Article: State and Local Government Funding of Health and Retirement Benefits for Employees: Current Problems and Possible Solutions with California Health Benefts as an Example

Government employee health and retirement benefits have come under a likely unprecedented critique, some may say attack, during the difficult economic times, particularly for state and local governments, during the beginning of the second decade of the twenty-first century.  Some suggested changes are more incremental than others.  The City of San Diego is putting a measure before voters to offer new city employees 401(k)’s rather than defined benefit pensions.[1]  The voters in the City of Carlsbad, a San Diego suburb, have already approved an initiative requiring future city employees’ benefits to be approved by voters.  Carlsbad had already implemented a two-tiered pension system in which new employees receive significantly lower retirement benefits.[2]  The University of California Board of Regents (“UC Regents”) has recently voted to increase employee and employer contributions to the retirement plan as well as to raise the retirement age for future university employees and to require those employees to pay more for their health care benefits.[3]  The UC Regents also has been resisting an effort to raise the limit on compensation upon which pensions are calculated.[4]  Other efforts have been to restrict the ability of employees to add to their pensions, for example, by buying additional years to add to the pension formula (normally, for example, years of services times final salary year or three year compensation times 1.2% to 3%).[5]

Some attempts at curtailing public employees’ retirement and health benefits are likely more radical.  The California Little Hoover Commission, an independent group including five governor-appointed citizens, four legislature-appointed citizens, two state senators, and two state representatives,[6] recently recommended “freez[ing] pension benefits for current state and local government workers” and moving to a “hybrid model” that would include a 401(k).[7]  The Commission also recommended a two-tiered system with lesser benefits for new employees, increasing contributions from government workers, preventing workers from increasing pay in final year of service, capping annual salary for calculating pension benefits, and increasing minimum retirement age, among other suggestions.[8]  The State of Wisconsin passed legislation to deny collective bargaining to government employees for benefits.[9]  Finally, the City of San Diego successfully litigated against the city police union to be able to renegotiate future health benefits of retirees.[10]

This article will first examine the various estimated costs for future retirement and health benefits of state and local government employees.  Secondly, the article will evaluate some of the suggested reductions in retiree health benefits and the limitations on such reductions, particularly in the context of the laws of California as an example.  Finally, the article will examine the health and retirement benefits of state and local government employees within the larger context of the societal stake in such benefits.

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John R. Dorocak, Honors A.B., Xavier University, J.D., Case Western Reserve University, LL.M. (Tax), University of  Florida, C.P.A., California and Ohio, is a Professor of Accounting at California State University, San Bernardino.  James Estes, B.A., M.B.A., California State University, Fullerton, Ph.D, California Coast University, CFP, CPCU, ChFC, CLU, is a Professor of Finance at California State University San Bernardino.  The Authors thank Lloyd E. Peake, B.A., University of Southern California, J.D., Southwestern University, Professor Emeritus in the Department of Management at California State University, San Bernardino, for his insightful comments.

[1]. Craig Gustafson, Public Safety Pensions Could Be On The Line Decision On Pensions May Go To Voters, San Diego Union-Trib., Feb. 26, 2011, at A1.

[2].See Aaron Burgin, Carlsbad Pension Reform Initiative Wins, SignOnSanDiego.Com (Nov. 2, 2010, 8:19 PM),

[3]. See Terence Chea, UC Regents Vote to Raise Pension Contributions, SignOnSanDiego.Com (Sep. 16, 2010, 11:44 AM),; Terence Chea, UC Raises Retirement Age for University Employees, SignOnSanDiego.Com (Dec. 13, 2010, 4:39 PM),

[4]. The Associated Press, Top Univ. of Calif. Execs. Seek Big Pension Boost, (Dec. 29, 2010, 12:22 PM),

[5]. See Anthony York & Jack Dolan, California State Employees Take Advantage of Pension Perk, L.A. Times, Feb. 16, 2011, available at

[6].Commissioners, Little Hoover Commission, (last visited Feb. 13, 2012).

[7]. Judy Lin, Commission: Freeze Pensions for Calif. Workers, (Feb. 24, 2011, 4:35 PM),; see also Marisa Lagos, Commission Urges Major Overhaul of State Pensions, The S.F. Chron., Feb. 25, 2011, at C8.

[8]. Lin, supra note 7.

[9]. Mark Trumbull, Did Wisconsin Senate Choose Nuclear Option in Collective-Bargaining Fight?, The Christian Sci. Monitor (Mar. 9, 2011),

[10]. San Diego Police Officers Ass’n v. San Diego City Emps. Ret. Sys., 568 F.3d 725, 740 (9th Cir. 2009).

Note: Nights on the Museum: Should Free Housing Provided to Museum Directors Also be Tax-Free

The Metropolitan Museum of Art is, arguably, one of the great cultural institutions of our time.  Visitors come from all over the world to indulge in its timeless collection spanning five thousand years of art and history.  It carries with its name not only the sound of resonating prestige, but also a mission to “stimulate appreciation for and advance knowledge of works of art that collectively represent the broadest spectrum of human achievement at the highest level of quality, all in the service of the public and in accordance with the highest professional standards.”[1]  To accomplish this mission, it requires that its director reside in a $4 million co-op, across the street from the museum, for free.[2]

Mr. Thomas Campbell, the newest director of the museum, is not the only curator receiving this generous fringe benefit.  This surprising advantage to the promotion of art and culture is also welcomed by the directors of other prestigious New York City museums,[3] including the president of the American Museum of Natural History, and director of the Museum of Modern Art.[4]  These three museums serve not only as homes to priceless works of art, but they also serve to provide their directors with about $15 million worth of “home.”[5]  A combined fair rental value of about $400,000 per year is provided free of charge, and free of tax, by the museums.[6]  This means that each director, in signing his or her employment agreement, accepts the luxurious housing, in addition to a handsome salary, as compensation.  Compensation, as most Americans know, is taxed.  However, for these museum directors, though their cash salary is included on their yearly income tax return, the value of the housing is not.  It apparently does not count as compensation.

In some situations this tax-free arrangement is not surprising.  It may be essential that an employee, such as a hospital worker, be available for twenty-four hour emergency calls.[7]  Parks may also provide housing for their rangers if they are required to be around at all hours of the day and night.[8]  Alternatively, certain jobs require individuals to move to isolated locations, such as a construction worker employed at a project at a remote job site,[9] or a military official called to relocate to a camp.[10]  Each of these situations seems fair, since if the employees were not provided with housing, it would be unlikely that they would be able to properly perform their work.  Does this call for necessity resonate in a museum director’s profession?  Of course, one important function of a museum director is to solicit and charm donors to contribute works of art to the museum.  However, does a museum director’s need for extravagant housing in a metropolitan area parallel a construction worker’s requirements for housing after he relocates to a secluded job site in Alaska?

