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William Byrnes (Texas A&M) tax & compliance articles

Archive for November, 2015

Which University May Be The 3rd (since 1986) to Default on Its Debts?

Posted by William Byrnes on November 17, 2015


University of Puerto Rico likely headed toward first credit default: S&P – Read the full story at Reuters.  Bankrupt

CNN reported that “The commonwealth paid a mere $628,000 toward a $58 million debt bill due in early August to creditors of its Public Finance Corporation.  This will hurt the island’s residents, not Wall Street. The debt is mostly owned by ordinary Puerto Ricans through credit unions.”

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Which University Paid Over $95 Million for Deceptive Practices & “Betrayal of Students’ Trust”?

Posted by William Byrnes on November 16, 2015


Argosy University includes Western State College of Law (at Argosy University).  Argosy’s parent EDMC has agreed to pay $95.5 million to resolve claims that it falsely obtained Justice logofederal and state education funds – making this the largest False Claims Act settlement with a for-profit educational institution in American history.  “EDMC’s actions were not only a betrayal of their students’ trust; they were a violation of federal law. ”

Excerpts from Attorney General’s Announcement this morning continue below:  

We have come together to discuss a historic step forward in our collective and ongoing fight against fraudulent and abusive practices in the for-profit education industry.  Today, we are announcing a landmark settlement with Education Management Corp., which became the second-largest for-profit education company in the United States.  Education Management Corp., also known as EDMC, operates chains of schools around the country under the brand names Argosy University, the Art Institutes, Brown-Mackie College and South University.  EDMC enrolls more than 100,000 students and approximately 90 percent of EDMC’s revenue comes from taxpayers in the form of federal education funding for EDMC students.

This case not only highlights the abuses in EDMC’s recruitment system; it also highlights the brave actions of EDMC employees who refused to go along with the institution’s deceptive practices.

Beginning in 2007, two EDMC employees blew the whistle on EDMC by alleging that it was running a high-pressure recruitment mill.  Essentially, the more students a recruiter induced to enroll, the more money that recruiter would receive.  These employees alleged that EDMC’s recruitment practices violated the Incentive Compensation Ban of Title IV of the Higher Education Act, which prohibits schools from basing recruiters’ pay on their success in securing new enrollees.  That ban is in place so that schools will account for the unique qualities and needs of potential students, rather than simply treating them as a vehicle for tapping into federal student aid funds.  Despite their alleged conduct, EDMC has certified its compliance with the ban to the Department of Education for over a decade.  Falsely claiming federal grant and loan money is a violation of the False Claims Act – and in 2011, the United States intervened in the case alongside five individual states: California, Florida, Illinois, Indiana and Minnesota.  Since that time, we have aggressively pursued justice in this case on behalf of the students and taxpayers that the Incentive Compensation Ban is designed to protect.

Under the settlement we are announcing today, EDMC has agreed to pay $95.5 million to resolve claims that it falsely obtained federal and state education funds – making this the largest False Claims Act settlement with a for-profit educational institution in American history.  The unprecedented size of the payment – and the stringent compliance measures EDMC has accepted – reflect the fact that this kind of abuse hurts not only taxpayers, but also the students – many of them non-traditional learners like veterans, older individuals and working parents – who trusted EDMC to provide an education that would address their individual needs.  EDMC’s actions were not only a betrayal of their students’ trust; they were a violation of federal law.

This resolution exemplifies the Justice Department’s deep commitment to protecting precious public resources; to promoting compliance with the law; and to standing up for those who are vulnerable to exploitation.  It is an extraordinary accomplishment both for the men and women who fought to achieve it and for future EDMC students – and students at educational institutions across the country – who will no longer be victimized by unacceptable recruitment practices.  In the days ahead, we will continue working with our invaluable partners at the Department of Education – through initiatives like the inter-agency task force on for-profit education – to ensure that our nation’s aspiring learners are finding and gaining access to educational opportunities that are right for them and that will help them thrive and achieve for many years to come.

Attorney General Loretta E. Lynch Delivers Remarks at Press Conference Announcing $95.5 Million Settlement with For-Profit College Company, Washington, DC Monday, November 16, 2015

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Judge grants FinCEN a “do over” for its FBME Bank determination, but will FinCEN release the evidence?

