Blind Justice or a Captured Agency?
Dr. Paul Johnson, Associate Professor with the Department of Political Science at Auburn University in Auburn, Alabama, defines Captured Agency as:
“A government agency, especially a regulatory agency, that is largely under the influence of the economic interest group(s) most directly and massively affected by its decisions and policies — typically business firms (and sometimes professional associations, labor unions, or other special interest groups) from the industry or economic sector being regulated. A captured agency shapes its regulations and policies primarily to benefit these favored client groups at the expense of less organized and often less influential groups (such as consumers) rather than designs them in accordance with some broader or more inclusive conception of the public interest.”
In 2013, the American Chemical & Equipment, Inc. Retirement Plan (ACE) filed a $300 million lawsuit against Principal Management Corporation, Etal, alleging excessive fees. As defendants, American Chemical named 22 affiliates of Principal Financial. The lawsuit was moved to The Southern District Court of Iowa in a Memorandum Opinion by the U.S. District Court, Northern District of Alabama. ACE had alleged the defendants, as advisers to the principal funds, first “pocket the entire acquired fund fee from the principal funds as investment money” before distributing a portion of the fee to sub-advisers for managing the underlying funds.
American Chemicals & Equipment attorney was pleased to receive Judge Jarveys opinion, stating it “was well-reasoned and concise in resolving important issues in our case. Further, we think the opinion frames in a very helpful way the issues that will be at the core of the trial of this case, and American Chemical is looking forward to trying this case before Judge Jarvey.” Two years later, the honeymoon ended when Judge Jarvey found that the lawsuit, brought by the retirement plan of American Chemicals & Equipment Inc., could not proceed because the plan didn’t hold “shares” in mutual funds that actually charged the offending fees. That, according to Judge Jarvey, is because the plan sued over a “fund of funds,” a product called LifeTime Funds, an investment account managed by the defendant. The complaint claims Principal Management got $80 million in fees in 2012, $102 million in 2013 and $118 million in 2014 “and did virtually nothing” to earn the massive paydays.
“The theoretical view held by many social scientists which holds that American politics is best understood through the generalization that nearly all political power is held by a relatively small and wealthy group of people sharing similar values and interests and mostly coming from relatively similar privileged backgrounds. Most of the top leaders in all or nearly all key sectors of society are seen as recruited from this same social group, and elite theorists emphasize the degree to which interlocking corporate and foundation directorates, old school ties and frequent social interaction tend to link together and facilitate coordination between the top leaders in business, government, civic organizations, educational and cultural establishments and the mass media. This “power elite” can effectively dictate the main goals (if not always the practical means and details) for all really important government policy making (as well as dominate the activities of the major mass media and educational/cultural organizations in society) by virtue of their control over the economic resources of the major business and financial organizations in the country. Their power is seen as based most fundamentally on their personal economic resources and especially on their positions within the top management of the big corporations, and does not really depend upon their ability to garner mass support through efforts to “represent” the interests of broader social groups. Elitist theoreticians differ somewhat among themselves on such questions as how open the power elite is to “new blood,” the exact degree of agreement or disagreement that usually prevails within its ranks, and the degree of genuine concern (or lack thereof) for the broader public welfare that enters into their choices of public policy goals, but all such theorists broadly share the notion that it is these few thousand “movers and shakers” who really run the country and determine the basic directions of public policy, certainly not the manipulated and powerless masses of ordinary voters choosing among candidates at election time.”