Sunday, October 8, 2017
To encourage the next generation of privacy and data security researchers to explore economic questions in privacy and data security, the Federal Trade Commission today issued a call for presentations from students to coincide with the agency’s third PrivacyCon conference on February 28, 2018.
The PrivacyCon Student Poster Session will coincide with PrivacyCon 2018, which will focus on the economics of privacy.
The Student Poster Session call for submissions seeks research and input on issues and topics that will be covered by PrivacyCon 2018. This includes research examining how to assess the greatest threats to privacy, ways for companies to weigh the costs and benefits of security by design techniques, and potential market solutions and failures related to privacy and security.
The Student Poster session is also aimed at encouraging interaction and discussion between experienced researchers and students. The session will provide students an opportunity to present and discuss their research and its relation to privacy and data security policy and law.
The deadline for the Student Poster submissions is December 15, 2017. More information about how to submit presentations and about PrivacyCon 2018 can be found on the event page.
Saturday, October 7, 2017
New EU Commission Guidelines Tackling Illegal Content Online Requires Enhanced Responsibility of Online Platforms
This Communication lays down a set of guidelines and principles for online platforms to step up the fight against illegal content online in cooperation with national authorities, Member States and other relevant stakeholders. It aims to facilitate and intensify the implementation of good practices for preventing, detecting, removing and disabling access to illegal content so as to ensure the effective removal of illegal content, increased transparency and the protection of fundamental rights online.
The Commission announced in the Digital Single Market Strategy mid-term review that it would publish guidance on illegal content removal by end 2017.
The Communication on "tackling illegal content online, towards enhanced responsibility of online platforms", adopted on 28 September 2017, concerns the removal of illegal content online – incitement to terrorism, illegal hate speech, or child sexual abuse material, as well as infringements of Intellectual Property rights and consumer protection online. The Commission expects online platforms to take swift action over the coming months, in particular in the area of terrorism and illegal hate speech – which is already illegal under EU law, both online and offline.
Online platforms need to exercise a greater responsibility in content governance. The Communication proposes common tools to swiftly and proactively detect, remove and prevent the reapparence of content online:
- Detection and notification: Online platforms should cooperate more closely with competent national authorities, by appointing points of contact to ensure they can be contacted rapidly to remove illegal content.
- Effective removal: Illegal content should be removed as fast as possible, and can be subject to specific timeframes, where serious harm is at stake, for instance in cases of incitement to terrorist acts;
- Prevention of reappearance: Platforms should take measures to dissuade users from repeatedly uploading illegal content. The Commission strongly encourages the further use and development of automatic tools to prevent the reappearance of previously removed content.
The Commission considers that online intermediaries can put in place proactive measures without fearing to lose the liability exemption under the e-Commerce Directive.
The Commission services have conducted several workshops, dialogues with industry and launched an ongoing study on the topic which have provided input into the Communication.
The approach is fully aligned and consistent with the proposed Copyright Directive, including those aspects on the liability of online platforms that are currently widely debated. It is also fully consistent with the proposed revision of the Audio-visual Media Directive.
Friday, October 6, 2017
Notice 2017-46 provides guidance for financial institutions required to collect taxpayer identification numbers (TINs) and dates of birth under temporary regulations under Chapter 3 or a Model 1 Intergovernmental Agreement (IGA) as follows:
(1) With respect to foreign financial institutions (FFIs), this notice provides that FFIs in Model 1 IGA jurisdictions will not be in significant non-compliance with an applicable IGA during 2017, 2018, and 2019 solely as a result of a failure to report U.S. TINs for preexisting accounts, provided the FFI reports the account holder’s date of birth, makes annual requests for the TIN, and searches its electronic records for missing U.S. TINs before reporting information on 2017.
(2) With respect to U.S. financial institutions, this notice delays the start date of the requirement to collect foreign TINs for account holders to January 1, 2018, provides a phase-in period for obtaining foreign TINs from account holders documented prior to January 1, 2018, and narrows the circumstances in which a foreign TIN is required.
Taxpayers may rely on the provisions of this notice prior to the issuance of amendments to the temporary Chapter 3 regulations reflecting the notice.
Notice 2017-46 will be in IRB 2017-41, dated October 10, 2017.
Current Status of FATCA an CRS (Sept 2017 edition) https://ssrn.com/abstract=3045459
Thursday, October 5, 2017
FATCA Regulations To be Reviewed By Treasury for Potential Revocation? Along with 200 Other Regulations...
This Second Report recommends actions to eliminate, and in other cases mitigate, consistent with law, the burdens imposed on taxpayers by eight regulations that the Department of the Treasury (Treasury) has identified for review under Executive Order 13789.
Treasury is committed to reducing complexity and lessening the burden of tax regulations. In response to Executive Order 13789, Treasury’s Office of Tax Policy completed a comprehensive review of all tax regulations issued in 2016 and January 2017. The June 22 Report identified eight proposed, temporary, or final regulations for withdrawal, revocation, or modification. Treasury continues to analyze all recently issued significant regulations and is considering possible reforms of several recent regulations not identified in the June 22 Report. These include regulations under Section 871(m), relating to payments treated as U.S. source dividends, and the Foreign Account Tax Compliance Act.
Included in the review are longstanding temporary or proposed regulations that have not expired or been finalized. As part of the process coordinated by the Treasury Regulatory Reform Task Force, the IRS Office of Chief Counsel has already identified over 200 regulations for potential revocation, most of which have been outstanding for many years.
Treasury and the IRS expect to begin the rulemaking process for revoking these regulations in the fourth quarter of 2017. Treasury and the IRS are also seeking to streamline rules where possible. Later reports and guidance will provide details on the regulations identified for possible action, the reasons that they may be revoked, and the manner in which revocation would occur.
- Download Treasury Revocation of Regs 2017
- Current Status of FATCA an CRS (Sept 2017 edition) https://ssrn.com/abstract=3045459
Actions Taken on Current Regs of June Report?
Final Regulations under Section 7602 on the Participation of a Person Described in Section 6103(n) in a Summons Interview (T.D. 9778; 81 F.R. 45409)
These final regulations provide that the IRS may use private contractors to assist the IRS in auditing taxpayers. Under the regulations, the IRS may contract with persons who are not government employees, and those private contractors may “participate fully” in the IRS’s interview of taxpayers or other witnesses summoned to provide testimony during an examination. In particular, the regulations allow private contractors to receive and review records produced in response to a summons, be present during interviews of witnesses, and question witnesses under oath, under the guidance of an IRS officer or employee. These regulations were issued as temporary regulations in 2014 and were finalized in 2016. Although only two comments were submitted during the public comment period, these regulations have since attracted public attention and criticism. In particular, the IRS’s ability to hire outside attorneys as contractors and have them question witnesses during a summons interview has raised concerns. After the IRS hired an outside law firm to assist with the audit of a corporate taxpayer, a federal court found that the “idea that the IRS can ‘farm out’ legal assistance to a private law firm is by no means established by prior practice” and noted that it “may lead to further scrutiny by Congress.”4 While the court determined, based on the statute, that the IRS had the legal authority to enlist the outside attorneys, the court was “troubled by [the law firm’s] level of involvement in this audit.”5 The Senate Finance Committee subsequently approved legislation that would prohibit the IRS from using any private contractors for any purpose in summons proceedings. This legislation has not been enacted into law.
After reviewing and considering the foregoing concerns and the public comments received, Treasury and the IRS are looking into proposing a prospectively effective amendment to
these regulations in order to narrow their scope by prohibiting the IRS from enlisting outside attorneys to participate in an examination, including a summons interview. Under the amendment currently contemplated by Treasury and the IRS, outside attorneys would not be permitted to question witnesses on behalf of the IRS, nor would they be permitted to play a behind-the-scenes role, such as by reviewing summoned records or consulting on IRS legal strategy.
When the IRS enlists outside attorneys to perform the investigative functions ordinarily IRS investigators wield significant power to question witnesses under oath, to receive and
review books and records, and to make discretionary strategic judgments during an audit— with potentially serious consequences for the taxpayer. The current regulation requires the
IRS to retain authority over important decisions, but the risk of a private attorney taking practical control may simply be too great. These powers should be exercised solely by government employees committed to serve the public interest, not by outside attorneys.
These concerns outweigh any countervailing need for the IRS to contract with outside attorneys. Treasury remains confident that the core functions of questioning witnesses and conducting investigations are well within the expertise and ability of the IRS’s dedicated attorneys and examination agents. Although Treasury and the IRS are currently considering proposing an amendment to the regulations so that outside lawyers would no longer be allowed to participate in an examination, Treasury and the IRS currently intend that the regulations would continue to allow outside subject-matter experts to participate in summons proceedings. In certain highly complex examinations, effective tax administration may require the specialized knowledge of an economist, an engineer, a foreign attorney who is a specialist in foreign law, or other subject-matter experts. In some cases, there is a compelling need to look outside the IRS for expertise that the IRS’s own employees lack. Because experts have a circumscribed role in providing subject-matter knowledge, outside experts do not pose the same risks as outside attorneys. Outside experts should thus continue to be permitted to assist IRS by reviewing summoned materials and, if necessary, by posing questions to witnesses under the guidance and in the presence of IRS employees. Such a role would be limited to the small subset of cases in which the IRS requires the assistance of a subject-matter expert to ensure effective tax administration.
