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Is Mitt Romney at risk from the Department of Justice?—A Commentary by Jonathan Macey ’82

The following commentary was posted on Politico.com on August 16, 2012.

Is Mitt Romney at risk from the Department of Justice?
By Jonathan Macey ’82

Former Massachusetts Gov. Mitt Romney, who is a private citizen, should be concerned because these accusations that he committed securities fraud when on leave from Bain Capital between 1999 and 2001 are being made by and on behalf of President Barack Obama. The president is, after all, in charge of the Justice Department and the FBI. The accusation here is that Romney filed with the Securities and Exchange Commission papers that falsely indicated he was running the company when he actually had retired.

Thankfully, the Framers anticipated these sorts of shenanigans. They created a constitutional system with a balance of powers and a fiercely independent judiciary. So Romney won’t actually be railroaded into prison for little or no reason.

But standing accused of crimes and possibly facing a criminal investigation by the federal government is damaging to the person targeted — even if it’s someone with Romney’s resources. And even if no one is likely to be convicted here.

The conclusion that Obama wants Romney investigated for committing securities fraud is difficult to avoid in light of assertions from Robert Bauer, counsel to the reelection campaign, that there are “very serious legal consequences” for people and companies that lied to the SEC.

Bauer also asserts, that “in the normal course this would subject somebody in this position to every manner of investigation with all the consequences that you can imagine would follow.”

Following hard on this accusation, Obama’s deputy campaign manager, Stephanie Cutter, accused Romney of “misrepresenting his position at Bain” to the SEC — adding this “is a felony,” in case there were any doubt about the implications.

Obama himself raised the stakes just three days later by personally accusing Romney of claiming that he left Bain in 1999 and then signing “an SEC listing that says he was the CEO, chairman and president of the company.”

Some of these accusations are absurd. For example, a key piece of evidence cited to show that Romney was working for Bain while running the Salt Lake City Olympics is that he negotiated his Bain severance package during this time. People negotiating against a company are not working for the company they are negotiating with. The term “severance package” is self-defining.

Romney is fortunate, like all of us, that we live in a country governed by the Rule of Law and by strong constitutional protections designed just for moments like this. But if Romney thinks that this is just politics as usual, he should consult with other likely innocent private citizens who have been run afoul of their political leaders and ended up accused of trumped-up crimes.

Obama’s tactics might even be reminiscent of those used against another successful businessman turned politician, Mikhail Khodorkovsky of Russia — now languishing in prison.

The Russian mogul has been sentenced to 13.5 years in prison for crooked oil dealings — after voicing strong opposition to Vladmir Putin’s regime. His conviction has been criticized by the European Union , as well as Amnesty International. The prosecution is generally regarded as politically motivated.

Or consider Yulia Volodymyrivna Tymoshenko, the former president of Ukraine. She was put in jail after she lost an election to Victor Yankuvych. She is a very wealthy businesswoman but was sentenced in 2011 to seven years for abuse of office when brokering a 2009 gas deal with Russia. The conviction was described as “justice being applied selectively” by the European Union Foreign Policy Office. The European Parliament criticized the conviction, too.

Many think that Romney’s exit from Bain is now the focus of legal issues because he is running for president. For there is no evidence of fraud by either Romney or Bain. The facts are that he took a paid leave of absence in February 1999 to serve as the president and chief executive officer of the 2002 Salt Lake City Olympic Games Organizing Committee.

It seems clear that Romney had not yet decided to run for Massachusetts governor and thought that he was likely to return to Bain after the Olympics. So Romney remained the CEO and sole shareholder. He signed many corporate and legal documents, attending to his interests within the firm, as he was required to do by law. There is no evidence that he was involved in managing the firm, or wooing investors, or deciding which companies to invest in.

It is also not surprising, however, that the securities laws would be used as the catalyst for the accusations now leveled against Romney. These laws are so amorphous and vague that they easily can be twisted for political motives — particularly because the public may not understand the nuances. They are tailor-made for attacks on people from business.

Former community organizers like Obama and former career politicians like Bill Clinton will never have a problem with the securities laws — because they were never involved in private, for-profit enterprise. Certainly, if you think that the private sector is evil — these sorts of accusations are not much of a stretch.

It appears that the Obama campaign has discovered an ideal weapon for attacking virtually anybody from business who dares to enter politics.

If Obama valued political freedom he would refrain from this sort of opportunism. In fact, he would be coming to Romney’s defense.

What we’ll never know is whether these particular attacks would have been launched even if Obama thought there was actually a chance that Romney could wind up in jail. I hope not. Because if so, there is not quite as much separating us from Russia as there should be.

Jonathan Macey is a professor specializing in banking and finance at Yale Law School and a member of the Hoover Institution’s Property Rights Task Force.