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Miami

Cypen & Cypen
NEWSLETTER
for
JANUARY 7, 2010

Stephen H. Cypen, Esq., Editor

1.            BOARD MEMBER MUST BE PHYSICALLY PRESENT FOR PURPOSES OF ESTABLISHING QUORUM:  The Florida Attorney General was asked whether a municipal retirement board may promulgate a rule allowing use of electronic media technology in conducting board meetings and stating that there is no physical presence requirement to constitute a quorum for conduct of official business; that is, that participation by a member of the board via electronic media technology constitutes his or her presence for purposes of establishing a quorum.  Following prior authorities, the Attorney General concluded that, in fact, a member must be physically present at a meeting for purposes of establishing a quorum.  Basically, the City’s nine member retirement board is facing the same issues as all such boards face:  (1) employee representatives are frequently unable to attend meetings due to emergency situations or are required to leave meetings to respond to such emergencies; (2) City-appointee members find that their business or professional schedules conflict with a scheduled board meeting; and (3) the board's consultants and money managers are located in various parts of the country and cannot easily reschedule their calendars to accommodate meetings that may be cancelled due to the absence of a quorum.  (So, what else is new?)  The overarching concern of the Legislature with meaningful interaction by members of the public with their local representatives would not appear to be well served by allowing local government entities to conduct business at arms length through use of communications media technology.  We respectfully disagree with the Attorney General, because his opinion is internally inconsistent.  The Attorney General has no problem with use of electronic media technology in order to allow a physically absent member to attend a public meeting if a quorum of the members of the board is otherwise physically present at the meeting site.  In other words, an absent member is considered “present” for all purposes other than establishing a quorum, including voting.  AGO 2009-56 (December 11, 2009).

 2.            VENTURE FACES CLASS ACTION SUIT:  The former directors of Venture Financial Group failed in their fiduciary duty carefully to manage employee stock ownership plans, resulting in a $12 Million loss to those retirement plans, according to a class-action lawsuit filed in U.S. District Court.  The 62-page lawsuit filed in Tacoma, Washington seeks to recover losses to the employee stock ownership and 401(k) plans. The suit was filed by two Olympia women, both of whom were participants in the plans, according to the newstribune.com.  The lawsuit targets the period January 1, 2008 through September 11, 2009, when Venture Financial Group “imprudently” held employee stock ownership plan assets in company stock, despite the fact that Venture Financial Group knew or should have known that it was engaging in risky investments.  Although Venture Financial’s stock was not publicly traded, it was valued at $18 a share at the end of 2007.  At the end of 2008, the shares were selling for a whopping 25 cents apiece.  Nice. 

 3.            MONEY MANAGER SETTLES SE.X SUIT, FACES FOURTEEN MORE:  A New York billionaire imprisoned for soliciting underage prostitution in Florida has disposed of several lawsuits from girls claiming se.xual abuse.  However, according to a report from WPBF.com, 14 of 18 claims against money manager Jeffrey Epstein remain.  The most recent settlement was approved by a U.S. District Court judge.  The terms of each settlement have been confidential, but an attorney representing two victims said the deep-pocketed money manager is not making it easy.  Epstein's investigators are digging up intimate details, and interviewing ex-boyfriends, family members, employers and friends.  One girl felt so emotionally beat up she wanted to drop the case.  On the other hand, an attorney representing seven women said Epstein's aggressive campaign has only made them more determined to win.  So, Folks, how does your money manager compare?

 4.         ATTORNEY PULLS GRENADE PIN IN COURT:  The Reno County, Kansas Sheriff's Office is investigating actions of a defense attorney who displayed a hand grenade in court, pulled the pin and set it on the prosecutor's table.  The attorney, according to The Wichita Eagle, said the grenade was a dud, and was meant to demonstrate to jurors what is meant by the term "imminent threat."  The attorney produced the grenade while representing a woman accused of forgery and theft.  The lawyer’s client claimed a co-defendant in the case threatened to kill her dog and hurt her daughter if she did not participate in the forgery of stolen checks.  Before placing the grenade in front of the Assistant District Attorney trying the case, the attorney placed it on a ledge in front of the jury box during closing arguments and asked jurors, "Are you afraid now?" 
Apparently the attorney was using the dead grenade as an example of compulsion, trying to make the case that his client was threatened with great bodily harm to commit the crimes.  Jurors took 15 minutes to find the defendant guilty of forgery, conspiracy to commit forgery and misdemeanor theft.  Meanwhile, the judge and the District Attorney reported the incident to the sheriff for investigation.   (It is illegal for anyone to bring weapons of any kind, even if they are fake, into a courtroom without prior authorization. 
We think the Kansas Bar should pull the plug on this clown.) 

