Posted On: April 18, 2009

Public Disclosure Is Good Business for Investors

Why is transparency and openness important? Think about Bernard Madoff.

People invested millions in Madoff on the promise of 14 or 15 percent returns, even though they had no idea what he was investing in or how he was pulling it off. Likewise, poorly-regulated and opaque investment vehicles like securitized mortgages and auction-rate securities share a large part of the blame for the financial crisis gripping this country, and the world, over the past year.

One of the more outrageous spectacles of the past year has been banks and other financial institutions resisting disclosure of how they invested or spent federal bailout money. It's bad enough when some bureaucrat won't tell you how much was spent on fixing a pothole. It's worse when a megabank begs for billions and then won't tell you where the money is going.

The nation's largest public pension funds, like CalPERS, may be learning the hard way about the risks associated with secretive investments by self-proclaimed financial geniuses. The value of CalPERS' investments in hedge funds has fallen from $7.6 billion to $5.9 billion. This comes after CalPERS and other public pension funds fought unsuccessfully against public records disclosure of the performance of their investments in venture capital funds and other alternative investments, claiming that if the public found out about investment performance the public pension funds would be chased away from lucrative venture capital funds. Now the New York Times reports that big public pension funds "have grown uneasy over the costs and secrecy" associated with hedge funds. And one hedge fund executive pled guilty and is cooperating with an investigation of corruption at the New York state pension fund.

Transparency and openness aren't just good public policy. They are good investment policy for public pension funds which don't want to get caught doing business with shady people with conflicts of interest who peddle opaque and risky investments..

Posted On: April 6, 2009

Federal Shield Law May Pass This Year -- Free Flow of Information Act, HR 985, Clears House Judiciary Committee

This may be the year the long-debated and much-needed federal shield law passes.

The so-called Free Flow of Information Act, HR 985, cleared the House Judiciary Committee March 25, and the committee's chairman, Rep. John Conyers, committed to "swift action" on the bill this year. Last year the federal shield law sailed through the House, 398-21, but stalled in the Senate at the end of the session in the face of opposition from the Bush Administration and its Justice Department. The shield law has bipartisan backing, with Senator Arlen Specter (R-Pa.), the ranking member of the Senate Judiciary Committee, having introduced S448, a similar measure.

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Posted On: April 6, 2009

Obama's Welcome Change on FOIA

In a welcome shift from its predecessor, President Obama's administration has issued new guidelines favoring disclosure and transparency in handling Freeom of Information Act guidelines.

Obama first signaled a shift on his first day in office when he issued a presidential memorandum calling on agencies to "usher in a new era of open government." Attorney General Eric Holder followed up on March 19 with new FOIA guidelines directing all executive branch departments and agencies to apply a presumption of openness when administering FOIA.

The devil will be in the details, of course, but the high-level endorsement of openness -- and the explicit reversal of the so-called Ashcroft Memorandum issued in President Bush's first year in office -- is important. Holder's memo tells federal bureaucrats that FOIA is the responsibility of everyone, and directs Chief FOIA Officers in each agency to report each year to the Department of Justice on their progress in improving FOIA administration.

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Posted On: April 1, 2009

Rights of Celebrities Can Collide With First Amendment

What do Dustin Hoffman, Joe Montana and Vanna White have in common?

All have been plaintiffs in high-profile cases testing whether a person's right to profit from celebrity overcomes a First Amendment right to talk about them or do a parody about them.

Joe Montana, the former San Francisco 49er quarterback, was thrown for a loss in a 1990s suit against a San Jose newspaper which reproduced, in poster form, actual newspaper pages containing his picture. Dustin Hoffman, too, lost a lawsuit which parodied the famous photo of him from the movie "Tootside," in which he appeared in drag. But Vanna White had better luck when she sued Samsung Electronics for running an ad using a robot which resembled her as the "Wheel of Fortune" spokesperson.

These cases show that when you use a famous person's likeness, you may get sued and the result of any lawsuit is not entirely predictable. A use which drives home a point, makes editorial comment on a celebrity, is predominantly a parody, or is newsworthy will generally be protected by the First Amendment and/or state law. A purely commercial use, on the other hand, is likely to expose the user to liability.

Bottom line here: you can generally comment on or criticize celebrities, but it's risky to use their name or likeness without permission for purely commercial purposes.