Regulations under Section 707 and Section 752 on Treatment of Partnership Liabilities (T.D. 9788; 81 F.R. 69282)
These partnership tax regulations include: (i) proposed and temporary regulations governing how liabilities are allocated for purposes of disguised sale treatment; and (ii) proposed and temporary regulations for determining whether so-called bottom-dollar” guarantees create the economic risk of loss necessary to be taken into account as a recourse liability. Treasury and the IRS, therefore, are considering whether the proposed and temporary regulations relating to disguised sales should be revoked and the prior regulations reinstated. By contrast, Treasury and the IRS currently believe that the second set of regulations relating to bottom-dollar guarantees should be retained.
Final and Temporary Regulations under Section 385 on the Treatment of Certain Interests in Corporations as Stock or Indebtedness (T.D. 9790; 81 F.R. 72858)
These final and temporary regulations address the classification of related-party debt as debt or equity for U.S. federal income tax purposes. Treasury received a very large number of comments on the Section 385 regulations. Many supported the regulations, while others were critical. Shortly after issuing the June 22 Report, Treasury and the IRS announced in Notice 2017-36 that application of the documentation rules would be delayed until 2019. After further study of the documentation regulations, Treasury and the IRS are considering a proposal to revoke the documentation regulations as issued.
Distribution regulations retained pending enactment of tax reform. The distribution regulations address inversions and takeovers of U.S. corporations by limiting the ability of corporations to generate additional interest deductions without new investment in the United States.
Final Regulations under Section 367 on the Treatment of Certain Transfers of Property to Foreign Corporations (T.D. 9803; 81 F.R. 91012)
After considering the comments and studying further the legal and policy issues, Treasury and the IRS have concluded that an exception to the current regulations may be justified by both the structure of the statute and its legislative history. Thus, to address taxpayers’ concerns about the breadth of the regulations, the Office of Tax Policy and IRS are actively working to develop a proposal that would expand the scope of the active trade or business exception described above to include relief for outbound transfers of foreign goodwill and
going-concern value attributable to a foreign branch under circumstances with limited potential for abuse and administrative difficulties, including those involving valuation. Treasury and the IRS currently expect to propose regulations providing such an exception in the near term.
Please download my new analysis of the impact of FATCA and CRS: https://ssrn.com/abstract=3045459
A former contracting officer for the U.S. Army Corps of Engineers (USACE), Far East District (FED) and a former officer in the Korean Ministry of Defense (MOD) were indicted for their roles in a scheme to direct over $400 million in Department of Defense (DOD) construction contracts to a large multinational corporation based in the Republic of Korea in exchange for over $3 million in bribes.
Acting Assistant Attorney General Kenneth A. Blanco of the Justice Department’s Criminal Division; Director Frank Robey, Major Procurement Fraud Unit, U.S. Army Criminal Investigation Command (CID); and Assistant Director Stephen E. Richardson of the FBI's Criminal Investigative Division made the announcement.
Former FED contracting officer Duane Nishiie, 58, of Honolulu, and former Korean MOD officer Seung-Ju Lee, 50, of Seoul, Korea, were charged in a nine-count indictment with mail and wire conspiracy, bribery, wire fraud, and conspiracy to commit money laundering. Nishiie was also charged with three counts of making a false statement.
According to the indictment, from 2008 through 2012, Nishiie and Lee solicited bribes from a large Korean engineering and construction company in exchange for Nishiie’s official actions to direct to the company certain contracts relating to the relocation and expansion of Camp Humphreys, a large military installation in Korea. The indictment further alleges that during this time, Nishiie, Lee and others used foreign bank accounts to hide the bribes accepted by Nishiie.
The indictment alleges that in late 2008, Nishiie took official action to steer a contract, valued at over $400 million, involving land development, utilities and infrastructure for the expansion of Camp Humphreys to the Korean company. Nishiie is also alleged to have used his official position in 2009 and 2010 to influence the award of a contract for construction of a project management office at Camp Humphreys, valued at over $6 million to the same Korean company.
In exchange for these actions, the indictment alleges, Nishiie and Lee received over $3 million in cash and other payments. Nishiie concealed these payments by using bank accounts held in the names of Lee and other Korean nationals.
U.S. Army CID, FBI and the Defense Criminal Investigative Service conducted the investigation. Trial Attorneys Richard B. Evans and Peter M. Nothstein of the Criminal Division’s Public Integrity Section are prosecuting the case.
Wednesday, October 4, 2017
State aid: Commission finds Luxembourg gave illegal tax benefits to Amazon worth around €250 million
The European Commission has concluded that Luxembourg granted undue tax benefits to Amazon of around €250 million. This is illegal under EU State aid rules because it allowed Amazon to pay substantially less tax than other businesses. Luxembourg must now recover the illegal aid. Download Amazon State Aid Decision
Commissioner Margrethe Vestager, in charge of competition policy, said "Luxembourg gave illegal tax benefits to Amazon. As a result, almost three-quarters of Amazon's profits were not taxed. In other words, Amazon was allowed to pay four times less tax than other local companies subject to the same national tax rules. This is illegal under EU State aid rules. Member States cannot give selective tax benefits to multinational groups that are not available to others."
Following an in-depth investigation launched in October 2014, the Commission has concluded that a tax ruling issued by Luxembourg in 2003, and prolonged in 2011, lowered the tax paid by Amazon in Luxembourg without any valid justification.
The tax ruling enabled Amazon to shift the vast majority of its profits from an Amazon group company that is subject to tax in Luxembourg (Amazon EU) to a company which is not subject to tax (Amazon Europe Holding Technologies). In particular, the tax ruling endorsed the payment of a royalty from Amazon EU to Amazon Europe Holding Technologies, which significantly reduced Amazon EU's taxable profits.
The Commission's investigation showed that the level of the royalty payments, endorsed by the tax ruling, was inflated and did not reflect economic reality. On this basis, the Commission concluded that the tax ruling granted a selective economic advantage to Amazon by allowing the group to pay less tax than other companies subject to the same national tax rules. In fact, the ruling enabled Amazon to avoid taxation on three-quarters of the profits it made from all Amazon sales in the EU.
Amazon's structure in Europe
The Commission decision concerns Luxembourg's tax treatment of two companies in the Amazon group – Amazon EU and Amazon Europe Holding Technologies. Both are Luxembourg-incorporated companies that are fully-owned by the Amazon group and ultimately controlled by the US parent, Amazon.com, Inc.
- Amazon EU (the "operating company") operates Amazon's retail business throughout Europe. In 2014, it had over 500 employees, who selected the goods for sale on Amazon's websites in Europe, bought them from manufacturers, and managed the online sale and the delivery of products to the customer.Amazon set up their sales operations in Europe in such a way that customers buying products on any of Amazon's websites in Europe were contractually buying products from the operating company in Luxembourg. This way, Amazon recorded all European sales, and the profits stemming from these sales, in Luxembourg.
- Amazon Europe Holding Technologies (the "holding company") is a limited partnership with no employees, no offices and no business activities. The holding company acts as an intermediary between the operating company and Amazon in the US. It holds certain intellectual property rights for Europe under a so-called "cost-sharing agreement" with Amazon in the US. The holding company itself makes no active use of this intellectual property. It merely grants an exclusive license to this intellectual property to the operating company, which uses it to run Amazon's European retail business.
Under the cost-sharing agreement the holding company makes annual payments to Amazon in the US to contribute to the costs of developing the intellectual property. The appropriate level of these payments has recently been determined by a US tax court.
Under Luxembourg's general tax laws, the operating company is subject to corporate taxation in Luxembourg, whilst the holding company is not because of its legal form, a limited partnership.Profits recorded by the holding company are only taxed at the level of the partners and not at the level of the holding company itself. The holding company's partners were located in the US and have so far deferred their tax liability.
Amazon implemented this structure, endorsed by the tax ruling under investigation, between May 2006 and June 2014. In June 2014, Amazon changed the way it operates in Europe. This new structure is outside the scope of the Commission State aid investigation.
The scope of the Commission investigation
The role of EU State aid control is to ensure Member States do not give selected companies a better tax treatment than others, via tax rulings or otherwise. More specifically, transactions between companies in a corporate group must be priced in a way that reflects economic reality. This means that the payments between two companies in the same group should be in line with arrangements that take place under commercial conditions between independent businesses (so-called "arm's length principle").
The Commission's State aid investigation concerned a tax ruling issued by Luxembourg to Amazon in 2003 and prolonged in 2011. This ruling endorsed a method to calculate the taxable base of the operating company. Indirectly, it also endorsed a method to calculate annual payments from the operating company to the holding company for the rights to the Amazon intellectual property, which were used only by the operating company.
These payments exceeded, on average, 90% of the operating company's operating profits. They were significantly (1.5 times) higher than what the holding company needed to pay to Amazon in the US under the cost-sharing agreement.
