Destructive ‘fat cat’ tax law a complete flop. It’s time to repeal it.

Brian Sanchez

On Wednesday, the House Subcommittee on Government Operations of the Committee on Oversight and Government Reform will hold a hearing on the unintended consequences of the Foreign Account Tax Compliance Act, or FATCA. Featuring witnesses representing the nine million Americans living abroad, the hearing will dramatize how this ill-conceived edict has turned law-abiding, middle-class citizens into virtual financial lepers. 

In the name of tracking down “fat cat” tax cheats, FATCA imposes an indiscriminate information dragnet requiring, under threat of sanctions, all non-U.S. financial institutions (banks, credit unions, insurance companies, investment and pension funds, etc.) to report data on all specified U.S. accounts to the Internal Revenue Service. No probable cause of criminal activity or even suspicion is required.

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Foreign banks have responded by dumping American clients, making it impossible for them to conduct everyday transactions to lead normal lives. FATCA is a primary factor fueling the record rate of Americans abroad renouncing their U.S. citizenship.

Witnesses called by the Democratic minority are expected to defend the Obama-era FATCA law by pointing to offshore tax evasion — a problem that no one denies. But that doesn’t mean FATCA is the right remedy. Talking about tax evasion to justify FATCA is comparable to “defending” America’s catastrophic experiment with the prohibition of alcohol by reciting the litany of the ravages caused by Demon Rum. 

There is no reason to think FATCA is an effective enforcement tool. The IRS is getting better at policing evasion for reasons having nothing to do with FATCA. According to Professor William Byrnes of Texas A&M University School of Law, the vast bulk of IRS recoveries “would have been generated without FATCA” via “normal investigatory techniques such as whistleblowing, prisoners dilemma, congressional hearings, and John Doe summons enforcement.”

Byrnes attributes the actual net recovery attributable to FATCA at a mere $100-200 million per year, far less than the approximately $800 million it was scored at upon enactment in 2010. Worse, projects Byrnes, the recovery trend is downward, and FATCA (excepting penalties) could “soon cost more money than it brings in.”

Byrnes may even be overestimating FATCA’s effectiveness in light of the IRS’s own standards. Generally, the agency claims to recover $7 for every enforcement dollar spent.

But for FATCA and related programs, sorting through the sheer “mountain of data,” the vast bulk of it irrelevant, almost reverses the recovery bang for the enforcement buck, according to W. Gavin Ekins, a research economist at the nonpartisan Tax Foundation: “Actually finding a dollar of tax evasion may cost us $5 of actually sifting through the data and compliance costs.” Compared to normal IRS programs that’s a 35-1 dysfunction quotient.

Among the hardships witnesses will testify to are crushing IRS penalties for filing errors and huge costs for accounting and legal services, even when no tax was owed. The Tax Foundation estimates that in 2016 FATCA paperwork cost individuals almost 4.5 million hours and over $165 million, a figure comparable to Byrnes’ estimate of FATCA-generated revenues. 

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Worse still is the massive compliance costs placed on the entire global financial system — money that comes out of the pockets of customers and depositors. Even a small bank can expect to spend millions of dollars looking for American “indicia” among thousands of accounts.

According to available data, bigger ones spend much more. For example, according to the Wall Street Journal, Canada’s “Big Five” banks collectively had paid out the equivalent of $693.5 million in primary compliance by 2014. Bank of Nova Scotia alone had spent $100 million as of 2013.

Estimates of total global compliance spending rely on aggregating what is known about per-institution costs. One such projection assesses FATCA’s cumulative cost at between $58 billion and $170 billion. An estimate by the Swiss-American Chamber of Commerce comes in at a stunning $1-2 trillion.  

It’s thus no mystery why big accounting, law and software firms are thrilled with FATCA and are keen to insist that “FATCA is here to stay!” But corporate welfare for compliance vendors who are the real fat cats in this saga is no reason to keep a bad law.

In early April Rep. Mark Meadows (R-N.C.) and Sen. Rand Paul (R-Ky.) introduced companion bills to repeal FATCA in accordance with the 2016 GOP Platform. In addition, Paul and Meadows recently wrote to Treasury Secretary Steven Mnuchin and OMB Director Mick Mulvaney urging executive actions to minimize FATCA’s damaging impact pending its removal from the statute books.

