Law Commons^™

Private Equity's Three Lessons For Agency Theory, William Wilson Bratton

Articles

It is time to consider the lessons to be learned from the recent boom in private equity buyouts, not least in view of its abrupt termination in the wake of tightened credit. In the past, such inquiries have been undertaken in the context of agency theory and have focused on the buyout's implications for solving the problem of separation of ownership and control. This article reverses the pattern of inquiry to consider the buyout's implications for agency theory, pointing to three lessons. The first lesson addresses agency theory's three-way association among control transfers, governance discipline and hostile takeovers, suggesting that …

Electronic Tax Fraud - Are There 'Sales Zappers' In Japan?, Richard Thompson Ainsworth

Faculty Scholarship

Although there is no public acknowledgement - in the press, in a court case, though any announcement by the Japanese National Tax Administration, or in any academic studies or papers - that Zappers and Phantom-ware are a fraud problem in Japan, a number of factors suggest that Japan may be very fertile ground for technology-assisted cash skimming fraud. Those factors include: (1) a high concentration of small to medium sized businesses; (2) the fact that the retail economy is highly cash-based; and (3) the high level of technology acceptance in the Japanese retail sector - electronic cash registers (ECRs) and …

The Enduring Ambivalence Of Corporate Law, Christopher M. Bruner

Scholarly Works

Prevailing theories of corporate law tend to rely heavily on strong claims regarding the corporate governance primacy and legitimacy of either the board or the shareholders, as the case may be. In this article I challenge the descriptive power of these theories as applied to widely held public corporations and advance an alternative, arguing that corporate law is, and will remain, deeply ambivalent - both doctrinally and morally - with respect to three fundamental and related issues: the locus of ultimate corporate governance authority, the intended beneficiaries of corporate production, and the relationship between corporate law and theachievement of the …

Systemic Risk, Steven L. Schwarcz

Faculty Scholarship

Governments and international organizations worry increasingly about systemic risk, under which the world’s financial system can collapse like a row of dominoes. There is widespread confusion, though, about the causes and even the definition of systemic risk, and uncertainty about how to control it. This Article offers a conceptual framework for examining what risks are truly “systemic,” what causes those risks, and how, if at all, those risks should be regulated. Scholars historically have tended to think of systemic risk primarily in terms of financial institutions such as banks. However, with the growth of disintermediation, in which companies can access …

The (Not So) Puzzling Behavior Of Angel Investors, Darian M. Ibrahim

Faculty Publications

No abstract provided.

Insource The Shareholding Of Outsourced Employees: A Global Stock Ownership Plan, Robert C. Hockett

Cornell Law Faculty Publications

With the American economy stalled and another federal election campaign season well underway, the “outsourcing” of American jobs is again on the public agenda. Latest figures indicate not only that claims for joblessness benefits are up, but also that the rate of American job-exportation has more than doubled since the last electoral cycle. This year’s political candidates have been quick to take note. In consequence, more than at any time since the early 1990s, continued American participation in the World Trade Organization, in the North American Free Trade Agreement, and in the processes of global economic integration more generally appear …

How Should The Financial Markets Be Regulated?, Tamar Frankel

Faculty Scholarship

The financial markets should be regulated mostly by examinations, not by prosecution. And examinations should be far more intense when prices rise, not after a crash.

Private Equity's Three Lessons For Agency Theory, William Wilson Bratton

Articles

No abstract provided.

Hope For Homeowners: Too Little, Too Late, Carole O. Heyward

Law Faculty Articles and Essays

Heyward argues that the HOPE for Homeowners Act of 2008 is too little, too late for the many homeowners who faced foreclosure in 2007 and the three million homeowners who are predicted to default. Given the significant barriers to success, it is unlikely that the program will prevent a significant number of foreclosures or that it will stabilize the mortgage market. Providing help to 400,000 homeowners is simply not enough, given the magnitude of the problem. The housing market is plagued by 12 million homeowners who owe more than their homes are worth. The problem is compounded by the record …

States, Markets, And Gatekeepers: Public-Private Regulatory Regimes In An Era Of Economic Globalization, Christopher M. Bruner

Scholarly Works

This paper illuminates the spectrum of international economic regimes through discussion of an under-theorized regulatory structure in which traditional distinctions between state and market, public and private power, hard and soft law, and international and domestic policy realms, essentially collapse - the public-private gatekeeper.

Specifically, I examine striking similarities between global bond markets and e-commerce markets through comparison of entities regulating admission to them - the dominant credit rating agencies (Standard & Poor's and Moody's), and the Internet Corporation for Assigned Names and Numbers (ICANN). Following anexamination of the development of these markets and the global regulatory power exercised by …

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

Cornell Law Faculty Working Papers

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 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 IPOs in the Sao 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 the stock market has …

Zappers And Phantom-Ware At The Fta: Are They Listening Now?, Richard Thompson Ainsworth

Faculty Scholarship

When the Federation of Tax Administrators (FTA) held a national Compliance and Education Workshop in Louisville, Kentucky (February 25-27, 2001) one of the invited speakers was Kevin Pratt, Manager, Underground Economy, Canadian Customs and Revenue Authority (CCRA). He spoke on Zappers.

