Chatterjee Column Part 2

Gareth objected to my column in the comments section, but I am responding to them here. Objections are in bold.

1. I can't speak to all the provincial statutes, but the BC statute doesn't prevent a jury trial.

Good to know. The statute is silent, but I have yet to see a jury trial invoked in one of these hearings. In the US, many state courts have held that those whose property is being seized have the right to a jury trial. It would be interesting to see if such a movement takes place here.

2. I don't know of any requirement that innocent owners promptly notify the police. There isn't one in the BC statute, and I don't remember one in the Ontario statute.

Here I was referring to the definition in Section II of Ontario's Civil Remedies Act:

“responsible owner” means, with respect to property that is an instrument of unlawful activity, a person with an interest in the property who has done all that can reasonably be done to prevent the property from being used to engage in unlawful activity, including,

(a) promptly notifying appropriate law enforcement agencies whenever the person knows or ought to know that the property has been or is likely to be used to engage in unlawful activity, and

(b) refusing or withdrawing any permission that the person has authority to give and that the person knows or ought to know has facilitated or is likely to facilitate the property being used to engage in unlawful activity; (“propriétaire responsable”)

Resposnible owners are shielded from seizures, but they have to meet the definition of responsible. In the May 2nd issue of the Lawyers Weekly, one story mentioned a case where

the attorney general is seeking forfeiture of two houses owned by a client couple, on grounds they ought to have known of the illegal activities of tenants, some of whom they say are social assistance recipients placed there by the province. "The government put them in there, and now the government seeks the houses because of the illegal activities of the people they put there."

3. I agree that the "instruments" part of civil forfeiture statutes raise different issues than the "proceeds" part. Note that only the "proceeds" part was at issue in Chatterjee.

Agreed - but the odds of the Supremes hearing the second part of the challenge are slim for the next little while. In the meantime, we are at the mercy of whatever random 3 judge panel that gets its hands on this first. Given that the original Ontario Court of Appeal was not sympathetic, I am not holding my breath now.

4. It just isn't true that any technical violation of the law can result in forfeiture. That's pure fear mongering.

So in your restaurant example, on a proceeds case, the government would have to establish that the restaurant's profits were directly or indirecly acquired precisely by the violation of the health law. If that were so, then it becomes less obviously unjust that the government could take that profit and compensate the victims of the adulterated food.

Hmm - I suppose the last guy who warned of the dangers of the state going overboard when it passed a new act that allowed it to go after its citizens was also fear mongering. Here we are just going to have to disagree. You have more faith in the state than I do.

5. I doubt your basic premise that entrenched property rights in the Constitution would have made any difference. Ireland and the US both have constitutional gurantees of property rights and their highest courts have upheld civil forfeiture laws.

True. That was my point. Despite the presence of property righst, things have been bad down there. So expect it to be worse up here.

Comments

[Gareth Morley]

Thanks for correcting me on #2. I should have re-read the Civil Remedies Act before commenting.

If I can try to spin my embarrassment a bit, this is still an example of why we're fortunate that the SCC held civil forfeiture is a provincial responsibility. Maybe Ontario's language on innocent owners is overbroad and unnecessary. Maybe some of BC's provisions are either excessive or inadequate. Comparative experience will shed light on this. A single federal solution wouldn't allow for that.

And the Canadian Civil Liberties view that the central government will always be more protective of civil liberties and property rights isn't consistent with the record. In Industrial Acceptance Corp., one of the 1950s cases that Chatterjee's lawyers relied heavily on, the federal statute gave innocent owners whose property was used in drug trafficking no defence at all. Industrial Acceptance was a lease company, and there was no evidence that they knew anything about the driver's trafficking. None of the provincial statutes are like that.

You're right that part of what is going on here is we have different images in our head of what "the state" is and what it does. I'm going to enter a not-guilty plea to the charge of having "faith" in the state. The state actually consists of people and those people have the full human range of incompetence and self-interestedness. State actors make mistakes and cover their asses and are overzealous.

The difference, I think, is that I see the danger of state error or abuse as symmetrical: it's just as likely (perhaps more likely) to take the form of inaction as excessive action. The threats to ordered liberty are as much to order as to liberty. In an open, multicultural society like Canada, it can be years before the police even understand what is going on, let alone are in a position to do something about it.

