“Lost” iPhones and Goldman Sachs: Filtering Deception Through Middlemen

"Once the lawyers get involved…"

There are a hundred ways to end that sentence. Once the lawyers get involved, everything falls apart. It takes ten times as long to finish a deal. A lawsuit is inevitable. The hysterics start.

Few of the potential endings are favorable towards lawyers. Perhaps the most common sentiment is: once the lawyers get involved, the truth gets buried.

To some extent, it’s true. The first thing a criminal defense lawyer says to a new client? Remain silent. The first thing a litigator says to a new client? Let’s get your story straight. The first thing a transactional lawyer says to a new client? Let me do the talking.

Once the lawyers get involved, everything goes through a filter. The truth comes out, but in a sanitized and selective manner. Sometimes only part of the truth comes out. Sometimes a little more than the truth comes out.

But it’s not a problem limited to lawyers. It’s a problem of middlemen.

Where there’s a middleman, there’s deniability. There’s confusion. There’s misunderstandings. There’s excuses. There’s a way for one side to throw its hands up and say, hey, it wasn’t me. There was a middleman. Something went wrong in the middle.

And that seems to be the case with two hot stories lately, the SEC’s enforcement action against Goldman Sachs and the "lost" prototype iPhone that Gizmodo disassembled on their webpage.

Take your pick for sources on both stories. Felix Salmon has a lot to say on Goldman Sachs. Daring Fireball has a lot to say on the iPhone saga.

Don’t let the volume of paper produced about these stories fool you: both stories are very simple.

Goldman Sachs was paid $15 million to push a crummy deal, which they did by concealing how the whole deal had been structured by someone betting against it, someone who walked away with $1 billion when all was said and done. Gawker Media, publisher of Gizmodo, paid $10,000 to the "finder" of a "lost" prototype iPhone.

Don’t blame them, of course. Something went wrong in the middle.

Does the law provide for relief when that happens?

Sometimes so, sometimes not. There’s no unambiguous rule that says Gawker is, or is not, liable for theft or that Goldman Sachs is, or is not, liable for fraud when they filter the deception through a middleman.

Answering that question is why we have lawyers and courts.

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