Michael Jackson's estate Generates Large Income while Creditor Claims Continue to Pile

When the world-renowned pop star Michael Jackson died in June 2009, he was in financial trouble and his property Neverland Ranch was facing foreclosure. Since his death, his estate has received substantial amounts of income, while numerous claims have been brought against his estate.

The New York Times has quoted Michael Jackson's former advisors who blame Jackson's spending habits for his financial difficulties. Alvin Malnik remarked "[Michael Jackson] never kept track of what he was spending. He would indiscriminately charter jets. He would buy paintings for $1.5 million. You couldn't do that ever other week and expect your books to balance." Charles Koppelman, another former Jackson advisor, commented "[Michael Jackson] was a fantastic visionary on the business front. He just couldn't deal with his personal finances."

Six months after his death, new claims continue to be brought against the late pop star's estate. Attorneys Thomas Mesreau Jr. and Susan Yu, of the law firm Mesereau & Yu, LLP, have filed a $341,452 claim against Michael Jackson's estate, for amounts owed for the defense of the late pop star in his child molestation case in 2005. The accounting firm of Cannon and Company has filed a creditor's claim seeking $56,582 for services rendered earlier this year. A company called Video & Audio Center has filed a $128,482.77 claim for installing electronic audio and video equipment at the Neverland Ranch. Michael Jackson's probate case is currently pending before the Los Angeles Superior Court as case number BP117321, and a search of the court's online case summary page can show a summary of the case activities.

Although Michael Jackson had to grapple with financial issues prior to his death, his estate appears to be pulling out of the red. Since the pop star's death, there has been a large influx of revenue from his music sales, film deals and merchandising contracts. Commentators project Jackson's estate can generate revenues of $30 Million annually, from his own music sales and from other music rights Jackson had purchased (which is rather low compared to the $55 Million generated by Elvis Presley's estate last year). Some believe the Neverland Ranch may have income potential, much like Elvis Presley's mansion Graceland.

During his life, Michael Jackson frequently engaged in humanitarian activities. The photograph to the right shows the late star with the late President Ronald Reagan and first lady Nancy Reagan at a White House ceremony on May 14, 1984, to launch the campaign against drunk driving.

Robin Mashal is a partner at the law firm of Hong & Mashal LLP. He can be reached at (310) 286-2000.

Can Your Facebook Photos Cost You Your Insurance Benefits?

A 29-year-old Canadian women who was on long-term sick leave from her job, stopped receiving insurance benefit checks after she posted some photographs on her Facebook page. According to the news, Natalie Blanchard who used to work at IBM's Bromont, Quebec office, was diagnosed with major depression and placed on sick leave a year ago. She was receiving monthly sick leave benfits from Manulife.

Soon after Blanchard posted her vacation photos on her Facebook account, she noticed she is no longer receiving her insurance benefit checks. When Blanchard contacted the insurance office, her insurance agent referred to her vacation photos saying she is no longer depressed and should be able to return to work. The photos showed Blanchard having fun at her birthday party, and at a Chippendales bar show.

Thomas Lavin, Blanchard's attorney is threatening legal action against Manulife and IBM, saying Blanchard went on vacation based on her doctor's orders. Lavin complains that the insurance company stopped his client's benefits without proper notice to her, and his client has been constructively terminated from her employment.

The materials for this blog are based on articles in ABC News and The Washington Post. For additional information, run a search on Google.

Robin Mashal is a partner at the law firm of Hong & Mashal LLP. He can be reached at (310) 286-2000.

Is Loan Modification Dead?

It was about two years ago when the U.S. real estate market crashed. The headline news contstantly talked about the increase in unemployment, how people are unable to make their mortgage payments, how the real estate values are dropping, and how most property values are "upside down."

And then came a sigh a relief: the "loan modification experts" who could negotiate with the lenders to reduce the loan principal balances, reduce the mortgage interest rates, or modify the mortgage payoff terms. Suddenly everyone was an expert in loan modification, the lawyers, the real estate brokers ... everyone and their best friend had some expertise in the field.

Well, it seems like the loan modification industry has also turned upside down. For a while now the news talks about government regulation of this industry. Here is a highlight of the news in California:

* On January 22, 2009, Senators Calderon, Corbett and Steinberg introduced Senate Bill 94, proposing to amend several California statutes in response to the urgent mortgage loan problems.

* On July 23, 2009, California Attorney General, Edmund G. Brown Jr. made a news release warning homeowners "to avoid 'shadowy and unscrupulous' loan modification consultants who use aggressive telemarketing tactics and charge thousands of dollars in upfront fees for foreclosure relied." This news release and related materials can be found on Attorney General's web pages entitled "Stop Loan Modification Fraud."

* On September 18, 2009, the State Bar of California made a news release about 16 attorneys who were "under invesitgation for misconduct related to loan modification."

* On October 11, 2009, California Governor Arnold Schwarzenegger signed into law Senate Bill 94 (Calderon) prohibiting any person from demanding of collecting any advance fee, retainer fee or other pre-payment from a consumer for loan modification or mortgage loan forbearance related to a residential unit of 4 units or less. The California Department of Real Estate has placed a Consumer Alert on its web site detailing Senate Bill 94's provisions.

* The November 2009 edition of the California Bar Journal contains an article by Nancy McCarthy entitled More Lawyers in Trouble for Foreclosure Activity. The article recites 3 more California attorneys having resigned the California State Bar, and one California attorney placed on inactive status, "as a result of their misconduct related to their loan modification activities."