Huge accumulations of criminal wealth create big risks of corruption and mass lawlessness -- different risks than are posed by ordinary street crime. It becomes harder to ignore when gunmen execute their business rivals in your favourite restaurant.

[MA Yahya]

1. I agree with keeping this provinical. I am no fan of the feds.

2. Much of why there is street crime is that the state has made lawful transactions unlawful. We can debate the merits of such legislation, but I see much of this illegal wealth a result of state action.

[Gareth Morley]

1. So we'd get Yahya J. concurring in the result.
2. It's true that illegal wealth usually comes from the fact that some transactions unlawful. Some of those should be unlawful, some shouldn't. But the result is still a problem.

[Marnie Tunay]

Moin, would you care to explain your statement that "much of why there is street crime is that the state has made lawful transactions unlawful." ??
I'm sure every gang member and pimp would agree heartily, but I, for one, am having great trouble with it.

[MA Yahya]

Take for example gambling. The state once made it illegal. So only the mob could run commercial gambling houses. Now the state keeps it illegal but runs a racket called lotto 649.

[Marnie Tunay]

Okay, would you legalize book-making?
And that's one example only, - hardly the "muchness" of street crime, which, according to my reading, would seem to revolve around crystal meth, cocaine, heroin, pot, prostitution, and murder over turf wars.
Would you legalize any of those?

[Stewie]

Again, one sees the tragic and public demise of a particular discussant's sense of proportion. Like Gareth Morley says, some transactions should be unlawful, some shouldn't. I saw no hint in Prof Yahya's comments of anything that could reasonably be taken as expressing support for "murder over turf wars".

Good grief.

"Potty"

[Marnie Tunay]

"Tragic and public demise???"

Speaking of a lack of proportion....

It's really hard to slam people on a personal level without instantly falling into the very behavior of which one is accusing them, - isn't it, Potty?

Hence the saying, "First, cast the mote out of your own eye...."

But, I'm glad you're back, Potty.
I was wondering if you were okay.

[Gareth Morley]

Marnie's making a legitimate reductio argument. Libertarians tend to attribute the growth of organized crime to paternalistic legislation banning exchanges people want to engage in - drugs, prostitution, gambling, high-interest unsecured loans, low-tax cigs and booze, for example.

There's some truth to this. However, even in libertopia, some consensual transactions are still going to be banned. For-profit crime does not require criminalization of the underlying activity: organized crime is big in gambling and prostitution even where legal and no one ever criminalized waste management or promoting mining stocks.

But like it or not, most people don't agree with libertarianism and think it's OK to ban consensual, harmful acts. Disagreeing with Prohibition didn't make Al Capone go away.

[Marnie Tunay]

Re the idea that banning "exchanges people want to engage in" fosters the growth of organized crime:

I wonder if that's really true. I rather suspect that most citizens don't want to be involved in bad-news drugs, prostitution, high-risk loans, gambling rings and the like. If my suspicion is correct, then, no matter whether afore-said activities are banned or not, the majority of purveyors are going to be linked to an organized gang with its paws in other, illegal activities, just as Hell's Angels are involved in both the legally shady areas of strippers/cum lap-dancers and escorts, as well as the outright illegal areas such as drugs and murders-for-hire.

But I bet I know where to go to get an idea of the accuracy of my suspicions: the Netherlands. Will scout and report back...

[Pithlord]

I'd like to see more academic work on the private costs and benefits of organized crime in various lines of business. I'd think Coase would be the starting point here: an organizational form tends to predominate where it minimizes transaction costs.

I see my job as trying to increase the transaction costs of gang forms of business organization.

[Gareth Morley]

That last comment was mine.

[Marnie Tunay]

I like your defintion of your job, Gareth - that's very cute and (forgive me for saying it) pithy.

I had to look up what Coase is, because I am not a philosopher. I gather that Coase is an argument that in specific marketing situations, monopolies will ultimately prove to be incapable of sustaining a profit. I don't get the connection here, because you are never going to have a monopoly in organized crime - there will always be warring criminal interests, on account of the inability of criminals to get along with each other for any length of time.