Perhaps the answer to this question is buried deep within the purposes and policies of our tax code.  Though the government must collect revenues, maybe relief should be given to certain individuals to lighten their load.  This Note will argue that a museum director, or other executive of a cultural institution, does not qualify as one of these burdened taxpayers, and should not be able to exclude from his gross income the value of housing provided for him by his museum employer.  Part I will provide a history of Section 119, the provision of the Internal Revenue Code (the “Code”) that these directors look to for excluding the value of housing from gross income.  This part will include a brief discussion of Section 119’s legislative history and the reasons behind its enactment in 1954.  Next, Part II will illustrate the three “elements” of Section 119, which must all be satisfied to qualify for the exclusion.  This part will include several examples of how regulations, rulings, and judicial decisions have interpreted each element, and the standards that have been applied.  Part III applies these interpretations to a museum director’s treatment of housing, and argues that based on current case law, the value of housing should be included income.  Finally, Part IV concludes that though Section 119 is a necessary provision designed to alleviate the burden on those in unique professions, it does not serve the purposes of the Section to exclude the value of housing from a museum director’s income.

Jane Zhao: Syracuse University College of Law, J.D. 2012.


[1]. IRS Form 990, Schedule O for the Metropolitan Museum of Art for 2008,, (last visited Nov. 9, 2011).  “The Internal Revenue Service (IRS) Form 990 is titled “Return of Organization Exempt From Income Tax.”  Form 990 returns are required to be filed annually by most tax-exempt organizations, except for church and government-affiliated organizations.  Form 990 is “the primary tool for gathering information about tax-exempt organizations, for educating organizations about tax law requirements and ensuring their compliance.  Organizations use it to inform the public about their programs.”  Form 990 Resources and Tools,,,,id=214479,00.html (last visited Nov. 21, 2011).

[2]. Kevin Flynn & Stephanie Strom, Plum Benefit to Cultural Post: Tax-Free Housing, N.Y. Times, Aug. 9, 2010, at A1, available at

[3]. Though this Note will mainly focus on examples of New York City museums, it should be mentioned that museums throughout the nation are inconsistent in whether the housing provided to their director is tax-free.  For example, in 2008, the Art Institute of Chicago, recognized the value of housing provided to its director as gross income.  See IRS Form 990, Schedule J for the Art Institute of Chicago for 2008,, (last visited Nov. 9, 2011).  The Smithsonian, in Washington, D.C., did not provide housing to any employees.  See IRS Form 990, Schedule J for the Smithsonian Institution for 2008,, (last visited Nov. 9, 2011).  The Museum of Fine Arts in Boston and the San Francisco Museum of Modern Art did provide housing to their directors but did not disclose whether such housing was treated as gross income on the directors’ tax returns.  See IRS Form 990, Schedule J for the Museum of Fine Arts for 2008,, (last visited Nov. 9, 2011); IRS Form 990, Schedule J for the San Francisco Museum of Modern Art for 2008,, (last visited Nov. 9, 2011).

[4]. Flynn, supra note 2.

[5]. Id.

[6]. Id.

[7]. See 4 C.B. 85, 1921 WL 50340 (1921).

[8]. See Coyner v. Bingler, 344 F.2d 736 (3d Cir. 1965).

[9]. See Treas. Reg. § 1.119-1(f), Example (7) (2010).

[10]. See infra note 28.

Article: Ebbing the Tide of Local Bank Concentration: Granting Sole Authority to the Department of Justice to Review the Competitive Effects of Bank Mergers

Take a trip back: the year is 1991, and First Hawaiian, Inc., Honolulu, Hawaii (“Applicant”) has applied for Federal Reserve Board (“Fed”) approval to acquire First Interstate of Hawaii, Inc., Honolulu, Hawaii, (“FIH”) which owns a bank as one of its subsidiaries.[1]  The Fed, instructed by statute to determine whether a particular transaction is likely to lessen competition, notes first that the Applicant is the second largest commercial banking organization in Hawaii, and that FIH is the fourth largest commercial banking organization in Hawaii.[2]  Further, after consummation of the transaction, the Applicant would control 37.3% of the total deposits in commercial banking organizations in Hawaii.[3]  Upon first blush, one would assume that the Fed would be hesitant to approve the transaction, given that the Applicant would occupy an even more dominant position in the Hawaiian commercial banking market.  But the Fed, much to the chagrin of the United States Department of Justice’s Antitrust Division (“DOJ”), approves the transaction, concluding that the proposed acquisition would not have “a substantially anticompetitive effect in any relevant market.”[4]

Now flash forward to the present day.  The United States has suffered through an economic collapse that required multiple bank bailouts, including $700 billion under the Troubled Assets Relief Program (TARP).[5]  All told, the Fed lent $2 trillion to shore up banks,[6] with much of the money going towards bailing out America’s largest banks, such as Bank of America[7] and Citigroup.[8]  Although the causes of the crisis are numerous,[9] there is no denying that regulators “pumped tens of billions of dollars into the nation’s leading financial institutions because the banks were so big that officials feared their failure would ruin the entire financial system.”[10]  After the financial collapse, the public and policymakers alike heaped much scorn upon banks that had become “too big to fail.”  But another pressing concern rose from the ashes of the fallout of the financial crisis: increasing levels of bank concentration in small, local markets and the dangers such concentration presents.

Banks in localized, small markets have sought out consolidation with equal vigor as the titans of the industry, and for good reason.  Empirical analysis demonstrates that as concentration among local markets increases, the banks operating in those markets have increased profit rates, can pay lower interest rates on deposits, and can charge higher interest rates on loans.[11]  This has a particularly potent effect on small businesses that rely primarily on local banks for their credit needs.[12] Yet under the current banking regulators’ antitrust analysis, lending to small- and medium-sized businesses as a distinct submarket is ignored, which presents opportunities for local banks, such as those involved in First Hawaiian, to exploit their increased market power, or, at the very minimum, to continue to seek consolidation in hopes of obtaining a monopoly over local markets.

This Article argues that the DOJ, rather than the banking regulators, such as the Fed, the Office of the Comptroller of the Currency (OCC), and the Federal Deposit Insurance Corporation (FDIC), should be given the sole power to review the competitive effects of bank mergers to minimize the dangers of continued local bank concentration.  Although we will never know the extent to which bank consolidation could have been prevented, it is clear that mergers such as First Hawaiian Inc., Honolulu, Hawaii would have come out differently under DOJ review.  Section I of this Article explores America’s long storied fear—shared by the public and policymakers alike—of concentration among industries, particularly that of the banking industry.  Section II describes the laws governing bank mergers that grew out of this fear of concentration, and details the reemergence of concentration in the banking industry.  Section III begins with a look at how the bank merger process works and then proceeds to explain why the DOJ should be the agency responsible for reviewing the competitive effects of bank mergers.  Finally, Section IV contemplates and responds to potential counterarguments.

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Aaron Stine: J.D., The George Washington University Law School.  B.A., International Relations, Mandarin Chinese, Michigan State University.

