Author: National Law Forum

A group of in-house attorneys developed the National Law Review on-line edition to create an easy to use resource to capture legal trends and news as they first start to emerge. We were looking for a better way to organize, vet and easily retrieve all the updates that were being sent to us on a daily basis.In the process, we’ve become one of the highest volume business law websites in the U.S. Today, the National Law Review’s seasoned editors screen and classify breaking news and analysis authored by recognized legal professionals and our own journalists. There is no log in to access the database and new articles are added hourly. The National Law Review revolutionized legal publication in 1888 and this cutting-edge tradition continues today.

Office of Foreign Assets Control: Understanding the Federal Agency

Recently posted in the National Law Review an article by Simi Z. Botic and D. Michael Crites of Dinsmore & Shohl LLP regarding  the climate surrounding our nation’s safety has drastically changed since 9/11: 

Since September 11, 2001, the climate surrounding our nation’s safety has drastically changed. In an effort to promote United States foreign policy and national security goals, the Office of Foreign Assets Control (“OFAC”) has responded to the changing political environment. Although OFAC is not a recent development, the agency certainly operates with the present security sensitivities in mind.

OFAC operates within the U.S. Department of the Treasury, administering and enforcing economic and trade sanctions. Blocking necessary assets exemplifies one trade sanction often imposed by OFAC. In particular, sanctions are enforced against targeted foreign countries, terrorist regimes, drug traffickers, distributers of weapons of mass destruction, and other individuals, organizations, government entities, and companies that threaten the security or economy of the United States.

By enforcing the necessary economic and trade sanctions, OFAC restricts prohibited transactions. OFAC defines a prohibited transaction as a “trade or financial transaction and other dealing in which U.S. persons may not engage unless authorized by OFAC or expressly exempted by statute.” OFAC is largely responsible for investigating the “prohibited transactions” of individuals, organizations, and companies who operate in foreign nations. OFAC also has the ability to grant exemptions for prohibited transactions on a case-by-case basis.

Administrative subpoenas, vital OFAC investigation tools, allow OFAC to order individuals or entities to keep full and complete records regarding any transaction engaged in, and to furnish these records at any time requested. Both the Trading with the Enemy Act of 1917, 5 U.S.C. § 5, and the International Emergency Economic Powers Act, 50 U.S.C. § 1702(a)(2), grant OFAC the authority to issue administrative subpoenas.

Adam J. Szubin is the current director of OFAC. In his capacity as director, Mr. Szubin is authorized by 31 CFR § 501.602 to hold hearings, administer oaths, examine witnesses, take depositions, require testimony, and demand the production of any books, documents, or relevant papers relating to the matter of investigation. Once OFAC has issued an administrative subpoena, the addressee is required to respond in writing within thirty calendar days from the date of issuance. The response should be directed to the named Enforcement Investigations Officer, located at the U.S. Department of the Treasury, Office of Foreign Assets Control, Office of Enforcement, 1500 Pennsylvania Ave., N.W., Washington, D.C.

Should an addressee fail to respond to an administrative subpoena, civil penalties may be imposed. If information is falsified or withheld, the addressees could receive criminal fines and imprisonment. OFAC is authorized to penalize a party up to $50,000 for failure to maintain records. Therefore, should you find yourself the recipient of an OFAC administrative subpoena, it is imperative that you do not delay in responding. Typically, OFAC requests detailed information about payments or transactions, along with documentation to support such information. The subpoena response should be drafted by your attorney. The addressee of the letter should not have direct communication with OFAC. Counsel for the addressee should also follow up with the individual OFAC officer to make sure that all necessary paperwork was received.

Lastly, entities are encouraged to make voluntary disclosures when there has been an OFAC violation. Once a subpoena has been issued, disclosures are no longer considered voluntary. If information is turned over in response to an administrative subpoena, it may then be referred to other law enforcement agencies for possible criminal investigation and prosecution. Therefore, if there is a possible violation of OFAC, it is in your best interest to consult with counsel about the proper steps to take moving forward.

© 2011 Dinsmore & Shohl LLP. All rights reserved.

The Top Five Tax Traps in M&A Transactions

Recently posted  in the National Law Review an article by Jeffrey C. Wagner  and Daniel N. Zucker of McDermott Will & Emery regarding tax consequences of acquisition and disposition transactions:

The tax consequences of acquisition and disposition transactions can dramatically impact deal value. Often the potential tax issues can be resolved in a manner that is consistent with the intention of the parties without changing the economics of the deal. If some of these tax issues are not addressed, however, the parties may not obtain the benefit they had bargained for even though it may have otherwise been possible. This puts a premium on the involvement of tax advisors from the outset of a transaction. Although one rarely wants to see tax be the “tail that wags the dog” in a deal, tax issues can present significant economic opportunities or costs that may often warrant tweaking or changing the deal structure to accommodate these issues.

