This Note argues that because procedural hurdles limit the likelihood that class action lawsuits and SEC enforcement cases will deter wrongdoers or provide adequate recourse to defrauded investors, regulators should seek to prevent companies from listing on U.S. exchanges unless these issuers make adequate disclosure of their auditing arrangements. This disclosure should include information about the division of labor between U.S. and non-U.S. auditors, as well as the degree of access PCAOB inspectors are granted to any non-U.S. audit firm’s records and procedures. By focusing disclosure require- ments on auditing structure instead of Chinese reverse merger companies specifically, legitimate Chinese or small-cap companies will not necessarily be disadvantaged when entering U.S. markets. In addition, this disclosure may provide an incentive for countries such as China, where PCAOB inspectors are largely precluded from ensuring compliance with auditing standards, to be more transparent in their auditing practices, thereby benefiting investors and markets generally.
This Note proceeds in four Parts, the first three of which describe and evaluate affected entities’ responses to the increase in fraudulent conduct by Chinese reverse merger companies. Part I outlines shareholders’ response to the phenomenon—class action lawsuits—and argues that this option is unlikely to be an effective avenue for redress. Part II evaluates the SEC’s three-part approach to fraudulent reverse mergers, which has involved filing enforcement actions, educating investors, and approving more robust listing standards for U.S. exchanges. Part III describes the important role of the PCAOB and its rules regarding U.S. auditing firms’ collaboration with non-U.S. firms, as well as the reasons Chinese companies have been able to avoid this regime. Building on the most successful aspects of this regulatory response and seeking to improve on its weaknesses, Part IV provides recommendations for how to make existing regulations more robust.
In recent years, schools have attempted to combat school violence and other behavioral problems by instituting harsh disciplinary policies and referring students to law enforcement. Civil rights advocates argue that these practices push students, especially students of color, “out of school and into the juvenile and criminal justice systems.” The process has come to be known as the school-to-prison pipeline.
Throughout the literature discussing this phenomenon, authors often reference juvenile justice systems in passing, but few studies have given in-depth attention to the specific practices within juvenile courts that perpetuate the school-to-prison pipeline. Accordingly, this Note takes a closer look at the connection between harsh disciplinary practices in schools and the dispositional processes that occur in juvenile justice systems. Part I examines zero-tolerance policies that push students out of schools in the first place. Part II explores the ways that students then enter juvenile courts. Part III discusses the guidelines and other factors that shape judges’ dispositional decisions, particularly when they handle minor crimes and violations of zero-tolerance policies. Finally, Part IV describes alternatives to punitive sanctions for juvenile offenders. Overall, this Note concludes that zero-tolerance policies and punitive juvenile justice dispositions fail to remedy the problems that they are meant to resolve.
This Article defines and explores irredeemably inefficient acts—a conceptually distinct and empirically important category of socially undesirable conduct. Though inefficient behavior is, no doubt, pervasive, the standard view holds that inefficient conduct may be converted into efficient behavior by forcing actors to internalize the external harms of their decisions. For some acts, however, such conversion is impossible. These acts are not just inefficient forms of otherwise socially beneficial activities—they are not just contingently inefficient. Rather, they are inefficient at their core; they reduce social welfare no matter what the regulator does. These irredeemably inefficient (or just irredeemable) acts are private, intentional, nonconsensual transfers of money. While this definition clearly describes theft, it also covers churning and price fixing, market manipulation and option backdating, insider trading and tax shelters, to name just a few examples. All these acts are socially undesirable in any form and at any level because though the money transfer is generally welfare neutral, transferors and transferees waste real resources to make sure that this transfer does, or does not, occur. Yet irredeemable acts may be over- deterred if enforcement is imperfect. Overdeterrence is possible for two reasons. First, enforcement increases the costs of irredeemable acts that remain undeterred. Second, enforcement burdens efficient conduct that yields outcomes indistinguishable from those produced by irredeemable acts. These considerations (along with the irrelevance of a standard cost–benefit comparison) underlie the unique optimal deterrence analysis of irredeemable acts. Antitrust law, corporate law, and criminal law largely reflect the divide between contin- gently and irredeemably inefficient acts, as well as some of the more specific prescriptions following from this Article’s inquiry. Securities and commodities regulation fails to recognize the same distinction despite a wide variety of irredeemable acts in securities and commodities law violations. Although the tax policy implications of the proposed framework are limited, this framework helps to resolve a long-standing debate about tax shelter regulation. Overall, the proposed analysis enriches our understanding of socially undesirable conduct, supports numerous rules and sanctions across divergent areas of economic regulation, and animates a call for legal reforms
Property rights and resource use are closely related. Scholarly inquiry about their relation, however, tends to emphasize private property arrangements while ignoring public property—property formally owned by government. The well-known tragedies of the commons and anticommons, for example, are generally analyzed with reference to the optimal form and degree of private ownership. But what about property owned by the state? The federal government alone owns nearly one-third of the land area of the United States. One could well ask: is there a tragedy associated with public property, too?
If there is, here is what it might look like: private claims to public property are remarkably durable. Consider private claims to the lands and resources owned and managed by the federal government. Once established, these claims—of which there are hundreds of thousands—seem, in many instances, to take on a life of their own. Mining claims, leases for the development of coal or oil and gas, grazing permits, hydropower licenses, ski resort leases, even residential leases—claims such as these are often extended, expanded, renewed, and protected by law and by bureaucratic practices in ways that shape, and often trump, other policy objectives with respect to federal land. Newer claim- ants, and policies that would favor new land uses or alter the mix of uses, tend to be disfavored. These tendencies create a set of managerial and policymaking difficulties that constrain lawmakers and land managers and that ultimately disserve the interests of the citizens in whose interest state property ostensibly is managed.
This Article examines the durability of private claims to public property, first, by providing a set of examples, and second, by explaining how the American historical experience and legal system combine to give public property this character. Third, it suggests implications for both theory and practice, in particular cautioning that lawmakers should take into account the phenomenon described here before granting new forms of access to various public resources.