Last Call For Kick Started, Kicked Out

Barry Ritholtz makes a very important observation: this week's announcement that Oculus, the Kickstarter funded company making virtual 3-D gaming glasses technology that got bought for $2 billion by Facebook, proves that everything critics had to say about the deregulation of crowdsource funding in 2012's JOBS Act (including myself) was 100% accurate.

With Facebook acquiring virtual-reality company Oculus, one of the all time great sucker plays -- the “Jumpstart Our Business Startups Act,” signed by President Barack Obama on April 1, 2012 -- has been revealed as the massive bait-and-switch it is. (The JOBS Act? Hows that for a misleading title?)

It is relatively uncommon for the chairperson of the SEC to object to new deregulation, but when new laws are thought to be anti-investor, it's no surprise. Regardless of strenuous objections, the JOBS Act became law, making it all-too-easy for companies to raise money. It was more of the same radical deregulation that helped cause the financial crisis. This was not about making markets work more smoothly, but rather, an extreme form of “smash & grab” capitalism.

Bill Black called it a “recipe for fraud.” But Professor Black was wrong -- it's not a fraud, it’s a scam. You see, fraud involves something where there is a violation of the law; no rules appear to have been broken here. This is how the JOBS Act is supposed to work: Let people make dumb decisions on their own, without any protection.

A scam on the other hand, is when people are legally duped out of their money. When the auto dealer offers you “rust-proofing,” it’s a scam. When a retail stockbroker offers you entry into a special purpose acquisition company, it’s a scam. Ordering something from a late-night infomercial -- Order now, and get a 2nd one free, you just pay shipping & handling! -- is a scam. These are legal ways to separate fools from their money.

And who got scammed?  Why, the Kickstarter backers, of course.

What did the KickStarter funders of Oculus get? Note I use "funder" and not "investor," because investors have a potential for an investment return. These funders, who backed the company three months after the JOBS Act passed, did not. As the Journal noted, they were promised “a sincere thank you from the Oculus team.” And, for $25, a T-shirt. For $300, the dangle of “an early developer kit” including a prototype headset. Total money raised: $2.4 million from 9,500 contributors.

Which just got turned into $2 billion.  The Kickstarter folks get a t-shirt for seeing their investment multiplied a thousand-fold.

And from a legal standpoint, thanks to the deregulation in the JOBS Act that the GOP created, they don't even have to cough up the damn t-shirt.  Legally, they get nothing.

Working as intended.  Have you contributed to any startups through Kickstarter or any other crowdsourced avenue since the JOBS Act became law?

Might want to reconsider in the future.  Very much so.

Charlotte Mayor Patrick Cannon Arrested On Federal Corruption Charges

Wow, Patrick Cannon didn't even make it through his first year as Mayor of Charlotte before getting arrested on bribery and corruption charges.  And yes, he's a Democrat.  There are bad politicians who are Democrats just as there are bad politicians who are Republicans.

The mayor of Charlotte was arrested by the Federal Bureau of Investigations on Wednesday on charges that he violated federal public corruption laws.

According to a federal criminal complaint filed in U.S. District Court, Patrick DeAngelo Cannon was charged with theft and bribery concerning programs receiving federal funds, honest services wire fraud and extortion under color of official right.

According to court documents, during the course of a separate criminal investigation, the FBI received reliable information that Cannon, a Democrat, was potentially involved in illegal activities associated with his position as an elected official, and began an undercover investigation in or about August 2010.

The complaint and affidavit allege that during the course of that investigation, Cannon allegedly solicited and accepted money bribes and things of value from undercover FBI agents, posing as commercial real estate developers and investors wishing to do business in Charlotte.

According to the documents, Cannon solicited and accepted bribes and items of value in exchange for the use of his official position as Charlotte Mayor, Mayor Pro Tem and/or as a City Council Member.

The complaint and law enforcement affidavit allege that Cannon accepted the bribes from the undercover FBI agents on five separate occasions.

