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Book Looks at Hidden Victims of Tort Reform

   CHICAGO, June 29, 2015 – In a new book, "Tort Reform, Plaintiffs’ Lawyers, and Access to Justice" (University Press of Kansas, 2015), Stephen Daniels, an American Bar Foundation Research Professor, and Joanne Martin, an American Bar Foundation Research Professor Emerita and Director of Administrative Services for the American Bar Endowment, examine the very real consequences of tort reform activity for plaintiffs’ lawyers and what it means for access to justice for ordinary people.
   Plaintiffs’ lawyers, acting as the gatekeepers to the civil justice system, are the key to meaningful access to justice for ordinary people. Many Americans cannot afford an attorney, meaning the only redress for an injury comes through an attorney who takes cases for a percentage of the recovery. However, in a variety of ways – up to and including strict limits on damage recoveries -- tort reform makes this kind of plaintiffs’ contingency fee-based practice a very precarious proposition. As one plaintiff’s lawyer told Daniels and Martin, “Unless there’s a way to make money practicing law, rights don’t make any difference.” Daniels and Martin’s research concentrates on Texas, where there has long been a successful, substantial plaintiffs’ bar and a long history of tort reform activity.
   Starting in the mid- 1990s, Daniels and Martin began a series of studies in Texas covering over 20 years of tort reform activity and the politics surrounding it. The choice to use the term “tort reform activity” is intentional for Daniels and Martin because they want to emphasize not just the tort reform legislation passed in Texas, but also the sophisticated public relations campaigns waged by tort reform advocates as a part of their political strategy.
  A key part of that strategy is an unrelenting attack on plaintiffs’ lawyers as the alleged cause of many problems that tort reform will solve, like diminished economic prosperity, disappearing jobs, or shortages of physicians. Another lawyer told them, “I believe tort reform was a major factor in my decision to close my practice. I found jury verdicts decreased due to the propaganda disseminated by insurance companies and big business, and this resulted in insurance adjusters offering less money to settle cases. I began to decline representation in cases I used to accept and was working harder and receiving less money on cases I took.”
  Most plaintiffs’ lawyers in Texas, however, are not going out of business. But Daniels and Martin found that some are leaving the practice area and most are adjusting their practices in the hope of staying solvent in a decidedly hostile environment caused by the public relations campaigns as well as the legislation enacted. Those adjustments involved re-examining the kinds of cases they would take and even the kinds of clients they would take on. This can diminish access and in some situations it can leave little or no chance for meaningful access.
   For example, Daniels and Martin found that after the Texas Legislature passed a cap on non-economic damages (commonly called “pain and suffering”) in medical malpractice cases in 2003, medical malpractice cases became much less attractive. The reason is simple – with limited damages it became more problematic to balance the risk and the cost involved in these cases given that the lawyer pays all of the costs involved in preparing such a case. If the lawyer is not successful, there is no fee and no recoup of what will be a substantial monetary investment.
   Not only have these cases become less attractive, but certain kinds of clients have become especially unattractive for the lawyers who will still take such cases. In the words one lawyer who still takes medical malpractice cases, “They essentially closed the courthouse door to the negligence that would kill a child, a housewife, or an elderly person.” The reason, he said, was the lack of economic recovery for damages like loss wages or medical expenses, and “unless it’s a drop-dead negligence that you can prosecute with one or two experts, that’s just not a case that I think in Texas right now us a viable case.” These are among the “hidden victims” of tort reform.
   In light of the apparent success of the various tort reform activities Daniels and Martin admit to a certain surprise that anyone would continue practicing as a plaintiffs’ lawyer in Texas. They found, perhaps to the reformers’ chagrin, these lawyers are still very much there. The reason is a unique professional identity that can transcend pure economic considerations. In the words of a younger plaintiffs’ lawyer, “You have true believers. . . I put myself in that category. What has appealed to me is a family with kids whose life gets turned upside down because someone in the family gets seriously hurt or killed, and they’re facing a greater than David and Goliath battle, and they need someone to fight for them. . . I’ll be in this business until the bitter end. And I hope that the bitter end is not five years from now.” Plaintiffs ‘lawyers’ own professional organizations at the local, state, and local levels bolster this professional identity.
   Source: American Bar Association (originally released on June 2, 2015)