 5.         NEW YORK’S REAL “LAW & ORDER” D.A. RETIRES AFTER 35 YEARS:  Robert Morgenthau has been cast in many roles during his decades in office.  The inspiration for the district attorney on TV's ''Law & Order.''  A taker-on of mobsters, misbehaving celebrities and corrupt CEOs.  A Democratic powerbroker who grew up among Roosevelts and Kennedys, helped launch careers, including U.S. Supreme Court Justice Sonia Sotomayor's.  A local prosecutor who used his office's prominence to stretch the long arm of the law where he saw fit. A  savvy, wry and indefatigable New York institution, who happens to be 90.  ''DA for life,'' according to New York Times.  Morgenthau is stepping down from one of the nation's biggest and most prestigious prosecutor's offices, with about 500 lawyers handling 100,000 cases a year.  As Manhattan's top federal prosecutor for eight years before being elected as the borough's DA in 1974, he symbolized the criminal justice system for generations of New Yorkers, not to mention TV viewers.   In a recent interview, Morgenthau quipped that he is retiring because, ''I looked at my birth certificate, and I said, 'It's about time.'''  Well, we guess it’s about time to start hawking discount brokers. 

 6.         COST OF “THE TWELVE DAYS OF CHRISTMAS” (BELATED ... AGAIN):  Even though Christmas is past, we thought we should keep our tradition of reporting PNC’s Christmas Price Index (see for C&C Newsletter for January 8, 2009, Item 4).  Well,  thanks to the weak economy in 2009, the PNC Christmas Price Index increased by a modest 1.8 percent compared to last year, based on prices of gifts in the holiday classic, "The Twelve Days of Christmas."  According to the 26th annual survey, the price tag for the PNC CPI is $21,465.56 in 2009, just $385.46 more than last year.  It is the smallest increase since 2002, when the index fell 7.6 percent.  The PNC CPI exceeds the U.S. government’s Consumer Price Index, the widely used measure of inflation calculated by the Bureau of Labor Statistics, which is down 1.3 percent this year.  As part of its annual tradition, PNC Wealth Management also tabulates the “True Cost of Christmas,” which is the total cost of items gifted by a True Love who repeats all of the song’s verses.  This holiday season, very generous True Loves will pay more than ever before -- $87,402.81 -- for all 364 items, up from $86,609.00, a 0.9 percent increase compared to last year.  We’re betting that Scott Rothstein did not receive very many Christmas gifts. 

 7.            FUTURE OF FANNIE, FREDDIE REMAINS IN DOUBT:  Rather than beginning to extricate itself from Fannie Mae and Freddie Mac, the Treasury Department removed a $200 Billion limit on aid to each of the companies, and promised to cover their losses through 2012.  Bloomberg News reports that since the government seized the lenders in 2008, the likes of Alan Greenspan and Warren and Buffett have argued the companies cannot be sustained as both a for-profit enterprise beholden to shareholders and a tool of housing policy, and should be nationalized or sold.  But nothing has happened.  Instead, Fannie Mae and Freddie Mac, which buy home mortgages from banks and package them into bonds sold to investors, have been bailed out with $1.5 Trillion in direct and indirect government aid.  The Obama administration is banking on the companies to help end a three-year housing slump.  The President is delaying plans to lay out a new framework for them in February and Congress has not scheduled hearings on their future.  Is this a great country, or what?

