Transnational Law Blog

New Wave of Insider Trading Charges as Judge Approved Wiretaps for White Collar Crime Investigation

It’s all over the news, and I should not be caught by surprise. Yet here I am becoming very disturbed by the loopholes in our financial institutions, which gave rise to an unprecedented amount of white collar crime - from Bernard Madoff to Raj Rajaratnam. Wall Street this week has seen the biggest insider trading charges in its history, charges alleging the involvement of various ratings firms, consultancies and half a dozen US public companies including IBM, Intel and two top hedge fund managers of Galleon and New Castle. Complaints filed in the court of the Southern District of New York are posted here.

The $20M insider trading case is currently seen as “a potential watershed in aggressive law enforcement”. Why did it take the SEC so long? Transaction cost or the difficulty in assembling evidence for insider trading? So far the FBI has received a judge’s permission to tap Mr. Rajaratnam’s phone, an authorization not traditionally available for white collar crime.  In the meantime, the Financial Times reports:

Billionaire investor Raj Rajaratnam and present and former executives of Bear Stearns, IBM, Intel, and McKinsey were charged on Friday in an alleged insider trading scheme that US prosecutors called the biggest ever involving hedge funds.

Mr Bharara said the investigation, aided by an unnamed co-operating witness, was continuing. He said the charges “should be a wake up call for every hedge fund manager and every Wall Street trader and every corporate executive who is even thinking about engaging in insider trading”.

Prosecutors claimed Mr Rajaratnam, founder of the Galleon hedge fund, and others used insider information from sources inside hedge funds, public companies, Moody’s Investors Service and an investor relations firm to trade ahead of earnings announcements, acquisitions and joint venture deals. 

The alleged scheme, which ran from 2006 until earlier this year, involved trades in companies including Google, IBM, Sun Microsystems and Hilton and produced profits of more than $20m, most of which went to Mr Rajaratnam, according to federal prosecutors. The Securities and Exchange Commission, which brought civil charges, put the proceeds of the scheme at more than $25m.

Among those charged with trading on and providing tips were Mr Rajaratnam; Danielle Chiesi, an employee of New Castle, a hedge fund set up by Bear; and Mark Kurland, a New Castle executive who formerly served as Bear’s head of research and asset management. Some alleged offences occurred after Bear – and New Castle – were acquired by JPMorgan Chase in March last year. New Castle, which faces civil charges filed by the SEC, was separated from JPMorgan in late 2008.

The SEC investigation is far from complete since those who are at risk of prosecution may choose to cooperate with the authorities and pass on names of other people and other hedge funds that they have shared information with. The case against Galleon is predicted to be just the “tip of the iceberg,” said Jacob Frenkel, a former SEC enforcement lawyer. 

Federal and California State Tax: One Step Forward, Two Steps Back

 

If you would like to find out the tax aspects of Obama's stimulus package which seizes about 36% of the stimulus, as well as how the State of California mends its budget crisis through various tax increases, there was a recent discussion on federal and state tax issues given by professor Heather Field and professor Darien Shanske, two respected tax professors at UC Hastings. The discussion was recorded in mp3 format and is now posted here.[mp3]

Other than the applicable nature of the subject discussed, the discussion offered some insights of how CA tax increases will negate many parts of our federal tax credits and how our state’s constitutional setting makes it difficult to avoid similar budget crisis in the future.

In the first section, professor Field opened  by explaining the need for a stimulus package and why the tax system plays an important role in stimulating economic activities. Professor Field then discussed the various implementations of the tax aspect which include non-repayment credit for first time homebuyers, educational tax credit for students, and sales tax reduction for new vehicle. The lecture ended with a thought provoking discussion as to weather the stimulus will work as well as the short term and long term nature of these tax provisions. It is appeared that President Obama is seeking to keep some of these tax provisions permanent despite growing concern over our budget deficit. Here, professor Field nicely instigated the debate over the role of our tax system as a tool for income redistribution.

