What are you studying now?

American constitutional rule with Professor Frank Upham. It’s interesting how, in the Constitution, Congress holds much of the power. In reality, the president might hold more power than prescribed in the Constitution. This makes me think that, in order for the government to operate properly, executive power might need more checks and balances.

What do you think of the recent U.S. Supreme Court decision on our healthcare laws?

I am not familiar with the specific content, but one point is, in America, there will be a clear exposition of ideas, of the verdict. In the end, even the president, with all his power, is subject to a court’s ruling. This is an extremely good social mechanism. If many things are prolonged indefinitely or drowned like a stone in the sea, this would severely limit a society’s production and development.

How does this compare to China’s supreme court?

In 2007 or 2008, I submitted the appeal for my own case to the Supreme People’s Court through various channels. There is no doubt that the Court received it, but to this day they have not given me a response. The highest body of the judicial system has not responded to a citizen’s appeal for years. This is a very big difference. With respect to my case, then, does it matter at all whether or not this court exists?

Do you expect things in China to change with the turnover in political leadership this fall?

It is not important whether the leaders change. The most important thing is whether citizens have the consciousness to recover their own rights. Just like with our things: If I take your cell phone, and you do not ask for it back, you tacitly approve of my taking it away, and you might have fewer possessions in the future. But all in all, the awakening of the Chinese people is occurring at the pace of a thousand miles a day. This is very encouraging. And the speed is accelerating. This historical development is inevitable—I don’t think any force can obstruct it.

What misunderstandings do you see between China and the U.S.?

When Americans discuss the problems of China, it is usually just about the urban conditions, not about the rural village populations, which make up about 80 to 90 percent of the country. I don’t think people understand at all or nearly enough about rural village society and conditions. Chinese people have a dire lack of understanding about America, because it is only cases like those about American firearms gone amok that everyday Chinese people might know.

Can you be an influence in China from the U.S.?

There is a Chinese saying: “It is for people to plan, and it is for the heavens to determine the results.” My imprisonment and illegal detention add up to about seven years. During that time, I was entirely unable to make even a phone call to the outside world. And yet do you think my influence has increased or decreased over these seven years?

How do you feel about life here?

This is a big topic! With regard to everyday life, there is a greater variety of food. As far as people, I don’t think there is that great a difference. Every people, every country shares certain commonalities, such as a sense of good and bad, or innate kindness. The free flow of information strikes me as the most prominent point of difference.

Do people recognize you?

Many, many people. Some people greet me, some see me and applaud, and some want to take photographs with me. Anyway, they are very friendly. “Are you Mr. Chen?” they ask. “Welcome to America.”

This Q&A was translated by C. J. Huang, edited, and condensed.

Stevenson more than fulfilled the requirements for a speaker at the TED2012 conference, where “the world’s most fascinating thinkers and doers are challenged to give the talk of their lives (in 18 minutes or less).” His moving, highly personal March 5 speech, recalling his grandmother’s words and the effect they had on him as a child, would be familiar to any student who has attended one of Stevenson’s annual Public Interest Law Center lectures, for he touched on his favorite themes of impressionability, hope, rehabilitation, and humanity. For the 1,400-seat TED audience, each of whom paid $7,500 to attend the conference, the talk “inspired one of the longest and loudest standing ovations in TED’s history,” according to its founder, Chris Anderson. It also moved them to pledge $1.12 million to support a campaign that Stevenson said from the stage would “end excessive sentencing of children and stop the practice of putting kids in adult jails and prisons, where they are 10 times more likely than other incarcerated people to be the victims of sexual assault and violence.”

Only three weeks later, Stevenson would argue that mandatory life-without-parole sentencing schemes for juveniles convicted of homicide are cruel and unusual punishment and therefore unconstitutional. The Court’s 5–4 combined decision in Miller v. Alabama and Jackson v. Hobbs, released in June, builds upon earlier Eighth Amendment arguments Stevenson has been making for nearly his entire legal career against capital punishment and what he calls death-in-prison sentences.

Stevenson began representing death row prisoners in 1985, four years before founding the Equal Justice Initiative (EJI), where he is executive director. He and his staff provide legal representation to indigent defendants and prisoners who have not received fair and just treatment in the criminal justice system. About five years ago, the mission of EJI, located in Montgomery, Alabama, expanded beyond capital defense to include life-without-parole sentences for juveniles.

In 2009, Stevenson argued Sullivan v. Florida—his third appearance before the Supreme Court. He laid the foundation for his position then when he argued that children under 18 should not be sentenced to die in prison for non-homicide crimes. He pointed to evidence indicating that children differ significantly from adult offenders in terms of level of maturity and a sense of responsibility, making mandatory life in prison a form of cruel and unusual punishment. While the Court ultimately declined to decide Sullivan, it upheld Stevenson’s reasoning in a companion case, Graham v. Florida, argued along similar lines the same day. Justice Elena Kagan’s majority opinion in Miller, released in June, invoked Graham as precedent: “While Graham’s flat ban on life without parole was for non-homicide crimes, nothing that Graham said about children is crime-specific.”

Coming from a Court not known to sympathize with criminal defendants, the recent decisions provide capital defenders with renewed hope. “Having the U.S. Supreme Court make announcements about what just can’t happen consistent with the Eighth Amendment was momentous,” says Cathleen Price, EJI’s cooperating senior attorney. “It’s momentous for that mission, for our national community, for our conversation about how to deal with criminal behavior.”

Stevenson is not one to dwell on his own achievements—at the Supreme Court level or otherwise—although even he allows that it has been “a very eventful year.” Instead, he maintains a longer-term view. “Throughout most of my career I’ve been trying to advocate for a more hopeful perspective on how we think about difficult and complex problems,” he says, before turning to the same stirring themes he sounded with the TED audience. “I do think that we can’t afford to reduce people to their worst acts. We can’t afford to engage in harsh judgments without an appreciation of the complexity of human existence. It really is when people fail, when they fall down, when they’re struggling, when they offend that we test our core values and principles. I talk about it differently in different settings, but I hope it reflects the same vision that a just society needs to be just to everyone, not just the powerful and the privileged.”

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Three weeks earlier, Harold Koh, legal adviser to the State Department, called Cohen out of the blue on a Monday morning. Cohen, one of the foremost scholars in the U.S. of Chinese law, had been following the news about his friend Chen—the daring nighttime escape from detention in Chen’s home in Shandong, the secret journey to Beijing, and Chen’s taking refuge at the U.S. Embassy—but had no clue that he himself was about to be entangled in the diplomatic standoff between the U.S. and China. Koh and Kurt Campbell, assistant secretary of state for East Asian and Pacific Affairs, asked if Cohen could advise Chen.

The U.S. negotiators had already hammered out a deal with Chinese officials: Chen could spend two years studying in China, followed by a third year in the U.S. But Chen wasn’t convinced. If he took the deal, he would be risking his safety and freedom. He asked to speak to Cohen, his old friend in New York.

The two men had met for the first time in 2003 in the U.S., when the self-taught legal advocate, who fought on behalf of the disabled and victims of forced abortions and sterilizations, was a guest of the U.S. State Department. Chen so impressed Cohen that their 30-minute appointment grew into a four-hour conversation. At that initial meeting, says Cohen, “I could see that he could become a Gandhi figure for China as an authentic child of the rural Chinese masses.”

Koh and Campbell put Chen on the phone with Cohen that day. “I was feeling anxious because I knew the U.S. government wanted him to take this choice,” says Cohen. “On the other hand, it’s a heavy responsibility to tell someone to take a risk while I sit here safely in New York.”

In a long conversation, Chen repeatedly told Cohen that he felt “feichang buanchuan”—very unsafe. Upon hearing this, Cohen advised Chen to stay in the embassy. But the next day, Chen seemed more confident, and Cohen discussed with him various options for staying in China, including convincing President Obama to guarantee his interest in Chen’s welfare. By Wednesday, Chen had accepted the deal and left the U.S. Embassy, only to change his mind within hours: He wanted to go to the U.S.

With a full-blown diplomatic tempest marring long-planned trade and strategy talks, both nations looked for a way out. Just one part of the deal still seemed viable: Could Chen go immediately to the U.S. to
study? Cohen said the U.S.-Asia Law Institute, which he co-directs, would be thrilled to host the activist.

By Friday, Chinese officials had stated that Chen, like any other Chinese citizen, was free to apply to study abroad. Though details would be hammered out over the next two weeks, the crisis was over.

For Cohen, this episode showed just how much U.S.-China relations had evolved. In 1992, Cohen was among those who tried to intervene on behalf of human rights activist Wei Jingsheng, but China did not permit Wei to leave the country for five years. In Chen’s case, it took just five days. “Human rights continues to be an area of disagreement,” says Cohen, “but under pressure China can be practical, even if it means a certain loss of face—and the U.S. put a lot of pressure on China in public.”

Still in daily contact, Cohen remains an adviser to Chen. So what tips has he given his most famous advisee for navigating law school? “To learn, to take advantage of the fabulous reception NYU has given him,” says the professor. “To try to conduct himself in a way to leave open the possibility of return to China.”

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RACHEL BARKOW, Segal Family Professor of Regulatory Law and Policy (moderator): One of the signs at Occupy Wall Street protests said, “We’ll know corporations are people when Texas executes one.” That’s a pretty good sentiment for how corporate America is viewed right now. And so what this panel is going to talk about is whether that’s a fair characterization, what is the scope of corporate malfeasance, what’s the right level for government to be addressing, what are the real wrongs that are out there. There’s no shortage of statutes aimed at targeting corporate wrongdoing: the Foreign Corrupt Practices Act, Sarbanes-Oxley, Dodd-Frank. Yet the FBI has reported that corporate fraud is on the rise. We have more prosecutions for foreign bribery. And in the wake of the financial crisis, many are asking questions about the conduct of players on Wall Street. So, Kathryn, suppose the president wants to know what, if anything, the government should do differently to combat corporate malfeasance. What would you tell him?

KATHRYN REIMANN ’82, Chief Compliance Officer, Citibank NA and Citi Global Consumer: I am not a sociologist or criminologist, but I do have a lot of practical experience in large corporate organizations with respect to culture and combating malfeasance.

When you talk about corporate fraud, you need somebody who is both motivated and, on a moral level, open to doing this kind of an activity. You need the opportunity and you need their assessment of what’s the threat or exposure to them. One thing that makes fraud in the context of any large organization, including government, particularly difficult to deal with is that when you talk about opportunity, unlike many other kinds of crimes, the opportunity often isn’t fleeting; it develops over time. Somebody comes in day after day, learns the system, learns the people around them. They know what the flaws are, they know where to exploit. The opportunity is continually there, the temptation is continually there, and they have the time to really get good at what it is that they’re going to do.

One thing that militates against commission of a crime is your perception of the victim. In corporate fraud, not only is it sometimes difficult for people to conceive of a victim, but also, if you view the victim as either not going to experience a harm or as perhaps having somewhat unclean hands themselves or in some way owing you or the public something, that, coupled with the opportunity, is going to put you in a situation where it’s much more difficult to combat fraud. From this perspective, I don’t think we need more legislation; we’ve got a lot right now that does speak to governance and basic controls, which are very important in preventing fraud. But we need to build the right culture, step up awareness. I would suggest that the government consider awareness campaigns in partnership with business that look for ways to set good civic examples, good cultural and governance examples that make people aware that fraud hurts them as well and that build a culture where everybody’s looking for this.

BARKOW: Harry, I assume you’re going to go right for it and say to the president, “I want your ear.”

HARRY FIRST, Charles L. Denison Professor of Law: I’m tempted, but I’m going to go for a law enforcement response. There used to be a place near the Law School called the Lone Star Cafe that had a huge slogan: “Too much ain’t enough.” This applies to prosecutions for corporate fraud. Too many prosecutions is not enough. I would look for ways to go after all those malefactors. Here are three.

First: individuals. Government prosecutors need to make a greater effort to go after higher-level managerial officers. Prosecutors prefer to win cases, so they’re cautious about going after managers where they might not have so much direct proof that they actually knew about things, but who should have known about things. There’s law to enable prosecutors to reach such conduct, and we need to go after higher-level people as a matter of deterrence.

Second: corporations. Many of us are familiar with the deferred prosecution agreements (DPAs) and non-prosecution agreements (NPAs) that have become very popular and useful tools for prosecutors. The Justice Department should be a little more cautious in the way they’re used. Particularly NPAs. When corporations are willing to give up lots of money in return for a letter that says we’re not prosecuting you, it’s very tempting. But it’s troubling. We need criminal prosecutions against corporations. DPAs at least have a criminal complaint filed.

Third: better mechanisms for getting those people inside to rat out their co-conspirators. Tools that can get information to prosecutors are really important. We should have amnesty from prosecution, not just leniency. You get off in return for turning others in. This works really well in crimes of conspiracy and has been used to extraordinary effect in the antitrust area. There are other areas in which it can be used and other tools that prosecutors can think of because if there’s one thing prosecutors generally don’t have, it’s the information that people inside know. To get that information is really important.

BARKOW: All right. I want to hear from a defense lawyer perspective. Bruce, do you think we need more snitching and more cooperation? Why are the incentives not sufficient right now to do that? Or are they?

BRUCE YANNETT ’85, Partner, Debevoise & Plimpton: Now that Harry can’t give me a grade, I can get away with saying at the start that there’s nothing that Harry just said that I agree with.

Look, there are plenty of incentives for people to come forward, and prosecutors do give people amnesty. They do enter into agreements whereby in exchange for information, they agree not to bring charges. A good defense lawyer with someone who has significant information will work hard to negotiate something. And Dodd-Frank, which we are just beginning to feel the effects of now, provides substantial financial incentives for people to rat. They can recover up to 30 percent of what the government recovers if they report to the SEC. Since the law took effect a year ago, the SEC has seen an explosion in whistleblower complaints, very often drafted by plaintiff lawyers and very often 15 to 20 pages long with exhibits attached. Not crazy handwritten, Martianslanded- on-top-of-Citibank kind of letters. The incentives are pretty substantial for people to come forward; we don’t need more.

On the deferred prosecution agreements and the non-prosecution agreements, Harry said that NPAs are used too often, and basically companies can buy their way out of problems. I will agree that they’re used too often—but for the opposite reason. What happens is that the government decides they don’t really have a case. Because if they really had a case, they’d either be talking about a deferred prosecution or an indictment. So it makes it too easy for them because the company wants to put this behind it. For its employees. For its shareholders. For a million reasons. Rather than put the government to its proof and attack a thin case, they’ll agree to an NPA.

