Long-Term Horizon, Deep Value, Dividend Investing
Contributor Since 2009
My name is Phil Mause. I am a lawyer in Washington, D.C., getting close to retirement. I am a yield oriented investor and in the last two years, I have done reasonably well in junk bonds, BDCs, mortgage REITS, and dividend paying blue chip stocks. As an avocation, I dabble in stand up comedy. I have been and continue to be a collaborating author with High Dividend Opportunities, a subscription site based on Seeking Alpha.
Eight years of litigation came to close this year as the Italian Supreme Court acquitted Amanda Knox and her co-defendant Raffeale Sollecito of charges that they were involved in the murder of Knox's roommate, Meredith Kercher. Numerous books, countless magazine articles and a veritable avalanche of internet traffic was generated by the case. In the process, two "camps" (an "innocence" camp and a "guilt" camp) emerged and went to war on the internet. The case had many twists and turns with an initial conviction at trial followed by a reversal of that conviction on appeal, then a reversal of the reversal by the Italian Supreme Court with a remand to an intermediate court which returned guilty verdicts and finally with the reversal of those guilty verdicts by the recent Supreme Court action. As the seesaw battle proceeded, there was a tendency of the camps to praise or attack the Italian legal system depending upon how they were faring at a particular point in time. Not surprisingly, the guilt camp extolled the virtues of the Italian legal system while they were winning, and then, upon the recent and definitive judgment of acquittal, began to imply the possibility of "corruption."
This article will not go into the merits of the case (the author believes that the judgments of acquittal were correct) nor will it try to evaluate whether the Italian system is somehow "better" than the American system. What I will do is to point to certain features of the Italian system which may suggest avenues of reform for the American system. Having followed the case and written a number of articles about it, I was fascinated by certain aspects of the Italian criminal justice system which appear to be superior to our own.
1. A True Second Look On Appeal - In Italy much more than in America, appellate courts take a true "second look" at criminal convictions. Appellate courts can hear new or old witnesses and can investigate the case factually. The first appeal was adjudicated under the supervision of Judge Pratillo Hellmann, who may well be the hero of this case. He heard evidence, appointed independent experts to resolve key technical issues, and concluded that the defendants were innocent. In America, the appellate process is very limited and generally does not involve a reexamination of the facts. Until fairly recently, criminal defendants also had an opportunity to challenge convictions through the Habeas Corpus process but recent changes in the law have narrowed this avenue of review substantially. Thus, an American defendant who is convicted at the trial level faces a daunting task in attempting to overturn that conviction. The system is now structured in such a way that, while "rubber stamp" review does occur at several levels, none of the reviewing courts really take a true "second look" at the case to determine whether the defendant is really guilty. Perhaps, this problem may be remedied in some states by "conviction integrity panels" designed to identify wrongful convictions. As DNA evidence is beginning to allow us to discover that more and more convictions are truly wrongful and that we have been imprisoning significant numbers of innocent men and women, it is vitally important that, in each state, there be some point in the after trial process at which a true second look at serious criminal convictions is undertaken. It may be that the solution is to remove various limitations on Habeas Corpus. The important thing is that somewhere and at some time a true, thorough, second look be focused on serious criminal convictions.
2. Written Opinions - In Italy, the trial court (actually a kind of mixed court and jury) writes a detailed opinion going through the evidence presented and reaching conclusions about factual issues. It attempts to reconstruct what actually happened and explains why its factual conclusions support conviction or acquittal. Of course, this written opinion facilitates appellate review because an appellate court can evaluate the conclusions of the court below to determine whether they are supported by the evidence. In the United States, the trial proceeding generally generates only a "guilty" or "not guilty" verdict without detailed explanation of the underlying rationale. It is very hard for appellate courts (or anyone else) to discern the connection between the evidence presented at trial and the outcome of the case. This is, to some extent, the natural result of the American system's reliance on lay juries. A jury of twelve sits through the trial, confers and reaches a verdict. To ask the twelve citizens to stay around after the verdict and write a detailed opinion citing the transcript of proceedings would create enormous burdens on those called for jury duty, might be impossible due to the differing views of individual jury members, and could become unworkable. The solution I would propose is that - in all cases in which the sentence is more than a certain length (say, ten years) the trial judge would have to write a detailed opinion describing why a reasonable jury could have found the defendant guilty. The opinion would cite the transcript of the proceedings. This opinion would then allow the appellate court to conduct a more meaningful review of the case.
3. Independent Experts - The real turning point in the Knox case came in 2011 when Judge Hellmann appointed two experts to review a key technical issue in the case. The issue involved DNA evidence which the prosecution claimed supported its case. One instance was the alleged DNA of Sollecito on the bra clasp of the victim found at the crime scene only after a considerable time had elapsed from the date of the crime. The other instance was a kitchen knife found in the apartment of Sollecito which knife allegedly contained DNA of the victim. At the trial level, there was the typical battle of the experts with experts from both sides testifying either that the evidence was reliable or that it should be disregarded. Judge Hellmann resolved this issue by appointing independent experts who would not be beholden to either side. The turning point in the litigation of the case came when the independent experts submitted their conclusions and determined that both items of evidence should be disregarded. This was a major victory for the defense. With these two items out of the case, there was no evidence of Knox or Sollecito in the room where the crime was committed and no evidence of the crime on the persons or belongings of either of the defendants. I think that consideration should be given to using independent experts more often in the United States criminal justice system. There are numerous technical issues in criminal cases - especially in case where crime scene evidence is of critical importance. I suspect that it is not at all unusual for American judges and juries to be confused by the testimony of technical experts - especially when dueling experts get into conflict on highly technical matters. Of course, the independent experts would have enormous power in certain cases and care would have to be taken in their selection. Each party could submit a list of acceptable experts and the judge could examine each list. His task would become easy if there were "overlap" and certain experts were on both lists. If no overlap could be found, the judge could investigate the selection of an independent expert and contact target individuals to finalize the selection.
I think that these measures would tend to reduce the unacceptably high rate of wrongful convictions in the United States.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.