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Lunch Beat

Bramwell's Lunch Beat: Dewey Mistrial, Citigroup’s Taxes, ACA Fine Jumps

Oct 20th 2015
Staff Writer and Editor AccountingWEB
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Mistrial declared in Dewey law firm case
A New York judge declared a mistrial on Monday in a financial fraud case against three former Dewey & LeBoeuf LLP executives, bringing an end, at least for now, to a trial that sought to hold them criminally liable for the biggest law firm failure in US history, wrote Sara Randazzo of the Wall Street Journal. The decision comes on the 22nd day of deliberations by a 12-member jury, which acquitted the ex-law firm leaders on several dozen counts of falsifying business records. But the jury couldn't reach a verdict on grand larceny and other more serious charges facing Dewey's former chairman, Steven Davis; ex-CFO, Joel Sanders; and former executive director, Stephen DiCarmine. The district attorney's office said in a statement that the result may “necessitate a retrial, pending a thorough review.” Judge Robert Stolz still has to rule on defense motions to dismiss the case.

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Legal industry learns from Dewey's mistakes
In a separate article for the Wall Street Journal, Sara Randazzo wrote that in the wake of Dewey's 2012 demise, peers have cut back on practices that helped bring down the firm: a reliance on borrowed money, making large promises about compensation to incoming partners, and revealing too little internally about a firm's financials. “How much more dramatic an example of ineptitude at a colossal level has there ever been?” asked Edwin Reeser, a former law firm leader who now counsels firms on business issues. Following Dewey's collapse, many law firms have been putting a renewed emphasis on being open with their lawyers about finances and major decisions. “Leaders hopefully have learned a lesson that if you're making someone a compensation deal you have to hide from your partners, it's not a good deal,” said Elizabeth Sharrer, the chairwoman of 500-lawyer Holland & Hart LLP.

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Citigroup accused of improperly avoiding $800 million in New York state taxes
An economics professor has filed a lawsuit against Citigroup accusing the bank of using an unusual federal tax break during the financial crisis to avoid paying $800 million in New York state taxes, wrote Lynnley Browning of the New York Times. In a lawsuit transferred to Federal District Court in Manhattan on Oct. 2, Eric Rasmusen, a professor of business economics and public policy at the Kelley School of Business at Indiana University, challenged the validity of the unusual federal tax break for the bank's New York state returns. His claim, originally filed under seal in New York State Supreme Court in 2013, seeks treble damages, or $2.4 billion, under the False Claims Act. The case says that Citigroup used the federal government's $45 billion taxpayer-funded bailout to improperly reduce its New York state franchise taxes in 2010 and 2011. “We believe the claims are without merit,” Citigroup spokesman Mark Costiglio said.

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Anheuser-Busch InBev aims its tax-trimming skills at SABMiller
James Kanter of the New York Times wrote that as a dominant player in Belgium, Anheuser-Busch InBev has enjoyed accommodations from the government that allow it to significantly lower its tax bills. While the official corporate tax rate is 34 percent, Anheuser-Busch InBev pays a tiny fraction of 1 percent on the profit of $1.93 billion it reported last year in Belgium. But its clout, which will only grow with the company's $104 billion deal to buy SABMiller, is also the source of scrutiny. The friendly tax arrangement is part of a pattern that small countries like Belgium use to woo multinationals. Such deals are increasingly coming under fire, and the European Union's competition commissioner is investigating whether some of them amount to illegal state aid.

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A health law fine on the uninsured will more than double
The federal penalty for having no health insurance is set to jump to $695, and the Obama administration is being urged to highlight that fact in its new pitch for health law signups, the Associated Press reported. That means the 2016 signup season starting on Nov. 1 could see penalties become a bigger focus for millions of people who have remained eligible for coverage but uninsured. They're said to be squeezed for money and skeptical about spending what they have on health insurance. In 2016, the penalty for being uninsured will rise to the greater of either $695 or 2.5 percent of taxable income. That's for someone without coverage for a full 12 months. This year, the comparable numbers are $325 or 2 percent of income.

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Quick Links

  • Luxury health benefits for top corporate bosses on the wane (CFO Journal)
  • CPA exam evolving to reflect shift in skills requirements (Journal of Accountancy)
  • House Republicans' latest bad idea: Impeaching the IRS chief (Bloomberg View)
  • What a Democratic president could mean for your taxes (MarketWatch)
  • How ‘tax-loss harvesting' can actually raise taxes (MarketWatch)
  • Presidential candidates, ‘free stuff,' and pixie dust (TaxVox)
  • No, raising taxes on the 1% will not lead to ‘surprising amounts' of revenue (Tax Foundation)
  • A-list entertainers, D-list tax policy (Tax Foundation)
  • Companies avoid $34 million in city taxes thanks to ‘Twitter tax break' (San Francisco Chronicle)
  • California Gov. Brown, lawmakers punt difficult tax questions (Associated Press)

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