I actually disagree, though, with the opening premise that corporate fraud is on the rise. What you’ve got is flavors of the month. I’ve been practicing in this area now for 25 years, and we’ve seen different waves of fraud. There’s been healthcare fraud, there’s been accounting restatement fraud—and now we’re dealing with the mortgage and banking fraud. I can assure you, five years from now it will be something different. And it’s not that any of those are increasing or decreasing materially; it’s certain things coming to light and the government deciding to allocate resources to attack that problem.

BARKOW: So maybe we should hear from the government, because you’re getting beat up a little bit, Sanjay. What do you think: Does the government need more tools? Do you have what you need?

SANJAY WADHWA (LL.M. ’96), Associate Regional Director for Enforcement, Securities and Exchange Commission: To your original question about what would I ask the president, I, too, have three items on my list: money, money, money. If you could only see the circumstances under which the government or the SEC operates, with limited resources, where we are pressed in terms of human capital, technological capital, and investigating and then prosecuting wrongdoing by corporate America and folks associated with it, you’d be struck by just how much of an imbalance there is. Anyone who’s served in the government at any time in their career knows what I’m talking about. So…resources. That’s what we need.

I don’t know if corporate fraud is on the rise. I am a practitioner, so I only see what I see. Last year we brought a historic number of enforcement actions—over 730—which was significantly higher than in years past.

Just to deviate a little bit, my group has been working for the last five years on the Galleon insider trading investigation involving Raj Rajaratnam and now the expert networks, and what we’re seeing is this shockingly poor culture of compliance at hedge funds, mutual funds, exchange-traded funds. Folks at companies are essentially just selling confidential company information when they moonlight as consultants to hedge funds. Hedge funds then trade on it and make millions. I don’t know what companies are doing to prevent this culture, which is really viral, from spreading in their corporation. We have employees from just about every tech company out there—prestigious and highly reputable American corporations—who have been implicated in the expert networks matter. It’s no different than backing up a truck to the loading dock, stuffing it with stuff you’ve pilfered from your employer, and then taking it out into the marketplace to sell it.

In terms of senior officers, look, Rajaratnam was the co-founder of Galleon. We’ve brought about 95 enforcement actions concerning the financial crisis, and we’ve named 50 or so CEOs and CFOs, but I don’t know if anybody at this table necessarily knows that. An SEC action is not nearly as sexy as a DOJ action with the handcuffs and the spectacle of a criminal trial. The Journal and the Times and other such publications aren’t reporting this. But the fact is that we are continuing to bring significant enforcement actions at an increasingly rapid pace, and that has been the case for the last couple of years.

BARKOW: Among the business community, are people more aware of the increased enforcement?

WADHWA: I should hope so. But we’re also not in the business of publicizing. We make our statements through our enforcement actions, and if the message is not being absorbed by compliance officers and general counsels and other legal officers at big companies, that’s really something that they need to fix. It’s not something that we can fix; the message is out there.

BARKOW: So, Sara, what’s a good corporate officer to do to try to improve the culture?

SARA MOSS ’74, Executive Vice President and General Counsel, Estée Lauder Companies: I’m certainly aware of the enforcement actions, but there have been enforcement actions for years. On prosecutions and SEC actions, it really is putting your fingers in the dike. There will never be enough resources to prosecute everyone. People will find ways to get around the rules. And there will be rogue employees, there will.

But going back to talking to the president: Why are there not incentives for companies that have outstanding compliance programs? We have the Federal Sentencing Guidelines for corporations; it lays out the factors for a robust compliance program. As the chief legal officer, I make sure we have a robust compliance program. And that includes a code of conduct, consistent enforcement, modules that people have to answer. Tone at the top is critical, and we try to make it vibrant and real and have people understand that it’s their obligation to protect the company and the shareholders from wrongdoing. Their job includes doing the right thing. I hadn’t thought about it in this way until you asked us to talk to the president, but it would be a lot cheaper, more effective, and a lot more positive to reward companies that have a robust compliance program and have not had problems.

WADHWA: Isn’t the lack of a reputational hit itself an incentive for companies to have robust compliance cultures?

MOSS: Sure. But how many do you actually hit? It’s like when instilling in children the difference between not getting caught and doing the right thing.

FIRST: Do you pay your children when they do well? What more incentive do you need than that the company doesn’t get into trouble?

MOSS: Maybe the government gives you a gold star.

FIRST: Usually we try to control ourselves; self-control comes at some cost to all of us.

YANNETT: But the fundamental difference—and I’m going to join with my colleague Sara—is for corporations, the strict application of respondent superior. I mean, if one of your kids hits the kid next door with a stick, you don’t get arrested for assault with a deadly weapon as the parent. If somebody on the NYU faculty assaults a student, the entire school doesn’t get shut down and prosecuted. You can have a fundamentally good company that takes compliance deadly seriously and have employees who do stupid things.

BARKOW: One underlying premise with what you are saying is that we can scratch the surface and figure out which compliance programs are real and which ones are not. How do we tell?

MOSS: There are auditors and people in the government who sit inside banks, and they know. You take the factors, for example, of what constitutes a real compliance program, and you talk to people. You look at the internal records of what the company has done when they find wrongdoing. Maybe I’m wrong, but I think you can determine that.

REIMANN: But think about Enron. Enron actually won an award and recognition for their compliance program and corporate culture right before the implosion.

As I listen to what everyone’s saying, one thing we get back to is leadership. I’m glad to hear the number of prosecutions that have been brought against Galleon and the like. Entities like that, where the people at the top have become engaged in something that is wrong, are not just corporations anymore. They’re criminal enterprises, and people do what they’re rewarded to do from the top of the house. You can paper over a compliance program as much as you’d like to, but if there is that at the core in leadership, if people are committed to a course of conduct that violates the law, there’s no compliance program that’s going to save you. What we’ve got to do is figure out a way to be vigilant and to find those places where leaders of companies are doing wrong. It’s very powerful when you can punish somebody who is sitting at the helm. There’s been a lot of research in this area.

Corporations where the CEOs are bullies or exhibit some very manifest behaviors that are not good leadership behaviors, there’s a tie between that and a bad culture. What we’ve got to think about and what I would also suggest to the president is these people come from somewhere, and building up civic awareness, starting even at the school level, will help you generate people who are thinking about these things and who can look for them and who place some value on governance and culture. As an employer, you want to have people who are discerning about the kind of company they’re joining. There isn’t a silver-bullet answer for that question. But it permeates this whole discussion.

BARKOW: So let’s get the law-and-economics perspective on this. The economists don’t love culture as the necessary factor, but what’s the right approach to target the bad apples? Assess compliance programs?

JENNIFER ARLEN ’86, Norma Z. Paige Professor of Law: In order to deter corporate crime, we need to reward companies that have good compliance programs, self-report, and cooperate, and we have to punish the individual wrongdoers. But we need cooperation from the corporations. Corporations can help or they can make it nearly impossible to get the needed information.

Historically, we held corporations strictly liable for corporate crimes committed in the scope of employment. This was a terrible approach because it discouraged firms from detecting and self-reporting their employees’ wrongs. After all, why would a rational firm detect and report a crime if this will just result in it getting convicted and punished?

So I support rewarding “good” companies by allowing those who self-report and cooperate avoid formal conviction. But they still should pay a monetary penalty in order to induce them to want to deter future crime.

To induce firms to help us go after the individual wrongdoers, we can threaten substantial criminal penalties if they fail to cooperate, and offer a DPA or NPA if they do cooperate. One advantage of the DPAs and NPAs is that we can exempt a firm from prosecution but still impose a substantial monetary penalty on the firm. You need firms to pay even if they do everything right to make sure that shareholders do not profit from the crime and that managers want to intervene ex ante to deter the crime, even if they expect that the firm will get credit for cooperation should a crime be detected.

I teach corporate governance, and I’m fascinated by the collision between the worlds of corporate crime and corporate governance. In corporate crime we’re worried about compliance. In corporate governance we sing the praises of high-powered incentives. We want managers whose pay goes up in the good times and plummets to poverty levels in the bad times so they’ll work hard. Yet anyone who knows about compliance knows that the evidence shows that short-term, high-powered incentives dramatically increase the risk of corporate crime. So if we are seeing more crime it is likely that it is arising out of this movement in the corporate governance world to enhance the high-powered incentives without any real recognition that there’s a serious downside combined with a bad economy: Bubbles create crime.

BARKOW: How much is the financial crisis tied to fraud and criminal activity or some kind of corruption at banks? We have monitors of banks—how come they couldn’t catch some of this? Geoff, what tool kit do they need in order to do a better job?

GEOFFREY MILLER, Stuyvesant P. Comfort Professor of Law: I don’t think the financial crisis caused misbehavior in banks. Nor did misbehavior in banks cause the financial crisis. The financial crisis was caused by something else, which was the tremendous amount of readily available cheap credit during the decade of the 2000s, which caused a housing bubble and many activities by firms, banks, and others that were highly risky. So the financial crisis was ultimately caused by cheap credit, and the chief culprit for the cheap credit is Alan Greenspan. I would recommend that, Sanjay, you go after Alan Greenspan for having caused most of the problems that we have now. Just kidding.

If I was talking to the president, I would say look for yellow flags. That is, look for things that indicate a possibility of fraud. And you’d use that to try to optimize your surveillance strategy to look for where fraud is. One of those indicators is cheap credit. And that happened in the 2000s, and there were plenty of people who took advantage of that. Also, a company that’s growing very rapidly is a sign of fraud. If you see a company where an insider or small group of people dominate and others don’t really know what’s going on, that’s a sign of fraud. If you see companies where people manipulate political connections a lot, that’s a sign of fraud. If you can’t quite understand the nature of the business, that’s a sign of fraud. If you see a company that has extreme operational complexity—Enron being an example—that’s a danger sign. If you see a company that tries very hard to manage its image, that’s a sign of fraud. By the way, Enron did that to an extreme; that’s why they won all those awards. I would direct my prosecutorial resources to companies that displayed those yellow flags.

Now, one last point—Berkshire Hathaway displays all the yellow flags of fraud, but I doubt that Berkshire Hathaway is committing fraud. So these yellow flags are only an indication, not a definite conclusion as to the presence of fraud.

REIMANN: If you think about the insider trading scandals and the housing market and the current debacle you’re dealing with, one thing that stands out is these are not instances where it was just a company committing the fraud. You have a variety of people who all have come to accept a level of behavior. Insider trading is a great example. From the hedge funds involved in it to the folks sitting in other companies who might have been issuers, to the fact that how long did it take Congress to kind of admit that, gee, maybe we shouldn’t be able to trade on insider information? Some of this passing of information just became accepted practice. The housing market—you had easy credit and people who found it profitable to let that easy credit roll on. You had people who applied for credit and because they didn’t need to give documents, they lied about their income. And then you had people who did appraisals and, well, everybody else was looking the other way, why not lie about the appraisal as well? There were colluding forces here, and if you want to get to the bottom of this, you have to figure out how corporations and others interact in these situations.

BARKOW: So, Mara, as I was listening to the yellow flags, I actually was wondering who was left, because that actually did strike me as all of corporate America. What are you doing at Civil Frauds to detect the good apples from the bad apples?

MARA TRAGER ’98, Assistant U.S. Attorney, Southern District of New York, Civil Division: My office, meaning the U.S. Attorney, has made civil fraud enforcement a priority. That’s reflected in part with the formation approximately two years ago of the Civil Frauds Unit that almost exclusively handles affirmative cases. In addition, there are many AUSAs in the Civil Division who have primarily defensive dockets who are also handling affirmative fraud cases. Since the formation of the Civil Frauds Unit, we filed over 20 lawsuits and have obtained judgments of almost half a billion dollars. In general, the cases that we’ve brought include mortgage fraud cases, fraud involving healthcare providers, procurement fraud, grant fraud. The Civil Division enforces the False Claims Act, which provides for treble damages, plus penalties when there is submission of false or fraudulent claims where federal funds are being used. And we also have been making greater use in recent years of the Antifraud Injunction Act. In terms of yellow flags that Professor Miller mentioned, he’s given us a lot of directions to go in potentially. The whistleblowers were mentioned earlier today, and whistleblower provisions are extremely important—certainly a lot of our cases stem from whistleblowers.

BARKOW: So one statute that you didn’t mention that also takes us a little more globally is the Foreign Corrupt Practices Act. Let’s talk a little bit about bribery. Our focus has been individuals in a company who engage in either criminal activity or civil violations, either to profit themselves or to gain recognition within their corporation. The bribery context is different, because companies may say that the kinds of things they’re doing in other countries is the cost of doing business in a global environment. So, Kevin, what should we be doing on a global level?

KEVIN DAVIS, Vice Dean and Beller Family Professor of Business Law: Just dealing with corporate misconduct on the national scale is challenging enough. Listening to all the domestic issues that have come up, I was thinking those are really tough questions. We don’t know what the problem is and we don’t know how to respond to it. The issues are even more challenging when you start to think about them on a global scale. Even in terms of do we know if foreign bribery is on the rise. Yes, we’ve got more enforcement actions, but we’ll never know if there’s been more or less corruption over the past few years. I suspect it’s been about the same. And I would guess that on account of all the FCPA enforcement that corporate America is probably somewhat less corrupt these days. We can never do enough, but we’re probably doing something. Given the recognition that it’s impossible for the United States to be the policeman for the globe—we’re not going to clean up corruption in Nigeria, right? We’re not going to clean up corruption in Afghanistan—because we can’t do it in New York or Chicago.

So that’s not on the table. We have to figure out what the priorities are, figure out what the purpose behind the statute is, and then decide how to move forward. The Foreign Corrupt Practices Act, as I understand it, is to try to prevent the United States or U.S. corporations from contributing to corruption in foreign countries. To prevent their governments from being undermined, to prevent development from being compromised, to prevent the United States from being embarrassed. Well, are we going to go after low-level bribery? Are we going to worry about people paying bribes to evade customs duties? That may not be such a high priority compared to the big bribes to obtain contracts for mobile phone systems. We can set priorities in terms of the type of misconduct. We can also focus on particular countries, the kinds of countries that need the most help from us. Some countries have their own anticorruption agencies that are more or less capable of dealing with these issues. But the Haitis of this world may not. Then we also have to figure out some new tactics. If the idea is to actually help these foreign countries, then we should think about helping them financially. $1.6 billion in the Siemens case went to the German government and the U.S. government and stayed there. Didn’t go to all those countries around the world that were actually the victims of the bribery. So we should give more thought to things like restitution payments for either the governments or particular groups within the foreign countries that are affected. And also think more about cooperation with foreign actors. This is also something we haven’t had to think about on the domestic side so much. Cooperation with foreign regulators, figuring out who prosecutes, what happens if one country wants to provide leniency, another one doesn’t. Working out all those issues should be a priority for us in the FCPA area as well.