1. Failure to Solicit Tax Advice at the Letter of Intent Stage

Although not binding, the terms of the letter of intent entered into by the parties in the early stages of the acquisition process can put one of the parties in a superior bargaining position as it relates to which party bears the burden or reaps the benefits of the tax costs and benefits associated with a transaction. Too often, a client does not engage its outside advisors (or significantly limits the involvement of its outside advisors) until after a letter of intent is signed. The failure to include the tax advisor at this early stage can mean lost dollars to the seller or additional cost to the buyers.

For example, if the target is an S corporation, in most cases the buyer should be able to secure the benefit of a tax basis step-up for federal income tax purposes without a material increase in the taxes payable by the seller with respect to the sale. However, if the buyer is not well-advised, the letter of intent may simply indicate that the buyer will acquire the stock of the target for the agreed-upon consideration. If, after the letter of intent is executed, the buyer recognizes that a tax basis step-up can be achieved with little or no tax cost to the seller, the buyer may request that the transaction be converted to an asset purchase or that a Section 338(h)(10) election be made by the parties. At this point, the seller has the leverage and can demand additional consideration from the buyer in exchange for the tax benefits that such a structure would provide.

2. Section 197 Anti-Churning Rules

When the acquisition of a business is structured for income tax purposes as an asset purchase (i.e., an asset purchase in form or a stock purchase coupled with a Section 338(h)(10) election), the buyer usually has bargained for the tax benefits that accompany such a transaction—namely, the ability to tax effect the purchase price by depreciating or amortizing the premium paid for the assets, which premium is usually attributable to the goodwill and going concern value of the acquired business. If the business being acquired was in existence on or before August 10, 1993 and, before or after the transaction, the seller or a related party owns, directly or indirectly, greater than twenty percent of the equity of the buyer – which may be the case, for example, if the deal calls for the seller to receive “rollover equity”—the goodwill and going concern value of the target (as well as other Section 197 intangibles) may not be amortizable by the buyer. As a result, the buyer will not obtain the tax benefits that it anticipated and paid for as part of the acquisition. The economic benefit that is lost can amount to as much as 20-25 percent of the purchase price depending on the discount rate used to calculate tax benefits and other factors.

Moreover, if the acquirer is a limited liability company or the corporate acquirer is owned by a limited liability company, and the seller will have an interest in the limited liability company following the acquisition, the anti-churning rules can be an issue even where the seller owns less than twenty percent of the limited liability company. It is therefore critical that any transaction that calls for the seller or a party related to the seller to obtain (or retain) an equity interest in the buyer in connection with the acquisition, the buyer should closely study whether the anti-churning rules could be applicable. A failure to do so can result in a significant – and perhaps needless—reduction in the buyer’s after-tax cash flow and adversely affect the purchase price payable by a subsequent buyer of the business.

3. Qualified Stock Purchase Failure

As an alternative to structuring an acquisition as an asset purchase in form, a buyer can realize the tax benefits of an asset purchase by structuring the acquisition as a stock purchase and making a Section 338 or Section 338(h)(10) election in connection with the transaction (the latter requiring the consent of the seller and being limited to target corporations that are S corporations or subsidiaries of a consolidated group). In order to be eligible to make a Section 338 or 338(h)(10) election, the acquisition must constitute a “qualified stock purchase”, one of the requirements of which is that 80 percent or more of the target corporation’s stock be acquired in a twelve-month period by “purchase”. For this purpose, “purchase” excludes transactions on which gain or loss is not recognized, including exchanges that qualify for tax-free treatment under Section 351. Frequently, when a new corporation is being organized to acquire the stock of the target corporation, one or more of the sellers may “roll over” a portion his or her target corporation stock for stock of the new corporation. When less than 20 percent of the stock of the new corporation is received by the seller(s) in the exchange such that greater than 80 percent of the stock is acquired for cash, it would appear that the requirement that 80 percent or more of the stock of target be acquired by purchase would be satisfied. However, if any seller receives any stock of the new corporation (even one percent) in a transaction that qualifies as a Section 351 exchange, the acquisition will not constitute a qualified stock purchase and will be ineligible for a Section 338 or 338(h)(10) election.

The solution here is to structure the transaction so as to intentionally not qualify as an exchange under Section 351. Although this will undoubtedly have ramifications to the sellers (who may otherwise have been expecting to not have to recognize gain currently with respect to their rollover equity), the failure to obtain a step-up in basis in the assets of target corporation and consequently, the inability to tax-effect the purchase price (through depreciation and amortization deductions) may have an even larger negative impact on the buyer.

4. Acquisition of Shares of “Loss Stock” from Consolidated Group

A recent overhaul of the so-called “loss disallowance rules” changed the rules that apply when a buyer acquires the stock of a target company out of a U.S. federal consolidated group in a transaction in which the seller recognizes a loss. Prior to the change in the law, any limitation on the recognition of that loss for tax purposes would impact only the seller; the buyer was unaffected. However, under the new rules, if the buyer acquires shares of stock from a consolidated group that constitute “loss stock” (i.e., the consideration paid for the stock is lower than the selling consolidated group’s tax basis of the stock), absent a special election made by the seller, the tax basis in the assets of the target corporation (as well as other target corporation tax attributes) may be subject to reduction in an amount equal to some or all of the seller’s loss.

