William James and Karl Marx both agree that it is not enough to have fine manners, high principles, and good intentions. In a fundamental sense, we are what we do — or seriously try to do, and teach and recruit others to do. This is not to say that whatever works is necessarily good. To be good, however, we do actually have to succeed in doing it.
So what have HLS grads been doing? Of course there are many noble exceptions. But as I look back on four decades as an HLS alumnus, a practicing member of the New York Bar, and a successful management consultant, on the one hand, and an investigative economist and tax justice activist on the other, I am reminded of Thorstein Veblen’s pithy definition of what it is that most lawyers mainly do: “Clever chicanery or the thwarting thereof.”
Indeed, since the 1970s the sheer quantity of “chicanery” produced per unit of “thwarting”in the legal profession has soared to Himalayan heights, especially, I suspect, among HLS grads who have entered corporate law firms, including many of my own generation. Including me — before I realized that I was indeed becoming what I was doing, and started doing something else.
Chicanery has long been recognized as an occupational moral hazard in the legal profession. John Stuart Mill described it in his 1825 “Unprinted Speech on the Influence of Lawyers:”
Even when a cause is good, a lawyer has not done his duty by it unless he is giving it all the gloss and varnish to which it is susceptible…Not half only, but three-fourths at least of his business is deception. It is not easy for a man who gets his bread by insincerity to remain entirely free from it in his other concerns… Supposing even the purity of his intentions to remain unimpaired, yet the habit of making falsehoods plausible begets a coolness with regard to the interests of truth…
And when they find, as they do by practice, that there is something plausible to be said in favor of the worst cause, however unfounded, while no part of their daily occupation tends to strengthen those faculties of their minds which would enable them to distinguish falsehood from truth, they soon begin to fancy that they cannot be distinguished…
They soon learn to be utterly indifferent what opinions they take or advocate; and where their interest is not concerned, they are determined by mere vanity, and choose that side of a question which affords the greatest scope for their ingenuity in defending it — most commonly, the wrong side. It is (also) not very favorable to the higher morality that their vocation brings them into close and constant contact with human nature in its most degraded shape… Generalizing, therefore — as lawyers are peculiarly prone to do upon their own confined experience — it is notorious that the doctrine of the universal selfishness of mankind finds the greatest proportion of its partisans among lawyers. In which respect I wil…l say that they judge from that portion of mankind with whom, in their professional pursuits, they are most peculiarly conversant…”[1]
Similarly, in the late 1950s, the noted sociologist C. Wright Mills astutely described “the higher immorality” — the propensity of large-scale organizations to undermine individual ethics and responsiblity with an impersonal corporate code that undermines personal responsiblity: [2]
“The higher immorality can neither be narrowed to the political sphere nor understood as primarily a matter of corrupt men in fundamentally sound institutions…The higher immorality is a systemic feature…Of course there may be corrupt (people) in sound institutions. But when institutions themselves are corrupting, many of those who live and work in them are necessarily corrupted..”
Chicanery 101
Unfortunately, such real-world proclivities are seldom discussed with HLS students before they leave law school. They may get a dose of reality from older lawyers or during summer internships. But the hard-scrabble realities are often only fully appreciated once they take the bait and the Bar, relocate, and commence full-time employment in the belly of the beast.
I recall my first job as a young legal associate at a prestigious Wall Street law firm. By the late 1970s this venerable century-old institution had established a leading global practice in so-called “antitrust” law. As I soon discovered, what this really meant was “anti-antitrust” law. Or even more precisely: “Cartel enhancement.”
It turned out (to the shock of my innocent eyes) that several of our largest clients were among world’s most aggressive cartels and banksters. For example: South Africa’s most lucrative enterprise, Anglo-American/ DeBeers, still presided over at the time by Harry Oppenheimer himself; Germany’s BASF, the world’s largest chemical company, a key precursor (in the 1920s) and a successor (in the 1950s) to IG Farben AG, the infamous pro-Nazi company;[3] and Citibank, one of the world’s most aggressive international banks, with an enormous appetite for designing its way around taxes, regulations, and anti-money-laundering rules at home and abroad.[4] Indeed, their behavior since the 1970s certainly qualifes all three of these clients to be regarded as among the world’s top serial corporate criminals.[5]
Given the importance that my firm placed on keeping these titans happy, however, it soon became clear that my job as a bright young corporate lawyer was not to sit in judgment on anyone’s business ethics, let alone to question their long-term impacts on the communities they inhabited or the planet at large. Rather, my job, in addition to tons of document review, was basically to help the senior associates and partners at the firm find artful dodges to make sure these giants could continue to stalk the earth, unimpeded by the laws of man.
In other words, “clever chicanery,” puro y duro.
