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Cypen & Cypen
MAY 7, 2009

Stephen H. Cypen, Esq., Editor


For the first time in more than three decades, Social Security recipients may not get any increase in their benefits next year, federal forecasts show.  The New York Times reports that absence of a cost-of-living adjustment, calculated under a formula set by law, will be a shock to older Americans already hit by plummeting home values, investment losses and rising health costs.  More than 50 million people receive Social Security.  Beneficiaries have received automatic cost-of-living adjustments every year since 1975.  The increase this year was 5.8 percent (see C&C Newsletter for October 17, 2008, Item 2).  (Actually, the Congressional Budget Office indicates that Social Security beneficiaries may not receive any cost-of-living increase in 2011, either!)


The Securities and Exchange Commission has filed civil fraud charges against the managers of the Reserve Primary Fund, which once had assets of $62 Billion, according to Pensions & Investments (see C&C Newsletter for September 25, 2008, Item 8).  The suit, filed in U.S. District Court in New York, claimed the managers did not provide key material facts to investors and trustees about the fund’s investments in Lehman Brothers Holdings, which sought Chapter 11 bankruptcy protection September 15, 2008.  SEC alleges that Reserve Management senior officials engaged in a systematic campaign to deceive the investing public into believing that the Primary Fund, their flagship money market fund, was safe and secure despite its substantial Lehman holdings.  The fund, which held $785 Million in Lehman-issued securities on September 15, became illiquid when it was unable to meet investor requests for redemptions.  SEC seeks unspecified financial penalties, disgorgement and prejudgment interest, as well as distribution of the fund’s remaining assets to investors. 


A.            Barth, an off duty police officer hired by Planned Parenthood to provide security at its reproductive health clinic, limited ability of pro-life advocate to walk in alley to communicate with pregnant women dropped off there to enter clinic, citing need to prevent people from being hit by trucks using the alley.  Issue of fact existed as to whether officer’s doing so violated advocate’s religious and free speech rights, as officer had no difficulty in allowing clinic visitors and their escorts to walk freely in the alley.  Police directives issued by officers in the field warrant heightened scrutiny, given potentially greater opportunities for arbitrary enforcement.  McTernan v. City of York, Pennsylvania, Case No. 07-4437 (U.S. 3d Cir., April 27, 2009). 

B.            Koltanovich, an off duty police officer hired by Planned Parenthood to provide security at its reproductive health clinic, did not restrict pro-life advocate’s access to alley patients used to enter clinic; but, when demonstrator stepped back into clinic parking lot to avoid being hit by a truck, officer arrested him for trespass.  Despite advocate’s argument that stepping back was necessary, the arrest did not violate Section 1983.  The court concluded that defense of necessity need not have been considered in assessment of probable cause for arrest for trespass at the scene.  Holman v. City of York, Pennsylvania, Case No. 07-4438 (U.S. 3d Cir., April 27, 2009). 

C.            Camacho, an off duty police officer hired by Planned Parenthood to provide security at its reproductive health clinic, ordered pro-life advocate not to enter alley over which women accessed clinic, and arrested advocate for approaching a couple of them to offer a pamphlet or advice.  Barring him from alley violated his religious and free expression rights, as the officer did not impede use of alley by others.  Officer’s assertions of need to ensure patient access and to protect visitors from physical harassment fell short, there being no evidence of such conduct.  And the arrest was actionable as well, because disorderly conduct requires “creation” rather than mere possibility of a hazardous or physically offensive condition.   Snell v. City of York, Pennsylvania, Case No. 07-4439 (U.S. 3d Cir., April 27, 2009). 

In preparing these summaries, we relied upon input from Chuck Carlson.  


Advisen, a company that collects information for the insurance industry, has released a report confirming that securities litigation is on the rise.  The report shows 169 securities cases were filed in the first quarter this year, up from 125 during the fourth quarter of 2008 and 134 from the same period a year ago.  Securities litigators have Bernard Madoff and the subprime crisis to thank for the uptick.  The figures include all kinds of security cases -- derivative, breach of fiduciary duty, fraud and regulatory actions. They also include cases filed outside the U.S.  Of the 169 cases filed in the first quarter, 67 were securities class actions and 34 were securities fraud cases, most of which were filed by the Securities and Exchange Commission.  Other types of suits filed included 26 breach of fiduciary duty cases, 14 derivative cases and 20 collective actions filed outside the U.S.  Interestingly, while securities class actions increased from 53 in the fourth quarter of 2008 to 67 in the first quarter of 2009, they constitute a smaller percentage of the overall cases filed than previously.  In the first quarter of this year, 76 cases were settled/awarded, meaning that either a judgment came down awarding damages or a settlement was reached.  Of the 76 suits, one was in a non-U.S. court and 13 were cases with non-U.S. companies as defendants.  The average settled/awarded amount for the quarter was $27.9 Million, down significantly from $60.6 Million in the fourth quarter of 2008.  By type of suit, the securities class actions suits settled/awarded had an average amount of $12.1 Million, derivative shareholder actions and other derivative cases were $10.2 Million and securities fraud had the highest average of $43.4 Million. 