Working with the Campaign to Repeal FATCA, grassroots taxpayer and free market groups, such as Americans for Tax Reform and National Taxpayers Union, support repeal. 

The Meadows-Paul FATCA repeal bill is ready to be added onto any suitable tax measure arising in the House. As my co-leader in the Campaign to Repeal FATCA, deVere Group CEO Nigel Green, has written, it’s time for the GOP White House and Congress “to honor the party’s pledge to get rid of this senseless, invasive, dictatorial and costly burden.” An early nod from the White House would be a welcome signal.

 

James George Jatras is a former U.S. diplomat for the State Department and a foreign policy adviser to the Senate GOP leadership. He is Co-Leader of the Campaign to Repeal FATCA.

The views expressed by contributors are their own and not the views of The Hill. 

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Law firms merger talks fall through

Brian Sanchez

Merger talks between law firms Ward Hadaway and Weightmans have fallen through with both firms saying they have mutually withdrawn from discussions.

The firms said that while they had much in common their respective strategic priorities were not aligned.

John Schorah, managing partner of Weightmans, said: “We have real respect for Ward Hadaway, they have a really good business with very good people. We have many common interests too, but after discussions it became clear that we each want different things from our respective futures.

“We sensibly agreed between us it was better to focus on those things.”

The firms confirmed at the beginning of the year that they were in talks over a potential merger.

In joint statement issued by the two firms in Jaunary, they said that they were “talking to each other to see if there are benefits of working closer together”.

But now they will both continue to forge independent paths.

Jamie Martin, managing partner of Ward Hadaway, said: “We have enjoyed talking to John Schorah and his team and getting to know the people at Weightmans a bit better and we wish them well for the future.”

He added that Ward Hadaway would continue to pursue a startegy of developing a Northern law firm across its three offices in Leeds, Manchester and Newcastle.

“We have exciting opportunities to follow as an independent law firm,” Mr Martin said.

Ward Hadaway’s Leeds office has enjoyed significant growth since it opened in 2008.

The firm employs more than 450 staff.

Weightmans has around 1,400 staff based in offices in Birmingham, Dartford, Glasgow, Knutsford, Leeds, Leicester, Liverpool, London and Manchester.

It acts for many local, police and fire authorities, and many NHS trusts. It also provides a wide range of commercial services for public sector bodies, large institutions, owner managed businesses and PLCs.

Last year, Weightmans posted a turnover of £95.1m, an increase of almost £6m on the previous year.

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Mogin Law Merges with D.C.-Based Firm

Brian Sanchez

Jonathan Rubin

Jonathan Rubin

Locally headquartered Mogin Law Firm PC, headed by Daniel Mogin, has merged with Washington, D.C.-based Rubin PLLC, headed by Jonathan Rubin, to form MorginRubin LLP, the firms announced Tuesday.

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“This was a natural match,” Rubin said. “Dan and I have been involved in hundreds of cases concerning price-fixing, monopolization, mergers, merger disruption, bid rigging, public policy advocacy, and competition policy. We also share the same philosophy when it comes to representing our clients.”

Both practices specialized in antitrust and competition law.

The new firm has eight attorneys — seven from Mogin’s previous practice and Rubin — and offices in San Diego and Washington.

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University of Louisville Foundation approves first detailed budget, sacks law and accounting firms

Brian Sanchez

LOUISVILLE, Ky. (WDRB) —  The University of Louisville Foundation on Tuesday adopted a detailed budget to guide its spending in the upcoming year — a basic financial management procedure that the $900 million organization never undertook during the 14-year administration of former U of L President James Ramsey.

Seeking a “fresh start,” the foundation also replaced its longtime general counsel, David Saffer of the Louisville law firm Stites and Harbison, and its longtime auditing firm, BKD LLP.

Diane Medley, a certified public accountant who chairs the foundation board, said it was “incredibly unusual” for an organization of the foundation’s size not to have a “line item” budget detailing its planned expenses on an annual basis.

“I think the way the foundation has been run in the past – it was a lack of accountability, and there was a lack of planning,” Medley told reporters following a meeting of the board on Tuesday. “It was used as a funding mechanism for various projects that the president felt added to the value of the university, and the whole process is not what you would normally expect.

“What happens when you don’t have a normal process?” Medley said. “Sometimes you have things that are not well thought out, and that’s what we are also grappling with, is, how to unwind some of those contracts and some of those projects and move forward in a good way.”

