Posts
It becomes increasingly hard to do satire these days.
A red sweep, huh?
Are they Commies or Republicans?
Stay tuned.
We know it's socialism (of their losses) for those at the top at least (and capitalism for those at the bottom who get to pay off the bad bets/debts).
But you have to admit that that sly dog (drunken dog) Mitch McConnell won.
Just like he proclaimed he would (and that the Republicans would) the day that Obama ran the 2008 election table and embarrassed the white boys who ran the game.
And Mitch did it the old-fashioned way.
He appealed to the unwashed (largely rural and racist population) by saying "No" to everything the Democrats wanted for six years for the country, and "Yes" to pure obstruction.
It's great living in a country that doesn't understand economics, isn't it? Or has a leadership population that has no (or very little) interest in explaining the economics of a free society to them? (Or doesn't want them to know.) (/Snark)
It's like the economic downturn that happened again after FDR's economic stimulus was halted by the Republicans (with too-soon tax increases because of fear of running a large deficit from the Depression-easing programs) never happened.
Of course, these voters don't know enough history to even know that that happened in the 30's, leading to the very long time of extended Depression misery that only ended after the economic stimulus of World War II began.
But where to begin explaining and trying to teach people history (and economics) again?
It seems like giving up is the current mindset for many on the left tonight (and don't get me started on the North Carolina debacle outside of Wake County).
Because explaining to brick walls is not that fulfilling.
And the corruption that is sapping the country's willpower now on so many other fronts (and I'm not even addressing the vote-flipping/suppression issues yet)? (Except, of course, for the ever-present Koch-funded political willpower for more corporate tax breaks and deficit reduction programs . . .)
Forget about it, Jake.
It's Americatown.
_ _ _ _ _ _ _
Yves tells the tale of the history of how all this corruption erupted.
Bad Attitudes puts the period at the end of the sentence.
Quis Custodiet Ipsos Custodes?
As always, the fix is in. Yves spells it all out for you in the post from which this comes:
Raw Story interviewed the whistleblower attorney who approached Kim after she made her charges of gross mismanagement and waste of resources. Her letter presumably represents the meatiest of his cases. He describes how the agency has been captured by large corporations:
…the private sector lawyer and ex-IRS attorney explained that since 1998, IRS restructuring has focused on bringing in “outside people.” This led to the employment of an extra layer of executives who were previously “partners from big accounting firms.” Citing active IRS criminal agents, the ex-IRS attorney said: “Almost every large firm or corporation has a person inside the IRS. It’s a revolving door, with the top two or three management layers all from big accounting and law firms, and this is why they won’t work big billion-dollar cases criminally. Private bar attorneys are, in effect, controlling the IRS. It’s a type of corruption – that’s the word used by one IRS agent I’m in touch with whose case was shut down by higher ups without cause.”
The incumbent IRS chief counsel, William Wilkins, was previously a lobbyist at the WilmerHale firm where for 21 years he represented and lobbied on behalf of private sector clients including the Swiss Bankers Association. Swiss banks UBS and Credit Suisse have faced penalties, hearings and convictions for helping wealthy Americans illegally conceal billions of dollars of taxable income.
Attorney James Henry, former chief economist at financial consultancy McKinsey, said that Wilkins’ firm “continued to represent the Swiss Banking Association throughout the 1990s and into the 2000s. Now Wilkins gets appointed chief counsel of the IRS in 2009, and he’s presiding over these whistleblower cases.”
So while we have Treasury attempting to defuse public ire over the latest high-profile form of corporate tax gaming, inversions, by relocating their headquarters overseas to a lower-tax domicile while not changing their US business, we have billions uncollected as a result of the IRS becoming a big-corporate crony.
So, big money prevails.
Blow the horns.
Break out the champagne.
Wake me when it's over.
Pro Big Corporate IRS: Agency Guts Whistleblower Program, Leaves Billions on the Table
October 24, 2014
Yves Smith
It’s widely known among tax professionals that the US does little in the way of tax enforcement, and the little that it does do is directed against individuals and small businesses.
What is not so widely known is how deep the institutional bias is in the IRS in favor of letting big corporate tax cheats get away with it.
Conventional wisdom is similar to the rationalization of weak enforcement at the SEC: that the agency is afraid that if they go after big companies, they’ll have the penalties and fines challenged in court, and they’ll often lose by virtue of being outgunned by better lawyers (yes, Virginia, even if you have a solid case, that doesn’t mean you’ll win at trial). And top tax litigators are among the most highly paid legal talent. I’m not up on current rates, but in the mid 1980s, Sumitomo Bank fought the IRS on a $100 million assessment and won. Their attorney was a solo practitioner who charged $1000 an hour.