To be clear, the Commission investigation did not question that the holding company owned the intellectual property rights that it licensed to the operating company, nor the regular payments the holding company made to Amazon in the US to develop this intellectual property. It also did not question Luxembourg's general tax system as such.
The Commission's State aid investigation concluded that the Luxembourg tax ruling endorsed an unjustified method to calculate Amazon's taxable profits in Luxembourg. In particular, the level of the royalty payment from the operating company to the holding company was inflated and did not reflect economic reality.
- The operating company was the only entity actively taking decisions and carrying out activities related to Amazon's European retail business. As mentioned, its staff selected the goods for sale, bought them from manufacturers, and managed the online sale and the delivery of products to the customer. The operating company also adapted the technology and software behind the Amazon e-commerce platform in Europe, and invested in marketing and gathered customer data. This means that it managed and added value to the intellectual property rights licensed to it.
- The holding company was an empty shell that simply passed on the intellectual property rights to the operating company for its exclusive use. The holding company was not itself in any way actively involved in the management, development or use of this intellectual property. It did not, and could not, perform any activities, to justify the level of royalty it received.
Under the method endorsed by the tax ruling, the operating company's taxable profits were reduced to a quarter of what they were in reality. Almost three quarters of Amazon's profits were unduly attributed to the holding company, where they remained untaxed. In fact, the ruling enabled Amazon to avoid taxation on three quarters of the profits it made from all Amazon sales in the EU.
On this basis, the Commission concluded that the tax ruling issued by Luxembourg endorsed payments between two companies in the same group, which are not in line with economic reality. As a result, the tax ruling enabled Amazon to pay substantially less tax than other companies. Therefore, the Commission decision found that Luxembourg's tax treatment of Amazon under the tax ruling is illegal under EU State aid rules.
The infographic is available in high resolution here.
As a matter of principle, EU State aid rules require that incompatible State aid is recovered in order to remove the distortion of competition created by the aid. There are no fines under EU State aid rules and recovery does not penalise the company in question. It simply restores equal treatment with other companies.
In today's decision, the Commission has set out the methodology to calculate the value of the competitive advantage granted to Amazon, i.e. the difference between what the company paid in taxes and what it would have been liable to pay without the tax ruling. On the basis of available information, this is estimated to be around €250 million, plus interest. The tax authorities of Luxembourg must now determine the precise amount of unpaid tax in Luxembourg, on the basis of the methodology established in the decision.
Since June 2013, the Commission has been investigating the tax ruling practices of Member States. It extended this information inquiry to all Member States in December 2014. In October 2015, the Commission concluded that Luxembourg and the Netherlands had granted selective tax advantages to Fiat and Starbucks, respectively. In January 2016, the Commission concluded that selective tax advantages granted by Belgium to least 35 multinationals, mainly from the EU, under its "excess profit" tax scheme are illegal under EU State aid rules. In August 2016, the Commission concluded that Ireland granted undue tax benefits of up to €13 billion to Apple. The Commission also has two ongoing in-depth investigations into concerns that tax rulings may give rise to state aid issues in Luxembourg, as regards McDonald's and GDF Suez (now Engie).
This Commission has pursued a far-reaching strategy towards fair taxation and greater transparency and we have recently seen major progress. Following Commission proposals on tax transparency of March 2015, new rules on automatic exchange of information on tax rulings entered into force in January 2017. Member States have also agreed to extend their automatic exchange of information to country-by-country reporting of tax-related financial information of multinationals. A proposal is now on the table to make some of this information public. New EU rules to prevent tax avoidance via non-EU countries were adopted in May 2017 completing the Anti-Tax Avoidance Directive (ATAD) which ensures that binding and robust anti-abuse measures are applied throughout the Single Market.
In terms of ongoing legislative work, the Commission's proposals for a relaunched Common Consolidated Corporate Tax Base in October 2016 would act as a powerful tool against tax avoidance in the EU. In June 2017, the Commission proposed new transparency rules for intermediaries - including tax advisors - who design and promote tax planning schemes for their clients. This legislation will help to bring about a much greater degree of transparency and deter the use of tax rulings as an instrument for tax abuse. Finally, just this September the Commission launched a new EU agenda to ensure that the digital economy is taxed in a fair and growth-friendly way. Our Communication set out the challenges Member States currently face when it comes to acting on this pressing issue and outlines possible solutions to be explored ahead of a Commission proposal in 2018. All of the Commission's work rests on the simple principle that all companies, big and small, must pay tax where they make their profits.
The non-confidential version of the decisions will be made available under the case number SA.38944 in the state aid register on the Commission's Competition website once any confidentiality issues have been resolved. The State Aid Weekly e-News lists new publications of State aid decisions on the internet and in the EU Official Journal.
For detailed State Aid analysis, see Practical Guide to Transfer Pricing. Fifty co-authors contribute subject matter expertise on technical issues faced by tax and risk management counsel. Free download of chapter 2 here
Previous Amazon case analysis is Byrnes’ Analysis of the 200+ page Amazon Decision. Is it the Death Knell of the Income Method and Inclusion of Employee Stock Compensation for Cost Sharing Agreement Valuation?
Starbucks State Aid analysis Application of TNMM to Starbucks Roasting Operation: Seeking Comparables Through Understanding the Market
transfer pricing update is 2017 U.S. Transfer Pricing and Intra Group Pricing Update
Federal Agent, Colombian Narcotics Kingpin and Colombian National Indicted for Conspiracy, Corruption and Obstruction
A Homeland Security Investigations (HSI) Special Agent and two Colombian nationals were charged today by a federal grand jury in the Southern District of Florida with conspiracy, corruption and obstruction of justice charges stemming from their participation in a bribery scheme that resulted in the dismissal of an indictment filed against one of the Colombian nationals in exchange for cash and other things of value, announced Acting Assistant Attorney General Kenneth A. Blanco of the Justice Department’s Criminal Division; Special Agent in Charge Michael T. Moreland of the Office of Professional Responsibility (OPR), Immigration and Customs Enforcement’s (ICE) Southeast Region; and Special Agent in Charge Jay Donly of the Office of Inspector General (OIG), HSI.
According to the indictment, Special Agent Christopher V. Ciccione, II, 52, Phoenixville, Pennsylvania, was the case agent for Operation Cornerstone, a large-scale Organized Crime and Drug Enforcement Task Force case that resulted in indictments of Colombia-based cocaine traffickers from the Cali Cartel, including Jose Piedrahita Ceballos, a Colombian national. The indictment alleges that Piedrahita gave benefits to Ciccione in exchange for official acts that resulted in the dismissal of the indictment against Piedrahita. Juan Carlos Velasco, also a Colombian national, served as the intermediary between Ciccione and Piedrahita. Ciccione ultimately succeeded in getting the Cornerstone indictment dismissed against Piedrahita in exchange for approximately $20,000 in cash, dinner, drinks and prostitution.
The indictment further alleges that while maintaining contact with Piedrahita, Ciccione misled the U.S. Attorney’s Office and HSI management and altered DHS records to represent to decision makers that Piedrahita was “unidentified” and that his case should be dismissed because “all investigative efforts” were “exhausted.” In addition, Ciccone falsified the concurrence of several other federal agents and even attempted to parole Piedrahita into the U.S.
The U.S. Department of the Treasury's Office of Foreign Assets Control designated Piedrahita as a Specially Designated Narcotics Trafficker pursuant to the Foreign Narcotics Kingpin Designation Act on May 3, 2016.
Tuesday, October 3, 2017
In April 2016, the Internal Revenue Service and the United States Department of the Treasury (the "Treasury Department") (together, the "Agencies") issued a rule identifying stock of foreign acquiring corporations that is to be disregarded in determining an ownership fraction relevant to categorization for federal-tax purposes because the stock is attributable to prior domestic-entity acquisitions. 26 C.F.R. § 1 .7874-8T (the "Rule"). The U.S. Chamber of Commerce and the Texas Association of Business filed a legal challenge to the IRS’s immediately effective Multiple Acquisition Rule, which attempts to prevent certain corporate mergers that are otherwise permitted under the inversion rules under Section 7874 of the Internal Revenue Code.
The administration asked Congress to give it the authority to eliminate corporate inversions. When Congress would not do so, Treasury and the IRS ignored the clear limits of the tax code to target entirely lawful transactions. The Chamber argued that Treasury violated the Administrative Procedural Act (APA). The Chamber argued Treasury violated the APA in issuing the Rule because the Rule exceeds Treasury's statutory jurisdiction, Treasury engaged in an arbitrary and capricious rulemaking, and Treasury failed to provide affected parties with notice and an opportunity to
comment on the Rule.
“Treasury and the IRS ignored the clear limits of a statute, and simply rewrote the law unilaterally. This is not the way government is supposed to work in America,” said U.S. Chamber President and CEO Thomas J. Donohue.
The District Court stated that based on the broad authority granted by Congress, the court concludes the Rule does not exceed the statutory jurisdiction of Treasury.