Eric Gorman: J.D., The John Marshall Law School.  B.S., Mechanical Engineering, Michigan State University.

[1]. See First Hawaiian, Inc., Honolulu, Hawaii, 77 Fed. Res. Bull. 52, 52 (1991).

[2]. Id. at 54.

[3]. Id.

[4]. Id. at 57.

[5]. See Alex Johnson, Bush Signs $700 Billion Financial Bailout Bill, (Oct. 3, 2008),

[6]. See Alan Feuer, Battle Over the Bailout, N.Y. Times,  Feb. 14, 2010, at MB1.

[7]. Bank of America received a $20 billion bailout and a government guarantee for almost $100 billion of potential losses on toxic assets through an individual rescue plan, in addition to the $25 billion it received under TARP.  See Patrick Rucker & Jonathan Stempel, Bank of America Gets Big Government Bailouts, (Jan. 16, 2009),

[8]. Citigroup received guarantees on losses of its pool of approximately $306 billion in troubled assets, along with $45 billion in capital.  See David Enrich et al., U.S. Agrees to Rescue Struggling Citigroup, Wall Street J., Nov. 24, 2008, at A1.

[9]. For an overview of the causes of the financial crisis, see generally Kenneth E. Scott, The Financial Crisis: Causes and Lessons, 22 J. Applied Corp. Fin. 8 (Dec. 10, 2009), available at; see also Sheila C. Bair, Chairman, FDIC, Causes and Current State of the Financial Crisis Before the Financial Crisis Inquiry Commission (Jan. 14, 2010), available at

[10]. See David Cho, Banks ‘Too Big to Fail’ Have Grown Even Bigger, Wash. Post, Aug. 28, 2009, at A01.

[11]. See generally R. Alton Gilbert & Adam M. Zaretsky, The Federal Reserve Bank of St. Louis, Banking Antitrust: Are the Assumptions Still Valid? (2003), available at

[12]. See generally Robert DeYoung et al., Youth, Adolescence, and Maturity of Banks: Credit Availability to Small Business in an Era of Banking Consolidation, 23 J. Banking & Fin. 463 (1999), available at http://

Article: Sacrificing Functionality for Transparency? The Regulation of Swap Agreements in the Wake of the Financial Crisis

Once the sole province of chief executive officers and hedge fund managers, swap agreements (or “swaps”), most notably credit default swaps,[1] came to the forefront of politicians’ and regulators’ minds with the near-collapse of the U.S. financial system in 2008.  Having operated largely in the shadows of the lightly regulated over-the-counter (OTC) derivatives market, companies went unimpeded when they sold credit default swaps to cover trillions of dollars in securities and bonds.[2] Credit default swaps written by American International Group, Inc. (AIG), for instance, covered more than $440 billion in bonds.[3] Unable to cover the contracts’ costs when they became due at the onset of the financial crisis, the U.S. government, arguably to save the larger financial system,[4] bailed out AIG and some of the largest financial institutions in the world.[5]

In response, and in an effort to gain control over the opaque OTC derivatives market, Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”) in 2010, which, in part, provided authorization to both the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) to regulate swap agreements.[6]  Acting on its congressional mandate, the SEC in early 2011 released for public comment Regulation SB SEF,[7] which purports to remove many swap agreements from the OTC market and put them on exchanges or swap execution facilities, and thereby inject greater transparency into the OTC derivatives market.

This Article argues that Regulation SB SEF does not adequately consider the fundamental differences between securities and swap agreements that render swap agreements less amenable to securities-like exchanges.  Part I of this Article defines what a swap agreement is and describes the SEC’s attempt to regulate them.  Part II dissects the case for regulating swap agreements and analyzes their fundamentals in order to better understand how to regulate them.  Part III suggests an alternative regulatory structure that will better allow the swaps market to function.

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Reed Schuster: Associate, Faegre Baker Daniels LLP; J.D. 2011, University of Minnesota Law School.

[1]. For a more in-depth discussion of credit-default swaps, see infra Part I.A.1.b.

[2]. See Marco Avellaneda & Rama Cont, Int’l Swaps & Derivatives Ass’n, Transparency in Credit Default Swap Markets 8 (July 2010), available at (“In 1997, the notional open interest in [credit default swaps] was on the order of 200 billion dollars; by 2007 it had grown to approximately USD 60 trillion.”).

[3]. Adam Davidson, How AIG Fell Apart, Reuters (Sept. 18, 2008),

[4]. Cf. Henry M. Paulson Jr., On the Brink: Inside the Race to Stop the Collapse of the Global Financial System 99 (2010) (“A Bear Stearns failure wouldn’t just hurt the owners of its shares and its bonds.  Bear had hundreds, maybe thousands, of counterparties—firms that lent it money or with which it traded stocks, bonds, mortgages, and other securities.  These firms . . . all in turn had myriad counterparties of their own.  If Bear fell, all these counterparties would be scrambling to collect their loans and collateral. . . .  That was how bank runs started these days.”).

[5]. See, e.g., Steven M. Davidoff, Uncomfortable Embrace: Federal Corporate Ownership in the Midst of the Financial Crisis, 95 Minn. L. Rev. 1733, 1737-44, 1754-55 (2011) (discussing the U.S. government’s assistance to AIG, Citigroup, and Bank of America); Matthew Karnitschnig et al., U.S. to Take Over AIG in $85 Billion Bailout; Central Banks Inject Cash as Credit Dries Up, Wall Street J. Online (Sept. 16, 2008), (reporting on the U.S. government’s bailout of AIG).

[6]. Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. No. 111-203, § 762, 124 Stat. 1376, 1759 (2010).  Interestingly, save for section 10(b) of the Securities Exchange Act of 1934, see Commodity Futures Modernization Act, Pub. L. 106-554, § 303(d), 114 Stat. 2763, 2763A-454 (2000) (providing for the regulation of swap agreements under section 10(b)); see also Caiola v. Citibank, 295 F.3d 312, 327 (2d Cir. 2002) (“Sections 302 and 303 of the [Commodity Futures Modernization Act] define ‘swap agreements’ and then expressly exclude them from the definition of ‘securities,’ but amend section 10(b) to reach swap agreements.”).  Swap agreements were expressly exempted from regulation in the Securities Exchange Act of 1934.  15 U.S.C. § 78c-1(a)-(b) (2006).

[7].Registration and Regulation of Security-Based Swap Execution Facilities, 76 Fed. Reg. 10,948 (proposed Feb. 28, 2011) (to be codified at 17 C.F.R. pts. 240, 242, 249).

Article: Financing Innovation: Branding, Monitoring, and Uncertainty

A recent breakthrough in contract theory identified the practice of braiding, in which parties weave informal and formal elements of contract together to overcome uncertainty.  These contracts are especially prevalent in the context of collaboration for technological innovation, but they also appear in other contexts with significant uncertainty, such as preliminary agreements in mergers and acquisitions.  Thus far, the literature has focused solely on the core contractual relationship—the crystallized instance of the initial agreement between two companies, such as a research collaboration between a large pharmaceutical company and a small biotechnology company.