It turns out that the picture is vastly worse than that. In 2006, recognizing that the IRS was losing over $450 billion a year in revenue to tax evasion, Congress mandated that the agency establish a whistleblower office and pay whistleblowers 15% to 30% of amounts recovered from their filings. Unfortunately, as a whistleblower from the IRS’ Office of the General Counsel in New York has revealed, the IRS at its highest levels is opposed to implementing the policy.
This whistleblower, Jane Kim, makes it clear that in this letter, she is acting as a de facto spokesperson for an attorney that represents IRS whistleblowers. The missive, which we’ve embedded at the end of the post, presents three cases where the tax revenue lost exceeded $13 billion. Two of them looked to be particularly egregious.
In one, a company set up completely sham foreign companies, with no operations whatsoever in any of these tax jurisdictions. Yet it claimed all of its profits were due to these phony companies and were kept permanently offshore (regular readers may recall that US technology companies who use Ireland and other low-tax domiciles to attribute their profits to “offshore” operations actually keep those “offshore” monies in US banks. For instance, Apple runs what amounts to a hedge fund to manage its “offshore” funds in Nevada).
The effect of this scheme was that the company paid corporate taxes nowhere. That scam with that one company alone lost the IRS a purported $3 billion a year in revenues.
Another mind-boggling case involved a criminal case that was peculiarly shut down. The target had foreign brokerage accounts for US individuals. The target clearly knew it had reporting, withholding, and remittance obligations for foreign accounts, since it had come forward to ‘fess up an amnesty program for past abuses. Yet it was still engaged in effectively hiding offshore income of US clients by not keeping the required records. The case had advanced far enough that the DoJ was ready to empanel a grand jury, and was waiting for the final go-ahead from the IRS. The IRS closed the investigation because it went along with the target’s claim that there were too many accounts to be audited (huh?) and therefore it should be permitted to sample them. The target manipulated the “random” sample to hide the misconduct.
So why does this occur? The very top level of the IRS is opposed to the whistleblower program, and more broadly, is effectively in bed with large corporations. As the whistleblower’s letter points out:
The IRS Chief Counsel Donald Korb, under whose tenure the Office was created, openly expressed his views on this issue when stating, “The new whistleblower provisions Congress enacted a couple of years ago have the potential to be a real disaster for the tax system. I believe that it is unseemly in this country to encourage people to turn in their neighbors and employers to the IRS as contemplated by this particular program. The IRS didn’t ask for these rules; they were forced on it by the Congress.”
The letter, which I strongly encourage you to read, includes describing how the IRS adopted specific policies to vitiate the whistleblower program, such as refusing to pay awards if they resulted in the reduction of refunds, as opposed to paying additional taxes, even though the financial impact is the same.
The letter also describes how the IRS bends over backwards to cater to “favored” taxpayers, even going so far as to engage in retaliatory audits against IRS attorneys who publicize the IRS waving through tax scams.
This isn’t the first time Kim has alleged IRS misconduct; David Cay Johnston publicized other charges by Kim in Tax Notes Today, such as pervasive mismanagement of cases and failing to ride herd on abusive union stewards in its New York office. But these charges are vastly more troubling, since they indict the top level of the IRS.
Raw Story interviewed the whistleblower attorney who approached Kim after she made her charges of gross mismanagement and waste of resources. Her letter presumably represents the meatiest of his cases. He describes how the agency has been captured by large corporations:
… the private sector lawyer and ex-IRS attorney explained that since 1998, IRS restructuring has focused on bringing in “outside people.” This led to the employment of an extra layer of executives who were previously “partners from big accounting firms.” Citing active IRS criminal agents, the ex-IRS attorney said: “Almost every large firm or corporation has a person inside the IRS. It’s a revolving door, with the top two or three management layers all from big accounting and law firms, and this is why they won’t work big billion-dollar cases criminally. Private bar attorneys are, in effect, controlling the IRS. It’s a type of corruption – that’s the word used by one IRS agent I’m in touch with whose case was shut down by higher ups without cause.”
The incumbent IRS chief counsel, William Wilkins, was previously a lobbyist at the WilmerHale firm where for 21 years he represented and lobbied on behalf of private sector clients including the Swiss Bankers Association. Swiss banks UBS and Credit Suisse have faced penalties, hearings and convictions for helping wealthy Americans illegally conceal billions of dollars of taxable income.