Although the law is not putting a complete halt to loan modifications, it will significantly reduce the industry's activities. The few who will remain in the field will be under close scrutiny, but they will be assist those truly in need of their services.

Robin Mashal is a partner at the law firm of Hong & Mashal LLP. He can be reached at (310) 286-2000.

Playboy sues Chicago Lawyer who Had Posed for the Magazine

Playboy magazine has sued Corri Fetman, a Chicago lawyer who had posed nude for Playboy and used to write a Playboy.com advice column titled "Lawyer of Love", report ABA Journal and Chicago Sun Times. Playboy is complaining about Fetman's use of the phrase "Lawyer of Love", and her attempt to register this phrase as a trademark, because Playboy argues Fetman gave up any rights to this mark in her freelance agreement with Playboy.

According to Chicago Tribune, in March 2009 Corri Fetman filed a $5.4 Million sexual harassment lawsuit against Playboy, claiming Fetman lost her writing column with Playboy as a result of her resisting sexual advances by Playboy executive Thomas Hagopian.

Corri D. Fetman is a Chicago divorce lawyer at the law firm of Fetman, Garland & Associates Ltd. Her firm's web site, has a prominent "Playboy Press" page, and as well provides a link to "Love Lawyer Advice Blog" maintained by Ms. Fetman.

It Happens to the Best of Us: $1.26 Billion Default Judgment Entered Against PepsiCo

Anyone who has consulted a lawyer about defending a lawsuit knows that if you don't file your answer on time, the plaintiff can can a "default judgment" against you. We can imagine someone who has never been sued before and has not had a chance to consult a lawyer to fall into this trap. But, could it also happen to a large, multi-national corporation which has been a party to many lawsuits, and has a bunch of lawyers on its payroll? Apparently it can.

The case in point is a recent $1.26 Billion default judgment entered against PepsiCo, Inc. in the Wisconsin state court. According to the news buzz, in April 2009, Charles Joyce and James Voigt filed a lawsuit alleging PepsiCo, Inc. developed Aqafina based on misappropriated trade secrets from the confidential conversations plaintiffs had with their distributors about selling purified water. The lawsuit was served on PepsiCo, Inc.'s agent in North Carlina. When PepsiCo did not answer the complaint, plaintiffs obtained the default judgment.

On October 13, 2009, PepsiCo's attorneys brought motion to set aside the judgment. They are making various arguments, that the documents were not properly served on the company's agent in North Carolina, that the papers were mislaid by PepsiCo's employees instead of being forwarded to the attorneys, etc. According to Yahoo! News, PepsiCo's attorneys have made this account of the events in their motion so set aside the judgment:

• June 11, 2009: Stith & Stith, PepsiCo's law firm in North Carolina was "allegedly" served with process, but PepsiCo was not made aware of this;
• September 15, 2009: Stith & Stith sends a correspondence concerning this lawsuit to Tom Tamoney in PepsiCo's legal department, but his secretary Kathy Henry was so occupied with other matters that she did not communicate the letter to anyone nor did she enter it into the log;
• September 29, 2009: Plaintiffs Charles Joyce and James Voigt request entry of default judgment against PepsiCo;
• September 30, 2009: The Wisconsin court enters default judgment against PepsiCo;
• October 5, 2009: Kathy Henry receives notice of judgment, and as she enters it into the log, she is reminded about the earlier letter;
• October 6, 2009: PepsiCo's attorneys learn about the case.

At the end of the day, the court may set aside the judgment and allow PepsiCo to file its answer and defend the lawsuit. But in the meantime, PepsiCo's attorneys and employees will need to explain this public embarrassment. How could it be that such a large company overlooks defending a good size lawsuit as this? Can a large company be at a disadvantage in such matters, because the various departments cannot effectively communicate with each other?

Some of the materials for this blog were obtained from ABA Journal and Yahoo! News. For additional information visit the Wisconsin Court web site or run a search on Google.

Robin Mashal is a partner at the law firm of Hong & Mashal LLP. He can be reached at (310) 286-2000.

Lawyers are Admonished and Fined for Sloppy Work

In the past few months, there has been some news about judges criticizing lawyers and imposing fines on them for poor written products.

The first matter in the news was in the case of Nault v. The Evangelical Lutheran Good Samaritan Foundation, United States District Court, Middle District of Florida, Case no. 6:09-cv-1229-Orl-31GJK. Judge Presnell was irritated at Plaintiff's attorney for filing moving papers "riddled with unprofessional grammatical and typographical errors that nearly render the entire Motion incomprehensible." Judge Presnell denied the motion without prejudice and ordered the attorney to "read the Local Rules and the Federal Rules of Civil Procedure in their entirety" and file a Notice of Compliance with the court.

