“Arguably, the most tantalizing of all exotic and sensational James Bond vehicles has been the British-manufactured sports vehicle known as the Aston Martin (which Agent 007 has enjoyed driving, courtesy of the uber-cool ‘Q Branch,’ a division of the M16 headquarters of Her Majesty’s Secret Service in London).

“Aston Martins … have appeared with dramatic splendor in at least a half dozen James Bond films….  In some of these movies, the Aston Martin has suffered a spectacular and explosive demise.  While the faint-at-heart car lover may weep at the blasphemous sight of an Aston Martin in pyrotechnic destruction, the hero ‘Bond, James Bond,’ always lives to see another day….

“It is, no doubt, uncommon for an Aston Martin to find itself the subject of a bankruptcy court decision.  But such is the case today.”

The question was whether the car, which was not disclosed on the debtor’s financial disclosure form and could have been worth $200,000 or more, was owned by the debtor or the charity that he controlled.  Since neither the debtor nor the charity showed up at the hearing, and since title to the car was in the debtor’s name, the Court ordered that the car be turned over to the bankruptcy trustee.  The Court did not say whether the car was equipped with pyrotechnic devices. (In Re Wamsley,IV, Debtor, Bankruptcy Ct, N.D. TX, No. 12-34039, 2/19/13.)

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The carpet company advertised a special sale on television, offering to carpet any room in the house for only $99.  It could be the living room, the family room, a bedroom, or any other room in the house.  The offer covered any number of rooms the resident wanted to carpet, only $99 each.

The company urged customers to call for a free home estimate.

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I received an email from my college class secretary the other day, attaching a photo sent to him from another member of the class.  The photo showed a group of four classmates sitting around a dorm room in our freshman year. The group included the class secretary, a classmate recently retired from the CIA, a third classmate and me.  The email included the statement that “[the third classmate] and Kramer are dead.”

I have added the classmate who sent the picture to the Nonprofit Issues® distribution list as a matter of aggravation, to remind him with every email that I still exist.  Never at a loss for words, he reminded me I now have something in common with Mark Twain.

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The owner of real estate claimed a charitable tax exemption for property leased to Catland, a 501(c)(3) organization devoted to animal welfare and wildlife conservation.  The owner was President, CEO and apparently sole director.  The organization had essentially no income, and the property was not open to the public. The owner lived in the residence on the property and his sister occupied a mobile home nearby despite a no-sublet clause in the lease.

The owner testified that he shared the house with 25-30 cats and that the upper floor of the house was used as an employee’s lounge, although there was no evidence of employees.  He testified that the basement was kept free of cats because it was a “safe zone for mice” and “a break room for volunteers.”

The Oregon Tax Court concluded that the property was used primarily for charitable purposes.  (Catland v. Yamhill County Assessor, T.C. Or, Magistrate Div., No. TC-MD 111066C, 10/30/12.)

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Every once in a while we get an unsolicited email from a company advertising help in legal writing.  We got one a while ago with the subject line: “What Every Attorney Ought to Worry About.”

The email had the company’s regular illustration.  But there were no words and no message.

Nothing like learning from those with first hand experience.

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The Medicare statute permits hospitals to recover reasonable depreciation on the buildings and equipment used in providing services, and the regulations provide that assets may be revalued in certain situations in a merger of unrelated entities.  When Hermann Hospital merged with Memorial Hospital in Houston, TX, the new Memorial Hermann Hospital sought a depreciation adjustment of more than $21 million.

The Secretary of Health and Human Services took the position that the new institution was not entitled to the adjustment because, even though the two hospitals were unrelated before the merger, they were related after the merger.

The U.S. District Court in Houston pointed out that the position was contrary to “common sense” since merged entities are always related after the merger and the only relevant question could be whether they were related before the merger.

But the Court denied the adjustment, accepting the HHS position that mergers between nonprofit providers must be equivalent to a “bona fide sale” in order to qualify.  It said the merger did not involve “arm’s length bargaining or reasonable consideration.”  (Memorial Hermann Hospital v. Sebelius, S.D TX, No. H-11-2771, 7/31/12.)

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“The [IRS] agent went to [the defendants’ tax preparation service] to have a tax return prepared.  He brought along the necessary paperwork.  The agent calculated he legitimately would owe about  $300 in taxes.  He testified that [the service] offered him a choice of three refunds: $3,200, $3,500, or $4,200.”

The Sixth Circuit Court of Appeals has affirmed a jury’s conviction on 26 counts involving the preparation of false tax returns. It also affirmed sentences of 60-months incarceration for the husband and 33-months incarceration for the wife who owned and operated the tax preparation service.  (U.S. v. Womack, No. 11-20210, 7/19/12.)

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The taxpayer failed to adequately substantiate her claims for charitable contributions, medical bills, and dependency expenses for her mother, the Tax Court said, and her claimed deductions should be denied.  On charitable contributions, for example, the taxpayer offered “receipts” for her claimed gifts, but seven different charitable organizations testified that the receipts were altered or fabricated.  The Court denied $48,116 in claimed contribution deductions over three years, and permitted only $185 that the IRS had conceded.

When it came time to consider the IRS’s penalty for fraud, the taxpayer maintained that she was unaware of the requirements for accurately stating and substantiating income.  The Court did not find that contention very credible, however, because of “a fact that permeates the entire record.  Namely, [the taxpayer] is an experienced tax compliance officer that remains employed by the IRS.”  (Quinn v. Commissioner, T.C. Memo. 2012-178, 6/27/12.)
 

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In a case contesting the appraisal method used to value the charitable contribution value of an historic preservation façade easement, the Tax Court said that it had received an appraisal report in a previous case which was “identical in all material respects, including the typographical errors,” to the one the taxpayers submitted in this case. 

How do you think this case came out? 

The same way the prior case came out.  The Court found that the appraisal was not a “qualified” appraisal and no deduction was permitted.  (Rothman v. Commissioner, T.C Memo 2012-163, 6/11/12.)

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When the Hollywood Foreign Press Association, a nonprofit membership organization comprised of about 80 foreign journalists covering the entertainment industry, disputed the terms of its contract with dick clark productions, inc. (“dcp”) to produce the Golden Globe Awards on television, the parties ultimately went to trial in a federal District Court in California to determine the meaning of the agreement.  The show has produced “millions of dollars in annual revenues” for HFPA since the mid-1990s to fund its operations and charitable giving.

Although the Court said the case “should not have required a trial” and the parties should have entered into “a reasonable compromise,” it found that dcp had the right to continue to produce the event so long as it is broadcast on the NBC television network.  What explains how HFPA granted dcp such sweeping rights is simply this, the Court said.

“HFPA suffered from the absence of sound, business-like practices.  It also lacked consistent leadership. It elected a new President every year for a one year term, with a maximum of two consecutive terms. Some elections triggered bitter feelings.  HFPA members have always been dedicated to the success of the Golden Globes Award Show.  But often they succumbed to bouts of pronounced turmoil and personal feuds.  In contrast, dcp acted in a consistently business-like fashion, and for almost all of the 27 year relationship it had with HFPA before this suit was filed dcp was represented by one experienced executive who was adept at dealing fairly and effectively with the often amateurish conduct of HFPA.” (Hollywood Foreign Press Association v. Red Zone Capital Partners II, C.D. CA, No. CV 10-8833, 4/30/12.)

Sounds like there is a lesson there.

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The board of a nonprofit was debating whether to adopt term limits for directors and came up with a list of pros and cons for the idea.  A pro said they would be good to help get rid of “dead wood” directors.  The con said there are lots of ways to deal with that issue and the organization had developed procedures to do so. The response to that comment was that having such procedures “leads to a this-is-the-way-we’ve-always-done-it mentality.”   

That’s a little like saying that brushing our teeth every night leads to a this-is-the-way-we-have-always-done-it mentality.  But some habits are really worth developing. (See Ready Reference Page: “Term Limits Are For Cowards”)

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How’s this for a fundraising scheme? 

The rabbi approached a hedge fund in Connecticut and threatened that a federal inmate over whom he had influence as a religious counselor would accuse the founder of the hedge fund of insider trading unless the fund gave $4 million to charities the rabbi operated.