Attorney James Henry, former chief economist at financial consultancy McKinsey, said that Wilkins’ firm “continued to represent the Swiss Banking Association throughout the 1990s and into the 2000s. Now Wilkins gets appointed chief counsel of the IRS in 2009, and he’s presiding over these whistleblower cases.”
So while we have Treasury attempting to defuse public ire over the latest high-profile form of corporate tax gaming, inversions, by relocating their headquarters overseas to a lower-tax domicile while not changing their US business, we have billions uncollected as a result of the IRS becoming a big-corporate crony.
Kim has sent her letter to many of the right Congresscritters: Elizabeth Warren, Maxine Waters, Alan Grayson, Chuck Grassley, Bernie Sanders, Mike Lee, Rand Paul, and Ted Cruz. You can help her effort along by calling their offices, particularly if you are a constituent, and voicing your outrage over the IRS’ policy of “nothing to see here” on big corporate tax fraud.
The Capitol Hill switchboard is 202-224-3121 or you can use this page at Congress.gov to find e-mail addresses and their district and DC office phone numbers.
243916277-Jane-J-Kim-October-19-2014-IRS-Letter
Comments:
OpenThePodBayDoorsHAL
October 24, 2014
Dog bites man story, wake me up when a story comes along that does not just confirm the utter and total corruption of each and every last one of our institutions. Once upon a time we had people like Frank Church and Jimmy Carter who genuinely had the moral center and the courage to stand up for reform. Ron Paul at least knew the top three priorities: end foreign adventure wars; prosecute financial criminals; and stop warrantless wiretapping and the surveillance-industrial complex. What will we get instead? Hilary. The thought of that business-as-usual fascist, the favorite of Rupert Murdoch (yes THAT Rupert Murdoch) makes me want to take a powder.
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Veri
October 24, 2014
In 2006, Rupert Murdoch hosted a fundraiser for Hillary Clinton’s Senate Campaign. In 2008, he and his son James, both contributed the maximum personal allowance to HRC’s Presidential run, $2,300 each. As Politico noticed about Obama… “…Obama fundraiser co-hosted by Gwyneth Paltrow and Elisabeth Murdoch.” Hillary Clinton is also one of the five 2016 candidates that Murdoch “could live with”. While sellout faux-gressive Third-Turd Way Democrats will be voting Republican-lite, I and many others will be either writing in a candidate or sticking with “none of the above”. There are many reasons not to vote for HRC beyond Murdoch’s support of Hillary. I and many others will not vote for a corporate Wall Street prostitute in the mold of Obama. If Democrats want a Presidential win in 2016, find a real Democrat and not those center-right DemoRepublicans that seem to infest The Democratic Party. Of course, this means that the Republicans have a better chance. However, in the end, both corporate Democrats and Republicans get us to the same finish line labeled, “WELCOME TO HELL”.↓
Vatch
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RUKidding
October 24, 2014
I agree and thanks for the links. Rather than not voting, I encourage everyone to consider what’s (deliberately) misleadingly called “Third” party candidates. I hear people say that it’s a “waste” of a vote to vote third party because that candidate cannot win. My answer: So? Why should I vote for someone who’s clearly in the pay of the 1%; who has clearly demonstrated that they will dance to the tune of the 1% while ignoring the 99s (other than – maybe – paying some lip service). Voting “third” party at least might get some alternative viewpoints out into the political discussion; it might open up some avenues to consider how to make changes. If “third” parties are allegedly so useless and pointless, then ask yourself why the 2 legacy branches of the UniParty are adamantly against having ANY “third” party involved in Pres. debates? Some loath Ron & Rand Paul, but I am always very glad to see them given a place at the debate podium, AND they don’t always get one. They should. Reply ↓
OpenThePodBayDoorsHAL
October 24, 2014
I’m lucky enough to live in a country with a parliamentary democracy (Australia). That means a couple of things, first of which is that a third (or fourth or fifth or even sixth) party can have an impact, usually as the swing vote or as part of a coalition. Right now we have a fascist government (Abbott) but his cutting and spending initiatives have disappeared without a trace due to very small parties including the Greens. Second thing is that voting is required by law here, which means the debate gravitates towards the center rather than having just two screeching polar opposites. Last thing is that every day they have “Question Time”, where the government must stand and answer questions, broadcast live for two hours. People hear good questions and then the realtime long version response, rather than the less-than-one-liner sound bites that rule American politics. Reply ↓
Xelcho
October 24, 2014