I thoroughly enjoy the professor's subjective approach toward controversial issues such as the role of our tax system and whether Obama’s tax cuts will sufficiently motivate economic activities in the short run. Field posited the question as to why the tax credits only applies for a “limited window,” and what would be the consequence of extending these provisions permanently.

Other than issues related to fairness and wealth distribution, economists have been concerned over inflation and potential negative impact on monetary system through tax instrument. We are injecting a huge amount of capital inflow to the economy, in the long run, it will take some painful interest hike to restrain these capital surplus, tame down inflation and pay off the budget deficit. Furthermore, at some point, consumers may stop responding to tax cuts as an effort to stimulate economic activities. Behavioral economics tells us that consumer behaviors are often altered by short term and long term expectations of the consumer’s future income.

The discussion quickly moved on to Darien Shanke discussion on California budget crisis and how California state has used tax system to mitigate budget problem in the time of overall global crisis. If California were an independent state, it would have been the tenth largest economy in the world. Here, professor Shanske introduced the not-so-obvious paradox: if California hasn’t overspent, why does a State which arguably has  the highest income and sale tax in the country constantly finds ways to bail itself out of budget crisis over the past couple decades?

The key problems rest in property tax and the fact that California doesn’t have a standard sale tax system. At ¼ of the country’s average property tax, the State imposes the lowest property tax rate in the nation. Because income tax is less sufficient and stable than property tax, our State budget has always been much more vulnerable in the time of crisis as it is now. For these reasons, our state is now seeing itself going through massive lay offs (10.5% unemployment rates in February), budget cuts on education, double fee on car registration and general income tax increases.

Professor Shanske then questioned how did end up here? Why can’t we simply increase property tax to balance the budget?  California is the only State in the country that requires 2/3 majority to pass the budget. Shanske reasoned that having super majority requirement is not too "insane", but if the State were to make it very difficult to change the budget and tax structure, it should have had a good initial arrangement. Here, our State legislators happened to choose the worse possible arrangement by adopting a highly unstable tax system, and making it very strenuous to change it. Given the State's distressing institutional constrains, professor Shanske left his audience empty of any probable solution. He is not to blame.

The lectures are immensely informative and thought provoking. Nevertheless, they do not require any tax background from its listeners to appreciate the on going changes and debates in the federal and state tax system. "The Tax Aspect of the Stimulus Package"[mp3] is a highly recommended tune.

On Law and Facebook

With the rise of web-based social networking services such as Facebook and Myspace, the massive collection of personal information collected by these sites has brought up some interesting legal issues around the world. The most common legal issues surrounding sites like Facebook involve questions about 1) privacy issues, and 2) what is the role of a person's personal pages in legal proceedings?

Is the information actually private?

While much has been made about Facebook trying to change its terms of service, and then backing down in the face of a large grass-roots opposition by its users, there have been legal and media challenges as well. Back in May, 2008, for instance, The Canadian Law Clinic filed a complaint alleging that Facebook's terms of service violated Canada's privacy laws. Similarly, news outlets have been warning people about the lack of privacy on sites like Facebook and Myspace for a while now.

On a more personal level, the lack of privacy of the information on personal Facebook pages has affected a few of my friends. When I was still in law school, the school's career office sent out warnings to the students that employers had been looking at Facebook and Myspace pages:

Dear Students:

We know that blogs and social networking websites such as Friendster,
MySpace.com, and Facebook are getting to be a fact of life, but
employers have become quite savvy in their research of potential
candidates. You should operate under the assumption that anything on
the web written by or about you will be discovered by a potential
employer. All of this is information that can be factored into an
employer's hiring decision. Quite a number of employers have told us
that they are now using these sources as a device to screen
candidates.