BARKOW: This roundtable is presenting more problems than solutions. Bruce, you worked on the Siemens case, and I’m curious about how multinational corporations navigate a global regulatory environment where they can find themselves being prosecuted or charged in multiple jurisdictions. What are the pitfalls for companies? What are the kinds of things that companies have to think about going forward?

YANNETT: I headed up the audit committee investigation to figure out what happened at Siemens, and we were dealing with 14 separate government investigations around the world. It’s a real challenge. One of the things that we accomplished in Siemens really for the first time in a significant case was we were able to, over time, develop trust with the German prosecutors. We had the trust of the SEC and Justice Department. They know we’re going to do a good job and an honest job. But in fact, in most of Europe, companies do not hire lawyers to get to the bottom of things; they hire lawyers purely in a defensive mode. Here we’re showing up saying no, our job is, on behalf of the audit committee, to find out the truth and they’re like, yeah, right. It took a long time to overcome that initial distrust. We were able, though, by the end of the day, to get both the Germans and Americans talking to one another, meeting together, coordinating, so that the penalties were actually announced on the exact same day at the exact same moment and were totally coordinated. The multicultural differences, from a law enforcement standpoint, are enormous in terms of the Fifth Amendment privilege: Does it exist, does it not exist? Does the attorney-client privilege exist or not exist? Data protection laws: Here, if I do an investigation for a big company, there are effectively no limits on what I can look at, and in Europe there are all kinds of legal restrictions on what data you’re allowed to look at and what the company is even allowed to keep. You’ve got, in the U.S., employees at will, so if they do something wrong, Sara or Kathryn can fire them tomorrow. In places like France or Italy, there are very strict labor protection laws, and you may have to negotiate with the union. So the complexity is enormous.

The issues that Kevin was addressing and that your question brings up is not so much how do you deal with it once it hits the fan, if you will, but how do you deal with it from an operational standpoint and trying to operate a compliant business on a global basis? I’m the last person at the table who’s naïve, but most Fortune 100 U.S.-based companies have people like Kathryn and Sara who are genuinely committed to trying to instill a good culture. Companies spend tens of millions of dollars a year just on compliance and, yes, they’re going to have bad people. We all do. So for them the challenge is how do we compete in Africa against the Chinese when the Chinese don’t prosecute these things internationally? They prosecute their own people for corruption, but they’re literally bringing suitcases full of cash into Africa for the natural resources—something that used to happen in the West but is way, way down. The level of corruption is probably fairly static. Just the bribers have changed over time. It was the Americans and then it was the Europeans, and now even they’re getting serious about enforcement. So it’s the Russians and the Chinese now. And if the enforcement by the U.S. authorities against the American companies is so tough and they go after the $50-customs-agent-fee kind of situation, what it does is, if you’re in Sara’s position as general counsel of a big global company, you may decide, you know, Vietnam is a really hard place, it’s just not worth it, so we’re going to pull out of Vietnam because the corruption is so high. If the American and Western European companies pull out of Vietnam, who’s there? And has the corruption problem gone down or up?

BARKOW: I have found a silver lining, which is that this is all good for lawyers. There’s a need for good lawyers to ferret out fraud, bribery, corruption, and to do the compliance work. To do the auditing. And then to do the defense work if companies find themselves charged, and to bring the actions on behalf of the government. But what happens when we find somebody who is the bad actor, the bad corporation, the bad individual? What’s the appropriate sanction in this context? What’s the right hammer to throw at the problem?

REIMANN: Well, within the realm of a corporation, it’s critically important that whatever compliance program you have, that your disciplinary program enforces it in a very evenhanded and obvious way. There are activities where no matter who it is, who’s caught doing them, they must and need to be fired. And not permitted to resign. Some activities have to be fireable offenses, and people need to know that. That shows people that you’re serious and starts building a culture and shows through example how a good leader leads—which is that you don’t tolerate certain things. One of the issues in these fraud bubbles we’ve talked about is that the environment has just become too tolerant and permissive for that activity. If people are going to get slapped on the hands, then it sends the message that this behavior is really not so bad.

MOSS: I would agree, but I would go a step further. Criminal prosecution of the individuals is an important tool. I’ve referred a number of employees for criminal prosecution. These have not been bet-the-company kinds of things, but I would do that anyway. That sends a very important message. If there’s criminal wrongdoing, there should be criminal prosecution. I’m not saying there should not be sanctions and fines. But certainly criminal prosecution should be a tool. Financial fraud is very serious, and when it is committed against us or our clients, criminal prosecution is warranted. It’s the lesser offenses where companies tend to be lax in discipline, and they don’t view firing as that kind of a tool.

ARLEN: There is a role for DPAs and NPAs to impose structural reform sanctions. Most frauds by publicly held firms are agency costs—they’re done by managers for themselves, not for shareholders. In some cases, the agency costs not only cause the crime to happen but also undermine managers’ response to news that a crime occurred: Managers do not report the crime because they benefit from it. In this case, sanctioning the firm will not deter the crime, because the sanction falls on the shareholders. You need some mechanism for reducing those agency costs that affect corporate compliance, self-reporting, and cooperation. When we have those agency costs, it can be helpful to use DPAs to mandate compliance programs structured to reduce agency costs—for example, with chief compliance officers who report directly to the board. You also may need a mechanism to ensure that the firm adopts the program. That was the idea behind the corporate monitors. You could have reporting requirements or you could have civil oversight, but you need some kind of oversight mechanism.

We started out with this revolution in DPAs and NPAs where we impose compliance programs and then had monitors, and we now are moving into a world where we impose these compliance programs on firms as part of DPAs and NPAs and then not have any monitor. The DPAs and NPAs are changing. We’re not doing enough to make sure that companies genuinely comply. We’re not using the DPAs and NPAs enough to indirectly penalize the people responsible for why the firm had bad compliance or didn’t investigate.

We also are not using DPAs to help shareholders oversee managers. The statements of facts in the DPAs and NPAs say whether the firm had a good compliance program or not. But the DPAs rarely identify the managers whose actions caused the prosecutor to conclude that the firm’s compliance program or cooperation was deficient. If shareholders had more information on who within the firm was involved in having the noneffective compliance program, you would see some pressure brought to bear on those people either to do a better job or exit. We’re not using the disclosure tools available to the government to harness the monitoring of the market.

BARKOW: Sanjay, can you give us context to the broader criticism about the SEC accepting settlements without any admission of wrongdoing aside from just monetary fines?

WADHWA: You’re talking about Judge Rakoff’s decision in the Citigroup proposed settlement. It’s not just the SEC; every federal agency does this “neither admit nor deny” in its settlements. At some level it’s just practical. We don’t have the resources to litigate everything on every matter, and the neither-admit-nor-deny allows a company to settle with us while protecting itself from flank attacks in the private litigation arena. When Citigroup is ready to pay $285 million and they say we’re neither admitting nor denying, it’s a little simplistic to say they’re doing it because they want to get this behind them. There is something there. That was what we argued before Judge Rakoff. He doesn’t think it’s fair, he doesn’t think there’s enough transparency there. But we’re fairly comfortable that we’re going to ultimately prevail because we are an independent agency, and our take on the matter needs to be respected by the judiciary to a large degree. Judge Rakoff is making his points, but I don’t think he’s got the law on his side.

At the conclusion of the discussion, there was just enough time for the moderator to take questions from a student in the audience.

ALEX GORMAN ’14: Regarding having incentive for good compliance programs: In the manufacturing world there are ISO standards, which are best practices, and if you meet that standard you then have access to certain preferred government contracts and private contracts. So perhaps if you can put together some sort of gold star for good compliance, then maybe the premium on the stock price or access to preferred contracts could act as some sort of affirmative incentive for change.

MOSS: Shareholders and investors really care, for example, about environmental issues. There are all sorts of gold stars or gold standards. The government cares about it, but also investors care about it. We have reports on what we do environmentally; we don’t on corporate governance. But you would think that investors and shareholders would care about that. Look at Avon—that’s had a huge impact on the company. It’s a good point.

GORMAN: What is the role of private party litigation and how that fits in? What is the role vis-à-vis government enforcement mechanisms?

BARKOW: Kevin, is private law sufficient? A good complement? Sanjay’s already brought up the point that the neither-admit-nordeny language is really designed by agencies to protect a company from mass-action lawsuits. But how should we think about private litigation more broadly?

DAVIS: Ideally it would complement, but the problem is it’s impossible to coordinate all these different types of sanctions that can be imposed on a company because often you have to worry—at least in the FCPA context—not only about shareholder litigation and litigation coming from competitors who lost out because you paid a bribe; you also have to worry about debarment. The federal government could bar you from doing business with them going forward. This is possible not just in the U.S., but with the international financial institutions, in the European Union, elsewhere. Contracts might be canceled. There’s a lot that can be done on the private law side to sanction firms for engaging in all sorts of misconduct. The problem is we don’t know if all that will add up to the right level of sanctions. To echo what Jennifer was saying, it’s important for the government to at least try to target their sanctions, focus on the individuals or the group who is engaged in wrongdoing to the extent possible. Because what is the point of a few hundred million dollars in penalties for Citibank?

ARLEN: When we talk about the need to punish the firm with private sanctions, we don’t always distinguish adequately in the type of crime. It’s one thing to impose a sanction on a firm for an FCPA violation where the firm probably profited from it. But private sanctions in the area of financial misstatement securities fraud are a terrible idea. Private liability on individual managers is a great idea if they committed the fraud. But private corporate-level sanctions for securities fraud imposed on corporations have very little deterrent effect. Moreover it punishes the victims twice, because most securities fraud involves lying to the market so that people buy into the firm at an excessively high price. When the fraud is revealed, the market price plummets, both because of the truth and the anticipation that the firm will bear private liability. One of the things that Judge Rakoff completely missed about the SEC’s policy when it applies to financial misstatement fraud is that you want to disable the class actions as applied to corporations and force plaintiffs to go after the individuals. Do private sanctions complement public enforcement, or are they just another way of victimizing the people who were victims of the crime originally?

FIRST: Private-actions remedies are very complicated, and we’ve got lots of different possibilities. We didn’t mention putting people in jail, which is a really good remedy, and then that raises the question of for how long. But for private remedies to have a deterrent effect, they must also provide compensation to victims to incentivize them to sue. One of the problems is separating that out. It looks a little different in these fraud cases than in antitrust cases where you can very well have victims who need compensation and deserve it, like consumers, and that may have a deterrent effect, but it also has a very important compensatory effect. In fraud cases there is a problem even in thinking about who was hurt and who was helped, because the shareholders are a floating bunch. People who were helped may already be out of the stock by the time the suit is brought. And that’s also true for the financial penalties. If they’re ultimately paid by the shareholders, that’s not a fixed set of people. These difficulties may lead us, in certain kinds of cases, to look for other things like the monitors.

Debarment has pluses and minuses. It can actually lead to distortions in the food and drug area, where the debarment is for Medicare and Medicaid, which the pharmaceutical companies don’t very much need. We have to really think hard about that.

One area in which debarment could be used more is individuals rather than corporations. If you debar a corporation, you actually may end up hurting unintended victims like consumers who lose a product. Whereas if individuals for a period of time either can’t be rehired by their company or have to be in a different business, that may actually be a very useful and targeted penalty. The remedies issue is very important, and you do have to consider the effect of private rights, but we also shouldn’t lose sight of the fact that the remedies are not just for class-action plaintiffs’ lawyers, but are mainly for the victims.

BARKOW: Thank you all.

Note: The views expressed by Sanjay Wadhwa and Mara Trager are their own and do not represent those of the SEC or the U.S. Department of Justice.

The world is taking notice: In February, the center won a $1 million MacArthur Award for Creative and Effective Institutions from the John D. and Catherine T. MacArthur Foundation to further its research and policy analysis in and beyond New York, where for years its quarterly and annual reports have served as bibles for those who work in both real estate development and housing policy. The center is one of 15 organizations around the world selected by the foundation for such funding.

Jointly operated by the Law School and the Robert F. Wagner School of Public Service, the Furman Center researches dozens of topics within four broadly defined areas of study: affordable housing, housing finance and foreclosure, land use regulation, and neighborhood change. These areas won’t change under the grant, but the award will enable new approaches to the work as well as more research participation from faculty. Furman has earmarked $650,000 of the award as a seed fund that scholars across the nation can apply to use over the next decade to launch new real estate and policy work. “Furman Center scholars have made important contributions on such issues as the foreclosure crisis, the future of home mortgage lending, fair housing and access to opportunity, and environmentally sustainable urban development,” said Margery Turner, vice president for research at the Urban Institute. “We look forward to continued collaboration with the center as it expands its capacity to engage in national policy research and debate.”

Vicki Been ’83, Boxer Family Professor of Law and the Furman Center’s director (below right), says the center’s location at the intersection of the law and public policy means its research is not only academically rigorous but also useful in informing legislative and regulatory decisions. Sometimes Furman data—such as recent research on how New York City property taxes affect renters and new initiatives looking at how homeowners’ perceived housing wealth will influence their financial decisions and retirement—spurs conversations that might not otherwise happen.

Often, those conversations lead to major policy change. In recent years, for instance, Furman played a key role in revealing that tenants were overlooked victims of the foreclosure crisis within a national dialogue that had focused mainly on homeowner distress; center research indicated that half of those affected by foreclosures in New York City were renters who had little power or protection. Policymakers used this data, which eventually led to the Protecting Tenants at Foreclosure Act of 2009 and similar protections in many states. These were unusual federal interventions into landlord-tenant regulations typically governed by states.

Ingrid Gould Ellen, professor of urban planning and public policy at Wagner and the center’s co-director (above left), says the award will help Furman dig deeper into how to make federal and local housing policy more effective. It’s important work, since federal subsidies provide a layer of funding for states’ and cities’ affordable housing stock around the country. In addition, Been says, the funds will help the center augment its growing trove of New York-focused research with comparative studies and data from other urban areas. She calls this multi-site research, noting that locating appropriate research partners with similar urban data sets is often a complex process.