Turned out it wasn’t such a good scheme. For that threat and lying to a federal investigator, the rabbi was convicted of extortion, wire fraud, blackmail and false statements to a federal official.  He was sentenced to 48 months in prison.  (U.S. v. Balkany, 2nd Cir., No. 11-0756-cr, 3/19/12.)

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“What is the fair market value of a house, severed from the land, and donated on the condition that it soon be burned down?  There is no evidence of a functional market of willing sellers and buyers of houses to burn.”

So said the 7th Circuit Court of Appeals in denying a charitable contribution deduction to landowners who were not satisfied with the house on their lakefront property and gave it to the local fire department on the condition that it be burned down and demolished. (Rolfs v. Commissioner, 7th Cir., No. 11-2078, 2/8/12.)  (See Tax Matters page March 1-31, 2012)

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A colleague recently received an e-mail from the New Jersey State Bar Association reporting that it had filed a friend of the court brief challenging last year’s state statute that reduced pension and healthcare benefits for state employees, including sitting judges.  It argued that the statute should be declared unconstitutional as it applied to the judges because the state constitution prohibits the other branches of government from directly or indirectly reducing the compensation of sitting judges during their term. It said there was no greater threat to an independent judiciary as a cornerstone of democracy.

Supporting the critical importance of judicial independence is “a central tenant” of its efforts, the Association said.

We had always thought of the Bar Association as an advocacy group, not a landlord.

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How’s this for chutzpa?

Larry and Susan Mischel filed documents with the California Secretary of State falsely stating that they were officers of Young Israel of Beverly Hills, a nonprofit corporation that owned a synagogue. At the same time they changed the name of the corporation to Jewish Resource Center.  They then filed a deed purporting to transfer the property to the Jewish Resource Center, and mortgaged the property to borrow $250,000, most of which they used for their personal expenses.  When Young Israel learned of the activity, it sued to quiet title and recover damages. 

The Mischels argued that Young Israel had no standing to sue. They said it no longer existed after they changed its name and officers.

Not surprisingly, a trial court rejected their argument and granted judgment in favor of Young Israel.  An appellate court has affirmed. (Young Israel of Beverly Hills v. Mischel, Ct. of App., CA, Second Dist., Div. I, No. B226490. 12/22/11.)

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As the field of candidates for the Republican nomination for President dwindled recently, the moderator of one of the televised debates told the survivors that they would have 90 seconds to answer the questions, instead of 60 seconds as in previous debates.  This would allow them to give more comprehensive answers, the moderator said.

Isn’t it wonderful to think that the issues of our time can be solved in a minute and a half?

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Local school “gets $500,000 for robberies” declared the teaser headline on the bottom of the front page of the community newspaper.  See Page (15).

Local school “gets $500,000 for new robots department” was the headline on page 15.  There was a big picture of the Vulcan Robotics Team 1218 showing off their prize-winning robot Taz and other devices.

Just another example of the limitations of humans relying on spell check. Would a robot have done a better job?

Thanks to Joe Stapleton of Montgomery, McCracken for this one.

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Just call me NJweedman.com. 

That’s what Robert Edward Forchion, Jr. asked a California court to permit when he asked to legally change his personal name to his Internet domain name.  According to the Court, he operated a medical marijuana dispensary, had devoted his adult life to promoting the legalization of marijuana and, in 2000, was convicted in New Jersey of marijuana offenses. 

The Court denied the request, in part because he might lose his domain name and continuing to use it as his personal name could cause confusion.  (In re: Forchione, Ct. of App. CA, Second Dist., Div. 1, No B227341, 8/31/11.)

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Fortune Books ran an ad recently in Money Magazine advertising its new e-book on Steve Jobs

The headline said it was about “the man who chose to think different.”

Our spotter said it was published by “a company whose grammar could be gooder.”

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On a list-serv for attorneys dealing with senior centers someone recently asked for suggestions for rules for swimming pools.  The following response came from a lawyer who also identified herself as an M.D.:

            “Wear clothes, don’t poop. That’s all I’ve got.”

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You don’t normally read legal briefs for their humor.  But I couldn’t help burst out laughing at a couple of lines in a friend of the court brief from the Pennsylvania Bankers Association in a case before the Pennsylvania Superior Court.  The case involves the question whether a charitable trust held by a bank as trustee can be terminated and transferred to a community foundation.  The trust is classified as a private foundation and one of the arguments, in addition to the reduction in trustee fee, is that transfer to a public charity would eliminate the 2% excise tax on net investment income of private foundations.

Even if the payment of taxes can be regarded as administrative expenses, the bankers said, “rather than the duty of an organization to contribute to the costs of governmental services which benefit the institution and the public at large,” it is really not a big deal. 

We can just imagine how eager the bankers would be to contribute to the costs of governmental services if there were a proposal to add a 2% excise tax on bank loan profits.

Then to cement their point, the bankers said:  “To take the position that the excise tax is unreasonable would require the conclusion that the [Internal Revenue Code] is unreasonable.”

And who could ever think the Internal Revenue Code is unreasonable?

(In Re: Estate of Hoffman, PA Superior Ct., No. 429 MDA 2011.)

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Like a farmer on a hill?

“The Attorney General is vested with the power to bring an action alleging legal violations by nonprofit corporations. The henhouse is protected and the foxes are watched by the Attorney General, sitting like a farmer on the hill, ready to act when the hens are troubled or in danger. Complaints about the foxes may always be directed there.”

The Pennsylvania Supreme Court in denying standing to Blue Cross subscribers seeking to bring a suit claiming that the nonprofit insurer had retained excessive reserves.  (Petty v. Hospital Service Association of Northeastern Pennsylvania, No. 34 MAP 2010, 6/20/11.) (Read the full story.)

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“From a commercial standpoint the Girl Scouts are not readily distinguishable from Dunkin’ Donuts.”

7th Circuit Court of Appeals Judge Richard Posner in an opinion holding that the Girl Scouts of the USA violated the Wisconsin Fair Dealership Law in seeking to force local girl scout councils to reorganize.  (Girl Scouts of Manitou Council v. Girl Scouts of the United States of America, No. 10-1986, 5/31/11.)  (See lead story June 16-July 15, 2011.)

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The trustee “served the notice of hearing on [the disinherited son] by mailing it to the Ventura County Jail where [he] was incarcerated…. [He] did not attend the hearing.”

The decisions against the son in the hearing he did not attend, and in a subsequent litigation he brought unsuccessfully against the trustee of his parents’ trust precluded a third action to try to recover an inheritance and to prevent his parents’ estate from going to a charitable foundation.  (Marinos v. Brown, Ct. of App. CA, Second Dist., Div. 6, No. B224692, 3/16/11.)

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A colleague recently brought back a claim check from the "Navel Hospital parking lot".

We never realized that so many people had belly button problems.

Thanks to Catherine Gillespie of Montgomery, McCracken for this one.

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The jury convicted the former executive director of the regional arts council for theft of property with a value of less than $20,000 and assessed punishment of 2 years in prison and a $5000 fine.  The sentence was suspended and the former E.D. was placed on community service for 5 years and ordered to pay $268,000 in restitution.

The Court of Appeals of Texas has affirmed the conviction without comment on the sentence.  (Romel v. State of Texas, No. 10-09-00062-CR, 2/23/11.)

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The taxpayer claimed $16,000 of noncash charitable contributions of clothing on his 2005 tax return.  Although he had a receipt from the charity, it did not include the required description of items and condition.  When the IRS questioned the validity of the deduction, the taxpayer created a spreadsheet to substantiate the donations.  It included 23 pairs of shoes, 10 business suits, 35 shirts, 22 pants, 9 “athletic wear” and 12 blankets and sheets.  The value of the claimed donation totaled exactly $16,000.

The Tax Court was not impressed.  “First, the purchase prices seem rather high.  Second, the values seem high for used items…. Third, we do not know how [the taxpayer] determined the values of the items…. Fourth, many of the quantities of items seem high, considering that [the taxpayer] claimed to have purchased the items over a relatively short span of three years.  Fifth, the information on the spreadsheet is uncorroborated.  Sixth, [the taxpayer] admits that he did not compile the values until his return came under audit, at which time he arrived at a total value of $16,000, precisely equal to the amount of noncash contribution deduction he claimed on his return.  Seventh, [the taxpayer’s] implausible and uncorroborated mileage deduction claim [also denied by the IRS and the Court] casts doubt on all of his testimony and recordkeeping.”  Deduction denied.  (Igberaese v. Commissioner, T.C. Memo 2010-284, 12/28/10.)

