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.” On March 12, 2009, the court ruled “dismissal without prejudice” because “the plaintiff has failed to obtain substitute counsel by the deadline.” Zahara was seeking new counsel.
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.