A student who uses a racy picture or a byline of "Party with your
pants off!"* or who describes him/herself as a "semi-stoner"* might
face questions from a more traditional employer. Even comments from
friends posted to your site can factor into the equation. If you are
going to post, we encourage you to keep your material as "clean" as
possible and consider using any privacy protection that the site
offers.

*We found this material in a very quick search on MySpace.

It turned out that a few students had even had their employment offers from firms rescinded due to inappropriate information on their social networking pages.  Always looking out for its student, my law school proceeded to actually review every student's pages and then gave specific warnings to anybody who posted anything "objectionable."

It appears that feelings about privacy are still in the process of adapting to the enormous increase in relatively available personal information posted on the web, and it will be interesting to see how this all shakes out in the future.

How can the information on social networking sites be used in legal proceedings?

A less "sexy" issue, but one that is increasingly relevant in today's world, are questions about the role of the information contained on social networking sites. There have recently been a number of cases testing the limits of using personal information as evidence and whether the contents of social networking pages are discoverable.

For example, in TV v. Union Township Board of Education, the defendant in the emotional distress case tried to get the court to order the plaintiff to give the defendant access to the plaintiff's Myspace and Facebook pages, with the expectation that comments posted on the pages would show that the plaintiff was not emotionally distressed. The Union County, New Jersey Superior Court Judge made a preliminary ruling that personal social networking pages are only discoverable if there is a particularized showing that the information is relevant, due to privacy concerns.

On the other hand, the Ontario, Canada case Leduc v. Roman, goes the other way and finds the contents of Facebook pages discoverable. This is because:

a court can infer from the social networking purpose of Facebook, and the applications it offers to users such as the posting of photographs, that users intend to take advantage of Facebook’s applications to make personal information available to others.  From the general evidence about Facebook filed on this motion it is clear that Facebook is not used as a means by which account holders carry on monologues with themselves; it is a device by which users share with others information about who they are, what they like, what they do, and where they go, in varying degrees of detail.  Facebook profiles are not designed to function as diaries; they enable users to construct personal networks or communities of “friends” with whom they can share information about themselves, and on which “friends” can post information about the user.

These first few cases are serving as test cases for the inevitable adaptation of the law to the times, and the law WILL adapt. Witness that lawyers in Canberra, Australia can now serve process on defendants via Facebook. I guess the steady march of progress continues on. 

A Capitalist Crisis?

Having born and brought up in a communist country as well as reading Marxism over the years in both social and economic disciplines, I can’t help asking myself the question: “How would Marx respond to this financial crisis?” The question lingered for weeks. Yesterday, I finally did a quick search on this subject. Unsurprisingly, there has been a revival of interest in Marx ever since the crisis started. Das Kapital, one of Marx’s most known analyses on the economy of capitalism have once again become the best seller all over the world. Last year, Phillip Collins of the UK Times published an article under “Karl Marx: did he get it all right?”. After a quick scan through Marx’s Ten Steps to Communism, the author gave Marx 3.5 over 10 for his assumed prophetic ability in predicting our financial crisis. Collin stated the obvious: Mark was right about the nature of crisis embodied in capitalism, but not much more.

I found the article a fun read with good review of Marxism, as well as was amused with Collins' British sense of humor. But it did not satisfy my curiosity. What is more? What do our American Marxists think about this issue? Robert Brenner, a Marxist and economic historian of UCLA, seems to offer a solid yet provocative perspective through his interview with Seoul’s economist, Jeong Seong-ji titled "A Way out of the Global Economic Crisis?"

Back in December 2007, Brenner was almost prophetic about the upcoming financial crisis while at least half of the world was still relatively optimistic about economic downturn. By late December 2008, Brenner once again stressed that the crisis is much more substantial than most people expected.

