Law Commons^™

The Morphing Of Mtic Fraud: Vat Fraud Infects Tradable Co2 Permits, Richard Thompson Ainsworth

Faculty Scholarship

Missing trader intra-community (MTIC) fraud has been slowly morphing from cell phones and computer chips to other commodities. In the last few months however MTIC made a dramatic appearance in tradable CO2 permits. It closed exchanges and prompted France and the Netherlands to unilaterally change their tax treatment of CO2 trades. The UK has followed the French treatment in large measure. On Monday June 8, 2009 rumors of MTIC fraud in carbon emission permits closed the main European exchange for spot trading of European Union carbon emissions permits and Kyoto offsets. When BlueNext began trading permits again on Wednesday, June …

The Supreme Court’S Impact On Securities Class Actions: An Empirical Assessment Of Tellabs, Adam C. Pritchard, Stephen Choi

Law & Economics Working Papers Archive: 2003-2009

Using a sample of securities fraud class actions filed between 2003 and 2007, we study the impact of a widely-followed Supreme Court decision from that period, Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308 (2007). This decision clarified the law with respect to one of the most hotly contested issues in securities litigation: pleading scienter. The Tellabs decision reversed a very lenient Seventh Circuit decision with respect to pleading scienter, but replaced it with a standard that is nonetheless relatively generous to plaintiffs. Looking at opinions resolving motions to dismiss decided before and after that decision, we …

Families For Tax Purposes: What About The Steps, Wendy G. Gerzog

All Faculty Scholarship

At least 4.4 million families in the U.S. are blended ones that include step-children and step-parents. For tax purposes, these steps receive preferential treatment for their status because they are on the one hand included as family members for many income tax benefit sections, but on the other hand excluded as family members for business entity attribution purposes and for gift and estate tax anti-abuse provisions. In the interests of fairness and uniformity, steps should be treated as family members for all tax purposes where steps have in fact voluntarily acted as their biological or adoptive counterparts, both when such …

Art Deaccessions And The Limits Of Fiduciary Duty, Sue Chen

Duke Law Student Papers Series

Art deaccessions prompt lawsuits against museums, and some commentators advocate using the stricter trust standard of care, instead of the prevailing corporate standard (business judgment rule), to evaluate the conduct of non‑profit museum boards. This Article explores the consequences of adopting the trust standard by applying it to previously unavailable deaccession policies of prominent art museums. It finds that so long as museum boards adhere to these policies, their decisions would satisfy the trust standard. This outcome illustrates an important limitation of fiduciary law: the trust standard evaluates procedural care but cannot assess deaccessions on their merits. Yet this limitation, …

Summary Of Hartford Fire Ins. Co.; Hartford Accident & Indem. Co.; & Richardson Constr., Inc. V. Tr. Of The Const. Indus. & Laborers Health & Welfare Trust; Tr. Of The Constr. Indus. & Laborers Joint Pension Trust; & Tr. Of The Constr. Indus. & Laborers Vacation Tru, 125 Nev. Adv. Op. No. 16, Elham Roohani

Nevada Supreme Court Summaries

Acceptance of the Ninth Circuit’s two certified questions: whether trustees must provide notice to recover on (1) payment bonds against surety and (2) against the general contractor.

Massachusetts Zappers - Collecting The Sales Tax That Has Already Been Paid, Richard Thompson Ainsworth

Faculty Scholarship

No other New England state is as vulnerable to Zappers as is the State of Massachusetts. Zappers and related software programming, Phantom-ware, facilitate an old tax fraud – skimming cash receipts. In this instance skimming is performed with modern electronic cash registers (ECRs).

