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On October 23, 2014, Judge Mulroy, a Cook County Circuit Court judge, ruled against Schad, Diamond & Shedden, P.C. ("Diamond") in one of the hundreds of qui tam tax cases that Diamond currently has pending before him. During a two-day bench trial in August, National Business Furniture's financial officers said they had relied on a completed Illinois Department of Revenue audit in determining that the company's practice of not collecting use tax on the charges was consistent with Illinois law…

On October 23, 2014, the New York Court of Appeals in Motorola Credit Corp. v. Standard Chartered Bank, 2014 NY Slip Op 07199, decided whether the "separate entity" rule serves to prevent a judgment creditor from ordering a garnishee bank operating branches in New York to restrain a judgment debtor's assets held in foreign branches of that bank. There, the plaintiff served a restraining order on the New York branch of Standard Chartered Bank, which froze funds at Standard's UAE…

I recently had the opportunity to speak at the Chicago Bar Association regarding non-traditional defenses in state tax cases. Since preparing for that presentation, I have taken some time to reflect on how taxpayer bills of rights and procedural due process rights tie into my representation of taxpayers in state courts and before state administrative bodies. Nowhere do these issues seem more useful than in the context of alternative apportionment. In a recent two-part article that Breen Schiller and I…

Texas, like five other states, allows for pre-action discovery to discover the potential wrongdoers in an articulated claim. Rule 202 of the Texas Rules of Civil Procedure authorizes a pre-suit deposition to investigate a potential claim. In In re John Doe a/k/a "Trooper", No. 13-0073 (2014), the Texas Supreme Court considered a situation where an anonymous blogger launched an on-line attack of a company that develops and markets software for use by auto dealerships and its CEO. The CEO lives…

In a recent Private Letter Ruling (201438014), the IRS issued a taxpayer a triple-whammy. The PLR concerns a trust instrument that identified certain "pecuniary bequests" to be made to charities named within the trust agreement. Unfortunately, there were insufficient assets outside of an IRA from which to satisfy the pecuniary bequests. The IRA, however, did not name the charities as beneficiaries, but rather named the trust. Normally, paying an IRA to a trust results in income taxation on the amounts…

In Daimler AG v. Bauman, 134 S. Ct. 746 (2014), the US Supreme Court in January 2014 held that a corporation is not subject to personal jurisdiction merely because it "engages in a substantial, continuous, and systematic course of business" in a forum. A corporation is subject to general jurisdiction only where it is considered "at home" and absent exceptional circumstances, a company is only "at home" where it is incorporated or has its principal place of business. Based on…

On August 4, 2014,  the U.S. Tax Court issued a final decision in the case of Estate of Franklin Z. Adell v. Commissioner (T.C. Memo 2014-155). The case involved Franklin Z. Adell, deceased. At the time of his death, Franklin owned 100 percent of the stock of STN.Com, a cable uplinking company. STN had only one customer, The Word network.  The Word is a broadcast network managed by Franklin's son, Kevin. Nearly all of STN's revenue came from its contract with The…

Quinn signed into law the Illinois "Amazon tax" that requires the online retailer with affiliates in Illinois to collect a "use tax" for all sales to Illinois customers. Illinois' first attempt at an Amazon law was struck down by the Illinois Supreme Court under the U.S. Constitution's Supremacy Clause, which prohibits States from passing laws that conflict with federal law. Illinois' original affiliate tax fell because it directly conflicted with the Internet Tax Freedom Act, a federal law that prohibits…

Fraudsters cannot hide behind a corporate shield in Canada when they use a company for an "illegal, fraudulent or improper purpose." The Ontario Court of Appeals in Shoppers Drug Mart Inc. v. 6470360 Canada, Inc., 2014 ONCA 85, addressed the situation where Shoppers Drug Mart ("Shoppers") contracted with the defendant Energyshop Consulting to manage and pay utility bills for Shoppers' stores nationwide. Michael Beamish ("Beamish") described himself as President of Energyshop, but Energyshop was not incorporated. There was no formal…

The so-called "sharing economy" has recently gained a lot of steam.  This model, which helps owners of latent high value assets pair up with possible users of those assets, has been cited among the most dynamic and exciting types of start-ups over the past few years. In fact, just this Monday, Illinois Governor Pat Quinn vetoed legislation that would have seriously restricted the extent to which the ridesharing app Uber may do business in the state, citing a fear of…

On July 14, 2014, the Michigan Supreme Court ruled in IBM v. Department of Treasury, Docket No. 146440, that the taxpayer, IBM, was entitled to a refund of income taxes paid to the state by virtue of its election to apportion its income using the three factor apportionment formula provided in the Multistate Tax Compact, MCL 205.581 et seq. The opinion has garnered a lot of attention, as it is the first state supreme court decision addressing whether taxpayers should…

Understanding Enhanced Asset Protection Structure in Bermuda It is important to know and understand the laws for asset holding when trying to recover claims. New legislation in Bermuda seeks to stimulate the trust industry and to attract international customers who wish to retain a certain level of control over their trusts. The Trusts (Special Provisions) Amendment Act 2014 enhanced the reserved power trusts where a settlor may retain fairly extensive powers over the trust. The new law adds specific provisions…

In a recent decision, Relfo v. Vasani (2014) EWCA Civ 360, the Court of Appeal was confronted with the Liquidator being unable to show evidence of each transaction transferring monies through various bank accounts and ultimately being received by the recipient. There, the Liquidator of Relfo sought funds belonging to Relfo, which were misappropriated and paid to accompany called Mirren. A director of Relfo had close ties to the Vasani family and at a time that Relfo owed substantial monies…