This article builds on braiding theory in several ways.  It provides new empirical information by analyzing actual contracts, modifications, and financing arrangements.  It expands braiding theory’s initial inquiry and seeks to understand how modifications to such original agreements affect braiding and how secured lenders finance such uncertain collaborations and monitor debtors.

Modifications reveal how parties gradually resolve uncertainty and how they respond to newly arising uncertainty.  First, modifications have shifted power within the “contract referee mechanism,” suggesting that braiding also works well as a mechanism to deal with ex ante uncertainty of bargaining power, revelation of information throughout the relationship, and ex post reallocation of that power.[1]  Second, modifications have formalized certain switching costs in termination provisions, and have adjusted those costs over time.[2]  This formalization suggests that crowding out of informal elements (here, switching costs) is not a necessary result even when there is a high-powered formal element.  Third, modifications reveal innovative nested option structures[3] that are developed in stages as nested uncertainty is revealed.[4]  Low-powered formal mechanisms[5] appear to be essential in developing an option-based response to these unforeseen uncertainties.

The secured lender’s behavior in these contracts is initially puzzling: neither the braiding solution nor the traditional secured credit solution is present to resolve uncertainty or even manage the risk of routine opportunism.[6]  The secured credit theory predicts that the lender will take one of two measures to police opportunism: monitor the debtor’s behavior or accept a bonding gesture by the debtor.[7]  Here, neither of those occur in any significant way.  The lender cedes control over the primary assets of the small collaborator, the intellectual property (IP), and allows the big collaborator an exclusive license.  The lender also does minimal monitoring: it might receive financial statements, but it does not actively monitor debtor behavior, the collaborative process, or the collateral.  Instead, the lender’s primary strategy is to take a security interest in the small company’s payment rights from any IP that emerges from the collaboration.

This article solves the puzzle with two steps that refine foundational assumptions in secured credit theory and the theory of transacting around uncertainty.  First, it is not the secured lender who monitors the debtor, but the big collaborator.  The big collaborator’s monitoring acts as a substitute for the secured lender’s expected monitoring.  Secured credit theory typically describes the secured lender as a “cop on the beat,” which allows other unsecured creditors to provide credit without worrying about monitoring.  Here, the big collaborator is the “cop on the beat,” and it is the secured lender who is benefitting from that diligence.  This particular monitoring arrangement is also normatively optimal as the secured creditor does not have the usual combination of countervailing effects—focused monitoring and security’s disincentivizing insulated recovery.[8]

Second, Knightian uncertainty is relative.[9]  The underlying uncertainty problem that braiding contracts attempt to solve is not an absolute attribute of a particular event or series of events as economics literature has typically suggested.  Instead, one’s economic position with regard to specific uncertainties can transform an uncertain event into a risky event.  This result can be seen in the secured lender’s strategy.  The big and small collaborators effectively solve the uncertainty problem in their technological innovation contract, but the uncertainty is not automatically solved for other parties.  Unlike the elimination of risk by monitoring, the uncertainty is still present and will not dissipate until the necessary information is revealed (or created).  The secured lender, however, cares nothing of this uncertainty and instead makes a bet on the exogenous probability of the success of the venture.  The uncertainty endogenous to the collaborative relationship determines that outcome, but need not be a part of the secured lender’s risk calculus.[10]  For example, any collaboration may have a ten percent chance of success, but the direction of each individual collaboration may be radically uncertain.  By having a position outside of that relationship, the secured lender has a different relative position and can avoid the uncertainty problem inherent in braiding contracts.  Portfolio theory provides a more rigorous explanation of this phenomenon by describing how specific uncertainty may be diversified away, a fact previously undeveloped in economic and legal academic literature.

Part II describes the theoretical background for this discussion.  It describes the phenomenon of braiding contracts and how they solve problems of technological and partnership uncertainty.[11]  It also considers alternative theories that seek to explain how the uncertainty problem has been solved, such as modularity theory and relational contracting theory.  It also examines prior empirical literature on collaborative alliances and questions its underlying assumptions about contracts underlying this literature.

Part III examines a new example of a prototypical braiding relationship and its contractual modifications as that relationship developed over time.  Specifically, it examines how modifications affect the contract referee mechanism, switching costs, and the nested options structure.  The modifications of these features reveal that braiding also deals with uncertainty of bargaining power[12] and unforeseen uncertainties which only emerge once the relationship has developed.  The formalization of switching costs through high-powered mechanisms also further undermines the explanatory power of the crowding-out phenomenon in the economics literature, but perhaps only where the formal and informal elements of the contract are tied to different information streams.

Part IV examines the third-party loan agreement with the small collaborator in that relationship.  The actual structure of this loan agreement undermines the standard predictions one would make under current theories of secured credit and policing debtor opportunism.  This analysis discerns a new pattern of monitoring, helps to refine existing secured credit theories and adds a new tool for solving puzzles in explaining the pattern of secured credit.

Part V considers the loan agreement’s approach to the collaboration’s uncertainty, finding that the only plausible explanation is that Knightian uncertainty is positionally relative.[13]  The secured lender is actually operating under a risk-based scenario despite the uncertainty inherent in the collaboration that it is lending into.  After describing intuitive analogies for this argument, this Part adds a first cut at using portfolio theory to establish a rigorous basis for the relativity of uncertainty.  The Part concludes by considering what the relativity of uncertainty means for the role of business lawyers in such transactions.

Part VI concludes.

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Nicholas J. Houpt: Associate, Akin Gump Strauss Hauer & Feld LLP.  J.D., Columbia Law School; B.A. University of Notre Dame.

[1]. Ronald J. Gilson et. al., Braiding: The Interaction of Formal and Informal Contracting in Theory, Practice, and Doctrine, 110 Colum. L. Rev. 1377, 1403 (2010) [hereinafter Gilson, Braiding].  A “contract referee mechanism” is a dispute resolution mechanism used in braiding contracts.  Id.  The mechanism typically requires (near) unanimous consent for certain key decisions in the collaborative relationship.  Id.  Lower-level employees are typically the ones deciding at first, with any unresolved disputes going to higher-level employees.  Id.

[2].Id.  Switching costs are the costs of finding another partner with whom to collaborate.  Gilson, Braiding, supra note 1, at 1403.  These costs include the learning curve that the new partner would have to undergo to catch up to the current partner, and would include a discount for reliability and trust that has not yet been established.

[3]. See id. at 1407-09.  Nested options are a mechanism used to solve potential hold-up problems that may arise once uncertainty is dissipated.  For example, once a technological innovation is developed, the next stage is commercialization.  One can predict these stages beforehand and use an option structure at each stage to prevent opportunism.  One collaborator may have an option of first refusal on the commercialization of any product that is developed, and if that collaborator cannot reach a commercialization agreement with the other, the other has an option to purchase the product and commercialize it through other means.  Without these options, the parties might try to hide their successes from each other and act opportunistically.