In principal, as newly-sworn members of the legal profession, we were well aware that we were also supposed to see to it that our clients played by the rules. But as Denis Healey, a former British Chancellor of the Exchequer, once put it, “The difference between avoidance and evasion is the width of a prison wall.”
This is especially true for specialized big-law fields like antitrust, international tax, securities law, and corporate litigation, where there has indeed come to be a kind of de facto “higher immorality.” In these fields, regulations are complex and elastic, and there is plenty of room for a certain kind of creativity. The supply of enforcement resources available to track down sophisticated transnational, often “victimless” white-collar crime is limited. If need be, there is also often special access to friendly regulators, politicians, and judges, either directly or by way of revolving door Rolodexes. So “the law” becomes a movable feast, a Rorschach test for one’s ethical sensibilities.
First Glance — The Global Haven Industry
For example, back then, Anglo American and DeBeers still dominated the world’s gold and diamond cartels, especially in the US, one of their largest markets. They were desperate to maintain the illusion that they had no legal “presence” here whatsoever, since it still had a few respectable antitrust enforcers. (One of our most talented senior partners had been one before the firm “revolved” him away.)
In Anglo’s case, to preserve this illusion, the firm designed and managed a dense thicket of hundreds of offshore holding companies. This rivalled the shell networks of top oil companies, defense contractors, and major kleptocrats for its sheer complexity.[6] Another key task was to provide counsel on acceptable “offshore” meetings in places like Bermuda and Luxembourg, beyond the reach of process servers and antitrust enforcers— even while turning the occasional blind eye to “emergency” stop-overs in Manhattan.
I played no role in administering the company database, but it was my very first introduction to the hoary world of “offshore havens.” To make a long story short, these are essentially places where, for a price, corporations — not to mention many of the world’s wealthiest investors, kleptocrats, organized criminals, and money launderers — can be miraculously transformed into “citizens of nowhere” for purposes of financial secrecy, tax laws, money laundering, and a host of other regulations that the rest of us take for granted.
Back then, when I first became aware of them, there were at most maybe a dozen such “havens” of any significance. Today there are at least 133 such havens, including many that are now “onshore” in First World countries. They now manage over $50 trillion in private offshore wealth, generating an annual tax revenue loss to world’s tax authorities of more than $500 billion.[7]
The key point for us here is that each and every one of these havens is the product of industrial-scale legal chicanery on behalf of what has by now become a truly global haven industry.
Some of the more routine aspects of this work is performed by law firms, accounting firms, and corporate registries located in sultry outposts like Panama,[8] Bermuda,[9] BVI, [10] the Cook Islands, Cyprus, Dubai, and Mauritius. But as I soon discovered, the true “systems operators” are located right next door and down the street in leading First World financial capitals like New York, London, Zurich, Luxembourg, Paris, Frankfurt, Hong Kong, and Singapore. And much of it is done by respectable professionals from the world’s finest law schools and business schools, employed by the First World’s best-known law firms and accounting firms, on behalf of the world’s most prominent hedge funds, private equity firms, private banks, and corporations. They pride themselves on practicing financial chicanery and “higher immorality” in the perceived self-interests of the world’s very best corporate clients.
Mistranslation
It was not just this one encounter with dodgy haven engineering that led me to walk out the door of my first and only Wall Street law job, less than six months after moving my family to Brooklyn from Boston, passing the bar, and joining the firm. That encounter did indeed provide a solid foundation for my decision. But what really turned the corner was an example of “coporate chicanery” that was far more specific and disturbing.
At the time, our key German corporate client was a party to a document–intensive antitrust investigation, and the agencies involved were short of resources to hire German translators. So one clever lead partner had volunteered to provide them with English language translations of all key documents.
As low-person on the totem poll, who happened to have taken four long years of German in high school, it fell to me to undertake this tedious mission. That appeared reasonable.
Except for the fact that one fine day the partner in charge invited me into his office. After a few niceties, he observed how unfortunate it was that one key passage in one salient client document in German had explicitly described the client’s intent to “dominate” – e.g., monopolize — one key market segment. He suggested that this unfortunate passage needed to be “toned down” in my English translation.
That was my last full day at that law firm. The partners were as shocked as senior partners ever get.
Later on, I recalled the tale about the eminent HLS professor who presented his class with the following hypothetical. A thief suddenly arrives in your office, and presents you with a silver punch bowl that you are quite sure he has just stolen. What are you to do? Well, the whole class agrees that it is both unethical and unlawful for a lawyer to conceal stolen property. So obviously it must be handed over to the police in due course.
But there is one more thing. The thief left his fingerprints on the punch bowl. What is to be done about those? Here the opinions of the class vary, so the professor finally volunteers his own: “Well…surely you wouldn’t want to give anyone back a dirty punchbowl!”
Clever chicanery. I would have failed the punchbowl test.