With respect to my earlier promise to investigate the statement that "banning exchanges people want to engage in fosters the growth of organized crime:
1. Here is an interesting 2004 study from Romania done on the question of whether or not legalization of prostitution increases the criminal element:

http://www.apfr.ro/en/documents/imptriva_prostitutiei_eng.pdf

2. Here is an NYTimes report on other issues and costs connected with legalizing the drug trade:
http://www.nytimes.com/1990/11/29/us/absenteeism-and-accidents-in-workplace-tied-to-drugs.html?n=Top%2FReference%2FTimes%20Topics%2FSubjects%2FM%2FMarijuana

because laws regarding for example, motor vehicle accidents would have to be updated to permit drug testing, and police would have to be provided with the technology and the proceedures:

http://www.nytimes.com/1990/11/29/us/absenteeism-and-accidents-in-workplace-tied-to-drugs.html?n=Top%2FReference%2FTimes%20Topics%2FSubjects%2FM%2FMarijuana

(I have to leave this for now, but I will try to get back to it tonight.)

[Gareth Morley]

Sorry to drop names without explanation. Coase is famous for two short papers, "The Nature of the Firm" (1937) and "The Problem of Social Cost" (1960?), and I was referring to the first.

In "The Nature of the Firm", Coase asked why, if markets are so great and so efficient, business corporations exist at all. Internally, a company isn't a market -- it's a miniature planned economy.

His answer was that there is always a tradeoff between the inefficiencies arising out of administrative command and those arising out of the difficulties of finding contractual partners, negotiating a deal with them and enforcing it afterwards ("transaction costs"). Companies grow to the point where the transaction costs of doing more internally and doing it through the market are roughly the same.

Organized crime is just an anti-social form of business organization, and presumably it too will grow to the extent it economizes on transaction costs relative to the alternatives.

[Marnie Tunay]

I don't have your knowledge of economics theory, Gareth, but I would question Coase's idea that the tradeoff is always between administrative "inefficiencies" and problems involved with finding and keeping contractual partners. The latter problems may well be significantly conditioned by factors other than administrative "inefficiencies."

Moreover, as you say, organized crime is an anti-social form of business organization. I would question whether or not the same models may be applied from organizations which are not in essence inimical to the society in which they are established.

[Marnie Tunay]

Here is an interesting 2002 study on the overall impact of legalized gambling in Minnesota, from the Minnesota Family Council:
http://www.mfc.org/legmanual/gambling%202.pdf

A 2003 European Survey on Best Practices in Preventing Organized Crime does not directly address the question of whether or not legalization of behaviors is inversely related to growth in organized crime, but it does highlight a related aspect: is organized criminal behavior an attitude which will always find a way to manifest within legal transactions, such as, for example, low-ball bidding on contracts?

http://www.coe.int/t/dghl/cooperation/economiccrime/organisedcrime/BestPractice9E.pdf

I found quite few listings at SpringerLink for publications, such as the ones below, which address the issues surrounding the question of whether or not legalizing gambling increases or decreases criminal involvement in gambling:

http://www.springerlink.com/content/rn2235135662lm80/

Last, here is a 2009 report done by the U.S. Congressional Research Service, which suggests that the criminals will always be with us - no matter how many activities we legalize with the intent of minimizing their involvement in the same:

http://www.fas.org/sgp/crs/misc/R40525.pdf

[Gareth Morley]

To change the subject a bit, I found Moin's reference to Chaoulli in the Lawyer's Weekly article troubling. I'm sympathetic to two-tiered medicine, but disagree with Chaoulli because it is an extreme example of a "substabtive due process" interpretation of section 7. That's bad (IMHO) because (a) the framers of the Charter were very clear that they wanted s. 7 restricted to process and adopted a phrase that had been interpreted to be solely procedural by the Supreme Court and (b) once you adopt substabtive due process, there is no sensible limit to judicial review of legislation. The Court becomes the super-legislature.

But at least in Chaoulli, the issue was Chaoulli's rights. In Chatterjee, the only issue was which level of government could enact laws governing proprietary entitlement to proceeds of crime outside the sentencing process. As the issue was framed, the Court had no right to answer "neither. ". That answer isn't available in Canadian federalism law.

[Gareth Morley]

"substabtive due process" should be "substantive". My bad.