Category: finance

Stimulus Bill Extends the Availability of Student Loan Forgiveness (US)

Section 2206 of the CARES Act allowed an exclusion of up to $5,250 from an employee’s gross income, if an employer paid principal or interest on an employee’s “Qualified Education Loan”.

Section 2206 of the CARES Act was only designed to be in effect for calendar year 2020. However, The Consolidated Appropriations Act, 2021 (the “CAA”) extends this provision of the law through December 31, 2025.

This provision of the CAA is in Section 120 of Division EE, called “The Taxpayer Certainty and Disaster Tax Relief Act of 2020”.

It does not appear that during 2020, many employers decided to provide student loan forgiveness as an employee benefit. Given the pandemic, that is certainly understandable. However, going forward, it might be something that employers might find more attractive as a recruiting or retention tool. Thus, the following is a brief refresher on this benefit.

Code Section 127 – Education Assistance Programs

Internal Revenue Code (the “Code”) Section 127 has for a very long time, provided an exclusion from an employee’s gross income for reimbursement provided to the employee under an employer’s “educational assistance program”. The maximum amount of tax-free reimbursement is $5,250 per calendar year.

The employee’s education under the program may be reimbursed without regard to whether it relates to the employee’s employment. However, the educational expenses cannot pertain to a sport, game or hobby.

The CARES Act

Section 2206 of the CARES Act amended Code Section 127 to allow an employer to pay for all or part of an employee’s “Qualified Education Loan” as a tax-free benefit, provided that benefit is provided as part of an employer’s education assistance program.

An important point to note is that the employee would not have had to incur the educational expenses while that person was an employee of the employer.

For example, an existing employee with student loan debts that were incurred prior to be being hired, can have that debt forgiven under the plan. Likewise, a newly hired employee with pre-existing student loan debt can also have that debt forgiven under the plan.

Code Section 127 – Employer Plan Requirements

Under Code Section 127, the employer must establish a written plan and communicate the terms of that plan to eligible employees. In addition, the Plan must satisfy the following requirements:

  • The terms of the Plan cannot discriminate in favor of highly compensated employees (“HCEs”).
  • For this purpose, Code Section 414(q) is referenced. In 2021, an employee is an HCE if he or she had compensation of more than $130,000 in 2020. 5% owners of businesses are also considered to be HCEs.
  • Collectively bargained employees must be considered in determining nondiscrimination eligibility requirements, unless educational assistance benefits were the subject of good faith bargaining.
  • Controlled group rules apply for testing nondiscrimination.
  • The calendar year $5,250 maximum exclusion for loan forgiveness must be combined with any other educational assistance that is provided to the employee under the employer’s Code Section 127 plan for that calendar year.
  • The plan cannot permit an employee to choose between taxable compensation and benefits and the educational assistance. Thus, an employee cannot elect salary reduction as a means of participating in the Section 127 plan. Simply put, the benefits under the plan have to be employer paid benefits.

Qualified Education Loans

The rules that define what will qualify as a “Qualified Education Loan” are somewhat complex. The IRS advises taxpayers to review Chapter 4 of IRS Publication 970.

However, in general, the loan had to be incurred for the employee’s costs of attendance (i) in pursuit of a degree, certificate, or other program that would lead to a “recognized educational credential”, and (ii) while carrying a course load at least one-half (1/2) of the normal course load for that particular course of study.

Loans from the government or a financial institution are fine. Loans from family members don’t qualify. Loans from tax-qualified employer retirement plans (e.g. 401(k) Plans) don’t qualify.

Attendance at an “eligible education institution” is required. In general, this will include all colleges, universities, vocational schools and other post-secondary institutions that are eligible to participate in the federal student aid program.

Costs of attendance at the eligible education institution include tuition and fees, books, supplies, transportation, miscellaneous personal expenses, room and board and various other costs.

© Copyright 2020 Squire Patton Boggs (US) LLP

ARTICLE BY Gregory J. Viviani and Joseph P. Yonadi, Jr. of Squire Patton Boggs (US) LLP
For more, visit the NLR Coronavirus News section.

Congress Passes COVID-19 Relief and Stimulus Package

On Monday, December 21, Congress enacted a $900 billion stimulus package to support American workers and businesses impacted by COVID-19. The measure represents a last-minute bipartisan agreement by a lame duck Congress to provide much-needed support as COVID-19 cases continue to rise across the country. Notably, the bill does not include funding to states and local governments, and does not provide any liability protections for businesses related to COVID-19. Those are issues favored by Democrats and Republicans respectively, and were dropped in the compromise.

