Al Capone on Tax Evasion Rather than Murder

When Joe Bruno was convicted I wrote that if Joe Bruno is guilty they all are, and thus because Joe Bruno is guilty, they all are. And that is the same attitude I have toward Sheldon Silver. I had assumed that Silver was the Speaker of the Assembly because, like those on Wall Street, he shrewdly made sure his particular acts of dishonesty were either technically legal or at least difficult to prove illegal beyond a reasonable doubt. Whereas he had the goods on the less shrewd thieves in the den thereof, which is why they continue to back him and do not dare to challenge him.

And if Silver is eventually not convicted, or if like Bruno and Silver’s predecessor Mel Miller his conviction is eventually overturned, that will not mean he has been “exonerated.” Because the real crimes are the ones he hasn’t even been charged with. Crimes they are all guilty of.

Let’s follow that analogy between Silver and Wall Street for a minute before moving on.

Back in the “Gilded Age” aka the “Robber Baron” era (1870 to 1910 or so), a gang would take control of the Board of Directors of a company and just vote to give each other newly minted shares of stock. (This was called “watering the stock.”) The pre-existing investors, who had actually put up money they had worked for and paid for their shares, would find that instead of collectively owning 100 percent of the business and its future profits they only owned half, or a quarter, or less. No real investment took place, and no wealth or income was created, by this financial engineering. Wealth and income were simply redistributed upward. It was simple, direct white-collar theft. This was made illegal.

Today large corporations don’t pay much in dividends. The dividend yield for the S&P 500 is less than half the historic average, at about 2.0%. Aside from the temporary ups and downs of the stock market, paper gains unless you cash out at the right time, that’s all investors get, and the dividend yield has been that low or lower for most of the time since 1995. Rather than pay dividends, the executive/financial class uses business profits to buy back stock. In fact if the profits are insufficient they have the company borrow money to buy back stock.

Those buy backs are then used to offset the stock and stock options that members of the executive /financial class award each other, payable some time in the near future. In exchange for their “work.” The pre-existing investors don’t get diluted as much, but they don’t get their fair share of the profits either. The top executives take more and more of that for themselves, often running companies into the ground. We’ll be seeing bankruptcies of companies that borrowed lots of money to buy back stock in the next few years.

With that little disconnect between shares bought and shares issued, what you have isn’t “watering the stock” as defined legally. Instead it is executives being paid to “create shareholder value,” even with no real value created. The requirements to receive the stock awards or make money on the options are set low so they are certain to be met. If the stock nonetheless doesn’t meet those requirements, the requirements are sometimes are retroactively changed so they are met anyway. The company often lends the executives the money required to exercise the stock options, but if the stocks go down the loans are often forgiven at the expense of shareholders. The effect on all this on the distribution of wealth and income is exactly the same as watering to stock, with a little legal prestidigitation it’s all “legal.” Or it must be because there aren’t thousands of C-suite executives in jail. And thus the distribution of wealth and income is back to what it was in the Robber Baron era. Basically they legalized crime by making it more complicated, and separating the steps.

And in government? Back in the Tammany Hall era those seeking to redistribute public money to themselves would hand someone like Boss Tweed (or their bag man) a paper bag full of cash in a back alley. The politicians controlled by the bosses would then arrange for public money to be shifted to the payee. It was simple and direct. This is, of course, illegal.

Ah, but none of those making deals in Albany handed Sheldon Silver a paper bag in a back alley. Money flowed to two law firms, and then to Sheldon Silver in exchange for his “work.” And Silver arranged for those using the law firms to get benefits at public expense in Albany. At a different time, not the same day or the day after. Which makes it “legal,” right? Compared with all the less sophisticated state legislators who ended up in jail for using something as stupid as the paper bag method. Yet the effect is the same, and New York State government has been back in the Boss Tweed era for some time.

I’ll be honest with you. I wouldn’t really care if people like Bruno and Silver were skimming a few mere millions on the side, if the people of New York weren’t forced to pay $billions extra to not have their needs fully met, and weren’t faced with the prospect of worse in the future as a result of the way Silver and company have sold it. For this I blame Silver, Bruno, Skelos, Pataki, who just announced he is considering running for President again (cough), all the other state legislators who voted for all the deals, and all the interests that backed those legislators and benefitted from those deals. These deals were bad to the bone.

Let’s consider just two.

For 25 years, to satisfy Generation Greed’s desire for more in exchange for less and feed all the parasites sucking the life out of the MTA, our state government has had that agency borrow $billions. For “capital expenditures” which were mere ongoing normal replacement. And for operating expenditures that were declared “reimbursable” by the capital fund about the time Bruno, Pataki and Silver took over, and have remained so ever since. Flat out fraud.