Open…, Great comment. I was unaware of the Murdoch’s connection. My question: Is what we are seeing, meaning all of these revelations coming out regarding the rot in seemingly all agencies the feds are involved in, due to changes in the regulatory systems or is it a change in how people can whistle-blow quietly and not risk retribution? My gut based upon the writings by various others but with particular attention to that of Bill Black seem to indicate that at least back in the 80s and 90s there was some semblance of a regulatory spine, at least in the circles he flew in. I am curious if that read is correct or an anomaly, please weigh in. XReply ↓
Bill Black
October 25, 2014
The “Reinventing Government” movement of the Clinton/Gore administration greatly increased the damage that Reagan did through his appointments (e.g., his Department of the Interior and EPA scandals and the scandal he tried to create by giving Charles Keating control over the regulatory agency). The first President Bush was (mostly) a believer in competence in government even though he was no fan of financial regulation. The rise to power of the “New Democrats” with Clinton/Gore was explicitly and fiercely anti-regulatory. (I wrote a long piece on this, so my super short summary here is that (1) it was openly opposed to anti-fraud efforts, (2) we were ordered to refer to — and think of and treat as — the industry as our “customer,” (3) the public sector was defined as failing and the answer was to emulate the private sector, (4) privatization was to be maximized and “public/private partnerships” were to be the norm even if the public services were not privatized, and (5) we were encouraged to employ useless — and deliberately unenforceable “guidelines” rather than regulations and even these were to be “negotiated” with the industry (but not the consumers) via “reg-neg.” It was a prescription that guaranteed disaster. It helped me decide to leave and go back to school to get a doctorate in criminology and begin to teach. Reply ↓
tim s
October 24, 2014
Hardly JUST another dog-bites-man story. The confirmation of what is suspected is a critical step in convincing those who don’t understand the extent and (especially) the nature or the corruption, and this story a very good one on that note. Most people still believe that these government institutions are simple incompetent, and your sleeping won’t convince them otherwise.Reply ↓
Fíréan
October 24, 2014
The ‘sleeping’ allows the perpetuity and expansion of influence of the corruption. How many are ‘sleeping’, with head in the sand or waiting for a saviour to come along ? Reply ↓
Propertius
Don’t worry, Yves, they’ll just persecute a few hundred thousand waiters and waitresses for underreporting tips. That’ll make up the difference. Reply ↓
diptherio
Question: When you realize that the rule-of-law no longer applies (if it ever did) and that certain people in our society are being allowed to disregard requirements that most people take for granted, what is the proper response? So far as I can tell, it’s either reform the system to replace the rule-of-law, or stop treating the rules as binding on you. If you can’t reform the system and yet you keep playing by the “little people” rules, in full knowledge that others do not have to abide by those rules…well, what would you call that? I know “chump” sounds harsh, but it’s a word I have a hard time avoiding when I read stuff like this. I, for one, do not appreciate being treated as a chump. I, for one, refuse to act like a chump. I know the score, as do we all, and I’ve come to my determination about what the self-respecting response to this situation is. One set of rules for everyone, right? Reply ↓
Ulysses
Great comment!! Let’s not be chumps – let’s throw all our energies into dismantling this illegitimate, kleptocratic ruling regime, and establishing a transparent, open system based on true popular sovereignty. Reply ↓
RUKidding
VIS the “little people” not obeying the law, just like the BIGS do with impunity? My advice: tread carefully. As this post indicates, the IRS will come after YOU with all the force it can muster if YOU, small fry, don’t obey the rules to the letter. Case in point: I knew a small business person who got enamored with one of those groups who promote the notion that the IRS is collecting federal taxes “illegally” (or some similar mumbo jumbo), and this group had all sorts of “documents” and whatever to “prove” that US citizens simply were not liable to pay fed taxes. Well this person I knew got totally hammered by the IRS. Lost *everything,* including his dignity. I had advised him strongly not to go down that road bc I knew, as a small fry, he was going to hurt badly.
Laws and taxes are for the small fry. If we, the people, don’t obey, get ready to take a severe beating. Reply ↓
Vatch
Wise words. People need to be very careful. Reply ↓
MikeNY
Yeah, it’s worth remembering that even the principled Thoreau, who went to jail rather than pay taxes for a corrupt purpose, was sprung by his friends, who paid his taxes.
There’s a difference between martyrdom and meaningless self-sacrifice — it has something to do with calibration of the likely effect on others.
P.S. It's not like I didn't warn you for years about tonight's coming uppance.
The Fall has arrived.
No further comment.
Green Party 2014 candidates For those who don’t want to vote Green (I don’t understand such attitudes, but I don’t expect to change many people’s minds), there’s the Libertarian Party