the cases he’s currently investigating. The Salt Lake Tribune recently reported that it is precisely this internal rift between real public servants and self-serving bureaucrats that brought about the legislative audit working to uncover the details of this brewing scandal.

“After hearing from several division staff members who expressed concerns about how the agency was being run, Rep. Jim Bird, R-West Jordan, late last year requested that the Legislative Auditor General’s Office audit the division.”

This kind of situation makes for a very unfriendly business environment and is embarrassing to everyone in government. With a formal audit underway, it appears Ms. Giani is simply buying herself time to try and get out from under the explosive details now coming to light. Consider a few embarrassing examples of the work being conducted by Ms. Cruella and her henchmen.

1. Wrongful Accusation of Criminal Behavior against Utah Citizens.
2. Misuse of the Courts and Legal Process.
3. Lying to Government Officials.
4. General Incompetence when it comes to explaining rudiments of the law.
5. Defaming Members of the Legislature who scrutinize the Department.
6. Punishing Citizens with Evidence Against the Department for their Political Activity.
7. Demanding “prior restraints” on Utah Citizens’ free speech, in an attempt to silencecriticism of the Department’s methods in public or in the courts.
8. Government employees lying to the public in order to “create” causes for investigation.
9. Disseminating confidential information obtained during investigations to private sector colleagues to enrich their business efforts.
10. Offering jobs and/or job referrals to witnesses who are willing to lie or distort the truth to defend the Department.

This kind of behavior is precisely what Ronald Reagan warned America about as early as 1964 when he deplored:

“It is time we realized that socialism can come without overt seizure of property or nationalization of private business. It matters little that you hold the title to your property or business if government can dictate policy and procedure and holds life and death power over your business. The machinery of this power already exists. Lowell Mason, former anti-trust law enforcer for the Federal Trade Commission, has written “American business is being harassed, bled and even blackjacked under a preposterous crazy quilt system of laws.” There are so many that the government literally can find some charge to bring against any concern it chooses to prosecute.” (Reagan, Ronald, A Time for Choosing, Speech given October 27, 1964)

Legislation has recently passed the Utah House of Representatives that would rein in the powers of the division and its director in an effort to secure more just handling of the Department’s responsibilities. However, as reported on FreeCapitalist Radio Monday February 12, 2008 this attempt to “rein in” the powers of Ms. Giani and her flying monkeys is being received about as well as the “Wicked Witch of the West” receiving Dorothy and her ruby slippers. For example, after Bird’s HB83 passed the Utah House, Giani defender Utah Senator Curt Bramble (R-Provo), apparently in an effort to help Giani and the Governor’s office stall the brewing controversy, strategically stalled the legislation from being considered by the State Senate indefinitely.

Reminiscent of something behind the iron curtain in the 1980s the outgoing commissar Klein remarked to the attorneys of a Utah citizen recently, who was cooperating with State legislators in their attempts to get to the bottom of the abuses going on in the Department that: because of his political activities the Division was “forced” to take tougher action. In a similar case Klein justified:

“Part of the problem is that I’ve been painted in a corner because your client has gone on the radio and publicly accused us of stuff. He’s got legislators out there trying to cut our powers because what we’re doing as if he’s entirely right in what he’s doing and government is unfairly coming after him. So ordinarily we have more flexibility but where I’ve got public attacks coming in saying we’re being accused of being unfair…[interrupted].”

Ayn Rand also famously warned us of situations like the present scandal brewing in Utah under Ms. Giani’s watch.

“This means that a businessman has no way of knowing in advance whether the action he takes is legal or illegal, whether he is guilty or innocent. It means that a businessman has to live under the threat of a sudden, unpredictable disaster, taking the risk of losing everything he owns or being sentenced to jail, with his career, his reputation, his property, his fortune, the achievement of his whole lifetime left at the mercy of any ambitious young bureaucrat who, for any reason, public or private,may choose to start proceedings against him…It is a form of persecution practiced only in dictatorships and forbidden in every civilized code of law. It is specifically forbidden by the United States Constitution. It is not supposed to exist in the United States and it is not applied to anyone-except to businessmen.”(Rand, Ayn. Capitalism: The Unknown Ideal, pg. 50 – from a speech given at the Ford Hall Forum, Boston, on Dec. 17, 1961)

The official audit of Ms. Giani and her staff is still under way. Potential legal action is reportedly pending against the State from private parties alleging damages in the hundreds of millions. Additional complaints are coming in from victims of the Department’s abusive handling methods including complaints against the Division of Real Estate, Licensing, Securities, and Consumer Protection. Transcripts and audio recordings of Commerce employees lying about Utah businessmen and their activities and other highly problematic behavior on the part of government employees are being delivered to government officials and media outlets. In the mean time, Utah citizens (the real Ma’s & Pa’s Mr. Hines is so fond of talking about while he pursues his agenda) are getting tired of being scammed by the so-called “scam busters.” Some investors have recently been told according to evidence obtained through recorded conversations that (consistent with what has been reported about Giani’s style of administration) if citizens want the State to help them they have to be willing to distort the truth and cooperate with the State’s agenda – independent of the facts involved. One local businessman recently complained,

“For more than two years now the Department of Commerce has been after me. They have come at me from every angle, from the Real Estate division, the Securities Division, Consumer protection etc. Every time, I’ve been able to demonstrate that they have no evidence against me and that I and my associates have done nothing wrong. Yet, the government continues to make horrible allegations, publicly bad mouth me and my colleagues and even accuse me of being a criminal to legislatures, business colleagues, and some of my closest associates. All of this so that Francine Giani, Wayne Klein, and Michael Hines can “look” like they’re doing their job. They’ve got all my clients in an uproar, they’ve told this story about what my business “really is,” all truth be damned, and their efforts have cost dozens of real Utahans their jobs and as essentially bankrupt me and my partners to the tune of millions of dollars. All this and not one charge filed, not one official action taken, and not one person in government responsible. There’s not even a forum where I can defend my case, I simply have to wait until these very powerful men and women are done playing politics with me, my investors, my customers, and my business. Maybe I’ll get an apology like Mr. Teran received from the Department, after they’ve succeeded in destroying my company.”

While the citizens of the State wait for the Governor to weigh in on the issue, thank goodness for good legislators and government leaders who don’t hesitate to reach for the pail of water when the Wicked Witch comes around. On a side note, sources suggest that Ms. Giani may already be preparing for her exit, vying for a position as an investigative journalist (Geraldo watch out!) back at Utah’s local Channel 2, KUTV along side consumer watchdog Bill Gephart. If it’s true, it’s likely that Ms. Giani can serve the people of Utah better there – for certainly there’s a role for consumer watchdogs. If she does return to the media perhaps she’ll feel less burdened, being freed from sticky things like State law, due process, fairness, etc.

Its time for Utahns (including our Governor) to get past the old cliché of Utah being among the “scam” capitals of the world, and start taking a closer look at the corrupt bureaucrats irresponsibly promoting that myth to the detriment of good people in a good state working hard to do many good things. Once again scandal is brewing in Utah. This time it’s the government in need of systematic reform. Perhaps Mitt would accept an invitation to come save the day in Salt Lake City one more time. Stay tuned…