October 2014 – Blog Business Law – a resource for business law students

Members of organized crime, drug dealers, and terrorists transact their “business” in cash to hide their tracks. As part of a scheme to launder money (make it look it was earned legitimately), criminals will deposit their ill-earned cash in bank accounts. In response, Congress passed the Bank Secrecy Act, requiring banks to assist the government in catching money launderers.

Under the Act, banks are required to report any cash transaction or combination of cash transactions in excess of $10,000 to the IRS.  Knowing this, criminals resort to structuring. Structuring is the deliberate parcelling of a large cash deposit into a series of smaller transactions in order to avoid detection by regulators. When bank officials suspect structuring is occurring, they are required to file a suspicious activity report, or SAR, and notify regulators of what they believe is happening.

In Ratzlaf v. United States, 510 U.S. 135 (1994), the Supreme Court found that government had to prove that defendant acted with knowledge that structuring is unlawful. As a result, Congress removed the “willfulness” requirement making it easier for the government tor prosecute structuring cases. The IRS, however, has been seizing assets of legitimate businesses and individuals without any proof or any charges filed. Small business and individuals can be a target. In one case, the IRS seized $66,000 from an Army sergeant’s college savings account, even though the sergeant was told by the bank teller to make smaller deposits in order to avoid taxes. Removing the “willfulness” requirement makes structuring a strict liability crime.

In a written statement, Richard Weber, the chief of Criminal Investigation at the IRS, said, “After a thorough review of our structuring cases over the last year . . . IRS-CI will no longer pursue the seizure and forfeiture of funds associated solely with ‘legal source’ structuring cases unless there are exceptional circumstances justifying the seizure and forfeiture and the case has been approved at the director of field operations (D.F.O.) level.”

Posted by Deena Khalil.

There are two sides of every story. According to Kelly Wallace who works for CNN, “It’s a case of she said versus they said.”

Rachael Cunnings, a young girl from New Jersey, accused her parents of throwing her out of their house when she turned eighteen. They refused to pay for her private school tuition, and so she sued them for expected future expenses, such as transportation, bills, college tuition, and living expenses.   The teen’s parents argue “that she was not kicked out of the house. Instead, they say she left on her own back in October because she didn’t want to abide by their rules.” There were many claims against each side, such as Rachael’s parents not liking her boyfriend, missing curfews, getting suspended, and apparently the teen’s parents were abusive.

The judge in the New Jersey Superior Court denied Cunnings request for high school tuition and living expenses. “The judge sounded skeptical of some of the claims in the lawsuit, saying it could lead to teens ‘thumbing their noses’ at their parents, leaving home and then asking for financial support.” There was another hearing that took place the following month about other issues in the case including her college expenses. Before the hearing, Rachael dropped the case; she was accepted by Western New England University with a $56,000 scholarship. In the end, the teen did not end up empty handed.

Deena is a finance major at Montclair State University, Class of 2017.

The Supreme Court issued an order denying an application to vacate the Fifth Circuit’s stay of a district court’s final judgment enjoining the enforcement of a Texas voting statute. The statute requires voters to produce identification before they vote. Business law students learn about injunctions (in this case, the court’s power to stop a party from acting) as a equitable remedy.

Congressman Marc Veasey, D-Fort Worth, sued Governor Perry and Texas Secretary of State John Steen in federal court, challenging the enforcement of the voter ID law, named SB 14. Veasey claimed that the law had the potential of preventing hundreds of thousands of people from voting. The strict Texas statute “requires the state’s estimated 13.6 million registered voters to show one of seven kinds of photo identification” before casting their ballot. Defendants responded SB 14 was designed to prevent voter fraud and argued voter ID laws were already approved by the Supreme Court in an Indiana case.

After a hearing, the district court agreed with Veasey that enforcement of the law “may prevent more than 600,000 registered Texas voters (about 4.5% of all registered voters) from voting in person for lack of compliant identification.” The district court determined the strict Texas statute was unconstitutional and enjoined defendants from forcing voters to produce ID. The Fifth Circuit issued a stay of the order, meaning defendants were temporarily permitted to enforce the law. The Supreme Court denied Veasey’s application to vacate the stay pending appeal. Led by Justice Ginsberg, three Justices wrote a scathing dissent (and in a rare circumstance, later corrected) expressing disagreement with the court’s decision not to vacate the stay.

Voting rights are analyzed under strict scrutiny. As of now, voters in Texas must show proper ID before they are allowed to vote in the midterm elections on November 4th.

Posted by Patrick Osadebe 

Do you think the lawyers in America get paid as much as they deserve? How much do you think a lawyer makes in a year? According to a survey conducted in 2014 by the Association of Law Placement, the highest starting salary of one of the largest firm in the US with about 700 plus employee is $160,000. This number may seem to be high based on our present economy situations but the results are accurate.

From the survey, only 27% of firms actually responded and one third actually start their employees with $160,000. According to James Leiplod who is the current NALP executive director, he stated that “it is fair to say that law firm starting salaries are flat.” In contrast to that statement, the starting salaries was much higher before the economic recession and the figure is basically a reflection of changes in large firm market.

Different firms may have different starting salaries based on size and experience but according to the survey, the median starting salary is about $125,000, which has been unchanged since 2012.

Patrick is a business administration major with a concentration in finance at Montclair State University, Class of 2016.

Posted by Abier Mustafa.

