prior probability

Note: This is the second of three blog posts on the case of U.S. v. Porat.

Michael Levy, a former federal prosecutor, has written up a brief but excellent analysis (see here) of some of the legal issues in the case of Moshe Porat, the disgraced former dean of the Temple University business school, who was charged with wire fraud by the U.S. Attorney’s Office in Philadelphia. In brief, the indictment, a copy of which is available here, alleges that Dean Porat provided false information about his school to U.S. News & World Reports in order to boost his school’s ranking in U.S. News’ annual survey of graduate programs. According to Levy’s expert analysis, the Porat case poses three tricky legal questions:

1. Does the person deceived have to be the person defrauded? In this case, for example, it was U.S. News & World Reports that was directly deceived (allegedly) by Porat. Aside from being lied to, however, what economic harm did U.S. News suffer as a result of Porat’s alleged fraudulent scheme? For his part, Levy notes that to the extent U.S. News was the “unwitting transmitter” of the false statements to the victims “the people deceived and the people defrauded [are] the same,” but I would pose the following second-order question: Is U.S. News, in fact, an “unwitting transmitter” of Porat’s fake date, or does the magazine have an independent duty to verify the information that it publishes? If so, shouldn’t the magazine be jointly liable, along with Porat, for this fraud?

2. Were the students who decided to attend Porat’s business school based on the school’s inflated ranking “defrauded” in any real sense? That is, even if the person deceived (U.S. News) does not have to be the person defrauded (the students), are you a victim of fraud if you are lied to but nevertheless get what you paid for? Or in Levy’s words: “Even if the students opted to go to [Temple] because of the fraudulently obtained rating, they got what they paid for–a [Temple] business school education and MBA.” Furthermore, according to the facts alleged in the indictment of this case, the price of tuition during the scheme either remained the same or went down! So, if Dean Porat did not charge more for his school’s degrees, and if students got what they paid for (a Temple business school education), then where is the harm? What money or valuable property did Porat or the business school obtain as a result of Porat’s (allegedly) fraudulent scheme?

3. Last but not least, even if we were to assume for the sake of argument that the students in Porat’s case were, in fact, harmed or defrauded, was the harm in this case the object or main purpose of Porat’s (allegedly) fraudulent scheme or was this harm merely incidental to it? In other words, remember the infamous “Bridgegate” case? Back in 2013, public officials in New Jersey had conspired to create major traffic jams in the town of Fort Lee after the mayor of that town refused to endorse the re-election bid of then-Governor Chris Christie. Among other things, these public officials were charged with, and convicted of, wire fraud. On appeal, however, a unanimous U.S. Supreme Court reversed the conviction because “the scheme … did not aim to obtain money or property.” See Kelly v. United States, 590 U.S. ___ (2020). In other words, to prove wire fraud, the prosecution has to prove not only that the defendants engaged in a fraudulent scheme; it also has to prove that the main purpose of the scheme was to obtain money or property.

To sum up, contrary to my initial assessment of the Temple business school case (see here), it looks like Porat has a real good chance of getting the wire fraud charges against him dismissed by the judge in his case. Yet, assuming that Dean Porat did, in fact, submit doctored data about his school to U.S. News to inflate his school’s ranking, would a dismissal of the criminal charges against him be the “right” result? In my next post (the last one in this series), I will offer a common-sense interpretation of the federal wire fraud statute and of the facts in the Porat case.

Before I proceed with my three-part series on wire fraud and the U.S. News rankings, I want to elaborate on one of the points in my previous post. Specifically, are the fraud allegations against the Temple business school a one-off–an unusual or rare event like Halley’s Comet–or are these allegations just the tip of a more massive iceberg? More generally, how much of the annual higher-ed rankings published by U.S. News & World Report are based on fake data? By way of example, consider this NYT report titled “College Says It Exaggerated SAT Figures for Ratings.” In brief, Claremont McKenna College (CMC), a private institution in Southern California, admitted in 2012 to having submitted inflated SAT scores to U.S. News for years. If CMC, one of the most prestigious liberal arts colleges in the country, is guilty of sending doctored data to U.S. News, it makes me wonder what other places, besides Temple’s business school (allegedly), have succumbed to this temptation? In any case, even if most of the data used by U.S. News to compute its rankings are not fake (a big “if” given CMC’s 2012 confession), there are so many other ways of “gaming” those rankings. (Again, see here for a survey of the most serious problems with the U.S. News system.) This is a serious question because, as I explained in my previous post, if those rankings are not credible to begin with, maybe U.S. News itself is guilty of fraud writ large! Instead of bringing charges against a few college administrators, why don’t the Feds go after the Big Fish? I will explore that possibility in my next post …

Note: This is the first of three blog posts on the case of U.S. v. Porat.