According to the Marxian professor: “The basic source of today’s crisis is the declining vitality of the advanced economies since 1973, and, especially, since 2000.” Brenner contends that capitalists solved the problem of slowing capital accumulation by calling forth to the ever greater levels of borrowing to sustain stability. Thus, our economic system requires the crisis that has so long been postponed since “it’s by way of crisis that, historically, capitalism has restored the rate of profit and established the necessary conditions for more dynamic capital accumulations” said the Marxian historian.

The interview covers controversy issues such as the role of the US’s hegemony in maintaining the world order, Keynes monetary policies as a solution for the crisis, the depth of the Chinese crisis and its role in financing the our debts over the past decades.

In addition, the professor also made a comparison between Obama’s future performance as with Roosevelt’s and how our country can only change the system under a class struggle namely revolving pressure from the workers and unions. He asserts: “like Roosevelt, Obama can be expected to take decisive action in defense of working people only if he is pushed by way of organized direct action from below.”

In responding to Jeong’s question on Korea, Brenner maintains that as deep and troublesome the Chinese crisis is revealing, China may be able to contain the crisis better than Korea due to its low-cost labor force and large domestic consumption. This is due to both Korea and China reliance on globalization for their growth, which turn out to be a weakness at the moment. “It’s not necessarily because Korea is doing the wrong thing,” the author continues, “it’s because I don’t think there’s going to be an easy way out for any part of what has become a truly global, interdependent capitalist system.”

For Brenner, the only way for countries to reestablish healthy capitalism appropriate for growth and further capital accumulation is through strengthening the movement of labor organization. The class struggle promises to balance the distribution of power necessary for readjustment.

“So, again, the top priority for progressives -- for any left activists -- where they should be active is in trying to revive the organizations of working people. Without the re-creation of working class power, little progress will be possible, and the only way to recreate that power is by way of mobilization for direct action. Only through working people taking action, collectively and en masse, will they be able to create the organization and amass the power necessary to provide the social basis, so to speak, for a transformation of their own consciousness, for political radicalization.”

I wonder if one could find a more Marxian solution to our financial crisis than what Brenner contends. On the other hand, this approach has never been so out of reach given the current feeble and fragmented state of our labor unions and the worker’s strength in taking the action necessary to protect their long-term interest.

Robert P. Brenner and Jeong Seong-jin. Photo provided by The Hankyoreh
-----
Below are a few additional quotes that I also found particularly thought-provoking.

Disputing Keynes monetary policy in effectively changing the landscape of our crisis
"But there is reason to doubt that Keynesianism, in the sense of huge government deficits and easy credit to pump up demand, can have the impact that many expect. After all, during the past seven years, thanks to the borrowing and spending encouraged by the Federal Reserve’s housing bubble and the Bush administration’s budget deficits, we witnessed what was, in effect, probably the greatest Keynesian economic stimulus in peacetime history. Yet we got the weakest business cycle in the postwar epoch."

China and East Asia as the US’s largest creditors
"To have a significant effect on the economy, the Obama administration will likely have to contemplate a huge wave of direct or indirect government investment, in effect a form of state capitalism. To actually accomplish this, however, would require overcoming enormous political and economic obstacles. The U.S. political culture is enormously hostile to state enterprise. At the same time, the level of expenditure and state indebtedness that would be required could threaten the dollar. Until now, East Asian governments have been happy to fund U.S. external and government deficits, in order to sustain U.S. consumption and their own exports. But, with the crisis overtaking even China, these governments may lose the capacity to finance U.S. deficits, especially as they grow to unprecedented size. The truly terrifying prospect of a run on the dollar looms in the background."

The US hegemonic role in maintaining the world order
"I see the elites of the world, especially the elites of the capitalist core, broadly conceived as being very happy with U.S. hegemony, because what it means for them is that the U.S. assumes the role and the cost of world policeman."

Future possibility for the working class to influence our political environment
"The problem is that there is very little organization of working people, let alone any political expression. So, one can say there is this very big opportunity created by the change in the political environment, or the ideological climate, but that by itself is not going to provide a progressive outcome."