The Federal Bureau of Investigation has issued its 2008 Annual Report on Internet Crime.  The number of complaints received rose 33% in 2008, compared to the prior year:  275,284 vs. 206,884.  Other noteworthy data include: 

  • Non-delivered merchandise or payment was the most reported offense.
  • The highest median losses included check fraud ($3,000), confidence schemes ($2,000) and Nigerian letter fraud ($1,650). (Can you believe the Nigerian letter fraud is still around?)
  • More than 77% of perpetrators were male (it figures) and men lost more money than women ($1.69 for every dollar).

And the really big ones:  over 50% of perpetrators live in California, Florida, New York, Texas, Washington, D.C. and Washington State (huh?) and one-third of complainants resided in California, Florida, New York or Texas.  Yeah, Baby, let’s keep fraud close to home. 


The Internal Revenue Service has announced its annual “dirty dozen” list of tax scams for 2009.  IRS urges taxpayers to avoid these common schemes: 

Phishing -- a tactic used by Internet-based scam artists to trick unsuspecting victims into revealing personal or financial information.

Hiding Income Offshore -- IRS aggressively pursues taxpayers and promoters involved in abusive offshore transactions.

Filing False or Misleading Forms -- IRS is seeing scam artists file false or misleading returns to claim refunds that they are not entitled to receive. 

Abuse of Charitable Organizations and Deductions -- IRS continues to observe misuse of tax-exempt organizations including arrangements improperly to shield income or assets from taxation and attempts by donors to maintain control over donated assets or income from donated property.

Return Preparer Fraud -- Dishonest return preparers can cause many headaches for taxpayers who fall victim to their ploys, such as skimming a portion of their clients’ returns and charging inflated fees for return preparation services.

Frivolous Arguments -- Promoters of frivolous schemes encourage people to make unreasonable and unfounded claims to avoid paying taxes they owe.

False Claims for Refund and Requests for Abatement -- This scam involves a request for abatement of previously assessed tax using Form 843, Claim for Refund and Request for Abatement. 

Abusive Retirement Plans -- IRS continues to uncover abuses in retirement plan arrangements, including Roth Individual Retirement Arrangements. 

Disguised Corporate Ownership -- Some taxpayers form corporations and other entities in certain states for the primary purpose of disguising ownership of a business or financial activity. 

Zero Wages -- Filing a phony wage- or income-related information return to replace a legitimate information return has been used as an illegal method to lower the amount of taxes owed. 

Misuse of Trusts -- For years, unscrupulous promoters have urged taxpayers to transfer assets into trusts as a means to avoid income tax liability and hide assets from creditors. 

Fuel Tax Credit Scams -- IRS is receiving claims for the fuel tax credit that are unreasonable.

Suspected tax fraud can be reported to the IRS using Form 3949-A, Information Referral. Whistleblowers also may provide allegations of fraud to IRS and may be eligible for a reward by filing Form 211, Application for Award for Original Information.  (IR-2009-041, April 13, 2009)

 7. TEN QUESTIONS NEVER TO ASK IN JOB INTERVIEWS:  You know enough to bring a list of questions to a job interview.  When the interviewer asks you, "So, do you have any questions for me?" the last thing you want to say is "No."  But that could be the best option if you are at a loss for words, because some interview questions are better left unasked.  From the San Francisco Chronicle, here are 10 highly unsuitable interview questions that should never make an appearance unless you don't want the job:

"What does your company do?"  Great question ... in 1950 (or even 1980) before the Internet existed.

"Are you going to do a background check?"  Alarm. 

"When will I be eligible for a raise?"  How about getting hired first? 

"Do you have any other jobs available?"  If a job is far below your abilities, you're better off saying so than beating around the bush. 

"How soon can I transfer to another position?"  If you like the job, take the job. If the job is not for you, wait for the right opportunity. 
"Can you tell me about bus lines to your facility?"  If you cannot figure this one out yourself... . 

"Do you have smoking breaks?"  Why give an employer a reason to turn you down?

"Is [my medical condition] covered under your insurance?"  You really do not want to tell a perfect stranger about your medical issues, especially one who is deciding whether or not to hire you.  Besides, very few interviewers can be expected to know on a condition-by-condition basis what is covered under the health plan.

"Do you do a drug test?"  Double alarm. 

"If you hire me, can I wait until [more than three weeks from now] to start the job?"  Employers expect you to give two weeks' notice.  If you are not working, they would love to see you more quickly.  In any case, a start-date extension is something to request after you have got the offer in hand, not before.