 8.            THERE WAS NEVER A YEAR LIKE ‘09:  JibJab explains why there was never a year like ‘09: http://sendables.jibjab.com/originals/never_a_year_like_09

 9.            TOP 10 POLITICAL SCANDALS OF 2009:  It might not have reached the heights of the Watergate and Lewinsky years, but the political scandals of 2009 had something juicy for everybody.  Republicans went for sex, Democrats for money and former Gov. Sarah Palin simply bailed out on Alaska.  But for sheer bizarreness, the award has to be split between the state dinner gate-crashers and former Illinois Gov. Rod Blagojevich, who was impeached for trying to sell Barack Obama's Senate seat -- before quitting and winning his own seat on Donald Trump's 2010 Celebrity Apprentice.  Here are US News & World Report’s picks for the Top 10 Political Scandals of 2009: 

 1.            South Carolina Gov. Mark Sanford's Affair.  South Carolina Gov. Mark Sanford had an extramarital tryst in Buenos Aires with an Argentine mistress. He has been reprimanded by the legislature and dumped by his wife. 
 2.            Sen. John Ensign's Affair.  Nevada Sen. John Ensign had an extramarital affair with an aide who is the wife of a former aide.  (Hmmm, sounds like a mutual aid pact.)  The Senate Ethics Committee is investigating. 

 3.            Michaele and Tareq Salahi.  Michaele and Tareq Salahi gate crashed a presidential state dinner.  A House committee is probing how they got in without an invitation and past the White House Social Office. 

 4.            ACORN.  There is an undercover video of ACORN workers advising conservative activists posing as a prostitute and her pimp on criminal activities, including tax evasion and human trafficking.  An internal ACORN probe found no wrongdoing. 

 5.            Sarah Palin Resigning as Governor of Alaska.  Sarah Palin unexpectedly quit as Alaska governor months after a trying vice presidential campaign.  She went on to write her autobiography, and is toying with a presidential bid in 2012. 

 6.            Obama's Beer Summit.  The arrest of Obama pal and Harvard professor Henry Louis Gates by a white Cambridge, Massachusetts cop prompted the president to hold a race-laced beer summit outside the Oval Office.  Since the summit, tensions in the case have eased.  Sure. 

 7.            Sen. Chris Dodd's Loan.  Soon-to-be-ex Sen. Chris Dodd received a sweetheart Countrywide loan for a Capitol Hill townhouse and handling of AIG bonuses. Dodd said he did not seek the VIP treatment, and he was cleared by the Senate Ethics Committee.  (Now, there’s a real seal of approval.) 

 8.            Rep. Joe Wilson's Outburst.  South Carolina Representative Joe Wilson shouted "You lie" during President Obama's joint session address on healthcare.  Wilson apologized, saying his shout was spontaneous.  (You lie, Joe.) 

 9.            Former Illinois Gov. Rod Blagojevich.  Former Illinois Gov. Rod Blagojevich was impeached amid charges he tried to sell President Obama's seat in the Senate.  He did win his own seat, though, on the 2010 Celebrity Apprentice.  (And all along we thought he would be starring as Blago the Clown on Nickelodeon.) 

10.            Climate-Gate.  There was a scandal over E-mails that suggested global-warming scientists used tricks to boost their warming theory.  The scandal dogged the climate summit in Copenhagen.  (Some chilly looks, eh?)
While we cannot quarrel with the editors of US News & World Report in their selection of items, we believe several do not even qualify as “scandals.” 

10.            IRS PROPOSES REGULATIONS TO ADJUST USE OF SOME TAXPAYER INFORMATION:  Internal Revenue Service announced issuance of proposed and temporary regulations and related revenue rulings addressing use or disclosure of tax return information by tax return preparers.  The regulations and related revenue rulings under section 7216 enable tax return preparers more effectively to provide a range of services that taxpayers would ordinarily expect from tax return preparers.  Generally, these services benefit taxpayers, increase voluntary compliance and improve tax administration.  The proposed and temporary regulations enable tax return preparers to use or disclose tax return information without explicit taxpayer consent in certain limited circumstances.  Tax preparers can contact their clients regarding tax law developments that may affect the clients.  They can also disclose information in connection with the potential sale or purchase of a tax return preparer’s business and during the process of conducting client conflict-of-interest checks.  Before the proposed regulations are adopted as final regulations, consideration will be given to any comments that are timely submitted to IRS.  IR-2009-121 (December 30, 2009).  Related Revenue Rulings 2010-04 and 2010-05 can be accessed, respectively, at http://www.irs.gov/pub/irs-drop/rr-10-04.pdf and http://www.irs.gov/pub/irs-drop/rr-10-05.pdf.