Zappers are a global revenue problem, but to the best of this author’s knowledge they have not been uncovered in Massachusetts. A global perspective says: it is highly unlikely that Zappers are not in the Commonwealth – we just need to find them. In fact, using a Quebec template, tax losses from Zappers and related frauds in …

London As Delaware?, Adam C. Pritchard

Law & Economics Working Papers Archive: 2003-2009

Regulatory competition has long driven the path of corporate law in the federal system of the United States. Now, jurisdictional competition has spread to exchange listings. New York took an early lead in that competition in the 1990s, but has now been overtaken by London. Can London prevail in the competition for stock listings in the long term? This essay explores that question through the insights offered by Delaware’s dominance in the market for corporate listings. Delaware has prevailed by offering corporate directors a predictable body of that credibly shields directors from the vagaries of political backlash in times of …

Obama's International Tax Plan: A Major Step Forward, Reuven S. Avi-Yonah

Articles

President Barack Obama last week personally introduced a set of proposals to reform U.S. international taxation that are the most significant advance toward preserving the income tax on cross-border transactions since the enactment of the subpart F rules by the Kennedy administration in 1962. (For prior coverage, see Doc 2009-10047 or 2009 TNT 84-1.) In essence, the Obama proposals introduce a 21stcentury version of the vision begun by Thomas Adams in 1918 and continued by Stanley Surrey in 1961: a world in which source and residence taxation are coordinated so as to achieve the underlying goals of the international tax …

Direct And Derivative Claims In Securities Fraud Litigation, Richard A. Booth

Working Paper Series

In the typical securities fraud class action under Rule 10b-5, the plaintiff class consists of buyers who seek damages equal to the difference between the price paid for the stock during the fraud period and the lower price that prevails after corrective disclosure. The argument here is that this claim is really an amalgam of direct and derivative claims and that the derivative claims should result in recovery by the corporation for the benefit of all stockholders. There are three types of losses that arise in the typical stock-drop action. First, part of the loss may be attributable to lower …

Mitigating Dysfunctional Deference Through Improvements In Board Composition And Board Effectiveness, Marc Goldstein

NULR Online

No abstract provided.

Use And Enjoyment Of Intangible Services: The German, Austrian, Danish And Estonian Vat Derogations, Richard Thompson Ainsworth

Faculty Scholarship

When the Czech Republic elected (effective January 1, 2009) to derogate from the standard rules for determining the place of supply for intangible services, pursuant to Article 58 of the Recast VAT Directive (RVD), it was following the lead of ten other Member States. This paper considers four of those other jurisdictions - Germany, Austria, Estonia, and Denmark - and compares their derogations with that of the Czech Republic.

In each instance a use and enjoyment standard determines the place of supply for certain intangible services. The affected transactions are (potentially) wide ranging. In each instance non-EU countries are on …

Guests At The Table?: Independent Directors In Family-Influenced Public Companies, Deborah A. Demott

Faculty Scholarship

No abstract provided.

National Security Review Of Foreign Mergers And Acquisitions Of Domestic Companies In China And The United States, Kenneth Y. Hui

Cornell Law School Inter-University Graduate Student Conference Papers

China’s recently enacted Anti-Monopoly Law has received much academic attention. In particular, many articles and comments have been written about Article 31 of the Anti-Monopoly Law, a provision on national security review of foreign mergers and acquisitions of domestic companies. The provision has often been labelled as draconian and protectionist. This paper argues that Article 31 is not necessarily so. Article 31 is actually, to a large extent, in line with the national security provisions found in liberal economies. By taking a comparative approach, this paper will demonstrate the similarities between the national security laws in China and the United …

Behind Close Doors: Governance Issues In Private Equity Driven Industries – The Close Corporation Paradox And Its Impact On Private Equity In The Us And Sweden, Kristian Hermanrud

Cornell Law School Inter-University Graduate Student Conference Papers

Publicly traded companies make up only a small fraction of the vast number of corporations operating in the US today. Only about 10,000 companies are traded publicly while there are roughly 20 million corporations doing business in the US. Likewise, over 245 private corporations’ annual revenues exceed $1 billion. Among these, more than twelve employ more than 50,000 employees. Despite the influence on vast amounts of people and capital legislature has, to a large degree, focused on publicly traded companies. The reasons for this stem, in large, back to the years of the market crash in the early thirties and …

Changing The Paradigm Of Stock Ownership From Concentrated Towards Dispersed Ownership? Evidence From Brazil And Consequences For Emerging Countries, Érica Gorga

Cornell Law Faculty Publications

This paper analyzes micro-level dynamics of changes in ownership structures. It investigates a unique event: changes in ownership patterns currently taking place in Brazil. It builds upon empirical evidence to advance the theoretical understanding of how and why concentrated ownership structures can change towards dispersed ownership.

