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Justice Dept. Levies $75M Tax Shelter Fine
Attorneys in the News | 2007/04/01 19:03

One former partner in Jenkens & Gilchrist’s Chicago office, Paul Daugerdas, earned $93 million in fees from tax shelter work, making him one of the single wealthiest participants in the tax shelter business, according to the New York Times.

Jenkens & Gilchrist, which will close its doors at the end of April, will also admit to criminal wrongdoing in the shelters, and will cooperate with the government in its continuing investigations. It was not clear whether Mr. Daugerdas and other colleagues were cooperating, the Times reports.

The agreement with Jenkens & Gilchrist is expected to assist in a wider probe of firms, including Ernst & Young, Deutsche Bank, and Sidley Austin Brown & Wood, and former tax partners with KPMG who were involved in the creation and marketing of the tax shelters.

Law firms have paid fines over the years, but have managed to avoid major damage from scandals involving their clients. Arthur Andersen was indicted in the collapse of Enron, but the company’s outside law firm, Vinson & Elkins, LLP, was not charged.

The main reason is that much of what attorneys do for their clients remains out of sight, according to Stephen Gillers, a legal-ethics professor at New York University School of Law, the Wall Street Journal reports. “Documents are kept confidential, . . . and prosecutors – have a hard time discovering potential wrongdoing by lawyers.”

But the fallout from the original Enron indictments continues. The Securities and Exchange Commission (SEC) announced last week that it is suing two former Enron corporate attorneys for participating in the massive fraud. Jordan H. Mintz, former general counsel, advised the business unit operated by Andrew Fastow, according to the Washington Post. Rex R. Rogers, also named in the suit, is former associate general counsel and a former SEC enforcement lawyer. He reviewed Enron’s public disclosures and securities filings.

The meltdown of Jenkens & Gilchrist, which numbered 600 partners in 2002, has not been as dramatic as the collapse of Andersen, but within a year of the announcement of the investigation in 2004, the firm’s revenue had fallen by 30 percent as partners left taking their clients with them. Only about200 partners remain with the firm, the Journal says.

Gerald Welch, a former Jenkens partner, said that the criminal investigation and the large number of civil lawsuits brought by investors “just became too much of a burden for them to overcome,” according to the Times.

“It became a question of the name,” he said.

A Jenkens’ spokesperson assigned blame to the Chicago office, according to a statement issued by New York prosecutors, the Times reports. “Those responsible for overseeing the Chicago tax practice placed unwarranted trust in the judgment and integrity of the attorneys principally responsible for that practice and failed to exercise effective oversight and control over the firm’s tax shelter practice.”

The firm’s Chicago office issued legal opinion letters blessing the shelters to 1,400 clients according to the IRS. It charged $50,000 apiece for these letters.



Another Enron in Europe?
Practice Focuses | 2007/04/01 19:02

Many European businesses are failing to effectively implement corporate governance codes which is heightening the risk of a serious corporate scandal on the scale of that involving Enron, new research claims.

A poll of Europe's 500 largest publicity listed firms found just 56 percent had the necessary policies in place to protect against ethic and compliance failures, with only 9 percent expecting budgets aimed at addressing the issue to increase.

The worrying figures were despite three-quarters of respondents predicting greater pressure from stakeholders for improved ethics and compliance programs.

The report by Integrity Interactive and the Association of Corporate Counsel (ACC) also found that although 99 percent of companies had a code of conduct or value and principles statement prescribing what staff can or cannot do, only half ensured that all employees were made to read it.

In addition, a quarter of companies confessed to sending their code to selected employees even though 72 percent believed that the entire workforce should be privy to it.

Frederick J. Krebs, ACC president, said: "Companies in the U.S. have spent the last several years ratcheting up their efforts on ethics and compliance but many of their European counterparts still have more work to do.

"For any ethics and compliance program to be effective and successful, it is vital that adequate steps are taken to ensure that all employees understand the policies in place. It is not good enough to have codes of practice buried on an Intranet site where employees have to proactively seek them out.

"Therefore training on codes and policies and the evaluation of levels of understanding of these, play a significant role in protecting a business against scandal and without it many could be heading for trouble."



UK resident released from Guantanamo
International | 2007/04/01 18:18

British resident and Iraqi citizen Bisher al-Rawi was released this weekend from the US military prison at Guantanamo Bay after nearly five years in custody as an enemy combatant. Officials have not confirmed the exact time of al-Rawi's release, but he issued a statement Sunday from his family's home in London. Al-Rawi expressed his happiness to be free and described his "nightmare" at Guantanamo: "Allegations are made against you that are laughably untrue, but you have no chance to prove them wrong. There is no trial, no fair legal process." Al-Rawi was also regretful that his "best friend" Jamil al-Banna remains imprisoned at Guantanamo.

Al-Rawi and al-Banna, also a UK resident, were originally suspected of ties to al Qaeda because of their alleged connection with radical Muslim cleric Abu Qatada. The men were arrested returning to the UK from Gambia with a suspicious electronic device, which they claimed was a battery charger, and were taken into US custody. Despite a general refusal to represent resident aliens at Guantanamo, the British government agreed to help secure al Rawi's release last year after learning that al-Rawi had previously aided British security service MI5. UK Foreign Secretary Margaret Beckett announced al-Rawi's impending release last Thursday; no official comments have been made regarding al-Banna's status.



A Little April Fool's fun from Google
Venture Business News | 2007/04/01 15:21

Google continues its string of technical innovations. On April 1st, to celebrate the ~500th April Fool's Day, they launched a new service: Google TiSP (Toilet Internet Service Provider) BETA. The new internet service, codenamed "Dark porcelain," delivers online connectivity via users' plumbing systems.