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It sounded a little like the dog ate the homework.

The taxpayers, a lawyer and his wife, claimed charitable contribution deductions of more than $27,000 in gifts to charity.  The gifts included $4000 in lunches, dinners and cash given to two homeless men (which was not deductible); $1250 given by checks to five schools, for which they did not have checks because the checks were stolen and they couldn’t get copies because their bank had failed; $750 worth of appliances and clothes they gave to the Salvation Army but did not wait for receipts; and about $20,000 given in cash as tithes to two churches and their daughter’s school for which they presented no substantiation.  The lawyer claimed he maintained a journal in which he had recorded each contribution, but that the journal had been stolen from his car and he had no other records.

The Tax Court held that their lack of effort to substantiate their claimed contributions was sufficient reason to sustain the IRS’s denial of the deductions, and the imposition of the 20% penalty for inaccurate reporting.  (Murphy v. Commissioner, T.C. Memo. 2010-264, 12/2/10.)

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It was a hectic situation, the police officer said, when a woman stabbed a man in a sixth floor unit of a highrise apartment in Tulsa recently and then set fire to the building.  As police entered the unit seeking the suspect, she climbed out onto a ledge and fell to the ground.

The woman was taken to the hospital in critical condition.  The man was taken to the hospital in fair condition.  The officer said his wounds were mainly “superfluous.”

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The Wharton School of Business at the University of Pennsylvania enjoys a reputation as one of the top ranked business schools in the country.  A student who already had three Masters degrees from other institutions enrolled in an Executive Masters in Technology Management program at the University, co-sponsored by Wharton but run by the School of Engineering. According to the federal District Court in Philadelphia, “he believed that he did not need additional education but would benefit from associating himself with what he referred to as ‘the Wharton brand.’”

When Wharton ended its co-sponsorship, it became clear that he was a student in the School of Engineering.  The student claimed that being considered an engineering student and not a Wharton student was “potentially career ending.”

The student sued the University for negligence, fraud, breach of contract and unjust enrichment.  The Court has dismissed the claims, holding essentially that he got the education he bargained for and that there was no commitment that he would receive a degree from Wharton.  (Reynolds v. University of Pennsylvania, E.D. PA, No. 06-1237, 10/25/10.)

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We received an email holiday card from an accounting firm the other day.  Not long thereafter, we received another email from the same firm.  It read as follows:

From:  [Accounting Firm]
To:       Undisclosed recipients

[Accounting Firm] would like to recall the message, “Season’s Greetings”.

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Co-owners of a pharmaceutical reseller were convicted for obtaining drugs at a steep discount to be distributed through a charity in Africa and then selling them commercially for a hefty profit. 

On appeal, one of the defendants sought to overturn the conviction on the grounds that he had been denied his Constitutional right to a speedy trial. Before being arrested, he had fled to Israel, become an Israeli citizen, and traveled under an assumed name.  He was finally arrested by Polish police after an alert by INTERPOL.

On appeal, the 11th Circuit Court of Appeals said the defense brought to mind the Yiddish word “chutzpah,” which, it said, has been used by courts where judges “encounter such flagrant abuses that no single word adequately expresses appropriate disgust.”  (U.S. v. Kresler, No. 08-13204, 8/16/10.)

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The Boston Fire Department put out a Twitter tweet recently confirming the cause of a two alarm fire in an apartment house.

The explanation was simple.  “Second floor resident was burning old mail in stairway.  Fire got away from her.”

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“Playing tackle football without equipment is not an obviously dangerous activity,” said the Philadelphia Legal Intelligencer story reporting the rationale behind a recent case at the Third Circuit Court of Appeals.  The Court had affirmed a District Court decision denying a claim by a 17-year-old boy who was rendered quadriplegic by an injury in such a game at a youth detention facility.  On a kick-off play, the teenager had run down the field “full force” and hit the ball carrier with his head.

“The record in this case is devoid of evidence from which a reasonable jury could conclude that serious injury is a common or likely occurrence in tackle football games,” the Court wrote.  “It is not obvious that the risks associated with playing tackle football without equipment are unreasonable,” it wrote.

The District Court judge and the three Court of Appeals judges were all men.

One can only wonder whether a wise motherly judge, or a wise pro football wife judge, might have had a different perspective.  (Betts v. New Castle Youth Development Center, No. 09-3753, 9/13/10.)

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It must have been a precipitous drop. 

Dr. Lamar Ellis, who reportedly asked Forbes Magazine to include him on the list of the 400 richest people in the world in 2006, has brought suit in a federal District Court in California against Bernard Madoff and numerous financial institutions.  He claimed they caused him and several related entities to lose $13 billion in Madoff’s Ponzi scheme. 

Ellis asked to proceed in forma pauperis because he could not pay the $350 filing fee. 

The Court was not persuaded and denied the request.  (Ellis v. Madoff, S.D. CA, No. 10-CV-1295, 6/21/10.)

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A donor’s will created a charitable remainder unitrust to provide income to four individuals for their lives and the remainder to two volunteer fire companies.  The trustees asked the court to permit them to divide the unitrust in two and commute one of the trusts in advance by paying the income beneficiaries the commuted value of the trust in cash and distributing the remainder to one of the fire companies.

Requesting the change under a statute that authorized the court to modify the terms of the trust “because of circumstances not anticipated” by the donor, the trustees claimed that the donor could not have anticipated that the beneficiaries would “rather have their money today than wait” and would engage in expensive litigation over what should be included in the trust.

“Unfortunately,” the Supreme Court of Virginia said, “beneficiaries of wills and trusts have, for centuries, engaged in such litigation with depressing frequency.  It may fairly be said that the likelihood of such litigation increases in direct proportion to the amount in controversy.” 

“There is no reason to suppose, and no evidence in the record to show, that the [donor] did not anticipate those risks,” the Court said.  The argument was based on “pure speculation,” it said, and reversed a trial court decision that had allowed the division.  (Ladysmith Rescue Squad v. Newlin, No. 091388, 6/10/10.)

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It is always interesting to read the corrections items in a publication to see the kind of things the editors think need to be set straight.  My all time favorite is one I saw many years ago. I don’t remember exactly where, but I think it was in a particularly ponderous law review. 

After identifying the volume, page and line on which the error had occurred, the correction said simply:  “Delete the words ‘the late.’”

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Some people know how to hurt a guy.

As other internet publishers, we offer recipients a way to unsubscribe if they find our emails are not interesting or useful to them.  We got a note on one unsubscribe recently.  “You’ve got some interesting discussions going that I’d probably read if it was free,” the guy said.

He was dropping off our free distribution list.

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We were recently reviewing the bylaws of a nonprofit corporation created to support an educational program at a university.  The original executive director had retired and the parties were reassessing the relationship. 

The new exec suggested a change in the section on qualifications for service on the board.  The old bylaws had been in effect for more than 15 years without question. They said a director should be “sympathetic with the deals of the program.”

The new exec thought it might be better to say that directors should be “sympathetic with the ideals of the program.”

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How often should a nonprofit’s Audit Committee meet? 

A client recently asked us to review a copy of its Board resolution establishing an Audit Committee.  The resolution had a great answer to the question.  It said:  “The Audit Committee shall meet at least as often as it determines….”

The key phrase appeared to be “at least.”

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As a long-time fire buff, I regularly monitor fire and police radios to hear what is going on at the moment.  A while back I was monitoring calls for a national park that includes a war memorial with an “eternal flame” to honor fallen soldiers.  It was during a major storm and the dispatcher sent one of the park rangers to check the monument.  “We have a report,” the dispatcher said, “that once again the eternal flame is not eternal.”

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A colleague recently received an oversized post card promoting a company providing appraisals of healthcare organizations.  The face of the card had the following headline: 

“Four out five health lawyers prefer” Fair Market Value.

Below the headline were pictures of four diverse models trying to look like professional health lawyers, and one of a character in a Tyrolean hat standing in front of a mountain and playing a horn.  Presumably the four models were intended to represent the target audience for the ad.  The other character must have been the company’s proof reader who failed to notice that the word "of" was missing from the headline..