The legislation includes funding for individual stimulus checks, a restart and expansion of the popular Paycheck Protection Program (PPP) (including clarification that business expenses paid with PPP loan funds are tax deductible), other new and expanded SBA loan programs, direct targeted funding to certain industries, unemployment compensation program extensions, payroll and other tax credits and deductions. The overall legislation will take effect when signed, but individual programs and provisions may have unique effective dates that are separate from the general effectiveness date.

While President Trump has until December 28 to sign the legislation into law, on Tuesday evening, December 22, he called upon Congress to enact an amendment to increase the amount of payments to individuals from $600 to $2000.  He has also expressed discontent with other provisions of the bill, causing some uncertainty as to whether he will sign it or force Congress to take further action.

​Given this uncertainty, we recognize that certain provisions of the bill may change. However, we know that these Congressional stimulus and relief efforts are of great interest to our clients, and we will continue to keep you apprised of any changes to the legislation and its final outcome. The following summaries are based on the version of the law enacted by Congress on December 21.

For a comprehensive review of these provisions and more, please see the following Pierce Atwood alerts:

Business and Tax Relief – including the PPP, other SBA lending, targeted financial aid to certain industries, and payroll and business tax credits and deductions.

Energy Investment Stimulus – including clean energy reforms, research and development, and extension and enhancement of renewable energy tax credits.

Individuals, Families and Workers Relief – including direct stimulus payments and unemployment programs.

Health Care Providers, Patients, COVID-19 Mitigation, and Vaccination – including additional grant money for providers, ending surprise medical billing, and additional support for COVID-19 mitigation.

©2020 Pierce Atwood LLP. All rights reserved.
For more, visit the NLR Election Law / Legislative News section.

ICE COLD MOVE: US Government Warns of Cybercriminals Targeting Cold Supply Chain for COVID-19 Vaccine

No supply chain is immune from cyberattacks.  This includes, unfortunately, in regards to the COVID-19 vaccine.

Yesterday the US Homeland Security Department issued a warning that a series of cyberattacks is underway aimed at the companies and government organizations that will be distributing coronavirus vaccines around the world.  Specifically, the attacks target the COVID-19 cold chain (an integral part of delivering and storing a vaccine at safe temperatures).

The warning cautions that “[i]mpersonating a biomedical company, cyber actors are sending phishing and spearphishing emails to executives and global organizations involved in vaccine storage and transport to harvest account credentials.  The emails have been posed as requests for quotations for participation in a vaccine program.”  It is unclear at this time whether these attacks are for purposes of stealing the technology for keeping the vaccines refrigerated in transit or for sabotaging distribution of the vaccine.

Josh Corman, the chief strategist for healthcare at the US Cybersecurity and Infrastructure Security Agency (“CISA”) commented that this underscored the need for all “all organizations involved in vaccine storage and transport to harden attack surfaces, particularly in cold storage operation, and remain vigilant against all activity in this space.”

Although this warning was specific to the COVID cold supply chain, all organizations should take note as the core strategies utilized by cybercriminals cut across industries.

© Copyright 2020 Squire Patton Boggs (US) LLP
For more articles on cybercrime, visit the National Law Review Corporate & Business Organizations section.

Q&A with Danish Hamid of DLA Piper on Recent Committee on Foreign Investment in the United States (CFIUS) Developments

Danish (DAA-n’sh) Hamid is a partner with DLA Piper’s Washington DC office. For the past 20 years, he has led an international practice that focuses on the intersection of corporate, compliance, and investigations matters. More recently, Hamid finds himself spending a significant amount of his time advising US and non-US clients on the national security implications of their foreign investment deals and whether those transactions could raise concerns with the Committee on Foreign Investment in the United States (CFIUS). CFIUS is an interagency committee chaired by US Treasury Secretary and is responsible for screening foreign investments in US businesses and certain real estate to determine whether such transactions can impair US national security. If CFIUS identifies material concerns, it can advise parties to restructure or withdraw from their deal or recommend that the US President block or unwind the transaction. Hamid has conducted numerous CFIUS due diligence reviews, advised clients on CFIUS risk-mitigation strategies, and has successfully represented parties with filings before CFIUS. He regularly speaks and writes on CFIUS matters with the goal of clarifying the regulatory complexities in this area for a non-lawyer audience. Hamid also brings a unique perspective with respect to CFIUS concerns given that he has led M&A deals in the past as a corporate lawyer and has now transitioned towards a more regulatory-focused practice. With this in mind, the NLR asked Hamid to provide the following insights regarding recent CFIUS developments:

CFIUS has been empowered by the Department of the Treasury with more staff and funding to monitor transactions not voluntarily reported. What does this mean for companies who are involved or accepting foreign investment?

