BRC News, July 31, 2010

SEC Sues Sam and Charles Wyly. Fishing: A Paleolithic "Industry."

The SEC has launched another headline-grabbing suit . All the right catch phrases are in the mix, bound to be repeated by harried journalists trying to pump up anti-business government press releases:: "Dallas billionaires," "six-year investigation," "Congressional hearings," "cloak of secrecy," "complex web" "sham system of trusts" "tax havens." Really, the SEC should construct one of those automatic phrase generators. When the rhetoric is stripped away, the accusations seem to be two: (1) The Wylys failed to announce that they hald more than 5 percent of the stock in certain companies. (2) They arranged to profit from the forthcoming sale of a company of which they were Chairman and Vice-Chairman.

The first accusation is one of those malum prohibitum rules that ought not to exist. Large shaeholders, like small shareholders, have no moral obligations to disclose anything to anybody.

The second accusation is not dismissed so easily. If all the facts are exactly as the SEC declares them to be, it appears that the Wylys may have used their positions as chairman and vice-chairman of Sterling Software in an improper way. Specifically, they may have profited from their knowledge of the coming sale of Sterling Software to Computer Associates. This would be improper because they had Lehman Brothers buying stock from existing shareholders, who were thereby deprived of the 50 percent profit they could have made when the company was acquired four months later.

But let us put this in perspective. If the only valid accusation against them is that they made an extra $31 million from their company's sale, and if we set that against two lifetimes of productivity (Sam Wyly is 75 and Charles Wyly is 76), surely the decent thing to do would have been to make a quiet announcement of the facts and let former shareholders of Sterling Software sue for their losses. If indeed they wanted to sue. Perhaps the former shareholder would not think it worthwhile. Perhaps they would just be grateful for having profited as much as they did from what the Wylys created.

Fishing: A Paleolithic "Industry." Here is an instructive NYT book review of Paul Greenberg's Four Fish: The Future of the Last Wild Food. As the Deepwater Horizon oil spill has reminded the world, property right are highly ambiguous in the world of fishing--understandably so. The Paleolithic life of hunting and gathering (of which fishing is a part) does not involve that act of "mixing one's labor" with land that is the Lockean basis of property. The fact that a tribe, or a family, or even an individual has traditionally hunted or fished or gathered over a certain range does not convert the area into the property of that tribe, family, or individual. And any attempt to set aside areas of non-property for the purpose of hunting and gathering is bound to create difficulties with the country's larger system of property law, as we have seen in the Gulf of Mexico. When a property owner is negligent and damages a non-property area, for example, who has the right to be compensated? And for what exactly? Ultimately, it would seem, the only solution is to derive the fruits of hunting and gathering from a system of production that is property based. In the meantime, what is most definitely not needed is to apotheosize the economic activity of the Old Stone Age and damn as unnatural any Neolithic Age or Industrial Age activity that encroaches on the pseudo-rights of hunter-gatherers.

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