New York Attorney General Eric Schneiderman has been on a roll lately. He is probing internet-service providers for what he claims is their false marketing of internet speeds. He's trying to shut down fantasy-sports companies because they create "the same public health and economic problems" as gambling. And he is claiming that the energy industry was dishonest about climate change.
For sheer theater, Schneiderman has been effective, grabbing headlines that have raised his profile in New York and beyond. And in that respect, he's adhering to the script of many of his predecessors -- from Robert Abrams to Eliot Spitzer and Andrew Cuomo, politicians who used the attorney general's office to bolster their images as defenders of the little guy.
But I have serious doubts about whether Schneiderman will produce much beyond headlines, at least in the unorthodox case he is trying to advance against ExxonMobil (XOM) - Get Exxon Mobil Corporation Report under a conspiracy theory that was hatched by zealots in the environmental movement and that has now, quite regrettably, gained currency among some establishment Democrats.
In pressing his case, Schneiderman is reaching for an obscure New York law called the Martin Act. The law was enacted in New York in 1921, requiring issuers of securities to register and provide financial details about their offering in order to give individuals accurate data for investing. The law is said to have been adopted to tackle "blue-sky" fraud, a term coined by a Supreme Court justice who decried speculative ventures that had "as much value as a patch of blue sky." Spitzer brought the law to prominence, albeit briefly, by using it to expose the hyping of stocks and other hidden shenanigans of Wall Street firms -- treating these firms like the petty con-men that the law was originally intended to target.
But there are serious questions about the limits of the Martin Act in the case that Schneiderman is trying to contrive against ExxonMobil. In that case, he makes an extraordinary claim that even members of the legal community are sharply questioning: That ExxonMobil misled shareholders by conspiring to keep secret the information it had about the risks of climate change.
Yet nothing could be further from the truth.
If anything, Exxon has been strikingly transparent about the research its own scientists have been conducting over the last 30 years into the question of what is causing climate change. Indeed, the company has long made its research publicly available. This includes hundreds of climate-related reports, including more than 50 peer-reviewed publications. More than that, ExxonMobil has worked closely with the scientific community, routinely sharing its climate research with outside scientists. And it has even donated its climate-related documents to the University of Texas, where the public has free access to them.
But none of this seems to deter the politically ambitious Schneiderman, who appears to be taking his cues from an obscure group of environmental activists at an outlet that calls itself InsideClimate News.
The outlet recently published a series of articles that, in my view, completely twists and distorts the work that ExxonMobil has undertaken through the years to understand climate change. A main conclusion of the series is this: that ExxonMobil discovered the causes of climate change in the 1970s and then set about to conceal that information.
But here is the irony of the sensationalized case that InsideClimate News tries to make: In preparing the stories, the outlet itself relied on the very information that ExxonMobil has been providing to the public for decades. Some cover up, huh?
According to its critics, including ExxonMobil, InsideClimate Newsappears to have relied on shoddy reporting, according to its critics To create this false storyline of a conspiracy by ExxonMobil, the critics say, the reporters and editors culled through ExxonMobil's own publicly available documents to collect data that supported their case. InsideClimate News then quoted data out of context, they say.
All this is beginning to raise questions about whether Schneiderman is seeking to actually enforce laws or simply grandstand politically.
"You wonder why this is the sort of thing that a New York attorney general should be doing," James Fanto, a professor at Brooklyn Law School, recently told Bloomberg. "It seems like it's just completely politically motivated."
The path that Schneiderman is taking should make business leaders shudder. The Martin Act is a tool that should be used judiciously, especially since the bar for prosecuting cases under it is low. Under the act, the government does not have to produce evidence showing that the defendant intended to commit fraud -- or that the defendant even committed fraud.
In addition, the law permits the attorney to gain access to sensitive, proprietary information from any businesses based in New York. And what can the attorney general do with that information? The law permits him to disclose large amounts of it -- in what I regard as a perverse incentive for him to leak information should he want to publicly embarrass his target.
All this makes me wonder why any company would want to even consider listing on the New York stock exchanges versus exchanges elsewhere, since Schneiderman is now making it clear that he intends to exercise the Martin Act against any company that doesn't line up with his ideological agenda.
Finally, lost in the legal discussion are the real-life implications of trying to hobble the energy sector. As I have said elsewhere, the industry has helped propel the nation's economic recovery with billions of dollars of investments in energy exploration. (That includes research and technology aimed at extracting new resources in an environmentally sound way.)
To get a sense of the industry's role in the economy, consider the findings of IHS Global Insight. In a November 2012 study, IHS projected that America's energy sector would potentially add 525,000 new jobs by 2020 and 811,000 by 2030. And these are not just any jobs. These are solid paying, ranging from blue-collar jobs to scientific and management positions.
Given all this, it is troubling that Schneiderman would embark on such an ill-conceived campaign, particularly at a time when members of his own party are complaining about income inequality that has in large part been driven by the loss of middle-class jobs.
For the sake of our economy, justice and plain common sense, Schneiderman needs to put an end to this quixotic campaign.
This article is commentary by @IamJohnBurnettan independent contributor. He does not own shares of any companies mentioned in this article.