Category: Notes

Supplying the Tax Shelter Industry: Contingent Fee Compensation for Accountants Spurs Production – Note by Ben Wang

From Volume 76, Number 5 (July 2003)
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The use of abusive tax shelters by major corporations has been called “‘the most serious compliance issue threatening the American tax system . . . .’” Losses to the Department of the Treasury (“Treasury”) are estimated to range anywhere from $7 billion to $30 billion per year. Meanwhile, corporate profits have risen 23.5% while their corresponding tax obligations rose by only 7.7%. Personal income taxes, on the other hand, are up 44%, which represents 79% of the total federal income tax and is estimated to increase to 85% by the year 2004. Also astounding is that the corporate tax-to-profit ratio has dropped between 1.5% and 2.9%, roughly translating into a decrease in corporate income tax receipts between $13 and $24 billion. Although the decrease in corporate tax receipts is unlikely to be attributed to a single cause, many commentators point to the growing acceptance of abusive tax shelters by large corporations as a major contributor.

The growing acceptance of abusive tax shelters by large corporations has been characterized as a “race to the bottom.” The perception that competitors are actively participating in abusive tax shelters has created an environment ripe for the promotion of tax schemes promising to zero out a corporation’s taxes. The major accounting firms are using armies of professionals to promote these schemes. Moreover, they have developed the resources, both in expertise and manpower, to capitalize on and perpetuate the perception. The role played by the Big Five in the tax shelter industry is extensive. They have created for themselves a vested interest in the proliferation of tax shelters through the use of contingency fees.

 

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Compulsory Voting in America – Note by Sean Matsler

From Volume 76, Number 4 (May 2003)
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Persistently low voter turnout in the United States continues to disappoint lovers of democracy. When scarcely half of the population of eligible voters turns out for a presidential election once every four years – to say nothing of midterm congressional elections or local elections – it becomes difficult to defend American democracy as truly representative. Instead, the will of the active voters, who constitute a stark minority of the eligible voting population, ultimately determines the electoral outcome. This regrettable situation is not the essence of a participatory democracy.

Although low turnout might easily be blamed on an American electoral lethargy, it could also be understood as a failure of the American electoral structure to motivate voter turnout. Accepting that premise as fact, it becomes possible to treat declining voter turnout as an opportunity to reconsider what has until now been a staple of American democracy: voluntary voting.

 

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Talent Agents, Personal Managers, and Their Conflicts in the New Hollywood – Note by David Zelenski

From Volume 76, Number 4 (May 2003)
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Hollywood is an impersonal, uncaring, and unforgiving place, and artists need the sophisticated assistance of third parties to help them locate employment opportunities and to assist them in making career decisions. This is where talent agents and personal managers step in. Agents and managers represent artists, and their collective role in the entertainment industry is straightforward. According to agent Joel Dean, they “try to put [artists and producers] together to make a match . . . . It couldn’t be simpler.”

To be more specific, agents procure employment for talent. Their job is to get the artists they represent as much work as possible. Managers, on the other hand, shape artists’ careers. Their job is to serve their clients in an advisory capacity and to counsel them on the career options that have been made available to them through their agents. When looked at this way, things seem very black-and-white: Agents present artists with employment opportunities, and managers suggest which of those opportunities artists should accept.

 

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The Thousand Mile Journey: Taoism and Western Legal Philosophy – Note by Eric Neigher

From Volume 76, Number 3 (March 2003)
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It was often said of K’ung Fu-tse: “If the mat was not straight, the master would not sit.” This is surely an outlook with which many American lawyers, and those who deal with them, are familiar today. Though there is, of course, something to be said for keeping the mat straight, especially in an area as specific and particular as the law, the refusal to sit because of minor discrepancies can lead to tired legs and a bad temper. In the legal context, this means that certain “mat-straightening” practices can lead to inefficient procedure, incomprehensible or purposeless laws, and, at worst, miscarriages of justice.

The American legal system, descended as it is from Hebraic, Roman, and British law, is, in spite of the genius of its framers, at times hopelessly mired in the muck of mat-straightening when it should be concerned with simply sitting and getting down to the business of justice. This is due not so much to flaws in the basic structure of the law, but to the immense over-complexity that is largely (though certainly not solely) a phenomenon of the modern era. These days, it seems that the simple purpose of the law has been completely obscured by the practice of it. Fortunately, though much of Western legal scholarship has ignored or simply not recognized this trend toward unnecessary complexity, in the East, particularly in China, political and social philosophers have been dealing with this exact kind of excessive insistence on convolution and bureaucracy for thousands of years. They know it as Confucianism.