Cell phone Company, AT&T, has agreed to pay back $105 million in what is being called ”the largest cramming settlement in history.” AT&T has been adding unauthorized charges to tens of thousands of customers’ monthly bills. The charges are usually for the amount of $9.99 per month, coming from third-party services, including trivia, horoscopes, and love tips.  ”AT&T is accused of keeping at least 35% of the fees, as well as obscuring the charges on bills and preventing customers from securing full refunds.”

There have been previous lawsuits against other cell phone providers besides AT&T.  For example, the Federal Trade Commission has filed a similar lawsuit against T-Mobile in the past also due to unethical charges to customers.  “For too long, consumers have been charged on their phone bills for things they did not buy,” Wheeler, the Federal Communications Commission chairman, said- “It’s estimated that 20 million consumers this year are caught in this kind of trap, costing hundreds of millions of dollars.”

AT&T has released a statement saying that they have provided customers with “Premium Short Messaging Services” in the past. However, they have discontinued third-party billing.  To resolve all claims, $80 million of the settlement has been set aside for customer refunds, along with $25 million in penalties due to regulators.

So if you’re an AT&T customer and have been wrongfully charged, you may be eligible for a refund!

Abier is a finance major at Montclair State University, Class of 2016.

Posted by Gerald Wrona.

Interesting. That is one word to describe the NY Times report on the pre-trial proceedings of the Libyan Investment Authority’s (LIA) suit against Goldman Sachs (Anderson). Acting as broker-dealer to the sovereign wealth fund, Goldman established a relationship with the fund’s managers in 2007. A year later, Secretary of State Condoleezza Rice was visiting Moammar Gadhafi in Libya’s capital to devise a “trade and investment agreement . . . which will allow the improvement of the climate for investment.” (Labbott). Shortly after that promising convention between the two political heads, Goldman and the Authority finalized the agreement and the bank sold derivative products totaling $1 billion to the LIA. Then the housing market “opened its mouth” and out came the demon of the subprime mortgage crisis.

Understandably, the LIA felt exploited. They bit the bullet. Their lawyers came to the London High Court armed with notions that those managing the sovereign wealth fund were ineffectual in understanding the investments presented to them by Goldman. To add insult to insult, they further asserted that the fund administrators were altered in their judgment by Goldman representatives’ leadership role in incidents allegedly involving the recreational consumption of alcohol and visits paid to what may have been brothels, or some other manufacturer of night entertainment, though a witness statement does not specify. Considering that it would never have been in Goldman’s interest to spend more time carousing then working on the deal with the authority, it is highly unlikely that the time spent in leisure outweighed the hours dedicated to the investigation of the necessary facts of the deal.

Though it is worth noting that Goldman has already been ousted for luring investors into crummy deals and then betting against those deals to increase revenue. This is how Goldman actually made money off the subprime mortgage crisis (Cohan).

Will evidence be disclosed that suggests Goldman dealt with the LIA in a similar way? It’s impossible to know. I believe the judge will find that the heart of the matter is whether Goldman conducted due diligence in their dealing with the LIA. For that reason, Robert Miles, one of the attorney’s representing Goldman, would do well to look to the Securities Act of 1933 for support. It states: “If a Broker Dealer conducts reasonable due diligence on a security and passes the information on to the buyer before a transaction, the Broker cannot be held liable for non-disclosure of information that was not found during the investigation.”  Securities Act of 1933, SEC §§ 38-1-28 (SEC 1933).

The trial is expected to start next year.

Gerald is a Business Administration and MIT major at Montclair State University, class of 2017.

Posted by Giancarlo Barrera.

First it was Target, Home Depot, and now, JPMorgan Chase.  They are the next victim under cyber attack. Chase is the biggest bank by assets in the US. They are also the dominate bank in New York City, where the majority of banks’ cooperate headquarters are located . “JPMorgan Chase has 65.8 million open credit card accounts, and 31.8 million of those accounts with sales activity, according to its most recent quarterly report. Chase also has 30.1 million checking accounts.”  According to what the FBI has been investigating, names, addresses, phone numbers, and emails were taken, but no passwords and social security numbers

It was reported that the hackers did not receive any money from this cyberattack. “The bank’s Chairman and Chief Executive Officer Jamie Dimon said that the company will spend $250 million this year on cybersecurity, but has been losing security employees to other banks with more “expected to leave soon.”

Giancarlo is a finance major at Montclair State University, Class of 2016.

The United States Supreme Court granted certiorari in Equal Employment Opportunity Commission v. Abercrombie & Fitch Stores, Inc.  Abercrombie allegedly denied a muslim woman a job at a Tulsa, Oklahoma store during an interview.  She was wearing a headscarf, which Abercrombie determined violated its “look policy.”  The “look policy” at the time was classic East Coast collegiate style.

The 10th Circuit Court of Appeals sided with Abercrombie ruling the muslim woman never indicated she needed a religious accommodation as required under federal law.  The EEOC argued Abercrombie was on notice that an accommodation was warranted because the woman was wearing the headscarf at the interview.

Under Title VII of the Civil Rights Act of 1964, a business operating with less than 15 employees (religious institutions exempted) must provide an accommodation for an employee’s religious observances, unless doing so is an undue burden for the company.  Examples of undue burdens could include, but are not limited to, costing the company more than ordinary administrative costs; workplace efficiency diminished in other areas of the business; infringing upon another employee’s job rights or benefits; impairing workplace safety; adding burdens on co-workers by forcing them to carry on the accommodated employee’s share of potentially hazardous or burdensome work; or conflicts with another law or regulation.

The High Court will decide the case next year.