The fact that CFIUS is devoting greater resources and budget towards monitoring non-notified transactions means that CFIUS may ask parties involved in those deals to explain why they did not submit a filing to CFIUS. If that explanation is not compelling, CFIUS may direct them to submit a filing and possibly apply a more rigorous review standard with respect to that filing. CFIUS may also impose a civil penalty on transaction parties (in some cases up to the value of the investment itself) if they did not file mandatory filing on their own initiative prior to closing if one was otherwise required. Relevant regulations permit CFIUS to impose that penalty on any transaction party that violates the mandatory filing requirement. Given these circumstances, transaction parties conduct CFIUS due diligence reviews to determine whether their deals will trigger a mandatory CFIUS filing or merit a voluntary submission to CFIUS.

CFIUS had an increased jurisdiction scope under Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA) in January of 2020. What impact has this had on the landscape in the intervening months?

CFIUS’s expanded jurisdiction under FIRRMA has caused more transaction parties to consider whether their deals trigger a filing. We have also observed an increase in the number of filings with CFIUS.

CFIUS has set up a webpage to accept tips and other information from the public on transactions not reported to the agency–how does this change the landscape?  Is it important for companies to be aware of this formalizing of a previously informal process? 

The fact that CFIUS is now actively seeking public tips on non-notified transactions is a relevant factor that transaction parties will need to evaluate when deciding whether to submit a CFIUS filing. There is a risk that CFIUS may receive public tips from a variety of sources such as disgruntled employees of US target companies or competitors to foreign investors in or acquirers of US businesses.

On Friday, Aug. 14, 2020, the president signed an executive order (EO) demanding the unwinding of a Chinese company’s acquisition of what would become TikTok–in your opinion, is this a sign of things to come?  What does this indicate about the current landscape of CFIUS and transactions with companies with access to American’s personal data?

It may be early to conclude if this is a sign of things to come. However, it has certainly captured the attention of CFIUS practitioners. Of course, separate from the EO, FIRRMA and recent regulations already made it fairly clear that CFIUS is interested in foreign investments in certain US companies that maintain or access sensitive data regarding US citizens.

Do you anticipate any major changes with CFIUS in light of the 2020 election?

Yes, we anticipate further regulatory developments impacting CFIUS. Just recently, the Treasury Department issued new regulations that went into effect on October 15th and have the potential of expanding the circumstances that trigger mandatory CFIUS filings. Those new rules seek to better align the CFIUS regime with US export controls by requiring parties to submit a mandatory CFIUS filing with respect to certain foreign investments in or acquisitions of US businesses involved with critical technologies for which a US regulatory authorization would otherwise be required. In addition, US export controls are evolving, which will invariably impact the CFIUS regime.

Copyright ©2020 National Law Forum, LLC
For more articles on CFIUS, visit the National Law Review Antitrust & Trade Regulation section.

Uncle Sam Wants to Protect Blockchain Technology

On August 27, 2020, the head of the U.S. Department of Justice’s Antitrust Division (“DOJ”), Makan Delrahim, spoke at the Thirteenth Annual Conference on Innovation Economics and emphasized that one of the DOJ’s top priorities is to protect innovation and ensure that antitrust laws do not act as an impediment to the burgeoning cryptocurrency market.  COVID-19 has illuminated the importance of innovative solutions, as businesses develop new ways to operate during the pandemic. In particular, Delrahim highlighted blockchain as an innovative technology that the DOJ seeks to protect because of its potential to topple existing monopoly structures.

Blockchain technology is essentially a shared ledger of information and transactions that is distributed across a number of computers on the network, the ledger updates with every transaction on each computer and is viewable by anyone with access to that particular blockchain at any time.  In traditional networking solutions, the company that owns or controls the network infrastructure (the intermediary) may be able to raise the cost of doing business on the network as it becomes larger.  In contrast, blockchain technology can operate a network without a centralized intermediary, resulting in potentially lower networking costs and limiting the concentration of market power.

Although blockchain technology offers tremendous value, Delrahim also underscored the potential for abuse.  He noted that those with current market power could use blockchain technology in an anti-competitive manner. This is particularly a concern with closed or permissioned blockchain networks where only insiders are allowed to operate a computer on the network. For example, seafood harvesters could collusively condition access to a permissioned blockchain, which tracks useful supply chain data, on agreeing to certain prices or output.  Such collusive activity would cause tremendous harm to competition and consumers.

In an effort to combat such potentially anticompetitive activities, Delrahim noted that the DOJ is taking proactive measures to understand how emerging technologies work and how they can affect competition. The Antitrust Division has implemented a new initiative to train its attorneys and economists in innovative technologies such as blockchain technology, machine learning, and artificial intelligence, to prepare itself for monopolists who may take advantage of these new technologies.

