THE BEGINNING OF THE GREAT LAND GRAB

By Dr. Richard S. Appel              July 5, 2005 www.financialinsights.org

July 5, 2005 – June 27, 2005, will likely go down in U. S. history as the day when the American People lost one of the unalienable rights bestowed upon us by our Founding Fathers. For to our detriment, it was on that fateful day that the Supreme Court of the United States expanded its interpretation of a major tenet of the Fifth Amendment to the Constitution.

Eminent domain is defined by my Webster’s Dictionary as “the power of the state to take private property for public use with payment of compensation to the owner”. This is granted by the Fifth Amendment. Prior to last Monday, this power was relatively sparingly utilized by various local, state and federal governments.

When a property was condemned under eminent domain, it was typically done to acquire land along the right of way for building a railroad or roadway, supplying water, or for the construction of a government facility such as a post office or a prison. Additionally, urban renewal and the destruction and replacement of slums with low cost housing, was effected by various governments working in conjunction with private enterprises. In all of these earlier limited instances, from the founding of our nation, each eminent domain “taking” was done to benefit some direct need of the American People at large.

Unfortunately, the recently handed down Supreme Court ruling has expanded the Fifth Amendment’s scope. Never before did a private entity directly benefit from the “taking” of the property of others through eminent domain. This ruling sets the stage for abuse. It has the potential to harm a yet unnamed number of ordinary citizens to primarily increase government tax revenues, and for the benefit of a few private enterprises and individuals.

The Supreme Court’s finding was the final decision in the case of Kelo vs. New London, Connecticut. The city of New London desired to condemn a number of well-maintained residences along its waterfront, and transfer their title to a private company. The sixteen homes were to be torn to the ground. In there place was to be built a series of buildings including a hotel, condominiums, and office space. The Supreme Court for the first time found that this eminent domain transfer to a private entity fit within the meaning of the Fifth Amendment.

Justice John Paul Stevens wrote the opinion for the majority of Justices. His vote in favor was joined by Justices Anthony Kennedy, David H. Souter, Ruth Bader Ginsburg and Stephen G. Breyer. The dissenters were Justices Sandra Day O’Connor, Antonin Scalia, Clarence Thomas and Chief Justice William H. Rehnquist. In rendering the opinion of the majority of Justices, Stevens stated in part that “The city has carefully formulated an economic development plan that it believes will provide appreciable benefits to the community, including – but by no means limited to –new jobs and increased tax revenues”. He went on to state that, “...To effectuate this plan, the city has invoked a state statute that specifically authorizes the use of eminent domain to promote economic development. Because this plan unquestionably serves a public purpose, the takings challenged here satisfy the public use requirement of the Fifth Amendment”.

The future of countless Americans will now be exposed to suffering in the name of “serving a public purpose” in a potential myriad of new fashions. This, while simultaneously enhancing the wealth of some private enterprises and individuals.

The day after the decision was handed down I turned first to the New York Times for additional information. Surprisingly, although the Times’ front page listed what they called major Supreme Court decisions on the “Ten Commandments”, “File Sharing”, “Revealing Sources” and “Domestic Violence”, and devoted substantial first page space to three of them, not a single word discussed Kelo vs. New London. This was surprising because the New York Times doesn’t normally devote extended coverage to Supreme Court decisions. Yet, in my opinion, they omitted any mention of the most important ruling while highlighting others of lesser merit.

Later that week a local newspaper, the Atlanticville, ran the headline, “High Court Ruling A Blow To Residents”. The Atlanticville described the potential ramifications to a number of local residents who were involved in a similar case. Their three-block neighborhood on Marine Terrace, Ocean Terrace, and Seaview Avenue in Long Branch, NJ, was involved in a similar eminent domain lawsuit. If they lose the case, which is now likely due to the Supreme Court’s decision, the 36 property owners will be forced to sell and vacate their homes. Their dwellings will then be “razed and replaced by upscale townhouses and condominiums.” Upon learning of the Court’s decision a local resident stated “It is a decision that invites corruption. It puts more power into the affluent and politically connected”.

There are numerous other similar cases pending across the nation that will be affected by this high court decision! And, there are will likely be countless more to follow.

When Eminent Domain was earlier utilized the compensation for those who lost their property was often at below market prices. The offer was typically presented by the governing body involved. Frequently, the affected individuals could not afford proper legal representation and thus were forced to take whatever was offered. Others, who had sufficient capital to protect themselves, at least could fight for their just compensation. This situation will not likely change in the future, and those who do not have adequate funds to protect their rights may suffer similar fates. As is often the case, those who will be the most damaged have the least ability to defend themselves.

Tragically, this decision opens the door for many people to be legally forced from their homes. They now stand to suffer financially whenever government officials determine that the “public good” will be better served if their property is transferred into the hands of others.

Sandra Day O’Connor wrote the Court’s dissenting opinion. In part she stated that, “Any property may now be taken for the benefit of another private party, but the fallout from this decision will not be random. The beneficiaries are likely to be those citizens with disproportionate influence and power in the political process, including large corporations and development firms”.

One has to wonder if Ms. O’Connor’s surprise announcement a few short days later, of her retirement from the Supreme Court after 24 years on the bench, was not motivated by the direction that this decision is destined to take the country. From her own words she must have been deeply disturbed by this decision. For with it, the United States eliminated the ability of the average American to protect him or herself while it sanctioned another group of “citizens with disproportionate influence and power in the political process” to take their property away from them.

It is impossible to foretell how this unprecedented interpretation of the Fifth Amendment will affect all of us. However, it is likely that as time passes eminent domain will become more widely utilized to displace honest, law-abiding Americans from their homes and property.

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FINANCIAL INSIGHTS is written and published by Dr. Richard Appel and is made available for informational purposes only. Dr. Appel pledges to disclose if he directly or indirectly has a position in any of the securities mentioned. He will make every effort to obtain information from sources believed to be reliable, but its accuracy and completeness cannot be guaranteed. Dr. Appel encourages your letters and emails, but cannot respond personally. Be assured that all letters will be read and considered for response in future letters. It is in your best interest to contact any company in which you consider investing, regarding their financial statements and corporate information. Further, you should thoroughly research and consult with a professional investment advisor before making any equity investments. Use of any information contained herein is at the risk of the reader without responsibility on our part. Past performance does not guarantee future results. Dr. Appel does not purport to offer personalized investment advice and is not a registered investment advisor. The information herein may contain forward-looking information within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. In accordance with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, the statements contained herein that look forward in time, which include everything other than historical information, involve risks and uncertainties that may affect the company's actual results of operations. © 2005 by Dr. Richard S. Appel. All rights are reserved. Parts of the above may be reproduced in context, for inclusion in other publications if the publisher's name and address are also included for credit.