A story in yesterday’s Wall Street Journal throws light on the suspicious business history of Lev Parnas, one of Rudolph Giuliani’s helpers in the Ukrainian affair (“Giuliani Associate Left Trail of Troubled Businesses Before Ukraine Probe Push,” October 31, 2019). Mr. Parnas has been charged by federal prosecutors and Mr. Giuliani himself may be under investigation. In an article titled “The Unravelling of Rudy Giuliani (October 17), The Economist wondered how the former adulated mayor of New York City has come to be embroiled in the Ukrainian scandal with shady figures:

One answer—popular in New York—is that his mayoral successes were significant but exaggerated, and weighed by character flaws that have worsened over time. … In truth it is hard to find any altogether convincing explanation for Mr Giuliani’s behaviour. He was once a serious politician prone to indiscipline; now he is wild. Yet a former colleague of his, who knows both men, suggests resentful envy of his old co-star Mr Trump—whom he must secretly disdain—may be eating him alive. If so, Mr Giuliani is going to really hate it when the president and his entire party flatly disown him. That looks like the inevitable next stage in his disgrace.

Everybody seems to forget the Rudolph Giuliani of the 1980s, who may help understand the character and values of today’s Giuliani. As the U.S. Attorney for the Southern District of New York, he mounted a legal and very mediatized witch-hunt against Wall Street financiers. Some like Ivan Boesky were probably crooks, but Michael Milken, Robert Freeman, and others were certainly not. Milken was charged with 98 crimes of racketeering and fraud, including so called “insider trading,” that is, buying or selling, or abstaining from it, on the basis of information not available to everybody. Like old witches, his will to defend himself was broken and he ended up pleading guilty to six rather regulatory offenses (but felonies nonetheless) other than insider trading. He was imprisoned for nearly two years.

In this witch-hunt, Giuliani used the Racketeer Influenced and Corrupt Organizations Act (RICO), which was never intended for ordinary white-collar crimes. As for insider trading laws, they are legally and morally shaky and highly controversial from an economic viewpoint. The main economic and legal arguments against criminalizing insider trading had been explained in a 1966 book by Henry Manne of George Mason University, Insider Trading in the Stock Market. Insider trading that is not stolen and does not violate any contractual agreement disseminates information that contributes to the correct pricing of stocks. Moreover, laws against insider trading give investors a misleading sense of security. And when revealing inside information does violate contractual agreements, it is better dealt with through civil litigation. In 1980, most Western European states had no law against insider trading, virtually none criminalized it.

It is safe to say that these arguments weighed nothing in the mind of Giuliani, who was pursuing personal publicity and political ambitions. In a little book I published in Paris in 1991, Apologie des sorcières modernes (In Defense of Modern Witches), a “pamphlet” in the French sense of the word, I compared creative financiers like Milken to witches hunted by self-righteous and obscurantist inquisitor Giuliani.

The fact that Giuliani recently tried to obtain a presidential pardon for Milken may be a rare redeeming factor in a life devoted to authoritarian pursuits (on his deep authoritarianism, see “Liberty, Authority, and Giulani,” EconLog, November 19, 2018).

It would be ironic if the former witch-hunter found himself on the wrong side of the law, after contributing so much to undermine the rule of law.