Cypen & Cypen
MAY 5, 2011
Stephen H. Cypen, Esq., Editor
1. MARYLAND COUNTY PUBLIC EMPLOYEES SUE OVER BENEFITS: Two years ago, long before Republican Scott Walker used the Wisconsin governorship to launch a national fight over public employee unions, Montgomery County, Maryland Executive Isiah Leggett won a startling victory in the union-friendly county’s collective-bargaining process. According to a piece in Washington Post, a county labor umpire, appointed with the blessing of local union officials, essentially ruled that the county’s binding arbitration process was not actually binding. But after wielding the ruling to extract wage concessions in a bad budget year, Leggett, a Democrat, agreed with spooked union leaders that the decision would be forgotten. Now, however, the exercise in legal make-believe is unraveling in the aftermath of two years of fiscal pain in the wealthy Maryland county. The county’s fight over collective bargaining is set to land in court, an unpredictable venue where the outcome could have a profound impact on the way the county negotiates with employees and crafts multibillion-dollar budgets. The county’s main government employees union sued the county, seeking to enforce it to abide by results of its binding arbitration process, which was disregarded in the proposed $4.35 Billion budget. Although mediators had ruled for the unions, Leggett proposed cutting health and pension benefits anyway. The legal dispute has raised the question whether Montgomery’s collective bargaining laws mean anything or can just be ignored? The union wants the court to force Leggett to recommend a budget that reflects the contract provisions it won during binding arbitration. County attorneys have argued that it would be irresponsible, not to mention unconstitutional, to require Leggett to recommend a budget he opposes. County attorneys have said there is a conflict between the county charter, which is treated as the county’s constitution, and the law that set up collective bargaining, in which case, the charter trumps. Under the charter, Leggett has virtually unchecked authority to propose any budget he sees fit, they argued.
2. WIDE RANGE IN 401(K) TOTAL PLAN COSTS: Total plan costs for running a 401(k) can vary widely, but for most employers the range between high and low total plan costs is moderate. For a 401(k) plan with approximately $2,000,000 in assets, the range between the high and low cost providers averages around 1.33%, while the range for the middle 50% of the universe is .31%. The range between high and low costs can be significant, but most 401(k) plan costs are going to be grouped around the median. According to the 401k Averages Book, the range between the high and low cost for a 50 participant plan with $2,500,000 in assets is 1.24%, while the range for the middle 50% of the universe is .29%. The median total plan cost for this plan size is 1.49%. Naturally, the disparity between high and low costs is largest for plans with smaller plan assets and more participants. Even though the range between high and low total plan costs might be greater for these types of plans, there is a significant reduction in the range between the middle 50% of the universe. The 401k Averages Book shows the range of total plan costs for a plan with 200 participants and $2,000,000 is 1.48%, while the range for the middle 50% of the universe is .32%. The median total plan cost for this plan size is 1.70%. (Just another reason that defined contribution plans do not stand up against defined benefit plans.) PRNewswire issued a press release on the 11th edition of the 401k Averages Book.
3. NEWARK FIRE DEPARTMENT UNVEILS FIVE NEW FIRETRUCKS, BOUGHT WITH FEDERAL AND CITY FUNDS: The Newark Fire Department has unveiled five new trucks, including two Haz-Mat vehicles that officials say will give the state’s largest city one of the best Haz-Mat responses in the country. The city received funding for the Haz-Mat trucks through a $750,000 federal grant, and paid for one of the new engines through its Haz-Mat fund. The other two trucks cost the city about $350,000 each. The vehicles put Newark on the level of New York, which is considered one of the best in the country. Newark is now one of only three cities on the East Coast to employ these state-of-the-art Haz-Mat vehicles, reports nj.com. Now let’s hope that the vehicles do not get a lot of use.
4. DO NOT FALL PREY TO THE 2011 DIRTY DOZEN TAX SCAMS: Holding income in offshore accounts, identity theft, return preparer fraud and filing false or misleading tax forms top the annual list of “dirty dozen” tax scams in 2011, Internal Revenue Service has announced. Here are the ignominious twelve for this year:
IR-2011-39 (April 7, 2011)
5. THE WORLD’S 10 COSTLIEST MILITARIES: Military spending, according to marketwatch.com, among all countries totaled $1.63 Trillion last year, but that number was up just 1.3% from the year before. Spending includes weapons, soldiers and cost of maintaining a country’s military infrastructure. Here are the top-10 ranking countries:
By the way, the proportion of U.S. Gross Domestic Product that goes to the Pentagon has risen from 3.1% in 2001 to an estimated 4.8% in 2010.
6. THE 10 MOST UNIONIZED U.S. CITIES: According to usnews.com, here are the country’s most unionized cities:
The foregoing represent metropolitan areas with populations over 300,000. Here are some more general statistics:
7. BUSCH OFFERS $1.5 MILLION FOR GIRLFRIEND’S DEATH: Beer tycoon August Busch IV has offered to pay $1.5 Million over the fatal drug overdose of his girlfriend at his mansion, according to advisen.com. Busch’s proposed settlement is with Dr. Kevin Martin, ex-husband of Adrienne Martin, who sued Busch for negligence in behalf of his 8-year-old son. Busch did not admit negligence, but decided to put the matter behind him and to help the boy. Authorities ruled Adrienne Martin’s December 19, 2010 death in Busch’s mansion an accident, and an autopsy listed an overdose of oxycodone as the cause. Busch was chief executive of Anheuser-Busch before it was sold to InBev, earning him about $100 Million. A bird in the hand … .