[4]. In this article, I challenge the effectiveness of nested options by pointing to evidence of nested uncertainty.  As one type of uncertainty is resolved and a predictable stage is entered, another type of uncertainty may develop that presents its own opportunism problems.  This unpredictable uncertainty can only be dealt with once it arises.

[5]. Low-powered formal mechanisms are soft commitments, like an obligation to negotiate in good faith.  High-powered formal mechanisms are much harder commitments, such as the obligation to perform a certain task at a certain time.  In the context of braiding contracts, low-powered formal mechanisms are used because hard terms, like price, quantity, and typical covenants, do not fit well with uncertain processes.  The options that are typically used are options to negotiate about a particular term or to terminate the agreement.

[6]. I explain other standard theories of secured credit not discussed in the Introduction, such as relational contracting and contextualist theory in Part IV.

[7]. See Saul Levmore, Monitors and Freeriders in Commercial and Corporate Settings, 92 Yale L.J. 49, 50-59 (1982) (describing monitoring and bonding as the two methods secured lenders use to manage agency costs).  See infra Part III.A for a more thorough discussion of the many different theories of secured credit.

[8]. See infra Part IV.C (discussing Richard Squire’s theory of symmetry in creditor’s rights).

[9]. Knightian uncertainty and risk are categories of risk proposed by the economist Frank Knight.  See generally Frank H. Knight, Risk, Uncertainty and Profit 197-232 (1921).  Risk is quantifiable and can be probabilistically allocated, whereas uncertainty is so radically unquantifiable that any allocation of risk would be arbitrary.


[10]. A familiar analogy might be the way that venture capitalists fund start-up firms.  The venture capitalist does not care that the entrepreneur wanted to invent a war-time anesthetic for soldiers and ended up with Novocain, a product that was successful in a different market; the venture capitalist looks for an innovative product with a chance of success.  Once found, the venture capitalist typically provides funds in exchange for equity, and the venture capitalist sells off a large portion of that equity once the product has succeeded.

[11]. Partnership uncertainty is the uncertainty involved in finding a collaborator whom one can trust, who will fit well with one’s working style, and who has the skills and know-how to make a successful collaboration.  Each of these things is difficult to signal before the collaboration begins, leaving these qualities uncertain ex ante.  As the collaboration proceeds, one can establish informational mechanisms to observe these qualities in the partner.


[12]. Uncertainty of bargaining power refers to the parties’ inability ex ante to determine which party is least likely to defect when given an ex post decision right.  In other words, it is not clear which party has the most to gain or most to lose in any future state of the world.

[13]. Positionally relative might mean several things and this article is only a first cut at clarifying the concept.  Uncertainty can be relative to one’s economic position, which would differentiate between the lender and the big collaborator, who each have very different economic transactions with the small collaborator and hence each have different concerns about uncertainty.  The other possibility is that uncertainty is relative to legal position.  The legal structure of the loan can be asset-based or cash-flow based and this structure might change how much uncertainty matters to the lender.

Note: Stateside Guantanamo: Breaking the Silence

On December 11, 2006, the Department of Justice quietly began to execute the initial stages of a secret new program, the Communication Management Unit (CMU).[1]  At 7:00 A.M., seventeen federal prisoners from across the country were removed from their cells without warning or explanation.[2]  They were held in isolation for two days and then transferred to the Federal Correction Complex (FCC) in Terre Haute, Indiana.[3]  There, they were notified of their transfer to the CMU—a “completely self-contained unit” designed to severely limit a prisoner’s ability to communicate with the outside world.[4]

Unlike other prisons in the United States, the CMUs have been operating in relative secrecy.[5]  Official comment from the Bureau of Prisons states that the program is part of an ongoing effort to monitor the mail and other communications of “terrorist inmates” within the federal prison system.[6]  The government asserts that CMUs were designed to allow for a concentration of resources in an effort to “greatly enhance the agency’s capabilities for language translation, content analysis and intelligence sharing.”[7]

All forms of communication in the CMU are monitored and severely restricted.[8]  CMU inmates are subjected to twenty-four hour surveillance.[9]  Every word they utter is recorded and remotely monitored by a counter-terrorism team.[10]  Conversation among inmates must be conducted in English, unless otherwise negotiated.[11]  Restrictions on visiting time and phone calls are more severe than in most maximum security prisons.[12]  Although most of the prisoners are not considered high security risks, the units also impose a categorical ban on any physical contact with visitors, including family.[13]

Although the U.S. government contends that the units were created to house terrorist prisoners, many CMU detainees have never been convicted of terrorism related offenses.[14]  Take CMU inmate Sabri Benkahla, who was born in Virginia and graduated from George Mason University.[15]  While studying in Saudi Arabia, he was arrested and charged with aiding the Taliban.[16]  A Virginia court found him not guilty in 2004.[17]  Despite the acquittal, prosecutors forced him to testify before a grand jury, where he was accused and convicted of perjury.[18]  At Benkhali’s sentencing, the presiding judge declared that he was “not a terrorist” and that his chances of “ever committing another crime were ‘infinitesimal.’”[19]  Other CMU inmates include Enaam Arnaort, the founder of the Islamic charity Benevolence International Foundation, and Dr. Rafil Dhafir, a physician and the founder of the Iraqi charity Help the Needy.[20]  Like Benkahla, Dhafir and Arnaout were initially accused of terrorist-related crimes, yet were ultimately imprisoned for far lesser charges.[21]

The CMUs have come under fire from civil rights organizations which argue that the units represent “an unwarranted expansion on the war on terrorism.”[22]  The Federal Bureau of Prisons’ (BOP or “Bureau”) failure to establish meaningful criteria for inmate designation to a CMU coupled with the fact that the units house predominantly Muslim males indicates a strong presumption of racial profiling.[23]  Equally troubling is the secretive manner in which the CMUs were established.  The Administrative Procedures Act (APA) requires that prison regulations be promulgated under the law, yet the Bureau failed to notify the public of any changes to the prison program and did not afford the opportunity for opposition to comment prior to the creation of the CMUs.[24]  Critics have dubbed the facilities a “stateside Guantanamo.”[25]

This Note will argue that the U.S. government’s creation of the CMUs and the current policies under which the prison units operate violate established constitutional and statutory standards.  Part I details the post-9/11 climate from which the CMUs arose.  Part II attempts to expose the clandestine creation of the CMUs, while Part III argues that their establishment represented a marked change in federal policy which failed to comply with the APA.  Part IV maintains that the rules which govern the operation of the CMUs deny inmates due process guarantees of the Fifth Amendment.  Part V addresses the disproportionate percentage of Muslims housed in CMUs.  Finally, Part VI offers recommendations aimed at resolving the CMU regime’s current inadequacies.