The center recently conducted work, for example, on inclusionary zoning—the practice of requiring or providing incentives for developers to create affordable housing along with market-rate properties—to establish how and where it works in the Bay Area, the 92 municipalities around Boston, and Montgomery County, Maryland. In addition, it is collaborating with teams at Northwestern University, the University of Connecticut, and Indiana University to research how children are affected by foreclosures.

Academic research centers tend toward either an academic and data-driven bent or a policy-focused one, Ellen says, but Furman’s ability to integrate both talents—producing rigorous research that can support policymakers’ decisions—set it apart in the eyes of the MacArthur Foundation. “We saw them as having the potential to become a national research center,” said Ianna Kachoris, program officer for housing at the MacArthur Foundation. “It’s not just about their doing data analysis but about producing data that is informative to policymaking.”

Furman Center board member and founding benefactor Jay Furman ’71, principal of RD Management, says the award will leverage the center’s enormous but geographically limited New York City influence. “Vicki and Ingrid are extraordinary,” he says. “Expanding the center’s work will offer the dual advantages of addressing complex problems in America’s cities and enabling a comparative study between New York and other cities.”

As the housing correction continues to unfurl and the economy remains fragile, the Furman Center will do just that, Been and Ellen say. Research into how reduced housing wealth will affect families, and the challenges of providing high-quality affordable housing with reduced government budgets are on the center’s lengthy research agenda. “We use our data to test theories and hypotheses,” Been says. “We help policymakers base their decisions on facts and evidence.’”

—Jane Hodges is a writer in Seattle and author of Rent Vs. Own: A Real Estate Reality Check for Navigating Booms, Busts, and Bad Advice (Chronicle, 2012).

NYU Law has responded in a variety of innovative ways to prepare students for that new world. The school has beefed up classes on international sales law and arbitration; professors are reorienting their scholarship to look overseas and organizing conferences here and around the world to discuss international commercial law issues. Also on the agenda: the announcement this fall of a program allowing students to study abroad for a semester in Buenos Aires, Paris, or Shanghai.

An explosion in international trading isn’t the only big change in the commercial realm. The study of commercial law has increasingly expanded beyond business-to-business transactions to include those between business and consumers. That has meant a growing emphasis in both the classroom and research on contracts involving everything from credit cards to mortgages to cell phones. The boom in online transactions alone has raised a host of tricky and novel contractual questions about things like disclosure and privacy that are receiving intense focus from professors and students. The financial crisis led to a flood of high-profile bankruptcies—General Motors, Lehman Brothers, and Bernard L. Madoff Investment Securities, to name a few—each of which raised challenging and controversial issues. NYU Law professors have found themselves smack in the middle of the heated debates over the courts’ authority and the government’s role.

In each of these aspects of commercial law and bankruptcy, NYU Law can claim some of the nation’s preeminent faculty. Gillette and Franco Ferrari both delve deeply into commercial law. Kevin Davis has focused his recent contract law scholarship through the lens of developing countries. In the consumer credit area, Oren Bar-Gill and Ryan Bubb have separately and together taken aim at exploitative contracts involving credit cards, mortgages, and cell phones, among others. Florencia Marotta-Wurgler ’01 has concentrated her scholarship on contracts and privacy issues in the online world. The school recently hired Arthur Gonzalez (LL.M. ’90), who, as chief judge of the U.S. Bankruptcy Court for the Southern District of New York, presided over three of the largest bankruptcies in history: Enron, WorldCom, and Chrysler. He joins Barry Adler, one of the nation’s foremost bankruptcy scholars, and Troy McKenzie ’00, who is exploring questions about the limits of the powers of bankruptcy courts. The theoretical study of contract law is the province of Lewis Kornhauser, Liam Murphy, and Richard Epstein.

These scholars and practitioners are a lively, independent-thinking cohort, who don’t necessarily agree on either normative or prescriptive policies about contracts, commercial law, or bankruptcy. While Bar-Gill and Bubb, for instance, favor more contract disclosure regulation, Marotta-Wurgler questions its practicality and Epstein thinks government should not be the regulating authority.

“NYU has an unsurpassed portfolio of commercial law scholars, comprising leaders in the application of empirical, theoretical, and doctrinal analysis to commercial and consumer issues,” says George Triantis, a Stanford Law School professor and expert in commercial law, contracts, and bankruptcy. “The tradition of excellence in this field spans generations of scholars, keeping NYU School of Law at the cutting edge of the discipline.”

Contract Law Here and Abroad

Clayton Gillette likes to tell his students the adage “If you give a person a fish, you feed him for a day; if you teach a person to fish, you feed him for a lifetime.” But then he tacks on an instructive twist: “If you teach a person how to buy and sell fish and open a fish market, you feed the person, the person’s family, employees, and customers.”

His message, in his words: “Commerce is the great mechanism for wealth creation and entrepreneurship.” Gillette hopes it especially resonates with students interested in developing countries. “Commercial law will bring both individuals and nations out of poverty,” he says. “I truly believe that.”

Gillette, who joined the NYU Law faculty in 2000 from the University of Virginia School of Law, does extensive work on domestic and international fronts. That’s reflected in his 2002 text, Sales Law: Domestic and International, co-written with Steven Walt. His recent domestic work has focused on whether standard form contracts tend to disfavor buyers. His argument: not necessarily, because market forces and the seller’s need to maintain his or her reputation will constrain bad contracts. He also presented a paper at a contractual innovation conference in May, organized by Kevin Davis and Florencia Marotta-Wurgler, that explored why some parties do not opt out of paying “consequential damages” in a contract, such as lost profits.

Professor Franco Ferrari, director of the Center for Transnational Litigation and Commercial Law, concentrates solely on international issues in commercial law and is widely considered one of the world’s experts on the topic, highly sought after by companies and lawyers eager for his advice. He has written 14 books and some 230 papers in French, German, Italian, English, and Spanish, oft cited by U.S. and German courts. In 2012 alone, he published two books: Internationales Vertragsrecht (International Contract Law), which he co-wrote and co-edited, and Contracts for the International Sale of Goods.

For two professors who well understand the importance of international trade, Gillette and Ferrari both describe themselves as “skeptics” of the uniform law governing worldwide sales transactions. Commonly known as CISG, the United Nations Convention on Contracts for the International Sale of Goods came into force in 1988 and was ratified by 78 countries at last count. Intended to promote trade and ease the worries of cross-border buyers and sellers, it sets up the rules that govern sales transactions between companies in different nations, such as when a deal is breached, what constitutes a change in a contract, and how disputes should be resolved.

“If you’re an American company buying shoes from Italy,” says Gillette, “you should understand, if nothing else, that your contract is not governed by the Uniform Commercial Code [which applies in the U.S.], and not by Italian domestic law, but is governed by this international sales law, CISG.”

While many observers hail CISG, Gillette thinks it could eventually fail for a variety of reasons. For one thing, he says, many of its provisions are vague and ambiguous, written not by commercial parties but by politicians more interested in reaching compromises than in setting up the clearly defined rules that businesses seek. “The upshot is a treaty whose provisions are likely to become less and less useful as time goes on,” he co-wrote (with Robert Scott) in a 2005 piece, “The Political Economy of International Sales Law,” for the International Review of Law and Economics.

Even the underlying notion of a worldwide uniform law bothers Gillette. “Just as we think competition for coffee leads to better coffee, so we think competition for law leads to better law,” he says. “There are benefits to be had when New York law competes with London law, which competes with French law, and parties have the ability to choose which law they want to apply to their transaction.”

The article was controversial among international scholars for obvious reasons. Gillette recalls how one of the drafters of CISG described the piece as “brilliant but flawed.” Laughing loudly, Gillette adds: “My view is he was half right.”

Ferrari falls roughly in the same camp as Gillette: Although the goal of uniform global law is worthwhile, it has been carried out poorly. “Unification is a myth up to now,” he declares, adding that it is filled with loopholes that lawyers can—and should— exploit. Indeed, much of his scholarship and outside consulting practice are devoted to debunking the myth and advising companies on how to take advantage of the loopholes.

One loophole he has widely written about is what he labels the “homeward trend.” Judges in the 78 countries are supposed to apply CISG uniformly, he says, “yet there’s no way a French judge applies the convention the same way as a U.S. judge.”

To take advantage of this loophole, he strongly advocates “forum shopping” as a way for companies to find courts that are more inclined to rule in their interest. He even teaches a seminar called Forum Shopping and International Commercial Law. “Forum shopping is, in my opinion, something lawyers have to do as an obligation to their client,” he says. “It is legal, no doubt. Those who hate it are those who can’t do it.”

Despite his gaming, or perhaps because of it, Ferrari doesn’t advocate junking CISG: “I believe that it’s a good thing, as long as you know what its defects are.”

Ferrari came to NYU Law full-time in 2010, and that year he created the Center for Transnational Litigation and Commercial Law. In addition to hosting visiting overseas lawyers and scholars, the center organizes conferences throughout the year at which discussion typically focuses on the different ways commercial law is applied internationally. In October 2011, for instance, the center, under the auspices of the United Nations Commission on International Trade Law, gathered 19 Italian academics in Milan to discuss the interpretation, applicability, jurisdiction, formation, and liability of international sales law.

Ferrari and Gillette collaborate frequently. In a 2010 article in International Commercial Law (Internationales Handelsrecht), “Warranties and ‘Lemons’ Under CISG Article 35(2)(a),” they tackled the question of what international standard to apply when determining whether a breach of warranty had taken place. They’ve also organized several conferences, including one in Florence a few years ago that gathered American and European scholars to talk about their approaches to commercial law. “European commercial law is more regulatory than American commercial law,” Gillette notes, while “Americans tend to begin from the proposition that the rules of commercial law should do for the parties what otherwise they would do for themselves.” He adds with a smile, “It was a full and frank discussion of a wide range of issues.”

Ferrari and Gillette are also mulling the idea of creating an encyclopedia of international sales law, around which they would organize a conference in Europe. “I like to do these in Europe because a lot of people who write on international sales law come from Europe,” Ferrari notes. It’s also a way, he says, to spread NYU Law’s expertise and to promote his own center.

Kevin Davis, vice dean and Beller Family Professor of Business Law, teaches a highly popular course, Financing Development, which dissects how capital flows to developing countries. Students study specific transactions and contracts, from aid agreements to sovereign lending to private financing. “What I try to do is to think about how legal principles can be designed to take into account the broader public interest,” says Davis, who joined the NYU Law faculty in 2004 from the University of Toronto Faculty of Law.

He’s especially interested now in anticorruption law. While much attention has been paid in recent years to the criminal side of overseas bribery, Davis is intrigued by the civil consequences of such acts. One question that he has explored in a working paper is this: If a company procures a contract through bribery, does it lose all rights to restitution and compensation?

A leading civil case sparked his interest. During a dispute between the Republic of Kenya and World Duty Free stores, it came to light that a representative of the stores had bribed Kenya’s president with $500,000 for approval to open stores there in 1989. The Kenyan government then voided the contract. World Duty Free sued, claiming Kenya had wrongly expropriated its property, and sought restitution. A panel of arbitrators sided fully with Kenya, ruling that claims based on contracts obtained by corruption cannot be upheld.

The decision is an example of the zero-tolerance approach: contracts obtained through bribery should be automatically made null and void with no restitution. But Davis advocates a different stance, which he calls proportional liability. “It takes into account the level of culpability of the firm,” he says, such as if it brought the situation to the attention of authorities. The problem with zero tolerance, says Davis, is that it leads to perverse incentives. Companies won’t come forth as readily or will lack incentive to undertake monitoring to self-report instances of bribery.

Consumer Credit—From Cell Phones to Credit Cards

Professor Oren Bar-Gill and Assistant Professor Ryan Bubb often work together on contract issues involving consumer credit. Each has an elite educational background, was an entry-level hire, and receives high praise from colleagues. Bar-Gill joined the faculty in 2005 and focuses on the law and economics of contracts and contracting. In 2011 he received a Young Scholars Medal from the American Law Institute recognizing his work in consumer contracts. Bubb came in 2010. His background is in political economy and government, and he had been a senior researcher at the Financial Crisis Inquiry Commission charged with investigating the causes of the economic meltdown.

Bar-Gill’s early research contemplated business-to-business contracts between two sophisticated parties, he says. But his recent work has turned to studying consumer contracts— between “one sophisticated party, a seller, and a less sophisticated party, a consumer.” Here, he’s employing behavioral economics, a combination of economics and psychology, to try to understand how the contracts are designed and to what extent they harm consumers.

Consumers are “imperfectly rational,” and sophisticated sellers tend to design contracts to exploit that trait, he notes. This occurs in everything from contracts for cell phones to credit cards to mortgages, and when it happens it “hurts consumers and reduces total social welfare,” Bar-Gill asserts.

One anecdote he likes to relate to students involves the introduction of the second generation of Apple’s iPhone. It was advertised as cheaper because the upfront price was dropped from $400 to $200. Yet the two-year service contract raised the monthly fee from $60 to $70. “It’s no longer a cheaper iPhone,” he says. “It might be better, but it’s not cheaper.” The broader point, Bar-Gill says, is that sellers are taking advantage of buyers’ myopic tendencies to focus on the short run. “The purpose of the contract design is to create a wedge between the cost of the product as it is perceived by the consumer and the actual cost of the product,” he says. Bar-Gill elaborated on this in “Mobile Misperceptions,” a 2009 paper he co-authored for the Harvard Journal of Law & Technology. He and then-Furman Academic Scholar Rebecca Stone ’09 argued that cell carriers’ contracts played on consumer misperceptions of pricing plans.

Bar-Gill has identified two general features that are detrimental to consumers that show up time and again in contracts for cell phones, credit cards, and mortgages: One is a high level of complexity, the other cost deferral.

Both features permeated and contributed to the subprime mortgage meltdown, as he discussed in his 2009 Cornell Law Review article, “The Law, Economics, and Psychology of Subprime Mortgage Contracts.” Mortgages went from the relatively simple 30-year, fixed-rate note to complicated hybrid adjustable-rate mortgages, where the rate is fixed for, say, two years, then fluctuates every year. “The problem with complexity is that imperfectly rational borrowers can’t understand what they’re getting, and the complexity also allows the seller or lender to hide various costs in non-salient features,” Bar-Gill says.