Thanks to Catherine Gillespie of Montgomery, McCracken, Walker & Rhoads for spotting this one.

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As a long-time fire buff, I regularly check on several Internet websites that report on major fire incidents.  Because the postings are often put up quickly based on initial reports from the fireground, the information is not always entirely accurate.  I couldn’t help noticing one recent posting.  The site said a chief reported fire “threw the roof” of a building and requested more help.  It didn’t say where the roof might have landed.

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Every fundraiser knows it is important to say thank you.

My wife and I recently received an acknowledgment of a small contribution that we made to a local charity.  The letter was addressed to both of us.  The salutation was: “Dear Sir or Madam,”

An amazing personal touch.

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“For reasons unknown to the court, the attorneys from these two firms have conducted this litigation in a vituperative manner more consistent with a cage fight than with zealous representation of clients in a court of law.  Counsel would do well to bear in mind that the attorney’s role is not only to advocate, but to lubricate; to help the wheels of justice turn efficiently and economically as well as fairly, so that the attorney’s client will be able to achieve a resolution without undue expenditure of time and money.”

Judge Marilyn Hall Patel in dismissing a motion to disqualify counsel and transferring the case to a federal District Court in Texas.  (United States of America Chess Federation v. Polgar, N.D. CA, No. 08-05126, 10/14/09.)  This is part of the same fight in which another federal District Court in Illinois said a seat on the board of the Chess Federation was not worth $75,000 and the controversy could not be decided in a federal court under diversity jurisdiction. (See Nonprofit Issues®, 8/1/09.)

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The group was planning for a conversation with a major local philanthropist. One of the proposed questions, based on an apparent oxymoron, was this:

“You trained as an attorney – where does your inspiration for philanthropy come from?”

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Headline from the news section at Firehouse.com:

“Bodies Burned in Fla. Crematorium Fire.”

A fire in an Indian River County crematorium destroyed the building and burned four bodies that were about to be cremated.

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The plaintiff sought to disqualify the proposed expert witness for the defense “on the basis that she is primarily a plaintiff/claimant’s disability and workers’ compensation attorney, and therefore lacks the qualification and expertise to serve as an expert on the handling of the defense of a workers’ compensation claim.”

It is hard to believe that this argument was actually put forward by another attorney, especially when so many attorneys consider themselves expert even when they know nothing at all about the issue.  The Court denied the motion.  (Diocese of St. Petersburg v. Safety National Casualty Corp., M.D. FL, No. 8:08-cv-050, 8/25/09.)

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“Can we borrow your 501(c)(3) status for $50,000?”

That’s apparently what a Gary (IN) City Council member asked the 84-year-old president of the Gary Historical and Cultural Society prior to a fraudulent real estate deal. 

A grocery store was given to the Society and then sold for $200,000 to the Gary Urban Enterprise Association in a deal arranged by the Councilmember, the president’s lawyer nephew and a property tax collector.  Unbeknownst to the president, the proceeds were split $50,000 to the Historical Society, $50,000 to the lawyer, $75,000 to the Councilmember, and $25,000 to the tax collector.  The three were all indicted, and the Seventh Circuit Court of Appeals has recently affirmed the conviction of the lawyer and tax collector. (U.S. v. Powell , No. 08-1138, 8/7/09.)

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“Although 40 boxes of files were properly shipped to Chicago, the new bookkeeper (Kogan) [for the American Friends of Yeshivat Ohr Yerushalayim] refused to receive half of them, which were sent back to New York and left on [the former bookkeeper] Michelle Fishman’s front porch, during a time when she was away from home.  When Ms. Fishman returned to the house, she found the boxes wet from rain and emitting an unpleasant odor, so she discarded them.”

When the American Friends claimed that it didn’t have all its records in seeking an abatement of more than $82,000 in penalties for three years of filing their Form 990 tax information return late, the IRS appeals officer determined that the taxpayer had not exercised “normal business care” in maintaining its records and sustained the penalties.  A federal District Court has affirmed.  (American Friends of Yeshivat Ohr Yerushalayim v. U.S., E.D. NY, No. 04-CV-1798, 7/29/09.)  See Tax Matters August 16-31, 2009.

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The defendant, convicted of two counts of securities fraud and five counts of wire fraud, was pleading for leniency in sentencing.  The Court was not impressed.

The defendant’s “argument falls into a pattern advanced by a subset of the white collar criminal.  This category encompasses a select class: distinguished, reputable, highly esteemed model citizens such as this defendant. The list of their achievements is long and impressive….  At home they are good family men and women, caring spouses, loving parents, loyal and reliable to friends.  At work, they are looked up to as outstanding professionals and business partners.  To their community’s charities and public causes they are generous patrons and sponsors.  And as worshipers they are devout, often rising as leaders of the congregation….

“A key aspect of the evidence proffered in mitigation consists of medical records and psychological evaluations attesting that the defendant’s criminal conduct, so at odds with an upright character, was driven by some recently diagnosed mental disorder, or ungovernable impulse, or other unknown inner or outer demon he could not conquer that made him do it.  An outpouring of sympathy and support from relatives, friends, business colleagues, community leaders, and even some of the victims, accompanies the presentation.  The beneficiaries of the defendant’s charitable work, in some cases intensified since his arrest, testify about his devotion of good will and donation of resources, underscoring the loss they and the larger community would suffer if deprived of the defendant’s invaluable contributions to their public services.  And of course, the defendant rises in the courtroom to convey profound, personal apologies for all the sorrow he has caused to all the people with whom he broke faith and hurt and betrayed and shamed.”

From the Sentencing Statement of Judge Victor Marrero, U.S. v. Regensberg, S.D. NY, No. S1 08 Cr. 219, 6/29/09.

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When the IRS challenged $8,848 in charitable contribution deductions, the taxpayer testified that “my accountant … unfortunately got a little creative.”

Unfortunate indeed.  The Tax Court sustained the Service’s disallowance of all but $1,088 of the claimed contributions.  (Kyne v. Commissioner, T.C. Summary Opinion 2009-98, 6/25/09.)

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“After learning of the IRS examinations [of tax returns prepared with false business losses], [the tax preparer] began preparing and filing Form 1040X, Amended Individual Income Tax Returns, on behalf of clients whose returns had been examined.  In these amended tax returns, [she] eliminated the disallowed Schedule C business losses, and replaced those losses with corresponding amounts for employee  business expenses on Schedule A.”

Needless to say, the IRS found that the employee business expenses were also false, and the IRS obtained a permanent injunction prohibiting the preparer and her father (who was already in jail for preparing false returns) from ever preparing tax returns for others again.  (U.S. v. Buddhu, D. CT, No. 3:08-cv-0074, 5/12/09.)

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Actor Craig T. Nelson says he doesn’t want to pay any more taxes and objects to government bailouts. He elaborated during a recent interview with Glenn Beck on Fox News:

“They should be allowed to go bankrupt! What happened – we are a capitalistic society.  OK.  I go into business, I don’t make it, I go bankrupt.  They’re not going to bail me out.”

“I’ve been on food stamps and welfare.  Anybody help me out?  No. No.”

--Craig T. Nelson on Glenn Beck, May 28, 2009.

Read the show transcript

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“The Foundation’s CFO testified at trial that the reimbursement obligations were not included as liabilities in the financial statements because [the founder] had told him that the obligations were not an actual liability but merely a promise to pay.”

Really?

(U.S. v. Lewis, 8th Cir., No. 08-1006, 2/23/09.)  (For the results of that type of thinking, see Lessons from Litigation, March 1-31, 2009.)

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The Director of Human Relations, who had worked for the nonprofit for 13 years, “was terminated by letter given to her by the janitor.”  (Humes-Pollett v. Family Health Center, S.D. MS, No. 2:07cv-277, 1/22/09.)

That brilliant management technique was not enough to cause the nonprofit to lose the ensuing discrimination litigation.  One can only wonder whether it had anything to do with causing the litigation to be brought.  (See Employment Law, February 1-28, 2009.)

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The 2009 Change the World calendar pad that I received at the Philanthropy Day luncheon last year has a motivational statement for every day of the week.  But I had to puzzle a long while over this one recently:

“Motivation will almost beat mere talent.”