"We've got that whole organizing-the-world's-information thing more or less under control," said Google Co-founder and President Larry Page, a longtime supporter of so-called "dark porcelain" research and development. "What's interesting, though, is how many different modalities there are for actually getting that information to you - not to mention from you."

"I couldn't be more excited about, and am only slightly grossed out by, this remarkable new product," said Marissa Mayer, Google's Vice President of Search Products and User Experience. "I firmly believe TiSP will be a breakthrough product, particularly for those users who, like Larry himself, do much of their best thinking in the bathroom."

As you figured it out, unfortunately it's only an April Fool's joke from Google. However, we can't help but fantasize about this great service:

Google has successfully devised a "last hundred smelly yards" solution that takes advantage of preexisting plumbing and sewage systems and their related hydraulic data-transmission capabilities. "There's actually a thriving little underground community that's been studying this exact solution for a long time," says Page. "And today our Toilet ISP team is pleased to be leading the way through the sewers, up out of your toilet and - splat - right onto your PC."

They also have posted do-it-yourself instructions on how to get it started right now:

http://www.google.com/tisp/install.html

It only takes 8 easy steps to get online at full speed, using the do-it-yourself package, or you can have a professional come in and hook up your toilet to the network. For your own physical safety and emotional well-being and in consideration of the nanobots' working conditions, please make absolutely certain that your toilet is unoccupied at the scheduled appointment time, Google warns.

Google has also announced it is actively developing a higher-performance version of TiSP specifically tailored to small and medium-sized businesses, including 24-hour, on-site technical support in the event of backup problems, brownouts and data wipes.

The Toilet Internet Service Provider (TiSP) project is a self-installed, ad-supported online service that will be offered entirely free to any consumer with a WiFi-capable PC and a toilet connected to a local municipal sewage system. TiSP is available today only in the U.S. and Canada. Google announced it has formed an international consortium of utility companies, sewage system experts, toilet manufacturers, and plumbers to develop solutions to the many problems facing all "dark porcelain"-based data-delivery innovators.

Why still in BETA phase? "When things go wrong with TiSP, they go very, very wrong. Let's leave it at that," Google answers.

So, rush out and order this April Fool's Day special from Google. It's such a great offer, it might not be available until the next Fool's Day.



Israeli Leader To Face Second Rape Count
International | 2007/04/01 10:24

Israeli Attorney General Meni Mazuz notified lawyers for Israeli President Moshe Katsav that a second rape charge may be added to Katsav's indictment for alleged sex crimes. The additional charges were made by the same woman who originally accused Katsav of sexual assault, fraud, and rape but it has not been made clear why these allegations have only recently emerged. Katsav, who has been on a leave of absence from his largely ceremonial post since January, was interrogated by police for more than two hours last week about the most recent charges.

Despite pleas for resignationfrom legal commentators and Prime Minister Ehud Olmert, Katsav has refused to considering resignation. All Israeli senior state officials have the right to a hearing before the attorney general before an indictment is formally filed. Katsav's hearing is tentatively scheduled for May 2. Katsav currently has immunity, but can be impeached or prosecuted after he leaves office at the end of this term this year.



Hick's father says plea deal proves case corruption
Breaking Legal News | 2007/04/01 10:23

Guantanamo inmate David Hicks, gagged from speaking to the media, will soon return to Australia from Cuba under a plea deal that reflects the weakness of the prosecution case and political needs of a close US ally, his father said today.

"The military commission system is transparent all right – transparently corrupt," Terry Hicks said, exuberant about the leniency of his son's sentence but still furious about the treatment the 31-year-old Muslim convert has endured for five years.

David Hicks will serve a nine-month sentence in a prison in his hometown of Adelaide after admitting last week that he aided al-Qaida in a plea deal at the US naval base at Guantanamo Bay.

The deal prevents him from talking to the media for 12 months or pursuing his allegations of abuse while in US custody.

Legal observers and opposition lawmakers have joined Terry Hicks in saying the deal is tailored to remove potential political embarrassment for Australian Prime Minister John Howard, who will seek his fifth three-year term as national leader at elections due later this year.



Judge tosses out rules for managing forests
Law Center | 2007/04/01 10:19

A federal district judge in San Francisco has ruled that the US Forest Service violated environmental laws when it promulgated a 2005 regulation governing the management of national forests. On motions for summary judgment in combined lawsuits brought by environmental groups, US District Judge Phyllis Hamilton of the Northern District of California Friday enjoined the Forest Service from enforcing the rule "until it has fully complied" with the Endangered Species Act and the National Environmental Policy Act. Hamilton found that the 2005 regulation, which gave national forest managers more discretion in allowing logging, mining and other activities, had been adopted without adequate procedural safeguards, environmental reviews and public comment. Hamilton wrote:

The agency was required to undertake some type of consultation, informal or otherwise, prior to making a conclusive determination that there would be no effect. Given the 2005 Rule's potential indirect effects on listed species, combined with the USDA's lack of documentation in support of their "no effect" determination, the failure to consult and/or prepare any type of biological analysis in conjunction with the 2005 Rule was arbitrary and capricious.

At the same time, Hamilton declined to reinstate a 1982 regulation, as the environmental groups had sought.

Rodger Schlickeisen, president of Defenders of Wildlife, one of the plaintiff groups, praised Hamilton's ruling, saying:

The Bush administration reversed decades of progress in managing national forests, without considering the impacts on wildlife and the environment. The administration also cut the public out of the loop when considering these large-scale changes to how our nation's forests are managed.

US Justice Department officials are considering an appeal.



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