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Luke Beata: J.D. Candidate, Syracuse University College of Law, 2012; B.A. International Relations and Economics, Boston University, 2002.

[1]. Katherine Hughes, Dr. Rafil A. Dhafir at Terre Haute Prison’s New Communications Management Unit, Wash. Rep. of Middle East Affairs, 12-13 (May-June 2007), available at

[2]. Id.; Nick Meyer, Local former U.S. Navy man locked in isolation unit “without explanation, The Arab Am. News (Jan. 15, 2011, 2:22 AM),


[3]. Hughes, supra note 1.

[4]. Id.

[5]. See id.; see also Basil Katz, Special U.S. prisons unconstitutional: lawsuit, Reuters (Mar. 30, 2010),

[6]. Communication Management Units, 75 Fed. Reg. 17,324, 17,324-26 (Apr. 6, 2010) (to be codified at 28 C.F.R. pt. 540).

[7]. Dan Eggen, Facility Holding Terrorist Inmates Limits Communication, Wash. Post, Feb. 25, 2007, at A7, available at

[8]. See id.

[9]. Carrie Johnson & Margot Williams, Guantanamo North: Inside Secretive U.S. Prisons, Nat’l Pub. Radio (NPR) (Mar. 3, 2011),

[10]. Id.

[11]. Eggen, supra note 7.

[12]. Johnson, supra note 9.

[13]. Hughes, supra note 1; Meyer, supra note 2.

[14]. Meyer, supra note 2.

[15]. Benkahla v. Federal Bureau of Prisons, et al., Am. Civ. Liberties Union (ACLU) (June 2, 2010),

[16]. Id.

[17]. Id.

[18]. Id.  Notably, the statements which he allegedly had misrepresented were related to the underlying offense of his earlier arrest of which he was acquitted.  Id.

[19]. Benkahla v. Federal Bureau of Prisons, et al., supra note 15.

[20]. Karen Friedemann, The CMU Black Hole, The Muslim Observer (Aug. 6, 2009),

[21]. Id.

[22]. Dean Kuipers, Isolation Prisons Under Fire, An ACLU Lawsuit will Challenge the Transfer of an Inmate to a Facility that Drastically Limits Outside Contact, L.A.Times (June 18, 2009),

[23]. Eggen, supra note 7.

[24]. Hughes, supra note 1; see also Katz, supra note 5.

[25]. Katz, supra note 5.

Article: The Speedy Trial Rrights of Military Detainees

In Washington, debate roils on about whether terrorism suspects should be tried by military commission, Article III courts, some combination of the two, or not at all.  The Obama administration’s highest profile decision to hold a civilian terrorism trial on American soil—that of Khalid Sheikh Mohammed (KSM) and his September 11 co-conspirators—was met with popular[1] and congressional[2] resistance and ultimately rescinded.[3]  Another Guantanamo detainee, Ahmed Ghailani, was transferred to the Southern District of New York, convicted of a single count of conspiracy to destroy government buildings and property, and sentenced to life in prison.[4]

United States v. Ghailani[5] tested the government’s ability under the Sixth Amendment Speedy Trial Clause and Fifth Amendment Due Process Clause to move military detainees to the civilian justice system after a delay of many years.  While the near-acquittal in Ghailani may freeze criminal trials of long-term military detainees for the foreseeable future,[6] eventually there will be further attempts to bring such prosecutions,[7] whether by President Obama or one of his successors.[8]  As the politicization of terrorism law and policy continues and perhaps even intensifies, more terrorism suspects may be moved between the military and civilian justice systems.  Just as the Bush administration focused its efforts on military commissions and the Obama administration on civilian trials, future Republican and Democratic presidents will be inclined to try terror suspects in their preferred venue.  As a result, there may be more cases like Ghailani in the future, with a defendant who has been transferred to the civilian justice system after spending years in military custody.

This Article examines the Sixth Amendment speedy trial rights[9] and related Fifth Amendment due process rights[10] of criminal defendants who were detained by the military as part of the War on Terror.  I argue that the government should prosecute detainees by either military commission or criminal trial where possible, with the venue depending on the nature of the case.  In criminal cases, the Speedy Trial Clause does not apply to periods of military detention absent unusual circumstances, and judicial scrutiny should occur primarily through the Due Process Clause of the Fifth Amendment.  While defendants carry a higher burden under the Due Process Clause, the determinative factors under both Fifth and Sixth Amendment analysis are the reason for the delay and the resulting prejudice to the defendant.

Part I of this Article examines the arguments for and against trying military detainees as a threshold question.  Part II discusses the nature of the Sixth Amendment Speedy Trial Clause and its interaction with the Fifth Amendment Due Process Clause.  Part III inspects the Barker v. Wingo[11] test for determining whether there has been a violation of Speedy Trial Clause and its application in Ghailani, United States v. Padilla,[12] and potential future detainee cases.  Finally, Part IV more broadly discusses the benefits and dangers of transferring terrorism suspects between the military and civilian justice systems and adjusting existing criminal law to meet the particular needs of terrorism.

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Walter E. Kuhn: Minority Chief Counsel, United States Senate Judiciary Committee, Subcommittee on the Constitution, Civil Rights and Human Rights.  J.D. Duke University School of Law, 2006; B.A, University of North Carolina at Chapel Hill, 2003.

[1]. See Lydia Saad, Americans at Odds With Recent Terror Trial Decisions, Gallup (Nov. 27, 2009), (discussing a poll showing that a majority of Americans believed that Khalid Sheikh Mohammed should be tried by military commission outside of New York City, and were “very concerned” or “somewhat concerned” that a trial would give KSM a forum to further his cause).

[2]. Eighteen senators introduced an amendment to deny the Department of Justice funding for the trials, but it failed to attract the sixty votes necessary in November 2009.  See Kasie Hunt, Senators try to block KSM trial, Politico (Feb. 2, 2010),  There was press speculation that if offered again, the legislation may receive enough votes for passage.  Michael Isikoff, No KSM in NYC?, The Daily Beast (Jan. 16, 2010),

[3]. Anne E. Kornblut & Peter Finn, Obama advisers set to recommend military tribunals for alleged 9/11 plotters, Wash. Post, Mar. 5, 2010, at A01.

[4]. Benjamin Weiser, Ex-Detainee Gets Life Sentence in Embassy Blasts, N.Y. Times, Jan. 25, 2011, at A18.

[5]. See generally 751 F. Supp. 2d 515 (S.D.N.Y. 2010).

[6]. See Jack Goldsmith, The Ghailani Sentence, Lawfare (Jan. 25, 2011), (“I doubt the Ghailani verdict points the way for more civilian trials of GTMO detainees in the near future.  There don’t seem to be that many cases that the administration thinks it can win in civilian court.  But more importantly, this verdict won’t change congressional resistance to such trials, and the President is unlikely to expend political capital in a presidential election cycle to reverse this resistance.”).