As a result, in all stock purchase agreements where the seller is a member of a U.S. federal consolidated group, the buyer should insist on a representation that none of the acquired shares are “loss shares” and, to the extent any of the shares are “loss shares”, the buyer should insist on a covenant that would require the seller to make the election that would, in lieu of reducing the target corporation’s tax basis in its assets and other tax attributes, cause the loss recognized by the seller to be reduced. In situations where the tax benefit to the seller from the loss is greater than the tax cost associated with the reduction in tax attributes, the seller should compensate the buyer for this tax cost.

5. Phantom Income/AHYDO Rules

Whenever an acquisition is financed, in part, through borrowing, and interest on the loan is not required to be paid at least annually (or there are warrants or other equity instruments issued to the lender in connection with the loan), the parties should consider the potential application of the original issue discount (OID) rules. Generally, subject to certain de minimis rules, if interest on a debt instrument is not required to be paid at least annually—i.e., the interest simply accrues automatically or accrues at the option of the borrower—the interest income and interest expense will be recognized for tax purposes notwithstanding that the interest is not actually paid on a current basis. This means that the holder of the debt instrument will recognize taxable income without receiving any cash—i.e., the holder recognizes so-called “dry income” or “phantom income.” Although the phantom income resulting from the characterization of a debt instrument as an instrument issued with OID is generally manageable (either because the holders are tax-exempt or that portion of the interest needed to cover taxes can be paid on a current basis), in certain circumstances, there are special rules that may result in the borrower’s tax deduction for the interest/OID being deferred or disallowed.

Specifically, the tax rules defer and, in some circumstances, permanently disallow deductions for OID on certain applicable high yield discount obligations (AHYDOs). An AHYDO is defined as a corporate debt instrument that meets three requirements. First, the debt instrument must have “significant OID.” Second, it must have a term exceeding five years. Third, it must have a yield to maturity that is at least five percentage points above the applicable federal rate (AFR) in effect for the calendar month during which the debt instrument is issued. A debt instrument is treated as having significant OID if, at the end of the first accrual period following the fifth anniversary of the issuance of the debt instrument (and at the end of each subsequent accrual period), an amount greater than one year’s worth of OID (the yield to maturity multiplied by the issue price of the debt instrument) can remain unpaid.

Where warrants or other equity-type instruments are issued along with the debt instrument (i.e., as part of an investment unit), there is a greater potential for OID and classification of the debt instrument as an AHYDO because the issue price of the debt instrument will be reduced by any value attributable to this equity thereby reducing the issue price and creating a greater spread between the instrument’s stated redemption price at maturity and its issue price—thus creating more OID.

Advance planning can often neutralize the effect of these rules without significantly changing the business deal. By simply adding a provision to the debt instrument that requires (i) all accrued but unpaid OID (in excess of one year’s worth) to be paid on the first interest payment date following the five year anniversary of the issuance of the debt instrument and (ii) all interest thereafter to be paid on a current basis, the debt instrument can escape classification as an AHYDO. Of course, this change has the potential for real, economic consequences which should not be minimized. However, where, as is frequently the case, the deal contemplates this debt being refinanced before the five-year anniversary (or the borrower is comfortable that a refinancing can be negotiated at that time), the borrower can avoid having its interest/OID deductions deferred or disallowed. In this regard, it should be noted that a debt instrument is tested for AHYDO classification at the time it is issued and is based on when payments on the debt instrument are unconditionally obligated to be paid. If a debt instrument is characterized as an AHYDO, the borrower’s interest/OID deductions are subject to the rules regarding deferral or disallowance even where the borrower actually pays the interest on a current basis.

Conclusion

The foregoing are just a few of the many tax issues that can arise in any deal. If they are spotted early enough, most tax issues can be addressed with relatively inconsequential structural changes to the deal and/or creative planning without changing the underlying business deal. However, if the opportunity to address the tax issues is missed, there are often material economic consequences to one or more of the parties. To the extent that there are tax costs inherent in the deal that cannot be ameliorated through creative planning, the parties need to address how such costs will be shared among the parties; otherwise, the burden of these tax costs may be borne by the wrong party. 

© 2011 McDermott Will & Emery

NLR Winter Law Student Writing Contest

The National Law Review is pleased to announce the commencement of the Winter Law Student Writing Contest:

The National Law Review (NLR)consolidates practice-oriented legal analysis from a variety of sources for easy access by lawyers, paralegals, law students, business executives, insurance professionals, accountants, compliance officers, human resource managers, and other professionals who wish to better understand specific legal issues relevant to their work.

The NLR Law Student Writing Competition offers law students the opportunity to submit articles for publication consideration on the NLR Web site.  No entry fee is required. Applicants can submit an unlimited number of entries each month.

