Amid another leak of documents revealing large-scale international tax avoidance, the secretary-general of the Organisation for Economic Co-operation and Development (OECD) said Monday that tax avoidance was fast becoming a thing of the past. “When we’re talking about the ‘Panama Papers’ or ‘Paradise Papers’we’re talking about a legacy that is fast disappearing,” Angel Gurria said. Speaking at the Confederation of British Industry (CBI) conference in London, Gurria said governments were working hard to stop tax avoidance and evasion.
Tax avoidance is allegedly a ‘legacy issue,’ OECD’s Angel Gurria says
Gurria was Speaking at the Confederation of British Industry (CBI) conference in London
He said governments were working hard to stop tax avoidance and evasion
U.K. Prime Minister Theresa May said her government is continuing to work against tax evasion
CNBC.com
Photographer | Collection | Getty Images
Amid another leak of documents revealing large-scale international tax avoidance, the secretary-general of the Organisation for Economic Co-operation and Development (OECD) said Monday that tax avoidance was fast becoming a thing of the past.
“When we’re talking about the ‘Panama Papers’ or ‘Paradise Papers’we’re talking about a legacy that is fast disappearing,” Angel Gurria said.
Speaking at the Confederation of British Industry (CBI) conference in London, Gurria said governments were working hard to stop tax avoidance and evasion.
“When we talk about ‘Double Irish’ or ‘Double Dutch’ (tax avoidance schemes) we’re talking about structures which are no longer there,” she said, adding: “This will not be repeated because of the work you and your governments and the OECD have done in the last few years.”
“There is quite literally no place to hide,” he said, noting that 50 countries had implemented automatic information exchanges regarding tax and that more nations were planning to do the same.
Gurria’s comments come after a leak of millions of documents revealing large-scale tax avoidance by high-profile individuals and companies via offshore financial services companies. The latest tax avoidance leak has been dubbed the “Paradise Papers” and comes after a similar leak in 2016 called the “Panama Papers” that showed how a Panamanian law firm allegedly helped its clients to avoid taxes by using offshore tax havens.
Speaking at the same business conference on Monday, U.K. Prime Minister Theresa May said that her government had continued the work against tax evasion that her predecessor David Cameron had begun.
“He started this work, not only in the U.K. economy but on an international stage. So we have seen more revenues coming into HMRC (the U.K.’s tax-collecting department) over the last few years, with £160 billion extra since 2010,” she said.
More work was being done to ensure “greater transparency” in the U.K.’s dependencies and British overseas territories, May said, and HMRC was already able to access more information about so-called “shell” companies.
“We want people to pay the tax that is due,” she said. That sentiment was echoed by the leader of the opposition Labour party, Jeremy Corbyn, who said that society was “undermined” by anyone that did not pay the tax they owed.
Today’s long-expected announcement that the European Union has assessed that Apple owes €13 Billion ($14.5 Billion) in back taxes to Ireland and the EU, is only one part of a much larger story of multinational corporations global tax jurisdiction and tax avoidance, and a looming fight between the EU and US over which one gets the €13 Billion. There is not much disagreement whether Apple actually owes the money. It also reopens the as yet unresolved matter of multinational corporate taxation, most recently exposed by Pfizer’s announcement that it would move its HQ to Ireland to avoid U.S. taxation, which was later blocked by the U.S. government.
Apple is facing a major corporate crisis as public opinion is focused on corporate greed
Ireland operating like a “rogue state”
Today’s long-expected announcement that the European Union has assessed that Apple owes €13 Billion ($14.5 Billion) in back taxes to Ireland and the EU, is only one part of a much larger story of multinational corporations global tax jurisdiction and tax avoidance, and a looming fight between the EU and US over which one gets the €13 Billion. There is not much disagreement whether Apple actually owes the money. It also reopens the as yet unresolved matter of multinational corporate taxation, most recently exposed by Pfizer’s announcement that it would move its HQ to Ireland to avoid U.S. taxation, which was later blocked by the U.S. government.
The problem with this is that Ireland has become a focal point for global corporate tax evasion by numerous foreign corporations. Ireland has suffered through a cycle of boom and bust, culminating in the 2008 global financial meltdown, which left Ireland’s economy in shambles. The upshot is that since that time, Ireland has become the poster child for tax evasion schemes, which has led to numerous EU investigations of Ireland’s tax laws. Ironically, it also led KPMG Canada to establish its own similar scheme in The Isle of Man, now under investigation by the CRA.
The bottom line is that this could not be happening at a worse time for Apple. The company is very likely facing a major corporate black-eye, at a time when public opinion is focused on corporate greed, income inequality and the decline of the middle class.
The opening salvo in a much larger global issue
“U.S. companies are the grand-masters of tax avoidance. I see it (U.S. objections to the EU ruling) as the United States digging in its heels, that it is protecting its corporate champions when in fact it’s claim jumping on what is really European income,” said Edward D. Kleinbard, professor at the Gould School of Law at the University of Southern California and a former chief of staff to the congressional Joint Committee on Taxation.
Margrethe Vestager, European Union Commissioner on Competition
The EU charges against Apple:
Apple’s effective European tax rate was 1% on sales of 16 billion euros or more per year.
It sank as low as 0.005% in 2014.
Apple created a head office that did not exist: “This ‘head office’ had no operating capacity to handle and manage the distribution business, or any other substantive business for that matter … The ‘head office’ did not have any employees or own premises.”
The pact deprived other European countries of billions of euros in unpaid taxes.
Reblogged from The New York Times:
Apple Must Pay Billions for Tax Breaks in Ireland, E.U. Orders
Europe’s antitrust enforcer ordered Ireland to collect billions in back taxes from Apple, a move that will ramp up trans-Atlantic tensions over what global companies pay in the countries where they do business.
The decision, part of a broader crackdown on tax avoidance by the European Union commissioner for competition, slammed Ireland for providing illegal incentives that allowed Apple to cut its tax bill in the region to virtually nothing some years. The clawback of taxes — 13 billion euros, or about $14.5 billion, plus interest — is a record penalty by the union for such activities.
The ruling adds to a strained relationship between the United States and the European Union over who has the right to regulate tax payments by some of the world’s largest companies.
But American officials have warned that the commission is overstepping its power given that taxes are typically left to national governments to oversee and that European officials should not retroactively issue penalties in past tax rulings. They also emphasized that such cases undermine continuing efforts to overhaul global policies and create measures to curtail tax avoidance.
“U.S. companies are the grandmasters of tax avoidance,” said Edward D. Kleinbard, professor at the Gould School of Law at the University of Southern California and a former chief of staff to the congressional Joint Committee on Taxation.
“Nevertheless, because of the nature of U.S. politics,” he said, the Apple case “will be framed by the U.S. as Europe overreaching and discriminating against ‘our team.’ ”
Since early this year, Ms. Vestager and Jacob J. Lew, the United States Treasury secretary, and their teams have met regularly to discuss Europe’s state-aid tax investigations. Mr. Lew visited Brussels in July to put forward the American perspective.
EUROPEBy E.B.S. VIA ASSOCIATED PRESS1:01Apple to Pay $14.5 Billion in Back Taxes
Video
Apple to Pay $14.5 Billion in Back Taxes
On Tuesday, Europe’s antitrust enforcer ordered Ireland to claw back billions from Apple over illegal tax breaks.