Delrahim’s speech is an acknowledgement that the DOJ looks favorably on innovative technologies, in particular blockchain solutions.  The DOJ wants to protect and promote the growth of these technologies by combating anticompetitive behavior.  Delrahim’s speech is also an important signal that the DOJ is focused on potentially anti-competitive applications of blockchain technology.  Any group of firms that are considering working together in developing a blockchain technology solution in their industry should take appropriate precautions to make sure their activities do not constitute a violation of U.S. anti-trust laws.

© Polsinelli PC, Polsinelli LLP in California
For more articles on Cryptocurrency, visit the National Law Review Communications, Media & Internet section.

U.S. Senate Subcommittee on Investigations Recommends Regulation of the Art Market & Other Headlines

U.S. Senate Subcommittee’s Report Recommends Art Market Regulations

As part of its investigation into the effectiveness of sanctions against foreign persons and entities, the Permanent Subcommittee on Investigations of the United States Senate issued a report focused on lack of regulation and pervasive secrecy in the art market. Specifically, the report notes that the art industry is considered the largest legal industry in the United States that is not subject to the requirements of the Bank Secrecy Act, which mandates detailed procedures aimed at preventing money laundering and requires businesses to know their customers’ identity. The report further observes that under the unwritten rules of the art market, a large number of art sales happen through intermediaries, with purchasers and sellers frequently not inquiring into each other’s identities and sellers not asking about the origin of the purchase money. Art advisers are frequently reluctant to reveal the identity of their clients for fear of losing the business.

The 147-page report sets forth a case study of how the art market was used to evade sanctions imposed on Russia. Brothers Arkady and Boris Rotenberg, billionaire business tycoons and long-time friends of Vladimir Putin, were among a number of Russians placed under U.S. sanctions in 2014 as part of an effort to punish Putin and his associates for the annexation of Crimea. It is illegal for U.S. companies to do business with sanctioned persons, but there are no specific laws in place obliging a buyer or seller in a transaction for the sale of art to identify themselves. The Subcommittee’s report concludes that the Rotenbergs took advantage of the lack of transparency required in art transactions, successfully evading the sanctions imposed on them. It is alleged that through the use of shell companies and a Moscow-based art adviser and dealer, they hid their identities and purchased more than $18 million in art from U.S. dealers and auction houses while under sanction.

Of significance to all art market participants, the Senate Subcommittee’s report recommends, among other things, that Congress should amend the Bank Secrecy Act to add businesses handling transactions involving high-value art. While the term “high-value” is not defined, the report cites the recent European Anti–Money Laundering (AML) legislation, which requires businesses handling art transactions valued at €10,000 to comply with AML laws, including the Know Your Customer rule. The report further recommends that the Office of Foreign Assets Control (OFAC) of the U.S. Department of the Treasury issue a comprehensive guide on the steps auction houses and art dealers should take to ensure that they are not doing business with sanctioned individuals or entities.

Legislation will be necessary to amend the Bank Secrecy Act to apply to the art market. In fact, a bill proposing to do exactly that was previously introduced and is presently pending, proposing to regulate antiques dealers only in connection with transactions over $10,000.

White Supremacist Scientist’s Skull Collection to Be Reexamined by University

Last year, a group of students at the University of Pennsylvania presented findings that a collection of skulls kept by the university include crania from at least 55 enslaved individuals. The collection was the work of Samuel George Morton, a now-discredited physician, who used the skulls to come up with pseudoscientific justifications for slavery. Discovery Magazine has touted him as the “founding father of scientific racism.” After facing calls for the skulls to be repatriated or buried, the university moved the collection to storage. Repatriation may be difficult since little is known about the skulls’ origin other than that Morton obtained them from Cuba.

Outdoor Art Serves the Public until New York’s Museums Reopen

New York Governor Andrew Cuomo announced that New York City’s museums can reopen beginning August 24. In the meanwhile, New York City’s tourism and marketing division has put together a list of outdoor and open-air art available for viewing by the public throughout all five boroughs.

Two Museums Fear Their Gauguins May Be Fakes

Fabrice Fourmanoir, a Gauguin enthusiast, investigator and collector who exposed the J. Paul Getty Museum’s Gauguin sculpture as a fake has now set his astute gaze on paintings at the National Gallery of Art in Washington D.C. and the Museum of Fine Arts in Boston. Fourmanoir has alleged that both paintings are not Gauguins and were instead commissioned and sold by a Parisian art dealer. The museums are considering a scientific examination of the paintings to confirm their origin and authenticity.