They don’t always get the quotes quite right.

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Sports are often considered a great way to teach kids lessons for life.  Our local school district seemed to be making a particular comment on life and society recently, however, when it invited youth coaches in the community to a special sports psychologist’s talk on “Extending Student Athlete Success: Teaching Students Sport and Lie Lessons.”

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A reader starting a new nonprofit worries that he or she and members of the family might be “out numbed by other board members” and lose control of the organization. 

We have been to a lot of tedious board meetings but never realized it might be a conscious strategy for one faction to try to out numb the other. 

**************************************************************************

Some people apparently have a hard time stomaching the truth about their heritage, at least according to the New York Times Book Review. (11/2/08.)

The reviewer of a new history book by David Hackett Fischer referred to an earlier work in which Fisher argued that the folkways brought by groups of early English settlers explain regional variations in American culture even today.  Those folkways, the review said, have left “an inedible impression” on the majority of Americans whose ancestors did not come from the British Isles.

Thanks to Catherine Gillespie of Montgomery, McCracken for proof-reading this one.

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The taxpayer was denied income tax deductions for unreimbursed business expenses, charitable contributions, and medical expenses totaling more that $65,000 over a three year period.  She “did not make a reasonable attempt to reconstruct the expenses claimed on her tax returns,” the Tax Court said.  “She refused to secure copies of canceled checks because she did not want to pay the $2 per check fee that would have been charged by her bank.”  (Sanderlin v. Commissioner, T.C. Memo 2008-209, 8/28/08.)

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The Philadelphia Business Journal annually honors a group of “Women of Distinction” in the region.  A colleague recently received an email invitation to this year’s event recognizing “25 of the region’s most dynamic women.”

The invitation contained a single illustration -- a naked nymph sitting on a rock.

We couldn’t help wondering whether this was supposed to be one of the women of distinction -- and what the Journal could possibly have been smoking when they chose the picture.

Thanks to Catherine Gillespie of Montgomery, McCracken for this one.

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An attorney drafting a big software development agreement for a charitable client received the main term sheet provided by the software development firm.  The software engineers titled the document, in big block letters across the top, "2008-09-15 [name of project] Human-Readable Summary."

“That unleashes a torrent of questions, not to mention punch lines,” the lawyer reported to us.  “In any event, ‘human-readable’ is a very high bar to set for a bunch of software engineers, and having read the document I can report that in this instance it was not reached.  But an aspirational title is a lovely gesture at the start of a cooperative venture.”

**************************************************************************

A client asked recently whether a colleague and I could come over to explain some legal issues to a “mandatory meeting” of the organization’s managers.

We’d be happy to, I said.  How many people will be there?

“Somewhere between 20 and 50,” he replied.

**************************************************************************

Here’s an interesting question submitted by Susan Perloff of Philadelphia:

I cannot find in stores the kind of chewing gum I like. So I went online. Prices are low, but the cost of chewing is high.

I have choices of:

Trident Sugarless Gum Cinnamon Flavor
…        2 Used & new from $9.65

Think I should buy some used chewing gum?

**************************************************************************

Some cases are considered “big” cases. It could be because of the principle involved, the amount of money involved, or the effect on the economy.  We ran across an opinion recently in the Katrina Canal Breaches Consolidated Litigation case (E.D. LA, No. 05-4182, 5/14/08). The opinion took up only six pages of a Lexis print-out.  The list of parties and their lawyers took up 121 pages of print-out.

If most of those lawyers actually read the opinion, their combined fees were probably enough to affect the Gross Domestic Product, even if they didn’t do much to increase national productivity.

**************************************************************************

We were reviewing an enhancement of some computer software for recording sales activity recently.  The notice told of the following improvement:

“The ‘Description’ field provides more detailed information regarding the product order, especially in the case of products.”

**************************************************************************

The organization apparently wanted to be sure to comply with all of its disclosure requirements in soliciting charitable contributions.  In what looked like 6 point type at the bottom of the return form, it gave its donors the following information:

“As this donation does not entitle you to any goods or services, your contribution is 100% tax deductible as according to PA State law.  [The organization] is an independent 501c3 Non Profit organization registered with the Federal Bureau of Charitable Organizations.”

No matter that Pennsylvania law does not provide for charitable contribution tax deductions or that there is no such thing as a Federal Bureau of Charitable Organizations.  It’s the thought that counts.

Thanks to Chuck Sterne of the Curtis Institute in Philadelphia for submitting this one.

**************************************************************************

The City “has undergone drastic changes, unanticipated at the 1815 creation of the Trust, including changes in State requirements, traffic patterns, the size of the community, the needs of the City, site safety, and parking availability.”

Really?  They didn’t anticipate today’s automobile traffic patterns and parking requirements when they put land into a trust in 1815?  How short-sighted of them.

(City of Augusta v. Attorney General, Supreme Judicial Court of ME, No. Ken-07-246, 3/18/08.)  Read the full story.

**************************************************************************

The defendants explained their delay in challenging the default judgments entered against them by claiming that, as nonprofit institutions, they lacked understanding of what the law required—or as counsel put it, “when people walk into not for profits they forget their brain at the door.”

It may not have been elegant, but it apparently rang true enough to convince a federal District Court to vacate the judgments against the brainless nonprofits and allow them to present a defense. (State Farm Mutual v. Tz’Doko V’Chesed of Klausenberg, E.D. PA, No. 06-3040, 2/27/08.)  (See story in Lessons from Litigation section.)

**************************************************************************

We noticed an advertising poster on the subway the other day promoting the services of a local plaintiffs’ lawyer:

Have you been seriously injured?

Auto Accident
Medical Error
Defective Product
Workplace Injury
Slip and Fall
Wrongful Death

Some people must really believe in the reach of transit advertising.

**************************************************************************

When the estate of Johnel Moore sued Jessy Dixon and Jessy Dixon Ministries for improperly enticing her to make more than $700,000 in contributions in the two years before her death, the lawyers deposed Lisa Conner, the Ministries’ bookkeeper.  At least 10 times in the deposition, the bookkeeper testified that she was Dixon’s employee, but after reviewing the transcript of the deposition, she submitted an errata sheet “correcting” her testimony, claiming she was an independent contractor.

The corrections “uncontestedly contradict her deposition testimony,” the Court said.  “She now wishes to testify ‘No’ when she previously testified ‘Yes,’ and she wishes now to state that she is an independent contractor hired by Dixon as opposed to his employee.”  The Court denied the request.

“A deposition is not a take home examination,” the Court said. “The defendants cannot change Conner’s testimony without adequate and appropriate explanation.”

(Estate of Moore v. Dixon, E.D. WI, No. 06-C-0321, 12/12/07.)

**************************************************************************

According to the complaint, the nonprofit seeking to terminate the employment of its Vice President-Legal Affairs and General Counsel asked him to sign a termination and release agreement.  When he refused, the organization tried to withhold his pay.  When he asked for his paycheck, he was told:  “We knew that wasn’t going to work, holding your pay.  We should have known better than that. And we’ll just go ahead and pay you, then we’ll fire you.”  (Carraway Methodist Health Systems v. Wise, Supreme Court of AL, No. 1041483, 11/30/08.)

To see how it all came out, see our lead story this issue.

**************************************************************************

The man appealed his conviction on one count of a 56-count indictment charging him with various crimes in taking money from charity bingo games for himself.  He complained that the government’s case was based primarily on evidence collected by his estranged wife, who was a paid informer for the government.  He said she had no authority to take evidence from his house.

In a lengthy opinion denying the appeal, a federal District Court in Mississippi noted that a defendant frequently assumes the risk that someone else will become an informer.  Citing another court’s opinion, the District Court said that “the risk of being betrayed by an informer or deceived as to the identity of one with whom one deals is probably inherent in the condition of human society.  In other words, that’s life.”

(Shelton v. U.S., N.D. MS, No. 1:00CR127-P-D, 11/16/07.)

**************************************************************************

The taxpayer said she could not provide any additional substantiation of her charitable contributions because the documents were destroyed when her basement flooded in 2001. The Tax Court was not impressed.  The taxpayer was claiming deductions for gifts allegedly made in 2002. (Barnes v. Commissioner, T.C. Memo 2007-141, 6/4/07.)