By E.B.S. VIA ASSOCIATED PRESS on Publish DateAugust 30, 2016.Photo by Andrew Testa for The New York Times. Watch in Times Video »
Just last week, the Treasury Department released a report criticizing any efforts to claw back taxes from American companies. The document repeatedly claimed that the European Commission did not have the right to undertake the clawbacks and that they could harm America’s efforts to collect taxes from domestic companies with vast international operations.
“That outcome is deeply troubling as it would effectively constitute a transfer of revenue to the E.U. from the U.S. government and its taxpayers,” Robert B. Stack, a senior Treasury official, said in the report.
The European Commission denies these claims, saying that it is relying on a history of using state-aid rules related to corporate tax issues. The Brussels-based agency also says that it has the right to act when certain companies are provided with an unfair advantage — either through tax breaks or other incentives — and that Apple’s operations are based in Ireland, therefore falling under its jurisdiction.
“No rules have been changed — not one rule,” Ms. Vestager said at a news conference in Brussels on Tuesday. “This is a question of paying unpaid taxes.”
In the Apple case, the antitrust commission said that the deals with Ireland allowed the company to allocate profits from two Irish subsidiaries to a “head office,” but that it could not have generated such profits since it had few operations and little distribution or substantive business.
By doing so, the commission said that Apple could effectively lower its tax rate on European profit to just 0.005 percent in 2014. Ms. Vestager said at a news conference on Tuesday that amounted to roughly €50 for every €1 million in Apple’s European profit.
“The so-called head office had no employees, no premises, no real activities,” Ms. Vestager said.
Apple defends its tax practices, saying it follows the law and pays all of its taxes.
“The commission’s case is not about how much Apple pays in taxes, it’s about which government collects the money,” the company said in a statement. “It will have a profound and harmful effect on investment and job creation in Europe.”
Ireland has broadly faced scrutiny for its tax strategies to attract large multinationals.
Its corporate tax rate, at 12.5 percent, is one of the lowest in the developed world. Other incentives and breaks allow companies to cut their bill even further. While it is phasing out some of the more contentious loopholes, Ireland just introduced a new break for revenues on intellectual property, a potentially huge benefit to large technology companies with troves of patents.
How Europe Is Going After Apple, Google and Other U.S. Tech Giants
The biggest American tech companies face intensifying scrutiny by European regulators, with — pressure that could potentially curb their sizable profits in the region and affect how they operate around the world.
The United States has a complicated view on Apple’s dealings in Ireland. The European inquiry was spurred in 2013 when a United States Senate committee said that Apple had negotiated a special corporate tax rate of 2 percent or less in Ireland.
The Treasury has also taken steps to curtail so-called inversions, in which an American company buys an overseas counterpart and shifts its headquarters overseas to lower its taxes. Ireland, with its low corporate tax rate, has been an especially big beneficiary of such deals, which helpedplump up the country’s economy last year.
Ireland stands by its approach to taxes, saying it did not give preferential treatment to Apple or other companies. The country’s Finance Ministry, in a statement, said that the commission’s decision would undermine continuing global tax overhaul and create uncertainty for business in Europe.
The finance minister, Michael Noonan, said he would move to appeal the Apple decision, adding it was “necessary to defend the integrity of our tax system.”
“It is important that we send a strong message that Ireland remains an attractive and stable location of choice for substantive investment,” he said.
Apple also said it would look to overturn the decision, although any appeals process could take years.
“The European Commission has launched an effort to rewrite Apple’s history in Europe, ignore Ireland’s tax laws and upend the international tax system in the process,” the company said in a statement.
The commission said the amount due in Ireland could be lowered if the American authorities decided that Apple should have paid more tax in the United States.
The commission also said that other countries in the European Union could take a share of the money if Apple conducted more taxable business in those nations than the company had previously declared. That could reduce the amount Ireland collects and give additional revenue to other countries.
Apple is also expected to have to pay interest on the €13 billion, but the commission did not disclose how much that would be.
The release of the Panama Papers is of such potential significance and magnitude that it is difficult to know where to begin. I have decided that I will begin with the most interesting and relevant topic for me, the Canadian angle: possible links from Mossack Fonseca’s tax haven shell companies to the Vancouver BC real estate market, the current Canada Revenue Agency investigation of KPMG’s Canadian offshore tax haven scheme, and potential conflicts of interest within CRA. The KPMG and CRA issues have been extensively investigated and reported by CBC News, and also discussed on this site.
UPDATE May 5, 2106: National Public Radio’s Takeaway news analysis program, today interviewed James Henry, senior adviser at the Tax Justice Network and a senior fellow at the Columbia Center for Sustainable Investment. James’ interview specifically discusses the foreign dark money driving the Vancouver housing market, providing further confirmation of my points in this post. Audio of the interview begins at 19:45 in the podcast below.
Kleptocrats
The release of the Panama Papers is of such potential significance and magnitude that it is difficult to know where to begin. I have decided that I will begin with the most interesting and relevant topic for me, the Canadian angle: possible links from Mossack Fonseca‘s tax haven shell companies to the Vancouver BC real estate market, the current Canada Revenue Agency investigation of KPMG‘s Canadian offshore tax haven scheme, and potential conflicts of interest within CRA. The KPMG and CRA issues have been extensively investigated and reported by CBC News, and also discussed on this site.
London, Miami, New York City, San Francisco and Vancouver: Similar Market Dynamics
With regard to the Vancouver housing bubble and links to shell companies in offshore tax havens, the probability of such links has already been suggested by other overheated real estate markets, notably in Miami, New York City and San Francisco. The high-end Manhattan real estate market has been overheated by a dramatic influx of foreign shell companies, as first reported by The New York Times in February 2015. The U.S. Treasury announced later in 2015 that it would begin identifying and tracking secret shell company buyers of New York and Florida real estate, which would likely expand to include the San Francisco market.
National Public Radio in the United States, recently interviewed the vice president of Transparency International, on the subject of shadow money in real estate markets. The guest talked about how the offshore deals impact ordinary people – and the first thing discussed was housing in cities like New York and San Francisco. The shadowy banking system allows people with illegal money – money from arms trading, money from drug sales, money stolen from the people of a struggling country – to launder it and use it, among other things, to buy real estate.
So the bidding wars that are driving up the cost of housing in cities, and the mega-priced condos that are shoving out other types of housing in places with scarce real estate, are directly linked to this dark money.
“Money from people linked to wrongdoing abroad is helping to power the gleaming condo towers rising on South Florida’s waterfront and pushing home prices far beyond what most locals can afford.”
The Vancouver Real Estate Connection
Anyone familiar with the Vancouver real estate market would be naive to assume that the same dynamics at work in the United States are not at work in Vancouver.
This Grey’s Point “tear down” property shown here, recently sold for over $9 Million, more than $1 Million over the asking price of $7.8 Million. There were 11 offers, all cash, and no offer included any contingencies.
While the U.S. Treasury and the New York Housing Authority took action nearly a year ago to stem the offshore secret shell company real estate activity, Canadian authorities have been much slower to act. B.C. Premier Christy Clark has been sharply criticized for her failure to act, which may be linked to political payments to Clark related to the B.C. real estate industry.