Future New Yorkers will now have to pay twice. For the ongoing expenses over the next 20 years, and for the ongoing expenses from the past 20 years (in debt service). Or perhaps the MTA will end up so broke, when the would-be bondholder catch on, that the ongoing expenses will not be funded for the next 20 years, and the system will deteriorate to the point of a collapse that would then take decades to recover from. The (last?) MTA Capital plan expired three weeks ago, with no replacement, and no one talking about it. And almost all the players who brought us to this point are still there.

And how about education? How about a state school aid formula that was rigged against New York City’s poor children for decades? And when the courts finally forced the state to abandon this policy, how about the state legislature’s decision to ensure all the extra resources tax-strapped New Yorkers were paying for education went to richer retirements after less work for teachers cashing and moving out? You know what should be the subject of a Moreland Commission? All those pension deals that “cost nothing” or “saved money” should be the subject of a Moreland Commission, starting with this one.

Richer retirements for those who already had the richest retirements, based on deals done in secret and fraudulently described, to be paid for by less well off people. People who will be lucky to get part of the Social Security they have been promised, once Generation Greed finishes sucking as much as it can out of our country. Get the facts on the deal linked above, and you’ll really see how, and for whom, the machine is really working.

To truly understand what Silver, Bruno, Pataki, the public employee unions, and moneyed interests that donate to New York politicians are, I suggest reading Triangle, the Fire that Changed America by David Von Drehele and focusing not on the fire but on the political situation in New York State 100 years ago.

At the time the Democratic political machine, basically Tammany Hall, firmly represented the interests of producers of public services – the hacks who worked for the government and the contractors – against the rest of the people. That’s how they got their votes – by providing less in services for higher taxes, and doing as little as possible for ordinary workers and those who paid the bills. The machine got its money by being paid off by the moneyed interests, whether those providing inferior working conditions in factories or those providing inferior housing in tenements. The public employees paid ball to avoid having to provide public services, while the rich and business interests played ball to evade regulation.

Around 100 years ago, however, there was a significant vibrant, progressive and pro-city, if generally pro-business, wing of the Republican Party. And there were mass movements not aligned with either party, and ready to vote for whichever one offered a decent deal – whether Teddy Roosevelt’s “Square Deal” or Franklin Roosevelt’s “New Deal.” Movements based in part on nascent private sector unions seeking a fair deal for all workers, rather than public sector unions seeking a better and better deal at the expense of less powerful workers. And there were rich and influential people on both sides.

As a result Tammany Hall faced losing elections. Not only for the offices most people pay attention to, such as President, Mayor and perhaps Governor. It had lost some of those before. But also for Congress and the State Legislature, the under-the-radar but far more powerful institutions where the self-interested had been able to exercise their authority unopposed.

To avoid a much-deserved oblivion, Tammy Hall caved. To co-opt the forces rising against them New York’s Democratic bosses put Al Smith in charge of the New York State Assembly and Robert Wagner in charge of the State Senate. What followed was a long period in which New York was one of the best run states in country, as Democrats and Republicans competed to see which party could provide better public services and a fair price, and fairness and efficiency in general. The corrupt machine was driven out of New York City Hall later, by Republican Mayor LaGuardia.

All that, however, was a long time ago. Today there is no mass movement, no elections, and no real alternative provided by either the Republican or Democratic parties. The only time we get rid of one of the sleazeballs is when some grandstanding prosecutor manages to catch them in a small value personal sin. Something that not surprisingly happens all the time.

The Silver, Bruno, Pataki, etc. legacy is exactly like that Tammany Hall, before the progressive era. A sweeter deal for public sector producer interests at the expense of everyone else. Incredibly, even though New Yorkers pay more in taxes, as a share of their income, than anyone else, the people who call themselves “progressive” are those who agree with the teacher’s union that the real problem is they should be paying even more for public services than they are. And expecting less in return.

More payoffs by moneyed interests. Why do the hedgies pay such a lower tax rate than regular workers, and why did the federal government borrow $billions to prop up the (unsustainable) asset values of the rich while doing nothing about the ever falling real wages of the rest? Please.

There is “pro-business corruption,” and “anti-business corruption.” In pro-business corruption business and financial interests arrange that consumer and labor fraud, tax evasion, the seizure of common resources without payment (as with dumping pollution into the common air and water), and other abuses are either made legal via technicality or not punished. Under “anti-business corruption” entrepreneurs are forced to pay people off just to avoid being put out of business despite doing nothing wrong. In New York State we have more of the latter than the former, but the state legislature is prepared to play it both ways.