Commentators argue that the Brazilian capital markets are finally taking off.

The number of listed companies and Initial Public Offerings (IPOs) in the São Paulo Stock Exchange (Bovespa) has greatly increased. Firms are migrating to Bovespa's special listing segments, which require higher standards of corporate governance. Companies have sold control in the market, and …

Integrating Subchapters K And S — Just Do It, Walter D. Schwidetzky

All Faculty Scholarship

The Code contains two “pass-through” tax regimes for business entities. One is contained in Subchapter K, which applies to partnerships, the other in Subchapter S, which, unsurprisingly, applies to S corporations. In the main, both Subchapters tax the owners of the entities rather than the entities themselves. Having two pass-through tax regimes creates obvious administrative and other inefficiencies. There was a time when S corporations served a valuable purpose, particularly when taxpayers needed a fairly simple and foolproof pass-through entity that provided a liability shield. But limited liability companies (LLCs), which are usually taxed as partnerships, 1 in most contexts …

The Economics Of Deal Risk: Allocating Risk Through Mac Clauses In Business Combination Agreements, Robert T. Miller

Working Paper Series

In any large corporate acquisition, there is a delay between the time the parties enter into a merger agreement (the signing) and the time the merger is effected and the purchase price paid (the closing). During this period, the business of one of the parties may deteriorate. When this happens to a target company in a cash deal, or to either party in a stock-for-stock deal, the counterparty may no longer want to consummate the transaction. The primary contractual protection parties have in such situations is the merger agreement’s “material adverse change” (MAC) clause. Such clauses are heavily negotiated and …

The Evolution Of Debt: Covenants, The Credit Market, And Corporate Governance, Charles K. Whitehead

Cornell Law Faculty Publications

No abstract provided.

The (Misunderstood) Genius Of American Corporate Law, Robert B. Ahdieh

Faculty Scholarship

In this Reply, I respond to comments by Bill Bratton, Larry Cunningham, and Todd Henderson on my recent paper - Trapped in a Metaphor: The Limited Implications of Federalism for Corporate Governance. I begin by reiterating my basic thesis - that state competition should be understood to have little consequence for corporate governance, if (as charter competition's advocates assume) capital-market-driven managerial competition is also at work. I then consider some of the thoughtful critiques of this claim, before suggesting ways in which the comments highlight just the kind of comparative institutional analysis my paper counsels. Rather than a stark choice …

Use And Enjoyment Of Intangible Services: The Czech Republic's Vat Derogation, Richard Thompson Ainsworth

Faculty Scholarship

On January 1, 2009 a minor change in the Czech Republic VAT became effective. A use and enjoyment standard was added to modify the sourcing of certain service transactions. Traditional proxy-based rules, derived from Articles 43 and 56(1) of the Recast VAT Directive (RVD), are set aside by this modification when the customer receiving the services has a permanent establishment (PE) in the Czech Republic. The modification is authorized by RVD 58.

This change is a limited adoption of RVD 58(b), and functions like a full force of attraction principle in direct taxation. If caught by these rules, transactions that …

Law Upside Down: A Critical Essay On Stoneridge Investment Partners, Llc V. Scientific-Atlanta, Inc., Franklin A. Gevurtz

NULR Online

No abstract provided.

Bankruptcy Or Bailouts?, Kenneth M. Ayotte, David A. Skeel Jr.

All Faculty Scholarship

The usual reaction if one mentions bankruptcy as a mechanism for addressing a financial institution’s default is incredulity. Those who favor the rescue of troubled financial institutions, and even those who prefer that their assets be promptly sold to a healthier institution, treat bankruptcy as anathema. Everyone seems to agree that nothing good can come from bankruptcy. Indeed, the Chapter 11 filing by Lehman Brothers has been singled out by many the primary cause of the severe economic and financial contraction that followed, and proof that bankruptcy is disorderly and ineffective. As a result, ad-hoc rescue lending to avoid bankruptcy …