  • Winning submissions will initially be published online in November and December 2011.
  • In each of these months, entries will be judged and the top two to four articles chosen will be featured on the NLR homepage for a month.  Up to 5 runner-up entries will also be posted in the NLR searchable database each month.
  • Each winning article will be displayed accompanied by the student’s photo, biography, contact information, law school logo, and any copyright disclosure.
  • All winning articles will remain in the NLR database for two years (subject to earlier removal upon request of the law school).

In addition, the NLR sends links to targeted articles to specific professional groups via e-mail. The NLR also posts links to selected articles on the “Legal Issues” or “Research” sections of various professional organizations’ Web sites. (NLR, at its sole discretion, maydistribute any winning entry in such a manner, but does not make any such guarantees nor does NLR represent that this is part of the prize package.)

Why Students Should Submit Articles:

  • Students have the opportunity to publicly display their legal knowledge and skills.
  • The student’s photo, biography, and contact information will be posted with each article, allowing for professional recognition and exposure.
  • Winning articles are published alongside those written by respected attorneys from Am Law 200 and other prominent firms as well as from other respected professional associations.
  • Now more than ever, business development skills are expected from law firm associates earlier in their careers. NLR wants to give law students valuable experience generating consumer-friendly legal content of the sort which is included for publication in law firm client newsletters, law firm blogs, bar association journals and trade association publications.
  • Student postings will remain in the NLR online database for up to two years, easily accessed by potential employers.
  • For an example of  a contest winning student written article fromNorthwestern University, please click here or please review the winning submissions from Spring 2011.

Content Guidelines and Deadlines

Content Guidelines must be followed by all entrants to qualify. It is recommended that articles address the following monthly topic areas:

Articles covering current issues related to other areas of the law may also be submitted. Entries must be submitted via email to lawschools@natlawreview.com by 5:00 pm Central Standard Time on the dates indicated above.

Articles will be judged by NLR staff members on the basis of readability, clarity, organization, and timeliness. Tone should be authoritative, but not overly formal. Ideally, articles should be straightforward and practical, containinguseful information of interest to legal and business professionals. Judges reserve the right not to award any prizes if it is determined that no entries merit selection for publication by NLR. All judges’ decisions are final. All submissions are subject to the NLR’s Terms of Use.

Students are not required to transfer copyright ownership of their winning articles to the NLR. However, all articles submitted must be clearly identified with any applicable copyright or other proprietary notices. The NLR will accept articles previously published by another publication, provided the author has the authority to grant the right to publish it on the NLR site. Do not submit any material that infringes upon the intellectual property or privacy rights of any third party, including a third party’s unlicensed copyrighted work.

Manuscript Requirements

  • Format – HTML (preferred) or Microsoft® Word
  • Length – Articles should be no more than 5,500 words, including endnotes.
  • Endnotes and citations – Any citations should be in endnote form and listed at the end of the article. Unreported cases should include docket number and court. Authors are responsible for the accuracy and proper format of related cites. In general, follow the Bluebook. Limit the number of endnotes to only those most essential. Authors are responsible for accuracy of all quoted material.
  • Author Biography/Law School Information –Please submit the following:
    1. Full name of author (First Middle Last)
    2. Contact information for author, including e-mail address and phone number
    3. Author photo (recommended but optional) in JPEG format with a maximum file size of 1 MB and in RGB color format. Image size must be at least 150 x 200 pixels.
    4. A brief professional biography of the author, running approximately 100 words or 1,200 characters including spaces.
    5. The law school’s logo in JPEG format with a maximum file size of 1 MB and in RGB color format. Image size must be at least 300 pixels high or 300 pixels wide.
    6. The law school mailing address, main phone number, contact e-mail address, school Web site address, and a brief description of the law school, running no more than 125 words or 2,100 characters including spaces.

To enter, an applicant and any co-authors must be enrolled in an accredited law school within the fifty United States. Employees of The National Law Review are not eligible. Entries must include ALL information listed above to be considered and must be submitted to the National Law Review at lawschools@natlawreview.com. 

Any entry which does not meet the requirements and deadlines outlined herein will be disqualified from the competition. Winners will be notified via e-mail and/or telephone call at least one day prior to publication. Winners will be publicly announced on the NLR home page and via other media.  All prizes are contingent on recipient signing an Affidavit of Eligibility, Publicity Release and Liability Waiver. The National Law Review 2011 Law Student Writing Competition is sponsored by The National Law Forum, LLC, d/b/a The National Law Review, 4700 Gilbert, Suite 47 (#230), Western Springs, IL 60558, 708-357-3317. This contest is void where prohibited by law. All entries must be submitted in accordance with The National Law Review Contributor Guidelines per the terms of the contest rules. A list of winners may be obtained by writing to the address listed above. There is no fee to enter this contest.

Congratulations to our Spring 2011 Law Student Writing Contest Winners!

Spring 2011:

Happy Birthday National Law Review!

The National Law Review Marks Second Year of Online Publication with Highest Daily Volume of U.S. Visitors among Legal Sites of Its Kind

CHICAGO–(BUSINESS WIRE)–  The National Law Review (www.NatLawReview.com), the fastest growing free, online database of legal analysis, marks its second year on a high note with its numbers continuing to increase, both in article contributors and in readership. 