To the best of anyone's present recollection, this was the first time zappers had been discussed with a large group of state-level US tax compliance professionals. However, most of the information that the CCRA presented to the FTA in 2001 was not its own - it was derivative. Zapper investigations were not an in-house specialty of the CCRA (although …

Testimony Before The U.S. House Of Representatives Appropriations Committee, Subcommittee On Agriculture, Rural Development. Food And Drug Administration, And Related Agencies, Regarding The “Commodity Futures Trading Commission”, Michael Greenberger

Congressional Testimony

Testimony before the U.S. House of Representatives Appropriations Committee, Subcommittee on Agriculture, Rural Development. Food and Drug Administration, and Related Agencies on the role of the Commodity Futures Trading Commission’s regulatory efforts Pertaining to excessive speculation within U.S. energy futures markets in general, and futures based on U.S. delivered crude oil contracts.

Testimony Before The U.S. House Of Representatives, Committee On Agriculture - “Potential Excessive Speculation In Commodity Markets: The Impact Of Proposed Legislation", Michael Greenberger

Congressional Testimony

Testimony before the U.S. House of Representatives, Committee on Agriculture. 110th Congress, 2nd Session (July 10-11, 2008).

Zappers & Phantom-Ware: A Global Demand For Tax Fraud Technology, Richard Thompson Ainsworth

Faculty Scholarship

There is a demand-market for technology that facilitates tax fraud. By all accounts the providers in this market are working in a growth industry.

In the short term this is bad news for those concerned with tax policy and information privacy. In the long term however, the fight against technology-assisted fraud is stimulating the development of a more robust technology base within tax administrations, and this is good news for those who believe that a sophisticated technological infrastructure is needed to resolve difficult questions of tax design.

This paper focuses on two technology-accelerants of SME tax fraud - zappers and …

Responding To Foreclosures In Cuyahoga County: A Pilot Initiative, Interim Report, Alan C. Weinstein, Kathryn W. Hexter, Molly Schnoke

Law Faculty Reports and Comments

The Center for Civic Education and the Cleveland-Marshall College of Law released their report, on May 12, 2008. The report, prepared for the Cuyahoga County Board of Commissioners, is an assessment of the County's comprehensive approach to addressing foreclosures on two levels: 1) Making foreclosure proceedings faster and fairer and 2) Creating an early intervention program to help residents prevent foreclosure.

Regulation By Exemption: The Changing Definition Of An Accredited Investor, Roberta S. Karmel

Faculty Scholarship

No abstract provided.

Private Investment Funds: Hedge Funds' Regulation By Size, Tamar Frankel

Faculty Scholarship

This Article focuses on hedge funds-a species of private investment funds. These funds appeared in the 1950s and remained active but small. Then, in a fairly short period, they grew enormously to over $1.5 trillion, although the estimates vary.¹ Hedge fund managers engage in more than twenty-five different categories of investment strategies.² Since 2002, the number of hedge funds has more than doubled to an estimated 9,000 funds,³ and their assets have grown by 400% to an estimated $1.4 trillion since 1999.⁴ Other estimates are higher, suggesting current hedge fund assets at $2 trillion and their …

Evidence And Ideology In Assessing The Effectiveness Of Financial Literacy Education, Lauren E. Willis

All Faculty Scholarship

Financial literacy education has long been promoted as key to consumer financial well-being. Yet the claim has never had more than negligible statistically significant empirical support. This review (1) sets forth the model of financial literacy education underlying public support for these programs today, (2) identifies pervasive and serious limitations in existing empirical research used by policymakers as evidence of the effectiveness of this education, and (3) recommends a number of alternative public policies suggested by the existing research.

Taking Certification Seriously – Why There Is No Such Thing As An Adequate Representative In A Securities Fraud Class Action, Richard A. Booth

Working Paper Series

Securities fraud class actions (SFCAs) arising under Rule 10b-5 are well established as a feature of the legal landscape, but they are a vestige of a largely outdated view of investor behavior and preferences. In the 1960s, most investors were undiversified stock pickers. Today, most investors hold stock through well diversified institutions. As a result, most investors are net losers from SFCAs. Moreover, it is arguable that it is irrational for most investors not to be diversified. A passive investor who fails to diversify assumes unnecessary risk for the same expected return that diversified investors enjoy. Given that federal securities …

Against Financial Literacy Education, Lauren E. Willis

All Faculty Scholarship

The dominant model of regulation in the United States for consumer credit, insurance, and investment products is disclosure and unfettered choice. As these products have become increasingly complex, consumers’ inability to understand them has become increasingly apparent, and the consequences of this inability more dire. In response, policymakers have embraced financial literacy education as a necessary corollary to the disclosure model of regulation. This education is widely believed to turn consumers into “responsible” and “empowered” market players, motivated and competent to make financial decisions that increase their own welfare. The vision is of educated consumers handling their own credit, insurance, …

Mtic (Carousel) Fraud: Twelve Ways Forward; Two Ways 'Preferred' - Has The Technology-Based Administrative Solution Been Rejected?, Richard Thompson Ainsworth