Upshot
In short run, of course, this situation was a personal nightmare. I was deeply anxious about my family and my career. I was also deeply disappointed that senior partners had respected and thought that I knew apparently believed that I was as “flexible” with respect to professional ethics as they were — just in order to shave a few points in yet another corporate litlgation game.
They must have presumed either that I would see things as they did, or go along because I effectively had little choice. After all, what was I going to do? Walk out the door, try to find another high-priced job after quitting this one on short notice? Trying to afford my new apartment and a New York life style for my family with no job? I think they must have believed they really had me. I think they almost did. In their own way, they were just behaving like one of their cartel clients.
I won’t bore you with all the twists and turns of the subsequent personal “restructuring. To make a long story short, in the private sector, I went off to become the chief economist at a leading global consulting firm, and then at my own successful strategy consultant firm. More important to me, in the public arena, I started to pursue a series of detailed investigations of the global haven industry that culminated in a whole career of investigative journalism — including visits to more than 70 countries, numerous articles, several books, and terrific senior fellowships at Yale and Columbia.
Along the way, I also had incredible investigative luck. I helped to topple Noriega in Panama by securing three years of his drug deal phone records later used in his trial. …I was in Beijing during Tiananmen Square protests in May 1989 and Moscow during Yeltsin’s election theft in May June 1996…I penetrated the private banking offices of a top Swiss private bank and two top US banks…located the secret offshore accounts of Marcos + Carlos Andres Perez and Paraguay General Stroessner… found the Hamburg bank where JP Morgan’s SVP for Latin America stashed $millions of loot for top Brazilian officials…made the first detailed estimates for the size and growth of offshore private wealth managed…and helped to found a leading global NGO to combat it.
This all took years. Just this year a source that I developed over four decades called me to confirm that President Nixon had owned offshore accounts at a haven bank in Nassau. And just last month I was part of an ICIJ-led team of 600 journalists that published the largest leak in history of data pertaining to llicit haven activity by 332 politicians and multiple dodgers around the world– the “Pandora Papers. [11] At first, in the 1980s, such data were produced mainly by a handful of investigative journalists like me, but by now offshore havens had attracted the interest of hundreds of journalists and NGOs all over the planet.
But this is not some bragging tale with a happy ending. The personal toll had been enormous. And in so many ways we have failed. The global haven story keeps on ticking, despite decades of detailed revelations, simply because of all the chicanery — which right now is helping polluters and fossil fuel finance to continue. The struggle continues.
But for purposes of this paper, looking back on it now, my decision to leave the “high immorality” of Big Law behind was one of the best decisions I’ve ever made.
So thank you, great big Wall Street law firm. I’m grateful that I was allowed to get a brief look inside, and especially, that I was confronted so early with such a clear-cut ethical choice. Who knows? With just a few hair-line changes in partner behavior, I might have been seduced into staying inside the beast much longer — becoming what they did, instead of who I am.
So remember that you become what you do, and just say no to legal chicanery. You won’t regret it for more than a few weeks.
***
James S. Henry is a leading economist, attorney and investigative journalist who has written extensively about capital flight, tax havens, and organized crime, including global pirate banking and Donald Trump’s private Russian/FSU connections. James served as Chief Economist at the international consultancy firm McKinsey & Co. As an investigative journalist, his work has appeared in numerous publications like Foreign Affairs, The American Interest, The Nation and The New York Times. He was the lead researcher of the recently released report titled ‘The Price of Offshore Revisited.’ His books include Pirate Bankers (2017, in process, Col U Press); Poggee and Mehta, ed, Global Tax Fairness (Oxford, 2016) (longest essay); The Blood Bankers (Basic Books, 2093,2005); and Banqueros y Llavadolores (Tercer Mundo, 1996)
[1] John Stuart Mill, “Unprinted Speech on the Influence of Lawyers,” reprinted in Economica, March 1925, p. 1-6. I don’t recall how I stumbled on this, except that it is a good example of the kind of serendipity of random free-range grazing that is really only possible in well-stocked non-digital libraries, where one is still permitted to have the luxury of having no idea what one is looking for.
[2] See C. Wright Mills, The Power Elite (Oxford, 1956): “The higher immorality can neither be narrowed to the political sphere nor understood as primarily a matter of corrupt men in fundamentally sound institutions…The higher immorality is a systemic feature of the American elite; its general acceptance is an essential feature of the mass society. Of course there may be corrupt (people) in sound institutions, but when institutions are corrupting, many of those who live and work in them are necessarily corrupted.”