I mentioned in a previous post that Moshe Porat, the former dean of Temple University’s business school, was recently charged by the Feds with one count of conspiracy to commit wire fraud and one count of wire fraud for submitting fake data to U.S. News & World Report about Temple business school’s online MBA and part-time MBA programs in order to inflate his school’s rankings in the annual U.S. News surveys. Today, I want to take a closer look at this fascinating Twitter thread by my colleague and friend Orin S. Kerr, a law professor at Cal Berkeley, about some of the legal issues posed by this wire fraud case.

In summary, Kerr correctly notes that the federal wire fraud statute, which is codified at 18 U.S.C. §1343, makes it a crime to commit fraud across State lines in order to obtain money or valuable property. Professor Kerr then poses the following two questions:

1. What exactly is criminal, if anything, about submitting fake data to US News?
2. And who was tricked into giving up their money?

It turns out that these two questions are one and the same. Why? Because to obtain a conviction under the federal wire fraud statute it’s not enough to prove that the defendant knowingly and intentionally made a fraudulent and material misstatement of fact (e.g. a business school dean who provides fake data to US News about his school’s programs). The prosecution must also prove that someone was actually harmed by the defendant’s fraudulent activity. But in the case of Moshe Porat, the former disgraced dean of Temple’s business school who allegedly sent fake data to US News in order to improve his school’s ranking, the key legal question is, Who was harmed by Dean Porat’s alleged fraud?

One could argue, or course, that it was the many applicants and wealthy donors to Temple’s business school who were harmed–at least to the extent that they applied or donated money to Temple under false pretenses–but at the same time one could just as well argue that the annual US News survey of graduate schools is not a reliable indicator of a school’s true worth or quality. To the point, if the annual US News survey of graduate schools is a bunch of bullshit to begin with, then no one is really harmed if this annual survey is based on doctored data! (Or in the more dignified words of Professor Kerr: “… Deans who submit fake U.S. Numbers aren’t trying to harm applicants and donors. They think their schools are fantastic, and that the U.S. News isn’t realizing how fantastic they truly are.”)

For lack of a technical or proper legal term, let’s call this the “calling bullshit” defense to wire fraud. Even if a business school dean in fact provides fake data to a third party like US News in order to fraudulently improve his school’s relative ranking, there is no crime of fraud if the US News annual survey of graduate programs is itself bullshit, which it probably is (see here, for example), though a full analysis of the utility of those annual surveys would require another series of blog posts. Instead of rehashing the same old pro and con arguments about these academic beauty contests, I will consider former prosecutor Michael Levy’s expert analysis of Porat’s case in my next post …

Kudos to Devon, i.e. @devonzuegel. Although I am still off Twitter and will most likely remain off for the foreseeable future (#SelfCancel), I found this fascinating thread via Marginal Revolution on the topic of “What are the criticisms of your work that you find most interesting?” (Hat tip: The Amazing Tyler Cowen.) Although I am not a big fan of the word “interesting,” I love the spirit of this question!

The names of 26 States have Native American origins.

The Queen of Jazz was born on this day (April 25) in 1917.

Note: This is my fourth and last blog post (for now) in my series on “Lockean takings.”

I want to conclude this series by noting the “Hohfeldian” structure (see image below) of the self-ownership principle.[1] In brief, if each person owns the legal right to his labor, if each person is a self-owner, so to speak, then–regardless of whether this right originates in natural law (Locke), social utility (Hume), or positive law–this right generates a correlative duty on the part of others.[2]

This Hohfeldian analysis also highlights the reciprocal nature of the pandemic problem.[3] On the one hand, not shutting down the economy makes it easier for the pandemic to spread, but on the other, the decision to order an economic shutdown also imposes significant costs on “non-essential” workers. If the government is going to order “non-essential” workers to stay at home for the greater good, then the government is also required under the Constitution to pay “just compensation” in exchange for one’s cooperation. This property rights approach to the pandemic not only respects the federal structure of our constitutional system of government, it also represents a fair compromise between our need to make significant sacrifices for the common good by staying at home for a reasonable period of time and our bedrock self-ownership right as well as our moral right to receive some of form of meaningful or just compensation in exchange for the deprivation of liberty.

One more thing. My Lockean or labor-as-property approach also follows from the reasoning in Robert Nozick’s Anarchy, State, and Utopia.[4] Nozick begins with the premise that every person has rights, including the right to liberty and property. Specifically, in Nozick’s words, “Individuals have rights, and there are things no person or group may do to them (without violating their rights).”[5] These rights are pre-political and must be respected by all, but at the same time, these rights are limited by the existence of other rights-holders and the existence of correlative duties.[6] As a result, you must respect the rights of others; you do not have the right to cross any moral boundaries while you are exercising your rights. Specifically, you do not have the right to impose unjustified harms or unjustified risks on others.

