Legalize Blackmail: An Example

This post is an ex­am­ple of the di­su­til­ity of out­law­ing black­mail. It is an illus­tra­tion of the ar­gu­ment made by Robin Han­son here

Back­ground—Sal­lie Mae is a US com­pany. For back­ground, see here, pp. 807

On Novem­ber 9, 2005, former Sal­lie Mae em­ployee Michael Za­hara filed a fed­eral law­suit against the com­pany, alleg­ing that it had a pat­tern and prac­tice of grant­ing for­bear­ance in a pur­pose­ful effort to in­crease to­tal stu­dent loan debt. On Oc­to­ber 29, 2008, per­mis­sion was granted to his le­gal coun­sel to with­draw from the case, cit­ing “From coun­sel’s per­spec­tive, a break­down in trust has re­sulted from the dis­cov­ery that Re­la­tor has been ar­rested for ex­tor­tion, the cir­cum­stances sur­round­ing that ar­rest, and Re­la­tor’s failure to dis­close the ar­rest to coun­sel.”[36][37] On March 12, 2009, the court ruled “dis­mis­sal with­out prej­u­dice” be­cause “the plain­tiff has failed to ob­tain sub­sti­tute coun­sel by the dead­line.”[38] Za­hara was seek­ing new coun­sel.[38]

Za­hara was later ex­on­er­ated of all charges, but was not able to re­sume the suit.

From a util­i­tar­ian per­spec­tive, whether Za­hara did at­tempt to ex­tort SM is of no rele­vance. Whether SM was pur­pose­fully in­flat­ing to­tal stu­dent loan debt (which was in its in­ter­est), is mas­sively im­por­tant to the US fed­eral bud­get, and to those stu­dents. Had black­mail been le­gal, we could bet­ter have po­liced Sal­lie Mae’s be­hav­ior. This has con­vinced me to agree with Robin Han­son that black­mail should not be out­lawed.