The database today announced that in its second official year of online   publication, it has increased its readership for more than 60,000 page views per month and now experiences one of the highest daily volumes  of U.S. readers among sites of its kind, as measured by third-party groups like Alexa/Amazon and Quantcast.

 Launched in 2009, The National Law Review provides in-house counsel and  other business professionals, including small business owners, with  free, easy access to analysis of pressing legal issues through its  pnline database. Top law firms, law schools and professional  organizations contribute articles to the site, and The National Law Review helps legal consumers quickly locate this analysis for no charge and without a log-in or password.

“We are thrilled to have reached such significant milestones so early on and feel this growth is a result of the needed service we provide to both in-house lawyers and law firms,” said Jennifer Schaller, co-founder   of The National Law Review and a former in-house attorney. “With our database, we put things in the hands of in-house counsel and professionals, allowing them to find the timely and well-researched legal analysis they need, when they need it, saving them time and money. And for law firms, we provide an effective and affordable way to share their expertise, opening them up to a whole new world of readers and potential clients.”

More than 100 organizations contribute their articles to The National Law Review, including AmLaw firms as well as boutique firms, law schools and professional organizations. In addition to publishing these       contributors’ articles on its site and including them in its database, The National Law Review systematically promotes them through alliances with bar associations and professional associations and through social media outreach.

 When an article appears on The National Law Review’s site, it gives the author(s) continuing opportunities to be read and brings attention to their expertise. Due to The National Law Review’s selection process, third-party credibility is added and articles are routinely referenced by mainstream media, bloggers and professional associations. Some Websites, including media sites, often pick up articles and place them on their Websites, which gives the contributors even greater readership and promotion opportunities.

“When we first were working on this idea, we knew it would be a powerful legal research tool, but we were not aware of how many opportunities an article would have to be read,” said Schaller. “It has truly exceeded   our expectations in terms of the reach our contributors gain with each article that is posted. It’s been wonderful seeing it develop and exciting to see it continuing to grow.”

Based in the Chicago area, The National Law Review is a free and easily accessible database of timely and authoritative legal analysis contributed by many of the nation’s premier law firms, law schools and       professional organizations. The site provides in-house lawyers, small business owners and executives an efficient way to research the legal issues affecting their operations. It also gives law firms an effective and affordable way to augment their existing marketing efforts. For more information about The National Law Review, visit www.natlawreview.com.

 Contact:

The National Law Review
Robin Iori, 248-766-0262

National Federation of Paralegal Associations, Inc. Annual Conference

The National Law Review would like to remind you of National Federation of Paralegal Associations, Inc. 2011 Annual Conference on October 13-16, 2011 in Bloomington, MN:

2011 Convention

2011 Convention postcard art Metrodome with skyline

Online registration closes Friday, Sept. 30th

Walk-up registrations accepted at the door.

Hotel Information

Hilton Minneapolis St. Paul Airport (use group code NFP)
Single or Double Occupancy:  $159.00 per night

Education Sessions

This year we will be holding 24 seminars plus the Student Workshop. There will also be a cooking class offered on Wednesday featuring Hilton Chef Eric Gideon Baker.  There is limited space for the Chef’s class and it is expected to fill up quickly so sign up early! The convention brochure (PDF) has details for all of these educational opportunities.  All sessions other than F and X are approved for 1.25 hours of CLE credit each.

Casual Up! for Breast Cancer

Casual Up! logo

Support the National Breast Cancer Foundation and Casual Up!
Friday, October 14, 2011

We all know someone or have heard of someone affected by breast cancer. One of the ways NFPA can help fight this disease is by using the privileges we have at our Annual Convention to make an impact in the fight against breast cancer. Friday, October 14th will be casual day to help raise money for breast cancer awareness and funding for mammograms for those in need. It’s simple, fun, and a great way for attendees to become involved in something that saves thousands of lives.

What do you wear on Friday, October 14th to support the National Breast Cancer Foundation and Casual Up? The dress code for donors (minimum donation $5) on this particular day will be relaxed. Be creative and inspire your friends or regions to get involved in a good cause. You can wear jeans, a pink T-Shirt or a pink ball-cap. You can even wear pink socks. The point is to be creative and help increase awareness of breast cancer.

You can also purchase Casual Up T-Shirts for $20 each…must be ordered by August 30, 2011. Shirts are designed by NFPA and available in unisex adult sizes.

Keynote Speaker

Judge Meyer

Honorable Helen Meyer
Minnesota Supreme Court Judge

Judge Helen Meyer earned her Bachelor’s Degree in Social Work at the University of Minnesota. She earned her J.D. from William Mitchell College of Law and then worked for 20 years as a civil trial lawyer and mediator. She co-founded Pritzker & Meyer in 1987 and established Meyer and Associates in 1996.