The Dark Foreign Money Connections
It is, therefore, now no secret that foreigners, keen to avoid publicity, are behind many of these real estate transactions. The New York Times noted that the Manhattan market has been significantly influenced by money from Russian oligarchs, one of whom was denied entry to Canada for suspected organized crime connections. The Miami market, not surprisingly, is seen to be influenced by drug cartel money and corrupt Latin American Billionaires.
The San Francisco Bay Area, while also influenced by Silicon Valley money, has seen its own influx of dark money in the real estate market. At first, the money was aimed at Silicon Valley and suspected to be focused on industrial espionage. The People’s Liberation Army has massive financial resources of its own from its ownership of a mobile phone network, and international weapons trading by PLA companies like Norinco. It is suspected of involvement in Silicon Valley espionage, and the establishment of “front” companies. In one particular case, a California high-tech startup without any apparent external funding was led by the son of a prominent PLA General. Think of the PLA as its own venture capital firm. Today, the emphasis seems to have shifted to cyber espionage, and the dark money has grown exponentially, evolving into real estate as elsewhere.
Vancouver and China
Vancouver’s connection to Asia is perhaps now greater than that of the San Francisco Bay Area, which was formerly seen as the West Coast’s top Asian cultural metropolis. The Vancouver connection goes back generations, as with San Francisco. Vancouver’s importance has been enhanced recently by two major events: the 1997 return of Hong Kong to China, and the dramatic rise of Chinese capitalism, wherein lie the seeds of Vancouver’s real estate dilemma. As Deng Zhao Ping said many years ago, “To get rich is glorious.”
The Panama Papers have exposed the names of numerous members of Chinese Premier Li Xinping’s family with Mossack Fonseca secret offshore accounts. This is only the outermost layer of the onion. Recent investigative reports in The New Yorker (February 22, 2016) “The Golden Generation,” and in The New York Times (April 12, 2016), have identified a significant local Vancouver population of billionaire Chinese “fuerdai,” or “second generation of the rich,” many are the children of officials from the outlying provinces in China, not the Beijing or Shanghai elite. The numbers support the notion that the influence of dark Chinese money on the Vancouver economy is much larger than previously understood. We have also seen how real estate firms and others have been only too eager to serve this money, and to engage in their own “shadow flipping” schemes to drive up real estate prices even further.
Anyone who has seen the Lamborghini dealership near Granville Island may ask themselves rhetorically how many cities in the World can support a Lamborghini dealership. When combined with the publicly disclosed $1 Trillion (U.S. dollars) that fled China in 2015 alone, and the artificially low value of the renminbi, you have a frenzy to buy hard assets offshore and the makings of a real estate nightmare in Vancouver. Li Xinping has personally expressed his displeasure with both the capital flight and the “fuerdai” living abroad, but despite his extraordinary personal power as the “new Mao”, he seems powerless to stop the trend, even the offshore secret accounts among his own family. Since the release of the Panama Papers revelations about Li Xinping’s family, Chinese Internet censors have blocked all access to this information at the “Great Firewall.”
The Offshore Tax Haven Market and the Canadian Connection
The other important aspect of the Canadian connection to the Panama Papers and Mossack Fonseca is the huge market opportunity to offer offshore tax havens. This opportunity has grown ever larger as the 1% has solidified its control of global wealth. Even assuming that there is no direct connection between Canadian firms and Mossack Fonseca, there is likely immense market pressure to compete or lose wealthy clients. On the other hand, a direct connection is not impossible, though not yet proven. We are about to learn of substantial links from global banks like HSBC, UBS, Credit Suisse and others to Mossack Fonseca. By way of example, Vladimir Putin and his Russian oligarch friends did not directly set up their secret offshore tax havens. They hired their financial institutions and friends to do it for them, secretly. What is clear is that at least one Canadian accounting firm, KPMG, has in fact set up its own offshore tax haven on the Isle of Man, which is now being formally investigated by the Canada Revenue Agency. In a separate but related matter, four KPMG senior partners were arrested in the UK, for their part in another tax evasion scheme.
History Of Offshore Tax Havens
The offshore tax haven market has been around for decades in other forms, and as some like to point out, is not always illegal or designed for dark criminal money. That said, it is undeniable that secret tax evasion schemes have an obvious appeal to those with dark money. Long before the Panama Papers revelations, there were the Swiss banks, which became famous for such secret accounts. The Swiss system was not immune from illegal and unsavory clients and their money, but the Swiss banks were immune from any exposure thanks to their policy of absolute secrecy for their clients. However, eventually, the Swiss banks were prosecuted by the U.S. government and the European Union, wealthy clients were exposed and prosecuted for tax evasion and worse. UBS was the most prominent Swiss bank to be prosecuted and paid a $1.5 Billion fine for its sophisticated tax evasion scheme for corporations and individuals. At the time, former U.S. Senator Phil Gramm, and former Chairman of the Senate Banking Committee was Vice-Chairman of UBS. The global links to tax evasion fraud became apparent, and Swiss banking secrecy became a thing of the past.
At the same time, as the sheer amount of plutocrat, drug cartel, and political oligarch money skyrocketed, the need for such tax evasion schemes also skyrocketed. For corporations, obliging countries like Ireland, for example, established highly favorable tax laws to attract corporations to base their operations there. Google, Facebook, and LinkedIn have operations there explicitly designed to evade taxation, and as the corporate location for much of their intellectual property, also to avoid taxes. Elaborate tax evasion schemes with colorful names like the “Dutch Sandwich,” or the “Double Irish” became popular with accounting firms. In the case of Ireland, the culmination was the announcement that Pfizer would acquire Allergan, an Irish pharmaceutical company, and transfer its corporate headquarters from New Jersey to Ireland, in a tax evasion scheme known as “corporate tax inversion.” The public outrage was so vociferous that this week the Obama Administration announced strict regulation against “tax inversions,” which led Pfizer to abandon its plan. In the case of Canada, we have had Burger King acquiring Tim Horton’s and relocating to Canada for the same reason.
In the case of wealthy individual tax evasion schemes, this is where UBS and Mossack Fonseca come into play as the global market opportunity for tax evasion grew exponentially. In Canada, the first hint of that something might be wrong, driven by the global market for tax evasion schemes, has been CBC News ongoing investigation into KPMG, its Isle of Man tax haven scheme, and the formal Canada Revenue Agency investigation and probable criminal charges against KPMG. This story has been extensively reported in a number of CBC News investigative stories and reported here on this blog.
In the last two weeks, we have seen new developments in the Canadian offshore tax haven melodrama that include CBC News revelation of a secret CRA amnesty offer to wealthy KPMG clients, conflicts of interest with CRA officials and accounting firms, and further delays in the CRA’s prosecution of the case against KPMG. It is worth noting that KPMG’s key defense argument is their right to client confidentiality, as with the Swiss banks. The argument failed in Switzerland and is likely to fail in Canada. The CRA case also languished under the Harper government, as both Joe Oliver and Stephen Harper engaged in activities with KPMG that have been seen as inappropriate and potential conflicts of interest. In a rather strange development this week, the CRA requested a copy of the Panama Papers from CBC News, which was refused. The CRA request seems to me more like a classic case of “a day late, and a dollar short.”
