From the diaries by Erick.
H/T to Michelle Malkin.
Reuters is reporting that Kenneth Feinberg, the Obama Adminstrations “Pay Czar” will be reviewing compensation contracts for company officials and may “claw back” much of what has been or will be paid.
Particularly concerning is this, from the second page of the article:
Feinberg said the law requires him to take market forces into account, but also to consider performance and past deals between a company and an employee.
“The statute provides these guideposts, but the statute ultimately says I have discretion to decide what it is that these people should make and that my determination will be final,” Feinberg said.
Earlier, the article particularly notes Citigroup energy trader Andrew Hall, where it states,
Feinberg told Reuters that Citigroup Inc included the contract of energy trader Andrew Hall in submissions due Friday by seven major companies still locked in the federal government’s TARP Program.
Feinberg said he hasn’t looked at Hall’s contract, which reports have said could pay him as much as $100 million this year.
“Whether I have jurisdiction to decide his compensation or not, we will take a look and decide over the next few weeks,” Feinberg said after speaking at a public forum in Martha’s Vineyard, Massachusetts, part of a newsmaker series hosted by the Martha’s Vineyard Times newspaper.
Feinberg said on Sunday that decisions he makes will be “binding,” but the law limits his power over contracts signed before February 11, 2009.
He also said he has the authority to use a “clawback” provision to go after compensation for executives from any company that received money from the U.S. Treasury’s Troubled Asset Relief Progr.am (TARP).
Even more interesting is this excerpt:
Mr. Hall, 58, and the other trader were paid under an employment contract signed last October, said a person briefed on the contract who was granted anonymity because of not being authorized to disclose the information. That was before a law went into effect instructing the Treasury secretary, Timothy F. Geithner, to examine the pay packages of top executives at companies that received exceptional bailout assistance from the government.
In other words, Feinberg is claiming that even though Citigroup signed this contract with Hall before the February 11, 2009 date set in the TARP legislattion, before the legislation was even passed into law, he can arbitrarily and without review revoke the compensation package into which Citigroup and Hall both willingly entered. He can, retroactively, revoke a common law contract using the force of the TARP legislation.
There’s a phrase used to describe this: Ex post facto law.
Legal dictionaries define ex post facto as, “Late Latin, literally, from a thing done afterward.” In other words, retroactive law.
Article I, Section 9, Paragraph 3 of the United States Constitution reads, in full,
No Bill of Attainder or ex post facto Law shall be passed.
Feinberg’s claim that he can retroactively “claw back” money promised under contract violates not only the spirit but the very letter of the Constitution. Further, it also presents Mr. Hall with a legal cause of action against the government: Interference with Contractual Obligations. I am no legal scholar, but I do not doubt Mr. Hall or others like him will challenge this “claw back” provision, costing taxpayers more money as the government is forced to defend itself.
Strangely, there is a method by which Mr. Hall’s contract could have been revoked. There is a legal recourse that would have allowed the government to declare Mr. Hall’s contract void without the need to pass ex post facto legislation and permitting Citigroup to render to him lesser compensation: Bankruptcy.
The very bankruptcy process that the TARP legislation was written to specifically prevent banks from needing would have enabled the government to legally and constitutionally revoke Mr. Hall’s contract.
Just because Mr. Hall will receive compensation greater than many people consider acceptable should not give the government the right to impose a smaller salary. His compensation package was agreed upon by both him and the corporation’s board. Both entered willingly, and both were compelled by contract to fulfill their end of the bargain. Mr. Hall apparently fulfilled his end, despite the slowing economy. He is entitled to his contractual compensation package.
Even worse than this, Feinberg is claiming he can do the same to any company that received TARP funds, even ones that have paid those funds back. How long until he claims that any business that would have been “excessively adversely affected” by the failure of one of those banks should also be subject to scrutiny?
Kenneth Feinberg would have us believe that his office and the TARP legislation gives him not only the right but the responsibility to revoke legal contractual obligations, even those agreed upon before TARP became law. The Constitution clearly dictates that he cannot, and any such provision of the TARP legislation cannot withstand even limited constitutional scrutiny.
Cross posted at Seeking Liberty.