Judge Meyer is certified as a civil trial specialist by the National Board of Trial Advocacy and the Minnesota State Bar Association, is a past board member of the Minnesota State Board of Legal Certification and the Minnesota Trial Lawyers Association, and has held leadership positions with the Minnesota State Bar Association and Academy of Certified Trial Lawyers.

Judge Meyer served for three and one-half years on Governor Ventura’s Judicial Merit Selection Commission, assisting him in the appointment of over 60 trial court judges and 5 appellate level judges. She was appointed by Governor Ventura as an Associate Justice of the Minnesota Supreme Court in June of 2002. Judge Meyer took the oath of office on August 5, 2002.

Pro Bono Conference

The 2011 Pro Bono Conference will be held on Friday, October 14, 2011, in conjunction with NFPA’s Annual Convention in Bloomington, MN.  The Conference will include presentations by paralegals working on pro bono projects across the country, as well as information on how to start or enhance your association’s pro bono efforts. Guest speakers include Erika Applebaum who is the Executive Director of the Innocence Project of Minnesota and Eric Cooperstein, chair of the Minnesota State Bar Association’s Rules of Professional Conduct Committee. There will be 1.25 hours of Continuing Legal Education available for Mr. Cooperstein’s presentation – Real-Life Ethical Predicaments for Pro Bono Coordinators and Volunteers.

Registration will be held in conjunction with registration for the Annual Convention. No charge for NFPA members!

Click here for the Pro Bono Conference details.

Leadership Workshops

3:45 to 5:30 PM Friday

Topics include:

  • Strategic Planning in Tough Economic Times – presented by Debra Hindin-King
  • Use of Technology for Local Associations – presented by Jessica Swedenhjelm, RP; Dana Murphy-Love, CAE; Kim Walker

Anti-Money Laundering Compliance Costs

Recently posted in the National Law Review an article by Emily Holbrook of Risk and Insurance Management Society, Inc. (RIMS) regarding anti-money laundering  initiatives take more precedence in the corporate world:

 

Each year, anti-money laundering (AML) initiatives take more precedence in the corporate world, particularly within the financial industry. According to Celent, global spending on AML compliance, including operations and technology, will reach a staggering $5.8 billion within the financial sector by 2013.

Overall, the AML compliance burden is expected to expand at a rate of 7.8% annually while global spending on AML software is projected to expand at a rate of 10.4% per year. But what is the motivation behind such a drive? The research firm found that 42% of respondents cited regulatory requirements, and 25% pointed to reputational risk and brand protection as the main driver for AML compliance spending. And in further findings, financial institutions cited the integration of their AML and anti-fraud operations and technologies as a long-term goal.

“Although intuitively attractive, many institutions may find it difficult to build a business case for integrating AML with anti-fraud,” said Neil Katkov, senior vice president for Celent. “Fortunately, the compliance-driven development of modern AML software, analytics and case management has created a new generation technology that can often deliver better results than legacy anti-fraud systems.”

It seems it’s out with the old and in with the new — and expensive — AML

Risk Management Magazine and Risk Management Monitor. Copyright 2011 Risk and Insurance Management Society, Inc. All rights reserved.

Administrative Law Judge Finds Employer Unlawfully Discharged Employees Based on Facebook Posts

Recently posted  in the National Law Review an article by Stephen D. Erf, Heather Egan Sussman and Sabrina E. Dunlap  of McDermott Will & Emery regarding the NLRB found that an employer unlawfully terminated five employees because they posted comments on Facebook:

In a first of its kind ruling, a National Labor Relations Board (NLRB) Administrative Law Judge (ALJ) found that an employer unlawfully terminated five employees because they posted comments on Facebook related to working conditions.  This is a landmark decision because, up to this point, employers have only been able to rely on the prosecution trends of the General Counsel’s office, including a recently issued report on the topic, and not actual decisions by the adjudicative body of the NLRB.

This landmark case involved an employee of Hispanics United of Buffalo (HUB) (a nonunionized organization), who posted a message on Facebook sharing critical comments made by a coworker concerning employees’ poor job performance and asking for the employees’ reactions.  Five employees commented on the post, defending their job performance and criticizing the critical employee and their working conditions, including work load and staffing problems.  HUB later discharged the Facebook poster and the employees who responded to the post, stating that their comments constituted harassment of the critical coworker.

Based on an unfair labor practice charge filed by one of the employees, the NLRB’s Buffalo Regional Director issued a complaint in May 2011. The ALJ heard the case in July and, on September 2, issued a written decision finding that the employees’ Facebook posts were protected concerted activity under Section 7 of the National Labor Relations Act (NLRA) because they concerned a conversation among coworkers about the terms and conditions of employment and the employees’ conduct was not sufficiently inappropriate as to lose the protection of the NLRA.  The ALJ awarded the employees back pay and ordered HUB to reinstate the five employees.  The ALJ also ordered HUB to post a notice at its Buffalo facility explaining to employees their rights under the NLRA and committing not to violate those rights in the future.

While NLRB complaints related to social media have been on the rise, this is the first ALJ decision specifically addressing employees’ use of Facebook.  As a result, employers are wise to consider the ALJ’s decision when disciplining employees based on social media activity.