Included in the budget approved Tuesday, for example, is $597,776 to satisfy “deferred compensation” obligations to a handful of university administrators.

Last month the foundation board voted to eliminate the deferred pay program – which has already cost the organization more than $20 million – but not all of the money owed to administrators has been paid out yet.

Before Tuesday, the foundation hadn’t budgeted a cent for deferred pay, and when Ramsey and few other top administrators cashed out last year, the organization dipped into U of L’s largest individual gift on record, from the late philanthropist Owsley Brown Frazier, to make the payments.

Financial documents reviewed by the foundation board Tuesday show a steep drop in donations during the first nine months of the fiscal year.

The foundation, which receives donations to the academic departments of the university, took in $20.3 million in gifts during the nine months ended March 31, down from $52.7 million during the same period a year earlier.

Foundation leaders chalked that up to bad publicity about the organization, whose finances are the subject of a $1.7 million “forensic audit” that will be released in June.

“I think donors from what they are telling us, they continue to love the university, they know what it means to the community, but they want to make sure that we’ve got the ship righted,” Medley said.

The gift comparisons were also skewed by a single, $20 million pledge that was recorded in the earlier period, according to Justin Ruhl, the foundation’s accounting director. Foundation staff declined to reveal the donor.

Medley said the decision to change the foundation’s legal and accounting firms was not based on those contractors’ performance, but simply to bring in new professionals to go along with the foundation’s almost entirely new board of directors.

Medley said the change had nothing to do with Saffer’s comment at a March meeting that the foundation, under Ramsey, had separate accounting for the deferred pay program “for obfuscation purposes.”

“We were having discussions with (Saffer) prior that, about transition,” Medley said.

The foundation hired Franklin Jelsma, managing partner at the Louisville firm Wyatt Tarrant & Combs, as its general counsel. No replacement has been named for BKD, the foundation’s longtime auditor.

Reach reporter Chris Otts at 502-585-0822, cotts@wdrb.com, on Twitter or on Facebook. Copyright 2017 WDRB News. All rights reserved.

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Corporate watchdog fines 54 firms for disclosure violations

Brian Sanchez

South Korea’s corporate watchdog said Wednesday that it has slapped a combined 218.9 million won ($194,300) in fines on 54 affiliates of large business groups for regulatory filing violations last year.

SK Group, the country’s third-biggest conglomerate by assets, were fined 33.3 million won due to 17 offending cases, while affiliates of OCI Co., the top solar power panel maker, were booked

(Yonhap)

46.7 million won for not properly reporting to authorities about their intra-affiliate business deals, according to the Fair Trade Commission.

Other big-name business groups like Hyundai Motor Group, LG, Lotte, POSCO, CJ and LS are also on the violation list, said the watchdog.

The South Korean fair trade law requires that large business groups with total assets reaching 10 trillion won or over open all deals, including services carried out among their affiliates, to the public. Appointments of executives and board members are also subject to mandatory filings.

Last year, 155 listed and non-listed companies under the wings of 27 business groups were obliged to file. (Yonhap)

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Republicans target Dodd-Frank law put in place after financial crisis

Brian Sanchez

Emboldened by a business-friendly president, Republicans in Congress are moving to unwind the stricter regulations that took effect after the 2008 financial crisis and Great Recession.

A House committee takes up legislation Wednesday that would defang the tighter rules. While passage by the GOP-controlled House could come in a few months, the Senate – where Republicans have only 52 of 100 seats – poses an obstacle.

The 2010 Dodd-Frank law was enacted by Democrats and President Barack Obama to respond to the crisis, putting the stiffest restrictions on banks and Wall Street since the 1930s Depression. It clamped down on banking practices and expanded consumer protections to restrain reckless conduct by financial firms and prevent a repeat of the 2008 meltdown.

The sweeping legislation rolled out by Rep. Jeb Hensarling, the Texas Republican who is Dodd-Frank’s fiercest foe and heads the House Financial Services Committee, would deliver a body blow to the financial law.

“Supporters of Dodd-Frank promised it would lift the economy, end bailouts and protect consumers,” Hensarling said in a statement. “Yet Americans have suffered through the worst recovery in 70 years, Dodd-Frank guarantees future bailouts for Wall Street, and consumers are paying more and have fewer choices.”