My summary assessment is that the Panama Papers Canadian Connection will not go away, and there are likely to be more revelations.
This is a metaphorical essay on personal ethics, worthy of a serious read and contemplation. When I saw the title I was intrigued but suspected it had something to do with Andy Grove’s adage, “sewage flows downhill,” which means “if anything bad happens it will eventually flow down to you.” This is about ethics. The points made here are particularly apt in light of the huge number and sheer scale of recent business frauds: the Volkswagen fraud, LIBOR, Lehman Brothers, Bernie Madoff’s pyramid scheme, Conrad Black in Canada, Olympus in Japan, Bernie Ebbers and Worldcom, Tyco International, stretching back all the way to Enron, Michael Milken’s junk bonds, and the 1980’s savings & loan debacle.
This is a metaphorical essay on personal ethics, worthy of a serious read and contemplation. When I saw the title I was intrigued but suspected it had something to do with Andy Grove’s colorful adage, “sewage flows downhill,” which means “if anything bad happens it will eventually flow down to you.” This is about ethics. The points made here are particularly apt in light of the huge number and sheer scale of recent business frauds: the Volkswagen fraud, LIBOR, Lehman Brothers, Bernie Madoff’s pyramid scheme, Conrad Black in Canada, Olympus in Japan, Bernie Ebbers and Worldcom, Tyco International, stretching back all the way to Enron, Michael Milken’s junk bonds, and the 1980’s savings & loan debacle.
This is only a small selective list and many will be able to think of many other well-known scandals. The problem is that there are no easy answers in many situations. How much do we risk by taking an ethical stand on an issue, and the fact that the bigger the issue the bigger our personal risk? It is very existential. At the same time appear to have learned nothing from all these recent scandals, tightened regulations or changed personal behavior. A recent study of Wall Street brokers suggests that most would still commit fraud, if they benefited substantially, and believed that they would not be prosecuted for it.
Some years ago I heard an analogy that resonated with me. It was a description of learning something – some piece of information about a person’s character – that was so negative, so vile, that no matter what else you knew about that person, you instantlyunderstood the core of the person in question. There is, in fact, a folk-wisdom saying that illustrates this concept, which I first heard on a talk radio show: “That tells me everything I need to know about him.” Ironically, the talk radio host from whom I first heard this expression was revealed to have done something I consider so vile that, even before he was taken off the air, I realized that deed (plus his “Yeah, so what?” attitude) told me everything I needed to know about him – and I stopped listening… and having stumbled across his new broadcast home while channel-surfing, I still refuse to listen to him.
Before I dig into this, I want to be clear – nobody is perfect. We all have our flaws, being human beings, and need to be forgiving and tolerant. We all struggle with weaknesses and sin, and while Jewish I’ve found I like the instructional concept of the Seven Deadly Sins (and the other side of the coin, the Seven Cardinal Virtues), and am convinced that while all these are human weaknesses, each person has their “one sin” with which they wrestle as their dominant weakness. And in that struggle with and – hopefully – victory over it do we demonstrate that we are more than a collection of chemicals and cells, but sentient creatures striving to improve ourselves.
So… this analogy goes as follows:
Imagine you have two cups. One contains the purest, clearest, most wonderful water possible. The other, raw sewage. When you mix the two, you get sewage. The same for a cup of sewage and a pitcher of water, or a barrel of water. Regardless of the size of the pure water container, the sewage contaminates it.
This became the root of what I refer to as “The Rules of Sewage” in regards to a person’s character. This one is the First Rule of Sewage, The Non-Proportional Rule of Sewage. It means, as the saying above goes, that you can sometimes learn a thing about a person that taints the entirety of their personality – e.g., a person beats their spouse. It doesn’t matter what else they are, what acts they do, they are polluted by that one thing.
This simmered in my mind over a couple of years, and I started to formulate other Rules of Sewage. Each was based on the same base concept – mixing water and sewage. Thus far I’ve come up with six.
The Second Rule of Sewage is the Non-Compartmentalized Rule of Sewage. You cannot pour a cup of sewage into a container of water, and have it only remain in the place you poured it. Bad character leaks into other elements of character. E.g., a person who cheats on their spouse – thus breaking a sacred oath – cannot be counted on to keep an oath in any other part of their life.
The Third Rule of Sewage is the Immersive Rule of Sewage. Imagine an edible fish taken from that pure water, placed in sewage, and somehow surviving – no matter the fish’s immune system and other defenses, it will become contaminated. No matter how pure you are to begin with, if you are surrounded by bad people or bad content, it will start to affect you. E.g., a good, honest person who goes to work in a place with bad ethics and stays there – for whatever reason – will sooner or later find they are making compromises to their own character and standards, and rationalizing their doing so. (And this is, of course, the root of the proverb “Birds of a feather, flock together.”)
The Fourth Rule of Sewage is Irreversible Rule of Sewage. Simply put, it’s a lot easier to mix the sewage in and ruin the water than reversing the process. While people are certainly capable of change, it takes deliberate effort to do so, and usually also an ongoing awareness and maintenance of that change to avoid slipping back to whatever factor is being avoided.
The Fifth Rule of Sewage is the Odiferous Rule of Sewage. Sewage, to put it bluntly, stinks like sh*t. Bad odors like that can be covered up or contained, but not forever. Sooner or later the malodorous item in a person’s character will out, and be readily apparent. This actually ties in with…
The Sixth Rule of Sewage, the Reactive Rule of Sewage – when faced with a tank of sewage, normal people react negatively. And while a person learning something about another (ref: Rule One) won’t physically turn their head away and scrunch up their face in disgust, I believe the plain truth is that upon learning of such a think will cause a decent person to dissociate – to whatever degree possible – from the other. Failing to do so, or worse expressing approval, could be considered an example application of Rule One about them too.
In putting this concept “out there” it will be interesting to see if other Rules of Sewage develop in the comments.
Four senior executives from the Belfast office of international accountancy firm KPMG have been arrested on tax evasion charges. KPMG acknowledged in a press release that four of its top executives in Northern Ireland were arrested Wednesday.
Reported by The Financial Times (UK), CBC News and the Guardian (UK), November 27, 2015
Four senior executives from the Belfast office of international accountancy firm KPMG have been arrested on tax evasion charges.
KPMG acknowledged in a press release that four of its top executives in Northern Ireland were arrested Wednesday.
“Pending further information and enquiry, we can confirm that four partners in our Belfast office are on administrative leave. As the matter is ongoing, KPMG is not in a position to make any further comments at this stage,” the company said in a news release.
The four men who were charged and released are:
Jon D’Arcy.
Eamonn Donaghy.
Arthur O’Brien.
Paul Holloway.
From left to right: Eamonn Donaghy, Paul Holloway, Tom Alexander (not arrested or implicated), and Jon D’Arcy of KPMG Northern Ireland. Arthur O’Brien is not shown.
New criminal offences that allow charges against people who help clients with tax evasion came into effect in the U.K. last March.
The Financial Times reports, “The arrests are the latest blow to Northern Ireland’s tightknit business community, which has been hit by a scandal surrounding the £1.2bn sale of a portfolio of property loans to Cerberus, a US private equity company. This year allegations emerged that some Northern Ireland politicians stood to gain from a £7m “fixer’s fee” linked to that deal.
