October 2008 Archives

San Francisco may become the first major city to decriminalize prostitution if voters next month approve Proposition K—a measure that forbids local authorities from investigating, arresting or prosecuting anyone for selling sex.

Proponents say the measure will free up $11 million the police spend each year arresting prostitutes and allow them to form collectives.

"It will allow workers to organize for our rights and for our safety," said Patricia West, 22, who said she has been selling sex for about a year by placing ads on the Internet. 

This is going to be a tough one

In 2004, almost two-thirds of voters in nearby Berkeley rejected decriminalization of prostitution. But proponents of Proposition K say their proposal has a better shot in San Francisco, which they believe is more sexually liberal than the city across the bay. That has to be a coin toss.

Police made 1,583 prostitution arrests in 2007 and expect to make a similar number this year. Most defendants are fined, placed in diversion programs or both. Fewer than 5 percent get prosecuted for solicitation, which is a misdemeanor punishable by up to six months in jail.

As you might expect, the mayor, district attorney, police department and much of the business community oppose the idea.  Interestingly, the San Francisco Chronicle editorialized against the measure, saying it could make the city a magnet for prostitution.

In a relatively unique twist, the proposition would also prohibit police from accepting federal or state funds for sex trafficking investigations that involve racial profiling. Such investigations often arise from raids on brothels that advertise as Asian massage parlors.

I'll track this one. 

John M. Hanamirian

The Connecticut Supreme added its voice to the issue of gay marriage holding that laws restricting gay couples from entering into this legal relationship violated the state’s constitution. In a well-reasoned and cogent opinion, the Court joined the highest courts of Massachusetts and California in doing what politicians seem hesitant to do: declare that laws which discriminate against couples on the basis of sexual orientation violate the fundamental rights of gay Americans. The Court wrote: “Like these once prevalent views, our conventional understanding of marriage must yield to a more contemporary appreciation of the rights entitled to constitutional protection. Interpreting our state constitutional provisions in accordance with firmly established equal protection principles leads inevitably to the conclusion that gay persons are entitled to marry the otherwise qualified same sex partner of their choice. To decide otherwise would require us to apply one set of constitutional principles to gay persons and another to all others. The guarantee of equal protection under the law, and our obligation to uphold that command, forbids us from doing so. In accordance with these state constitutional requirements, same sex couples cannot be denied the freedom to marry.”

Alan Milstein

The last of the defendants in a District of Columbia embezzlement and tax scheme pleaded guilty this week to charges of mail fraud and receiving stolen property, conspiracy to commit money laundering and tax evasion.

Here is how it went. Jayrece Turnbull (courtroom artist's depiction above), the leader of the defendant scam team, received fraudulent property tax refund checks totaling $24.2 Million Dollars over a 6 year period. She deposited those checks into her bank account. At one point, Ms. Turnbull deposited a $410,000.00 in a Maryland bank. When the bank representatives questioned the deposit and the authenticity of the check, Ms. Turnbull decided to forge a letter to herself from the District of Columbia on fake letterhead.  She then mailed that forged letter to herself in an effort to lend a “veneer of legitimacy to the deposit transaction;  that didn’t work out so well.

John M. Hanamirian

Beyond amazing and into disbelief. The names are omitted and the case is presented in the form of a hypothetical.

Plaintiff sued Defendant who was defended by attorney AP. When AP failed to respond to discovery requests, the trial court ordered terminating sanctions against Defendant.  Defendant then retained new counsel in the case, but the trial court still entered default judgment against Defendant. Defendant appealed.

While Defendant’s appeal was pending, Attorney AP purchased Plaintiff’s interest in the suit. Attorney AP sought to substitute himself for Plaintiff in the appeal and to be represented by another lawyer in his firm. By this time, Defendant was also suing Attorney AP for malpractice. The appellate court denied the motion to substitute into Plaintiff’s position on the appeal because doing so would violate the Rules of Professional Conduct and Attorney AP’s fiduciary duties to Defendant.

The court held that by switching sides, Attorney AP would be violating his duty to safeguard client confidences. The court also held that Attorney AP’s violation of “a myriad of ethical duties” would undermine public confidence in the legal system. Yes, it would.  

John M. Hanamirian

Here are the details on Helio’s indictment. According to the prosecution, Helio and his co-defendant sister and their attorney, used an offshore Panamanian shell company, Seven Promotions Corp., to conceal from the I.R.S. approximately $5 Million Dollars of income from a Brazilian auto sponsor. 

Helio had sponsorship contracts that that Brazilian company paid him totaling $2.0 Million dollars per year. Pursuant to an alleged unwritten side agreement, Helio returned $1.8 Million per year to certain executives of that Brazilian company and kept the $200,000.00 difference. Of that amount, he reported $50,000.00 on his Federal income tax returns.

In addition, apparently, Helio entered into a separate deal with Penske Racing whereby Helio would be paid $6 Million Dollars, $5 Million Dollars of which was to be paid as a licensing fee to Seven Promotions and $1 Million Dollars of which was paid to Helio. The amount payable to Seven Productions didn’t make it there, but rather, was paid to a Netherlands company as part of what was described as a deferred royalty plan; essentially a straw party type plan or a  “pay the tax later, if ever” plan. Helio’s outside counsel, not the one who was also indicted, advised that the structure was not appropriate and would not shield a tax liability. He was right.

John M. Hanamirian

Helio Castroneves two-time Indianapolis 500 winner and television's  " Dancing With the Stars" contestant, was indicted yesterday on tax evasion and tax fraud charges, accused of using offshore accounts to hide millions of dollars in income from the I.R.S.

Castrovenes  is charged with conspiracy and six counts of tax evasion for purportedly failing to report to the IRS about $5.5 million in income between 1999 and 2004. Also indicted were the driver's sister, business manager and attorney.  All plead not guilty.

John M. Hanamirian

Let’s hope it is not Patriot Act II.

I first read this story in late August and it is developing. Two owners of a chain of grocery markets in California pleaded not guilty to charges of conspiracy to defraud the IRS by filing false individual tax returns that failed to include millions of dollars of income.

The indictment says that starting in 1998 and continuing through 2003, the two principals of the grocery chain hid income from their operations in an account that they hid from their employees and their controller.

The account was part of a deal that the two grocery chain owners struck with a wholesaler whereby they agreed to process coupons for the wholesaler through a separate company formed for that purpose. That company showed deposits of $41  million dollars during that time period and the principals withdrew nearly $21 million dollars and deposited those monies into their personal bank accounts. That money never made it onto their personal income tax returns.

Tax Tip #744: If  your personal bank records show deposits of $41 million in any given year and you are in your own business, there is a decent likelihood that the IRS will look at your returns.