© 2011 McDermott Will & Emery

ANALYSIS: 'ObamaCare' label is sticking

Posted on September 29, 2011 in the National Law Review an article by Wendell Potter  of Center for Public Integrity regarding backers of the president’s health plan are loosing the public relations battle:

Backers of the president’s health plan are losing the public relations battle

The Kaiser Family Foundation just released the findings of its annual survey of businesses to determine how much the cost of employer-sponsored health coverage has gone up. There were some unexpected findings.

Tea Party members protest President Obama’s health care mandate in Cincinnati. Tom Uhlman/AP

One was that the average cost of annual premiums for family coverage is now more than $15,000. The 9 percent increase in the cost of health insurance over last year caught many people by surprise, because it represented a bigger hike in premiums than in recent years.

What seems clear is that insurers decided last year to charge their customers considerably more than necessary this year to be able to meet Wall Street’s profit expectations; insurance companies are also concerned that such increases will be more difficult once health care reform is fully implemented in 2014.

Here’s another surprise. Kaiser found that 50 percent of small employers are aware that they are now eligible for a tax credit from the federal government—thanks to the Affordable Care Act—if they provide subsidized coverage to their employees. I can hardly believe the awareness of the tax credit is that high.

As I have traveled across the country in recent weeks, speaking to a wide range of audiences, one thing has become abundantly clear: the provisions of the Affordable Care Act already in effect are anything but abundantly clear to people.

That’s because opponents of health care reform have won the public relations battle in defining the Affordable Care Act.

While the most recent Kaiser survey did not seek the views of the general population nor ask employers what they think or know about the Affordable Care Act, other polls show that advocates of the new law have been losing ground in the battle for public support.

This week I have been speaking at Florida churches —  a Catholic church in Winter Park, outside Orlando, Monday night, and a Unitarian Universalist church in Clearwater Tuesday night.  The hosts wanted an overview of what’s in the new law and what’s not—to provide factual, unbiased information and also to dispel many of the myths that have gained traction, starting before the law was even enacted.

What the hosts told me—and what I learned from talking to people who attended the forums—is that the Obama Administration and the national groups that backed  the legislation have essentially been missing in action when it comes to explaining the benefits of the law.

Kaiser’s finding that 50 percent of small businesses were familiar with the tax credit would certainly come as a shock to Dr. Patrick Cannon, advocacy director for Florida CHAIN (Community Health Action Information Network). He has been traveling the state trying to reach small business owners and educate them about the tax credit.

He has found almost no one even knows about it. This undoubtedly helps explain why the number of small businesses offering coverage to their employees dropped significantly in the most recent Kaiser survey.

Cannon believes that one of the reasons is that reform advocates missed an important opportunity to brand the Affordable Care Act in positive terms—starting with the most basic term of all, the name of the law itself.

As Cannon pointed out, opponents of the law  use a single term to describe the law: ObamaCare. The term has so seeped its way into the vernacular that even some of the law’s advocates have started using that pejorative label. The groups that support the law, he notes, use a wide range of terms to describe it.

Cannon is embarking on an effort among supporters to be consistent in calling it the Affordable Care Act.

Because opponents have been able to define the law on their own terms (or term), advocates are finding it increasingly difficult to have civil conversations with people about it—including with independents.

Liz Buckley, executive director of Focus Orlando, told me that, “If you even try to have conversations with people about it, people think you’re just trying to reelect Obama. They just shut down the conversation.”

Why the administration has been so inept or disengaged is baffling. It’s true that people will be skeptical of information about the law that comes straight from the White House, but the folks behind the Obama campaign in 2008 seemed to know how to get third parties motivated and active on behalf of the candidate.

Where are those folks now? If the White House is serious about making sure the law goes forward—and making sure the Obama legacy is a positive one—they better get in gear and turn public awareness and attitudes around. Otherwise, pretty soon,it may be too late.

Reprinted by Permission © 2011, The Center for Public Integrity®. All Rights Reserved.

Mortgage Industry to Face Centralized Repository for State Regulatory Enforcement Actions – Deadline for Comments is September 20, 2011

Posted in the National Law Review an article by attorney  Thomas J. McKee, Jr., Gil Rudolph and Michael R. Sklaire of Greenberg Traurig, LLP regarding State Regulatory Registry LLC (SRR);

 

 

Deadline for Comments is September 20, 2011

On July 22, 2011, the State Regulatory Registry LLC (SRR) issued a Request for Public Comments on a proposal to collect, centralize and publish all state regulatory enforcement information concerning mortgage loan originators. By creating a central source of investigation information, the SRR aims to provide a repository of background information for both consumers and other state and federal regulators. Before implementing, the SRR has asked for public comments to be submitted by September 20, 2011.