EUROPE

Raphael’s True Cause of Death Revealed

Scientists have dispelled the myth that Renaissance painter Raphael, noted by historians as having had many trysts, died of the sexually transmitted disease syphilis. A new study conducted at the University of Milan Bicocca has concluded that the artist likely died instead from a pulmonary disease similar to pneumonia. Raphael’s physicians subjected him to bloodletting, a process wherein blood is drawn from a patient to rid the body of disease. As physicians of that period did not typically practice bloodletting for lung ailments, it is suspected that Raphael’s doctors failed to properly diagnose his symptoms. Moreover, it has been determined that rather than aiding in his recovery, the bloodletting likely contributed to and quickened his death. Raphael died in 1520 in Rome at the age of 37.

Selfie Menace Continues

Security camera footage has confirmed that an Austrian tourist broke two toes off of a sculpture by famed neoclassical sculptor Antonio Canova. The damage occurred at the Gipsoteca Museum in Possagno, when the tourist sat on a sculpture of Paolina (Pauline) Bonaparte, Napoleon’s sister, to take a selfie. The perpetrator surrendered to authorities. The work damaged was an original plaster cast model dating back to 1804, the marble version of which is kept at the Galleria Borghese in Rome. Artnet previously assembled a round-up of tragic cases of art being damaged by tourists angling for better selfies.

Building Decorated by Picasso Demolished, Triggering Protests

Despite ongoing protests, the Norwegian government has begun tearing down the Y-block office building in Oslo, part of its governmental headquarters in the city damaged in the 2011 terrorist attack by Anders Breivik, who detonated a car bomb. Prior to any demolition of the Y-block building, Picasso’s The Fishermen, a sand-blasted 250-ton section of the building’s facade, and The Seagull, a 60-ton floor-to-ceiling drawing in the building’s lobby, were removed and relocated. Opponents of the demolition argue that the Y-block building’s brutalist architecture should be preserved, and that Picasso’s works and the building “belong together.” They also argue that the demolition is, in essence, a symbolic completion of what Breivik wanted, to erase the symbols of democracy. Construction of the new governmental headquarters is expected to be completed in 2025.

Ancient Greek Architecture Likely Catered to the Handicapped

New research conducted at California State University suggests that the stone ramps featured on many ancient Greek temples were primarily built to accommodate the disabled and mobility impaired. While these ramps may have served other purposes, such as enabling transportation of materials, they were featured most prominently in quantity and size at temples dedicated to Asclepius, the Greek god of healing. As these sites drew in many visitors with disabilities, illnesses and ailments, who would have had difficulty navigating stairs, it is now thought that the ramps were specifically crafted to assist these guests.

Croatian Museums and Historic Sites Can’t Catch a Break

After the coronavirus forced churches, galleries and museums throughout Croatia to close, in March 2020, a 5.3 magnitude earthquake rocked the country, damaging its largest Gothic-style cathedral and many other landmarks, including the Archaeological Museum in Zagreb. The strongest earthquake recorded in the country in almost 150 years made many buildings structurally unsound, and museum owners began storing works in their facility basements. On July 24, 2020, that was no longer an option when a severe storm hit Zagreb, leading to massive flooding. As water surged into their basements, The Archaeological Museum and Museum of Decorative Arts, among others, struggled to protect their collections. The full extent of the damage from the storm is not yet known, but expected to be significant.

Restoration Plans for Notre Dame by Traditional Methods Finalized

After discussing the issue for more than a year, the decision was made to reconstruct the roof and spires of the renowned Notre-Dame de Paris cathedral to resemble their appearance prior to the April 2019 fire. Despite calls from French President Emmanuel Macron to rebuild these features in a contemporary style, they will be constructed using the original material and traditional methods to the extent possible. In addition to the roof and spires, the vault will need to be repaired and three of the cathedral’s gables will have to be dismantled and rebuilt. After this work is completed, the building’s statues, which fortunately were removed just days prior to the fire, will be returned. The reconstruction of Notre Dame is scheduled to be completed in 2024.

© 2020 Wilson Elser

For more art world news, see the National Law Review Entertainment, Art & Sports law section.

Asset Protection for Doctors and Other Healthcare Providers: What Do You Need to Know?

As a doctor or other healthcare professional, you spend your career helping other people and earning an income upon which you rely on a daily basis—and upon which you hope to be able to rely in your retirement. However, working in healthcare is inherently risky, and a study published by Johns Hopkins Medicine which concluded that medical malpractice is the third-leading cause of death in the United States has led to a flood of lawsuits in recent years. As a result, taking appropriate measures to protect your assets is more important now than ever, and physicians and other providers at all stages of their careers would be well-advised to put an asset protection strategy in place.

