News stories sometimes have economic implications that are lost in the noise and the headlines.
One of those is the recently decided Roger Clemens case. After an unexpectedly brief deliberation, the trial jury found Clemens not guilty on all six charges, which had included lying to Congress and obstruction of justice by lying to federal investigators.
This was a federal case that stemmed from Congressional hearings on the illicit use of performance enhancing drugs in Major League Baseball. The Justice Department does not generally release information about the costs of prosecution for a specific case but knowledgeable people have estimated that the government spent at least $2million to $3 million on it.
It was Clemens’ second trial on the same charges. The first, nearly two years ago in August 2010, ended in a mistrial because of prosecutorial misconduct. As a package then the two trials most likely involved marginal costs in the range of $3 million to $5 million.
Cash outlays are generally higher for defendants in federal cases, partly because a lawyer capable of establishing a defense that will stand up to the massed forces of the U.S. government is going to be expensive.
A federal trial is an costly pastime for defendants, and Clemens paid a multimillion-dollar price to maintain his innocence.
The real economic cost of Clemens’ two trials though, is not the marginal cost to taxpayers or the cash costs he paid for his defense. It is the cost to his reputation, which has significant economic value and is now diminished despite the verdict.
Our reputations were always valuable and have become even more so in an information-drenched society that never sleeps and never forgets. Growing up in America used to involve opportunities for renewal, for becoming a different person as we went through changes in education, jobs and location. Ours was a country of second acts.
That still happens, but it is a lot tougher. Today, nothing about us is forgotten. Things said and done in elementary school become attached to us permanently, through the Internet and social media, to follow us through the rest of our lives.
Reputations are fragile structures that are easily damaged by accusations, even when they are later shown to be unsupported or even baseless. And accusations, for some reason, seem to stick in our minds more readily than exonerations. Ray Donovan, who had been President Ronald Reagan’s secretary of labor, was accused in New York City of larceny and fraud. When he was acquitted he asked, “Where do I go to get my reputation back?”
Clemens might well ask the same question, but unfortunately, the answer is “nowhere.” The damage is as permanent as a tattoo. It will never be completely erased.
Given the economic costs of the Clemens trial, we might wonder if it was necessary. After the mistrial in 2010, the judge advised the federal prosecutors not to retry the case and, in retrospect, there was wisdom in his advice. The main witness in the case was not fully credible and the physical evidence presented was even less so — to the point of being comical.
The interplay of accusation and memory is reflected in the discussions about Clemens’ chances of being inducted into the Baseball Hall of Fame. So many people believe that he did take performance-enhancing drugs that his induction is now “controversial,” despite his consistent denials, the jury verdict, and a pitching record marking him as one of baseball’s all-time greats.
The economic issues that the Clemens case illustrated are especially interesting as our nation and our economy change. As reputations become more sensitive to accusations, the direct economic impact of federal charges becomes more asymmetric.
Federal charges, whether proven or dismissed, hurt a defendant a lot more than the government. And they are going to be a lot more common as the federal government becomes more involved in law enforcement and increasingly apt to use criminal investigations in regulatory matters.
The ultimate effect on employment and our economy is still unclear, but it has revived that old teacher threat: “This is going on your permanent record.” Only now it’s going to cost you, a lot.
James McCusker is a Bothell economist, educator and consultant. He also writes a monthly column for the Herald Business Journal.
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