In 2008, the Nationwide Mortgage Licensing System & Registry (NMLS) was created under the federal Secure and Fair Enforcement for Mortgage Licensing Act (“SAFE Act”), with the purpose of “provid[ing] consumers with accessible information . . . regarding the employment history of, and publicly adjudicated disciplinary and enforcement actions against loan originators.” 12 U.S.C.A. § 5101(7). As part of implementing this purpose, the NMLS intended to use the SRR as the vehicle through which to include all regulatory actions taken by state regulators against companies and individuals that could be gathered and published. Previously, actions by state regulators could only be found, if at all, through a search of the individual state regulators’ websites.

The proposal to incorporate state regulatory reporting into the NMLS, which would take effect in Spring of 2012, consists of twelve major policies and processes, which include, among others:

  1. The state agency that took the action will be responsible for inputting such information into the NMLS. The SRR will not verify, validate, or amend any of the enforcement actions, as such information can only be changed by the inputting agency.
  2. Whether an action will actually be included in the NMLS can vary from state to state, depending on state-specific statutes and regulations. Further, each state will determine which actions will be shared only with other regulators, and those that will be made available to the general public.
  3. Reported actions will not be limited to those actions that are public. Instead, a regulator will have the ability, at their discretion, to include information that is to be shared only among regulators or among agency employees.
  4. A recommendation that any postings be made within five (5) days of receipt of a state agency’s final order.
  5. Provide a standardized set of information to be posted, including, for example, (a) the enforcing agency, (b) a description of the Order, and (c) the amount of any fine or other penalty.
  6. The SRR recommends that actions taken against companies should be posted on a prospective basis, while actions taken against loan originators should be posted as of the date each state’s SAFE Act became effective.
  7. All respondents named in an action will be included in any reporting, and the action will be tied to the records of both the named company and/or individuals.
  8. A company or individual will be notified of any posting in the system and will be able to view any publicly posted actions against it in the NMLS. The SRR proposal does not, however, contain a mechanism for a company or individual to learn of the non-public postings against it.
  9. State regulators will have the ability to post multi-state actions through NMLS. Each state involved in such an action is responsible for posting the action pursuant to its own reporting policies.

At first glance, the proposed registry presents a number of benefits to companies. For example, by having a central repository for all state regulatory actions, companies will have easy, up-to-date, access to the types of enforcement actions being pursued across the country, including the resulting fines and penalties assessed. Such information can be invaluable when defending an enforcement action and evaluating settlement proposals with state agencies. Companies will be able to see enforcement trends and use such information to modify their practices. The new system will greatly simplify a company’s ability to learn from the conduct of others.

Such benefits, however, do not come without a host of potential drawbacks. Specifically, while the system seeks to compile standard information regarding enforcement actions, it does not set forth a standard for reporting. Instead, its reliance upon individual state standards for reporting could lead to competitive disadvantages where, despite identical conduct, one company is tagged with a report while another is not solely due to a difference in state reporting standards.

The discretion given to regulators under the system could have similar effects. Giving regulators the discretion to input information (including non-adjudicated information) that will only be shared among regulators or agency employees could result in information being shared without verification, accountability, or opportunity to cure. Successfully defending an enforcement action would not necessarily preclude the sharing of negative comments about a company on the system. Companies will not be privy to such secret, albeit formalized, statements that could be prejudicial to how such entities are viewed and/or treated by other regulatory agencies. Nevertheless, the repository could be a potential treasure trove of information for future plaintiffs and will certainly be a frequent target of discovery in lawsuits.

Companies should carefully examine the potential ramifications each of the proposed policies may have on their business.

©2011 Greenberg Traurig, LLP. All rights reserved.

The 16th Annual National Institute on Negotiating Business Acquisitions

The National Law Review wants to remind you to mark your calendars for the 16th Annual National Institute on Negotiating Business Acquisitions presented by the ABA’s  Business Law Section Mergers and Acquisitions Committee, General Practice, Solo & Small Firm Division, and the Center for Continuing Legal Education:

Negotiating Business Acquisitions

Event Information

When:  November 10 – 11, 2011

Where:  The Ritz-Carlton Miami Beach | South Beach Miami
                 1 Lincoln Rd, Miami Beach, FL, 33139-2000

 

Primary Sponsors

 

 

  • Highlights

This National Institute includes an extensive mock negotiation that will give you valuable insights on negotiating key representations, warranties, closing conditions and indemnification provisions in an acquisition agreement. Advance preparation is not needed for this program.

  • Program Description

This two-day National Institute will provide you with an expert perspective on negotiating business acquisitions.

Panelists include nationally known mergers & acquisitions attorneys who will discuss all facets of the acquisition process, including techniques used in structuring and negotiating M&A deals; the tax and securities law aspects of business acquisitions; and the impact of recent legal and regulatory developments on M&A transactions.

The program will examine both fundamental and cutting-edge issues, with sessions addressing
the following:

  • The key business, financial, and legal terms of the acquisition agreement
  • Special issues in asset acquisitions
  • Tax considerations in M&A transactions
  • Acquisitions of public companies and related Delaware and securities law considerations
  • An investment banker’s perspective on M&A trends
  • Recent developments, including the role of private equity buyers
  • Ethical issues in M&A transactions