The cost-deferral problem arises when the initial mortgage rate for a hybrid is low yet jumps for the remainder of the term. “This ties into the myopia of consumers and optimism about how they might be able to make higher payments later on, and maybe they’ll be able to refinance their loans later on,” Bar-Gill suggests. Everyone knows how that played out.

Is there a policy solution to complexity and cost deferral? The answer, he thinks, is coming up with a smart, sophisticated way to require companies to disclose all the costs, something the new Consumer Financial Protection Bureau is working on now. He advocates an “aggregate” disclosure—“a simple disclosure that imperfectly rational consumers can easily understand, which aggregates all the different price dimensions of the contract.”

Bar-Gill is active in trying to stimulate new ideas for consumer protection. In February he and Omri Ben-Shahar of the University of Chicago Law School organized a conference at NYU with the American Law Institute that explored regulatory techniques for enforcing consumer laws. Bar-Gill is also working to compile articles on consumer protection into a book, tentatively titled The Law, Economics, and Psychology of Consumer Contracts.

Other potential solutions to confusing and misleading credit resulted from an article Bubb and Bar-Gill wrote earlier this year for the Cornell Law Review titled “Credit Card Pricing: The CARD Act and Beyond.” They examined the impact of the 2009 law that overhauled regulations governing the credit card industry. The law, known as the CARD Act, cracked down on a variety of industry practices, such as raising the interest rate and sharply increasing fees when consumers went over their credit limits. Credit card companies complained that they would be forced to charge annual fees again, lower rewards programs, and make other changes to cover the lost revenue. But surprisingly, Bubb and Bar-Gill found that credit card companies in fact made none of those changes, even though revenues from late and over-limit fees dropped. “We saw no increase in annual fees, no change in the use of introductory interest rates,” Bubb says.

On the whole, Bubb thinks the CARD Act was for the good. “It increased consumer welfare and reduced issuer profits,” he says. Yet their paper also found that card companies haven’t changed their basic pricing structure much. They still offer low introductory interest rates, which entice consumers to make bad choices. So the authors proposed a counterintuitive solution: Go after the low prices; that is, ban abnormally low teaser interest rates. “They confuse consumers and have no plausible social function,” says Bubb. “They are just being used to lure in borrowers and confuse them about the cost of credit.”

Bubb admits to the difficulty in winning political support for such a proposal. “It’s like saying you can’t have a sale,” he says.

Internet Contracts: Does Anyone Read the Fine Print?

If consumers think credit card contracts are complicated, Professor Florencia Marotta-Wurgler can only shrug. She has focused her scholarship on contracts in the online world—where merchants literally have no limits as to how long and complicated they want to make their terms. Over time, she notes, online contracts have grown “ridiculously bigger and bigger” as they attempt to govern all aspects of online commerce—from privacy information to warranties to dispute resolution. This phenomenon was one reason she got interested in online contracts. Another was the wonder of how people buy just about anything from the comfort of their home and trust the transaction will take place. “I was thinking today,” she related during our interview, “that every single item of clothing I’m wearing, including my purse, was bought online. And everything went smoothly.”

Raised in Buenos Aires, she attended the University of Pennsylvania and New York University School of Law. She joined the NYU faculty as an entry-level hire in 2006 and teaches Contracts and Internet Contracts.

In her research, Marotta-Wurgler attempts to discover, with intensive empirical study, whether online contracts, with their fine print and voluminous detail, tend to favor the sellers. That has long been the view of consumer advocates and some scholars, who figured that strong disclosure rules would help solve the problem. Turned out things aren’t so simple.

In one paper, she looked at so-called “Pay Now, Terms Later” contracts for software—meaning buyers didn’t get to see the terms until after forking over the purchase price and opening the box. This is common in software products sold in shrink-wrap packages.

Marotta-Wurgler studied about 800 contracts involving software products, of which half disclosed terms after the purchase and half before. She found that there was no difference between the two types in terms of their consumer-friendliness, as she wrote in her 2009 Journal of Legal Studies paper, “Are ‘Pay Now, Terms Later’ Contracts Worse for Buyers? Evidence from Software License Agreements.” She concluded that the amount of disclosure was unrelated to the terms of the contract and that regulation to ban these types of contracts would make little difference to consumers.

A related article looked at whether sellers in competitive markets offer more pro-consumer contracts versus sellers in concentrated markets, as one would imagine. There, too, Marotta-Wurgler found little difference among the contracts, as she detailed in “Competition and the Quality of Standard Form Contracts: An Empirical Analysis of Software License Agreements,” published in 2008 in the Journal of Empirical Legal Studies. In “‘Unfair’ Dispute Resolution Clauses: Much Ado About Nothing?” she also debunked the concern that anticonsumer dispute resolution clauses, such as mandatory arbitration and forum selection, were pervasive in online software contracts. That chapter appeared in the 2007 book Boilerplate: Foundations of Market Contracts.

It was clear, then, that disclosure mattered very little in online contracts. And the reason might be that almost nobody reads the contracts. So Marotta-Wurgler and a researcher set out to find some real data on the number of people who read online contracts, focusing on software products. Combing through a terabyte of data provided by online monitors Nielsen and comScore, she looked at the reading habits of 50,000 people. It was well-known that few people read online contracts, but her finding was astonishing: Only 0.1 percent read them. And these were sophisticated buyers of expensive software. (When Marotta-Wurgler testified in 2009 before a Senate committee on misleading Internet practices, Chairman Jay Rockefeller asked her twice to restate the percentage of people reading contracts to emphasize the point.)

Taken together, her empirical research is a yellow light to policymakers itching to legislate restraints on online contracts—restraints that could impose unnecessary costs.

The Power of Bankruptcy Courts

No one has had a better seat in the world of bankruptcy than Judge Arthur Gonzalez, who presided over the Enron, Chrysler, and WorldCom bankruptcies, three of the biggest in history. He retired from the bench in March 2012 and became a senior fellow at the Law School. Gonzalez is no stranger to NYU, having been an adjunct since 2008. He’s teaching several bankruptcy courses, as well as serving as faculty co-director (with Barry Adler) of the Lawrence P. King and Charles Seligson Workshop on Bankruptcy and Business Reorganization, which gathers top talent in the restructuring world, and the Galgay Fellows Program, which provides grants for students to work as summer interns in bankruptcy courts.

NYU Law students of bankruptcy wanting to connect the theoretical with the practical need look no further than to Gonzalez. “One of the goals here,” he says, “is to be available to students, explore ideas of clinical programs, and also to give students some practical view of what they are learning and how it plays out.”

Gonzalez had an unusual career path. He taught in New York City schools for 13 years before switching to law. He received a J.D. from Fordham University School of Law in 1982 and an LL.M. in taxation from NYU Law in 1990. After working for a while for the Internal Revenue Service and in private practice, he eventually was appointed to the Bankruptcy Court in 1995. He was reappointed to another 14-year term in 2009 but decided, he says, that he “really wanted to do more teaching.” (The court keeps him close, however. In July, Gonzalez was named the independent examiner investigating details of the $4 billion bankruptcy of home lender Residential Capital.)

This semester Gonzalez is teaching Bankruptcy; in the spring he will teach a course in cross-border insolvency laws, and another that concentrates on large corporate reorganizations like Enron and WorldCom. He won’t need a textbook for that one.

Enron was not only “fascinatingly complex,” Gonzalez recalls, but also wrapped in a “Hollywood aspect, a political aspect, and an investigatory aspect.” His challenge was to conduct hearings and “insulate them from what was going on outside of the courtroom,” he says. He’s proud that creditors got maximum value even while the company was being investigated on numerous fronts.

Judging from the rhetoric in this year’s presidential campaign, Gonzalez’s handling of the Chrysler bankruptcy was by far his most controversial. Republican candidates insisted it was an unprecedented abuse of the normal procedures of bankruptcy law. They argued it disregarded the rights of secured creditors and blocked other, nongovernment bidders in order to get the company up and running quickly. Gonzalez responds that the government never would have agreed to fund a full, planned reorganization, which could have taken up to a year to complete. Instead, the quick sale that he allowed lasted only 41 days. “Some people argued the government was bluffing, that it would not pull the plug on the funding, so I should go through with a full planned process,” Gonzalez recalls. “I took the position that the record was supported by the notion that the government meant what they said.”

His colleague Barry Adler, Bernard Petrie Professor of Law and Business, was among the bankruptcy scholars who also found fault with the way the process was handled. “Judge Gonzalez streamlined the proceeding and saved the company and maybe saved the economy,” says Adler, “but he did it in a way, in my view, that the bankruptcy law shouldn’t have permitted him to do.”

He argues that Gonzalez should have opened up the bidding more fully to better judge the real value of Chrysler. He says neither he nor anyone else could have predicted what would have happened with a full proceeding, but his bottom line is this: Judges shouldn’t “mess with” the rights of creditors.

In 2009, Adler was invited to speak before an oversight committee looking into the Troubled Asset Relief Program’s role in the auto industry bailout. Adler recalls wryly: “The Republicans wanted me to say secured creditors were cheated, and the Democrats wanted me to say they were not. I would say neither. And no one was happy.” As he summed up in a 2010 article in the American Bankruptcy Institute Law Review, the GM and Chrysler bankruptcies were “no doubt interesting. But the law that they produced may be more curse than blessing.”

Adler joined the NYU Law faculty in 1996. He had previously taught law at the University of Virginia, Emory University, and George Mason University. It was at Emory, in 1993, where Adler wrote an article on bankruptcy that first got him noticed in the academic world. And now, 20 years and a financial meltdown later, the ideas he advocated then are “oddly enough,” as he puts it, back in vogue. (Alas, he’s not always cited.)

The article, “An Equity-Agency Solution to the Bankruptcy-Priority Puzzle” in the Journal of Legal Studies, proposed a rapid-fire way for companies in financial distress to reorganize and avoid the time and expense of a typical bankruptcy proceeding. He called it “chameleon equity”—a phrase that didn’t stick. Today the strategy is called a bail-in (as opposed to a bailout, of course).

Bankruptcy is usually a cumbersome process in which shareholders and creditors argue over the value of a company, which the judge ultimately decides. Adler insisted in the article that the valuation process is unnecessary. When a company can’t cure a debt, there should follow an automatic transformation of its capital structure (one that the parties agreed to in the original contract). The equity shares disappear, the junior debt turns into new equity, and the senior debt is reinstated as whole.

Fast-forward to the 2008 financial crisis, and now scholars and the popular press are advocating the bail-in idea. It would be especially valuable to save large financial institutions, where a restructuring process is required literally overnight to stave off a run on their assets. Adler is writing a book on the subject, after having co-written a chapter on the idea in the 2010 book Regulating Wall Street: The Dodd-Frank Act and the New Architecture of Global Finance, published by the NYU Stern School of Business.

Adler’s work in contracts tends to tilt more toward the theoretical. In a 2008 article in the NYU Law Review, he analyzed the long-held theory of efficient breach—the notion that it’s legally OK for a party to breach a contract as long as the victim is compensated. But he turned the question on its head, looking at cases in which the person who breaches the contract actually benefits the other party rather than injures it. The law now says a person who breaches a contract cannot sue the victim to gain those benefits, known as negative damages. Using economic analysis, Adler suggested that, in fact, allowing negative damages might be beneficial in certain cases, though not all. He aptly called his article “Efficient Breach Theory Through the Looking Glass.”

Nestled in a pile of papers on Associate Professor Troy McKenzie’s desk is, as he describes it, “a nice letter” from the chief justice of the United States. In it Justice Roberts appointed McKenzie a reporter, or academic adviser, to the committee on bankruptcy for the Judicial Conference of the United States. The committee serves to consider changes to the nation’s bankruptcy rules. That’s not a bad honor for a guy who originally planned on becoming a chemical engineer, his major at Princeton University. He joined the Law School faculty as an entry-level hire in 2007. With a laugh, he says he might get around to framing the letter.

McKenzie’s scholarship on bankruptcy has taken him in several directions. One involves exploring how bankruptcy courts handle mass torts and similar complex litigation—and how they can become a litigation resolution device. McKenzie argues in a forthcoming paper, “Toward a Bankruptcy Model for Non-Class Aggregate Litigation,” that bankruptcy courts can do a better job than regular courts in dealing with aggregating mass tort cases.

He is also delving into questions about the role and powers of bankruptcy courts and judges. It’s particularly timely, as bankruptcy judges have played prominent roles during the recession, in everything from Lehman Brothers to mortgage foreclosures to the bankruptcy reorganizations of General Motors and Chrysler. Yet as they exercise those broad powers, McKenzie notes, they enjoy neither of the twin protections that regular federal judges receive under Article III of the Constitution: life tenure (their terms are for 14 years) and compensation that cannot be diminished. To some commentators, that structure threatens to undermine the protection of an independent judiciary under the separation of powers doctrine.

McKenzie wrote about this conundrum in a 2010 Stanford Law Review article, “Judicial Independence, Autonomy, and the Bankruptcy Courts.” He concluded that the current system for bankruptcy judges works for the most part. The Supreme Court has dealt with this issue in numerous cases, most recently in the highly publicized matter involving Anna Nicole Smith, the former Playboy Playmate who was widowed after a brief marriage to J. Howard Marshall II, a former Yale Law School professor turned wealthy Houston oilman.

“Most people don’t realize this is quite an important case about bankruptcy,” says McKenzie. “The question is, what kinds of decisions can bankruptcy judges decide and enter, and what kinds of decisions do they have to leave to district judges?”

The Supreme Court ruled 5–4 that Smith’s estate (she died in 2007) was not entitled to a portion of Marshall’s $1.6 billion fortune. A federal bankruptcy judge had earlier ruled in her favor, while a Texas probate judge had sided with one of Marshall’s sons. The Supreme Court ruled in 2011 that the bankruptcy court did not have the authority to decide her claims against Marshall, citing constitutional issues including the lack of lifetime tenure.

McKenzie, who is working on an article about this case, is critical of the decision on grounds it draws an “artificial line” for determining the powers of bankruptcy judges. In doing so, he contends, the Court has opened questions about whether bankruptcy judges can enter final judgments in even bread-and-butter cases. In the Bernard Madoff scandal, for instance, a bankruptcy trustee is trying to recover money under the Fraudulent Conveyance Provision. That’s a common practice in bankruptcy cases, McKenzie says, yet the Court’s decision in Stern v. Marshall now casts doubt on its validity.