Chuck Rosenburg Selected to Head DEA

   (DPA) - 5/30/2015 - A senior F.B.I. official and former U.S. attorney, Chuck Rosenberg, has been selected by President Obama as acting director of the Drug Enforcement Administration. Rosenberg has served as the chief of staff to the F.B.I. director, James B. Comey, for the past 18 months.
   Outgoing DEA head Michele Leonhart announced her retirement last month in the wake of numerous scandals. She came under intense criticism for opposing the Obama administration’s efforts to reform mandatory minimum sentencing laws, and for opposing the administration’s hands-off approach in the four states that have approved legal regulation of marijuana.
   The DEA has existed for more than 40 years but little attention has been given to the role the agency has played in fueling mass incarceration, racial disparities, the surveillance state, and other drug war problems. Congress has rarely scrutinized the agency, its actions or its budget, instead showing remarkable deference to the DEA’s administrators. That has started to change recently, and Leonhart’s departure was seen as an opportunity to appoint someone who will overhaul the agency and support reform.
   “The new DEA chief has a tough job ahead,” said Bill Piper, director of national affairs for the Drug Policy Alliance. “Let’s hope he’s in line with the political consensus in favor of scaling back mass incarceration and the worst harms of the drug war.”The Drug Policy Alliance’s online campaign has raised awareness of the damage the DEA is causing, and the organization and its allies have been working with members of Congress to cut the agency’s budget and reduce its power.
   The DPA recently placed a mock “Help Wanted” ad in Capitol Hill newspaper Roll Call that highlights the major flaws with Leonhart’s regime – and that lays out all the problems that the next DEA administrator must try to avoid. The tongue-in-cheek ad sought a new head of the Drug Enforcement Administration (DEA) to “prolong the failed war on drugs,” with primary areas of job responsibility to include “Mass Incarceration,” “Police State Tactics,” “Obstruction of Science,” “Subverting Democracy” and “Undermining Human Rights.”
   “Drug prohibition, like alcohol Prohibition, breeds crime, corruption, and violence – and creates a situation where law enforcement officers must risk their lives in a fight that can’t be won,” said Ethan Nadelmann, executive director of the Drug Policy Alliance. “It’s time to reform not just the DEA but broader U.S. and global drug policy. The optimal drug policy would reduce the role of criminalization and the criminal justice system in drug control to the greatest extent possible, while protecting public safety and health.”
   DPA also recently released a new issue brief, The Scandal-Ridden DEA: Everything You Need to Know. The brief covers numerous DEA scandals, including the massacre of civilians in Honduras, the inappropriate use of NSA resources to spy on U.S. citizens and the use of fabricated evidence to cover it up, the warrantless tracking of billions of U.S. phone calls, and the misuse of confidential informants. The brief notes that the traditional U.S. drug policy goal of using undercover work, arrests, prosecutions, incarceration, interdiction and source-country eradication to try to make America "drug-free" has failed to substantially reduce drug use or drug-related harms. It instead has created problems of its own – broken families, increased poverty, racial disparities, wasted tax dollars, prison overcrowding and eroded civil liberties.
   Even as U.S. states, Congress, and the Obama Administration move forward with marijuana legalization, sentencing reform, and other drug policy reforms, the DEA has fought hard to preserve the failed policies of the past. Last year, Leonhart publicly rebuked President Obama for saying that marijuana is as safe as alcohol, told members of Congress that the DEA will continue to go after marijuana even in states where it is legal despite DOJ guidance stating otherwise, and spoke out against bipartisan drug sentencing reform in Congress that the Obama administration is supporting.
  The DEA also has a long history of obstructing scientific research and refusing to acknowledge established science, as chronicled in a report by DPA and MAPS last year, The DEA: Four Decades of Impeding and Rejecting Science. DEA administrators, including Leonhart, have on several occasions ignored research and overruled the DEA’s own administrative law judges on the medical uses of marijuana and MDMA.
   In a recent report the Justice Department’s Office of Inspector General found that the DEA withheld information and obstructed investigations. In a hearing last week senators grilled the DEA for failing to provide information and answer basic questions. “It’s been now eight months — I still don’t have a response from DEA to these questions,” Senate Judiciary Chairman Chuck Grassley said. “When we don’t get responses to our letters, that colors our view of the agency — particularly when we’re writing about a constituent who suffered from a real lapse in process,” Senator Diane Feinstein said.
   Last year Congress passed a spending limitation amendment prohibiting the DEA from undermining state marijuana laws. It was signed into law by President Obama, but expires later this year. The U.S. House also approved two amendments prohibiting the DEA from interfering with state hemp laws. An amendment to shift $5 million from the agency to a rape kit testing program passed overwhelmingly. Numerous hearings have already been held this year scrutinizing the agency. Reformers say more amendments, bills, and hearings are on the way.
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   Source: Drug Policy Alliance