Following note: Just as Brenner stresses the capitalist exploitation of labor and social resources as well as insists on  importance of worker's union in order to improve our political and economic landscape. Look at what have just happened here (pdf).

Russia's Foreign Policy -- Returning to a 'Cold War' Mentality?

In recent months, Russian President Vladimir Putin has displayed an increasingly chilly attitude toward what he sees as the West's adherence to an outdated 'world order.' In July, Putin suspended Russia's participation in the Conventional Armed Forces in Europe Treaty (providing limits on what arms the US, Canada, and Russia may station on the European subcontinent), a move widely seen as a reaction to a plan by the US and Europe to install new anti-missile interceptor sites in Poland and the Czech Republic--both former members of the Warsaw Pact. This was, perhaps, a scaled-back response, given Putin's threat in June to re-target nuclear missiles toward Europe, though Putin has since unveiled an anti-missile defense plan of his own, and reinstituted Cold War era long-range bomber patrols.

Putin has also reinforced Russian ties with rising non-Western powers. Iranian President Mahmoud Ahmadinejad was the guest speaker at the meeting of the Shanghai Co-operative Organization (SCO) last week; its member nations--China, Russia, Kazakhstan, Uzbekistan, Tajikistan and Kyrgyzstan span an increasing valuable reserve of oil and mineral resources, and the organization is perceived to be gaining political clout. Russia's gas and oil reserves have been key to its recent ascendancy--Russia's GDP has increased three-fold since 2002, with 70% of its income stemming from sales of gas and oil.

Perhaps in an effort to consolidate its position as a strategic supplier of the world's natural resources, Russia planted a titanium replica of its national flag in the seabed of the North Pole earlier this month, claiming ownership to up to half of the North Pole seabed area. The issue of who can actually claim 'legal' title to the North Pole seabed is governed by the United Nations Convention on the Law of the Sea, under which Russia would have to prove that the portion of the arctic seabed it claims--the Lomonosov Ridge--is actually an extension of Russia's landmass. Not coincidentally, scientists have begun speculating that there may be significant oil and mineral deposits underneath the North Pole, making the right to access to its seabed (and thus, those resources) potentially very lucrative. The move by Russia, however, drew criticism from other nations with potential stakes in the North Pole, and prompted countering moves by Canada, the US, and Denmark.

What's next for Russia remains to be seen. While Putin's term as President will end in 2008, his successor will likely also likely come out of the highly secretive and oligarchic FSB.

Think that Clickwrap Contract is Ironclad? You May Want to Take a Closer Look

As an article posted on Wired today illustrates, 'clickwrap' contracts are no cure-all for the companies that employ them -- especially large, consumer-oriented (versus B2B) ones. The title of this particular article--"Courts Turn Against Abusive Clickwrap Contracts," though, is somewhat ambiguous. While the article does highlight a few recent cases in which courts have delved beyond the prima facie validity of a clickwrap contract--turning a more critical eye toward its substantive terms, the reach of these cases is likely more limited than it first appears.

In the first case mentioned, Gatton v. T-Mobile, a California State Court of Appeal had recently found an arbitration clause in a T-Mobile clickwrap contract to be unenforceable; the plaintiff(s) had argued that the clause was, essentially, an end-run around California's more liberal class-action laws. The Court of Appeal agreed, finding a 'high degree' of substantive unconscionability in the arbitration clause. That the contract was a clickwrap one, then, provided the minimum degree of procedural unconscionability necessary to warrant the dismissal of T-Mobile's motion to compel arbitration. (By way of background, California law requires both an element of substantive unconscionability and of procedural unconscionability in order to support an overall finding of 'unconscionability'.)

