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The Second Circuit is the first court of appeals to consider the holding in the United States Supreme Court's decision in RJR Nabisco Inc. v. European Community, 136 S. Ct. 2090 (2016), which said that Section 1964 (c) of RICO does not apply extraterritorially for injury to business or property and requires a domestic injury, not merely recovery for foreign injuries. The Supreme Court did not explain how to determine a domestic injury. In Bascunan v. Elsaca, 2017 US App…

You may have already seen the Bloomberg article issued on June 1, 2017 which outlines what many of us have sadly come to know as the "Diamond" qui tam claims: the ongoing exploitation of the Illinois False Claims Act and abuse of the state and local tax regime by an aggressive lawyer turned whistleblower. I won't repeat the Bloomberg article's details, other than to confirm that the industry du jour for the Diamond qui tam claims is custom tailors.  Many of…

The New Mexico Office of Administrative Hearings granted Conagra Foods' Motion for Summary Judgment concluding the interest earned on notes was properly characterized as non-business income. Conagra is a packaged food corporation headquartered in Omaha.  The company in March 2008 entered into an agreement to sell its Food Trading and Merchandise business.  The purchaser issued PIK Notes to Conagra as part of the sale proceeds.  Upon completion of the sale and receipt of the proceeds, Conagra totally exiled the Trading…

On June 28, 2017, the Illinois Appellate Court in Shared Imaging, LLC v. Hamer, 2017 IL App (1st) 152817, P1 (Ill. App. Ct. 1st Dist. June 28, 2017) reversed the Circuit Court's decision and held that Shared Imaging, LLC (the "Taxpayer") is entitled to a depreciation deduction on the selling price of units of equipment that occurred prior to their return to Illinois, a credit for taxes paid to other states for the periods before the units were returned to…

The Internet has become the common form of commerce. As such, illegal activity has migrated there. The Internet is frequently used to engage in illegal activity cloaked in anonymity. Claimants have few if any direct means of enforcing their rights and court orders against the offenders. The power to make orders against Internet companies is essential to preserving the effectiveness of law online. Obtaining a remedy is often the practical solution to enforcing rights. Moreover, illegal online conduct crosses multiple…

These are two things many of us were questioning would ever occur in our lifetime.  But we can now say both are a reality!  Today marks the first time in over two years that Illinois will be operating under a budget.  This is a result after the House voted to override Governor Rauner's veto of Senate Bill 9.  The House garnered the necessary votes to end the two year stalemate full of political puffery and sparring.  Some of the relevant…

On May 22, 2017, in Water Splash Inc. v. Menon, The United States Supreme Court addressed the issue whether under the Hague Service Convention service by mail was prohibited. At issue was Article 10 of the Convention that provided if the country of destination does not object, the Convention shall not interfere with "(a) the freedom to send judicial documents, by postal channels, directly to persons abroad." Article 10 does not expressly refer to "service." The question before the Court…

A Norwich Pharmacal order enables an applicant to obtain discovery about a wrong that has been committed from a respondent who is not "mixed-up" in it. Relief was expanded by the court in UNW v. XYC BVHC (Com)108 of 2016 to post-judgement relief in aid of enforcement where disclosure is intertwined with the willful evasion of the judgment debt. The BVI court clarified the power to order a registered agent to provide third party disclosure. This enabled a judgment creditor…

Insight can be hard to gain from publicly announced settlements, mostly because litigation is typically settled due to the cost of defense and overall frustration with litigating. But the recently announced settlement of a False Claims Act case in New York, based on state income tax, is an exception. A Harbinger for More to Come On April 18, the New York Attorney General announced what he touted as the largest settlement of a New York whistleblower lawsuit brought under the…

Courts have held that the Bankruptcy Code's avoidance powers do not apply extraterritorially, SIPC v. Bernard L Madoff Inv. Sec. LLC ("Madoff"),480 B.R. 501 (Bankr. S.D. N.Y. 2012); Barclay v. Swiss Fin. Corp Ltd., 347 B.R. 708 (Bankr. C.D. Cal. 2006); Societe Generale plc v. Maxwell Commc'n Corp plc "Maxwell I"),186 B.R. 807 (S.D.N.Y. 1995) and others have found to the contrary, Weisfelner v. Blavatnik (In re Lyondell),543 B.R. 127 (Bankr. S.D.N.Y. 2016); Sec. Investor Prot. Corp. v. BLMIS (In…

The Illinois Income Tax Act ("Act") allows a partnership (or an LLC taxed as a partnership) to deduct from its base income: 1) any income of the partnership which constitutes "personal services income," as defined in Section 1348(b)(1) of the Internal Revenue Code, or 2) a "reasonable allowance for compensation" paid or accrued for services rendered by the partners to the partnership, whichever is greater. 35 ILCS 5/203(d)(2)(H). The deduction, which is commonly claimed by real estate partnerships, engineering firms,…

On 3/16/17, the Sixth Judicial Court of South Dakota overturned the State's recently-enacted remote sales tax law, SDCL Chapter 10-64, in South Dakota v. Wayfair Inc. The law established a minimum standard for economic nexus (200 or more transactions or more than $100,000 in gross revenue from South Dakota).  In striking down the economic nexus standard, the court specifically stated that it was bound to follow the United States Supreme Court's decision in Quill Corp. v. North Dakota, 504 U.S.…

