The Next Best Use for Extortion

July 31, 2007 9:25 PM by S.M. Oliva | Other posts by S.M. Oliva | Comments (1)

George Washington University President Stephen Joel Trachtenberg steps down today after 19 years in office. As a onetime GW student and longtime neighbor of the school, I long held a mixed view of Trachtenberg's tenure, on the one hand applauding his efforts to develop the physical campus--despite the opposition of local anti-property rights activists--while on the other sharing the concern of many GW alums over the school's mediocre academics. Still, I was prepared to give Trachtenberg the benefit of the doubt and simply applaud his long and dedicated service. That was until I learned about a disgraceful act that took place just a few weeks ago as Trachtenberg headed for retirement. Admittedly, I'm remarkably biased on this particular subject, but as far as I'm concerned, this single act destroys any respect I had for Trachtenberg or his so-called "university."

On July 11, GW's law school announced receipt of a $5.1 million endowment via an alumnus to fund a new research center. That sounds perfectly innocent. Except that the money came from an act of judicially-sanctioned extortion and the generous alumnus was the lead shakedown artist:

WASHINGTON -- The George Washington University Law School was granted a $5.1 million Cy Pres award to endow a Center for Competition Law. On July 10, 2007, a United States District Court judge granted a motion to award a portion of a class-action settlement in the case of Diamond Chemical Company, Inc. v. Akzo Nobel Chemicals B.V. and Atofina Chemicals, Inc, et al. to The George Washington University Law School.

The $5.1 million award resulted from a successful class-action antitrust lawsuit brought by attorney Michael D. Hausfeld, J.D. '69, alleging global price-fixing schemes. Hausfeld specializes in antitrust and international law at Cohen, Milstein, Hausfeld & Toll, P.L.L.C. and is considered one of the country's top civil litigators.

"GW Law's ­­­­­­­­­­­­­­­­­­­­­­­­world-class antitrust faculty and our long-standing expertise in a broad spectrum of international law issues make us the natural choice for this cy pres designation," said Frederick M. Lawrence, dean of the Law School. "We will strive to provide research and programs that advance knowledge in the field of competition law and to reach out to the realms of private practice and government policy to make a significant practical affect."

Class action attorneys must often address the probability that full restitution to all injured parties may be impossible or infeasible. Not all members of the class can be identified and contacted despite repeated efforts. Under such circumstances, trial courts typically order undistributed settlement funds to be used for a cy pres award -- from the Latin phrase "next best use"-- to a recipient who would use the funds in a manner to indirectly benefit the class.

How does creating a slush fund for law professors indirectly benefit a class of hydrogen peroxide buyers? (The price fixing allegedly involved chemical companies charging "anticompetitive" prices for hydrogen peroxide.) It's a gross injustice to divert restitution funds to third parties with no connection to the cause of action.

More to my point, it's a perversion of academia to acquire funds through extortion under the pretense of endowing research. Is there any doubt that GW's new center will serve as a slush fund for plaintiffs' attorneys, pro-antitrust law professors, and their Waylon Smithers-like sycophants in the economics field? GW's own press release identifies as a goal of the center, "serving as a resource for those seeking to promote private enforcement in competition law in the United States and abroad."

These antitrust folks concocted a perfect extortion-welfare scheme. First the Justice Department threatens criminal prosecution of various chemical companies for "price fixing," which leads executives to surrender and offer their shareholders' equity as ransom. Once the feds collect their loot, Michael Hausfeld and his fellow parasites swooped in with the civil complaints. Again, the companies--and their cowardly executives are just as guilty here--opened up their treasuries. And then, lo and behold, the plaintiffs' attorneys say they can't find enough plaintiffs to distribute the money to, so they'll just divert the money to a slush fund benefitting the lead attorney's alma mater.

GW is aiding and abetting theft and extortion. The law school undermines the very concept of the rule of law by opening this center. It's disgraceful. And the funny thing is, if by some chance the new GW president were to put a stop to this program and fire the people responsible, he'd be denounced--even by many libertarians--for violating the faculty's "academic freedom".