The other matter in the news was the 2008 unpublished opinion, in the case of Espitia v. Fouche, where the Wisconsin Court of Appeals imposed a $100 fine on an attorney for providing an inaccurate case citation in his court brief. The Court explained its frustration with the lawyer's work in that the case citation was wrong, the case title was wrong, and it was from a different district. Apparently, the court had to spend a great deal of time locating the case cited in the lawyer's brief, all of which could have been prevented by the lawyer verifying and proof-reading his work. Here is the entire footnote from the Court's opinion justifying the $100 fine:

"Counsel for Espitia cites to an unpublished case assertedly upholding a stipulated damages clause due to the difficulty of ascertaining "the exact amount of income certain vending machines would produce." The cite provided is "Buellesbach v. Roob, 2005 AP 160 (Ct.App.Dist.I)." Buellesbach indeed is unpublished but it has nothing to do with liquidated damage clauses or vending machines; it is a misrepresentation case brought by newlyweds against a wedding photographer. Also, "2005 AP 160" is the docket number, which we discovered only after reaching a dead end at 2005 WI App 160, 285 Wis.2d 472, 702 N.W.2d 433. At last we located the unpublished case that addresses the subject matter for which counsel cited Buellesbach: Stansfield Vending, Inc. v. Osseo Truck Travel Plaza, LLC, 2003 WI App 201, 267 Wis.2d 280, 670 N.W.2d 558. Different name, different citation, different district (District IV) but, as promised, unpublished. It is a violation of Wis. Stat. Rule 809.19(1)(e) to provide citations which do not conform to the Uniform System of Citation and of Wis. Stat. Rule 809.23(3) to cite to unpublished opinions. One reason may be that they can be time-consuming to locate. A $100 penalty is imposed against Espitia's counsel. See Hagen v. Gulrud, 151 Wis.2d 1, 8, 442 N.W.2d 570 (Ct.App.1989)."

Such judicial criticism and sanctions come as little surprise. With the current volume of litigated case, and relative shortage of judicial officers, judges are typically assigned a large case load. Since judges can allocate little time to each matter, they appreciate well-drafted pleadings and documents from the litigators.

Some of the information for this blog were gathered from Robert J. Ambrogi's blog, and ABA Journal.

Robin Mashal is a partner at the law firm of Hong & Mashal, LLP, and can be reached at (310) 286-2000. His practice focuses on business law, real estate law and civil litigation. Hong & Mashal LLP is a California business law firm.

Can Social Networking Do You Harm?

In today's world, everyone talks about the benefit of social networking and blogging. However, few talk about its potential drawbacks. Some recent events illustrate how social networking can have adverse legal cosequences.

State and Federal tax collectors have been using social networking forums to assist in locating tax evaders and collecting back taxes from them. In one case, the California tax collectors were able to collect "four figure" taxes from a person after a discussion board posting showed the debtor had closed his business and "moved across the bay." The Minessota taxing authorities found a long sought tax delinquent when he announced on MySpace the name and location of his new employment. Searching for information on Google and social networking sites is supplemental to the traditional search methods, such as searching for bank accounts, employment records, real estate records, and motor vehicle records.

In December 2008, Master Harper of the ACT Supreme Court, Australia, authorized a plaintiff to "substitute serve" a default judgment on a hard-to-reach defendants via Facebook. The normal procedure is to serve default judgment on a defendant by personal service or by mail. Given the difficulty in locating the defendants, this Australian court ordered plaintiff to serve notice of entry of default judgment on defendants by transmitting computer messages to defendants' Facebook page.

Some information for this blog was gathered from articles on The Wall Street Journal, and The Sydney Morning Herald. For further information, run a search on Google.

Robin Mashal is a partner at the law firm of Hong & Mashal, LLP, and can be reached at (310) 286-2000. His practice focuses on business law, real estate law and civil litigation. Hong & Mashal LLP is a California business law firm.

The Legal Side of "Cash For Clunkers" Program

On June 24, 2009, President Obama signed into law the Consumer Assistance to Recyle and Save ("CARS") Act of 2009, commonly referred to as the "cash for clunkers" program. CARS Act encourages consumers to trade in their older (8 to 25 year old) vehicles, for newer more fuel efficient models. CARS Act required the U.S. Department of Transportation, National Highway Trasportation Safety Administration ("NHTSA") to issue final regulations and implement the CARS by July 24, 2009.

Those consumers whose trade in vehicle qualifies can receive credits ranging from $3,500 to $4,500. The qualifying transactions need to take place between July 1 and November 1, 2009, to the extent the government allocated funds remain available. To check whether your vehicle will qualify for trade in under CARS Act you may visit the official web site.

Under Section 61 of the Internal Revenue Code, "gross income" includes income from whatever source. However, CARS Act specifically states CARS credit is not income to the purchasers. So, for example, if a consumer's transaction qualifies for $4,500 credit, that consumer will truly offset the cost of new vehicle's purchase by $4,500, without having to consider the individual's deductions and tax bracket.

Prior to CARS Act's enactment, other bills were presented and considered at the Congress. One was H.R. 385, the Consumer Auto Relief Act of 2009, which sought to amend the the Internal Revenue Code to (1) allow consumers to deduct up to $7,500 of the purchase price of a new passenger car or light truck; (2) allow deduction of interest paid on purchase loan for such vehicles; and (3) allow deduction of state and local sales taxes on the vehicle purchase. Notice that Auto Relief Act would have provided income tax deductions, whereas CARS Act excludes the credits from purchasers income altogether.

Information for this blog were obtained from StateSurge.com, Consumer Reports, and NHTSA's web site and publication.

Robin Mashal is a partner at the law firm of Hong & Mashal, LLP, and can be reached at (310) 286-2000. His practice focuses on business law, real estate law and civil litigation. Hong & Mashal LLP is a California business law firm.

IRS Prosecutes Tax Evaders Using Information Obtained from Swiss Bank UBS AG

The U.S. government has ratched up its tax collection efforts. On the one hand, the government has been prosecuting tax evaders, and pressuring Swiss banks to disclose information that would assist with such prosecutions. On the other hand, the government has introduced Voluntary Disclosure Program, a safe harbor allowing delinquent taxpayers to make voluntary disclosure and payment by September 23, 2009, in order to avoid criminal prosecution and imprisonment.