This Nozickian or classical liberal approach may appear unworkable in the context of a pandemic because one person’s refusal to engage in social distancing by itself creates significant risks for innocent third parties, including the risk of death for persons with underlying medical conditions. In other words, every human activity–no matter how benign its motivation or useful its consequences–carries some positive and nontrivial risk of injury to self and to others.[7] Or as Nozick (1974, p. 75) himself points out, “it is difficult to imagine a principled way in which the natural rights tradition can draw the line to fix which probabilities impose unacceptably great risks upon others.” Here is where the Hohfeldian logic of the self-ownership principle comes into play. If an economic shutdown is indeed the most effective method of saving lives during a pandemic–by requiring workers to stay at home and businesses to shut down–, then everyone who is inconvenienced by the shutdown (rich or poor) must be compensated for this inconvenience as soon as possible by the governmental entities that ordered the shutdown. (Footnotes are below the fold.)

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Note: This is my third blog post in my series on “Lockean takings.”

Now that we have surveyed some lockdown orders, the next question is, Why doesn’t the concept of self-ownership inform our understanding of the Takings Clause?

Generally speaking, there are two broad schools of property rights: natural law theories, which emphasize the moral aspect of property, and consequentialist theories, which link property rights to social welfare. John Locke, for example, famously defended the proposition that people have natural rights to property, while David Hume, Karl Marx, and many others have argued that property is merely a useful social convention, one that is in our self-interest to follow.[1] Nevertheless, whether the justification of property is rooted in social utility or in natural rights, most theories of property share the same Lockean premise: each person owns his own body and is generally entitled to the fruits of his own labor.[2] Of course, both perspectives–the Lockean/Nozickian one grounded in natural rights or Humean/Marxian theories based on social conventions–both can be true. We can have a natural right to X, and at the same time, X can also constitute a socially-useful artificial convention.

Either way, whichever perspective one prefers–i.e. whether property rights are considered a Lockean natural right essential for human autonomy or a Humean social convention essential for the maximization of economic welfare–most people agree that everyone owns their own labor, or in the memorable words of John Locke (1690, Sec. 27), “every man has a property in his own person; this nobody has any right to but himself.”[3] As Richard Epstein (1985), Alex Tuckness (2020), and others have noted, Locke’s general self-ownership principle–regardless of whether it is rooted in natural law or positive law–is among his most important contributions to political philosophy.[4]

Some commentators, however, have criticized this Lockean premise–i.e. self-ownership–as too individualistic and narrow-minded.[5] Following in the footsteps of Aristotle and Aquinas, some scholars like to emphasize the notion of “the common good” above and beyond personal self-interest.[6] This communitarian critique of Locke’s self-ownership principle, however, overlooks an important point: it is up to each person to decide for himself what the common good consists of. In fact, many Marxists and so-called “left libertarians” embrace the self-ownership principle as the starting point of their critiques of capitalism and inequality.[7]

In addition, I wish to make a further clarification here. Locke’s self-ownership principle should not be confused with his labor theory or “mixing” theory of property rights–the idea that we acquire property rights over something (something unowned) when we mix our labor with that thing.[8] Put another way, makers have property rights over what they make. This aspect of Locke’s theory, however, runs into some notorious difficulties. Robert Nozick, for example, a libertarian political philosopher sympathetic to Locke, posed the following famous hypothetical: “If I own a can of tomato juice and spill it into the sea so that its molecules (made radioactive, so I can check this) mingle evenly throughout the sea, do I thereby come to own the sea, or have I foolishly dissipated my tomato juice?” (Nozick, 1974, p. 175.)

Putting aside Nozick’s fanciful hypothetical, another difficulty with Locke’s labor theory of property occurs in science and mathematics. Proving a theorem or discovering a law of nature like F = ma takes a lot of work, but who owns the rights to the proof or the discovery? The person who proved the theorem or made the discovery? Or do theorems, like most scientific discoveries, belong to our “intellectual commons”?[9] At the same time, even if no one “owns” mathematical proofs or other types of intellectual discoveries in a legal sense, the informal “priority rule” in science nevertheless confirms the resiliency and generality of Locke’s labor theory of property. Generally speaking, “priority” (i.e. credit for making a discovery) is supposed to go the person or group who first made the discovery; theorems and discoveries are supposed to be named after the person who discovered them.[10] At the very least, only the discoverer of a theorem or law of nature is entitled to publish the results of his work. 

In any case, although Nozick’s radioactive can of tomato juice and the process of intellectual discovery in science and mathematics both test the outer limits of Locke’s labor theory of property, these examples do not detract from Locke’s general self-ownership principle: we own our own bodies and the fruits of our labors; we get to decide how to live our own lives. Most, if not all, “left libertarians” accept the general Lockean principle of self-ownership.[11]

So, to sum up our definitional analysis of “property” thus far, most people, even the most ardent opponents of natural rights and critics of Locke, generally agree with the principle of self-ownership, that we have property rights in our persons. This key Lockean insight is so fundamental and so universally accepted that it should inform our understanding of the Takings Clause. Specifically, when the government restricts our self-ownership by preventing us from leaving our homes to make a living, we are owed just compensation. In my next post, I will discuss the reciprocal nature of the pandemic problem. (PS: My footnotes are below the fold.)

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