11.            URBAN INSTITUTE FACT SHEET ON RETIREMENT ACCOUNT BALANCES:  The retirement savings of American households took a big hit when the stock market crashed in 2008.  Recently, however, a good portion of these losses has been reversed.  The Urban Institute’s Fact Sheet follows trends in Retirement Account Balances since the beginning of 2005.  Some Key Points: 

  • Assets in retirement accounts (defined contribution plans and IRAs) exceeded $8.6 Trillion in the third quarter of 2007.  By the end of the first quarter of 2009, when the stock market bottomed out, retirement accounts had lost $2.8 Trillion (33 percent) of their peak value. 
  • Since then, account balances have rebounded sharply.  The most recent data show that retirement accounts gained roughly $1.3 Trillion (23 percent) since the first quarter of 2009, ending the third quarter at around $7.1 Trillion.
  • Although current retirement account assets remain 17 percent below their peak value in 2007, they are above their 2005 value and near their 2006 value.  

The nonpartisan Urban Institute publishes studies, reports and books on timely topics worthy of public consideration. 

12. COBRA SUBSIDY EXTENSION:  The Employee Benefits Security Administration, United States Department of Labor, has released a statement regarding the Consolidated Omnibus Budget Reconciliation Act and the recent extension of premium reduction under the American Recovery and Reinvestment Act.  Congress has acted and the President has signed the Fiscal Year 2010 Defense Appropriations Act (H.R. 694).  The act extends eligibility period for the COBRA premium reduction for an additional two months (through February 28, 2010) and the maximum period for receiving the subsidy for an additional six months (from nine months to 15 months).  Millions of unemployed Americans and their families will be better able to afford and keep their health benefit coverage because of this new law.  Individuals who had reached end of the reduced premium period before the legislation extended it to 15 months will have additional time to pay the reduced premiums related to the extension.  To continue their coverage they must pay the 35% premium costs (60 days after date of enactment) or, if later, 30 days after notice of the extension is provided by their plan administrator.  Access  http://www.dol.gov/cobra for more information on new notice requirements, updated guidance, fact sheets and frequently asked questions. 

13. PENSION PLANS IMPROVE FUNDED STATUS:  U.S. pension plans’ funded status improved to 85%, with a deficit of $225 Billion at the end of 2009, compared with a funded status of 75% and a deficit of $409 Billion at the end of 2008.  Business Insurance’s report of Mercer L.L.C.’s analysis indicates that improved funding status will help pension fund earnings and reduce the need for future cash contributions.  (On the other hand, some companies may see increased cash contribution requirements because of smoothing methods, which deferred prior losses.)  Reasons for improvement in funding in 2009 include higher corporate bond yields and a rise in stock market values.  Most plan sponsors continue to have assets invested predominantly in return-seeking assets, mainly equities. 

14. H&R BLOCK SETTLES NATIONWIDE IRA LAWSUIT:  H&R Block Inc will pay as much as $20.2 million to settle a New York state lawsuit accusing it of fraudulently marketing retirement accounts that caused hundreds of thousands of mostly lower-income clients to lose money.  Reuters reports that the agreement calls for the largest U.S. tax preparer to refund $11.4 Million to $19.4 Million in fees to customers nationwide who opened one of its Express IRAs, a type of individual retirement account.  H&R Block will also pay $750,000 in fines and other costs to the state, and convert Express IRAs into new retirement accounts that do not charge fees.  The size of the refund ultimately depends on the number of claims made.  New York had accused H&R Block of steering more than 600,000 customers to Express IRAs, without disclosing hidden fees that wiped out the interest 85 percent of them could earn.  Separately, H&R Block also settled private class action lawsuits based on the same allegations, which were pending in federal court in Missouri.  Show me. 