In February 2009, Swiss banking giant UBS AG settled a U.S. prosecution action against it, by agreeing to pay $780 Million and disclosing information about 250 U.S. depositors. UBS is considered the second largest wealth manager globally. The U.S. Governmet has so far brought four criminal prosecution actions based on in the information disclosed on the UBS depositors.

The latest case has been one against John McCarthy, a resident of Malibu, California. In U.S. vs. McCarthy, United States District Court, Central District of California, Case no. CR 09-00784, the prosecutors charged that in 2003 McCarthy opened a Swiss bank account in the name of COGS Enterprises Ltd., a Hong Kong entity. According to the information released, McCarthy has agreed to plead guilty to failure to report foreign bank accounts from 2003 to 2008, a felony charge. McCarthy has admitted transferring more than $1 Million from his U.S.-based businesses to the Swiss bank account. He has agreed to pay panalties equal to one-half of the highest balances held in this account during the years 2003 though 2008. Under the plea agreement, he faces up to five years inprisonment, three years' supervised release, and fines of up to $250,000. McCarthy is scheduled to appear before the Los Angeles federal court on September 14, 2009.

An earlier case was against Jeffrey Cherkin, a New York businessman. The plea agreement states, Cherkin had used Hong Kong based corporations to hide commissions paid him by toymakers in Hong Kong and in China. When Cherkin needed money, he would request Swiss banks to make out checks payable to Cherkin's U.S. companies and he would personally carry the checks back to the U.S. Charkin has pleaded guilty to filing a false 2007 U.S. tax return and faces 3 years of imprisonment.

Some of the materials for this blog were obtained from the Reuters, The Miami Herald, and USA Today.

Robin Mashal is a partner at the law firm of Hong & Mashal, LLP, and can be reached at (310) 286-2000. His practice focuses on business law, real estate law and civil litigation. Hong & Mashal LLP is a California business law firm.

Time is Running out on IRS's Voluntary Disclosure Program

U.S. tax laws require all individuals who are U.S. residents or citizens to pay U.S. taxes on their worldwide income. That is, a U.S. resident or citizen has to report his foreign salaries, interest income, rental income, etc. and pay taxes on them, the same way he would report and pay taxes on his U.S. income. Domestic corporations are likewise taxed on their worldwide income.

U.S. taxpayers who have financial interest in or signature authority over offshore bank accounts, and the aggregate value of these accounts exceeds $10,000 at any time during the calendar year, must annually disclose their assets and accounts by filing a Department of Treasury form TD F 90-22.1, Report of Foreign Bank and Financial Accounts ("FBAR").

FBAR is due by 30th day of June the year after the taxpayer reaches the $10,000 threshold. Failure to file an FBAR when due may result in civil and/or criminal penalties. There is a 6 year statute of limitation for the IRS to bring a civil claim for delinquent on their FBAR filings. Failure to file FBAR, and the filing a false or fraudulent reports, can result in monetary penalties of up to $500,000 and up to 5 years of imprisonment.

The Department of Treasury has implemented a Voluntary Disclosure Program ("VDP"), which provides a limited time safe harbor for taxpayers with offshore assets to avoid large penalties against them. In order to take advantage of VDP, such taxpayers must disclose unreported foreign income and foreign accounts by no later than September 23, 2009.

VDP is available to individual taxpayers, corporations, partnerships, and trusts; however, the taxpayers need to make their disclosure before the IRS initiates any civil or criminal investigation against them. As well, the taxpayers must file FBAR and amended tax returns for up to 6 years prior and pay the applicable taxes and penalties. If the taxpayer properly complies, the taxpayer will be immune from IRS bringing criminal tax evasion charges against the taxpayer or pursuing imprisonment.

Information for this blog were gathered from various sources including John C. Friskey's article and from the IRS web site. The materials presented in this blog and our other blogs are informational, and should not be relied upon as legal advice.

Robin Mashal is a partner at the law firm of Hong & Mashal, LLP, and can be reached at (310) 286-2000. His practice focuses on business law, real estate law and civil litigation. Hong & Mashal LLP is a California business law firm.

Phi Alpha Delta Law Fraternity, International

The Phi Alpha Delta Law Fraternity, International (commonly referred to as "PAD") is a professional fraternity. PAD's Constitution states the organization's purpose is "to form a stong bond uniting students and teachers of the law with members of the Bench and Bar in fraternal fellowship designed to advance the ideals of liberty and equal jusitce under law; to stimulate excellence in scholarship; to inspire the virtues of compassion and courage; to foster integrity and professional competence; to promote the welfare of its memebers; and to encourage their moral, intellectual and cultural advancement; so that each member may enjoy a lifetime of honorable professional and public service."

PAD was founded in 1902 in South Haven, Michigan. Since then, the organization has reached international dimensions. Prominent PAD members have included several U.S. Presidents including William H. Taft, Woodrow Wilson, Warren Harding, Harry S. Truman, James E. Carter and William J. Clinton, and U.S. Supreme Court Justices such as Tom C. Clark, Warren Burger, William H. Taft, Ruth Bader Ginsburg, Stephen Breyer, and Samuel Alito, not to mention the many Senators and Congressmen.