The purchase of the loans is the subject of criminal investigations in the UK and the US.
As well as working together at KPMG, the four men are investors in a property company called JEAP Ltd. The company is registered in County Down and has a trading address at 17 College Square East in Belfast — the same address as KPMG. They are listed as JEAP’s directors and shareholders and its articles of association describe its purpose as “to engage in property development activities.”
It is not clear if the arrests are linked to the activities of that company. Property development was a popular investment among professionals on both sides of the border during Ireland’s property boom, which ended in 2008 when the global financial crisis hit.
An island-wide collapse in property prices triggered Ireland’s financial and banking crisis from 2008 to 2010, which reverberated almost as loudly in Northern Ireland as it did in the Republic. Many investors lost heavily in the crash.
The arrests of four such senior staff is a blow to KPMG’s presence in Northern Ireland. Its operations in Belfast are among the biggest of any professional services firm. It is understood that senior staff from the Dublin office have been sent north to ensure the office is able to carry out its day-to-day functions.” End
CRA alleges KPMG ‘tax scam’
Meanwhile in Canada, KPMG is fighting the Canadian Revenue Agency over tax arrangements that allegedly hide money for wealthy clients.
The CRA alleges KPMG has used “deceptive practices” that hide the money of wealthy clients in Canada..
In February 2013, a federal court judge ordered KPMG to turn over a list of multimillionaire clients who placed their fortunes in an Isle of Man tax shelter scheme created by the accountancy firm. KPMG is fighting that court order and has yet to identify the wealthy people involved.
The case is scheduled to return to court in 2016.
Legal action against the firm for violations of tax laws and links to tax shelters have been mounting in recent years.
Files leaked from Luxembourg earlier this year show KPMG among the advisers of some multinationals who have successfully shifted money to the low-tax region.
In 2005, the firm paid fines in the U.S. of $456 million US for creating illegal tax shelters to help rich clients avoid tax.
Pfizer’s announcement this week of its intricate $160 Billion merger/acquisition with Irish pharmaceutical company Allergan, revealed that Pfizer will be moving the new corporate headquarters to Dublin. Essentially, Pfizer, the much larger company, is providing a bridging loan to Allergan to purchase Pfizer so that it may move to Ireland. This enables Pfizer to avoid paying U.S. taxes, even after receiving massive support for R&D from U.S. government programs.
Pfizer CEO Ian Read
Pfizer’s announcement this week of its intricate $160 Billion merger/acquisition with Irish pharmaceutical company Allergan, revealed that Pfizer will be moving the new corporate headquarters to Dublin. Essentially, Pfizer, the much larger company, is providing a bridging loan to Allergan to purchase Pfizer so that it may move to Ireland. This enables Pfizer to avoid paying U.S. taxes, even after receiving massive support for R&D from U.S. government programs. Pfizer CEO, Ian Read, has deflected questioning about the apparent tax avoidance scheme by simply saying that the price of the deal would have been different had Pfizer bought Allergan and remained in New York. Needless to say, the reaction to this has been swift and harsh from many quarters.
Colorfully named offshore tax avoidance strategies like the “Dutch Sandwich” and the “Double Irish” have been superseded by wholesale corporate uprooting and transplantation in foreign jurisdictions. Ireland is particularly notable for its favorable tax treatment of foreign companies, which has attracted the attention of the EU and U.S. tax authorities. Burger King’s merger with Tim Horton’s and corporate move to Canada is a recent case. KPMG Canada’s Isle of Man scheme, while designed for high wealth individuals, is another example. The Pfizer/Allergan merger is a barely disguised form of corporate tax evasion that is for the moment legal, and evidence of the return of a Gilded Age of corporate excess and plutocracy. It is a social and political issue of the highest order, not to mention business ethics.
Included here is today’s editorial from the New York Times.
Pfizer’s Big Breakthrough: Global Tax Avoidance
The $160 billion deal to combine Pfizer and Allergan, the maker of Botox, does not appear to be illegal. But it should be. This merger is a tax-dodging maneuver that enriches shareholders and executives while shortchanging the public and robbing the Treasury of money that would pay for a host of government programs — including education, scientific research and other services that also benefit corporations.
Pfizer, with a market value of nearly $200 billion, will be acquired by the smaller Allergan, which is run from New Jersey but technically headquartered in Ireland. This will allow Pfizer, which is based in New York, to pass itself off as Irish as well. Once the paper shuffling is complete, much if not most of Pfizer’s earnings — including those that are made in the United States — will be taxed at global tax rates that are generally lower than American tax rates.
In recent years, dozens of American companies have used similar tactics, known as inversions, to reincorporate in Ireland, Britain and other countries with lower corporate tax rates than those in the United States — at a cost to the Treasury conservatively estimated at $20 billion over 10 years. Pfizer’s merger is by far the largest such move.
But if it’s a loss for taxpayers, it’s a great deal for Pfizer. As with other companies that have “inverted,” the only thing it has to lose is its tax obligations. Inverted companies almost invariably keep their headquarters and top executives in the United States. They remain listed on United States-based stock exchanges, where they raise capital under the protection of American securities’ laws. The newly combined Pfizer Inc. and Allergan P.L.C., for instance, will be renamed Pfizer P.L.C. and trade under the ticker symbol PFE, Pfizer’s current symbol, on the New York Stock Exchange, according to The Wall Street Journal.
In addition, inverted companies continue to enjoy the protection of patent laws in the United States, as well as their connections, official and unofficial, with federal research agencies — all of which are crucial to drug-company profits. Contrary to popular belief, much high-risk, pathbreaking research and development can be traced not to the big drug companies but to taxpayer-funded research at the National Institutes of Health.
Traditionally, corporate taxation was a way to repay the public for benefits companies received from federal support. But in recent decades, corporate taxes as a share of federal revenue have shriveled. Inversions will only worsen that trend, effectively bolstering corporate profits at the expense of the public.
Pfizer executives, and the executives of inverted companies, don’t put it that way. They say they cannot remain competitive if they have to pay tax on profits at the relatively high United States top rate of 35 percent.
That claim does not stand up. American multinationals routinely take advantage of write-offs that reduce the top rate to a much lower level. Moreover, even an inverted company is supposed to pay tax on earnings generated in the United States at American rates. But by having a foreign parent company in one country — Ireland in this case — while remaining headquartered in the United States, a company can lower its tax bill through an accounting gimmick known as “earnings stripping,” in which profits from the United States are shifted to the foreign parent in the lower-taxed country, thus reducing the American tax bill.
It is not hard to write legislation and draw up rules outlawing inversions, and bills currently in Congress could put a stop to them quickly. What is lacking is political will to tell powerful corporate interests to stop. The Treasury Department under President Obama has issued rules to curb the practice. But the Pfizer and Allergan hookup is expected to get around these constraints. The administration could do more, but even more aggressive executive action would not be as effective as robust legislation.
Reincorporating abroad is a sophisticated variation on the old practice of avoiding corporate taxes by renting a post office box in the Caribbean and calling it corporate headquarters. Congress put a stop to those tactics in 2004. It is past time to shut down inversions as well.
