October 3, 2009

Legal vs. Illegal Blackmail

A reader points out a problem with free market blackmail without government involvement:
Blackmail does not necessarily end with the original quid quo pro agreed to as a result of the original extortion. The person that receives the benefit of such an extortion through blackmail is nonetheless often able to return to the well, time and time again, based only on the capacity and willingness of the victim to continue to pay.

There's a real market failure when you are trying to pay for exclusive control of information, which is these days an infinitely duplicable product.

Thus, blackmailees murdering blackmailers is a staple of old-fashioned detective shows. These kind of market failures call for government regulation. But what kind?

The legal system helps facilitate some kinds of blackmail by using the power of the state to enforce the contract on both parties, getting around this market failure problem with blackmail. For example, in 1994 Michael Jackson paid $22 million to his blackmailer in return for future silence. Since this was the settlement to a lawsuit, the agreement, including the plaintiff's future silence, was legally enforceable, which presumably increased Jackson's willingness to fork over $22 million. After the settlement, the plaintiff refused to testify in a criminal trial and the prosecution of Jackson collapsed.

On the other hand, the American legal system sent Bill Cosby's alleged natural daughter to prison for five years for attempting to barter her silence for $40 million.

It seems like there is kind of an excessively fine line here between becoming a millionaire or going to prison. I'm sure that somebody out there could persuasively explain the legal distinctions that take one person who knows a celebrity's secret to a life of luxury and another person to a prison cell, but it seems rather hazy.

My published articles are archived at iSteve.com -- Steve Sailer


Anonymous said...

Can the 1994 blackmailer (rape victim?) now release or sell the story without repaying the $22 million since Jackson is room temperature?


Muswell Hillbilly said...

The distinction, at least on the surface, seems fairly obvious: blackmail is where the person with the inside knowledge solicits the one with the dirty secrets.

Confidentiality agreements and other forms of contract arise when the one with the secret solicits the one with inside knowledge.

Not that it makes complete sense, but I can imagine some commonsense and policy arguments for that.

One easy policy one is that allowing "blackmail" gives an incentive to pry into people's lives and actively discover as much damaging info as possible, and that's something that ought to be discouraged.

James B. Shearer said...

... After the settlement, the plaintiff refused to testify in a criminal trial and the prosecution of Jackson collapsed.

I doubt any agreement that purported to bar you from testifying truthfully at a criminal trial in response to a subpoena would be held to be legally enforcible as it would be against public policy.

James B. Shearer said...

As someone pointed out in the earlier thread, if blackmail were legal there would be a problem with threats to reveal false information. Easier to make all such threats illegal without getting into truth or falsity.

Anonymous said...

That's a tough one. Jackson was accused of something illegal. Cosby was accused of something that was not illegal. In the latter, I can see the police arresting the lady because the Coz had done nothing illegal, but with Jackson, he couldn't go to the police because the accusation was regarding an actual crime.

David said...

As far as I can tell, the reasoning behind blackmail legislation is really all about the following issue:if we allowed blackmail we would develop an even more extensive cottage industry built around discovering people's secrets. Currently this industry is called the paparrazi and it only infringes upon the privacy of public figures. If we allowed for blackmail not only would celebrities be subject to even more intrusive examination but there would be a significant incentive to discover the secrets of ordinary wealthy people (or not so wealthy people) and this would create a huge secret traffiking industry: who wants to live in a libertarian version of the GDR in which the ultra-free-market funds everyone to be an informer and take an interest in 'the lives of others'. I think it is plausible that avoiding creating this secret-traffiking cottage industry is an important enough goal that it offsets whatever infringment on liberty banning blackmail (or even refusing to provide a legal outlet for contractual, above the board blackmail) might entail.

Remember, the ordinary social oppribium that nasty gossipers are often subject to would be ineffective in stopping blackmailers because, if all goes as planned, both parties involved will want know one else to find out that it has happened.

James Kabala said...

I can see three big differences:

1. A lawsuit is filed by the actual victim (or his family, in this case), not just someone who happened to stumble across the dirt, which is what a blackmailer usually is. Letterman never did anything to Robert Halderman; as far as we know the two men had never even met before this incident. In the case of Autumn Jackson, she did have a genuine personal grievance (if her claim was true), but it did not involve a civil or criminal offense.