Only a few weeks in office, President Donald Trump launched his attack on the financial law, ordering up a government review of the complex legislation that has been filled out with hundreds of rules written by regulators in a six-year slog. Trump says the restrictions on banks have crimped lending, the economy and job creation.

“We’re going to be doing a big number on Dodd-Frank,” he promised in late January.

While the review due in June could provide a blueprint, it will take legislation to make a wholesale revamp of the law.

Wielding a heavy knife, Hensarling’s bill calls for repealing about 40 provisions of Dodd-Frank. It goes to the heart of the law’s restrictions on banks, giving some of them greater leeway in how much capital they build to cover unexpected big losses. Federal regulators would lose the power to dismantle a failing financial firm and sell off the pieces if they decide its collapse could endanger the system. To be repealed: the Volcker Rule, which bars the biggest banks from trading for their own profit. The idea behind it was to prevent high-risk trading bets that could implode at taxpayer expense.

The legislation paints a bull’s eye on the Consumer Financial Protection Bureau. The five-year-old agency is a prime target for Republicans, who have long accused it of regulatory overreach. While it enforces consumer-protection laws, the CFPB also gained powers under Dodd-Frank to scrutinize the practices of virtually any business selling financial products and services: credit card companies, payday lenders, mortgage servicers, debt collectors, for-profit colleges, auto lenders, money-transfer agents.

Hensarling’s bill would eliminate those powers. And it would allow the U.S. president to remove the CFPB director at will, without needing a specific cause for firing. That’s the subject of a battle currently in federal court. Meanwhile, Hensarling and other Republicans have called on Trump to immediately fire CFPB Director Richard Cordray, an Obama appointee, in what has become a nasty partisan brawl.

The CFPB would be renamed the Consumer Law Enforcement Agency. No longer would its funding come from the Federal Reserve; the CFPB would have to depend on Congress to dole out the money as most federal agencies do. It would lose its authority to write rules or take enforcement action on payday loans.

The targeting of the CFPB especially rankles Democrats and consumer advocates. The agency carried out an ambitious program of investigations across the spectrum of financial products, wrote new rules for mortgage lending and opened a vast new database for consumers to lodge specific complaints against financial companies. As a result of its enforcement actions, the CFPB says it has recovered $11.7-billion that it returned to more than 27 million consumers harmed by illegal practices.

The legislation “bows down shamefully to Wall Street’s worst impulses and would lead us back down the road to economic catastrophe,” says Rep. Maxine Waters of California, the senior Democrat on the financial services panel.

Among other changes to Dodd-Frank that the bill, called the Financial Choice Act, would make:

  • Repeal the Federal Reserve’s authority to set a cap on how much banks can charge businesses for handling debit card transactions, known as “swipe fees.” The Fed set the cap at an average of about 24 cents per debit-card transaction. Prior to the cap, fees averaged 44 cents per swipe.
  • The Fed also would lose its power to supervise and set rules for non-bank financial firms.
  • The Financial Stability Oversight Council, a group of top federal regulators, would be stripped of its authority to label certain non-bank financial firms as potential threats to the system because their collapse could threaten the economy.


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Troy women’s law firm expands across the nation

Brian Sanchez



The mother-daughter team of Linda and Alison Orlans launched Orlans PC, expanding their certified women-owned law firm, Orlans Associates PC. Based in Troy, the new firm is the result of a merger of Orlans Associates P.C. of Troy, Orlans Moran PLLC of Waltham, MA and Atlantic Law Group LLC of Leesburg, VA. The merger makes it the second largest Womens Business Enterprise National Council (WBENC) certified women-owned law firm in the United States. Linda Orlans will serve as Executive Chair, and Alison Orlans will assume the role of President and Chief Executive Officer.

Combining teams and resources allows Orlans PC to enhance client service by refining processes, leveraging shared technology and increasing collaboration, according to Linda Orlans.

The future goes to those prepared to change ahead of the times, Linda Orlans said. The legal world is changing and our mission is to be on the forefront and help affect that change for the better. This unified law firm represents a dramatic step forward in creating a more capable, more responsive and more efficient entity to serve a growing client base.

Orlans PC provides legal services to local and national banks, credit unions, consumer loan finance companies, loan servicers, investors, government agencies, landlords, municipalities, utilities, title insurance companies and private individuals. It operates in eight jurisdictions including Washington DC, Delaware, Massachusetts, Maryland, Michigan, New Hampshire, Rhode Island, Virginia.

