Jacob Hornberger
Campaign for Liberty
April 28, 2010

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Commentators are debating whether the Justice Department The Justice Department didn’t bring its suit with the aim of proving that the company committed fraud.will be able to prove its civil fraud case against Goldman Sachs. Unfortunately, they’re missing the point. It brought its suit to get a massive amount of money for the federal government in a pretrial settlement of the case.

Here’s how the racket works. The government knows that its litigation will cost Goldman Sachs millions of dollars in litigation costs, including attorney’s fees, deposition expenses, bad public relations, and loss of revenues. So, the government calculates that the company will be willing to settle for a large amount of money to save itself from all that aggravation. The government accepts the settlement. The Justice Department lawyers celebrate that they’ve “won” the case. Federal officials, ever more desperate for more revenues to pay for their out-of-control spending, are exultant over the “free” monies that have been deposited into the government’s coffers.

Many years ago, I was a young lawyer practicing law in my hometown of Laredo, Texas. One of my clients was the owner of a local trucking company. One day, he got served with a notice from the State of Texas assessing him with an enormous fine. The fine, the notice stated, represented the amount of extra burden that my client’s trucking business was placing on the roads and highways of the state. The state was claiming that because the trucking industry used the state’s roads and highways more than other people, it was more responsible for their maintenance costs.

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