2. Even a settled-out-of-court lawsuit does not result in absolute secrecy. Jackson's victim may be prevented from ever revealing the graphic details for further money, but Jackson's reputation was destroyed forever the day that lawsuit was filed. A blackmailer, as I noted in the previous posts, is the exact opposite of someone who wants the truth to come to light. A Jackson blackmailer would (if truly amoral, as blackmailers often are) have been happy to see further kids molested as long his checks kept coming.

3. It is possible to blackmail for non-money; e.g., vote this way on Bill X or I will reveal your affair. That cannot happen in a lawsuit.

don said...

When did Cosby become a rapist? That would be the only equivalence between the two cases. Maybe it was because Cosby told the girl he loved her and Michael told the little boy he loved him. Of course Michael stuck his penis in the child afterward but essentially it is the same story right?

Anonymous said...

The big difference between the Jackson case and the Cosby case is that in the former, but not in the latter, the "blackmailer" was (or at least claimed to be) the victim of a crime committed by the blackmailee.

There is a long tradition, in the West and elsewhere, of a crimes being settled by momentary compensation rather than by imprisoning or executing the offender, and actually it makes perfect sense to allow the victim to decide which option better suits his interests.

David said...

Even if we granted that the public has an interest in encouraging people to air the dirty laundry of others,there is surely no public interest (beyond simple liberty, but ought not be our only or ultimate value) served by encouraging people to discover dirty laundry and then collude to conceal it for a price.

David said...

Clear legal pathways which regulate behavior are only appropriate for behavior which we think people ought to be able to confidently and casually engage in. Consider most traffic regulation. We want people to be able to commute so we make our regulations very precise so people know exactly whether they are engaging in legal or illegal behavior.

Our current legal opacity discourages people from confidentally and casually going down that road.

Our double standard involving confidentiality agreements and blackmail serves the purpose of limiting the ease by which people can engage in blackmail. Degrees matter. If for a blackmailer to get paid legally, he has to navigate his way through an opaque legal world and also try to coax the blackmailee to broach the issue first, society has limited the efficiency of the secret-concealing market and discouraged people from entering it.

Leaving the law opaque and creating strange double standards is a way of discouraging behavior without completely eliminating those cases where we have some interest in allowing it.

Anonymous said...

Distinction seems pretty obvious. Since raping a kid is illegal, the kid who got raped by Michael Jackson had the legal right to sue Michael Jackson for a lot of money. The settlement payment was in part a payment for keeping quiet, but for the most part it was to settle the kid's claim. Suppose someone ELSE found out Michael Jackson raped the kid and threatened to blab unless HE got $22 million. It's hard to imagine Jackson paying up in that situation. Thus, in the settlement situation the person who gets the cash is the same person who got wronged by the "blackmailee's" abhorrent behavior, while in the straight blackmail situation the person who gets the cash is just some random bystander in the fortuitous position of having confidential information who himself suffered no wrong. I have no problem with the former getting rich but not the latter.

Anonymous said...

Steve, would you mind posting the standards by which you decide whether to post a comment or not?

I've had several comments not posted, recently. Including one that seemed pretty reasonable that that ran more or less as follow:

The motivation behind making blackmail illegal is the same as that for making intentional infliction of emotional distress illegal: Severely distressed people are not economically productive.

Fits well with Posner's take on law and economics.

Anonymous said...

It's possible that Halderman's blackmail scheme was motivated by (embarrassing, hairbrained, fool in love) love for his (younger, more attractive, out of his league) ex-girlfriend, similarly as Barrack probably did the out-of-character Rezko-aided home purchase to appease Michelle. There would be jealosy from discovery of the Letterman affair with the ex, plus love-fueled determination to raise cash to maintain appeal. The reduction from $200K in income to $125K after child support would have dropped Halderman just about exactly out of the professional Manhattan lifestyle.

A reckless male in love committing an out-of-character crime for, at least, an unretainable woman, this would seem to be a cautionary Antonio/Bassanio story. At some point in Act III, Halderman considers the loss of the Manhattan lifestyle after leaving his family in pursuit of Jezebel who has left him, resolving to win it all back in a single throw of the dice risking prison and reputation. Will Act V be the end of Halderman?

beowulf said...

Its easy the kid who got paid off by Jackson had a lawyer doing his talking, the woman who claimed to be Cosby's daughter did her own talking.

I read in the papers that Letterman brought his lawyer to the "negotiation" with his alleged blackmailer. OK, if you're a blackmailer and your victim bring a lawyer to the parley and you didn't-- that's a problem.

James Kabala said...

"Letterman never did anything to Robert Halderman"

It's starting to look as if I was wrong here; it should be changed to "never did anything criminal to Robert Halderman."