What is an asset protection strategy? Simply put, it is a means of making sure that you do not lose what you have earned. Medical malpractice lawsuits, federal healthcare fraud investigations, disputes with practice co-owners, and liability risks in your personal life can all put your assets in jeopardy. While insurance provides a measure of protection – and is something that no practicing healthcare professional should go without – it is not sufficient on its own. Doctors and other healthcare providers need to take additional steps to protect their wealth, as their insurance coverage will either be inadequate or inapplicable in many scenarios.

“In today’s world, physicians and other healthcare providers face liability risks on a daily basis. In order to protect their assets, providers must implement risk-mitigation strategies in their medical practices, and they must also take measures to shield their wealth in the event that they get sued.”

What Types of Events Can Put Healthcare Providers’ Assets at Risk?

Why do doctors and other healthcare providers need to be concerned about asset protection? As referenced above, medical professionals face numerous risks in their personal and professional lives. While some of these risks apply to everyone, it is doctors’ and other medical professionals’ additional practice-related risks – and personal wealth – that makes implementing an asset protection strategy particularly important. Some examples of the risks that can be mitigated with an effective asset protection strategy include:

  • Medical Malpractice Lawsuits – All types of practitioners and healthcare facilities face the risk of being targeted in medical malpractice litigation. From allegations of diagnostic errors to allegations of inadequate staffing, plaintiffs’ attorneys pursue a multitude of types of claims against healthcare providers, and they often seek damages well in excess of providers’ malpractice insurance policy limits.
  • Contract Disputes and Commercial Lawsuits – In addition to patient-related litigation, medical practices and healthcare facilities can face liability in other types of civil lawsuits as well. By extension, their owners’ assets can also be at risk, as there are laws that allow litigants to “pierce the corporate veil” and pursue personal liability in various circumstances.
  • Federal Healthcare Fraud Investigations – Multiple federal agencies target healthcare providers in fraud-related investigations. From improperly billing Medicare or Medicaid to accepting illegal “kickbacks” from suppliers, there are numerous forms of healthcare fraud under federal law. Healthcare fraud investigations can either be civil or criminal in nature, and they can lead to enormous fines, recoupments, treble damages, and other penalties.
  • Drug Enforcement Administration (DEA) Audits and Inspections – In addition to healthcare fraud investigations, DEA audits and inspections present risks for healthcare providers as well. If your pharmacy or medical practice is registered with the DEA, any allegations of mishandling, diverting, or otherwise unlawfully distributing controlled substances can lead to substantial liability.
  • Liability for Personal Injury and Wrongful Death in Auto and Premises-Related Accidents – In addition to liability risks related to medical practice, doctors, other practitioners, and healthcare business owners can face liability risks in their personal lives as well. If you are involved in a serious auto accident, for example, you could be at risk for liability above and beyond your auto insurance coverage. Likewise, if someone is seriously injured in a fall or other accident while visiting your home (or office), you could be at risk for liability in a personal injury lawsuit in this scenario as well.

To be clear, an asset protection strategy mitigates the risk of losing your wealth as a result of these types of concerns—it does not mitigate these concerns themselves. The means for addressing medical practice-related concerns is through the adoption and implementation of an effective healthcare compliance program.

Are Asset Protection Strategies Legal?

One of the most-common misconceptions about asset protection is that it is somehow illegal. However, there are various laws and legal structures that are designed specifically to provide ways for individuals and businesses to protect their assets, and it is absolutely legal to use these to your full advantage. Just as you would not expect your patients to ignore treatment options that are available to them, you are not expected to ignore legal tools and strategies that are available to you.

What are Some Examples of Effective Asset Protection Tools for Doctors and Other Healthcare Providers?

Given the very real liability risks that doctors and other healthcare providers face, for those who do not currently have an asset protection strategy in place, implementing a strategy needs to be a priority. With regard to certain issues, asset protection measures need to be in place before a liability-triggering event occurs. Some examples of the types of tools that physicians, healthcare business owners, and other individuals can use to protect their assets include:

1. Maximizing Use of Qualified Retirement Plans

Qualified retirement plans that are subject to the Employee Retirement Income Security Act (ERISA) can offer significant protection. Of course, obvious the limitation here is that these assets placed in a qualified plan will only be available to you in retirement. However, by maximizing your use of a qualified retirement plan to the extent that you are preserving your assets for the future, you can secure protection for plan assets against many types of judgments and other creditor claims.

2. Utilizing Nonqualified Retirement Plans as Necessary

If you operate your medical practice as a sole proprietor, then you are not eligible to establish a qualified retirement plan under ERISA. However, placing assets into a nonqualified retirement plan can also provide these assets with an important layer of protection. This protection exists under state law, so you will need to work with your asset protection attorney to determine whether and to what extent this is a desirable option.