As explained in the complaint, inversions are the natural consequence of America’s misguided policy of imposing high taxes on corporations, and then trying to export those taxes to income earned globally. “Instead of breaking the rules to punish companies engaged in lawful transactions, Washington should just do its job and comprehensively reform the tax code,” Donohue stated. “The real solution is tax reform that lowers rates for all businesses, allowing American companies to compete globally and the United States to attract foreign investment.”
Section 7874 sets a specific numerical threshold governing combination transactions between U.S. and foreign companies: so long as the shareholders of a foreign company own more than 40 percent of the combined entity’s stock, the transaction will not be treated as an inversion subject to this statutory provision. In order to circumvent this numerical threshold, the rule, which was made immediately effective, artificially ignores any stock owned by the foreign shareholders that came from prior acquisitions of a U.S. company within the three years before a merger. As a result, the rule disallows some mergers that clearly satisfy the 40 percent threshold.
“Treasury and the IRS rewrote the Internal Revenue Code and steamrolled over the Administrative Procedure Act, which requires that an agency provide interested parties with notice and an opportunity to comment before a rule becomes effective,” explained Lily Fu Claffee, chief legal officer of the U.S. Chamber. “Treasury and the IRS admitted to skipping over any prior notice or opportunity to comment on their Multiple Acquisition Rule, but offered no justification for dodging their legal obligations in this way. Treasury and the IRS should not act as if they are above the basic rules that govern all federal agencies.”
The District Court stated that the standard of review is highly deferential to the action of Treasury, and a reviewing court "may not use review of an agency's environmental analysis as a guise for second-guessing substantive decisions committed to the discretion of the agency." The court undertook a review of the full analysis by which Treasury determined the Rule is necessary to achieve the goals of the Internal Revenue Code. The court concludes Treasury did not rely on factors that Congress did not intend for them to consider or fail to consider an important aspect of the issue before them. Thus, the court concluded Treasury did not engage in an arbitrary and capricious rulemaking.
Treasury asserted that it complied with the APA's notice-and-comment requirements because a temporary regulation may be issued without notice and comment. The court disagreed stating that the statute specifically refers to permissible effective dates of regulations and publication of notice in the Federal Register as required by the APA but does not mention an exception for temporary rules.
Treasury countered that the temporary regulation was merely interpretative. The Court quoted Phillips Petroleum (5th Cir 1994): "Generally speaking.. .'substantive rules,' or 'legislative rules' are those which create law, usually implementary to an existing law; whereas interpretative rules are statements as to what the administrative officer thinks the statute or regulation means." The Court disagreed with Treasury stating that adjustments to application and treating stock as if it were not stock are not mere interpretations of the statute, but substantive modifications to the application of the statute. The court concluded the Rule is a substantive or legislative regulation, not an interpretive regulation, and Treasury is not therefore excused from the notice-and-comment procedure required by the APA.
Consequently, the inversion temporary regulations is unlawful and may not be enforced.
Texas A&M University invites nominations and applications for the position of Dean of the Texas A&M University School of Law. The desired appointment date is July 1, 2018.
Texas A&M University is a tier‐one research institution and American Association of Universities member. As the sixth largest university in the United States, Texas A&M University is a public land-grant, sea‐grant, and space‐grant university dedicated to global impact through scholarship, teaching,
and service. The members of its 440,000 strong worldwide Aggie network are dedicated to the University and committed to its core values of excellence, integrity, leadership, loyalty, respect, and selfless service.
Located in Fort Worth, the Texas A&M University School of Law is one of 16 colleges and schools that foster innovative and cross‐disciplinary collaboration across more than 140 university institutes and centers and two branch campuses, located in Galveston, Texas and Doha, Qatar. Since joining the A&M family in 2013, the law school has sustained a remarkable upward trajectory by increasing its entering class credentials and financial aid budgets; shrinking the class size; hiring new faculty members, including nationally recognized scholars; and enhancing the student experience. Consistent with its mission, Texas A&M University School of Law integrates cutting-edge and multidisciplinary scholarship with first‐rate teaching to provide students with the professional skills and knowledge necessary for tomorrow’s lawyers. Texas A&M University School of Law faculty members and students play a vital role by providing their legal expertise to collaborations with other Texas A&M professionals to develop new understandings through research and creativity.
The next Dean of Texas A&M University School of Law should provide dynamic, innovative, and entrepreneurial leadership and vision to shape the school’s continued transformation into a model for future legal education. Candidates should have a Juris Doctorate and a scholarly record appropriate for appointment at the rank of tenured professor. Other candidates who hold distinguished records of professional and intellectual leadership or outstanding service to the community will also be considered. The successful candidate should be:
- committed to the school’s scholarly mission;
- a strong law school advocate who seeks cross‐unit collaborations with other university schools and colleges;
- a successful fundraiser who can obtain support for various programs and projects, including the Law School Building Project recently approved by The Texas A&M University System Board of Regents, as well as endowed faculty chairs, professorships, and student scholarships;
- an effective administrator with team‐building skills and a collaborative management style appropriate to a complex organization; and
- dedicated to community engagement and public service and experienced at external relations, including outreach to law firms, corporations, and foundations as well as government agencies, non‐profit organizations, and policy‐makers.
The Texas A&M University School of Law is located in the heart of downtown Fort Worth, a city known for a unique confluence of Texas history and renowned arts. Fort Worth enjoys a diverse business community, including energy, defense, international trade, and logistics as well as financial services. Just outside of downtown, Fort Worth has many neighborhoods with recognized schools a short distance from the law school. Fort Worth is known nationally as the home to the Bass Performance Hall, the Kimbell Art Museum, and the Amon Carter Museum of American Art, among others. The Trinity River flows through the city. It features over 40 miles of trails, providing access to the Fort Worth Botanic Garden, the Japanese Garden, the Fort Worth Zoo, and the historic Stockyards. The Fort Worth/Dallas metropolitan area has a total population of more than seven million. It offers a vibrant legal community that supports extensive federal and state court systems, including the Patent and Trademark Office, the Federal Reserve Bank, the National Labor Relations Board, the Environmental Protection Agency, and the Securities and Exchange Commission. Fort Worth/Dallas has one of the world’s largest airports. As one of the most desirable places to live and work in the United States, the metroplex has attracted many multinational corporations.
Applications should include a curriculum vitae, a cover letter including a statement of interest, and a list
of three references. Only nominations and applications received by November 17, 2017, are assured consideration. Nominations and applications received after November 17, 2017, may or may not be considered.
Applications and nominations should be submitted electronically in confidence to email@example.com. Applicant information will be kept confidential to the maximum extent allowable by law. Additional information and timeline can be found at http://lawsearch.tamu.edu.
Texas A&M University provides equal opportunity to all employees, students, applicants for employment or admission, and the public, regardless of race, color, sex, religion, national origin, age, disability, genetic information, veteran status, sexual orientation, or gender identity.
Norwegian Company Agrees To Plead Guilty To Price Fixing On Ocean Shipping Services For Cars And Trucks
A Norwegian corporation has agreed to plead guilty and pay a $21 million criminal fine for its involvement in a conspiracy to fix prices, allocate customers, and rig bids, the Department of Justice announced. Download Us_v._hoegh_autoliners_information_0
According to a one-count felony charge filed today in the U.S. District Court for the District of Maryland, Höegh Autoliners AS conspired with competitors to suppress and eliminate competition by allocating customers and routes, rigging bids, and fixing prices for the sale of international ocean shipments of roll-on, roll-off cargo to and from the United States and elsewhere, including the Port of Baltimore. Höegh participated in this conspiracy from as early as January 2001 until at least September 2012.
In addition to the fine, Höegh has agreed to be placed on corporate probation for three years to ensure full compliance with the antitrust laws. Höegh has also agreed to cooperate with the department’s ongoing investigation.
“With today’s charge, the United States has brought to justice another participant in a long-running global conspiracy to subvert competition for shipping services,” said Acting Assistant Attorney General Andrew Finch of the Justice Department’s Antitrust Division. “We expect Höegh to reform its corporate culture and prevent criminal conduct from recurring.”
“Today’s plea announcement is significant and highlights the FBI’s collaboration with our partner agencies as we hold this company accountable for this elaborate antitrust scheme,” said Special Agent in Charge Gordon B. Johnson of the FBI’s Baltimore Division. “The effort by investigators and prosecutors in this case cannot be overstated and will play a part in restoring confidence in the shipping industry. Our job is to protect victims who don’t see these crimes occurring, but who always end up paying the price.”
Höegh is the fifth company to plead guilty in this investigation—bringing the total criminal fines to over $255 million. Four executives have already pleaded guilty and been sentenced to prison terms. An additional seven executives are known to have been indicted, but remain fugitives.
Today’s charge is the result of an ongoing federal antitrust investigation into price fixing, bid rigging, and other anticompetitive conduct in the international roll-on, roll-off ocean shipping industry, which is being conducted by the Antitrust Division’s Washington Criminal I Section and the FBI’s Baltimore Field Office, along with assistance from the U.S. Customs and Border Protection Office of Professional Responsibility, Special Agent in Charge Washington/Special Investigations Unit.