For his part, Gonzalez doubts that the decision will amount to much. He expects future rulings to favor keeping cases with bankruptcy courts and allow them to enter final rulings. Besides, he argues, separate bankruptcy courts provide a valuable service. It would be “extremely difficult” for a federal district judge to oversee the lengthy and continual demands of a Chapter 11 reorganizational filing, for instance, while ensuring speedy trials in other cases.

The Theoretical Approach

Lewis Kornhauser, Liam Murphy, and Richard Epstein have played important roles in a long-running theoretical debate about the fundamental purpose of contract law. The dominant theory has varied over the years as one camp or another takes hold, alternating between an economic view and one more based in moral theory, with various shades of gray thrown in. Contract law is about making commerce efficient, argued one view. No, it’s about preventing harm and compensating people for unfair losses, said another. No, it’s about enforcing promises, said yet another. Today, the economic theory still reigns, even as advocates of the philosophical foundations of contract law have reemerged to challenge that view.

Lewis Kornhauser, Alfred B. Engelberg Professor of Law who joined the faculty in 1982, was one of the earliest scholars to write on the idea of using economic analysis to analyze contractual issues. Not surprising, given his economic bent including a J.D. and Ph.D. in economics from the University of California, Berkeley. Economic analysis had already crept into other areas of law, especially torts, in the 1960s and ’70s. In his 1983 dissertation, published in the Journal of Law & Economics, he used economics to explore how nonlegal matters, like a seller’s reputation, could serve as a substitute to enforce contracts and determine remedies for breach. It’s a simple idea, but very little was written using such analysis back then, Kornhauser notes. His paper, “Reliance, Reputation, and Breach of Contract,” is peppered with equations. Kornhauser later wrote a half-dozen other contract papers, each looking through the economic prism, including “An Introduction to the Economic Analysis of Contract Remedies” in the University of Colorado Law Review in 1986. Written as a survey of literature for lawyers, it was, he says, an effort to “propagate the faith” of economic analysis in contract law.

Murphy, Herbert Peterfreund Professor of Law and Philosophy, entered the debate a few years later and remains today the self-described philosopher of the contract faculty. “My connection is primarily foundational, theoretical, philosophical,” he says. While teaching Contracts to 1Ls, he keeps abstract theory to a minimum. But his Contract Theory seminar is where he lets loose on teaching contract doctrine from a theoretical point of view.

Murphy agrees with central ideas from the economic camp—that the role of the law of contracts is to promote mutually beneficial transactions. But he believes that economic theory doesn’t capture all the aims of contract law, that it requires philosophical underpinning. It is especially important, he says, that contract law not conflict with commonsense ethical ideas about keeping promises. For example, contract remedies should be in line with the simple idea that promises should, all things equal, be performed. If they are not, the practices of both contract and promise are likely to be weakened.

Still, Murphy doesn’t go as far as the theory that Charles Fried, the former solicitor general and now Harvard Law professor, laid out in his 1981 book, Contract as Promise. Injecting morality into the debate, Fried argued that contract law is about enforcing a moral obligation to keep promises. In “Contract and Promise,” which appeared in the Harvard Law Review Forum in 2007, Murphy suggested a more nuanced view. While the “morality of promise” is relevant to understanding the purpose of contract law, he argued, he disagreed with Fried’s more stringent notion that contract law is about enforcing the moral obligation to keep promises for their own sake. Murphy is working on a book on contract theory that will include this debate as well as issues such as the basis of the obligation to keep promises. As is usual in his philosophical world, the answer “is rather more elusive than you might have thought,” he says.

There are few areas in commercial law (or all of legal scholarship, for that matter) that the prolific Epstein, Laurence A. Tisch Professor of Law, hasn’t written about. He has tackled contracts, bankruptcy, consumer credit, cyberspace issues—you name it. But his heart and head appear most obsessed by issues involving contracts, the “most generic” area in commercial law, as he puts it. Epstein’s work on contracts often focuses on the practical question of whether contracts are better than other structures for creating agreements and understanding. Well known for his libertarian views, he is consistent on that issue: Contracts work a heck of a lot better than government regulations or torts, in everything from malpractice to antitrust, from labor law to securities regulation.

“There are many obstacles to contracting, but the obstacles are always greater from direct government coercion,” he contends.

Epstein, who joined the NYU Law faculty full-time in 2010 after five years of alternating semesters between the University of Chicago and NYU, teaches Contracts to 1Ls. He tends to structure the class into three major themes. One is to teach contract doctrine, which “they really have to know.” This involves centuries- old issues such as the rules of consideration, what promises are enforceable, the meaning of conditions, and knowing when contracts are completed, among many others. Another leg of his class scrutinizes deals that were litigated and figures out why they went awry and how that could have been avoided. The third is to discuss the scope of the law of contracts.

On that point, he says students often ask about the limits of contracts, in doctrines such as unconscionability and contracts against public policy. “There is a temptation to limit the scope of the field and to say some form of direct regulation is necessary,” he says.

In all of these signature issues of commercial law and bankruptcy, it is easy to get lost in the details. That’s why Clay Gillette’s office is adorned with gorgeous pictures of his visits to Kenya and other emerging nations, where he often comes upon people buying stuff in marketplaces. They are a reminder of his heartfelt views about marketplaces and the law. Marketplaces improve people’s lives, he says flatly. “And the objective of commercial law is to facilitate well-operating markets—to ensure that they operate in a way that leaves buyers and sellers both better off.” That’s about as good a definition of commercial law as you could find.

—Larry Reibstein is a New York-based journalist.

Bauer, now chief counsel to the Obama-Biden campaign, agreed to come to NYU School of Law as a senior fellow and adjunct professor. He has already shared his inside-the-Beltway perspective with students in seminars on presidential power and campaign finance, and he will continue doing so until at least 2015. “The picture Ricky drew overall of the Law School and its direction was compelling,” says Bauer. “He also made a powerful case for the excellence NYU had achieved—and that it would continue to pursue—in the fields of primary interest to me.” (Among other important Washington figures recently or currently teaching at the Law School, some on a fulltime or half-time basis, are C. Boyden Gray, White House counsel under George H.W. Bush; Paul Clement, solicitor general under George W. Bush; Sally Katzen, administrator of the Office of Information and Regulatory Affairs in the Clinton White House; and judges Harry Edwards and Douglas Ginsburg of the U.S. Court of Appeals for the District of Columbia Circuit, who both maintain senior status on the bench.)

With moves like these, Revesz has surprised even his most ardent supporters—who 10 years ago had no idea how big the job would become under his aegis. “The faculty was wildly in favor of Ricky becoming dean,” remembers Barry Friedman, Jacob D. Fuchsberg Professor of Law, who was on the search committee that recommended him to succeed John Sexton, now president of NYU. “But we knew there would be strengths and weaknesses. What’s interesting has been to see his strengths increase and his weaknesses kind of evaporate.”

One common perception was that Revesz—described by nearly everyone as brainy and hyper-logical—wouldn’t be good at motivating donors. “With that professorial look, he’s not the fund-raiser from central casting,” says Robert Kindler ’80, Morgan Stanley vice chairman and a Law School trustee. But David Tanner ’84, executive vice president at Continental Grain Company and now also a Law School trustee, says he hadn’t been a major donor until Revesz persuaded him to become one. “He has a wonderful way of making you feel like your philanthropy is really going to make a difference,” Tanner says, adding that Revesz “has no qualms about asking for big numbers.”

Very big numbers: Revesz has raised an average of about $50 million in each of his 10 years as dean, bringing his total so far to more than half a billion dollars. Despite the economic recession, he more than doubled the size of the annual fund from $3.1 million in 2002 to $6.5 million today and is building up the school’s endowment (still smaller than those of several rival schools). But sometimes, at a school Revesz describes as “entrepreneurial,” the endowment, which is composed of restricted funds, has to wait: Money, especially unrestricted funds raised for the annual fund, is needed to deliver student services, financial aid, and programs that, Revesz says, “help students and recent graduates do things they want to do”—including taking public interest and government jobs.

In fact, nearly every aspect of Revesz’s job has grown. Larry Kramer, until August the dean of Stanford Law School, says the responsibilities of law school deans have changed radically in recent decades. A dean was once primarily part of the faculty—a leader of the academic cohort. Then fund-raising and administrative duties multiplied, making the dean a veritable CEO. And NYU Law, which offers nearly a dozen joint-degree versions of its J.D., plus 10 LL.M.s and a J.S.D., is a particularly complicated organization to run, says Kramer, who was a vice dean and professor at NYU Law from 1994 to 2004.

Revesz is, by all accounts, a quick decision-maker once he hears the facts. And his door is always open, at least metaphorically; students and colleagues say he answers nearly every e-mail before the next day. Once, Revesz recalls, he got a 1:00 a.m. e-mail from a student who needed advice before a clerkship interview with Second Circuit Judge Guido Calabresi at 7:00 that morning. Revesz, who had studied with Calabresi at Yale, responded, and the student got the clerkship. Telling the story, Revesz says, “I remember thinking, This really is a fullservice operation.”

It’s tempting to think it was the chaos of his childhood in Argentina—which came only two decades after the decimation of his father’s family in the Holocaust—that fueled Revesz’s ambition. Each morning, Revesz remembers, he turned on the radio to find out if a coup or a general strike would make it impossible for him to get to school that day. (Because the heat in his apartment building didn’t come on until 8:00 a.m. and political paroxysms were frequent, Revesz says, it was rational to check the radio before deciding to crawl out from under the covers—a precocious application of cost-benefit analysis.) He chose the U.S., particularly Princeton, with its This Side of Paradise campus, as a refuge. After graduating summa cum laude, he went on to MIT for a master’s in engineering; his adviser suggested he round out his studies by learning microeconomics. That fomented his interest in public policy and a transition from engineering to law. From Yale Law School, where he was editor-in-chief of the Yale Law Journal, and a pair of prestigious clerkships for Second Circuit Chief Judge Wilfred Feinberg and Supreme Court Justice Thurgood Marshall, he arrived at NYU in 1985.

“Ricky is a great American success story,” says Raymond Lohier ’91, a judge of the U.S. Court of Appeals for the Second Circuit. In fact, Lohier likens Revesz to Calabresi, former dean of Yale Law School (and, like Revesz, from a family displaced by European fascism).

Like many ambitious deans, Revesz has made a tangible mark on his institution, building Furman Hall (which had been planned by Sexton) and Wilf Hall, acquiring 22 Washington Square North, and upgrading and modernizing the Law School’s cornerstone, Vanderbilt Hall. But he has made even more impressive changes to what happens in those buildings—including increasing the size of the full-time faculty from 83 to 109. Many of his 44 hires have been laterals from Columbia, Harvard, Michigan, and Chicago. The bottom line: Nearly half the current Law School faculty, including some of its biggest stars, has arrived during the Revesz era. “It’s been a singular focus of his,” says Kindler. “To get so many to come from Columbia and Harvard while losing very few to competitors is a very big deal.”

Revesz says he doesn’t rely on a checkbook to lure new faculty, explaining that NYU can’t afford to outbid schools with much larger endowments. Instead he appeals to a scholar’s desire to be part of a uniquely collaborative academic community that has an impact on the outside world. One Columbia professor, after meeting with Revesz, told the dean that it seemed the choice was between working alone in his office or joining NYU Law to work collaboratively; his eventual move downtown was another victory in legal academia’s version of the Subway Series. For those Revesz wants to entice from other cities, he has taken advantage of his simple observation that people often change jobs when their children are about to start elementary school, or just after their children finish high school—timing his recruitment efforts accordingly.

One of the results of the hiring spree, besides a faculty deeply loyal to the dean: There are now at least a dozen fields of law in which NYU arguably has the best faculty among the leading law schools. (Since Revesz became dean, this magazine has made the case for NYU’s preeminence in 11 of those fields.) But not content to merely hire leading academics, he exhorts them to do their best work after they arrive at NYU—one reason he personally moderates the weekly brown-bag lunches at which professors take turns sharing works in progress. His involvement, he says, helps keep research and writing on the front burner.

Revesz encourages professors to collaborate with students; he himself has had student co-authors on nearly all his recent publications, including his 2008 book, Retaking Rationality: How Cost-Benefit Analysis Can Better Protect the Environment and Our Health, co-authored with Michael Livermore ’06, now an adjunct professor at the Law School. The book lives up to its title, making a powerful argument for employing cost-benefit analysis—which, in Revesz’s view, had been co-opted by pro-business, anti-regulatory interests—in the service of environmentalism.

One reason Revesz seeks out student co-authors, he jokes, is that knowing a student is depending on him keeps him working when he might otherwise grab an extra hour’s sleep. But the real motivation, he says, is to give students an opportunity to share an experience he had at MIT, where his adviser made him feel, he says, like “a full colleague.” Even 30 years later his gratitude is palpable when he talks about it. That kind of interaction between students and professors is typical of Ph.D. programs but has rarely been available in law schools. In 2003, however, NYU Law launched the Furman Academic Scholarship Program. It is based on the graduate model, offering full-tuition scholarships, summer funding, and close faculty mentoring to a select group of students interested in academic careers.

The larger goal is to give all students interested in research the chance to do professional-level work, just as students in litigation clinics get to work on real (and sometimes important) cases. “You should think of your three years here as a time when you can accomplish significant professional things,” Revesz announces each spring at a breakfast for admitted students, who might have mistakenly thought law school was just for taking classes.

Matthew Shahabian ’11, now a law clerk to Judge Robert Katzmann of the U.S. Court of Appeals for the Second Circuit, recalls speaking to Revesz about a subject of mutual interest: how discount rates, which are used to determine the present value of future benefits, influenced the perceived worth of various environmental regulations. At their first meeting, Revesz proposed co-authoring an article—“not,” Shahabian says pointedly, “that I be his research assistant.” From then on, he became accustomed to receiving comments and revisions from Revesz late at night. Eventually, Shahabian says, it dawned on him that at the same time Revesz was working on their article, “he was also writing another article with a friend of mine, teaching, traveling for conferences, meeting with donors….”

But Shahabian didn’t know the half of it. One way that Revesz has increased the complexity of the organization he leads is by adding a dozen academic centers and institutes that vary in the details but share the goal, he says, of getting professors, students, and professionals in the field “to work on topics of great legal or public-policy salience.” In 2008, the dean himself started the Institute for Policy Integrity, making his former student and collaborator Livermore the executive director.

And that’s just in New York; the dean’s portfolio includes major global initiatives, including a dual LL.M. degree program with the National University of Singapore Faculty of Law and a recently announced plan to give J.D. students semesters abroad in Shanghai, Paris, and Buenos Aires—the city Revesz left three decades ago.