 

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Arbitration of “Public Injunctions”: Clash Between State Statutory Remedies and the Federal Arbitration Act – Note by Thomas A. Manakides

From Volume 76, Number 2 (January 2003)
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In 1924, proponents of the Federal Arbitration Act (“FAA”) believed arbitration was an amicable way to resolve disputes between business professionals: Arbitration “preserves business friendships. . . . It raises business standards. It maintains business honor.” This indeed may be true, but judicial opinions interpreting the FAA have transcended the realm of legal reasoning, becoming hostile and antagonistic not toward a party’s improper action, but toward judges.

 

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New York’s Controversial Ethics Code Changes: An Attempt to Fit Multidisciplinary Practice Within Existing Ethical Boundaries – Note by Laura Noroski

From Volume 76, Number 2 (January 2003)
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Whether and to what extent multidisciplinary practices should be allowed in the United States has recently been described as the “‘most important issue facing the legal profession today.’” Multidisciplinary practices, or “MDPs,” emerged as an important ethical issue more than ten years ago when the accounting profession began to offer businesses a wide variety of professional services they had not traditionally offered. Consulting and other professional service firms followed suit, and began promoting services similar to those traditionally offered by law firms. The growth of these nonlegal firms led such firms to hire an increasing number of lawyers. Not surprisingly, this trend raised concerns about the unauthorized practice of law, conflicts of interest, and lawyer independence. Since the distinctions between legal and nonlegal professions have become muddled, the American Bar Association (“ABA”) has devoted significant resources to addressing the MDP issue.

While both supporters and adversaries of MDPs assert that protecting the client’s interest is of utmost concern, each side differs in its interpretation of what is best for the client. Supporters often point out efficiency and client demand for integrated services as central reasons to embrace MDPs as an inevitable practice structure. On the other hand, many lawyers believe MDPs are properly banned by Rule 5.4 of the Model Rules of Professional Responsibility, and are inherently dangerous to clients and the public because of potential conflicts of interest and compromises of client confidentiality. MDP adversaries also argue that the client is best served by lawyers, rather than collaborations of lawyers and non-lawyers, since lawyers must comply with a stringent ethical code that preserves confidentiality, loyalty, and independence of judgment, which other professions do not.

 

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Islamic Marriage Contracts in American Courts: Interpreting Mahr Agreements as Prenuptials and Their Effect on Muslim Women – Note by Lindsey E. Blenkhorn

From Volume 76, Number 1 (November 2002)
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In 1958 in Pakistan, Parveen Chaudry’s parents introduced her to Hanif Chaudry, the man they had chosen to be her husband. In accordance with Islamic tradition, Parveen’s parents negotiated the terms of her marriage contract with Hanif, consenting to and even signing the contract on Parveen’s behalf. According to Islamic law, Parveen’s marriage contract included a mahr provision, or dower, in the amount of 15,000 rupees (approximately $1,500), to protect Parveen if Hanif suddenly divorced her. Islamic law provides that couples retain their assets before, during, and after marriage, and because Parveen would likely not be permitted to work outside the marriage home without her husband’s permission, the mahr was a nest-egg in case the marriage soured.

One year after their marriage, Hanif moved to London to pursue a career in medicine, leaving Parveen behind in her native Pakistan with her parents and one-year-old child until her parents were able to pay for plane tickets to London. Once Parveen joined Hanif in London, he moved his family to New Jersey, where Parveen gave birth to their second child. Five years later, Hanif sent his wife and children back to Pakistan with the understanding that he would join them shortly. During the next five years, Parveen, who by now had three young children, attempted to rejoin Hanif in New Jersey, while Hanif took affirmative action to prevent her return and ultimately responded with divorce proceedings.

 

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Walker v. Cheney: Politics, Posturing, and Executive Privilege – Note by Jeffrey P. Carlin

From Volume 76, Number 1 (November 2002)
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On February 22, 2002 the General Accounting Office (“GAO”) filed an unprecedented lawsuit against Vice President Richard Cheney, seeking an injunction requiring him to produce certain records relating to the National Energy Policy Development Group (“NEPDG”), which he chaired at the behest of President George W. Bush. For the first time in its eighty-one year history, the GAO has filed suit against a federal official in relation to records access.

The suit is the result of a GAO inquiry begun at the request of Representatives Henry Waxman and John Dingell, who were concerned about the potential influence Enron and other special interest groups had over the NEPDG’s activities. The Vice President has so far refused to meaningfully acquiesce to any of the GAO’s information requests or attempts at accommodation, and has argued that the GAO does not have the statutory authority to obtain the records requested. More significantly, he has hinted at—though not formally asserted—executive privilege, setting the stage for a legal showdown that could make its way to the Supreme Court.

 

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