Canada is routinely cited as a boring backwater in financial services that has none of the scandals plaguing the rest of the industry. But in an extraordinary investigative report on The National, CBC’s Ian Hanomansing revealed an ongoing Canada Revenue Agency investigation, and a looming criminal investigation into KPMG Canada’s Isle of Man tax “haven” scheme reserved for its wealthiest clients. The report names names. Current Canadian government ministers are also implicated in apparent conflicts of interest.
Canada is routinely cited as a boring backwater in financial services that has none of the scandals plaguing the rest of the industry. But in an extraordinary investigative report on The National, CBC’s Ian Hanomansing revealed an ongoing Canada Revenue Agency investigation, and a looming criminal investigation into KPMG Canada’s Isle of Man tax “haven” scheme reserved for its wealthiest clients. The report names names, one particular Vancouver Island KPMG client family, and shady shell companies. Current Canadian government ministers are also implicated in apparent conflicts of interest. I was particularly struck by the similarity of the KPMG Canada scheme to similar tax evasion schemes in both the European Union and the United States which have been the subject of criminal investigations, admissions of guilt, and substantial fines. Of particular note is the UBS tax evasion scheme which has led Swiss and U.S. authorities to prosecute senior UBS executives. The key similarity between the Swiss tax evasion fraud, and the Canadian KPMG situation is the attempt to stand on professional-client privilege, essentially secrecy.
It is the refusal of KPMG, backed by CPA, to reveal client information in the government inquiry. In the case of the Swiss, this defense collapsed ignominiously and led to the wave of prosecutions of Swiss financial institutions, the closure of at least one Swiss banking institution, and the end of Swiss banking secrecy.
IMHO, blatant and flagrant tax evasion by high worth individuals and corporations have reached an epidemic level. Colorfully named offshore tax avoidance strategies like the “Dutch Sandwich” and the “Double Irish” have been superseded by wholesale corporate uprooting and transplantation in foreign jurisdictions. Ireland is particularly notable for its favorable tax treatment of foreign companies, which has attracted the attention of the EU and U.S. tax authorities. Burger King’s merger with Tim Horton’s and establishing corporate headquarters in Canada is only a more recent case. KPMG Canada’s Isle of Man scheme, while designed for high wealth individuals, is another example. The Pfizer/Allergan merger is the latest barely disguised form of corporate tax evasion that is for the moment legal, and evidence of the return of a Gilded Age of corporate excess and plutocracy. It is a social and political issue of the highest order, not to mention business ethics.
A larger question now looms. Which other Canadian firms and financial institutions may have similar tax evasion schemes?
KPMG tax ‘sham’ could lead to criminal investigation, experts say
CBC News travels to Isle of Man to find denials, secrecy around alleged ‘sham’ company
By Harvey Cashore, Dave Seglins and Frederic Zalac, CBC NewsPosted: Sep 10, 2015 5:50 PM ET Last Updated: Sep 11, 2015 1:59 PM ET
KPMG tax ‘sham’ could lead to criminal investigation
A KPMG tax avoidance scheme in the Isle of Man could lead to a criminal investigation if the Canada Revenue Agency can support allegations that the accounting firm’s offshore structure intended to deceive authorities, two tax experts have told CBC News.
“It is clearly a case where it could lead to a criminal investigation, because obviously there were things that were done here that were not in line with reality,” Laval University tax professor Andre Lareau told CBC News during a trip to the Isle of Man this summer.
CBC asked Lareau, an internationally recognized expert on tax law, to visit the renowned offshore haven in the Irish Sea in a bid to track down answers about a KPMG tax scheme that the CRA is alleging was “intended to deceive” authorities.
“It really is a textbook case of a sham, when you look at the documents,” Lareau concluded.
But he also cautioned that a criminal investigation would require a higher burden of proof, both to collect evidence in the first place and to obtain a conviction.
And that the CRA would need to show that KPMG and its clients knowingly deceived tax authorities.
“They have to prove the intention to defraud the system,” he said.
Shroud of secrecy
CBC News and Lareau arrived in the Isle of Man on Tynwald Day, the national holiday, and spoke directly to Steve Rodan, the speaker of the legislature who insisted the Isle of Man was not a tax haven.
“It’s a tax-efficient jurisdiction,” he said.
“‘Tax haven’ is a term of abuse these days. We are open and transparent, anyone can come in and look at the books. There’s no secrecy here, no banking secrecy,” Rodan told CBC News.
But when CBC and Lareau went looking for the offices, shareholders and directors of the Ogral corporation — which was set up more than a decade ago by the Cooper family of Victoria, B.C. on advice from KPMG Canada — the reporters were stonewalled.
Anne Couper Woods, a “nominee director” of Ogral Corporation — and dozens of other Isle of Man companies — based in Douglas, the capital, refused to discuss the KPMG case with CBC News.
“We wouldn’t comment at all,” she told CBC reporters. She declined to answer questions about how KPMG Canada first got in touch with her to set up the shell companies. “I have no further comments,” she said.
Sandra Georgeson, another Isle of Man director of Ogral Corporation was a little more forthcoming. She admitted that one of the shareholders — another company called Korderry — was simply a “nominee service” used to protect the identity of the true owners of Ogral.
Steve Rodan, the Speaker of the House on the Isle of man insists his homeland has no tax or banking secrecy. (CBC News)
“It’s just so that you can provide a shareholder,” she told CBC News in an interview from her office on Athol Street. When CBC producer Harvey Cashore asked her the reason behind providing a nominee shareholder, she replied simply, “confidentiality.”
She also declined to say who were the real owners of the company.
When Lareau went to the offices of KPMG in downtown Douglas, he says he was told that KPMG would never get involved in an alleged scheme that would have clients pretend to give away their money to an Isle of Man corporation.
Back in Canada, KPMG lawyers don’t dispute they advised the Cooper family to set up the Ogral company.
They claim, however, that the money in Ogral did not belong to the Coopers. Court documents show that KPMG was rewarded with hundreds of thousands of dollars in commissions, and was promoting the Isle of Man scheme to other multi-millionaire clients.
Internal KPMG memos told tax advisers the firm was promoting a “no tax” plan and could charge fees “in the range of 15 per cent of annual savings.”
CRA alleges ‘sham’
In civil court documents, CRA alleges that KPMG, as well as some of its wealthy clients, knowingly participated in a “grossly negligent” tax avoidance scheme that deliberately deprived the federal treasury of millions in unpaid taxes.
B.C. resident Marshall Cooper said he was unaware of Canadian tax laws when he emigrated from South Africa in the mid-1990s. (Facebook)
The tax planning product “is a sham and was intended to deceive the minister,” the CRA court filings allege.
Still, the CRA’s current court action against KPMG and its clients remains strictly in the civil arena.
The CRA has required at least three of the known KPMG clients — i.e. the Cooper family — to pay substantial penalties as well as the taxes owed. The Coopers are appealing the case.
The CRA has also launched civil court action against KPMG, demanding that it hand over the names of all the multi-millionaire Canadian residents who set up offshore companies in the Isle of Man.
KPMG is appealing a judge’s order to hand over the names and that case has been stalled for more than two and a half years.
KPMG prosecuted in U.S.
Michael Hamersley, a former KPMG lawyer turned whistleblower in the U.S., also reviewed the documents filed in court in Canada.