Silver is accused of taking money is exchange for making more NYC development exempt from NYC property taxes for years and years.

I explained some time ago why New York’s 421a and 421b programs, given the current state of the city economy, don’t produce affordable housing, unaffordable housing, jobs, or anything else.

The tax exemption allows the apartment builder to charge more to the apartment buyer or investor, who are forced by the latest housing bubble to stretch as far as they can and go up to what the market can bear. So New York City loses tax revenues but the benefit goes not to the condo owner or renter, but to the developer? Not even.

Higher rents and investment sales prices allow the owners of building sites to charge more to developers, who pocket the public’s money and waltz off the Florida with the retired public employees. The price of development sites is now so high that smart developers have decided to stop building. Others want an upzoning, so their tax-free development can host even more residents for whom the city will not be able to provide services given it soaring pension costs. Something Silver also helped to arrange.

Basically, the tax break disappears into the ground. Like all those retroactive pension deals, it only benefits those cashing in and moving out at the expense of those left behind.

Is any of this a surprise? Does the indictment really mean something is truly different about what has gone on for the past 20 years in the state? Something we didn’t know before?

So now the New York Times, like the News and Post, says Sheldon Silver should resign.

“This dramatic turn of events could be the start of a wholesale cleanup of Albany’s appalling political culture, something voters have wished for and deserved for many years. But it’s only a start.”


What has the New York Times done in recent years to encourage people to run against and unseat those who currently sit in the State Assembly, the State Senate, and Congress? The press is supposed to provide people with the information they need to participate in government, right? So what has the Times (or the rest) done to provide information about what it takes to get on the ballot and run for these offices – without the backing of the very interests that profit from the system as it is?

What has the press done to publicize how New York’s fiscal situation and priorities compare with other places? To let the public know about any challengers offering alternatives, and what those alternatives are?

Silver is accused of not putting some of his outside income on his state financial disclosure form. How many state legislators don’t even bother to fill out the form? Isn’t it common knowledge that the requirement for financial disclosure is only there to use against challengers who might present an actual threat, may not know about that requirement, and might thus fail to fill out the form out of ignorance? That the rules are not enforced against those on the inside? Like many of the other rules. Run against an incumbent and unless you are really shrewd and get lots of help, you and your family will end up in trouble. For those on the inside, on the other hand, many of these rules might as well not exist, particularly since those on the inside appoint the judges.

To call for Silver to resign now is to admit culpability in not doing more to get rid of Silver (and his Republican counterparts) by getting rid of the state legislators under them two years ago, four years ago, ten years ago. By calling for an uprising against them on the front page.  What, aside from a few details and technicalities, is known now that hasn’t been known for years? What went on with Silver that hasn’t gone on in Albany in general, in Congress, and in the corporate boardrooms? What will change if this one guy goes away, but all the other hacks or still there?

I’ll say it again. If Silver is guilty they all are. Or, rather, because Silver is guilty they all are. A common situation with regard to the leaders of our diminishing public and private organizations in the era of Generation Greed.

  • RockH

    Great column Larry. I am still a fan after all these years bro.

  • Elysium10

    Sorry Larry you got this one wrong, those less sophisticated lawmakers as you alluded, pointing out “Whereas he had the goods on the less shrewd thieves in the den thereof, which is why they continue to back him and do not dare to challenge him,” did just that, challenged him. They showed Sheldon the door, “He is gone!” This reminds me of the 1973 movie, “The Spook Who Sat By the door?”

    Your article left me scratching my head, so I read it twice. After the second reading I got the impression that you favored the legalized criminal action of sophisticated thugs over the “less sophisticated state legislators” who resorted to what you also referred to the “paper bag method” to carry out their theft and extortion as result it
    caused their downfall. However, you offered no alternative within the bound of law, as if nothing else existed. Rather than comparing the skills of a sophisticated criminal leaders whose only advantage over the “less sophisticated” has to do with the former serving in a superior position that lend itself to trust and second, having no oversight which was not the case for the well-controlled assembly members under Sheldon’s rule. There is nothing brilliant about this arrangement except for loopholes it presented.

    You pointed out, “Ah, but none of those making deals in Albany handed Sheldon Silver a paper bag in a back alley.” Well, not so fast, we are finding out that Sheldon was not above installing the paper bag method, which you assigned to the stupid lawmakers. Since Sheldon was leader for two decades, lawmakers entered in his universe, so we must conclude he set the example for the rank and file to follow. As reported this week, “Rumors have circulated that bags of cash were being delivered to the speaker’s office on behalf of various special-interest pleaders, although that’s never been proven. But the existence of the rumors indicates the climate around Silver.”