While any victory over a clickwrap contract may be good news to consumers, what seems to be really 'doing the work' in this case, and its forerunners (see Dix v. ICT Group, Inc. (type "Dix and ICT" in the search field) and Aral v. Earthlink), is that the clickwrap contract at issue contained an arbitration (or forum selection) clause that, in essence, limited consumer class-action suits in states that have relatively pro-consumer statutes on their books (California and Washington). Similar cases brought in Maryland (Koch v. America Online, 139 F. Supp. 2d 690 (D. Md. 2000)) and Florida (America Online, Inc. v. Booker, 781 So. 2d 423 (Fla. Dist. Ct. App. 2001)) have failed to pass muster.

The Gatton case, may, however, provide some insight into how a clickwrap contract could be viewed as procedurally unconscionable. This, really, is the key, as most states will require both substantive and procedural unconscionability to support the defense. As the California Court of Appeal writes,

The element focuses on oppression or surprise. “Oppression arises from an inequality of bargaining power that results in no real negotiation and an absence of meaningful choice.” . . . Appellate courts considering unconscionability challenges in consumer cases have routinely found the procedural element satisfied where the agreement containing the challenged provision was a contract of adhesion. A contract of adhesion is “ ‘ “imposed and drafted by the party of superior bargaining strength” ’ ” and “ ‘ “relegates to the subscribing party only the opportunity to adhere to the contract or reject it.” ’ ” (emphasis added) [citations omitted].

That a contract of adhesion requires a stark inequality in bargaining power may make procedural unconscionability a particularly easy finding in cases against large consumer-oriented service and product providers. As you may have noticed, the above cases were brought against just this type of company--T-Mobile, AOL, and Earthlink. Further, because clickwrap contracts are, essentially, of a 'take-it-or-leave-it' nature, the procedural unconscionability is virtually built-in.

Now, it may be worth remembering that there is a long line of cases that support the clickwrap contract--arbitration/forum slection clauses included (see, e.g., Forrest v. Verizon Communications, Inc., 805 A.2d 1007 (2002), DeJohn v. .TV Corporation Int'l, 245 F. Supp. 2d 913 (C.D. Ill. 2003)). Larger companies that feel they are particularly at risk may want to take a suggestion or two from Ross Runkel, a professor at Willamette University College of Law, who puts forth the idea that companies might try to include some type of opt-out provision in their clickwrap contracts. A clickwrap contract containing this type of provision would be less likely to be deemed purely 'take-it-or-leave-it', therefore less likely a contract of adhesion, and also less likely, then, to be deemed procedurally unconscionable. Without procedural unconscionability, (at least, theoretically) the 'unconscionability' defense is taken off of the table.

Transnational Scope of U.S. Patent Law?

On October 27, the Supreme Court for the United States (SCotUS) agreed to review a patent infringement suit, filed by AT&T against Microsoft.  The undisputed facts are illustrated in the picture above (respectfully copied from Patently-O.)  Microsoft generated a software code in the US for its infamous Windows operating system, which included a code for synthetic speech technology patented by AT&T.  Microsoft then produced software from that code in the US and abroad.  That software produced and sold in the US, Microsoft has admitted, infringed AT&T's patent no. 32,580 (the '580 patent.)  But that software produced and sold abroad presents the issue in this case, likely to be argued in February of '07 according to SCotUS Blog.

The questions presented in Microsoft's petition for cert. read:

In certain circumstances, Section 271(f) of the Patent Act prohibits the "suppl[y] . . . from the United States . . . [of] all or substantial portion of the components of a patented invention . . . in such manner as to actively induce the combination of such components outside of the United States," as well as the "suppl[y] . . . from the United States [of] any component of a patented invention that is especially made or especially adapted for use in the invention."  35 U.S.C. 271(f)(1) and (2).  For purposes of that statute, the questions presented are:

1. Whether software object code can be a component of a patented invention; and, if so,
2. Whether copies of software object code are "supplie[d]" from the United States when those copies are created overseas by replicating a separate master version supplied from the United States.

In other words, does following the treasure map above lead one to infringement?