8. FORGERY SUSPECT SHOWS UP IN COURT WITH FORGED DOCTOR’S NOTE: Some people never learn, and Michelle Astumian happens to be one of them. In a California court to be sentenced for forgery, she presented a doctor's note to the prosecutor, requesting that the hearing be postponed. But findlaw.com says the note was a fake. Astumian had already pled no contest to two counts of forging drug prescriptions and one count of using a fraudulent check. Out on bail, she returned to court officially to be sentenced to a jail term of 4 years - 8 months. Well, because no one trusts a forger, the district attorney immediately called Astumian's doctor to verify the note. The judge, who was not too pleased to find out that Astumian had tried to pass off another forged document, ordered her to jail. Astumian probably was not under oath when she presented her note, so she's not liable for perjury. However, there are laws against lying to officials and impersonating health care providers, which her little stunt may have violated. Astumian's forged doctor's note probably also caused her to forfeit $45,000 in bail. Not falsifying documents was undoubtedly part of her bail conditions, and she violated them right in front of the judge. Let’s forge ahead.
9. FAKE MASSAGE PARLOR INSPECTOR DEMANDS HAPPY ENDING: What do $200 and a fake massage parlor inspector have to do with one another? Everything, according to findlaw.com. In a story that brings new meaning to the term “shake down,” Edward LaPorte, posing as a fake inspector, not only requested a happy ending, but demanded $200 for his time. LaPorte popped into a Lake Forest, California, massage parlor, wearing a police badge and carrying a gun, when he informed the manager that he was there to investigate a complaint. He was so into his fake inspector role that he also carried a metal clipboard to take notes. The shameless fake massage parlor inspector then complained of back pain, requesting that the manager rub him down. When she sent a masseuse into the room, LaPorte was naked, and, requested a frontal massage. Of course, once the parlor told the fake inspector that they did not offer happy endings, he left, and they called the police. LaPorte was arraigned on charges of impersonating a peace officer, firearm violations and felony burglary. The burglary charge may seem a bit odd, but in California it is defined as entering a building with intent to commit theft or a felony within. Besides a happy ending, LaPorte entered the parlor with hopes of swindling the owner for $200. Even if she had given it to him willingly, he would have acquired it by fraud, which is considered theft in every state. Although it may rub you the wrong way, isn’t there a new ABC television show called “Happy Endings?” – a far cry from the innocence of “Happy Days.”
10. AIG TRIES TO SELL DEATH-BET SECURITIES: American International Group Inc. has sought to rally support among investors and credit-ratings firms for a controversial deal: sale of securities backed by insurance policies on lives of older people (see C&C Newsletter for August 7, 2007, Item 5). There have been few offerings of these types of securities, which critics have called “death bonds,” “blood pools” and “collateralized death obligations” because they pay off when the insured dies. And AIG’s effort so far is not panning out, as Standard & Poor’s recently declined to provide a rating, an essential step in selling such securities to most investors. AIG’s push highlights the giant insurer’s outsize role as an investor in the market, known as life settlements, a role that has largely gone unnoticed. With life settlements, investors buy older people’s policies, betting the future death benefit will exceed the cash they pay both to buy the policy and for premiums while waiting for the person to die. AIG’s life-settlements portfolio totals about $18 Billion in anticipated death benefits, well over a third of the estimated $45 Billion that has changed hands since the market revved up about a decade ago. In general, life insurers have said widespread ownership of their policies by investors -- essentially betting on death -- would be bad for the industry’s reputation. Many insurers, including one of AIG’s units, have gone to court asserting that buyers misled them about wanting policies for estate planning when the goal was to flip them to investors. For investors, many life settlements have proved to be losing bets, as people have lived longer than expected and as credit dried up in 2008. Since then the market has remained depressed, in part because of mounting litigation. The new wrinkle of securitization arose in the market’s boom years before the financial crisis. Just as Wall Street banks bundled mortgages to make mortgage bonds, financiers looked into bundling hundreds of life insurance policies into bonds they could then sell, with the bonds’ income coming from the death benefits. Critics say that concept of a Wall Street pipeline that needs to be filled with policies could encourage fraud by commission-paid agents and others trying to get older people to purchase and sell policies. Under AIG’s proposal to sell securities based on part of its portfolio, a subsidiary of its property and casualty unit would collateralize notes worth $900 Million with 1,157 policies acquired since 2001. AIG would sell $250 Million to outside investors. The full story appeared in the Wall Street Journal. P.T. Barnum was right: “there’s a sucker born every minute.”
11. REMARKABLE QUOTES FROM REMARKABLE JEWS: Whoever called it necking was a poor judge of anatomy. Groucho Marx
12. BLESSED ARE THE CRACKED, FOR THEY LET IN THE LIGHT: God must love stupid people; He made so many.
13. PARAPROSDOKIAN: (A paraprosdokian is a figure of speech in which the latter part of a sentence or phrase is surprising or unexpected in a way that causes the reader or listener to reframe or reinterpret the first part. It is frequently used for humorous or dramatic effect.): Some people are like Slinkies ... not really good for anything, but you can't help smiling when you see one tumble down the stairs.
14. QUOTE OF THE WEEK: “This report, by its very length, defends itself against the risk of being read.” Winston Churchill
15. ON THIS DAY IN HISTORY: In 1943, Postmaster General Frank C. Walker invents Postal Zone System.
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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.