3. Forming a Trust

Trusts are the centerpieces of many high-net-worth individuals’ asset protection strategies. There are many types of irrevocable trusts that can be used to shield assets from judgment and debt creditors. When you place assets into an irrevocable trust, they are no longer “yours.” Instead they become assets of the trust. However, you will still retain control over the trust in accordance with the terms of the trust’s governing documents. Some examples of trusts that are commonly used for asset protection purposes include:

  • Domestic asset protection trusts (DAPT)
  • Foreign asset protection trusts (FAPT)
  • Personal residents trusts
  • Irrevocable spendthrift trusts

4. Offshore Investing

Investing assets offshore can offer several layers of asset protection. Not only do many countries have laws that are particularly favorable for keeping assets safe from domestic liabilities in the United States; but, in many cases, civil plaintiffs will be deterred from pursuing lawsuits once they learn that any attempts to collect would need to be undertaken overseas. Combined with other asset protection strategies (such as the formation of a trust or limited liability company (LLC)), transferring assets to a safe haven offshore can will provide the most-desirable combination of protection and flexibility.

5. Forming a Limited Liability Company (LLC) or Other Entity

If you are operating your medical practice as a sole proprietor, it will almost certainly make sense to form an LLC or another business entity to provide a layer of protection between you and any claims or allegations that may arise. However, even if you have a business entity in place already—and even if you are an employee of a hospital or other large facility—forming an LLC or other entity can still be a highly-effective asset protection strategy.

6. Utilizing Prenuptial Agreements, Postnuptial Agreements, and Other Tools

Depending on your marital or relationship status, using a prenuptial or postnuptial agreement to designate assets as “marital” or “community” property can help protect these assets from your personal creditors (although debts and judgments incurred against you and your spouse jointly could still be enforced against these assets). Additionally, there are various other asset protection tools that will be available based on specific personal, family, and business circumstances.

7. Gifting or Transferring Assets

If you have assets that you plan to give to your spouse, children, or other loved ones in the future, making a gift now can protect these assets from any claims against you. Likewise, in some cases it may make sense to sell, transfer, or mortgage assets in order to open up additional opportunities for protection.

Ultimately, the tools you use to protect your assets will need to reflect your unique situation, and an attorney who is familiar with your personal and professional circumstances can help you develop a strategy that achieves the maximum protection available.

Oberheiden P.C. © 2020  

ARTICLE BY Dr. Nick Oberheiden of Oberheiden P.C.

For more articles on healthcare providers, see the National Law Review Health Law & Managed Care section.

Supreme Court Decides to Rule on FTC’s Disgorgement Authority

As previously blogged about here, the Supreme Court recently upheld the SEC’s disgorgement authority but imposed certain limits, including consideration of net profits.  FTC defense practitioners immediately began to consider how the ruling might potentially impact FTC investigations and enforcement actions, including how it might bear upon other judicial challenges to whether Section 13(b) of the FTC Act authorizes the FTC to obtain equitable monetary relief.

On July 9, 2020, the Supreme Court granted certiorari in the AMG Capital Management and Credit Bureau Center matters that should now decide the issues of whether Section 13(b) permits courts to award disgorgement.

In AMG v. FTC, the Ninth Circuit held that courts’ equitable powers include awarding equitable monetary relief, including disgorgement.  In contrast, the Seventh Circuit in FTC v. Credit Bureau Center recently disregard years of precedent when it held that the express terms of Section 13(b) illustrate that Congress only authorized injunctive relief, not equitable monetary relief or disgorgement.

The two matters have been consolidated and with a total of one hour allotted for oral argument.   The importance of these matters cannot be overstated as they conclusively resolve splits of authority relating to whether or in what circumstances FTC lawyers are entitled to seek equitable monetary relief in the form of disgorgement.

© 2020 Hinch Newman LLP

Accounting and Auditing Enforcement Activity Declines Slightly in 2019

Los Angeles—The U.S. Securities and Exchange Commission (SEC) and the Public Company Accounting Oversight Board (PCAOB) publicly disclosed a combined 81 accounting and auditing enforcement actions during 2019, down slightly from the previous year, according to a Cornerstone Research report released today. Monetary settlements totaled approximately $628 million, $626 million of which was imposed by the SEC.

Cornerstone Research’s report, Accounting and Auditing Enforcement Activity—2019 Review and Analysis, examines publicly disclosed SEC and PCAOB enforcement actions that involve accounting and auditing. The most common allegations in 2019 SEC actions involved financial reporting issues, with revenue recognition violations comprising the largest share. The percentage of PCAOB actions involving revenue recognition increased in 2019.

The SEC and PCAOB have highlighted revenue recognition as one of the areas that may present challenges as a result of the economic impact of COVID-19.

Enforcement actions involving announcements of restatements or internal control weaknesses increased by 65%. The percentage of 2019 SEC actions involving announced restatements and/or material weaknesses in internal controls (42%) was nearly double the 2018 percentage (23%).