PAD has various Chapters located internationally. PAD's Chapter chartered and located in Loyola Law School Los Angeles is referred to as the William Joseph Ford Chapter. For additional information about Phi Alpha Delta, you may visit its web site, or contact the executive office by telephone at (410) 347-3118.

Robin Mashal is a partner at the law firm of Hong & Mashal LLP, and can be reached at (310) 286-2000. While attending Loyola Law School, Mr. Mashal joined William Joseph Ford Chapter of PAD. His practice focuses on business law, real estate law and civil litigation. Hong & Mashal LLP is a California business law firm.

Justice Sotomayor is Sworn In to the U.S. Supreme Court

On Saturday, August 8, 2009, Sonia Maria Sotomayor was sworn in as the 111th justice of the United States Supreme Court. This was a historical event, as Justice Sotomayor is the first Hispanic justice, and the third female justice in the Court's 220-year history.

Justice Sotomayor is of Puerto Rican descent. She was born in the Bronx on June 25, 1954. Her father passed away when she was 9, after which she was raised by her mother. She completed her undergraduate studies suma cum laude at Princeton University in 1976, and obtained her law degree from Yale Law School in 1979, where she was an editor of the Yale Law Journal. Early in her career, she worked at the New York District Attorney's office, and later had her own private practice. In 1991, President George H.W. Bush nominated her to the U.S. District Court for Southern District of New York. In 1997, President Bill Clinton nominated her to the U.S. Court of Appeals for the Second Circuit. At the Second Circuit, Justice Sotomyor heard more than 3,000 appellate cases and wrote some 380 court opinions. On May 26, 2009, President Obama nominated Justice Sotomayor for appointment to the U.S. Supreme Court, to replace Justice David Souter who is retiring.

Justice Sonia Maria Sotomayor

Section 1 of Article III of the U.S. Constitution provides federal judges with life tenure. That is, once a federal judge (including a U.S. Supreme Court Justice) takes the bench, he or she will remain in that position unless the judge resigns or is removed by impeachment. The policy behind this constitutional provision is to eliminate any control by the government's executive branch over the judicial branch. This explains why the nomination and confirmation of federal judges is such a lengthy and hotly debated matter. This is especially true of U.S. Supreme Court justices who sit at the Nation's highest court and their opinion is the ultimate interpretation of the law. In Justice Sotomayor's case, the confirmation process took better than two months and frequently made the news on a daily basis.

The swearing in oath to the U.S. Supreme Court dictates a duty to administer impartial justice. According to Title 28, Chapter I, Part 453 of the United States Code, each Supreme Court Justice takes the following oath of office: "I, [name], do solemnly swear … that I will administer justice without respect to persons, and do equal rights to the poor and to the rich…. So help me God." There is a famous story about Justice Oliver Wendell Holmes, Jr. who served as a justice of the U.S. Supreme Court from 1902-32. One day Justice Holmes was returning to the Court after having lunch with a young lawyer visiting from Washington. As the two parted, the young lawyer said "Do justice, sir." Justice Holmes responded "No, sir. I shall interpret the law. Justice is none of my business."

The materials for this article were obtained from various sources including Yahoo News, Wikipedia, Washington State Bar Association, Cornell University Law School, and About.com. For additional information run a search on Google.

Robin Mashal is a partner at the law firm of Hong & Mashal, LLP, and can be reached at (310) 286-2000. His practice focuses on business law, real estate law and civil litigation. Hong & Mashal LLP is a California business law firm.

Former AIG Executives Reach Settlement with the SEC

The Securities and Exchange Commission ("SEC") brought lawsuit in the Manhattan federal court against former American International Group, Inc. ("AIG") executives. In this suit, the SEC charged former AIG chief executive officer ("CEO") Maurice "Hank" Greenberg with altering AIG's financial records to inflate its earnings between 2000 and 2005. The suit charged former AIG chief financial officer ("CFO") Howard Smith with civil-fraud.

Based on SEC announcement, Greenberg and Smith have entered a settlement without admission of any wrongdoing. Under the settlement terms, Greenberg and Smith are paying $15 Million and $1.5 Million, repectively. As well, Greenberg and Smith have consented to judgments enjoining them from violating the anti-fraud provisions of the Exchange Act, and from controlling any person who violates the reporting, books and records and internal control provisions of the federal securities laws.

In 2006, SEC sued AIG for securities fraud and improper accounting. AIG was able to settle those claims by paying $700 million in disgorgement and $100 million in penalties.

The information for this article was obtained from various sources including Reuters, CNN, ABC News, and MarketWatch. For additional information run a search on Google.

Robin Mashal is a partner at the law firm of Hong & Mashal, LLP, and can be reached at (310) 286-2000. His practice focuses on business law, real estate law and civil litigation. Hong & Mashal LLP is a California business law firm.

IRS Goes after Swiss Bank Accounts of Tax Evaders

We have all heard the stories about rich people hiding their money in secret Swiss bank accounts. Well, that may no longer be possible, as least when it comes to evading U.S. income taxes.

In a lawsuit filed by the Internal Revenue Service ("IRS") and the Department of Justice ("DOJ"), the U.S. Government is seeking to compel the Swiss bank UBS to turn over information on 52,000 American depositors, whose accounts hold approximately $14.8 billion U.S. Dollars. The prosecutors will be seeking "John Doe" summons, ordering UBS to turn over information about unidentified U.S. taxpayers believe to be UBS depositors.

