LawCataBlog

The Right Focus on Damages: The Benefits of Engaging a Non-Testifying Kovel Witness.

2007-11-06T12:57:54-05:00

Lawblogger-G would like to thank Kristopher A. Boushie of Forensis Research & Analysis, LLC for the attached article entitled "The Right Focus on Damages: The Benefits of Engaging a Non-Testifying Kovel Witness."

Download kovel_update.doc

Prosecutorial Indiscretion --- Again

2007-11-02T11:56:45-04:00

Cleared former FBI agent, Lindley DeVecchio declared his "nightmare is over" Thursday and blasted the prosecutors who charged him in four gangland murders based on a mob moll whose story had glaring inconsitencies and which fell totally apart at the eleventh hour.

"After almost two years, this nightmare is over," the ex-agent said, gazing across a long conference table in his lawyers' office. "My question is where do I go to get my reputation back?"

DeVecchio isn't the first to ask. That question goes back to May 25, 1987, when the disgraced ex-labor secretary Raymond Donovan wondered aloud at the Bronx courthouse upon his own acquittal on fraud and theft charges. And now the disgraced ex-agent was getting his turn.

There was no Office of Recovered Reputations in the Bronx when Donovan needed it. There's none for DeVecchio in Brooklyn now.

DeVecchio walked out of the courtroom with his wife at his side amid applause from supportive FBI colleagues.

His bitterness at the prosecutors who used a former mobster's mistress as their star witness was evident at a press conference later.

"I'll never forgive the Brooklyn DA's office for irresponsibly pursuing this case after being warned by others that this one witness was untrustworthy," DeVecchio said. He said the trial "has tested my faith in the system I spent 30 years of my life defending."

The case's collapse was a huge embarrassment for Brooklyn District Attorney Charles Hynes, who decided to bring charges even though a 1994 federal probe found there wasn't enough evidence to prosecute DeVecchio.

It also calls into question yet again the government's habit of using criminals granted immunity to testify against other defendants. Some might also question why a DA's office would use as its star witness, a woman who sat idly by as her boyfriend "The Grim Reaper" Scarpa ordered the murders i.e. "hits"of countless persons including her son's best friend.

During the trial, when questioned about the 1990 murder of her son's friend, Patrick Porco, 18, she testified she heard Scarpa tell their 17-year-old son, Joey, that Porco had to be killed because DeVecchio had called from the FBI to say Porco was about to rat on Joey for a murder the previous Halloween.

"You loved this boy, didn't you?" asked defense attorney Douglas Grover of her feelings for Porco.

"Yes," said Schiro, who has said Porco was like a second son to her.

Asked if she tried to stop the murder, Grover asked "Ms. Schiro, did you say one word to [Scarpa] about killing this boy who slept in your house and was your son's closest friend? Did you plead for the boy's life?"

"No," she admitted.

Grover then asked her about Porco's funeral, where she calmly held her secret as she paid her respects and embraced the slain teenager's hysterical mother.

Read more about this case at The New York Law Journal

Final Circular 230 Regulations Issued: The IRS and Treasury have issued final regulations under Circular 230 governing practice before the IRS.

2007-10-19T12:39:05-04:00

According to Susan Berson, The IRS and Treasury have issued final regulations under Circular 230 governing practice before the IRS. These regulations are effective as of September, 26, 2007. Highlights of the regulations include:

Who may practice: Sections 10.3(a) and (b) clarify that an attorney or CPA is not required to file a Form 2848, Power of Attorney and Declaration of Representative, with the IRS before rendering written advice in a "covered opinion" or in "other written advice" as defined in sections 10.35 and 10.37, respectively. Section 10.3 establishes a new category of individuals authorized to practice before the IRS for enrolled retirement plan agents." Enrolled retirement plan agents are permitted to represent taxpayers before the IRS with respect to issues arising under specified employee plan programs.

Contingent fees: Section 10.27 allows a practitioner to charge a contingent fee for services rendered in connection with an IRS challenge to an original return or amended return or claim for refund or credit where the amended return or claim was filed within 120 days of the taxpayer receiving a written notice of examination or challenge to the original return. Contingent fees are also permitted for interest and penalty reviews and claims for refund or credit relating to these reviews as well as for services rendered in connection with any judicial proceeding arising under the Internal Revenue Code.

Conflicting interests: In order to represent conflicting interests, a practitioner is required to obtain written consent to the representation from each affected client. This can be done in a confirmatory letter that is countersigned by the client and returned to the practitioner within 30 days. Standards with respect to tax returns and documents, affidavits and other papers Section 10.34 of the final regulations addresses the standards relating to documents, affidavits and other papers being submitted to the IRS. The final regulations do not address the standards with respect to tax return positions because of the recent amendments made to section 6694 by the Small Business and Work Opportunity Tax Act of 2007. Rather, the IRS has issued proposed regulations under section 10.34(a) and (e) to coordinate with the new civil penalty standards under section 6694. Such regulations when finalized will be effective as of Sept. 26, 2007. Section 10.34(b)(2)(ii) provides that a practitioner may not advise a client to submit a document to the IRS that contains or omits information in a manner that demonstrates an intentional disregard of a rule or regulation unless the practitioner also advises the client to submit a document showing a good faith challenge to the rule or regulation.

Sanctions: Section 10.50 authorizes the imposition of a monetary penalty (see Notice 2007-39) in addition to other sanctions against practitioners who violate the provisions of Cir. 230.