Highlights

  • In 2019, the SEC initiated 57 enforcement actions involving accounting and auditing allegations, an 11% decline from the 64 actions in 2018, but near the 2014–2018 average. The SEC brought only 5% of accounting and auditing actions as civil actions, the lowest percentage since 2016.

  • The PCAOB publicly disclosed 24 auditing-related enforcement actions in 2019, up 26% compared to 2018, the year in which the PCAOB disclosed its lowest number of actions since 2014.

  • The percentage of SEC and PCAOB actions involving non-U.S. respondents declined, but remained above the 2014–2018 average.

  • At 115, the total number of respondents in 2019 SEC and PCAOB actions was 23% below the 2014–2018 average.

  • The SEC and PCAOB imposed monetary penalties against 84% of firms and 63% of individual respondents. The median penalty the SEC imposed on firms in 2019 was $4.1 million, nearly three times greater than the 2018 median.

 Read Accounting and Auditing Enforcement Activity—2019 Review and Analysis.

Copyright ©2020 Cornerstone Research

For more SEC enforcement actions see the National Law Review Securities Law & SEC news section.

The Federal Government Is Taking Action Against COVID-19 Fraud

The federal government has responded to the coronavirus (“COVID-19”) pandemic with legislation to aid individuals and struggling businesses. One of the many laws created was the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), a $2 trillion federal appropriation addressing the economic fallout caused by COVID-19. Many are rightfully concerned about individuals aiming to take advantage of the vulnerability, panic, and available federal dollars during this time. In response, the federal government has vowed to aggressively take action against COVID-19 related fraud.

Fraud Committed Against Individuals

The Department of Justice (“DOJ”) announced its first enforcement action against COVID-19 fraud in March 2020. A website, coronavirusmedicalkit.com, was offering access to World Health Organization (“WHO”) vaccine kits for a shipping cost of $4.95. However, no vaccine currently exists nor is a vaccine currently being distributed by the WHO. Once alerted of the website’s existence, U.S. District Judge, Robert Pitman immediately issued an injunction preventing any further public access to the site. The site operators are currently facing federal prosecution.

Fraud Committed Against the Federal Government

Opportunists are not only acting to deceive the public but are also acting to defraud the federal government. Recently, Samuel Yates, a Texas native attempted to defraud $5 million in federal funds. The Small Business Association (“SBA”) is providing loans to businesses through a Paycheck Protection Program (“PPP”). The PPP allows employers to continue paying their employees during the pandemic. Yates applied for two loans. In one loan application, he sought $5 million claiming to have 400 employees with a $2 million monthly payroll expense. In another application, he claimed to have only 100 employees. Each application was submitted with a falsified list of employees created by an online name generator, and forged tax records. Yates was able to obtain $500,000 in loan proceeds before his scheme was uncovered. He is currently facing federal prosecution for bank fraud, wire fraud, false statements to a financial institution, and false statements to the SBA.

Christopher Parris, a Georgia resident, also attempted to defraud the federal government by selling millions of non-existent respirator masks. Unlike Yates, Parris was able to make millions on sales orders by misrepresenting himself as a supplier who could quickly obtain scarce protective equipment. His plan was uncovered just a few weeks ago after attempting to sell masks to the Department of Veteran Affairs (“VA”). The VA became suspicious of the price—which was about 15 times what it was paying amid the shortage, and alerted their Inspector General who brought in Homeland Security. Over $3.2 million was seized from Parris’ bank account related to this scheme, and he is currently facing federal prosecution for wire fraud.

Although enforcement action has been taken against individuals, companies should take note that fraud is being prioritized and aggressively prosecuted against businesses as well. Just last month, the Securities & Exchange Commission (“SEC”) charged two companies with issuing misleading claims to the public. The first represented that it could slow the transmission of COVID-19 through thermal scanning equipment that could quickly detect individuals with fevers and would be immediately released in each state. The other offered a finger-prick test kit that could be used from home to detect whether someone was COVID-19 positive. Both claims were untrue and each company is facing federal charges for violating the antifraud provisions of the federal securities laws.

These federal efforts mark the beginning of a shift, holding both individuals and companies accountable for COVID-19 related fraud. The Department of Homeland Security has noted that those taking advantage during this vulnerable time will inevitably increase. Inter-agency efforts, swift enforcement, and emerging legislation will likely follow in an effort to protect the public against all levels of COVID-19 related fraud. As they have during previous economic crises, whistleblowers will play a critical role in aiding these enforcement efforts.

Katz, Marshall & Banks, LLP

For more on COVID-19 related fraud, see the National Law Review Coronavirus News section.