15. ENGLISH LAW GOVERNS DISPUTE WITH RETIREMENT SYSTEM:  City of Harper Woods Employees’ Retirement System, a municipal pension fund, brought a shareholder derivative suit on behalf of BAE Systems PLC, alleging intentional, reckless and negligent breaches of fiduciary duties and waste of corporate assets by current and former directors and executives of BAE.  The U.S. District Court dismissed the suit, holding that English law controls, and that Harper Woods had no standing under English law to pursue the instant action.  Harper Woods appealed the dismissal of its complaint, contending that the District Court erred in applying English law.  Harper Woods also asserted that, if British law in fact bars the derivative suit, a public policy exception to the applicable choice of law rule applies, and that District of Columbia law should thus govern its suit.  The Court of Appeals affirmed.  First, pursuant to the District of Columbia’s internal affairs doctrine, English law applies to the case.  Second, Harper Woods did not show that its complaint fell outside the rule that establishes that the company, not a shareholder, is the proper plaintiff in a suit seeking redress for wrongs allegedly committed against the company (and that Harper Woods did not demonstrate that an exception to the rule applied).  Third, Harper Woods forfeited its claim that the District Court erred in dismissing its complaint with prejudice, because it did not seek leave in that court to amend.  City of Harper Woods Employees’ Retirement System v. Olver, Case No. 08-7101 (US DC Cir., December 29, 2009). 

16. NON-VESTED MEMBER OF FRS NOT ENTITLED TO IN-LINE OF DUTY DISABILITY UNLESS INJURY AROSE OUT OF PERFORMANCE OF DUTIES AND CAUSED TOTAL AND PERMANENT DISABILITY:  Johnson appealed from an adverse determination of the State of Florida Division of Retirement on a claim for in-line of duty disability retirement benefits under the Florida Retirement System.  An employee of a county school board, Johnson was injured in the line of duty.  At the time of her injury, Johnson’s creditable service in the state retirement program totaled less than the 10-year then-required for normal vesting.  Thus, in order to recover disability benefits, Johnson had to demonstrate an in-line of duty, work-related injury, which caused a total and permanent disability.  After Johnson’s initial claim for benefits was denied, she appealed to the Division, which concluded that she failed to prove by competent evidence that she was totally and permanently disabled, concluding, instead, that at most, she demonstrated a temporary, moderate disability.  As a non-vested member of FRS, Johnson was entitled to in-line of duty disability benefits only if her injury and her illness arose out of an in actual performance of duties required by her employment, and was the substantial cause or aggravating cause of her total and permanent disability.  Here, although the evidence presented at the hearing was disputed, the Division’s final order, denying benefits on the basis that Johnson failed to establish a total and permanent disability, is supported by competent, substantial evidence.  Because the court was prohibited from reweighing evidence, the Division’s order was affirmed.  Johnson v. Department of Management Services, 35 Fla. L. Weekly D74 (Fla. 5th DCA, December 31, 2009). 

17. IN DISCRIMINATION CONTEXT, “MARITAL STATUS” DOES NOT INCLUDE SPECIFIC SPOUSE:  A circuit court denied review of a final order of the Miami-Dade County Equal Opportunity Board awarding damages to Ms. Fish in an alleged employment discrimination case.  The record conclusively demonstrated,  however, that Ms. Fish was not discharged from her employment because she was in the class of married persons protected by the Florida Civil Rights Act of 1992, Chapter 760 (Part I), Florida Statutes.  Rather, she was terminated after years of service because she married Mr. Fish, one of three hands-on partners who operated her employer.  It is well established that a valid discrimination claim cannot arise on the basis of the specific identity of an individual’s spouse.  “Marital status” for discrimination purposes means the state of being married, single, divorced, widowed or separated, and does not include the specific identity or actions of an individual’s spouse.  (The fact that she was replaced by another married woman itself demonstrates that Ms. Fish could not establish a prima facie case of discrimination on such grounds.)  Review granted, lower court decision quashed.  Industrial Affiliates, Ltd. v. Fish, Case No. 3D09-1979 (Fla. 3d DCA, December 30, 2009).  Go Fish. 

18. IF FAMOUS CHARACTERS THROUGHOUT TIME HAD JEWISH MOTHERS:  CHRISTOPHER COLUMBUS' JEWISH MOTHER:  “I don't care what you've discovered, you didn't call, you didn't write...”

19. FABULOUS RANDOM THOUGHTS:  I don't understand the purpose of the line, "I don't need to drink to have fun." Great, no one does. But why start a fire with flint and sticks when they've invented the lighter? 

20. QUOTE OF THE WEEK:  “If you think dogs can’t count, try putting three dog biscuits in your pocket and then giving Fido only two of them.”  Phil Pastoret 

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Items in this Newsletter may be excerpts or summaries of original or secondary source material, and may have been reorganized for clarity and brevity. This Newsletter is general in nature and is not intended to provide specific legal or other advice.


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