**************************************************************************

A federal District Court had sentenced a Boston public school teacher to a year in a halfway house after he had been convicted of falsifying charitable contributions on 16 separate income tax returns he prepared for clients while moonlighting after class. The First Circuit Court of Appeals has overturned the sentence, saying the teacher should spend some time in jail for committing fraud, asking clients to provide false information, and lying about it both to investigators and in court. The Court of Appeals was apparently unimpressed by the letter from the principal of the teacher’s school, who asked for leniency because the teacher was a good role model for students who did not often encounter educated and professional African-Americans.  (U. S. v. Taylor, No. 06-2216, 8/17/07.)

**************************************************************************

The defendant pled guilty to a tax fraud scheme in which he arranged for contractors building his personal residence to falsely submit their bills to his business so that they would appear as deductible business expenses rather than non-deductible personal costs. The stipulated tax deficiency was $228,557. He was sentenced to 250 hours of community service, three years of probation, including one year of house arrest, and a fine of $250,000. The government appealed, arguing that the sentence should have included time in jail.

“[The defendant’s] sentence of probation included home confinement in the very mansion built through the fraudulent tax evasion scheme at issue in this case,” the Court of Appeals observed, “an 8,000-suqare-foot house on approximately eight acres, with a home theater, an outdoor pool and sauna, a full bar, $1,843,500 in household furnishings, and $81,000 in fine art.  The perverse irony of this gilded cage confinement was not lost on the government, it is not lost on us, and it would not be lost on any reasonable public observer of these proceedings, including those would-be offenders who may be contemplating the risks associated with willful tax evasion.” 

The defendant’s good charitable works were not sufficient to justify the reduced sentence, the Court held and remanded the case for resentencing.  (U.S. v. Tomko, 3rd Cir., No. 05-4997, 8/20/07.)

**************************************************************************

The speed and certainty of the judicial system is sometimes amazing.

In 2001, a church group applied to use New York City school facilities for Sunday worship services. The Board of Education denied the application relying on Standard Operating Procedure Manual §5.11 regulating use of the facilities by outside groups.  A federal District Court enjoined the enforcement of the SOP. A panel of the Second Circuit Court of Appeals has vacated that order, reaching its conclusion “in rather circuitous fashion.”

“Judge Calabrese would hold that this dispute is ripe for adjudication and would vacate the injunction because he concludes that Revised SOP §5.11, while a restriction on the content of speech permitted on school property, is viewpoint-neutral.  Judge Walker agrees that the dispute is ripe for adjudication but would affirm the injunction because he concludes that Revised SOP §5.11 is viewpoint-discriminatory.  Judge Leval expresses no opinion on the merits, but votes to vacate the injunction because he concludes that the dispute is not ripe for adjudication.”

They spent 130 pages explaining their disparate views and remanded the case to the trial court “for all purposes.”

(The Bronx Household of Faith v. Board of Education, No. 06-0725-cv, 7/2/07.)

**************************************************************************

From the caption of this case, you can probably guess how this one came out.

Jerry Quinn Davis v. United States of America and the World et al.

The plaintiff, acting without a lawyer, filed a civil rights complaint and asked to be allowed to proceed in forma pauperis so that he would not have to pay any of the court costs.  The complaint included claims against the 50 states and “nonprofit organizations and businesses who deal in ignorant envious bloodlust.”

A magistrate judge in Florida recommended the complaint be dismissed under the Court’s power to dismiss an in forma pauperis case that is based on an indisputably meritless legal theory or factual allegations that are clearly baseless.

Case No. 3:07cv167/MCR/MD, N.D. FL, 6/22/07.

**************************************************************************
The well-developed finance policies of a nonprofit organization include the following principle:

“The Director of Finance’s accounting system is password protected.  No one knows the password.”

No one?

Thanks to Tish Mogan, Standards for Excellence Officer for the Pennsylvania Association of Nonprofit Organizations, for this one.

**************************************************************************
When I called a client recently to talk about a particularly unpleasant litigation matter, her assistant said she was out of the office at the dentist.  “I wonder which of us causes more pain,” I mused. 

“The dentist has Novocain,” the assistant replied.

**************************************************************************

Members of the Top Hatters Motorcycle Club, organized in part to raise funds for charitable activities, argued that they should be able to attend the local garlic festival wearing their distinctive jackets with the club insignia.  They argued that the festival’s informal dress code, which prohibited wearing gang colors or other demonstrative insignia, violated the Club members’ right to free expression.

The back of their vests depicted a skull with wings and a top hat above, with the words Top Hatters.  During depositions, several members were asked what the display was intended to express.  One said it represented the belief that “underneath our skin all of us are alike” and that the wings represented freedom.  Another testified that to him the skull meant death.  A third said the insignia signified “whatever you want to interpret it as.”

The Court found that the rule prohibiting the vests did not violate their right of free expression.  (Villegas v. City of Gilroy, 9th Cir., No. 05-15725, 4/30/07.)

**************************************************************************

In reading a law student’s memorandum recently, we were struck by the assertion that a healthcare provider could not be held liable for damages to a patient who alleged that one of the provider’s female physicians had an improper sexual relationship with him.  The memo said the employer could not be liable because the state Supreme Court had held that an employee’s sexual misconduct, “with the exception of an on-duty police officer, is outside the scope of employment as a matter of law.”

And the scope of employment of an on-duty police officer includes what?

**************************************************************************

Be careful what charities you promote.

The police officer “observed several decals on [the suspect’s] windshield indicating support for police charitable organizations.  [The officer] was aware that vehicles used to transport contraband often bear such collections of pro-police decals.”

It was one of the factors that caused a court to hold that the officer’s search of the suspect’s car was permissible without a warrant.  (U.S. v. Seldon, 4th Cir., No. 04-4473, 3/15/07.)

**************************************************************************

The son argued that his mother’s decision to disclaim an inheritance and allow money to go to charity was “inapposite with logic and human nature” because no individual, given the choice of “keeping their money and the power over it and paying no taxes” or “giving away their money and the power over it and paying no taxes” would ever choose to divest.

That, of course, is what contributors to charities do every day.

A Court of Appeals in Texas recognized that reality in a case in which the son sought to effectively undo the disclaimer. “Although [the son] might have made a different decision than his mother did,” the Court said, “such does not render his mother’s decision unreasonable as a matter of law.” (Baker Botts, LLP v. Cailloux, Ct. of App., fourth Dist., No. 04-05-00446-CV, 2/14/07.) (See lead story March 1-15, 2007 issue.)

**************************************************************************

The New Jersey Department of Health has warned squirrel hunters near a toxic waste dump about eating the catch because it might be contaminated with lead, according to a recent story from the Associated Press. The state sent out a letter advising adults to eat squirrel no more than twice a week and children and pregnant women even less.

“We’ve known for a long time something was wrong here,” the AP quoted one resident, “we just didn’t know what it was.”

Thanks to Scott Meyer of Montgomery, McCracken for finding this one.

**************************************************************************

The bylaws provided: “The unanimous vote of the Board present at any meeting at which a quorum is present shall be required to constitute the act of the Board of Directors with respect to … hiring or discharging the President….”

The President was a member of the Board.

Guess who never missed a meeting.

Thanks to Eric Vieland of Epstein Becker & Green, P.C. in New York for this one.

**************************************************************************

The press release began:

“Philadelphia, Jan. 11 – Mothers Work, Inc., the leading designer and retailer of maternity apparel in the world, announced today that it has recently agreed to settle a lawsuit … alleging pregnancy discrimination….”

**************************************************************************

It takes some people a while to get the word.

The Supreme Court of Kentucky affirmed a trial court’s summary judgment in favor of a charity on the ground that it had no duty to the injured plaintiff, but it disagreed with the trial court’s conclusion that the charity was also entitled to charitable immunity. The Supreme Court noted that “Kentucky abrogated the charitable immunity rule in [a case decided in 1961].” (Pinkston v. Audubon Area Community Services, No. 2006-CA-000473-MR, 12/1/06.)

**************************************************************************

“This ‘dog of a case’ gave the Court a great amount of facts to chew upon and applicable law to sniff out. Nonetheless, having thoroughly gnawed through the record, this Court finds that no material dispute of fact remains, and summary judgment is appropriate on all counts.”