    The press repeatedly reported that Sheldon ruled by fear, which meant, he had the need to breathe down their necks of underlings, usurp their powers, which belong to the people, and monitored their lives for the purpose of snooping for dirt to blackmail members to his will, while engaging in wrong doing that was far worse than the 10
    lawmakers who were prosecuted for committing lesser sins. We need not discuss
    his willingness to protect rapists and harassers and pay off victims. So, his treatment of women was nothing to be desired, in fact it was quiet thuggish.

    The point is, Sheldon raked in over $6,000,000 in kickbacks, did not disclose this income, used State money to reward his “runner,”that provided referrals, engage in kickback from entities doing business with state and influenced the court to get preferred rulings on cases that he personally benefited from. Yet, your summation of Sheldon’s empire and operation was treated as a footnote; so, in all fairness to the “less sophisticated” Assembly members that fell from grace, Sheldon’s wrongdoings deserved far more attention than you gave it in your six pages polemic.

    Clearly, Sheldon’s leadership style was disturbing and stunned once I became aware of his dictatorial role after reading a New York Time article, “Inside Albany: A Guide to
    Power”, and “State Has a Tradition of Centralized Control,” (New York Times, January 3, 1998). Recently, Keith Wright said in the wake of Sheldon’s arrest, ““Democracy is a bitch,” he too got it wrong. Democracy was not the bitch that has caused the problems, on the contrary, it was the “bitches in hiding”—fascism for a few and communism for the collective, concealing themselves behind democracy. We need to get into the habit of calling a thing what it actually is and not what it pretend to be.

    However, in the above Times articles, “Sliver said the rank-and-file legislators are responsible for the current system because they elected the leaders and set the rules. “It is not a dictatorship.” Although disingenuous, he had a point. One must ask, what possessed 150 individuals to repeatedly delegate the people power to one man
    without the people’s permission is beyond comprehension, unless they underwent
    collective mind control. Why would they allow themselves to be dumb down, spied on and even give up their authority to write bills and bring them to the floor considering we are now discovering Sheldon allowed a Real Estate lobbyist to insert into bills language that benefit the Real Estate industry which is a fraud perpetuated against the people.

    Most telling, however, was Sheldon’s perception of his controlled underlings. Fredric U. Dicker reported in the New York Post Feb 2, 2005 that several months prior to Sheldon arrest, he contemplated on his retirement and a possible replacement, looking among the 150 members with disillusionment and with laughter, saying:

    “Have you looked at them?” Silver asked with a chuckle, a well-known Albany figure
    recalled.” Going on to say, “Which one of them do you think could do the job better? Tell me,’’ Silver continued, this time breaking out in laughter. The influential Albany figure said, “It was clear that Shelly was saying what people are saying today — that it really is a mediocre crew.’’

    This goes to prove that an authoritarian seldom if ever respect individuals who are willing to delegate powers and rights that are never to be given up out of fear. So, regardless of what something is called, we will know a thing by observing and studying its nature and character–its moral and ethical actions and reactions. Thus, under no circumstances based on the numerous descriptions of Sheldon’s leadership, such as, “He rule with an iron fist” did it resemble democratic principles or
    respect. Hence, to favor a lesser evil is ridiculous– compared to what? Tax evasion to murder? You said:

    “I’ll be honest with you. I wouldn’t really care if people like Bruno and Silver were skimming a few mere millions on the side, if the people of New York weren’t forced to pay $billions extra to not have their needs fully met, and weren’t faced with the prospect of worse in the future as a result of the way Silver and company have sold it.”

    In my view, with all due respect, the above is unacceptable; what is the point of having a democratic system if we do not perfect it; why have laws if people like Sheldon is allowed to break them because “everybody is doing it,” while the “less sophisticated and stupid lawmaker” as you refer to them are prosecuted and jailed for far less? Clearly, this is a double standard. Where is the justice in such disparity? This remind me of the unfairness of the “cocaine vs crack” law since the ones that suffers the most are minorities; so it’s no longer physical slavery but instead psychological domination. As noted, when one rule over others with an iron fist, we cannot call the leadership style or the environment democratic or fair, such rulership is incompatible with our governance and need to be correctly identified as an autocratic or despotic leadership, as espouse in “Two Treatises Of Government” by John Locke:

    “Despotic power is an absolute, arbitrary power one man has over another, to take away his life, whenever he pleases. Usurpation is the exercise of power; so tyranny is the exercise of power beyond right, which nobody can have a right to. When the
    President or the legislature makes not the law, but their will, the rule; and their commands and actions are not directed to the preservation of the properties of the people or made use of; to impoverish, harass, or subdue them to the arbitrary and irregular commands of those that have it; it becomes tyranny.”