Monday, October 2, 2017
FINRA Sanctions Morgan Stanley $13 Million in Fines and Restitution for Failing to Supervise Sales of UITs
The Financial Industry Regulatory Authority (FINRA) announced that it has fined Morgan Stanley Smith Barney LLC $3.25 million and required the firm to pay approximately $9.78 million in restitution to more than 3,000 affected customers for failing to supervise its representatives’ short-term trades of unit investment trusts (UITs).
A UIT is an investment company that offers units in a portfolio of securities that terminates on a specific maturity date, often after 15 or 24 months. UITs impose a variety of charges, including a deferred sales charge and a creation and development fee, that can total approximately 3.95 percent for a typical 24-month UIT. A registered representative who repeatedly recommends that a customer sell his or her UIT position before the maturity date and then “rolls over” those funds into a new UIT causes the customer to incur increased sale charges over time, raising suitability concerns.
FINRA found that from January 2012 through June 2015, hundreds of Morgan Stanley representatives executed short-term UIT rollovers, including UITs rolled over more than 100 days before maturity, in thousands of customer accounts. FINRA further found that Morgan Stanley failed to adequately supervise representatives’ sales of UITs by providing insufficient guidance to supervisors regarding how they should review UIT transactions to detect unsuitable short-term trading, failing to implement an adequate system to detect short-term UIT rollovers, and failing to provide for supervisory review of rollovers prior to execution within the firm’s order entry system. Morgan Stanley also failed to conduct training for registered representatives specific to UITs.
Susan Schroeder, FINRA Executive Vice President and Head of Enforcement, said, “Due to the long-term nature of UITs, their structure, and upfront costs, short-term trading of UITs may be improper and raises suitability concerns. Firms must adequately supervise representatives’ sales of UITs –including providing sufficient training –and have in place a system to detect potentially unsuitable short-term UIT rollovers.”
In assessing sanctions, FINRA has recognized Morgan Stanley’s cooperation in having initiated a firmwide investigation that included, among other things, interviewing more than 65 firm personnel and the retention of an outside consultant to conduct a statistical analysis of UIT rollovers at the firm; identified customers affected and establishing a plan to provide remediation to those customers; and provided substantial assistance to FINRA in its investigation.
As a result of this case, FINRA launched a targeted exam in September 2016 focused on UIT rollovers. In addition, in its 2017 Exam Priorities Letter, FINRA highlighted that it was evaluating firms’ ability to monitor for short-term trading of long-term products.
In settling this matter, Morgan Stanley nether admitted or denied the charges, but consented to the entry of FINRA’s findings.
Investors can obtain more information about, and the disciplinary record of, any FINRA-registered broker or brokerage firm by using FINRA's BrokerCheck. FINRA makes BrokerCheck available at no charge. In 2016, members of the public used this service to conduct 111 million reviews of broker or firm records. Investors can access BrokerCheck at http://www.finra.org/brokercheck
Sunday, October 1, 2017
A Massachusetts-based medical manufacturer has agreed to pay more than $13 million to settle charges that it committed accounting fraud through its subsidiaries to meet revenue targets and made improper payments to foreign officials to increase sales in certain countries.
The Securities and Exchange Commission issued an order finding that the South Korean subsidiary of Alere Inc., which produces and sells diagnostic testing equipment, improperly inflated revenues by prematurely recording sales for products that were still being stored at warehouses or otherwise not yet delivered to the customers. According to the SEC’s order, Alere also engaged in improper revenue recognition practices at several other subsidiaries.
“Our securities laws give investors the right to a fair picture of public companies’ finances. For Alere, that picture was distorted by multiple accounting failures and by outright fraud,” said Paul Levenson, Director of the SEC’s Boston Regional Office.
The SEC’s order also finds that Alere subsidiaries in India and Colombia obtained or retained business by using distributors or consultants to make improper payments to officials of government agencies or entities under government control. Alere failed to maintain adequate internal controls to prevent the payments, and the company inaccurately recorded the payments in its books and records.
In consenting to the SEC’s order without admitting or denying the findings, Alere agreed to pay disgorgement of ill-gotten gains totaling $3,328,689 plus interest of $495,196 and a penalty of $9.2 million.
Saturday, September 30, 2017
The OECD has released updated and new IT-tools and guidance to support the technical implementation of the exchange of tax information under the Common Reporting Standard (CRS), on Country-by-Country (CbC) Reporting and in relation to tax rulings (ETR).
In relation to CbC Reporting pursuant to BEPS Action 13, the updated CbC XML Schema and User Guide now allows MNE Groups to indicate cases of stateless entities and stateless income, as well as to specify the commercial name of the MNE Group. Furthermore, both with respect to the CbC and ETR XML Schemas and User Guides, certain clarifications have been made, in particular with respect to the correction mechanisms.
The OECD is further pleased to announce that a dedicated XML Schema and User Guide have been developed to provide structured feedback on received CbC and ETR information. The CbC and ETR Status Message XML Schemas will allow tax administrations to provide structured feedback to the sender on frequent errors encountered, with a view to improving overall data quality and receiving corrected information, where necessary. In the same context, the User Guide for providing CRS-related Status Messages has also been slightly updated to clarify the technical aspects of the structured feedback process.
The different new and updated IT-tools and user guides may be accessed here:
- Country-by-Country Reporting XML Schema and User Guide
- Exchange on Tax Rulings XML Schema and User Guide
- Country-by-Country Reporting Status Message XML Schema and User Guide
- Exchange on Tax Rulings Status Message XML Schema and User Guide
- Common Reporting Standard Status Message XML Schema and User Guide
The U.S. net international investment position increased to -$7,934.9 billion (preliminary) at the end of the second quarter of 2017 from -$8,091.6 billion (revised) at the end of the first quarter, according to statistics released today by the Bureau of Economic Analysis (BEA). The $156.7 billion increase reflected a $1,004.2 billion increase in U.S. assets and an $847.5 billion increase in U.S. liabilities (table 1).
The $156.7 billion increase reflected net financial transactions of –$107.5 billion and net other changes in position, such as price and exchange-rate changes, of $264.2 billion (table A).
The net investment position increased 1.9 percent in the second quarter, compared with an increase of 2.7 percent in the first quarter, and an average quarterly decrease of 5.6 percent from the first quarter of 2011 through the fourth quarter of 2016.
U.S. assets increased $1,004.2 billion to $25,937.6 billion at the end of the second quarter, mostly reflecting increases in portfolio investment and direct investment assets.
- Assets excluding financial derivatives increased $1,019.6 billion to $24,006.3 billion. The increase resulted from other changes in position of $657.3 billion and financial transactions of $362.2 billion (table A). Other changes in position mostly reflected the appreciation of major foreign currencies against the U.S. dollar that raised the value of assets in dollar terms. Financial transactions mostly reflected net acquisition of portfolio investment and direct investment equity assets.
|Position, 2017:I||Change in position in 2017:II||Position, 2017:II|
|Financial transactions||Other changes in position 1|
|U.S. net international investment position||-8,091.6||156.7||-107.5||264.2||-7,934.9|
|Net position excluding financial derivatives||-8,133.3||161.3||-116.8||278.1||-7,972.0|
|Financial derivatives other than reserves, net||41.6||-4.6||9.3||-13.9||37.1|
|Assets excluding financial derivatives||22,986.7||1,019.6||362.2||657.3||24,006.3|
|Financial derivatives other than reserves||1,946.7||-15.4||(2)||(2)||1,931.3|
|Liabilities excluding financial derivatives||31,120.0||858.3||479.1||379.2||31,978.2|
|Financial derivatives other than reserves||1,905.1||-10.8||(2)||(2)||1,894.3|
|1 Disaggregation of other changes in position into price changes, exchange-rate changes, and other changes in volume and valuation is only presented for annual statistics released in June each year.|
|2 Financial transactions and other changes in financial derivatives positions are available only on a net basis; they are not separately available for U.S. assets and U.S. liabilities.|
U.S. liabilities increased $847.5 billion to $33,872.5 billion at the end of the second quarter, mostly reflecting increases in portfolio investment and direct investment liabilities.
- Liabilities excluding financial derivatives increased $858.3 billion to $31,978.2 billion. The increase resulted from financial transactions of $479.1 billion and other changes in position of $379.2 billion (table A). Financial transactions mostly reflected net incurrence of portfolio investment liabilities. Other changes in position mostly reflected price increases on portfolio investment and direct investment liabilities.
|Preliminary estimate||Revised estimate|
|U.S. net international investment position||−8,141.2||−8,091.6|
|Direct investment at market value||7,843.6||7,895.4|
|Financial derivatives other than reserves||1,946.7||1,946.7|
|Direct investment at market value||7,952.4||7,952.4|
|Financial derivatives other than reserves||1,905.1||1,905.1|
Next release: December 28, 2017 at 8:30 A.M. EST
U.S. Net International Investment Position, Third Quarter 2017
Friday, September 29, 2017
Arrest Of 10 Individuals, Including Four Division I Coaches, For College Basketball Fraud And Corruption Schemes. High School players paid $150,000 to be recruited?