8. TEN SECRETS TO HAPPINESS DURING THE RECESSION: says that research has pinpointed ways to feel good even in the worst of times.  But how can we truly feel happy right now, in this moment when our 401(k)s and house values are tanking?  When our jobs are threatened or already lost? posed this very question to leading happiness researchers to find out what tools we can employ to stay upbeat in gloomy days.  What truly provides satisfaction is having a meaning and purpose in life, which is doubly important in the midst of this economic nightmare.  Here are ten other secrets: 

  • Spend $20 on an experience rather than an item.  A recent study shows that you will feel more invigorated by doing things than by purchasing things. When researchers asked people how they felt after recent purchases using discretionary income, they found that money spent on theater tickets, ski trips and fine dining brought more pleasure than that spent on designer jeans, cellphones and diamonds.  (Jeans ... maybe, but diamonds?) 
  • Pursue meaningful life goals.  Having life aspirations that you are working to achieve is a major factor in determining happiness. 
  • Be open and receptive to what is happening right now, in the moment.  Even if you are facing massive credit card debt or a balloon mortgage payment that you are not going to be able to make, try to tune in to your situation with a sense of neutral observation. 
  • Nurture meaningful relationships.  They come in especially handy when you cannot quiet those disparaging thoughts.  You may be pleasantly surprised to see how many people are there for you when you are not your usual funny, witty or playful self. 
  • Recognize your strengths.  In times of difficulty, we get to see what we are made of and to test our mettle.  Everything can be taken from a man but one thing:  the last of the human freedoms -- to choose one's attitude in any given set of circumstances, to choose one's own way. 
  • Count your blessings.  We all hate to hear, "Well, at least you have your health," when times are tough -- especially if those words come from those who are financially secure.  The key to conjuring feelings of improved happiness may lie in spending time with others who are less fortunate. 
  • Keep an optimism journal.  It may sound corny, but evidence suggests doing so can actually improve your outlook on life. 
  • Seek advice from your neighbor.  It may be more informative than your own best predictions about what will make you happy.  So, if you are trying to determine the restaurant where you are going to spend that $20, rely on a friend's recommendation rather than the menu you see posted in the window.  (Who does that, anyway?) 
  • Get out and sweat.  When you are feeling down in the dumps, there is no better pick-me-up than exercise.  Studies indicate that burning off 350 calories three times a week in sustained, sweat-inducing activity can reduce symptoms of depression about as effectively as antidepressants. 
  • Do unto others.  Practicing acts of kindness has been shown to enhance well-being.  Individuals who were asked to perform five considerate acts on a particular weekday reported higher levels of pleasure than members of a control group who did no such acts.  We saw it happen after 9/11, and we are seeing it again with the economic crisis. 

Really, now, what have you got to lose? 


The classic “West Side Story” is enjoying its Broadway revival.  Now from Pulitzer Prize-winning political cartoonist and animator Walt Handelsman comes the remix:  “Worst Slide Story.”  Lighten up a bit and catch a listen at


Internal Revenue Service reports that a record 90 million tax returns were electronically filed this year, led by a big increase by people using home computers.  For the first time, more than 30 million individual income tax returns were filed from home computers.  By April 24, 2009, IRS had accepted 31.2 million returns filed from home computers, up 19.3% from the same time last year.  IRS E-file broke the 90 million mark this year.  By April 24, IRS had accepted 90.6 million income tax returns through E-file, up almost  6% compared to the same time last  year.  A higher percentage of the population is choosing to e-file this year.  As of April 24, almost 70% of individuals chose to e-file their tax returns, compared to 61% for the same time last year.  IRS will continue to accept income tax returns through IRS E-file until October 15, 2009.  IRS E-file is popular because it is fast, safe and accurate.  An electronically prepared and filed return has an error rate of less than 1%, compared to an error rate of about 20% for a paper prepared return.  (Huh?)  People can receive a refund in as little as 10 days if they use electronic filing and direct deposit.  Also, people who owe can pay electronically by debiting their financial account or using a credit card.  IR-2009-046 (April 30, 2009).  We’re glad to see that Uncle Sam is trying to keep up with the times.


The economy may be contributing to expanding waistlines of U.S. workers, as one-in-ten reports increased snacking during the day due to concerns over the current economic situation.  Overall, 43% say they have gained weight in their current jobs, according to a CareerBuilder survey.  A quarter of employees report they have gained more than ten pounds and 12% say they have gained more than twenty pounds while in their present positions.  Women are more likely (around 48%) than men (39%) to say they have gained weight at their current jobs.  Eating habits can often be the  culprit in workplace weight gain.  Nearly 40% of employees surveyed eat out for lunch twice or more per week, making it difficult to control portions and calorie intake.  In addition, 12% buy their lunch out of a vending machine at least once a week.  Snacking can also be a slippery slope for those trying to cut back on calories, as 67% of employees surveyed snack at least once a day, including 24% who snack twice a day.  One of the ways employees can cut back on workplace weight gain is by heading to the gym during lunch hour, but only 9% of employees work up a sweat in the middle of the day.  More employees may be inclined to take advantage of gym facilities during lunch and outside of work, as 25% of companies now provide gym passes, workout facilities or wellness benefits.


WINDOWS -- What you jump out of when you're the sucker who bought Yahoo @ $240 per share. 
INSTITUTIONAL INVESTOR -- Past year investor who's now locked up in a nuthouse. 
PROFIT -- An archaic word no longer in use. 


“Do not go where the path may lead, go instead where there is no path and then leave a trail.”  Ralph Waldo Emerson  (But be careful what kind of trail you leave.)

Copyright, 1996-2009, all rights reserved.

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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