AIG: A Clawback You Can Believe In

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RussB's picture
RussB
Status: Silver Member (Offline)
Joined: Dec 9 2008
Posts: 101
AIG: A Clawback You Can Believe In

We've heard alot of talk about "clawbacks" of executive compensation, where executive performance was morbidly incompetent, or where the compensation process was clearly criminal ("fraudulent conveyance"), or where the amount, compared to performance, was simply unconscionable.

Yet for all the talk it seems there's an insuperable political obstacle to doing this. Namely, it's clear none of those in government who are talking actually want to do this, since they could easily do it at will.

But there's one clawback somebody really is seeking. 

http://www.nytimes.com/2009/03/20/business/20aig.html?em

AIG is suing us for $306 million in tax refunds it says it deserves. The claim is clearly bogus. Even Bush's IRS rejected it (you know we're in trouble when they expect an Obama administration to be more corporate-friendly than Bush was).

The claim involves tax-offshoring scams. Basically, they set up phony entities with "names like Lumagrove, Laperhouse, and Foppingadreef" in places like Ireland, the Caymans, and the Dutch Antilles. There they allegedly pay taxes to these foreign governments, and then get an inflated US tax credit for having done so.

So it was a widely arcing tax evasion maneuver to begin with, enabled by corporatist US law. And now, in a political environment where they clearly feel they can get away with anything (or perhaps where they feel they better grab whatever they can while the getting's good, no matter how brazenly), as part of today's general plunder expedition, they're trying to claw back even the little tax they did pay. They're also demanding $119 million in "penalties and interest".

(Part of the refund they demand is for "tax-related payments". Does this mean lawyers' and accountants' fees? But if the claim is correct, it follows that their lawyers and accountants were incompetent. So why aren't they suing them for malpractice?)

They also claim that when a 2004 accounting scandal forced them to restate earnings, they restated these erroneously such that their revised tax bill was too high. In other words, they got caught cooking the books to evade taxes, had to pay more, and are now suing saying they ended up overpaying. Poor babies.

Of course, for this lawsuit they are using taxpayer money to sue the taxpayers.

Is $306 million a large amount in itself? No, but just like the bonuses, it is exemplary. It is characteristic. It is a symbol of AIG's entire existence, and of an entire corrupt, sociopathic, criminal system.

Why are offshore tax havens allowed at all? We see how the practice and the law are doubly treasonous. These corporations, which could never exist without the nurturing and protection of American public society, are allowed first to move operations offshore, denying America its rightful share of the return on the business. And then they get a reduced domestic tax bill as a reward! Why does this perverse tax incentive exist at all?

And then, as if that's not enough, they now sue to get back even the pittance they did pay.

The finance industry is simply the biggest, fattest, most blood-bloated parasite the world has ever known. It has staked out America and the world as its private property, and all it does is COLLECT RENT, while the real owners of the land break their backs doing all the work and get none of the reward.

An AIG spokesman said it shouldn't be "required to pay more than its fair share of taxes". We can be certain AIG has never once in its entire history paid anything near its fair share of taxes, nor did they do so in any of the years concerned here. Yet now they're trying to claw back even the measly pennies they did pay.

As you can see, they won't be satisfied until they have confiscated every last penny.

http://attempter.wordpress.com/

DrKrbyLuv's picture
DrKrbyLuv
Status: Diamond Member (Offline)
Joined: Aug 10 2008
Posts: 1995
Re: AIG: A Clawback You Can Believe In

You bring up an important issue that has been largely ignored -

Why are offshore tax havens allowed at all? We see how the practice and
the law are doubly treasonous. These corporations, which could never
exist without the nurturing and protection of American public society,
are allowed first to move operations offshore, denying America its
rightful share of the return on the business. And then they get a
reduced domestic tax bill as a reward! Why does this perverse tax incentive exist at all?

Tax havens represent a huge potential for fraud. The Guardian UK had an excellent piece about this:

Five reasons why tax havens and the banking crisis are linked

As world leaders finally get around to doing something
about international tax evasion, a strange counter argument is forming:
tax is a red herring, say the sceptics; better to focus first on
sorting out the banking crisis rather than get bogged down in an
"irrelevance".

While it is true there were many other causes of the financial crisis -
too much debt, being the most obvious - it is wrong to pretend that
systemic tax avoidance of the sort practiced on a huge scale by our
banks is unconnected with their eventual demise. Here are five reasons
the two issues should be seen as intimately related.

1) Offshore = out of mind  The offshore
vehicles used by banks to hide their activities from the taxman also
served to obscure their extent from investors and regulators. Granite, the Jersey-based trust operated by Northern Rock, is exhibit A. Tax havens are also breeding grounds for corruption.

2) Pushing rules to the limit is infectious  As the FSA points out
there is no point in having principles-based regulation when you are
dealing with people with no principles. Similarly when you encourage
bankers to ignore the spirit of tax law and only heed the letter, you
encourage them to look for loopholes and shortcuts everywhere.

3) Everyone must pay their fair share  We
are all going to have to pay more taxes to clean up this mess, but
public support for government bank bail-outs could be fatally
undermined if voters believe that only little people pay taxes. The
sight of the super-rich swanning about in tax havens should be of more
concern to the CBI than anything else right now - without public
support, banking is toast.

4) Complexity confuses everyone  One
reason why the world of finance became so convoluted was to stay one
step ahead of the taxman. The "double dips" and other tax-efficient
structures described here ultimately baffled everyone: including their creators. Just ask AIG.

5) Avoidance fuels unsustainable growth expectations  Hiding
the true source of your wealth can give your investors a dangerous
false sense of security. General Electric, for example, grew lending
for years by keeping its tax rate shrinking, until suddenly it lost its credit rating.
Far from being "dead money", structured finance vehicles also require
large amounts of borrowing to sustain: when the debt market dries up,
they are the first to go under.

Larry

RussB's picture
RussB
Status: Silver Member (Offline)
Joined: Dec 9 2008
Posts: 101
Re: AIG: A Clawback You Can Believe In

That is a good piece, Larry.

On its face it does seem rather odd that a country would even go to the trouble of having a tax code if they're going to turn around and let their citizens avail themselves of offshore tax havens and places like Switzerland who openly and formally advertise their services for tax cheats. Why would you allow someone like that to even remain a citizen and own property, let alone use public resources to defend him and his alleged property rights?

Of course the answer is that taxes are indeed "for the little people" as Leona Helmsley said. Just like everywhere else, the law is intentionally and systematically written to allow the rich to evade almost every part of it.

If a common street grifter was busted, would they waste one second confiscating every cent of the ill-gotten gain even though his wife was claiming it was "her" separate property? And yet there seems to actually be a question about confiscating Bernie Madoff's stolen property, because his wife is saying it's hers.

Don't anybody kid yourself - this is not some failure of the law. This is exactly how the law is supposed to work.

(Speaking of Leona Helmsley: I happened to think of her the other day and had a weird realization. As rotten as she was, as much of a gilded age crook as she was, she did at least provide a tangible service, and by all accounts really cared about giving her customers good service.

Compared to the predator scum of today, who were never anything but pure swindlers, parasites who never produced a thing, and who never cared about anything in life but the most subhuman gutter craving for money, Helmsley actually looks good!) 

 

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