At the same time, he has strengthened student opportunities to learn about the legislative and executive branches of government. Notably, he oversaw the addition of a required course on the Administrative and Regulatory State to the first-year curriculum, setting the stage for 2Ls and 3Ls to delve deeply into how Washington functions. He underscores the importance of this area by co-teaching, with Livermore, the Administrative and Regulatory State Clinic, in which students work with non-governmental organizations to prepare petitions, draft public comments for notice-and-comment rule-makings under the Administrative Procedure Act, and participate in administrative law litigation.

Mindful that many NYU Law graduates go on to work in corporate law firms or on Wall Street, Revesz has forged significant ties to the business community, taking advantage of resources that are available only in New York City. In 2007, the Law School launched the Mitchell Jacobson Leadership Program in Law and Business, which offers a J.D./M.B.A., mentoring, and a curriculum that includes a Business Law Transactions Clinic as well as roughly 10 “Law and Business of” courses—in investment banking, micro-finance, and bankruptcy, to name a few—co-taught by faculty from NYU Law and the Stern School of Business to students of both schools, who work collaboratively to analyze significant transactions presented by the principals who negotiated them.

Revesz has also made a considerable effort to support socioeconomically disadvantaged students, to diversify not only classrooms but also, eventually, law firm partnership rosters and corporate boardrooms. Last year, Sponsors for Educational Opportunity honored NYU Law for helping students from underserved communities succeed in college and the workforce. The Law School’s programs that support such students include TRIALS (Training and Recruitment Initiative for Admission to Leading Law Schools), a partnership with Harvard Law School and the Advantage Testing Foundation that offers LSAT preparation courses and other support; a five-week summer course in partnership with Legal Outreach to introduce middle-school and high-school students in underserved areas to careers in the law; and the AnBryce Scholarship Program—created by the chairman of the Law School Board of Trustees, Anthony Welters ’77, and his wife, Beatrice Welters, the U.S. ambassador to Trinidad and Tobago—which provides 10 full-tuition scholarships per class to outstanding J.D. students who are among the first in their family to pursue a graduate degree. “I truly believe in this approach to education,” Revesz says.

With all these initiatives and responsibilities, Revesz might resent the time spent on fund-raising, especially because there are no shortcuts—if he wants to raise twice as much money, he says, he has to make twice as many calls. But, in a typically Revesz-ian way of finding intellectual stimulation in jobs others might find tedious, he says he enjoys fund-raising because it introduces him to leaders in a variety of fields. Potential donors, he explains, tend to be innovators. Asked by a reporter why American universities are so much more innovative than their European counterparts, he responded that because leaders of U.S. institutions have to fund-raise, they need to interact with successful non-academics. As a dean, “you wouldn’t learn as much,” he says, “if you were just sitting around waiting for a big check from the government.”

Sitting around isn’t Revesz’s style. When he took the job, he had big shoes to fill. In 10 years he has not only filled those shoes, but used them to cover a lot of new ground.

—Fred Bernstein ’94, a journalist, clerked for two federal judges and now writes about his favorite subjects—including law, architecture, and fatherhood—for many publications.

Those seeking to unravel the increasingly intertwined U.S.-China relationship generally look to Washington/New York and Beijing/Shanghai. That’s only appropriate, given the political and financial centers of the two countries. Those looking to identify crucial individual participants in that dynamic, however, should enlarge their North American focus a few hundred miles to the north, to Toronto, Canada. There, they will find Winston Wenyan Ma (M.C.J. ’98), the 39-year-old managing director and deputy chief of China Investment Corporation’s representative office in Toronto. It’s a mouthful of a title, but the gist of it is simple: Ma is China’s financial front man in North America.

Ask him to describe his job, and he will tell you that he is a simple investment professional tasked with a simple mandate: to seek out attractive investment opportunities for his employer, CIC, one of China’s sovereign wealth funds. That’s an honest description, but it deftly sidesteps the larger point: with some $482 billion in assets as of December 2011, CIC is currently the fifth largest sovereign wealth fund in the world, according to the Sovereign Wealth Fund Institute. And Ma’s specific focus is on investments in natural resources, among other sectors, that will help ensure that China can continue its remarkable economic transformation for years—and decades—to come. In 2009, for instance, CIC bought a $1.5 billion ownership stake in Canadian coal mining company Teck Resources and invested $1.58 billion in Virginia-based power company AES, in part to own 35 percent of its wind-generation business. Collectively, this makes Ma a key executive in the most fundamental financial transaction of our time: having lent the United States hundreds of billions of dollars during the debt binge of the last quarter-century, China is now converting that debt to ownership in some of the most crucial assets in the world. His job might be simple to describe, but it has profound implications.

U.S.-China relations are often viewed through a zero-sum lens: exchange rates are seen to benefit China at the expense of the American trade deficit, for example, and the use of overworked (and, by implication, underpaid) labor in Chinese factories makes iPhones and all manner of consumer goods affordable for the American masses. With Winston Ma, however, it’s not a case of one profiting at the expense of the other. His entire career is, in fact, an example of the possibilities of combination, especially the bringing together of people of diverse backgrounds for mutual benefit.

In the last three decades more than two million Chinese students have left home to study in another country. As keynote speaker at the Hauser Global Law School Program’s annual dinner in January, Ma played the historian and put himself in the larger context of waves of Chinese seeking broader opportunities.

The first wave was in the 1980s, when China opened up after the Cultural Revolution. This was a very focused group: the majority came to the U.S. for Ph.D.s in physics, chemistry, and engineering. “Most came on scholarships,” he said, “because they couldn’t have afforded to otherwise, and they were taking any chance they could to get out of China.” Many in that initial wave were happy to stay abroad after graduation, given the palpable increase in their standard of living. They bought homes, started families, and plotted a future in their adopted countries.

Ma arrived as part of the second wave. By the 1990s, China had been on a headlong course of economic development for 10 years and was reaping the initial benefits of modernization. Students began broadening their scope, taking law, management, and finance. “Many of us, myself included, were happy to join a big law firm or a bank, earn a great salary, and stay put,” he said. But he also noticed an increasing number of fellow expats returning to China.

The third wave of students began arriving after China’s entry into the World Trade Organization in 2001. That seminal event changed the face of the Chinese economy, creating a sizable number of Chinese millionaires: a 2011 survey by China Merchants Bank and Bain & Company reported that more than half a million Chinese have investable assets of more than $1.6 million, almost 60 percent of whom were considering emigrating. But more and more are returning home as well. “As China has become much more integrated in the global financial system and enjoyed huge economic growth, the focus is not on leaving China but returning to it,” said Ma. “Students now consider studying abroad to have opportunity costs as well as benefits.”

Even members of the first and second waves are today considering a return home after formative years abroad. The term bestowed on the increasing number of these Chinese is haigui, or “sea turtle.” Just as adult female sea turtles return to the very beach on which they were hatched in order to lay their eggs, Chinese are returning to their homeland in increasing numbers to participate in the remarkable transformation of their country. Ma became a sea turtle himself in 2008. Before he did, though, he spent a decade deliberately becoming a bilingual, bicultural businessperson. A coveted one. “There’s an endless appetite on both sides of the water for people with the expertise that Winston has. People who are not only very knowledgeable about the business world, but who know how to commute between two very different political-legal cultures with very different values, attitudes, and experiences,” says Professor Jerome Cohen, co-director of NYU’s U.S.-Asia Law Institute, who was, in the early 1980s, the first Western lawyer to practice in Beijing. “We just don’t have anything like the number of people we need, on both sides.”

As exchanges around the globe eye Greece with concern, there is no doubt that our world is shrinking and enmeshed. We should all care how China fares in investing its trillions, says Cohen. Consider Japan in the 1980s and ’90s, he adds. “Japan did not invest wisely in the U.S. Its subsequent economic difficulties created tensions between the countries that might have better been avoided.”

Ma was born in July 1973 in Suzhou, the historic silk capital of China, which boasts numerous lakes and interconnecting canals and about 150 classical Chinese landscaped gardens. Known as the Venice of the East, it is only about 40 minutes by commuter rail from Shanghai. Ma enjoyed a middle-class youth there as the second child of two high school teachers. (His sister, Xiaoyan, lives with their mother and works for the Suzhou government.) After a strong showing in high school, he entered Dalian Military Academy in Liaoning Province for a compulsory one-year course in military training as a member of Fudan University’s Class of 1990. Along with Tsinghua and Peking Universities, Fudan, established in 1905 in Shanghai, is considered one of China’s most elite educational institutions.

Ma earned a bachelor of science degree in electronic materials and silicon devices in 1995, graduating first in a class of 23. While a number of Ma’s classmates then took the obvious route, snagging jobs at places like Intel and Singapore Semiconductor, Ma had other ideas. With an eye already on U.S.-China relations, he decided that he would dive headlong into the middle of a raging debate of the time: software piracy. The two governments were in the midst of negotiating a pact to help protect American software, and Ma saw an opportunity to be a pioneer in intellectual property protection in China. “It was a chance to combine knowledge of American culture, technology, and crossborder issues,” he says. So he decided to go to law school to round out his expertise. He didn’t go far, enrolling in a post-undergraduate degree program at Fudan’s own School of Law.

Ma graduated at the top of his class once again—this time the first of 32. But he soon realized he’d made a miscalculation. Intending to stay ahead of the curve, Ma actually might have been too far ahead of it when it came to intellectual property in China. The epiphany came, he says, when he visited a friend in the graduate dormitory at Fudan and watched a steady stream of students come knocking at the door to buy versions of pirated software that the friend kept stashed under his bed. “At that moment, I knew it was the wrong choice of career,” he says. “I was way too early. It was the right path, but it wasn’t really taken seriously until after the turn of the century.”

It was time to change directions, and as luck would have it, NYU Law sent a contingent of professors to lecture at Fudan during Ma’s final year of law school. Led by John Pagan, then head of the school’s Hauser Program, the effort was a trailblazing one. The program, conceived in 1995, set out to invite about a dozen international scholars each year to join the NYU Law community. But it came with a remarkable twist: the program would fully fund the candidates. Law schools rarely gave scholarships to foreign students at the time, and to find one that included a full ride—airfare, board, and living expenses—was almost unheard of. Hauser was charting a new course, though, and had Ma in its sights from the very beginning.

The only problem? It had its eyes on another student as well, Chinese student that year, Ma seemed destined to do something very uncharacteristic: come in second place. While his parents had provided for top schools, financing a foreign education was another thing entirely, and when he learned from Pagan that he wasn’t the frontrunner, Ma says he faced the depressing prospect that he might not get a U.S. law degree. (Harvard Law was ready to have him, but he’d have to finance it himself.)

Then he got “the e-mail.” Pagan informed him that his rival for the scholarship had chosen to go to Harvard. Hauser wanted Winston Ma. Pagan, who currently teaches law at the University of Richmond, jokes that Ma’s memory must be failing him. “I can’t believe that we ever considered him our number two choice,” he says. “I recall him as a brilliant, focused, and highly motivated young scholar.” Ma impressed Pagan to such a degree that Pagan later invited him to teach at Richmond as a visiting international scholar. “I’ve never met the guy who chose to go to Harvard,” Ma says now. “Maybe I should track him down and thank him.”

When Ma flew from Shanghai to New York, it was his first trip out of China. He joined a mini-U.N. of young scholars—his Hauser cohorts hailed from Australia, China, Germany, India, Israel, New Zealand, the Philippines, and Venezuela—and he even met his future wife, Angela Ju-Hsin Pan (who enrolled from Taiwan one year after Ma, earning an LL.M. in 1999), at the school. Even if publications like the Wall Street Journal still hadn’t grasped the paradigm shift in China’s global economic position—Ma remembers having to read well into the newspaper to find any stories about China—he knew he was part of a select group of native Chinese speakers who would soon be in a position to help shape history.

While Ma narrowed his focus to capital markets law during his studies at NYU, he says the coursework that initially resonated with him was about civil procedure. In a course taught by Andreas Lowenfeld, Herbert and Rose Rubin Professor of International Law, he was flabbergasted by one of the very first issues, that of constitutional law and the matter of jurisdiction. “I’d had a legal education, but I’d never heard of civil procedure being discussed in the context of constitutional law,” Ma recalls. “It was also the first time I got to see the eloquence of a Supreme Court justice opinion.”

The lawsuit in question was a famous one: International Shoe v. Washington, a landmark case in which the Court established a number of legal rules, from corporate participation in interstate commerce in state unemployment compensation funds to the due process clause of the 14th Amendment. “They were talking about whether it was fair to have a case like this, before even addressing the substantive question of whether they were for or against,” says Ma. “The opinion by Chief Justice Harlan Stone was one of the most eloquent I have ever read. I still remember some of the exact words, like the fact that a lawsuit cannot ‘offend traditional notions of fair play and substantial justice.’ I was also amazed that a professor would be so familiar with a case written by a judge. In China, you opened up a book and looked up the penalty for the charge. Here, it was much more of an engaged discussion.

“I went to Chinese law school from an engineering background,” he continues, “where everything is structured. Chinese law was like that too, with the Supreme Court issuing opinions not in essay format but merely saying, ‘These are the standards, and this is how we’re going to apply them in court.’ Contractual law, for example, might say that if there’s a dispute about a contract, then the jurisdiction should be at the defendant’s side, because if you want to bring a case, you bring it at their jurisdiction. It’s a very practical approach to the law. In China, I would never have paid that much attention to legal theory, as practical rules ultimately prevail. So what really fascinates me about the U.S. is that it’s actually much more sensitive to the facts. There are general themes, but the facts are all different and unique, and thus require a better appreciation of cultural history. My civil procedure course at NYU was the starting point for me of a more balanced understanding of language and culture and social concerns.”

In particular, says Ma, his NYU Law studies showed him the value of understanding the human factor in business and social dealings, and of being aware of precedent and history. “In this interconnected world, understanding other people’s cultural traditions, historical backgrounds, and social values is critical,” says Ma. “When you’re working in the derivatives business, you’re dealing with the most complicated financial models that are out there. But I also spend a lot of time trying to understand the people on my side and the counterparty side.” Even today, in a continuing attempt to understand Anglo-Saxon culture in an English-dominated world, he goes the extra mile. Beside his bed is a volume of Shakespeare.