This case has caused a large diplomatic stir. Swiss president Hans-Rudolf Marez made a statement to assure the public that Switzerland's banking secrecy remains intact. The case was originally set to go to trial on July 13, 2009, but Judge Alan S. Gold continued the trial date to August 3, 2009 to allow parties an opportunity to settle. Judge Gold ordered the IRS and the DOJ to consult Obama administration on how far the U.S. government may be willing to proceed if UBS will not voluntarily disclose the information on the account holders. In further attempts for diplomatic resolution, U.S. Secretary of State Hillary Clinton and Swiss Foreign Minister Micheline Calmy-Rey are scheduled to meet on Friday, August 1, 2009.

Earlier this year, UBS was facing criminal charges in a separate U.S. tax dispute. UBS settled that case by paying $780 million U.S. Dollars, and turning over information on around 250 American depositors with secret bank accounts. UBS's admissions in the earlier criminal case have supported U.S. Government's demands in the instant civil case.

Switzerland's banking industry has boomed due to its secrecy, and the Swiss are reluctant to give up on that. The recent U.S. cases are unprecedented hits on the famed Swiss bank secrecy. It is expected that UBS will end its cross-border banking operations.

Some of the information in this blog were obtained from articles by The Wall Street Journal, The Associated Press, The New York Times, Reuters, and USA Today. For additional information, run a search on Google.

Robin Mashal is a partner at the law firm of Hong & Mashal, LLP, and can be reached at (310) 286-2000. His practice focuses on business law, real estate law and civil litigation. Hong & Mashal LLP is a California business law firm.

The Advertisement Battle between Microsoft and Apple

For months, Apple was running "Get a Mac" television advertisements coloring PC computers as inferior products. The ads depicted Apple Mac as a young, hip character as contrasted to the PC computer, an outdated, geeky, unreliable character.

Finally, PC started fighting back. Microsoft started running "laptop hunter" ads that challenged a shopper to find an Mac laptop computer with features found on PC laptop computers with a budget of "under $1,000". After she shopped Mac and PC stores, she chose the PC laptop and paid cash for it with the money she won in the challenge. These ads apparently did not sit well with Apple.

Apple's lawyers reportedly contacted Microsoft demanding they stop running the laptop hunter ads. Since the original PC ads started running, Apple had reduced the laptop prices, so the under $1,000 price challege no longer held true. Microsoft partially heeded the call from Apple's attorneys. Instead of discontinuing the laptop hunter campaign ads, Microsoft started running updated hunter ads that challenge shoppers to find Mac laptops with similar features to PC laptops for "under $1,700".

Apple and PC computers have been market rivals since Apple Computer Inc. (now, Apple Inc.) was incorporated in 1977. The final chapter in this competition is yet to be written. One thing is for certain that this competition prevents either of these two market forces from having an unrivaled domination of the computer market. And true competition benefits consumers with the selection, quality and price of products available in the market.

Some of the information in this article was obtained from articles on Cnet News, PC World, The Christian Science Monitor, The National Business Review, and Wikipedia.

Robin Mashal is a partner at the law firm of Hong & Mashal, LLP, and can be reached at (310) 286-2000. His practice focuses on business law, real estate law and civil litigation. Hong & Mashal LLP is a California business law firm.

Buyers Beware: Get-Rich-Quick Advertisements May be Scams

We have all seen the commercials on television, promising to give us the secret to riches for a few dollars. They seem too good to be true, but who could resist them in these economic times. As it turns out, some of the advertised items are nothing more than scams.

The government has just announced a joint operation by the Federal Trade Commission ("FTC"), the Department of Justice ("DOJ") and some state agencies, investigating companies that allegedly conned consumers out of millions of dollars through deceptive advertising and other illegal practices. The law enforcement action which has been named Operation Short Change, has targeted some widely advertised products.

Several of the investigation targets are California companies. For example, one investigation target is John Beck Amazing Profits, LLC, which apparently marketed "John Beck's Free and Clear Real Estate System". The product was sold for $39.95 and made promises about purchasers' earning potentials, but the promises were allegedly not truthful. Other targets include John Alexander, LLC and Family Products, LLC, both California limited liability companies, with addresses in Van Nuys, California.

For additional information, refer to the NetworkWorld.com article, visit FTC web site, or search Google.

Robin Mashal is a partner at the law firm of Hong & Mashal, LLP, and can be reached at (310) 286-2000. His practice focuses on business law, real estate law and civil litigation. Hong & Mashal LLP is a California business law firm.

Have You Made Your Estate Plan Yet?

We often do not think about preparing our estate plan until something reminds us of it. Sometimes we are reminded when we hear of the passing of celebrities, such as the recent deaths of Farrah Fawcett, Ed McMahon, Michael Jackson and Billy Mays. Sometimes we are reminded by the illness or passing of a loved one. Other times, articles like this give us a reminder. No matter what brings this to our attention, we should prepare our estate plan early and while we are in good mental and physical health, to avoid complications for our loved ones.

Estate planning tools such as wills and living trusts allow the property owner to plan who will benefit from their estate, which properties or dollar amounts are given to each beneficiary, and who will be in charge of administring the estate after they pass on. Moreover, proper estate planining can minimize the amount of estate taxes that have to be paid after the person dies, and can eliminate the need to go through a probate. These will maximize the amount of properties that will be passed to the beneficiaries. Since no one can predict how many years they will live, it is best to prepare one's estate plan sooner rather than later.