Securities lawyer, promoters, face fraud charges

   Washington D.C., May 26, 2015  — The Securities and Exchange Commission has announced that fraud charges have been filed against a securities lawyer who used his New York law office as the headquarters for planning and implementing market manipulation schemes. Also charged are two stock promoters from Canada who assisted him.
   The SEC alleges that Adam S. Gottbetter orchestrated promotional campaigns that touted the prospects of microcap companies and enticed investors to buy their stock at inflated prices so he and his cohorts could sell shares they controlled and reap massive profits. Gottbetter enlisted Mitchell G. Adam and K. David Stevenson to help him in the last of three schemes he conducted in a six-year period. They repeatedly cautioned each other about the dangers of missteps that might draw law enforcement attention to the scheme, such as failing to keep secret the identities of Adam and Stevenson. The three rehearsed stories they would tell if ever questioned by law enforcement. During one meeting in New York City, Gottbetter complained about the difficulties of stock manipulation but conceded that robbing a bank was the only other way to make so much money so quickly.
    Gottbetter agreed to pay $4.6 million to settle the SEC’s charges. Stevenson also agreed to settle the SEC charges against him while a case against Adam will be litigated in federal court in Newark, N.J.
    In a parallel action, the U.S. Attorney’s Office for the District of New Jersey today announced criminal charges against Gottbetter, Adam, and Stevenson.
   “As a securities lawyer, Gottbetter should have served as a gatekeeper and protected the capital markets and investors from fraudsters. Instead, he swung the gates wide open and illicitly profited at investors’ expense,” said Andrew Ceresney, director of the SEC’s Division of Enforcement.
    According to the SEC’s complaint, Gottbetter was involved in the manipulation of the stocks of Kentucky USA Energy Inc. (KYUS) and Dynastar Holdings Inc. (DYNA) before teaming up with Adam and Stevenson in July 2013 to utilize their offshore ties for a new and potentially more lucrative scheme. Together they schemed to drive up the stock price for purported oil and gas exploration company HBP Energy Corp. (HBPE) through fraudulent trades generated by a trading algorithm. They then planned to launch an extensive promotional campaign featuring multiple call centers, roadshows, and a listing on the Frankfurt Stock Exchange. After creating the false appearance of liquidity and investor interest, they planned to dump their shares of the stock on unsuspecting investors around the world. While Stevenson and Adam managed to do some small coordinated trades, the scheme was thwarted before the planned manipulation and promotion could be launched when Stevenson was arrested by the FBI.
    The SEC’s complaint alleges that Gottbetter violated Sections 5(a), 5(c) and Section 17(a) of the Securities Act of 1933, and violated and aided and abetted violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. The complaint alleges that Adam and Stevenson violated and aided and abetted violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5.
    Gottbetter agreed to be barred from the penny stock industry in addition to paying $4.6 million in disgorgement and prejudgment interest from ill-gotten gains in the Kentucky USA Energy manipulation scheme. He consented to injunctions against future violations. Stevenson also agreed to be barred from the penny stock industry and consented to an injunction against future violations. The settlements are subject to court approval.
    The SEC’s investigation was conducted by Simona Suh of the Market Abuse Unit and Nancy A. Brown and Elzbieta Wraga of the New York office. The case was supervised by Amelia A. Cottrell and Michael J. Osnato Jr. The SEC’s litigation against Adam will be led by Ms. Brown and Ms. Suh. The SEC appreciates the assistance of the Newark Field Office of the Federal Bureau of Investigation, the U.S. Attorney’s Office for the District of New Jersey, and the Financial Industry Regulatory Authority.
   Source: U.S. Securities and Exchange Commission

Photo by Steve Rensberry (c) 2014