[7]. Evidencing the administration’s intention to try detainees criminally in the future, Attorney General Eric Holder reiterated his general support for Article III terrorism trials after reversing his decision to try KSM and his co-conspirators in New York.  Attorney General Eric Holder, Address at the American Constitution Society Convention (June 16, 2011), available at  Further, the administration transferred Ahmed Abdulakir Warsame to New York for criminal trial after a short period of military detention following his capture in the Gulf of Aden.  Charlie Savage, U.S. Tests New Approach to Terrorism Cases on Somali Suspect, N.Y. Times, July 7, 2011, at A10.  Members of the Senate Judiciary Committee also sent Attorney General Holder a letter expressing concern about the potential criminal trial of Ali Mussa Daqduq, a detainee held in United States custody for years in Iraq.  Letter from Senators to AG Holder: Prosecute Senior Hezbollah Commander Before Military Tribunal (May 17, 2011) available at

[8]. In the short-term, the 2011 National Defense Authorization Act prohibited the use of fiscal year 2011 Department of Defense funds to transfer Guantanamo detainees to the United States, despite protest from President Obama and Attorney General Eric Holder.  Ike Skelton National Defense Authorization Act for Fiscal Year 2011, Pub. L. No. 111-383, § 1032, 124 Stat. 4137, 4351 (2010); Press Release, President Barack Obama, Office of the Press Secretary, Statement by the President on H.R. 6523 (Jan. 7, 2011), available at (“Section 1032 [barring the use of funds to transfer detainees into the United States] represents a dangerous and unprecedented challenge to critical executive branch authority to determine when and where to prosecute Guantanamo detainees.”); see also Peter Landers, Congress Bars Gitmo Transfers, Wall Street J., Dec. 23, 2010, at A2.

[9]. U.S. Const. amend. VI (“In all criminal prosecutions, the accused shall enjoy the right to a speedy and public trial.”).

[10]. U.S. Const. amend. V (“No person shall . . . be deprived of life, liberty, or property, without due process of law.”).

[11]. 407 U.S. 514, 530-33 (1972).

[12]. No. 04-60001-CR-COOKE (S.D. Fla. Apr. 3, 2007) (denying motion to dismiss indictment for speedy trial violations in derogation of Sixth Amendment rights).

Article: Federalism, Harm, and the Politics of Legal Garcia v. Texas

Humberto Leal Garcia savagely raped and murdered sixteen-year-old Adria Sauceda in San Antonio in the spring of 1994.[1]  A Texas jury sentenced him to death.[2]  On these facts alone, his case appears indistinguishable from the dozens of Texas capital cases that regularly receive federal court review, capable of spurring the occasional, predictable complaints about Texas justice and compelling the indignation of the capital defense bar and abolitionist community, but otherwise not especially noteworthy legally or politically.  Yet, Texas law enforcement officials investigating the murder did not allow Leal, a Mexican national who had resided in the United States since the age of two, access to the Mexican consulate pursuant to the Vienna Convention on Consular Relations.[3]  So when Leal sought a stay of his Texas execution from the United States Supreme Court in the summer of 2011, he created more than just a legal question for the Court’s resolution.  His case ignited a storm of controversy at multiple levels of politics—constitutional, international, and electoral.

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J. Richard Broughton: Assistant Professor of Law, University of Detroit Mercy.  In the interests of disclosure, I note that I am a former Assistant Attorney General of Texas, and my former office handled the federal court litigation on behalf of Texas against Leal.  I left the office in 2003 and did not participate in that litigation.  I then served as a lawyer in the Capital Case Unit at the United States Department of Justice, but left the DOJ in 2008 and played no role in the Leal litigation there, either.  I will refer herein to the Medellin litigation, in which I had only a very minor role while at DOJ, and, in any event, my discussion here contains only public information about that case.  I am grateful to Stacy Johnson for her excellent research assistance on this project.

[1]. Garcia v. Texas, 131 S. Ct. 2866, 2867 (2011) (per curiam).  Confusingly, the current Supreme Court Reporter’s caption refers to the petitioner as “Garcia.”  In its opinion, however, the Court refers to him as “Leal,” which is the proper reference and the one employed by the lower courts.  For accuracy here, I will cite to the Supreme Court’s opinion as “Garcia v. Texas,” but will refer to the petitioner personally as “Leal.”

[2]. Id.

[3]. Vienna Convention on Consular Relations, Apr. 24, 1963, 21 U.S.T. 77, T.I.A.S. No. 6820; Garcia, 131 S. Ct. at 2867.

Note: It’s Not Popular but it Sure is Right: The (In)admissibility of Statements Made Pursuant to Sexual Offender Treatment Programs

Sex offenders are not a sympathetic bunch.  Throughout American history, society has imposed on sexual offenders a variety of punishments, from incarceration[1] to castration.[2]  In recent years, in response to public pressure following several heinous and highly publicized sexual crimes against children, the punishments imposed upon sexual offenders have increased.[3]  Many jurisdictions have enacted laws allowing for the indefinite civil confinement of sexual offenders, while others offer surgical castration or require offenders to submit to polygraph[4] or penile plethysmograph tests.[5]  Furthermore, both the federal government and many states offer or mandate sexual offender treatment programs which may employ some of the above-mentioned methods of punishment, often with the ultimate goal of rehabilitating the offender.

In deciding the appropriate and just punishment for sexual offenders, society and its elected representatives have struggled to reconcile the tension between the very real threat sexual offenders pose to America and its children, and upholding the basic rights afforded all criminal defendants under the Constitution.  While recent conversations surrounding the rights of individuals convicted of sexual offenses have focused on civil confinement,[6] this is not the only punishment practice that implicates the constitutional rights of sexual offenders.  The rights of such offenders are also affected by what are commonly known as “sex offender treatment programs” (SOTPs).  These programs, administered by the government, are voluntary at the federal level, and may be voluntary or mandatory at the state level.  The majority of SOTPs employ a cognitive behavior therapy model and commonly require participants to admit to all past sexual offenses—charged or uncharged, convicted or not convicted—in order to successfully complete the program.

To this end, the programs are laudable.  Based on scientific research showing the efficacy of cognitive-based therapy where the patient takes responsibility for his own wrongdoing, the required admissions to past sexual offenses seem a logical, and indeed necessary, component of rehabilitation.  However, the programs are also problematic, implicating participants’ constitutional rights because statements made during the course of SOTPs can be used as propensity or character evidence in a pending prosecution for a sexual offense, or as the basis for new charges in a subsequent prosecution.

Take John Doe for example.[7]  He was arrested for a sexual molestation offense for the first time in 1982.  In the years that followed, Doe was in and out of prison for a variety of sexual offenses.  Following his last stint in federal prison on child pornography charges, Doe was ordered to participate in a SOTP as a condition of supervised release.  The SOTP required Doe to author an autobiography detailing all sexual abuse that he had suffered and all that he had perpetrated.  Doe did so, providing a detailed written account of each of his victims over the past three decades.  Shortly thereafter, Doe was released from prison.  A few months later, Doe violated the terms of his supervised release by distributing child pornography via the internet.  When police searched Doe’s house, they found a copy of the autobiography and other materials Doe wrote in the course of the SOTP.

