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Reparations Issue Is a Smoke Screen and a Shakedown

April 22, 2002|PETER FLAHERTY | Peter Flaherty is president of the Washington-based National Legal and Policy Center, a nonpartisan foundation promoting ethics and accountability in government.

Imagine getting sued for what your great-great grandfather did--legally--a century and a half ago. That is the predicament of Aetna Inc., which now faces a lawsuit demanding reparations because the company insured slaves in the 1850s.

Other firms that did not even exist during the time of slavery, such as CSX Corp. and FleetBoston Financial Corp., are named in the same suit. CSX was formed in 1980, the end product of numerous railroad mergers and acquisitions. FleetBoston can be traced to hundreds of predecessor banks, only one of which the plaintiffs can single out for its links to slavery.

The suit, filed in federal court in Brooklyn, N.Y., by a 36-year-old black activist named Deadria Farmer-Paellmann, puts the value of slave labor at $1.4 trillion--almost as much as the federal government collects in individual and corporate income taxes each year.

Those seeking reparations have their eyes on other potential targets, which could include some of the nation's oldest newspapers and universities. The Hartford Courant, Baltimore Sun and the forerunner of the New Orleans Times-Picayune "profited" from slavery by printing runaway slave notices during the 1800s. Harvard, Yale and other universities were built on the backs of slave labor, it could be argued, because their early benefactors included slave owners.

Don't assume that the reparations lawsuits are destined to fail. During the past few decades, it has become possible to win meritless lawsuits, especially against corporations. A big impetus for that was the $246-billion tobacco settlement. The prospect of billions of dollars in tobacco money prompted state governments to abandon legal precedent and rewrite statutes to make it easier to sue. In asbestos litigation as well, companies with only the most tenuous links to the substance are now being bankrupted.

Forum shopping--the practice of finding sympathetic judges--also has become easier, as has the practice of lawyers suing with no real clients. In the slave reparations case, neither Farmer-Paellmann nor the millions of blacks she claims to represent were ever slaves.

Even if Farmer-Paellmann loses in court, she knows that because of negative publicity generated against the targeted companies they will be under pressure to make massive payouts to African American interest groups.

This is a manifestation of the new form of corporate shakedown. Activists and trial lawyers work the media to demonize certain companies, often prompting the latter to hand over fistfuls of cash to make them go away.

The master of the craft is Jesse Jackson, who extracts billions out of corporations fearful of being branded racist if they do not pay up.

Last year, Toyota caved in to Jackson's threat of a boycott by pledging to spend a whopping $7.8 billion on a "diversity" plan, even though the company already had an excellent record of hiring and awarding dealerships to blacks.

Other scam artists are promoting a nonexistent reparations tax credit among African Americans. The IRS recently revealed that it had paid out as much as $30 million to taxpayers, including four or more current or former IRS employees, who had claimed such a credit in 2000 and part of 2001. One woman received a $500,000 payment.

The reparations issue is a smoke screen for those unwilling to tackle the real problems affecting blacks, such as failing schools, crumbling inner cities and family disunity. It is an attempt at easy money, either by litigation or by shakedown. The companies involved must not give in to such legalized extortion. If they do, it will never end.

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