On 12/12/16, the U.S. Supreme Court held that the bank fraud statute does not require proof that the bank suffered a financial loss nor that there was intent for the bank to suffer a loss. The Racketeer Influenced and Corrupt Organizations Act, commonly referred simply as RICO, provides for civil penalties for acts arising from racketeering activities defined as a long list of state and federal crimes, including bank fraud. Oftentimes when a bank is defrauded by its customer, who…

It is a well-known fact that the states have become more aggressive in their SALT litigation tactics. And, like a bad cold, they seem to "catch" new audit issues from their brethren states. This can easily lead to a single issue being contested in multiple states. Taxpayers then have the sometimes daunting task of devising a strategy of not only how to win in a particular state, but also making sure the tactics in one state do not negatively affect…

In a recent New York Court of Appeals decision, the court found that a New York trial court had personal jurisdiction over a foreign bank in an action alleging the foreign bank was part of a money-laundering scheme perpetrated by the plaintiffs' employees, because the foreign bank's intentional and repeated use of New York correspondent bank accounts to launder the illegally obtained funds. InRashid v. Pictet & Cie, 2016 N.Y. Lexis 3569 (Ct. App. N.Y. November 22, 2016), Plaintiffs sued…

A freezing order tying up a defendant's assets is a powerful tool for claimants in English common law jurisdictions. But, they must be obtained with full and frank disclosure and come with serious ramifications when that does not occur. Typically, an applicant for freezing order must undertake to pay the defendant compensation if it is subsequently determined that he freezing order was improperly granted. When a defendant claims the order was improperly granted, the court has the discretion to conduct…

The Illinois Appellate Court has, once again, determined that there was no "reckless disregard," by a taxpayer under the Illinois False Claims Act ("IFCA"), by failing to pay Illinois use tax on internet and catalog sales made into Illinois. The decision issued by the appellate court on October 17, 2016 in State of Illinois, ex rel, Beeler, Schad and Diamond, P.C. v. Relax the Back Corporation, mirrors another recent decision from the same appellate court in State of Illinois, ex…

It certainly is not the role of the Cook County Court of Administrative Hearings to play the role of legislator, but nonetheless, that is the responsibility it has assumed due to the inadequacy of the current Cook County Amusement Tax Ordinance ("Ordinance"). Under the Ordinance, a tax is imposed upon the patrons of every "amusement" which takes place within the County. Cook County Code of Ordinances, Part 1, Article XII, Ch. 74 Sec. 74-392(a). It is the duty of the…

One of the major offshore financial centers, Jersey, has been a jurisdiction of choice for those seeking to conceal their ill-gotten assets. But, developing case law offers solace for creditors to recover those illegitimately acquired assets. "Equitable tracing" is a process which permits a claimant to identify one right as a substitute for another. For example, if a fraudster transfers money into an account in the name of a third party, the victim can trace its right against the fraudster…

A recent Chief Counsel's Ruling issued by the California Franchise Tax Board illustrates the issues and potential opportunities that arise as a result of adopting a factor presence nexus standard.  Chief Counsel Ruling 2016-03, July 5, 2016.  California, effective January 1, 2011, adopted a factor presence nexus standard for determining if a corporation was doing business in the state.  That standard was amended and effective January 1, 2014 a corporation is doing business in California if its sales exceed the…

The enforcement of foreign judgments is a challenge, especially if they emanate from the US because there is no automatic recognition. How Ireland treats enforcement efforts of foreign judgments is an excellent example of the challenges faced by plaintiff's counsel. The enforcement of non-EU judgments in Ireland is whether there is a "solid practical benefit" derived from the Irish proceeding. And, the absence of assets (or of a real possibility that assets will come into Ireland) is likely to support…

HMB Tip of the Month: Given the fact that the fall election is right around the corner, we expect that there will be an uptick of activity in some markets, especially with negotiated incentives, while other markets will face a standstill, depending on the political landscape of the particular market.  Also, we also expect a flurry of activity during the lame duck sessions in particular markets.  As a result, it makes sense to have internal and/or external resources whose boots are…

The U.S. Supreme Court on June 20, 2016, inRJR Nabisco Inc. v. European Community, 579 U.S. ___, addressed the application of the RICO statute 18 U.S.C. Section 1961 et seq.,  to activities outside the U.S. and the injury that must be suffered by private litigants in order to recover. This case involved a global money-laundering scheme, wherein drug traffickers smuggled narcotics into Europe and sold the drugs for Euros that through a series of transactions involving black-market money brokers, cigarette…

The purpose of the appointment of a protector is to monitor the actions of a trustee and to ensure that appropriate action is taken to preserve the trust fund. Protectors are commonly given "positive" powers such as the power to appoint and remove trustees and "negative" powers such as the right to withhold consent to distributions to beneficiaries. The role of a protector is a significant one to the administration of a trust. In Guernsey, the court was asked to…

There are approximately 800,000 companies registered in the British Virgin Islands ("BVI"). BVI entities are used as vehicles for investing in Hong Kong, Singapore and mainland China where anywhere from 40-50% of BVI entities are used. There are three types of funds that can be organized under BVI law-private, professional and public. High net worth individuals are most interested in private funds, which is limited to 50 investors. A private fund can be set up using a partnership, a company…

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