From the always insightful Stu’s Views:
Charles O. Rossotti is a Republican businessman who was commissioner of the IRS for five years during the last part of the Clinton Administration and the first part of the Bush Administration. In this recent PBS interview , Rossotti told Bill Moyers that we are paying about 15% too much in taxes due to illegal tax cheats. According to Rossotti, roughly $250-300 billion a year is owed but not being paid. “Which basically means everybody is paying 15 percent more,” says Mr. Rossotti. “You could give everybody twice as big a refund, if they average it out, if you just collected all the taxes that are due.” Mr. Rossetti says that the the biggest single amount of unpaid taxes is attributable to abusive tax shelters promoted by the very people we trust to keep the system honest — accounting firms and law firms.
I think it’s safe to say that Mr. Rossotti will not be on the KPMG expert witness defense team in the investigation noted earlier here.
As noted in this earlier post, the legislative reaction to the corporate scandals over the past few years has had unintended consequences–i.e., exorbitant compliance costs.
In this article, UCLA corporate law professor Stephen Bainbridge decries the lack of legislative cost-benefit analysis that was done in connection with enacting the onerous Sarbanes-Oxley Act (SOX). As Professor Bainbridge notes:
As an investor, I don’t want my portfolio companies spending a dollar on “good corporate governance” unless doing so adds at least a buck to the bottom line. I don’t have any voice in how much to spend on corporate governance, however. The board of directors and top management make that decision (as they should, of course). Unfortunately for the bottom line, however, directors and management have a strong incentive to over-invest in corporate governance consultants and so on.
Why? The answer lies in the incentive structures of the relevant players. Who pays the bill if a director is found liable for breaching his federal or state duties? The director. If the director has adequately processed decisions and consulted with advisors, will the director be held liable? Unlikely. Who pays the bill for hiring corporate governance consultants, lawyers, investment bankers, auditors, and so on to advise the board? The corporation and, ultimately, the shareholders.
Victor Davis Hanson, a registered Democrat and among the most insightful current commentators on America’s role in the Middle East, predicts in this NRO Online piece that the Democratic party’s approach to the current Presidential campaign is doomed to failure. The entire piece is well worth reading, but here is a tidbit:
No one wishes to occupy a country. But after the instability in Iraq and a cost nearing 400 combat deaths the Democrats are now not merely questioning the tactics of achieving democracy in Iraq, but the entire notion of occupation itself. But once they go down that road they will discover history is not on their side and will be hard put to offer better alternatives to the present course.
For the record, not occupying Germany in 1918 led to the myth that the Prussians were never beaten, but stabbed in the back while occupying foreign territory ? a terrible mistake not repeated with postwar Japan and Germany. It might have been neater and quicker to leave Afghanistan after the Soviets were expelled in the 1980s and to depart Haiti in a flash, but the wages of those exit strategies were the Taliban and September 11 as well as the current mess in the Caribbean. The first Bush administration left the present jumble in Iraq to the second, which to its everlasting credit is determined not to leave it to others. Had Mr. Clinton bombed and then just left the Balkans, rather than the present costly and bothersome peace we would have had the sectarian and tribal sort of ruin that surely will get worse if we run now from Iraq.
Since the Democrats viciously and clumsily have attacked one of the most courageous (and humane) policies of any administration in the last 30 years, the American people will soon come to ask what they in fact will propose instead (“put up or shut up”). Most of us are cognizant that bombing from 40,000 feet gives an “exit strategy,” but, without soldiers on the ground, postpones the problem of tyrannical resurgence ? and thus will inevitably leave either another war for another generation or something far worse still on the horizon like September 11.
There were a number of legitimate areas of debate for the fall campaign ? deficits, unfunded security measures at home, moral scrutiny over postwar contracts, more help for Afghanistan, greater control of domestic entitlements, unworkable immigration proposals, and the like. But instead of statesmanship from the opposition, we got slander about Mr. Bush’s National Guard service, misrepresentations about intelligence failures that had hampered both previous administrations and the present congress, preference for an unsupportable European position over our own, and stupidity about what to do in Iraq.
The Democrats may have seen some short-term gains from all the attention given to their bluster, but theirs still remain untenable issues. And so nemesis will bite them like they will not believe in the autumn ? and, of course, just when it matters most.
The Chronicle reports that Houston-based Plains Resources executives are joining Seattle billionaire and Microsoft co-founder Paul Allen to buy out and take private the midstream energy company for about $395 million in cash and the assumption of $50 million in debt. Plains’ board voted in favor of the sweetened $16.75-per-share price, unlike last month when it turned down an earlier offer of $14.25 per share. Plains Resources is Mr. Allen’s first sizable investment in the energy business in general and in pipelines specifically.
The NY Times reports federal grand jury in Manhattan is investigating the sale of tax shelters by Big Four accounting firm KPMG to corporations and wealthy individuals who used them to escape at least $1.4 billion in federal taxes. This announcement comes on the heels of KPMG’s recent shake up of its tax practice and removal of three senior executives in the wake of widening Congressional, IRS, and civil lawsuit scrutiny over failed tax shelters that the firm promoted. KPMG was among the most aggressive sellers of tax shelters, collecting $124 million in fees for tax shelters from 1997-2001, acccording to a recent Senate Permanent Investigations subcommittee report.
As noted in an earlier post, a political action committee ? Texans for a Republican Majority ? that House majority leader Tom DeLay of Houston created is the subject of a grand jury investigation in Austin. Yesterday, the Chronicle and the Austin American Statesman report that the investigation turned to Texas House Speaker Tom Craddick and six other Republican lawmakers Thursday as Travis County prosecutors subpoenaed records of the speaker’s race. the primary issue in the investigation is whether Texans for a Republican Majority improperly used corporate contributions to help finance the campaigns of more than 20 Republican candidates for the Texas House of Representatives in 2002. Campaign finance watchdog organizations believe the investigation will affect whether “soft money” ? that is, unlimited contributions from corporations, unions and wealthy individuals ? will become a primary financing source for state and local elections.
The Chronicle reports and the Texas Lawyer reports here on the plaintiff in the landmark Roe v. Wade abortion case seeking a Fed. R. Civ. P. 60(b) order allowing her to return to the courtroom in the hope of overturning the U.S. Supreme Court‘s decision that made the procedure legal. After losing in the District Court on her motion, the plaintiff has appealed that denial to the Fifth Circuit Court of Appeals, which has set oral argument on the matter for March 2.
In an ironic twist, the Chronicle also runs a front page story today about twin baby girls born Feb. 11 in Houston, one of whom weighed 2.8 pounds and the other 12 ounces at birth. Houston’s fabulous Texas Children’s Hospital in the Texas Medical Center has long been one of the nation’s leader’s in the care of premature babies.
All the major newspapers have multiple articles on yesterday’s indictment of former Enron CEO and COO, Jeff Skilling. The best are The Houston Chronicle, The Wall Street Journal ($), and The New York Times.
As mentioned in earlier posts, I have read all of the books that have been published over the past couple of years on the Enron collapse, and the best one by far is Bethany McLean and Peter Elkind‘s “Smartest Guys in the Room.”