New Category of Reportable Transaction for Patented

Transactions: The IRS has issued proposed regulations under Section 6011 proposing to create a new category of reportable transaction for patented tax advice or tax strategies. See Prop. Reg. Sec. 1.6011-4(b)(7). Upon publication as a final regulation, the provisions covering "patented transactions" will be effective for transactions entered into on or after Sept. 26, 2007. Under the new category of reportable transaction, a patented transaction is a transaction for which the taxpayer pays a fee in any amount to a patent holder or the patent holder's agent for the legal right to use a tax planning method that the taxpayer knows or has reason to know is subject to a patent. A patented transaction also includes a transaction for which a taxpayer (the patent holder or the patent holder's agent) has the right to payment for another person's use of a tax planning method that is the subject of the patent. The proposed regulations also define when a taxpayer has participated in a patented transaction. Proposed regulations have also been issued under Section 6111 describing when a person is a material adviser with respect to a patented transaction. Under the proposed regulations, the threshold amount as described in Section 6111(b) has been reduced from $50,000 to $250 for fees received from individuals and from $250,000 to $500 for fees received from all others.

Online EIN application: Employee Identification Numbers (EINs) can now be applied for through a web-based system. See IR-2007-161. According to the IRS, the new system instantly processes the request (assuming the taxpayer passes all validity checks) and generates an EIN in "real time." The new system can be accessed through www.irs.gov.

Proposed regulations update S corporation regulations: The IRS and Treasury have issued proposed regulations (REG -1433326-05) clarifying changes made to subchapter S by the American Jobs Creation Act of 2004 and the Gulf Opportunity Zone Act of 2005 ("GOZA"). Highlights include: the S corporation family shareholder rules,the definitions of powers of appointment potential current beneficiarieswith regard to electing small business trusts, an allowance of suspended losses to the spouse or former spouse of an S corporation shareholder, and relief for inadvertently terminated or invalid qualified subchapter S subsidiary elections. Comments about the proposed regulations must be received by Dec. 27, 2007. A public hearing is scheduled for Jan. 16, 2008.

House of Representatives Votes to Extend Internet Tax Ban for 4 years

2007-10-17T05:40:00-04:00

The House of Representatives overwhelmingly passed legislation on Tuesday that would extend a moratorium on state Internet access taxes for four years, brushing aside calls by some lawmakers for a permanent ban.

Attention now shifts to the U.S. Senate where similar legislation has been stalled in the Senate Energy and Commerce Committee because of a dispute about whether to extend it temporarily or make it permanent.

The tax ban, first passed in 1998, is set to expire on Nov. 1. The extension exempts some states that approved taxes prior to the original enactment.

The vote was 405-2.

The bill to extend the tax break fell short of the permanent exemption that many lawmakers favor. A bill to make the moratorium permanent has 238 House co-sponsors, more than a majority.

Action is uncertain in the Senate, where there is also considerable support for a permanent tax ban.

The bill is HR 3678.

Read Doing Business On The Internet: Forms and Analysis (with Forms on Disk) for more information concerning the Internet.

M&A DEALS IN TROUBLE

2007-10-15T14:47:00-04:00

The credit crunch has thrown the closing of some M&A buyouts deals into doubt, as private equity firms face pressure from banks and debt buyers to revise the terms Recently, Wall Street investors have attempted to renegotiate some of the billions of dollars worth of pending mergers that were initiated before the global credit crunch and slumping housing market. In some of these troubled take over deals, the buyers claim that the target company's valuation has materially suffered to such an extent that the buyers no longer see any economic value in proceeding. Some investors are now saying that many recent buyout deals will probably be renegotiated and that while some will survive with their original terms largely intact, most will be dramatically restructured, and a few deals will not get done.

The deals most affected are those in the consumer products sector and other sectors of the economy tied to the falling housing market. For example: Home Depot already has announced that the trio of private equity firms seeking its HD Supply unit wants new terms for the previous $10.3 billion buyout. The Supply division caters to home remodeling professionals. Likewise, JPMorgan Chase and Lehman Brothers have objected to financing the $1.8 billion buyout of PHH, a mortgage lender, by Stephen Schwarzman's Blackstone Group and General Electric.

It has also been reported that Kohlberg Kravis Roberts & Co. and Goldman Sachs recently told Harman International, a maker of high-end audio equipment, that they intended to back out of their $8 billion deal because of problems with the business. There buyout of student loan maker Sallie Mae is also in trouble. Last week, the battle for Sallie Mae took yet another twist. Billionaire J. Christopher Flowers lowered his $25 billion offer for the nation's largest student loan provider and publicly lowered the offer to $50 a share from $60 a share. This was an by Flowers to get Sallie Mae's board to admit its business could materially suffer from the current credit crunch.and that its business is worse off financially than when the deal was brokered in April. Flowers then soured on deal altogether and vowed his $50 share was off the table. For now, Sallie maintains that Flowers is breaching the merger agreement and has filed suit thru its parent, SLM, against Flowers (J.C. Flowers & Company, and the banks JPMorgan and Bank of America.

The affected deals aren't limited to private-equity transactions. Athletic shoe retailer Finish Line, along with its advisers at UBS, are reportedly trying to get out of the $1.5 billion takeover of rival Genesco after both companies reported big declines in sales.

At some point, investors will return to the credit market, willing once again to purchase the debt that funds big buyouts. In the meantime, the big question will be whether the buyers and sellers behind the huge-dollar deals still see enough economic advantage to justify proceeding in the near term. One last caveat: This recent turmoil in the merger market also has some speculating that a recession is likely in the near future! Learn more about this from ALM's treatise Private Equity Funds: Business Structure and Operations