    In addition, Sheldon’s dictatorial leadership altered the legislative system from its initial intent and the modification became more serious once, “redistributing public money to himself” became his sole aim, not for the benefit of his Assembly members or for the benefit of New Yorkers neither for the benefit for his own district, as noted by someone who knows him well, “he was a grubber” The used of his position to enrich himself by aligning himself with his neighborhood gang members was no different from “Bloods and Crips” who operate from the lowest conscious level because they don’t know any better and lacked opportunities that were available to Sheldon et al. But these sophisticated men and women obliged themselves with some same tactics of street gang, instilling fear, plus taking advantage of the trust invested in their positions and operating without oversight; these are the elements that worked
    in Sheldon, Madoff and Wall Street’s favor. There was nothing sophisticated about Madoff’s pyramid scam or Wall Street’s worthless mortgaged backed securities that was ignored by SEC, given a high rating by Standard and Poor’s or the shadow banking system that had been installed to assist in this operation.

    On the point of changing the true nature of the system, John Locke wrote:

    “The Constitution of the legislative is the first and fundamental act of society. When those in power hinder the legislative …from acting freely, pursuant to those ends for which it was constituted, the legislative is “altered.” It is not a certain number of men, or their meeting, unless they have also freedom of debating, and leisure of perfecting, what is for the good of the society.”

    Even worst, Sheldon extend his powers grab beyond its intent when there is a clear separation of power among the three branches of government to the Judiciary. When this happens we no longer have a single Constitutional Judiciary but instead, an added dimension– a Phantom Court that rises to do personal biding for an unconstitutional other and then retreat back into the shadow. He appointed judges, sent his cases before them, expecting and received preferential treatment, corrupting the judiciary system not to ensure that laws benefited New Yorkers but again to enrich himself and his cronies and dam everybody else. Whenever the Executive or Legislature or both infringe upon the Judiciary, James Madison said:

    “An elective despotism was not the government we fought for; but one in which the powers of government should be so divided and balanced among the several bodies of magistracy as that no one could transcend their legal limits without being effectually checked and restrained by the others. – James Madison, Federalist 84, …“The accumulation of all powers, legislative, executive, and judiciary, in the same
    hands, whether of one, a few, or many, and whether hereditary, self-appointed, or elective, may justly be pronounced the very definition of tyranny. – James Madison, Federalist 47, 1788

    By extending his control into the judiciary, the Constitution was altered and that concerns everyone. We were warned by Hamilton that the judiciary was the weakest of the three branches of government and when encroached upon by the legislature or executive or both, then the people need to be concern. Hamilton said,

    “It proves incontestably, that the judiciary is beyond comparison the weakest of the three departments of power… I mean so long as the judiciary remains truly distinct from both the legislature and the Executive. For I agree, that “there is no liberty, if the power of judging be not separated from the legislative and executive powers.” And it proves, in the last place that as liberty can have nothing to fear from the judiciary alone, but would have everything to fear from its union with either of the other departments…”

    Democracy cannot be perfected as the Founders intended when men and women are not free to think and act his or her conscious within the bound of law, or when they willingly delegate their and people’s power to another, or when prosecution is conducted with flip of coin–lesser crimes or worse crime, instead of the rule of law in a Constitutional society. Since a speaker is not selected or elected by the people, the speakership ought to be limited to a minimum of two years to avoid this sort of domination, the legislators ought to be paid a decent salary to curtail the temptation to break the law and disclosure ought to be explicit not for challengers but to keep
    legislators honest and provide public oversight.

    So, with this said Larry, the comparison of tax invasion with murder when both are crimes was confusing and just did not do it for me. Sheldon wrongdoings ought to be compared with same Constitutional and legal standards his formerly jailed Assembly members were subjected to and hopefully his replacement will be reminded that he is not there to follow Sheldon examples but to do better than he did, there is need to reinvent the wheel, the Framers left a guide.

    Just saying!

    • Larry Littlefield

      I’m pointing out that regardless of the current accusations, which he will probably get off from, he is worse than that. And they all are.

      People in politics, of which I am not one, tend to be concerned mostly with the effect of people on politics.

      I am more concerned with the effect of people in politics on ordinary people’s lives. There is the greater failure.