According to a list published by Forbes magazine in 2013, Maryland was among the worst states for retirement for several reasons. One such reason is its estate tax and, according to Maryland's comptroller, is at least partially to blame for an outflow of its retirees to other states. So, trying to change its image and curb the outflow, Maryland recently increased its estate tax exemption (effective 1-1-2015) so that it gradually increases over a 5-year period at which point it should…

What do Papa John's Pizza, delivery charges and whistleblower lawsuits have in common?  When it comes to state sales tax, a lot it turns out. Zachary Tucker is an Illinois resident who ordered a Papa John's pizza for delivery one day.  Whether Mr. Tucker enjoyed the pizza is not known.  What is known is that Mr. Tucker did not appreciate the fact that Papa John's charged him 16 cents in sales tax on the $2.39 delivery fee.  Mr. Tucker, on…

Section 550 of the US Bankruptcy Code allows for the bankruptcy trustee to recover for the benefit of the estate property transferred to an immediate transferee that can be avoided under other Code provisions. In a recent matter in the Madoff bankruptcy proceeding, Sec. Investor Prot. Corp v. Bernard L. Madoff Inv. Secs. LLC, 2014 U.S. Dist. Lexis 91508 (S.D. N.Y. July 6, 2014), the bankruptcy trustee sought to recover funds that had been transferred from Madoff Securities to certain…

There are numerous international banks with offices in New York or that do business in New York. Recently in Mashreqbank PSC v. Ahmed Hamad A1 Gosaibi & Bros., 2014 N.Y. Lexis 705 (N.Y. April 8, 2014), the Court of Appeals clarified the reach of jurisdiction in New York when a foreign national moves money through a bank in New York as a part of a fraudulent transaction. There, the Court of Appeals dismissed an action arising from an international swap…

When a case is brought in the Cayman Islands involving a disputed question of fact, a litigant is entitled to discovery of documents relevant to the issues raised in the dispute. Relevant means if the documents assist one party, however slightly, to advance his case. The definition of documents is broad to include, paper, computerized including metadata, audio or video, and contents of portable devices. The rules contemplate discovery to be given two weeks after the pleadings close and the…

When a fraud has occurred, a private investigator is often engaged by counsel to gather evidence about the fraud and the fraudsters. If events take you to Canada, one must understand the law surrounding privilege and privacy and be cautious to avoid prejudicing the case. An investigator must be retained "for the dominant purpose of litigation" for his work to be protected from disclosure by litigation privilege. Blair v. Wawanesa Mutual Insurance Co., 1998 ABQB 1025. To maintain the privilege,…

In the past, courts had decided that RICO's reach depended upon the location of the enterprise. European Community v. RJR Nabisco, Inc., 2014 U.S. App. LEXIS 7593 (2d Cir. April 23, 2014) redirected the focus to predicate acts. There, plaintiffs alleged that RJR Nabisco and related entities ("RJR") managed and controlled a global money-laundering scheme involving organized criminal factions in Russia and Colombia. Plaintiffs alleged that RJR employees travelled from the U.S. to Europe, Central America and other locations to…

The Department of Justice and Carl A. Zwerner ("Taxpayer") have agreed to settle the case of United States v. Zwerner (S.D. Fla., No. 1:13-cv-22082). The settlement calls for the Taxpayer to pay penalties and interest totaling about $1.8M in connection with the Taxpayer's failure to file the FBAR in multiple years.  Despite the jury finding the Taxpayer guilty of willful noncompliance of the FBAR filing requirements, the Government agreed to settle the matter for an amount that is significantly less…

For private foundations interested in a "return on investment" on the distribution of their foundation's charitable dollars (that is, a return beyond the satisfaction of doing good), Program Related Investments ("PRI's") are generally the tool of choice.  A PRI can be counted as part of the foundation's required 5% annual distribution provided that the investment accomplishes one or more the foundation's charitable purposes, is not made to achieve a significant investment return, and is not used for lobbying or political…

A recent decision in the Southern District of New York, Wultz v. Bank of China, 2014 U.S. Dist. Lexis 1841 (S.D.N.Y. February 13, 2014), required a non-party bank to prepare a Rule 30(b)(6) witness with information that was only available overseas. There, the Bank of China subpoenaed Bank Hapoalim, a non-party Israeli bank, requesting documents pertaining to transactions and wire transfers involving an alleged Islamic Jihad leader. Bank Hapoalim moved to quash, arguing that Rule 45 did not require it…

For many Gen Y'ers (a/k/a Millennials, and generally understood to be people in their 20's and 30's today), philanthropy goes far beyond writing a check to one's favorite public charity (or, even, texting a donation to the Red Cross following some natural disaster or another). Instead, philanthropy is now understood as a broader deployment of social capital with consideration of the Return on Investment (ROI) to be achieved through that deployment. Outright donations, in which the donor's ROI is a good…

On April 3, 2014, in Matter of Kapon v. Koch, 2014 N.Y. Slip Op 02327, the New York Court of Appeals clarified the standard for enforcing subpoenas to nonparties in civil litigation. There, William Koch commenced a fraud action in California and served nonparty subpoenas for deposition on two New Yorkers who moved to quash the subpoenas. The Court held that "so long as the disclosure sought is relevant to the prosecution or defense of an action, it must be…

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