His testimony helped the Internal Revenue Service convict three KPMG U.S. executives in a different tax shelter scheme in the mid-2000s. In that case, KPMG U.S. also agreed to pay a fine of nearly half a billion dollars.
The KPMG Canada case “resonates plenty,” Hamersley said. “It’s exactly the type of behaviour that I saw in the U.S. at the time.”
“When your transaction and the tax results are dependent upon hiding the true facts, you start to cross into potential criminal liability,” Hamersley told CBC News.
KPMG Canada declined to speak with CBC News about the Isle of Man offshore scheme.
“Professional standards and obligations preclude us from disclosing, responding to, or discussing any matters that involve clients,” Kira Froese, KPMG Canada’s director of communications, wrote in an email. “It is inappropriate for us to comment on matters that may be before the courts.”
Canada’s Department of Justice did not return an email or phone calls by the time of publication asking about the delay in the case.
For most people, pleading guilty to a felony means they will very likely land in prison, lose their job and forfeit their right to vote.
But when five of the world’s biggest banks plead guilty to an array of antitrust and fraud charges as soon as next week, life will go on, probably without much of a hiccup.
The Justice Department is preparing to announce that Barclays, JPMorgan Chase, Citigroup and the Royal Bank of Scotland will collectively pay several billion dollars and plead guilty to criminal antitrust violations for rigging the price of foreign currencies, according to people briefed on the matter who spoke on the condition of anonymity. Most if not all of the pleas are expected to come from the banks’ holding companies, the people said — a first for Wall Street giants that until now have had only subsidiaries or their biggest banking units plead guilty.
UPDATE, May 19, 2015: As the fines levied against the banks are announced tomorrow, keep in mind that these fines are treated as mere costs of doing business and are tax-deductible. More concerning, The New York Times, CNN Money, and The Nightly Business Report have today reported on the latest update of the University of Notre Dame, Labaton Sucharow study on Wall Street ethics, first released in 2012. The bad news is that nothing has yet changed on Wall Street, with even more study respondents reporting first-hand knowledge of unethical behavior and a willingness to engage in it themselves so long as they can get away with it.
5 Big Banks Expected to Plead Guilty to Felony Charges, but Punishments May Be Tempered:
Barclays Bank, JP Morgan Chase, Citigroup, Royal Bank of Scotland, and UBS
UBS could pay a fine of up to $500 million to avoid a trial over charges from 2012 that it manipulated benchmark interest rates.CreditRuben Sprich/Reuters
For most people, pleading guilty to a felony means they will very likely land in prison, lose their job and forfeit their right to vote.
But when five of the world’s biggest banks plead guilty to an array of antitrust and fraud charges as soon as next week, life will go on, probably without much of a hiccup.
The Justice Department is preparing to announce that Barclays, JPMorgan Chase, Citigroup and the Royal Bank of Scotland will collectively pay several billion dollars and plead guilty to criminal antitrust violations for rigging the price of foreign currencies, according to people briefed on the matter who spoke on the condition of anonymity. Most if not all of the pleas are expected to come from the banks’ holding companies, the people said — a first for Wall Street giants that until now have had only subsidiaries or their biggest banking units plead guilty.
The Justice Department is also preparing to resolve accusations of foreign currency misconduct at UBS. As part of that deal, prosecutors are taking the rare step of tearing up a 2012 nonprosecution agreement with the bank over the manipulation of benchmark interest rates, the people said, citing the bank’s foreign currency misconduct as a violation of the earlier agreement. UBS A.G., the banking unit that signed the 2012 nonprosecution agreement, is expected to plead guilty to the earlier charges and pay a fine that could be as high as $500 million rather than go to trial, the people said.
Regulators say that a group of London traders, known as the “cartel” and the “mafia,” illegally dipped into the $5.3-trillion-a-day currency trade.
The guilty pleas, scarlet letters affixed to banks of this size and significance, represent another prosecutorial milestone in a broader effort to crack down on financial misdeeds. Yet as much as prosecutors want to punish banks for misdeeds, they are also mindful that too harsh a penalty could imperil banks that are at the heart of the global economy, a balancing act that could produce pleas that are more symbolic than sweeping.
Holding companies, while appearing to be the most important entities at the banks, are in less jeopardy of suffering the consequences of guilty pleas. Some banks worried that a guilty plea by their biggest banking units, which hold licenses that enable them to operate branches and make loans, would be riskier, two of the people briefed on the matter said. The fear, they said, centered on whether state or federal regulators might revoke those licenses in response to the pleas.
Behind the scenes in Washington, the banks’ lawyers are also seeking assurances from federal regulators — including the Securities and Exchange Commission and the Labor Department — that the banks will not be barred from certain business practices after the guilty pleas, the people said. While the S.E.C.’s five commissioners have not yet voted on the requests for waivers, which would allow the banks to conduct business as usual despite being felons, the people briefed on the matter expected a majority of commissioners to grant them.
In reality, those accommodations render the plea deals, at least in part, an exercise in stagecraft. And while banks might prefer a deferred-prosecution agreement that suspends charges in exchange for fines and other concessions — or a nonprosecution deal like the one that UBS is on the verge of losing — the reputational blow of being a felon does not spell disaster.
“For any company there’s a huge reputational difference between a deferred-prosecution agreement and a guilty plea,” said David A. O’Neil, a partner at Debevoise & Plimpton and former senior Justice Department official who helped secure a guilty plea to a financial crime last year from the French bank BNP Paribas. “But the government needs to be careful that it doesn’t turn a guilty plea into a D.P.A. with just another name.”
The foreign exchange investigation, which centers on accusations that traders colluded to fix the price of major currencies, will test the Justice Department’s strategy for securing guilty pleas on Wall Street.
Timeline: Tracking Criminal Inquiries of Wall St. Giants
In the case of UBS, the bank will lose its nonprosecution agreement over interest rate manipulation, the people briefed on the matter said, a consequence of its misconduct in the foreign exchange case. It is unclear why that penalty will fall on UBS, but not on other banks suspected of manipulating both interest rates and currency prices.
The action against UBS underscores the threats that Justice Department officials issued in recent months about voiding past deals in the event of new misdeeds, a central tactic in a plan to address the cycle of corporate recidivism. Leslie Caldwell, the head of the Justice Department’s criminal division, recently remarked that she “will not hesitate to tear up a D.P.A. or N.P.A. and file criminal charges where such action is appropriate.”
Still, the bank is expected to avoid pleading guilty in the foreign exchange case, the people said, though it will probably pay a fine. While UBS was unlikely to plead guilty to antitrust violations because it was the first to cooperate in the foreign exchange investigation, the bank was facing the possibility of pleading guilty to fraud charges related to the currency manipulation. The exact punishment is not yet final, the people added.
The Justice Department negotiations coincide with the banks’ separate efforts to persuade the S.E.C. to issue waivers from automatic bans that occur when a company pleads guilty. If the waivers are not granted, a decision that the Justice Department does not control, the banks could face significant consequences.
For example, some banks may be seeking waivers to a ban on overseeing mutual funds, one of the people said. They are also requesting waivers to ensure they do not lose their special status as “well-known seasoned issuers,” which allows them to fast-track securities offerings. For some of the banks, there is also a concern that they will lose their “safe harbor” status for making forward-looking statements in securities documents.