Coaches Alleged To Have Accepted Cash Bribes In Return For Steering College Players Under Their Control To Corrupt Financial Advisors
Joon H. Kim, the Acting United States Attorney for the Southern District of New York, and William F. Sweeney Jr., Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), announced the arrest today of 10 individuals, including four Division I NCAA men’s basketball coaches and a senior executive at a major athletic apparel company (“Company-1”), in connection with two related fraud and corruption schemes. In the first scheme, as alleged in the three Complaints unsealed today, college basketball coaches took cash bribes from athlete advisors, including business managers and financial advisors, in exchange for using their influence over college players under their control to pressure and direct those players and their families to retain the services of the advisors paying the bribes. In the second scheme, a senior executive at Company-1, working in connection with corrupt advisors, funneled bribe payments to high school-aged players and their families to secure those players’ commitments to attend universities sponsored by Company-1, rather than universities sponsored by rival athletic apparel companies.
The three Complaints unsealed today charge four coaches, CHUCK CONNORS PERSON, LAMONT EVANS, EMANUEL RICHARDSON, a/k/a “Book,” and ANTHONY BLAND, a/k/a “Tony”; three athlete advisors, CHRISTIAN DAWKINS, MUNISH SOOD, and RASHAN MICHEL; a senior executive at Company-1, JAMES GATTO, a/k/a “Jim,” along with two individuals affiliated with Company-1, MERL CODE and JONATHAN BRAD AUGUSTINE, with wire fraud, bribery, travel act, and conspiracy offenses. The defendants were all arrested this morning in various parts of the country. DAWKINS, SOOD, and AUGUSTINE are scheduled to appear before U.S. Magistrate James L. Cott in federal court later today.
Acting Manhattan U.S. Attorney Joon H. Kim said: “The picture of college basketball painted by the charges is not a pretty one – coaches at some of the nation’s top programs taking cash bribes, managers and advisors circling blue-chip prospects like coyotes, and employees of a global sportswear company funneling cash to families of high school recruits. For the ten charged men, the madness of college basketball went well beyond the Big Dance in March. Month after month, the defendants allegedly exploited the hoop dreams of student-athletes around the country, treating them as little more than opportunities to enrich themselves through bribery and fraud schemes. The defendants’ alleged criminal conduct not only sullied the spirit of amateur athletics, but showed contempt for the thousands of players and coaches who follow the rules, and play the game the right way.”
FBI Assistant Director William F. Sweeney Jr. said: “Today’s charges detail a corrupt practice in which highly rated high school and college basketball players were steered toward lucrative business deals with agents, advisors, and an international athletics apparel company. As alleged, NCAA Division I and AAU coaches created a pay-to-play culture, agreeing to provide access to their most valuable players while also effectively exerting their influence over them. Today’s arrests should also serve as a warning to those who conduct business this way in the world of college athletics.”
According to allegations contained in the three Complaints unsealed today in Manhattan federal court, and other publicly available documents:
Overview of the Investigation
The charges in the Complaints result from a scheme involving bribery, corruption, and fraud in intercollegiate athletics. Since 2015, the U.S. Attorney’s Office for the Southern District of New York and the FBI have been investigating the criminal influence of money on coaches and student-athletes who participate in intercollegiate basketball governed by the NCAA. The investigation has revealed two related schemes. In the first scheme (the “Coach Bribery Scheme”), athlete advisors – including financial advisors and business managers, among others – allegedly paid bribes to assistant and associate head basketball coaches at NCAA Division I universities, and sometimes directly to student-athletes at those universities, facilitated by the coaches. In exchange for the bribes, the coaches agreed to pressure and exert influence over student-athletes under their control to retain the services of the bribe-payors once the athletes entered the National Basketball Association (“NBA”).
In the second scheme (the “Company-1 Scheme”), athlete advisors working with high-level Company-1 employees, allegedly paid bribes to student-athletes playing at, or bound for, NCAA Division I universities, and to the families of such athletes. These bribes were paid in exchange for a commitment by the athletes to matriculate at a specific university sponsored by Company-1, and a promise to ultimately sign agreements to be represented by the bribe-payors once the athletes entered the NBA.
Participants in both schemes allegedly took steps to conceal the illegal payments, including (i) funneling them to athletes and/or their families indirectly through surrogates and entities controlled by the scheme participants; and (ii) making or intending to make misrepresentations to the relevant universities regarding the involvement of student-athletes and coaches in the schemes, in violation of NCAA rules.
As described in the complaints, these schemes operated as a fraud on the universities involved, all of which provide scholarships to players and salaries to coaches with the understanding and expectation that the players and coaches are in full compliance with all relevant NCAA rules and regulations. Moreover, these schemes subject the universities to substantial potential penalties by the NCAA, including, but not limited to, financial fines and penalties as well as the potential loss of eligibility to compete in various NCAA events.
The Coach Bribery Schemes
The first scheme alleged in the Complaints entailed bribes by DAWKINS and SOOD, among others, to four men’s basketball coaches, PERSON, EVANS, RICHARDSON and BLAND, in exchange for the coaches’ agreement to direct players under their control, and the players’ families, to retain DAWKINS and SOOD once the players entered the NBA. These corrupt arrangements, which turn on the coaches’ abuse of their positions of trust at the universities, are valuable both to the coaches, who receive cash bribes, and to the bribe-payors, for whom securing a future NBA player as a client can prove extremely profitable.
Allegations Involving Chuck Person
Beginning in or around 2016, and continuing into 2017, PERSON, a former NBA player and the associate head coach at University-1, abused his coaching position at University-1 to solicit and obtain approximately $91,500 in bribe payments from a financial advisor and business manager for professional athletes, who, unbeknownst to PERSON, was providing information to law enforcement (“CW-1”). In exchange for the bribes, PERSON agreed to direct certain University-1 basketball players to retain the services of CW-1 when those student-athletes entered the NBA. The bribe payments initially were arranged by MICHEL, who had a preexisting relationship with PERSON and operated a clothing store that specialized in making bespoke suits for professional athletes. Over the course of the scheme, PERSON did, in fact, arrange multiple meetings between CW-1 and players and/or their family members, in which he falsely touted CW-1’s qualifications without disclosing that he was being bribed to recommend CW-1. For example, at one meeting, PERSON told the mother of a player at University-1 that CW-1 was PERSON’s own financial advisor and had also advised NBA Hall of Fame inductee (and University-1 alumnus) Charles Barkley, neither of which was true. PERSON similarly told another player that CW-1 would purchase him a separate cell phone over which they could communicate so as to conceal the nature of the scheme.
In addition to the bribe payments that PERSON solicited and received, PERSON also arranged for CW-1 to make payments directly to the families of the players PERSON was steering to CW-1. PERSON further claimed to have given approximately $18,500 of the bribe money he received to the families of two student-athletes whom PERSON sought to steer to retain CW-1.
Allegations Involving Lamont Evans
Beginning in 2016, and continuing into 2017, EVANS solicited at least $22,000 from CW-1 and SOOD in exchange for EVANS’s agreement to exert his official influence over certain student-athletes that EVANS coached at two NCAA Division I universities, University-3 and University-4, to retain SOOD and CW-1’s business management and financial advisory services once those players entered the NBA. In return, EVANS (who had received bribe payments from DAWKINS previously), promised SOOD and CW-1 that he would steer multiple specific players to retain their services. Indeed, as a part of the scheme, EVANS arranged for CW-1 to meet with a student-athlete EVANS coached at University-4 (“Player-4”), and arranged for SOOD to meet with the mother of another student-athlete EVANS had previously coached at University-3, for the purpose of pressuring them to retain SOOD and CW-1. Moreover, and in return for the bribe payments, EVANS falsely touted the services of SOOD and CW-1 to players and their families, telling Player-4, for example, that CW-1 was “my guy,” adding, falsely, that CW-1 “has helped me personally. And I trust that,” and assuring Player-4 that “[i]t’s going to benefit you. I promise you that.” In explaining the benefit of bribing an assistant coach such as EVANS, DAWKINS explained to SOOD and CW-1 that because coaches like EVANS could not get “caught” receiving bribes because “his job is on the line,” EVANS and other corrupt coaches would have an incentive to “block” other athlete advisors from accessing the players under the coaches’ supervision and directing those players to the bribe-payors.
Allegations Involving Emanuel Richardson, a/k/a “Book”
Beginning in or around February 2017, and continuing through September 2017, DAWKINS and SOOD, along with two undercover law enforcement agents posing as financial backers of CW-1 (“UC-1” and “UC-2,” respectively), paid or facilitated the payment of $20,000 in bribes to RICHARDSON in return for RICHARDSON’s commitment to steer players under his control at University-4 to retain DAWKINS and SOOD’s services upon entering the NBA. During that period, RICHARDSON repeatedly assured DAWKINS and SOOD that RICHARDSON would use his influence over players at Univeristy-4 to direct them to DAWKINS and SOOD, explaining, with respect to one particular player DAWKINS and SOOD sought to sign (“Player-6”), that Player-6 would be “insulated in who he talks to.” RICHARDSON added, with respect to himself, that “you’re looking at the guy” whom Player-6 trusted. RICHARDSON subsequently facilitated at least one meeting between DAWKINS, SOOD, and a representative of Player-6 for the purpose of having that representative commit the player to retain DAWKINS and SOOD’s business management and financial advisory services. In addition, RICHARDSON appears to have provided a portion of the bribe money he received from DAWKINS, SOOD, UC-1, and UC-2 to at least one prospective high school basketball player (“Player-5”) in order to recruit that player to play for University-4.