Sometimes, the beneficiaries may challenge a person's will or trust, claiming the deceased was not in proper mental state when he or she executed the estate plan. For this reason, it is best to prepare and execute the estate plan in an earlier age, rather than in an older age. Moreover, a complete estate planning package often includes advance health care directives, which are instructions for how a person wishes to deal with situations where person is seriously ill. Such instruments need to be prepare and executed while the person is in good health and able to properly state their wishes.

Estate planning is a broad topic which cannot be properly summarized in a few lines. This weblog is intended as general information and should not be relied upon as legal advice.

Robin Mashal is a partner at the law firm of Hong & Mashal, LLP, and can be reached at (310) 286-2000.

Countrywide Financial's senior executives are sued by the SEC

On June 4, 2009, the Securities and Exchange Commission filed a complaint against Angelo Mozilo, David Sambol, and Eric Sieracki, in the United States District Court, for the Central District of California, Case number CV 09-03994 VBF (AJWx). The complaint alleges that the named defendants "misled the market by falsely assuring investors that Countrywide was primarily a prime quality mortgage lender which had avoided the excesses of its competitors."

Based on this complaint, Countrywide Financial Corporation was founded by Eric Mozilo in 1969. Countrywide was headquartered in Calabasas, California, and its shares were traded on the New York Stock Exchange. Countrywide became one of the country's largest mortgage lenders until it suffered losses due to subprime loans, and was merged into Bank of America in July 2008. Angelo Mozilo was Countrywide's chairman of the board and its chief executive officer. David Sambol was Countrywide's chief operating officer. Eric Sieracki was Countrywide's chief financial officer.

Robin Mashal is a partner at the law firm of Hong & Mashal, LLP, and can be reached at (310) 286-2000. His practice focuses on business law, real estate law and civil litigation. Hong & Mashal LLP is a California business law firm.

Some Relief for the Borrowers

With the current state of global economy, there seems to be some good news for the borrowers. Here are a few examples.

Banks are Cash Strapped
The government has been conducting "stress tests" on banks, and telling some they need more liquidity. This apparently prompted some banks to send letters to borrowers with offers to discount the principal amount of their mortgage debts, if they can currently payoff their loan balances. Some borrowers have been able to approach lenders and negotiate nearly 30% off their principal balances to payoff the loan in cash. These scenarios are limited to large commercial mortgage loans, and only for those borrowers who can afford to pay them off in cash. But for those who have this ability, it is an amazing opportunity to make a good deal of money as the market will recover in the next few years.

Qualified Principal Residence Indebtedness
Section 108 of the Internal Revenue Code treats a discharge of a debt as ordinary income, taxed at ordinary income tax levels. For example, if a homeowner owes $500,000 to a bank and bank agrees forgive this debt, this like the homeowner had income of $500,000 and used it to payoff the debt. However, in light of the current "mortgage meltdown", Congress has created an exception. The Mortgage Debt Relief Act of 2007 allows a homeowner to exclude income from the discharge of debt on their principal residence in calendar years 2007 through 2012, based on mortgage restructuring, or forgiveness of mortgage debt in connection with a foreclosure. The Act allows up to $2,000,000 of forgiven debt to be excluded from income for married couples filing jointly, and up to $1,000,000 for married couples filing separately.

Deferred Discharge of Debt Income
On February 17, 2009, President Obama signed into law the American Recovery and Reinvestment Act of 2009. This Act added a new Subsection 108(i) to the Internal Revenue Code, which permits a debtor to defer the recognition of discharge of debt income from the purchase, exchange, or forgiveness of a debtor’s debt instruments during calendar years 2009 and 2010. When this election is properly made, the taxpayer must include the discharge of debt in taxpayer's income ratably over the five taxable years starting with the fifth taxable year after the taxable year in which the reacquisition event took place.

Protection for Credit Card Borrowers
On May 22, 2009, President Obama signed into law the Credit Card Accountability, Responsibility and Disclosure ("CARD") Act of 2009. This new regulations will become effective February 2010, and are intended to protect the consumers from deceptive practices by the credit card companies, and include the following features: Cardholders must be given 45 days' notice prior to significant term changes including interest rate increases; credit card company cannot raise interest based on cardholder's record with other creditors; no more double-cycle billing; and payments on each statement will be due at least 21 days after the statement is mailed out.

Robin Mashal is a partner at the law firm of Hong & Mashal, LLP, and can be reached at (310) 286-2000. His practice focuses on business law, real estate law and civil litigation. Hong & Mashal LLP is a California business law firm.

Can Incorporation be a Disadvantage?

There are numerous articles addressing the advantages of incorporating your business. I would like to point out some disadvantages of incorporating a business under certain circumstances under California law.

Corporate Formalities
Running a business in corporate form requires far more formalities than running unincorporated businesses. Corporations must hold an annual shareholders' meeting and an annual directors' meeting. In addition, if a corporation contemplating an extraordinary transactions, should hold a special meetings of shareholders and directors to approve the same. All corporations incorporated under California law (or foreign corporations qualified to do business in California) must annually file a Statement of Information with the California Secretary of State and pay the $25 filing fee. In the Statement of Information--which is a public document--the corporation discloses its address, the names and addresses of its officers, directors and agent for service. By contrast, sole proprietorships and general partnerships are not subject to the above formalities.

Federal Taxes
A corporation is considered a separate legal entity from its shareholders. Therefore, a corporation's income is taxed once at the corporate level, an again at the shareholder level when the money is distributed to the shareholders. A significant portion of the corporate income can be lost in such a "double taxation". Some corporations may qualify to make "Subchapter S" election which will eliminate double taxation.