On the last occasion, on February 21, Cannon allegedly accepted $20,000 in cash in the Mayor's office.

According to the complaint and the affidavit, between January 2013 and February 2014, Cannon allegedly accepted from the undercover agents over $48,000 in cash, airline tickets, a hotel room, and use of a luxury apartment in exchange for the use of his official position.

The big question of course is that Cannon was elected Mayor last just November, and the sting goes back his City Council days in 2010.  He's been under investigation for nearly four years.  Cannon certainly would have lost to Republican Edwin Peacock for Mayor if he had been arrested six months ago after Mayor Anthony Foxx went on to become US Transportation Secretary.  Of course, he would have lost in the primaries to City Councilman James Mitchell too, so.

So why now?  The bulk of this stuff happened before he was Mayor.  Cannon also owned the largest private parking company in Charlotte, E-Z Parking, and you can imagine the kind of nonsense that went on there in deals between the company and the city.

Republicans are calling on Cannon to resign immediately.

Also, dammit Democrats.  Stop this.  You're better than this.

Jurist Prudence

If there was a moment in yesterday's Supreme Court oral arguments in the Hobby Lobby case where things got weird, convoluted, and political, it was when Justice Elena Kagan quoted Justice Antonin Scalia's own arguments from 1990 on why your boss's religious views should not affect employees:

During oral arguments Tuesday about the validity of Obamacare's birth control mandate, Justice Elena Kagan cleverly echoed Justice Antonin Scalia's past warning that religious-based exceptions to neutral laws could lead to "anarchy."

"Your understanding of this law, your interpretation of it, would essentially subject the entire U.S. Code to the highest test in constitutional law, to a compelling interest standard," she told Paul Clement, the lawyer arguing against the mandate for Hobby Lobby and Conestoga Wood. "So another employer comes in and that employer says, I have a religious objection to sex discrimination laws; and then another employer comes in, I have a religious objection to minimum wage laws; and then another, family leave; and then another, child labor laws. And all of that is subject to the exact same test which you say is this unbelievably high test, the compelling interest standard with the least restrictive alternative."

Kagan's remarks might sound familiar to the legally-trained ear. In a 1990 majority opinion in Employment Division v. Smith, Scalia alluded to the same examples of what might happen if religious entities are permitted to claim exemptions from generally applicable laws. He warned that "[a]ny society adopting such a system would be courting anarchy."

Of course, that was 24 years ago when the President was a Republican, so this time around those religious exceptions to a law a Democratic president signed into law are necessary, in Scalia's eyes.   But in 1990, he wisely wrote of "slippery slope" arguments.

"The rule respondents favor would open the prospect of constitutionally required religious exemptions from civic obligations of almost every conceivable kind," Scalia wrote in the 6-3 opinion, "ranging from compulsory military service, to the payment of taxes, to health and safety regulation such as manslaughter and child neglect laws, compulsory vaccination laws, drug laws, and traffic laws; to social welfare legislation such as minimum wage laws, child labor laws, animal cruelty laws, environmental protection laws, and laws providing for equality of opportunity for the races."

In other words, if Hobby Lobby is allowed to except itself from Obamacare's mandate, what can't it except itself from?  That's the golden ticket..

StupidiNews!

• LA County Sheriff's Department investigators have concluded that "Fast & Furious" movie star Paul Walker was killed while driving too fast, at least 80 MPH in a 45 MPH zone.
• As expected, as US appeals court has extended the stay of same-sex marriages in Michigan pending the state's appeal over the unconstitutional finding of its ban on the practice.
• The death toll in Sunday's mudslide near Seattle is up to 14, with dozens still reported missing as search and rescue teams comb through the area.
• Senate majority leader Harry Reid has removed legislation from a Ukraine aid package boosting the International Monetary Fund opposed by the GOP in exchange for quick passage later this week.
• Minecraft developer Markus "Notch" Persson has canceled plans to bring the game to the Oculus Rift 3-D display system after the company's surprise acquisition by Facebook on Tuesday.