Allegations Involving Anthony Bland, a/k/a “Tony,”
Beginning in or around July 2017, and continuing into September 2017, DAWKINS and SOOD, working with UC-1, paid and/or facilitated the payment of at least $13,000 in bribes to BLAND in exchange for BLAND’s agreement to exert his official influence over certain student-athletes BLAND coached at University-5, to retain DAWKINS and SOOD’s business management and/or financial advisory services once those players entered the NBA. In particular, as BLAND told DAWKINS and SOOD, in return for their bribe payments, “I definitely can get the players. . . . And I can definitely mold the players and put them in the lap of you guys.” In addition, and as part of the scheme, at BLAND’s direction DAWKINS and SOOD paid or facilitated the payment of an additional $9,000 directly to the families of two student-athletes at University-5. In return, BLAND facilitated a meeting between DAWKINS and SOOD and a relative of a player currently attending University-5 (“Player-9”) for the purpose of pressuring Player-9 to retain DAWKINS and SOOD.
The Company-1 Scheme
In addition to the Coach Bribery Scheme described above, the investigation further revealed a second, related scheme. In the second scheme, JAMES GATTO, a/k/a “Jim,” a high-level executive at Company-1, and MERL CODE, an individual affiliated with Company-1 and its high school and college basketball programs, conspired to pay high school basketball players or their families for commitments by those players to attend and play for aCompany-1-sponsored university, and to sign with Company-1 upon turning professional. In addition, DAWKINS, SOOD, and JONATHAN BRAD AUGUSTINE brokered and facilitated the corrupt payments in exchange for a promise that the players also would retain the services of DAWKINS and SOOD upon turning professional.
Specifically, in or around 2017, GATTO, CODE, DAWKINS, AUGUSTINE, and SOOD agreed to pay bribes to at least three high school basketball players or their families in the following manner:
Allegations Involving Player-10 and University-6
First, GATTO, CODE, DAWKINS, and SOOD worked together to funnel $100,000 from Company-1 to the family of a high school basketball player (“Player-10”) in exchange for Player-10’s commitment to play at an NCAA Division I university whose athletic programs are sponsored by Company-1 (“University-6”), and in further exchange for a commitment from Player-10 to retain DAWKINS and SOOD, and to sign with Company-1, once Player-10 joined the NBA. DAWKINS told CW-1 and others on a recorded conversation that he did so at the request of a coach at University-6 (“Coach-2”), and call records show that GATTO spoke directly with Coach-2 multiple times in the days before Player-10 publicly committed to attending University-6.
Moreover, because the payments to the family of Player-10 were both in violation of NCAA rules and illegal, they were disguised by GATTO, CODE, DAWKINS, and SOOD using fake purchase orders, invoices and related documents to make them appear to be payments from Company-1 to CODE’s company. As CODE explained to DAWKINS, while such payments are sometimes made “off the books,” for this particular payment, GATTO and CODE had identified it to Company-1 as “as a payment to my team, to my organization, so it’s on the books, [but] it’s not on the books for what it’s actually for.” Indeed, the money, once allocated by Company-1, was funneled back to DAWKINS to use to pay the father of Player-10 in cash.
Allegations Involving Player-11 and University-6
Second, DAWKINS and AUGUSTINE agreed to facilitate payments to the family of another high school basketball player (“Player-11”) in exchange for Player-11’s commitment to play at University-6 and ultimately to retain DAWKINS’s services. While these payments were not directly funded by Company-1, they were made to benefit Company-1, which, as noted, sponsors University-6, and with the expectation that Company-1 would provide additional funding to AUGUSTINE in return. AUGUSTINE noted, “all [Coach-2] has to do is pick up the phone and call somebody [and say] these are my guys, they’re taking care of us.”
Because these payments from DAWKINS to Player-11’s family were both in violation of NCAA rules and illegal, AUGUSTINE suggested that the “easiest way” for DAWKINS to provide money for Player-11 and his family would be to send the money to AUGUSTINE’s “non-profit for the grassroots team,” although AUGUSTINE confirmed that he also would accept cash.
As DAWKINS subsequently explained to UC-2 in the context of providing such money to AUGUSTINE and others, “obviously some of it can’t be completely accounted for on paper because some of it is, whatever you want to call it, illegal.”
Allegations Involving Player-12 and University-7
Third, GATTO, CODE, DAWKINS, and AUGUSTINE agreed to make payments of as much as $150,000 from Company-1 to another high school basketball player (“Player-12”) in order to secure Player-12’s commitment to play at an NCAA Division I university whose athletic programs are also sponsored by Company-1 (“University-7”). Because Player-12 played for an amateur team run by AUGUSTINE and sponsored by Company-1, AUGUSTINE, with the assistance of CODE and DAWKINS, attempted to broker the deal to secure Player-12’s commitment to attend University-7 rather than a school sponsored by a rival athletic apparel company. In exchange for the payment, Player-12 similarly was expected to commit to retaining DAWKINS’s services and signing with Company-1 once Player-12 joined the NBA.
Much as with the payments to Player-10 described above, according to intercepted calls, GATTO stated that the payments from Company-1 to Player-12 were allegedly requested specifically by a coach at University-7 (“Coach-3”), who allegedly called GATTO directly and who, according to DAWKINS, CODE, and AUGUSTINE, “knows everything” and, in particular, “knows something’s gotta happen for” Player-12 to commit to attending University-7.
* * *
Charges (Potential Maximum Term of Imprisonment)
Chuck Connors Person
Bribery conspiracy, Solicitation of bribes, Honest services fraud conspiracy, Honest services fraud, Wire fraud conspiracy; Travel Act conspiracy (80 years)
Bribery conspiracy, Solicitation of bribes, Honest services fraud conspiracy, Honest services fraud,
Wire fraud conspiracy; Travel Act conspiracy (80 years)
Bribery conspiracy, Solicitation of bribes, Honest services fraud conspiracy, Honest services fraud,
Conspiracy to commit wire fraud; Travel Act conspiracy (80 years)
Emanuel Richardson, a/k/a “Book”
Bribery conspiracy, Solicitation of bribes, Honest services fraud conspiracy, Honest services fraud,
Conspiracy to commit wire fraud; Travel Act conspiracy (80 years)
Anthony Bland, a/k/a “Tony”
Los Angeles, CA
Bribery conspiracy, Solicitation of bribes, Honest services fraud conspiracy, Honest services fraud,
Conspiracy to commit wire fraud; Travel Act conspiracy (80 years)
Bribery conspiracy, Payments of bribes, Honest services fraud conspiracy, Honest services fraud (3 counts), Wire fraud conspiracy (2 counts), Wire fraud (2 counts), Travel Act conspiracy, Money laundering conspiracy (200 years)
Bribery conspiracy, Payments of bribes, Honest services fraud conspiracy, Honest services fraud (3 counts), Wire fraud conspiracy (2 counts), Wire fraud (2 counts), Travel Act conspiracy, Money laundering conspiracy (200 years)
James Gatto, a/k/a “Jim”
Wire fraud conspiracy, Wire fraud (2 counts), Money laundering conspiracy (80 years)
Wire fraud conspiracy, Wire fraud (2 counts), Money laundering conspiracy (80 years)
Jonathan Brad Augustine
Winter Garden, FL
Wire fraud conspiracy, Wire fraud (2 counts), Money laundering conspiracy (80 years)
The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as the sentencing of the defendants will be determined by a judge.
Mr. Kim praised the work of the FBI and the Criminal Investigators of the United States Attorney’s Office for the Southern District of New York.
Anyone with information relevant to the investigation is asked to contact the FBI at the special phone number established to receive such information, (212) 384-2135.
The case is being handled by the Office’s Public Corruption Unit. Assistant United States Attorneys Robert Boone, Russell Capone, Edward B. Diskant, and Noah Solowiejczyk are in charge of the prosecution.
 As the introductory phrase signifies, the entirety of the texts of the Complaints and the descriptions of the Complaints set forth below constitute only allegations and every fact described should be treated as an allegation.
State personal income grew 0.7 percent on average in the second quarter of 2017, after increasing 1.4 percent in the first quarter, according to estimates released today by the Bureau of Economic Analysis (table 1). Each of the major aggregates of personal income–net earnings, property income, and personal current transfer receipts–grew more slowly than in the first quarter.
Personal income grew 1.3 percent in Nevada, faster than in any other state. Utah had the next fastest growth at 1.1 percent. Iowa, Nebraska, and West Virginia had the slowest growth in personal income, with each state growing less than half the rate of the nation.
Earnings. On average, earnings increased 0.8 percent in the second quarter of 2017, after increasing 1.5 percent in the first quarter. Earnings growth ranged from 1.6 percent in Nevada to -0.1 percent in Nebraska, and was the leading contributor to growth in personal income in most states (table 2).