The Court found that Louis Vuitton could not make out a case against Haute Diggity Dog and others for trademark violation in the sale of pet products called Chewnel #5, Dog Perrignon, Chewy Vuiton, and Sniffany & Co. (Louis Vuitton Malletier S.Z, v Haute Diggity Dog, LLC, E.D. VA, No. 1:06cv321 (JCC), 11/3/06.)
**************************************************************************

The name of the case was:

Denham Springs Development District v. All Taxpayers, Property Owners and Citizens of the Denham Springs Economic Development District, and Nonresidents Owning Property or Subject to Taxation Therein, and All Other Persons Interested In or Affected In Any Way by the Issuance of Not to Exceed $50,000,000 Denham Springs Economic Development District Sales Tax Increment Bond (Bass Pro Shops Project) in One or More Series, the Means Provided for the Payment and Security Thereof and Related Matters. (Supreme Court of LA, No. 05-C-2274, 10/17/06.)

Think that covers everybody?

**************************************************************************

“The Authority claims that … the Authority’s Board of Directors relied on the advice of their attorney, Heather Brown, who reassured the Authority that its actions ‘were neither fraudulent nor illegal.’ The Court finds it interesting that the Authority will not admit that any of its Board members actually received, read, or had any knowledge of Ms. Brown’s July 8, 2002 memorandum….” (Gill Construction Inc. v. 18th & Vine Authority, W.D. MO, No. 05-0608-CV-W-SOW, 9/21/06. See story.)

**************************************************************************

The taxpayers filed an “emergency application for preliminary injunction notwithstanding the Anti-Injunction Act” to prevent the “principals, officers, agents, rogue agents and/or employees” of the IRS from engaging in any further collection activity until all claims were fully resolved and the IRS had returned “all sums wrongfully collected.”

Guess how that one came out.

The amazing thing is that a federal District Court judge wrote a respectful
50-page opinion, despite the fact that the complaint was one of at least 12 virtually identical lawsuits brought within the District by tax protesters. (Erwin v. U.S., D. DC, Civ. Action No. 05-4698, 9/15/06.)
**************************************************************************

When asked why he had no records to substantiate the “church and charitable” contribution deductions claimed on his income tax return, the taxpayer testified that “the point of giving is not to make a worldly claim.”

While the “sentiment is correct,” the Tax Court said, “substantiating a gift does not taint the heart of the giver.” Worldly claim denied. (Combs v. Commissioner, T.C. Summary Opinion 2006-132, 8/28/06.)

**************************************************************************

The judge in Michigan was being censured for accepting tickets to a University of Michigan football game “in open court” from an attorney appearing before him.

Does that suggest that if he had accepted the tickets in a plain brown envelope outside of the court room it would have been okay?

The justices of the Michigan Supreme Court spent 73 pages deciding that the gift was not “ordinary social hospitality” and that the judge should be censured. (In Re: Haley, No. 127453, 7/31/06.)

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Do you ever actually read any of that spam you get on your computer? One earnest message caught my eye recently.

“More earning power
A Gen uine Univrsit y De gree in 4-6 weeks!

Have you ever thought that the only thing stop ping you from a great job and better pay was a few letters behind you n ame? Well no w you can get them!

BA BSc MA MSc MBA PhD

Within 4-6 weeks!
No Study Required!
100% Verifiable!
…
Just call the number below.
You thank me later”

**************************************************************************
When a prominent lawyer in Philadelphia died recently, the local legal newspaper ran a highly complimentary story on his career, quoting numerous attorneys and others about his great skills, his gentle kindness, and his droll sense of humor.

That last characteristic might have helped him appreciate the comment of one of his colleagues who praised him as “the penultimate Philadelphia lawyer.”

Thanks to David Grove of Montgomery, McCracken for this one.
**************************************************************************
The managing partner of the law firm was asked why the firm had not agreed to contribute $300 per lawyer to local legal service organizations as part of a Bar Association initiative. There was no reservation about the goal of the program, he said, but if the firm agreed to participate in similar campaigns in each of the cities in which it has offices, it would be “difficult.”

He pointed out that the firm’s partners already donate an individual average of $650 a year to charity.

According to published reports, the firm’s average profit per equity partner was more than $1 million last year. Such generosity!

**************************************************************************

The charity sent out its thank you letter to supporters a little more than two weeks after the fundraising event. It read in its entirety as follows:

“On behalf of the [Special] Awards Committee, thank you for your support of the [Special] Awards Breakfast and the important work of the [charity]. Your gift will make a difference in the lives of so many.

“This special fundraising event took place on Friday, [date] with a networking and VIP reception that started at 7:15 a.m. and the Breakfast & Award Ceremony commencing at 8:00 a.m. The breakfast was held at the [name] Hotel, [address], in the Millennium Ballroom.

“It is because of donors like you that we are able to keep our promise [to better the world].”

One can only wonder whether the second paragraph was included because it was such a memorable event that the donors would have forgotten where they had been.

**************************************************************************

The defendant complained that there was insufficient basis to issue a search warrant for her home. The Court was not impressed. “Common sense indicates that employees charging tens of thousands of dollars in women’s clothing and furniture on the credit cards of the charity they manage raises the ‘fair probability’ that a crime has been committed, and that evidence will be found in the employees’s homes.”

(Dela Torre v. County of Fresno, 9th Cir., No. 05-15538, 5/2/06.)

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Guess how this case comes out.

“In this case we are asked to decide whether to grant the petition for admission to the Maryland Bar of Emsean L. Brown, who was convicted of bank fraud in 1991, was incarcerated, and since that time has misrepresented various aspects of his history.”

Despite the first sentence of the opinion, it took the majority of the Court of Appeals of Maryland 27 pages to reach the conclusion that he should not be admitted and a dissenting judge added 25 pages of argument to the contrary.

(In the Matter of the Application of Brown, Misc. Docket No. 10, Sept Term 2005, 4/11/06.)

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The editor of the newsletter of a high-rise condo association asked a building employee to submit tips on apartment maintenance. He e-mailed a well-considered, well-written treatise that appeared to be beyond his writing capabilities. So she Googled the title and found the identical article on the website of a university in another state. She told the employee that she does not endorse plagiarism and requested that he try again with original material about the building.

In less time than it takes for the residents’ council to vote an increase in monthly fees, he e-mailed a second story, less cogent and less well written. The editor was still suspicious, though, because it discussed cleaning the debris out of wells.

Submitted by Susan Perloff
Philadelphia, PA
susanwrites@comcast.net
www.susanperloff.com

**************************************************************************

The School claimed that in order to discriminate against the students, all non-native English speakers, it must have treated them differently from other similarly situated individuals who are native English speakers. It said that uniformly treating all individuals badly is not unlawful discrimination.

A federal District Court in Minnesota declined to dismiss the complaint and allowed the students the opportunity to try to prove their case. (Mumid v. Abraham Lincoln High School, D. MN, Civ. No. 05-2176, 3/13/06.)

**************************************************************************

The IRS was trying to enjoin a tax preparer from doing any more returns because of repeated false or inflated deductions and other claims. The preparer claimed that finding errors on 88 returns out of 3300 prepared was “statistically insignificant” and no basis for the government’s case.

The Court noted, however, that the IRS had audited only 88 returns and 100% of the sample should have paid more tax. “It is misleading to suggest that the 3,212 tax returns that have yet to be audited will not result in additional tax due,” it said. Injunction granted. (U.S. v. Sonibare, D. MN, Civ. No. 06-497, 3/10/06.)

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Headline on a recent report of information for corporate counsel:

“Information on company’s Web site not trade secrets”

Thanks to Joe Stapleton of Montgomery McCracken for forwarding this “breaking news.”

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Ever have trouble figuring out the scoring system for Olympic figure skating?

Maybe it’s because serious journalists can describe a performance like this: “He jumped, glided and moved” through his routine “flawlessly – though not perfectly”. Philadelphia Inquirer, February 15, 2006.

**************************************************************************The headline on an insert in our bank statement last month:

“Introducing Personal Checking and Savings Statements in Spanish.”

**************************************************************************
Talk about being taken to the cleaners.

The draft contract called for the cleaning company to perform background checks on its employees and only send folks to clean the campus if, in the company’s reasonable judgment, they did not pose an unusual risk to the safety or welfare of the students.