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Linda Orlans launched Orlans Associates PC in the Detroit area in 1998, and has expanded over the years to serve hundreds of clients in the Northeast, Mid-Atlantic and Midwest. Over the past decade, the number of women-owned law firms has grown five times faster than the national average, and Linda has been at the forefront of a new wave of woman-owned law firms opening across the country.

Legal expertise fused with lean six sigma principles has allowed us to build a different kind of firm, where our attorneys can perfect legal processes, collaborate, and focus on results, said Alison Orlans. This merger allows us to think more creatively and more entrepreneurially about the services, support and process we put in place for our clients.

Established in 1998 by Linda Orlans, Orlans PC is a Michigan-based law firm that serves the real estate and financial services industry. Decades of extensive experience includes: representing investors, lenders, banks and servicers in loan transactions, default, bankruptcy proceedings, land contract disputes and default, title issues, secured and unsecured asset recovery and real estate transactions.

For more information, visit orlans.com or call 248-502-1400.

Submitted by Emily Moran

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Gender Pay Gap Law Is A Long Time Coming

Brian Sanchez

New laws that force employers to reveal the gender pay gap in their workforce are a welcome change that will do more to reduce inequality in wages between men and women than legislation passed in the last four decades.

The changes, introduced on Thursday 6th April 2017, will see thousands of businesses record their gender pay gap data for the first time, with the demand that they publish their figures before April 2018. The laws are a long time coming, and I welcome the significant impact they are likely to have on the UK’s existing long-term gender pay gap, arguably doing more for pay parity in the next five years than equal pay legislation has done in 45 years.

The new rules, which are set to be enforced by the Equality and Human Rights Commission, state that companies employing more than 250 people should provide data about their pay gap, the proportion of males and females who fall into different pay bands, along with their gender bonus gap, and a breakdown of how many women and men receive a bonus annually. It is set to affect around 9,000 companies across the UK, which together employ more than 15 million people.

The UK is the latest country to take action to tackle the gender pay gap, which is prevalent in many leading economies around the world. Earlier this month, Iceland became the first country to force companies hiring more than 25 employees to prove they pay all employees the same, regardless of their gender, ethnicity, sexuality or nationality.

Iceland is not the only country to roll out a similar law; Switzerland has one, and the US state of Minnesota. However, Iceland is thought to be the first to make it a legal requirement. It comes as part of a drive by the nation to eradicate the gender pay gap by 2022.

In my opinion, the brave move by Iceland is one that should be emulated by countries across the globe, including the UK. The decision to roll out the new gender pay gap rules in the UK this month are a welcome step in the right direction, however, more needs to be done to ensure smaller businesses are paying both men and women fairly.

There are many proven benefits to gender equality in the workplace. Research has shown that those businesses paying both genders equally are likely to enjoy better financial results than those that do not. A 2015 report from McKinsey & Company, entitled Why Diversity Matters, revealed that the best companies for gender diversity were 15% more likely to have better financial results than their competitors. Therefore, it is in every organisation’s best interests to support the changes in the law rolled out this month.

That said, it seems that many companies are already setting themselves up for failure when it comes to reporting on the gender pay gap. A survey of 145 employers by Totaljobs found that 82% were not reviewing their gender equality or equal pay policies following the new legislation, while 58% did not have complete salary information across roles and gender. Worryingly, more than a third of those firms responding to the survey revealed they were failing to review salaries to guard against gender discrimination.

Furthermore, the research – in which 4,700 employees were also interviewed – found that men were more likely to receive a bonus than women. In the past year, 43% of male respondents had received a bonus averaging £2,059, compared with 38% of women who received an average of £1,128.

The research also showed that 58% of men felt both genders received equal pay, while only 44% of women believed they were paid the same as a man in a similar role. This disparity proves that while legislation is likely to help fix existing issues, there is still a long way to go until attitudes towards gender equality in the workplace is truly achieved.

Overall, the legislation is set to have a positive impact on the lives of women working for large businesses who may not have been paid as much as their male colleagues in the past. The decision to force businesses to publish salary amounts is a brave one, and it is one that will hopefully encourage employers to roll out fairer policies when it comes to pay. That being said, it will be some time until, like in Iceland, smaller businesses are asked to do the same, and so we are in for a wait until we can truly say that the world of work treats men and women with the equality they deserve.

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