In turn, the S.E.C. asked the Justice Department to hold off on announcing the currency cases until the banks’ requests had been reviewed, one of the people said. As of Wednesday, it seemed probable that a majority of the S.E.C.’s commissioners would approve most of the waivers, which can be granted for a cause like the public good. Still, the agency’s two Democratic commissioners — Kara M. Stein and Luis A. Aguilar, who have denounced the S.E.C.’s use of waivers — might be more likely to balk.
Document: Settlements in Foreign Exchange Investigations
Corporate prosecutions are a delicate matter, peppered with political and legal land mines. Senator Elizabeth Warren, Democrat of Massachusetts, and other liberal politicians have criticized prosecutors for treating Wall Street with kid gloves. Banks and their lawyers, however, complain about huge penalties and guilty pleas.
UBS has confirmed it is being investigated by US authorities into whether it helped Americans evade taxes through investments banned in the US. The Swiss bank said US regulators were investigating potential sales of so called “bearer bonds”. These bonds can be transferred without registering ownership, enabling wealthy clients to potentially hide assets. The fresh investigation by the US Attorney’s Office for the Eastern District of New York and from the US Securities and Exchange Commission comes after UBS paid $780m (£512m) in 2009 to settle a separate Justice Department tax-evasion probe.
UBS has confirmed it is being investigated by US authorities into whether it helped Americans evade taxes through investments banned in the US.
Former UBS wealth management executive, Raoul Weill, currently on trial in U.S. Federal Court, charged with bank fraud
Former U.S. Senator Phil Gramm, and former UBS bank Vice Chairman, suspected of probable knowledge of UBS involvement in LIBOR, currency manipulation and U.S. tax evasion schemes
The Swiss bank said US regulators were investigating potential sales of so called “bearer bonds”.
These bonds can be transferred without registering ownership, enabling wealthy clients to potentially hide assets. Bearer bonds are literally cash, and therefore attractive as untraceable financial instruments. Think Eddie Murphy in Beverly Hills Cop explaining that he found “bearer bonds” in Victor Maitland’s warehouse.
“We are cooperating with the authorities in these investigations,” the bank said.
The fresh investigation by the US Attorney’s Office for the Eastern District of New York and from the US Securities and Exchange Commission comes after UBS paid $780m (£512m) in 2009 to settle a separate Justice Department tax-evasion probe.
UBS made the announcement as it revealed a better-than-expected 13% rise in fourth quarter net profit to 963m Swiss francs (£683.9m).
However, it warned the increased value of the Swiss franc relative to other currencies, following the Swiss National Bank’s decision to abandon the cap on the currency’s value against the euro, would “put pressure” on its profitability.
“The increased value of the Swiss franc relative to other currencies, especially the US dollar and the euro, and negative interest rates in the eurozone and Switzerland will put pressure on our profitability and, if they persist, on some of our targeted performance levels,” it warned.
UBS results for the full year, were hit by more than $1bn to settle past scandals. In November, it was one of six banks fined by UK and US regulators over their traders’ attempted manipulation of foreign exchange rates, paying 774m Swiss francs in total.
It also paid $300m in the second quarter to settle charges it helped wealthy German clients evade tax.
The US Department of Justice (DOJ) is continuing to investigate UBS over currency manipulation allegations.
Some people seem to be having a problem with Nick Hanauer. He seems to have pissed off a lot of people, but at the same time, he seems to be talking sense and to have achieved significant traction. This often seems to happen in times of turmoil and change. A multi-millionaire in his own right, but also someone with a profound liberal arts and humanities grounding, Mr. Hanauer has called “foul,” with the behavior of the 1%. I am personally fascinated with people like this, because I sense that Hanauer is somewhat like me. I worked with Ivy League MBA’s at Intel who said to me that they wished that they had my humanities education, while I told them that I wished I had their management education. I now teach management in a prestigious university and can comment intelligently.
Some people seem to be having a problem with Nick Hanauer. He seems to have pissed off a lot of people, but at the same time, he seems to be talking sense and to have achieved significant traction. This often seems to happen in times of turmoil and change. A multi-millionaire in his own right, but also someone with a profound liberal arts and humanities grounding, Mr. Hanauer has called “foul,” with the behavior of the 1%. I am personally fascinated with people like this, because I sense that Hanauer is somewhat like me. I worked with Ivy League MBA’s at Intel who said to me that they wished that they had my humanities education, while I told them that I wished I had their management education. I now teach management in a prestigious university and can comment intelligently.
I admit openly to being a capitalist, but something has gone terribly wrong with our system. I follow the leading global investment banks. I know about Michael Lewis, Liar’s Poker, Flash Boys, LIBOR, foreign exchange fraud, commodity trading fraud, tax evasion for wealthy U.S and German clients, money laundering for drug cartels and ask myself what has gone so terribly wrong. The worst has been Silicon Valley luminary venture capitalists like Tom Perkins, who have become an obscene embarrassment. Some of the wealthy have tried to distance themselves from Mr. Perkins, but actually have their own equivocations for why everyone misunderstands them.
I agree with Mr. Hanauer. The pendulum is swinging back as it always does and unless the rich get on board with ethical reform, the backlash will be harsh.
Super-Rich Guy To ‘Zillionaires’: Back $15 Minimum Wage Or
Prepare For Revolution
Reblogged from The Huffington Post |
A Seattle millionaire is urging his super-rich peers to support a $15 minimum wage or face the possibility of a devastating populist revolt.
In an essay published this week by Politico Magazine, venture capitalist Nick Hanauer warned that the widening income gap in the U.S. would eventually spark a violent revolution.
“No society can sustain this kind of rising inequality,” Hanauer wrote in the piece, shared nearly 200,000 times on Facebook by Tuesday afternoon. “In fact, there is no example in human history where wealth accumulated like this and the pitchforks didn’t eventually come out.”
Hanauer, whose fortune ballooned thanks to an early investment in Amazon, first suggested raising the minimum wage to $15 last year in an op-ed published by Bloomberg View.
Hanauer argues in the Politico essay that the trickle-down economics evangelized by conservatives since President Ronald Reagan is “idiotic” and compared it to the way medieval monarchs and rulers claimed their fortune and power was bestowed by higher powers.
“Historically, we called that divine right,” he wrote. “Today we have trickle-down economics.”
That philosophy makes it difficult for middle-class customers to earn enough money to spend on the products people get wealthy selling, Hanauer writes.
“The model for us rich guys here should be Henry Ford, who realized that all his autoworkers in Michigan weren’t only cheap labor to be exploited; they were customers, too,” he writes. “Ford figured that if he raised their wages, to a then-exorbitant $5 a day, they’d be able to afford his Model Ts.”
Hanaeur said inaction by larger companies like Walmart and McDonald’s prove that “we should compel retailers to pay living wages – not just ask politely.”
This year has given Hanauer reasons to feel emboldened. French economist Thomas Piketty struck a nerve with his book on the widening wealth gap, Capital In The Twenty-First Century which skyrocketed to No. 1 on Amazon. Further fueling the fire, the International Monetary Fund last month urged the United States to raise the minimum wage or risk even slower economic growth.
“If workers have more money, businesses have more customers,” Hanauer wrote. “The middle class creates us rich people, not the other way around.”
mayo615 