At trial, the government seeks to introduce Doe’s autobiography and the other written statements to show his propensity to commit sexual offenses.  The government is also considering bringing charges against Doe for the crimes he admitted tobut for which he was never charged.  At trial, the jury will hear about every single incident of sexual misconduct Doe has ever engaged in because they will have full access to Doe’s private writings—the very writings that the government told him he must produce as a term of his supervised release.

This paper will explore the admissibility of such statements against individuals like Doe who make statements detailing prior sexual offenses, charged or uncharged, in the course of their participation in a government-run SOTP.  Part I will provide a brief overview of federal and state SOTPs and discuss the judicial proceedings in which such statements might be admitted.  Part II will explore the admissibility of SOTP statements under the Federal Rules of Evidence (FRE) and the constitutionality of such under the Fifth Amendment.  Finally, Part III will argue that notwithstanding the evidentiary and constitutional bases for admitting these statements, there are alternative and more compelling evidentiary, constitutional, and policy arguments for not admitting them.  First, many of these statements should be protected from compelled disclosure by the therapist-patient privilege.  Second, the probative value of such statements does not outweigh the prejudicial effect, and thus the statements should be deemed inadmissible under FRE 403.  Finally, such statements violate the Sixth Amendment right to counsel and should be excluded where a defendant is not advised by counsel of the risk of being compelled to make such statements at the time he accepts a guilty plea requiring participation in a SOTP, or where a defendant is sentenced to participate in such a program as part of sentencing, supervised release, or parole.

Ultimately, I argue that it is simply good social policy to exclude statements made during the course of SOTPs. Failure to do so may deter individuals from participating in SOTPs in the first place and prevent offenders from receiving treatment that is critical to decreasing recidivism and to protecting America’s children from sexual crimes.  The solution, I conclude, is to offer a limited “use immunity”[8] to SOTP participants, prohibiting such statements from being used in a search warrant application or as the basis for a subsequent prosecution for crimes admitted to in the statements.

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Meghan Gilligan: J.D. Candidate, Syracuse University College of Law, 2012; B.A. English and Political Science, magna cum laude, University of Rochester.

[1]. Facts About Adult Sex Offenders, Association for the Treatment of Sexual Abusers, (last visited Oct. 11, 2011).

[2]. See Anti-Androgen Therapy and Surgical Castration, Association for the Treatment of Sexual Abusers, (last visited Oct. 22, 2011).

[3]. Jean Peters-Baker, Challenging Traditional Notions of Managing Sex Offenders: Prognosis is Lifetime Management, 66 UMKC L. Rev. 629, 631 (1998).

[4]. See id. at 662 (noting that “[t]he polygraph is one method of measuring a sex offender’s level of risk to the community in a laboratory setting” and is frequently used “to determine the offender’s normal and deviant sexual histories”); see also Mary West et al., Offender Treatment Programs, August 2000: 50 State Survey, Colo. Dep’t of Corrections 20 (Aug. 2000),  Thirteen states reported using polygraph tests to assess sex offenders’ progress in treatment programs, including Colorado, Hawaii, Indiana, Iowa, Kansas, Massachusetts, Minnesota, New Hampshire, Tennessee, Texas, Vermont, Virginia, and Wisconsin.  Id.  Other states stated an intent to implement the use of polygraphs in the near future, and several more reported the discretionary use of polygraphs, or the use of polygraphs in post-release supervision.  Id.

[5]. See Peters-Baker, supra note 4, at 663 (explaining that penile plethysmographs are devices used to measure the response of an individual’s penis to audio or visual stimuli); see also Fed. Bureau of Prisons, Sex Offender Treatment Program (2002), available at (“[a]ll participants will undergo plethysmograph and polygraph examination”).

[6]. See generally, e.g., United States v. Comstock, 130 S. Ct. 1949 (2010).

[7]. “John Doe” is not based on a real individual but is instead exemplary, used to illustrate a plausible scenario based on existing SOTP practices and case law concerning prosecutions for sexual offenses.

[8]. Dissenting in McKune v. Lile, Justice John Paul Stevens coined the term “use immunity” with regard to statements made pursuant to a SOTP.  536 U.S. 24, 70 (Stevens, J., dissenting).

Article: The Influence of International Human Trafficking on United States Prostitution Laws: The Case of Expungement Laws

When the issue of human trafficking first gained widespread public attention in the United States in the 1990s, the discussion centered on international human trafficking.  In 2000, the United States passed an anti-trafficking law, popularly called the Trafficking Victims Protection Act (TVPA), and the United Nations adopted an anti-trafficking treaty called the Palermo Protocol.  Both the TVPA and the Palermo Protocol focused on combating international human trafficking by encouraging countries around the world to pass laws against trafficking and prosecute traffickers.  Meanwhile, in the United States, state-level criminal justice systems treated United States citizens qualifying under the federal definition of “human trafficking victim” as criminals by prosecuting them for prostitution.  Activists for sexually exploited women and girls in the United States noted the irony that the United States was so concerned about trafficking in other countries, but was neglecting trafficking of its own citizens.  The United States was allowing laws and practices in the states that it was condemning in other nations.  For example, federal law requires other countries to ensure that victims of trafficking are not inappropriately incarcerated for unlawful acts as a direct result of being trafficked.[1]  Yet many states lack laws ensuring that sex trafficking victims are not prosecuted for prostitution.  As a result, anti-trafficking activists have put pressure on Congress and state legislatures to apply the same legal standards used in an international context to sexually exploited women and girls in the United States.  They are leveraging the international human trafficking legal framework to push for legal change to state laws on prostitution.

This essay will begin with an explanation of the legal framework for addressing international human trafficking, including the definitions of trafficking and the laws and policies developed to eradicate human trafficking.  Then the essay will describe how this framework has come to influence state laws in the United States, focusing in particular on the recent trend of laws allowing for the expungement of prostitution convictions if the defendant can show that she was a victim of sex trafficking.  The essay will conclude by evaluating the effectiveness of this legal framework at both the international and domestic level.

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Carrie N. Baker is an Assistant Professor in the Program for the Study of Women and Gender at Smith College in Northampton, Massachusetts.  Baker holds a B.A. in Philosophy from Yale University and an M.A., J.D., and Ph.D. in Women’s Studies from Emory University.  Her work has been published in numerous law and women’s studies journals.  Her book, The Women’s Movement Against Sexual Harassment (Cambridge University Press, 2008), won the National Women’s Studies Association 2008 Sara A. Whaley book prize.

[1]. 22 U.S.C. § 7106(b)(2) (2006 & Supp. III 2010).