Faculty Scholarship

In a May 31, 2006 Communication to the Council, the European Parliament, and the European Economic and Social Committee, the European Commission indicated a need to develop a co-ordinated strategy to improve the fight against fiscal fraud [COM(2006) 254 final]. Although the Communication considers fiscal fraud broadly (VAT, excise duties and direct taxes) the most pressing need seems to be for a VAT strategy that will effectively deal with MTIC (Missing Trader Intra-Community) or carousel fraud. To this end the Commission hosted a conference: Fiscal Fraud - Tackling VAT Fraud: Possible Ways Forward. The March 29, 2007 conference was constructed …

Zappers: Tax Fraud, Technology And Terrorist Funding, Richard Thompson Ainsworth

Faculty Scholarship

"Zappers," or automated sales suppression devices, have brought unheard of efficiencies and economies of scale to a very simple tax fraud - skimming cash sales at point of sale (POS) terminals (electronic cash registers). Until recently the largest tax fraud case in Connecticut, also the "largest computer driven tax-evasion case in the nation," was a zapper case. Stew Leonard's Dairy in Norwalk Connecticut skimmed $17 million in receipts and hid the cash in St. Martin (a Caribbean island). Talal Chahine and his wife, Elfat El Aouar, owners of the La Shish restaurant chain in Detroit Michigan have the dubious honor …

The Argentine Financial Crisis: State Liability Under Bits And The Legitimacy Of The Icsid System, William W. Burke-White

All Faculty Scholarship

This essay examines the jurisprudence of the International Center for the Settlement of Investment Disputes (ICSID) arbitral tribunals in a series of cases brought against the Republic of Argentina in the wake of the 2001-2002 Argentine financial collapse. The essay considers the ICSID tribunals' treatment of non-precluded measures provisions in Argentina's bilateral investment treaties (BITs) and the customary law defense of necessity and argues that the ICSID tribunals have sought to radically narrow the opportunities available to states to craft policy responses to emergency situations while strengthening investor protections beyond the intent of the states parties to the BITs under …

It-Apas - Vertical Harmonization Of Transfer - Pricing Standards, Richard Thompson Ainsworth

Faculty Scholarship

The World Customs Organization (WCO) and the Organization of Economic Cooperation and Development (OECD) have begun considering the harmonization of transfer pricing norms among income tax, customs and VAT regimes. Two conferences have been organized in May of 2006 and 2007.

These conferences have concluded so far: (a) that more analysis is needed; (b) that harmonization will require adjustments on all sides; and (c) that pilot projects (real world statutory and administrative efforts to harmonize) or case studies in harmonization (hypothetical fact patterns) are needed to facilitate consideration. This paper assesses the three basic paths being pursued at the present …

In Translation For The Latino Market Today: Acknowledging The Rights Of Consumers In A Multilingual Housing Market, Jo Carrillo

Faculty Scholarship

No abstract provided.

An Opt-Out Home Mortgage System, Michael S. Barr, Sendhil Mullainathan, Eldar Shafir

Other Publications

The current housing and financial crisis has led to significant congressional and executive action to manage the crisis and stem the harms from it, but the fundamental problems that caused the crisis remain largely unaddressed. The central features of the industrial organization of the mortgage market with its misaligned incentives, and the core psychological and behavioral phenomena that drive household financial decisionmaking remain. While the causes of the mortgage meltdown are myriad and the solutions likely to be multifaceted, a central problem that led to the crisis was that brokers and lenders offered loans that looked much less expensive and …

Disney Examined; A Case Study In Corporate Governance And Ceo Succession, Lawrence Lederman

Articles & Chapters

No abstract provided.

An Artifact Of Law: U.S. Prohibition Of Retail Hedge Funds, Houman B. Shadab

Articles & Chapters

The U.S. hedge fund market is one of the largest and most sophisticated hedge fund markets in the world, yet due to U.S. securities regulation it is also one of the least accessible. In the U.S., federal securities law requires individuals to be wealthy to qualify to invest in hedge funds. Nonwealthy individuals, or retail investors, are effectively prohibited from purchasing hedge fund securities. Wealth-based qualifications are meant to ensure that those investing in hedge funds possess enough financial sophistication to make informed investment decisions. However, the application of wealth-based qualifications to hedge fund investors is more an artifact of …

Who Is The "Sovereign" In Sovereign Debt?: Reinterpreting A Rule-Of-Law Framework From The Early Twentieth Century, Odette Lienau

Cornell Law Faculty Publications

Combining legal interpretation with political science analysis, this Article highlights the competing "statist" and "popular" conceptions of sovereignty at stake in sovereign debt issues. It argues that these two dominant approaches do not exhaust the offerings of intellectual history and considers an alternative approach that emerged in the early twentieth century and may be of relevance again today. The Article contends that U.S. Chief Justice Taft's foundational 1923 "Tinoco" decision, which grounds the current approach to sovereign governmental recognition, has been misinterpreted to support a purely statist or absolutist conception of sovereignty. It argues that a proper interpretation presents an …