The company asked the school to delete the word “reasonable.” That made the school feel really comfortable.

**************************************************************************

The Florida State Supreme Court has sanctioned two attorneys for advertising that “demeans all lawyers” and reduces “the public’s trust and confidence in our system of justice.” The Court objected to their use of a pit bull in their TV ads and their use of the phone number 1-800-PIT-BULL. The Court said the devices do “not assist the public in ensuring that an informed decision is made prior to the selection of the attorney.” (The Florida Bar v. Pape, No. SC04-40, 11/17/05.)

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The tax protester claimed that the New Jersey court had no jurisdiction to enforce IRS summonses against him because he is (1) “a non-citizen national of New Jersey,” (2) “domiciled within the New Jersey Republic,” (3) does “not reside permanently anywhere on earth, and intend[s] to reside only in Heaven,” and (4) has “studied the Constitution, the Internal Revenue Code, and the Treasury Regulations and has independently determined … that he has no legal duty to pay internal revenue tax.”

Guess what the federal court said. See Tax Matters December 1-15, 2005 (McGugan v. Katzmar, D. NJ, Civ. Action No 05-2667, 11/15/05.)

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The supervisor complained that the new receptionist was careless and gave her a memo warning that she would not be able to advance “from the basis [sic.] responsibilities because of her error rate.”(Hornbuckle v. Detroit Receiving Hospital and University Health Center, E.D. MI, No. 04-74093, 11/8/05.) See November 16-30, 2005 Employment Law page.

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We regularly have the opportunity to negotiate indemnification clauses in contracts. Some of them are more overreaching than others, but Eric Vieland of Montgomery McCracken has produced one he recently received that seems to go about as far as one can go. When you actually parse the sentence it says:

"[Your organization] expressly and irrevocably agrees … to assume unlimited liability for harm or injury suffered by … any other person."

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Sometimes it takes a while in reading an opinion to understand how the case will come out. Sometimes it doesn’t.

From the first sentence of this opinion, can you guess how this case comes out?

“This is yet another in a long line of cases in which Plaintiff Leonora Fulani has misused the courts in an attempt to pursue a political agenda which she is not able to accomplish at the ballot box.”

In a case in which Fulani sued John Kerry, John Edwards, Terry McAuliffe, the Democratic National Committee and others for conspiring to keep Ralph Nader off the 2004 Presidential ballot, federal District Court Judge Loretta Preska didn’t spend much more time building up suspense. In the second sentence of the opinion, she said: “For the reasons set out below, this misguided effort also fails.” (Fulani v. McAuliffe, S.D.N.Y., No. 04 Civ. 6973, 9/19/05.)

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The NJ Division of Alcoholic Beverage Control has published a raft of proposed new regulations, along with provision-by-provision economic impact statements as required by statute. The impact statement for Subchapter 31 reads in part as follows:

"This subchapter provides an appropriate sanction, by way of forfeiture, in addition to fines and imprisonment, for persons who engage in unlawful alcoholic beverage activity. A direct adverse economic impact is felt by those persons engaged in illegal activity when their property is seized and forfeited by the State. There is also a positive economic impact for the State when the forfeited property is sold at auction."

Thanks to Eric Vieland of Montgomery McCracken for forwarding such a helpful insight.

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Business News headlines on the Internet
August 5, 2005 12:41 p.m. ET  

Jobs growth unexpectedly strong in July

Stocks fall on jobs report

Isn’t there something a little perverse in that?

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The attorney sued the National Association of Securities Dealers and its regulatory affiliate for $100 million in damages “resulting from her perjury conviction and disbarment, claiming that defendants were at fault in failing to advise her explicitly that she could be prosecuted for perjury if she lied under oath.”

Noting that the attorney’s claims were of “gossamer durability,” the Court dismissed the claim. (Scher v. National Association of Securities Dealers, S.D. NY, 04 Civ. 6169 (MBM) 7/4/05.)

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We were reviewing an old Form 1023 application for recognition of exemption recently requesting recognition for a new private foundation.

Asked to list the names of the trustees, the form listed three individuals and a bank. Asked to list their “specialized knowledge, training, expertise or particular qualifications,” the form said: “N/A.”

The IRS recognized the exemption.

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From an on-line poll:  

Which celebrity does more to promote the health of women?
1) Barbara Walters
2) Katie Couric
3) Oprah Winfrey
4) Susan Sarandon
5) Dr. Phil
6) None of the above.

None of the above?

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The development contract provided as follows:

“In interpreting the Contract Documents, detailed Specifications shall take priority over general Specifications, large scale drawings shall take precedence over small scale drawings. In case of conflicts between the drawings and Specifications, the Specifications shall govern. Figure dimensions on drawings shall govern over scale dimensions, and detail drawings shall govern over general drawings. In the event an item of the Work is described differently in two or more locations on the drawings or in the Specifications, Contractor shall submit a request to Project Coordinator in writing, for clarification of the conflict.”

Can anybody get anything right in this development?

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In denying an application for real estate tax exemption, the Court noted: "We believe that the practice of posting the subject properties with 'No Trespassing' signs must draw into doubt the assertion that [the properties] are being 'actually and regularly used' to benefit the general public as a public recreational area."

Berks County Board of Assessment and Revision of Taxes v. Berks County Conservancy, 102 Pa. Commw. 64, 71 (1986).

A few days after police seized a photographer’s computer and his digital photographs of a model and photographic assistant, they arrested him on criminal charges related to her death. One of the detectives printed a picture of the model and put it on the front of his investigation notebook “for inspiration.” Detectives also copied other pictures of her for use in the investigation, several of which were posted visibly to the public in the detectives’ office.

The photographer sued for copyright infringement.

A federal District Court has dismissed the claim, holding that the use was permissible under the “fair use” doctrine of copyright law, in part because “any photographs used during the investigation could actually increase in value because of the publicity surrounding [the photographer’s] criminal prosecution.” (Shell v. City of Radford, W.D. VA, No. 7:04CV00409, 1/10/05.)

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“Fairview paid over $9,000 for an executive and two employee-board members to attend a three-day conference at the Phoenician Inn in Scottsdale, Arizona, where they studied board accountability. One board member/employee and the executive played a $460 round of golf. Another day, all three attendees played in a golf tournament that cost over $600 for green fees and club rental. The executives submitted credit card receipts with no detail for multiple dinners that cost over $200 each.” --From the Compliance Review report on Fairview Health Services released by Minnesota Attorney General Mike Hatch.

A conference on board accountability?
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The defendant challenged his conviction for illegally possessing a firearm “on the ground that the officer who made the arrest did not find the gun, which was buried deep in a pocket of his cargo pants. Still, the gun was found, and uncertainty about just which officer found it and when does not preclude a reasonable jury from finding guilt beyond a reasonable doubt.”

“Nor does it matter that the local jail gave the cargo pants to charity after [the defendant] failed to claim them. He says that the prosecutor’s inability to produce the pants at trial was a … concealment of exculpatory evidence unknown to the defendant. [The defendant] was aware of his own pants.” Conviction affirmed. (U.S. v. Lee, 7th Cir., No. 03-4239, 2/25/05.)

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Headline of the day. Or was it tomorrow?

“HISTORY MUST PLAY BIGGER ROLE IN FUTURE”

From the Gloucestershire [England] Citizen, 3/28/05.

Thanks to Eric Vieland of Montgomery, McCracken, Walker, & Rhoads, LLP, for this one.

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“Plaintiffs have lost their way; they need to consult a map or a compass or a Constitution because Plaintiffs have come to the judicial branch for relief that may only be granted by the legislative branch. This action is one of dozens of similar bootless actions filed in twenty-three district courts across the United States on behalf of uninsured and indigent patients, wherein Plaintiffs argue, without basis in law, that private non-profit hospitals are required to provide free or reduced-rate services to uninsured persons.”

Judge Loretta A. Preska of the Southern District of New York beginning a 43-page opinion dismissing another of the purported class action cases brought against charitable hospitals on behalf of uninsured patients. (See Nonprofit Issues, Dec. 16, 2004-Jan. 15, 2005.) (Kolari v. New York-Presbyterian Hospital, No. 04 Civ. 5506 (LAP), 3/29/05.)