Posted by William Byrnes on November 10, 2015


Several of my blog readers have been following FinCEN’s first use (and abuse alleges the FBMEFinCEN-logo-shieldbank, defendant of this contentious matter) of the PATRIOT Act’s power allowing FinCEN to block a foreign financial institution from the US financial market.  Over the past year, FinCEN has published a couple press releases referring to its action against FMBE, and that its action is justified based on the nefarious behavior of some of FBME’s clients.  See FinCEN Cuts FBME Bank from Access to U.S. Financial System

But, there are generally two or more perspectives for any story.  FBME has fought back against FinCEN’s determination, and at least convinced a judge that there is more here going on than meet’s the eye.  See FBME Bank Obtains Preliminary Injunction Against FinCEN

On Friday, FinCEN agreed to a “do-over” of its determination with FBME, and to disclose ‘four’ items of the substantial evidence upon which it relied (but not the other evidence).  Of course this heightens the interest in the evidence that FinCEN will not disclose.

At the core of this case for FBME is whether FinCEN must disclose to FBME all the evidence that it relied upon to make a determination to ban FBME from the US financial system.  Who is to determine if such evidence is protected by national security interests?  FinCEN itself, or the judiciary?  Should a defendant have to defend against non-reviewed evidence?  What if the evidence is hearsay, by example – newspaper accounts?

So, now I am curious if the doctrine of due process has been afforded FBME bank?  And if the rules of evidence have been followed?

Some respondents will point out that a civil action, such as FinCEN, does not require the heightened protections of the doctrine of due process and the rules of evidence that apply to an individual’s criminal investigation.  “The government giveth the license to carry on commerce, and the government taketh away that license.”  Though I disagree with that bifurcation from a political philosophy and from a rule of law perspective, the Courts lean in the respondents’ favor.

In FBME’s situation, this FinCEN determination impacts FBME maintaining a correspondent banking relationship in the US, and also implies to other regulators that they should evaluate FBME’s activities in light of FinCEN’s determination.  It is the equivalent of a banking death sentence.

Given the public nature of FinCEN’s allegations, not sure how FBME can obtain a correspondent U.S. banking relationship in the future.  But BNP pled guilty to funding genocidal regimes and Iran, was given a setence of five year probabtion and nearly $10 billion in fines.  No BNP employees went to prison, or even paid a fine.  And BNP is operating in the US.  (see BNP Paribas Criminally Sentenced for Financing Sudan, Iran and Cuba)  A search of this blog will find numerous like situations of criminal activity at banks, a non-prosecution agreement, and the bank continues on.

Why is FBME being treated differently?  Should it be?  Questions that we cannot provide an opinion upon because we have limited information.

In consideration of the many other banks that have been fined for AML and/or OFAC transgressions, the FBME case stands out because of the severity of the sanction and the lack of background information about FinCEN’s action.

FBME states in its press releases that it has been cooperating with FinCEN over the course of FinCEN’s investigation.  However, alleges FBME, FinCEN has not been cooperating with FBME because FinCEN will not present the evidence at the heart of the matter upon which FinCEN bases it allegations against FBME upon.  FBME argues that it cannot defend against “secret” evidence.  FinCEN retorts that the evidence is required to remain secret as a matter of national security.  Sounds reminiscent of a Star Chamber.  I thought we don’t like Star Chambers in America?  

If this is national security protected evidence, should at least the FISA tribunal be presented with it and agree?  It’s not the correct forum, but better than a single executive branch serving as its own prosecutor, judge, and executioner.

Read the court documents and excerpts from the Judgement – Is FinCEN Becoming a Star Chamber? The Curious FBME case

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FATCA, CDOT, and CRS milestones represented on one page

Posted by William Byrnes on November 9, 2015


Prof. Haydon P. Perryman, CGMA

Source: Home

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Will the USA Follow the EU Commission and Create Tax Haven Black Lists? Ways & Means Ponders This Question.

Posted by William Byrnes on November 3, 2015


http://lawprofessors.typepad.com/intfinlaw/2015/11/will-the-usa-follow-the-eu-commission-and-create-tax-haven-black-lists-ways-means-ponders-this-quest.html

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OECD’s Exchange of Information Statement of Outcomes of October 29-30 Annual Meeting

Posted by William Byrnes on November 3, 2015


http://lawprofessors.typepad.com/intfinlaw/2015/11/oecds-exchange-of-information-statement-of-outcomes-of-october-29-30-annual-meeting-.html

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