- Growth in construction earnings was the leading contributor to above average earnings growth in Nevada and Oregon (table 3).
- Growth in retail trade earnings was the leading contributor to above average earnings growth in Utah.
- Growth in professional, scientific, and technical services earnings was the leading contributor to above average earnings growth in Florida.
- Growth in information earnings was the leading contributor to above average earnings growth in Georgia and Colorado.
- Growth in construction earnings and in finance and insurance earnings were both contributors to above average earnings growth in Rhode Island.
- Growth in finance and insurance earnings was the leading contributor to above average earnings growth in Texas.
Farm earnings declined for the nation and in every state in the second quarter (table 4) and was the leading contributor to slow earnings growth in many states. In Nebraska, Iowa and North Dakota, the decline in farm earnings reduced earnings growth by half a percentage point or more. The slow growth in farm earnings reflects lower prices for grains and other crops.
For the nation, earnings grew in 20 of the 24 industries for which BEA prepares quarterly estimates. Earnings growth in three industries–health care and social assistance; professional, scientific, and technical services; and finance and insurance–was the leading contributor to overall growth in personal income.
Property income. Property income increased 0.8 percent in the second quarter of 2017, down from 1.3 percent in the first quarter. Property income growth ranged from 1.2 percent in Michigan to 0.4 percent in Rhode Island.
Transfer receipts. Transfer receipts grew 0.2 percent for the nation in the second quarter of 2017, down from the 1.3 percent growth in the first quarter. Growth rates ranged from 2.0 percent in Alaska to -1.1 percent in Iowa.
Bermuda has become the first overseas territory to be awarded whitelist status by France. ... will attend key meetings in Paris and Brussels next month to “provide necessary support to Bermuda’s efforts to avoid blacklisting by the EU Code of Conduct Group”. read the entire story in the Bermuda Royal Gazette
Thursday, September 28, 2017
The finance and economic affairs ministers of the EU member states discussed updating international tax rules for companies at their informal meeting in Tallinn today, so that these rules could also be applied to taxing enterprises that use digital technology. The ministers agreed to move forward swiftly and to reach a common understanding at the Ecofin Council in December.
“For us, it is important to agree on new international tax rules that also take into account the business models of the digital economy. This would guarantee the equal taxation of all companies regardless of their location or place of activity. I hope that today’s discussion helped us get a step closer to a suitable solution,” said Toomas Tõniste, the Minister for Finance of Estonia, after the meeting.
“Tax problems connected with the digital economy and the need for new solutions have been a subject of discussion for a long time. At the same time, companies have to operate in unequal conditions. Countries are deprived of tax income and to compensate for that, they impose unilateral measures. This, however, harms our common market and the entire European Union,” the minister added. “Thus, the sooner we reach a solution the better. This guarantees the fairer taxation of companies and creates a better business environment.”
According to Minister Tõniste, a common solution that covers the entire European Union is also important because different tax rules in member states can create multiple taxation and lead to a belief that doing business outside of the EU is more lucrative than inside the European Union. “If we can agree on the approach inside the European Union, then we can also affect the global rules in a way that is favourable to us. We all agree that a global solution would be the best solution,” said the minister.
Business models of the digital economy differ substantially from the business models of the traditional economy, and companies often operate virtually in several countries. The international rules for taxing the profit of companies, however, still assume that in order to create a taxable profit, the company has to be physically present. This allows many companies not to pay their taxes because the tax rules are out of date. This is also one of the reasons why this situation cannot simply be solved with measures that stop companies from evading their taxes.
Estonia is of the opinion that when bringing the tax rules up to date, it is important to abandon the requirement that companies have to be physically present in a country or own assets there, and replace this with the concept of a virtual permanent establishment. A precondition for this is a more precise agreement on the virtual taxpayers who have to start paying taxes.
Wednesday, September 27, 2017
First automatic Common Reporting Standard exchanges between 49 jurisdictions set to take place this month; now over 2000 bilateral exchange relationships in place
In 2014, the OECD and the G20 approved the Common Reporting Standard (CRS), which will be the basis for the automatic annual exchange of information on offshore financial accounts to the tax authorities of the residence country of account holders. At present, 102 jurisdictions have publicly committed to implement the CRS, with 49 being committed to start exchanges this month and a further 53 taking up exchanges in September 2018.
The successful implementation of the CRS requires both domestic legislation to ensure that financial institutions correctly identify and report accounts held by non-residents, and an international legal framework for the automatic exchange of CRS information. The preferred route to put the international legal framework in place is through the CRS Multilateral Competent Authority Agreement (CRS MCAA), which defines the scope, timing, format and conditions for the exchange of CRS information and is based on the multilateral Convention on Mutual Administrative Assistance in Tax Matters, the prime instrument for cooperation in tax matters. At present, 95 jurisdictions have signed the CRS MCAA.
While the CRS MCAA is a multilateral agreement, exchange relationships for CRS information are bilateral in nature and are activated when both jurisdictions have the domestic framework for CRS exchange in place and have listed each other as intended exchange partners.
Today, we are pleased to announce that another series of bilateral exchange relationships was established under the CRS MCAA. In total, there are now over 2000 bilateral relationships for the automatic exchange of CRS information in place across the globe. The full list of automatic exchange relationships that are currently in place under the CRS MCAA is available online.
With first exchanges for jurisdictions committed to a 2017 timeline now being only weeks away, all 49 have now activated their exchange relationships under the CRS MCAA and the network of bilateral exchange relationships (also including those established through the EU DAC2 Directive and bilateral agreements) now covers over 99% of the total number of possible exchange relationships. In addition, 20 of the 53 jurisdictions committed to first exchanges in 2018 have already put the international legal requirements in place to commence exchanges under the CRS MCAA next year. A further activation round for jurisdictions committed to a 2018 timeline is scheduled to take place in November 2017 which will allow the remaining jurisdictions to nominate the partners with which they will undertake automatic exchanges of CRS information.
Today's wave of activations of bilateral exchange relationships is a key milestone for the successful and timely implementation of the CRS in the 49 jurisdictions committed to first exchanges this month and marks the delivery on their political commitment to fight tax evasion.
Tuesday, September 26, 2017
OECD releases first peer reviews on implementation of BEPS minimum standards on improving tax dispute resolution mechanisms
As part of continuing efforts to improve the international tax framework, the OECD has released the first analysis of individual country efforts to improve dispute resolution mechanisms. The six peer review reports represent the first evaluation of how countries are implementing new minimum standards agreed in the OECD/G20 BEPS Project. The BEPS Project sets out 15 key actions to reform the international tax framework, by ensuring that profits are reported where economic activities are carried out and value is created.
A key pillar of the project focused on improving the mutual agreement procedure (MAP), which resulted in a new minimum standard to ensure that tax treaty related disputes are resolved in a timely, effective and efficient manner (Action 14). This minimum standard is complemented by a set of best practices. In addition to implementing the Action 14 minimum standard, countries committed to have their compliance with this standard reviewed and monitored by their peers. (For further information about the OECD's work on Action 14, see: www.oecd.org/tax/beps/beps-action-14-peer-review-and-monitoring.htm.)
The first six peer review reports relate to implementation by Belgium, Canada, the Netherlands, Switzerland, the United Kingdom and the United States. A document addressing the implementation of best practices is also available on each jurisdiction. The six reports include over 110 recommendations relating to the minimum standard. In stage 2 of the peer review process, each jurisdiction’s efforts to address any shortcomings identified in its stage 1 peer review report will be monitored. The six assessed jurisdictions performed well in various MAP areas:
- All provide for roll-back of bilateral APAs with a view to preventing disputes from arising;
- MAP is available and access to MAP is granted in the situations required by the minimum standard;
- The competent authority function is adequately resourced, and takes a pragmatic and principled approach for the resolution of MAP cases; and
- MAP agreements reached so far have been implemented on time.
The main areas where improvements are necessary concern:
- Resolution of MAP cases within the pursued average of 24 months is a challenge for some jurisdictions, especially concerning transfer pricing cases;
- MAP guidance is generally clear and accessible, however, improvements for some jurisdictions are necessary and already under way; and
- Each of the six jurisdictions was given recommendations to align their tax treaty MAP provisions with the Action 14 minimum standard. For a number of those treaties, such alignment will already be realised via the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS.
These first peer review reports represent an important step forward to turn the political commitments made by members of the Inclusive Framework into measureable, tangible progress. The six jurisdictions concerned are already working to address deficiencies identified in their respective reports. The OECD will continue to publish stage 1 peer review reports in accordance with the Action 14 peer review assessment schedule.
Lexis’ Practical Guide to U.S. Transfer Pricing is updated annually to help multinationals cope with the U.S. transfer pricing rules and procedures, taking into account the international norms established by the Organisation for Economic Co-operation and Development (OECD). It is also designed for use by tax administrators, both those belonging to the U.S. Internal Revenue Service and those belonging to the tax administrations of other countries, and tax professionals in and out of government, corporate executives, and their non-tax advisors, both American and foreign. Free download here