Vail Valley: AIG bonus punishment is just wrong |

Vail Valley: AIG bonus punishment is just wrong

Rohn RobbinsVail, CO, Colorado

Im as outraged as you are. The $165 million paid out in bonuses to the same AIG executives who drove the insurance giant to near-extinction, and steered the U.S. financial markets further towards the brink of ruin, is unconscionable. But not every outrage deserves a law, especially one as flawed as the one ram-rodded through Congress last week.Denouncing the squandering of the peoples money, the House voted decisively to impose a 90 percent tax on the employee bonuses paid by AIG and other companies that have received government bailouts of at least $5 billion. It would apply to any bonuses paid out after Dec. 31, 2008.While Congress sentiment is laudatory, the proposed legislation is deeply flawed.First, lets put the bonuses in perspective. To date, AIG has received $182.5 billion in federal bailout money. The bonuses represent 9 hundredths of 1 percent of the bailout funds. Its a lot of money, but focusing on the bonuses is a lot like Edward John Smith, captain of the Titanic, fretting over an ice cube tinkling in his highball glass as the iceberg that would ultimately sink her was swelling on the moonlit seas.Heres whats wrongBut thats not why the proposed law is wrong-headed. Whats wrong is this:First, contracts are and should be sacrosanct. Ours is a nation of laws, based in part upon the bedrock that, as long as they do not contract to engage in or support illegal activities, its citizens may freely contract and the law will back them up. The AIG employee bonus agreements, when entered into, not only preceded the bailout but, so far as I can tell from this distance, violated no laws existing at the time when they were made. The government should not be, and cannot be, in the business of quashing private contracts entered into lawfully between what were then wholly private parties. Particularly when the ground for doing so is the rising public tide of moral outrage. The government must act lawfully and mere outrage is not a cognizable legal ground.Second, while it is a proper function of the Congress to raise and levy taxes, it may only do so for the purposes of raising revenue and not out of what clearly seems mere retribution. Specifically, Article I, Section 8 of the Constitution gives Congress the power to lay and collect taxes, duties, imports, and excises and allows Congress to tax in order to provide for the common defense and general welfare. It is difficult, if not impossible, to conceive of how a sky-high tax targeted specifically and exclusively at a couple dozen people held currently in the public contempt could be construed to find legitimate harbor within the bosom of the Constitution.Third, according to Article I, Section 9 of the Constitution, No Bill of Attainder or ex post facto Law shall be passed. What this amounts to is a constitutional prohibition against retroactive laws. An ex post facto law may be defined as a law passed after the occurrence of an event or action which retrospectively changes the legal consequences of the event or action. To impose a penalty where none before existed and when the penalty claws backwards to recoup what is only later legislated to be some species of ill-gotten gain, simply violates the Constitution.Denial of due processFourth, the claw-backs in the form of taxes could very well be construed to be a taking as the term is contemplated under the due process clause of the Fifth Amendment to the Constitution. That clause, provides that No person shall be … deprived of life, liberty, or property, without due process of law. Due process is the principle that laws and legal proceedings must be both fair and uniformly applied. One person may not be given more justice than another. It engenders the idea that the government must respect all legal rights bestowed upon and owed to its citizens according to the law of the land, instead of picking and choosing what rights it may selectively bestow.Supreme Court Justice Felix Frankfurter, famously dissenting in the 1950 case of Solesbee v. Balkcom observed that the Due Process Clause embodies a system of rights based on moral principles so deeply imbedded in the traditions and feelings of our people as to be deemed fundamental to a civilized society as conceived by our whole history. Due Process is that which comports with the deepest notions of what is fair and right and just.The retribution in the form of claw-backs proposed by Congress in a maelstrom of the AIG fiasco is not fair, right nor just, nor in keeping with the laws and the traditions of this nation and, rather than succumb to emotion, the government simply must lead by example, particularly in challenging times.While the Congressional whirlwind made for great theater, it does not make for good law. We cannot, for the sake of expediency, abandon principals rooted in our laws and embedded in the fabric of our history. Instead, Congress should look inward and ask the hard questions that were apparently not asked before the bailout funds were spooned out in what in retrospect seems overly generous dollops. Why were strict and specific conditions and safeguards not imposed? Whose backsides are being covered now with rousing speeches and populist calls for the financial heads of those who caught Congress asleep at the switch?President Obama would be wise not to sign the legislation too hastily advanced by Congress and the legislature should more carefully craft legislation going forward to prevent any further shameful plunder of the public treasure.Rohn K. Robbins is an attorney licensed before the Bars of Colorado and California who practices in the Vail Valley. His practice areas include: business & commercial transactions, real estate & development, homeowners associations, family law and divorce and civil litigation. He may be heard on Wednesday nights at 7 p.m. on KZYR radio (97.7 FM) as host of Community Focus. Robbins may be reached at 970-926-4461 or by e-mail at:

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