Armed with a degree in international economic law, Ma dived right into corporate and capital markets work in a succession of jobs with increasing responsibility at Davis Polk & Wardwell, J.P. Morgan, and Barclays Capital. He detoured exactly once, by leaving Davis Polk for the University of Michigan in 2001 to pursue an M.B.A. and a master’s in engineering with an eye to hitching onto the tech boom bandwagon. When the tech bubble burst partway through his M.B.A., he finished his degrees but headed to Wall Street.

Ma’s focus was capital markets, specifically, sophisticated equity derivatives. At Davis Polk, Ma’s initial strategy had been to take on as much local U.S. work as he could, with the goal of being seen on par with his American associates and not just as someone with a specialty in speaking to Chinese clients or to Chinese on behalf of U.S. clients. So while he did work on initial public offerings for Chinese companies, he made sure it was only part of his workload. He took the same approach at his Wall Street jobs. While he helped Chinese companies looking to learn about (and use) novel financial products developed in the U.S. market, he also made sure to play a significant part in U.S.-centric transactions.

One notable example: in July 2003, J.P. Morgan partnered with Microsoft to create a one-time transferable stock option program that allowed holders of underwater Microsoft options to sell their options to the bank. Some 51 percent of Microsoft employees, representing 55 percent of the eligible shares, chose to do so in one of the largest equity derivative transactions ever—$8.8 billion worth. In this and other instances of J.P. Morgan’s entering into derivatives trades on its own balance sheet, Ma frequently served as one of the firm’s main financial engineers.

Linda Simpson, the partner overseeing Davis Polk’s equity derivatives capital markets business, says Ma uses all the available tools at his disposal to get his job done neatly and cleanly. “Winston is nothing short of a Renaissance man,” she says. “On one deal, he realized that all the other lawyers had overlooked an interesting mathematical issue about the pricing of one security. He wrote letters to professors about the issue, and they wrote him back. I was blown away. How many associates do that?”

Simpson also noticed something that most people who work with Ma have seen: regardless of what job he happened to be doing at any point in time, he didn’t just get buried in the details; he also stepped back to take a wide-angle view. When working with Securities and Exchange Commission regulations on a specific derivatives deal, he would also ask: How should the Chinese securities officials regulate local markets in China? How will China adopt usage of new kinds of derivatives that the U.S. is introducing? “He is a terrific U.S. lawyer,” says Simpson. “But he is also a lawyer with a Chinese law degree and an M.B.A. There aren’t that many people with qualifications like that, and it’s no surprise that he’s now become extraordinarily valuable to China as well.”

Beyond his day-to-day role in structuring financial products for clients at J.P. Morgan, Ma was often brought in as a translator of China-specific issues that his New York colleagues found more difficult to understand than the usual concerns of U.S.-based issuers. When Chinese companies sought U.S. financing, for example, the country’s foreign exchange system required establishing offshore financial affiliates that served as pass-through vehicles for transactions that couldn’t be done directly in China itself. “It was pretty confusing to some of my New York colleagues,” says Ma. “And I played a particular communications role in bringing them up to speed on how the transactions worked.”

Ma has a knack for making complex products understandable, despite English being his second language. In every trading desk he has worked on, Ma has been known as a patient teacher of younger and less experienced traders, and he has even helped CFOs and treasurers of client companies polish their own communications with such constituents as investors, rating agencies, and regulators.

Starting from his first job at Davis Polk, Ma began honing his writing skills in English, contributing numerous articles on legal and other technical matters regarding derivatives to the newsletter Derivatives Week’s “Learning Curve” column. He eventually published some 20 articles on derivatives pricing, trading theory versus practice, and capital markets innovations in China.

Eventually, Ma’s ambitions grew and he began working on a book that capitalized on his position as a Chinese national on Wall Street. His 2006 opus, Investing in China: New Opportunities in a Transforming Stock Market, is one part investing textbook and one part treatise on the ongoing developmental challenges still facing Chinese securities markets. The publication turned Ma from a well-regarded banker and lawyer into an internationally quoted expert on China’s markets and legal system. Rather than being merely Chinese Investing 101, Ma’s book characteristically demystified all manner of complex topics, including multiple derivative securities; the differences, due to local regulatory and legal frameworks, between Chinese and Western investment products; and the overriding influence of China’s particular brand of state-owned capitalism on its securities markets.

“It wasn’t just cheerleading,” says Richard Sylla, Henry Kaufman Professor of the History of Financial Institutions and Markets at NYU’s Stern School of Business, who wrote the foreword. “He also provided some warnings, in particular about those enterprises that were majority-owned by the state. He pointed out that if China followed the path of other countries, they would privatize these things. He didn’t make an explicit argument, but by talking about it, he was tacitly endorsing the idea. And that’s just what they did, with the result that China became much more attractive to foreign investors.”

Ma sees the book as a major turning point in his career. “After my book, it had become very clear that I might prove a valuable link between China and the U.S.,” he told a reporter. Indeed, senior Chinese bureaucrats were now noticing their countryman as well. Peter Zhang, deputy director general of the China Banking Regulatory Commission, offered high praise in a book blurb: “His expertise in both legal and financial areas combined with his understanding of the Chinese financial system make the book attractive to those interested in the Chinese financial markets, particularly in the legal aspects and market innovation.”

In late 2006, Chinese authorities established the country’s first derivatives trading exchange, the China Financial Futures Exchange. The first product was an index futures contract. Soon thereafter, the Shenzhen Stock Exchange organized an annual China International Derivatives Forum, where Ma was an “international expert” speaker and usually the sole Wall Street representative from the North American markets. Even at that late date, few Chinese had made it to the front office of a U.S. trading floor.

Remarkably, the increased attention didn’t go to his head. When it was suggested that he translate his book into Chinese, he demurred. “I’m of the view that local people always know the situation the best, and it seemed to me that Chinese people didn’t need advice from someone sitting in New York on how to invest in their own markets,” he says. “I think about the guys who were paid to watch bicycles outside the Shanghai Stock Exchange in the 1990s, at 10 cents per bike. They could probably read the market up and down much more sensitively than I could have, just by counting the number of bicycles out there.”

At Barclays, where he had ascended to the title of deputy chief of the convertible and equity solutions group, Ma began a series of dinners modeled on the salons of the 19th century, inviting bankers, lawyers, journalists, regulators, and businessmen interested in the broad topic of China for evenings of inspired conversation.

The effort was another example of Ma’s deliberateness. “He called them ‘China dinners’ and invited a select group of people he thought would mesh well,” says Ruth Sherman, a communications consultant who attended a few and who had worked with Ma on improving the cultural aspects of his speech. “Winston guided the conversation at those dinners; he showed that he knew the value of being a connector—something that is obviously highly valued in the business world. He understood that intuitively.”

One topic that consumed the group at more than one dinner: the “Made in China” miracle after the country’s entry into the World Trade Organization in 2001. Ma’s guests debated the big questions: Why had China become the world’s manufacturing center? How long would its competitive advantage last?

Ma’s co-host, Michael Zakkour, who at the time was running a consulting firm for U.S. multinationals, says dozens of friendships came out of the dinners, as well as business partnerships. “We put together some of the best intellects in New York and beyond for those salons,” says Zakkour, who marvels at Ma’s cross-cultural fluidity. “He comes across as both Chinese and American. Winston is one of those rare characters who can live, work, operate, think, and act in both cultures.” Zakkour lived in Beijing for four years and continues to commute to China regularly. He points out that there are lots of people who can learn Mandarin and then speak to Chinese natives by substituting Chinese words in American phrases and syntax. But the brilliant ones, he argues, speak in a cultural and social context as one Chinese would to another. “That’s a whole degree of difficulty higher,” says Zakkour. “And Winston has done it, only in reverse.” Frank Guarini ’50 (LL.M. ’55), the 88-year-old seven-term New Jersey congressman who counts Ma among his friends, agrees: “He is a man of the future—someone who will be a major player in the business world of tomorrow.”

Among friends and coworkers, Ma is always quick with a joke or, somewhat surprisingly, a line straight out of a Hollywood blockbuster. Salim Mawani, who worked with Ma at Barclays Capital, recalls a never-ending string of movie one-liners that poured out of Ma deep into long nights on the trading desk. Ma’s memos to colleagues often began with references such as “Houston, we have a problem,” from Apollo 13, or “We will not vanish without a fight!” from Independence Day.

Ma readily admits to being a movie buff, but points out that it was also a subtle way for him to practice English with his colleagues instead of getting mired in legalese or banking-speak. As usual, his cultural barometer is unerring, to the point where he has a genuine appreciation of good, old-fashioned raunchy American comedy. “I like Old School,” he says, referring to the 2003 frat boy favorite starring Will Ferrell, Vince Vaughn, and Luke Wilson. It is hard to imagine, but the fact is that behind the otherwise formal and polite demeanor, Ma laughs along with his trading floor peers at R-rated comedies. When asked of other ways Ma finds to blow off some steam, his wife, Angela, says he enjoys relaxing and having a beer while watching the New York Knicks. He is also an avid runner and swimmer, and a self-taught student of Chinese medicine. Plus, he enjoys cooking; one of his specialties is eel.

Ma is also a perfectionist, which his wife acknowledges can be irksome to a self-described “normal” person such as herself. “He has ‘correct’ attitudes toward almost everything,” she says. “He eats healthy—fruits and vegetables—likes to exercise, and likes to go to bed and get up early. Winston values efficiency and is always working on something productive. That’s basically a good thing, but it can occasionally be annoying.”

Describing Ma as a perfectionist seems suspiciously like the answer to the cliché interview question, “What is your greatest weakness?” Only in this case, it seems to have the virtue of truth. Winston Ma is a perfectionist, in both his personal and professional life: always on message, always proper. It can make it a little difficult to get a read on him as an actual person, but spend enough time with him and you will see a twinkle in his eye.

Not that Angela Ma doesn’t have her own drive. Since earning her LL.M. from NYU Law, she has passed the bar in three jurisdictions—Taiwan, the United States (New York), and China—and has worked for law firms and banks herself. In the past dozen years, though, she has moved four times in support of her husband’s career. Now she is writing her dissertation on ownership issues regarding stolen art and looted cultural property to earn a J.S.D. at the Central University for Nationalities, in Beijing.

In 2007, Ma recalls, he and another colleague from Barclays, Dev Shrotri, would have numerous conversations asking each other why they were watching from afar as their respective countries were undergoing massive economic transformation. “We were a Chinese guy and an Indian guy working for a British bank,” says Ma. They named it their “Chindia” quandary. And then they acted: Dev went to India to work on a start-up, and Ma went to Beijing.

As much as recent headlines about China’s government emphasize that connections and nepotism are still a common way to land lucrative jobs, Ma found his position in a surprisingly old-fashioned way: by answering a help-wanted ad.

China Investment Corporation was founded in 2007 as a wholly owned entity of the Chinese government. According to its 2011 annual report, it is “a vehicle to diversify China’s foreign exchange holdings.” Like the Chinese government itself, the fund takes the long view, and has elucidated plans to evaluate performance over a 10-year horizon. CIC posted recruiting notices in the Financial Times and the Wall Street Journal, and Ma submitted his résumé without having any personal contacts there. (He’d met the fund’s president, Gao Xiqing, at a speech at NYU but had not run into him again until his interview.) Ma got the job, joining the fund in May 2008 as a managing director in the special investments department in Beijing. He took a pay cut and became a “sea turtle,” but says the pride of working for his country and the fact that he is once again on the cutting edge of global finance more than make up for it.

His transformation has not gone unnoticed. “Winston Ma is at ease in both Eastern and Western cultures,” says Gustave Hauser (LL.M. ’57), a cable television pioneer who with his wife, Rita, a member of the President’s Intelligence Advisory Board, founded NYU School of Law’s eponymous program. “He understands the nuances between the two cultures. Not only that, he is intellectually stimulating, socially adept, and gregarious. People like him. And the Chinese government has clearly recognized his competence by giving him such great responsibility.”

Since joining CIC, Ma has had leadership roles in major direct transactions in mining, energy, agriculture, and financial services sectors. He mentions that he is working with the Canadian heads of Chinese companies to establish the first-ever China Chamber of Commerce in Canada, which will include finance and information technology companies in Toronto, energy companies in Alberta, and mining companies in British Columbia and Quebec. But he is otherwise understandably reticent about discussing his specific duties, given the political sensitivity of his post. Nonetheless, all signs point to Ma’s enjoying the favor of his superiors. “Winston’s education and training in law have enabled him to be more effective in his work at our company,” says CIC president Gao. “In particular, the analytical capabilities and sensitivity to risks required of a lawyer prove to be valuable to a large financial investor like CIC.”

What are Ma’s views on China’s particular version of state capitalism? Or the Chinese aphorism “The state advances while the private sector retreats”? If Ma has opinions, he’s not sharing them. “I’m just acting as an investment professional,” he repeats, perhaps the only time over the course of several discussions with Ma that his answer seems programmed and not considered. CIC’s mandate makes clear it is a financial investor and does not seek corporate control. Returns have been solid, if not extraordinary. Despite a 4.3 percent loss in 2011, the fund has registered a 3.8 percent annual return since 2007.

Steer Ma away from the confidential details of his day-to-day job, and it’s possible to engage him in an area he enjoys speaking about: what we can learn from history and how we can use its lessons to better ourselves and our relationships today. He likens the current mutable state of global capital markets to the shifts that faced the Solvay Council in 1911, when physicists were confronting earthshaking discoveries in the quantum realm that threatened the foundations of a discipline rooted in the notions of Isaac Newton and James Clerk Maxwell. Solvay was convened as a cooperative focused on intellectual debate and collaborative efforts. Ma sees both the Hauser Program and his job at CIC as similar opportunities to move the dialogue forward about a still rapidly changing world.

And indeed, Ma is one of an extremely select group of people with the experience, education, and background to provide a bridge for constructive dialogue between China and the United States as they feel out their respective positions in a new world order. “Each government must work to build domestic security and prosperity to fit its own unique political, economic, geographic, cultural, and historical circumstances,” Ma said in his Hauser dinner keynote in January. “But there must be cross-border conversations and brainstorming in the broadest possible context, and NYU and the Hauser Program are the perfect venues for that. This historic time of the century calls for the collective effort of the NYU community—each and every one of us.”

—Duff McDonald is a contributing editor at Fortune. He is at work on The Firm, a history of McKinsey & Co., due from Simon & Schuster in 2013.

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Ma is named one of 21 Young Leaders in 2013 by the Asia Society

Ma profiled in Dividend, the magazine of the Univeristy of Michigan Ross School of Business