California Taxes
A corporation formed under California law (or a foreign corporation that qualified to do business in California) will have its income subject to California franchise taxes. Section 23151(d) of the California Revenue and Taxation Code sets the minimum franchise tax rate at 8.84 percent. Except for the initial year of formation, a corporation must pay a minimum franchise tax of $800, as estimated tax, by the 15th day of the fourth month of a corporation's taxable year. As well, the income will be subject to a second level of taxation at the shareholder level.

Local Law Restrictions
Sometimes being incorporated hinders you under local ordinances. For example, some rent control laws allow a property owner to evict a tenant from the rental property for landlord's own use (commonly referred to as "owner occupancy"). However, rent control laws in Los Angeles, Santa Monica and West Hollywood will not allow use of owner occupancy if the property's title is held by a corporation (or a partnership). This is true even if there is the corporation has one single shareholder and that shareholder will move into the unit after the tenant is evicted. These are clear instances where incorporation can be a disadvantage under the local ordinance.

Appearing in Lawsuits
In California, a corporation can appear in a lawsuit only through a licensed attorney. In fact, it is misdemeanor for a non-attorney to reprsent a corporation in a lawsuit. Therefore, if your corporation is sued or wishes to bring a lawsuit, you must first retain a lawyer before you can appear in the legal action. Moreover, if a corporation is not in good standing with the California Secretary of State, is will lack standing to appear in a lawsuit whether as a plaintiff or as a defendant. These restrictions do not apply to unincorporated entities such as sole proprietorships and general partnerships.

The subject of incorporation and selecting a proper business form is very expansive. For more information you can refer to Forming and Operating California Limited Liability Companies (published by Continuing Education of the Bar - California), or Advising California Partnerships (published by Continuing Education of the Bar - California), or consult your own attorney.

Robin Mashal is a partner at the law firm of Hong & Mashal, LLP, and can be reached at (310) 286-2000. His practice focuses on business law, real estate law and civil litigation. Hong & Mashal LLP is a California business law firm.

Who Needs a Lawyer Anyway?

Parties to civil lawsuits often ask whether it is necessary to retain a lawyer, or they can litigate their own case (known as "in pro per" or "pro se" litigant). This is ultimately a party's own decision. The following are some points to help guide you through your decision making process.

Sometimes it is Not Your Decision
Sometimes is not your choice whether or not to retain a lawyer. For example, in California a business entity (such as a corporation or an LLC) can appear in a case only through an attorney. In fact, it is a misdemeanor in California for a non-lawyer to represent a business entity in a case. If your business entity sues or gets sued in the Superior Court, you have no choice but to retain an attorney. On the other hand, California court system allows disputes of $7,500 or smaller to be brought in the Small Claims Court. If you get sued in the Small Claims Court or you wish to bring your claim in the Small Claims Court, you may not be represented by an attorney. In these scenarios, the law dictates whether or not legal representation is possible.

Costs of Retaining a Lawyer
In scenarios other than the above examples, you need to decide whether it is cost-beneficial for you to retain a professional (i.e., an attorney) to litigate the case for you. Your cost-benefit analysis must considers two factors: your incremental costs and your incremental benefit. The costs of retaining a lawyer can vary, depending on the complexity of the case and the experience level of the lawyers you consider. Some simple matters may be performed for a small flat fee, and more complex litigation matters handled by specialized attorneys may cost several hundreds of dollars every hour. These costs you need to balance against the benefits of retaining a lawyer.

Benefits of Retaining a Lawyer
Litigation can often be intricate and complex. Litigating a case requires knowledge of the procedural rules, knowledge of the substantive laws, experience and some common sense. It is possible for a party who had a stong case to lose in court because the proper legal procedures were not followed. For example, if you file your lawsuit beyong the statute of limitations, you will simply have no case at all. On the other hand, when a defendant properly brings a demurrer motion to a complaint, she may be able to dispose of plaintiff's lawsuit in a very early stage. When the parties are involved in multi-million dollar lawsuits, they do not hesitate to retain the best attorneys money can buy. With smaller disputes, parties consider less expensive alternatives. In either scenario, a lawyer's assistance can prove invaluable. Just as you would seek a physician's help with a surgical operation, you should get professional legal help in litigation matters.

The Wisdom of Old Adages
We have all heard the saying “he who is his own lawyer has a fool for a client”. There is a good deal of truth to this. Litigation requires technical knowledge and skills, and proper focus. Parties to a lawsuit often get too involved in the dispute to be able to see the big picture. Retaining a lawyer not only provides you the lawyer's knowledge and skills, but also adds this element of "focus" to your lawsuit. Since your attorney is not a party to the disputes, your attorney can keep a "cool head" and advise you about the pitfalls and opportunities. As the saying goes "cooler heads will prevail."

Conclusion
The bottom line is how important is the outcome of this civil lawsuit to you. Say you have a $250,000 claim for damages, or your are faced with defending a $250,000 lawsuit. Do you feel you have sufficient knowledge, skills and focus to handle the lawsuit? Would you risk losing the case in order to save legal fees?

Photograph from Wikimedia, under creative commons license.

Robin Mashal is a partner at the law firm of Hong & Mashal, LLP, and can be reached at (310) 286-2000. His practice focuses on business law, real estate law and civil litigation. Hong & Mashal LLP is a California business law firm.