The Efficiency Of Friendliness: Japanese Corporate Governance Succeeds Again Without Hostile Takeovers, Dan W. Puchniak

Research Collection Yong Pung How School Of Law

It is widely assumed that hostile takeovers are a prerequisite for an efficient system of corporate governance. This assumption is false. Since the new millennium, Japan has transformed itself from being on the brink of one of the largest economic meltdowns in modern economic history to currently being in the midst of its longest period of postwar economic expansion (2002-2007). This astounding recovery was achieved without a single successful hostile takeover of a major Japanese company. True to its postwar tradition, corporate Japan has successfully restructured through government intervention, bank-driven reallocation of capital, and orchestrated and friendly mergers — the …

Quebec's Module D'Enregistrement Des Ventes (Mev): Fighting The Zapper, Phantomware And Tax Fraud With Technology, Richard Thompson Ainsworth

Faculty Scholarship

On January 28, 2008 the Quebec Minister of Revenue, Jean-Marc Fournier, announced that by late 2009 the MRQ will begin testing a device, the module d'enregistrement des ventes (MEV) that is projected to substantially reduce tax fraud in the restaurant sector. By 2010 or 2011 MEVs will be mandatory in all Quebec restaurants, where they will assure accuracy and retention of business records within electronic cash registers (ECRs).

This paper moves beyond a discussion of the variety of sales suppression programs in use - zappers and phantom-ware. The concern here is on enforcement efforts, particularly the MEV. The intent is …

A Team Production Approach To Corporate Law And Board Composition, Bernard S. Sharfman, Steven J. Toll

NULR Online

No abstract provided.

Trapped In A Metaphor: The Limited Implications Of Federalism For Corporate Governance, Robert B. Ahdieh

Faculty Scholarship

Trapped in a metaphor articulated at the founding of modern corporate law, the study of corporate governance has - for some thirty years - been asking the wrong questions. Rather than a singular race among states, whether to the bottom or the top, the synthesis of William Cary and Ralph Winter’s famous exchange is better understood as two competitions, each serving distinct normative ends. Managerial competition advances the project that has motivated corporate law since Adolf Berle and Gardiner Means - effective regulation of the separation of ownership and control. State competition, by contrast, does not promote a race to …

Mergers And Market Dominance, Herbert J. Hovenkamp

All Faculty Scholarship

Mergers involving dominant firms legitimately receive close scrutiny under the antitrust laws, even if they involve tiny firms. Further, they should be examined closely even in markets that generally exhibit low entry barriers. Many of the so-called "unilateral effects" cases in current merger law are in fact mergers that create dominant firms. The rhetoric of unilateral effects often serves to disguise this fact by presenting the situation as if it involves the ability of a small number of firms (typically two or three) in a much larger market to increase their price to unacceptable levels. In fact, if such a …

California Biometrics: A Second Proposal For California's Commission On The 21st Century Economy, Richard Thompson Ainsworth

Faculty Scholarship

This proposal takes a long view to revenue reform. It seeks to fundamentally align the sales tax with the digital foundation of the 21st Century economy.

The core policy question is whether California is willing to change the way it defines sales tax exemptions; is it willing to move from product-centric to person-centric exemptions. Certified tax determination systems can be relied upon. A key element in this proposal is the encryption of exemption certificates in IDs (smart cards with biometric identifiers that will allow the poor or handicapped to make certain purchases tax free).

This proposal suggests that (for example) …

California Zappers: A Proposal For The Commission For The 21st Century Economy, Richard Thompson Ainsworth

Faculty Scholarship

California has not uncovered a single instance of technology-assisted cash skimming - there are no zappers, and no phantomware in California. Is this because Californians are not skimming cash sales with technology, or is this because the California technology works so well that the fraud cannot be detected?

The record in foreign jurisdictions is reasonable clear. Automated sales suppression technology is widely used to skim cash sales, denying the state revenues from consumption taxes that have been paid by the consumer, reducing taxable business profits, and funding a cash hoard out of which unreported employee wages are paid. Government studies …

The Future Of The Securities And Exchange Commission As A Market Regulator, Roberta S. Karmel

Faculty Scholarship

No abstract provided.