[3] BASF’s dominance of the global chemical industry dated back a century to its pioneering role in the 1860s in dyes and pesticides. In the 1920s it was merged with five other German giants, including Bayer and Hoechst, forming the industrial behemoth IG Farben. By 1939 IG Farben was the largest company in Europe and the fourth largest company in the world. In the 1930s it played a crucial role in funding the Nazi Party; in the 1940s it went on to provide the main industrial underpinnings of Hitler’s entire war effort, aided at least 160,000 slave laborers, including 30,000 at Auschwitz. It became notorious for poison gases like Sarin and Zyklon-B, which was used to kill more than 1 million people. After the war, several of its key former executives were rehabilitated by the Allies, and the firm was separated again into its main components, BASF and Bayer, which continue to this day, and Hoechst, which merged with France’s Rhone Poulenc to become “Aventis” in 1999 and then merged again to become “Sanofi-Aventis” in 2004. As of 2020, BASF employed more than 120,000 people at chemical plants in 90 countries, including the US. As of 2018, it ranked second on a list of the world’s worst water polluting companies and fourth among air polluters. See PERI, https://peri.umass.edu/combined-toxic-100-greenhouse-100-indexes-current/. In 2000 it paid an $82 million fine to US state attorney-generals to settle charges of price fixing in vitamins. See Good Jobs First (2020) https://violationtracker.goodjobsfirst.org/prog.php?parent=basf&sort=desc.
[4] Paul Volcker served as the Chase Manhattan Bank’s Vice President of Strategy before being appointed Federal Reserve Chairman by President Carter 1979. He famously remarked that “Strategy at Chase consists of doing today what Citibank did yesterday.”
[5] See for example, James S. Henry, “The Global Bankster Crime Wave,” The American Interest, October 17, 2017, available at https://www.the-american-interest.com/2017/10/25/economics-global-bankster-crime-wave/. This details some 655 corporate felonies committed by the world’s top 22 banks from 1998 to 2015 across 14 different offense categories, from illicit trading and price fixing to mortgage fraud and the facilitation of tax dodging. Citibank alone accounted for 69 offenses, for which it was fined $24 billion. The total fines paid by all 22 banks during this period was nearly $300 billion. In May 1999, BASF paid $250 million of a record $500 million fine to the US DOJ for participating in a global cartel to fix vitamin prices. See https://www.justice.gov/archive/atr/public/press_releases/1999/2450.htm. In 2000 BASF paid another $82 million fine to US state attorney-generals to settle charges of price fixing in vitamins. See Good Jobs First (2020) https://violationtracker.goodjobsfirst.org/prog.php?parent=basf&sort=desc. As of 2018, BASF ranked second on a list of the world’s worst water polluting companies and fourth among air polluters. See PERI, https://peri.umass.edu/combined-toxic-100-greenhouse-100-indexes-current/. Anglo-American/DeBeers was never prosecuted for its crimes against humanity under the apartheid regime, and most of its antitrust indiscretions also went well-defended. See for example, Consolidated Gold Fields PLC et al v Anglo American Corporateion of South Africa and DeBeers Consoidated Mines Ltd and Minorco, S.A., US District Court (Southern District), 713 F. Supp 1457 (1989), at https://law.justia.com/cases/federal/district-courts/FSupp/713/1457/1465821/.
[6] I may still have a copy of this enormous computer printout tucked away somewhere, strictly for antiquarian interest. It is not the largest such offshore network that I’ve seen — that prize goes to a Kazahk bank fraudster who maintained a roster of 3000 offshore shells, rotated regularly by a fulltime staff. His Ukrainian business partner even acquired his own corporate registry in Cyprus to make things easier.
[7] See Tax Justice Network’s latest “Financial Secrecy Index” (2020), at https://fsi.taxjustice.net/en/introduction/fsi-results. The basic FSI Index ranks 133 “financial secrecy jurisdictions.” An overlapping “Corporate Haven Index” ranks 70 jurisdictions that specialize in helping multinational companies shift profits to low-tax jurisdictions. For my estimates of offshore private wealth, see James S. Henry, “The Price of Offshore Revisited (2012/13), for a recent estimate of the worldwide annual tax revenue lost to tax havens, see www. taxjustice.net.
[8] For example, Panama law firms Mossack Fonseca and Alcogal are featured in The Panama Papers (ICIJ, 2016). https://www.icij.org/investigations/panama-papers/, and in The Pandora Papers. (ICIJ, October 2021), https://www.icij.org/investigations/pandora-papers/about-pandora-papers-leak-dataset/.
[9] Cf Bermuda’s Alleyby law firm was featured in The Paradise Papers (ICIJ, 2017), https://www.icij.org/investigations/paradise-papers/#_ga=2.11029.
[10] BVI corporate registeries and trusts feature prominently in the recently released The Pandora Papers. (ICIJ, October 2021), https://www.icij.org/investigations/pandora-papers/about-pandora-papers-leak-dataset/.
[11] See International Consortium of Investigative Journalists (October 3, 2021), https://www.icij.org/investigations/pandora-papers/about-pandora-papers-leak-dataset/