In Re Extraordinary Rendition

Paul Cavalluzo is counsel to the Canadian federal commission investigating the extraordinary rendition of Canadian citizen Maher Arar.  In an interview with the Washington Post, Cavalluzo summarized the Arar Commission's findings as follows:

This is really the first report in the Western world that has had access to all of the government documents we wanted and saw the practice of extraordinary rendition in full color... .  The ramifications were that an innocent Canadian was tortured, his life was put upside down, and it set him back years and years.

A brief outline of the Arar Commission's factual findings follows:

• Maher Arar and his wife were wrongly put on a watch list of the US government, being described as "Islamic extremist individuals".  The US placed the Arar's on this list after the Royal Canadian Mounted Police (RCMP) provided incorrect information to US authorities. 
• Arar was detained by US authorities during a layover in New York's JFK Airport, on September 26, 2002, while returning home solo from a family vacation.  He was held in the States for 2 weeks before being flown on a private plane to Jordan.  From Jordan, Arar was driven across the Syrian border where he was tortured and questioned in a notorious Damascus prison.  No charges were ever filed against Mr. Arar.
• In the words of Justice Dennis O'Connor, who authored the Arar Commission's findings, "I am able to say categorically that there is no evidence to indicate that Mr. Arar has committed any offense or that his activities constitute a threat to the security of Canada."  Justice O'Connor concludes, "Canadian investigators made extensive efforts to find any information that could implicate Arar in terrorist activities... .  The results speak for themselves: they found none."

Ex-CIA Operative: 1. US, Cuba, Venezuela: 0

Luis Posada Carriles' distinguished career of hiding, detention, and escapes was capped by Magistrate Judge Garney's 24-page opinion, obliging U.S. Immigration and Customs Enforcement (ICE) to let Posada loose.  Venezuela and Cuba have demanded his extradition, but the US has been less than cooperative.  The official reason for US refusal to extradite Posada is the belief that Venezuela and/or Cuba would torture this alleged international terrorist.   [Insert punch line here.]

On the fifth anniversary of 9-11, U.S. Magistrate Judge Norbert Garney, in El Paso, Texas ordered the supervised release of 79-year-old exile, last week, from ICE custody.  Posada Carriles is a CIA-trained Venezuelan citizen, wanted by both Cuba and Venezuela in connection with the 1976 bombing of a Cuban plane off Barbados, killing 73 people, and a 2000 plot to assasinate Fidel Castro. 

Cuba initially acquitted Posada for his invovlement in the assassination plot, but Posada escaped prison for El Salvador before the Cuban government could appeal the case.  In El Salvador, Posada worked for the Nicaraguan Contra resupply network, operated by then White House national security council staffer Oliver North.  Later, Posada was detained in Panamanian prison for his involvement in the assasination conspiracy.  Upon being freed, he hid in Honduras, before sneaking into the US in March 2005.  The Miami Herald reports that he was captured by the ICE that May, "when federal immigration agents detained him in Miami-Dade county hours after appearing at an invitation-only news conference". 

[Subsequently,] Posada sued ICE in federal court when the Homelands Security agency denied his release March 22, arguing he was a "danger to the community" and posed a "risk to the national security of the United States."

But Garney wrote in his opinion Monday that the ICE statement was not enough to keep Posada in detention.  According to Garney, the law requires for indefinite detention a formal certification by the U.S. attorney general [sic] that a detainee is a terrorist or threat to the community.  "In this case, petitioner was never certified by the Attorney General as a terrorist or danger to the community or national security," wrote Garney, adding the government also had not "moved to detain petitioner under any special circumstances".

Magistrate Judge Garney's opinion only holds the weight of a recomendation, prior to approval by Article III Judge Philip Martinez.  Judge Martinez's opnion is expected soon.  According to Reuters, the US can not find another country to take Posada, where he will be free from torture.  So, the court's only option in this case is to free him within in the US, or find a legal reason to continue his detention