FI - Fuerst Ittleman

Mitchell Fuerst Presents Webinar on Year-End Tax Planning for CFOs

FI - Fuerst Ittleman — 2010-11-24T09:33:18+01:00

On November 23rd, Mitchell Fuerst, Managing Partner of Fuerst Ittleman, PL, presented a webinar on “CFO Best Practices for Tax Breaks & Strategies to Capitalize on Before Year-End 2010.” Offered by ExecSense, the world’s largest library of webinars for executives and legal professionals, the seminar focused on the steps that companies and their CFOs can implement before the end of the calendar year to maximize their tax advantages; i.e., to anticipate those tax increases that will be coming in 2011 and to make use of tax breaks that must occur before January 1st.

The list of topics addressed in the webinar included:

• accelerating income and postponing deductions
• taxable compensation and ordinary dividends to shareholders
• distributions of real estate
• dividends in lieu of salary
• accelerating capital gains
• electing out of installment treatment

The webinar detailed the key provisions of the tax code that will be expiring at the end of 2010 and those which will be carrying over into 2011. Mr. Fuerst also focused listeners’ attention to new reports that will be due to the Internal Revenue Service with a company’s 2010 tax filing.

The complete webinar can be accessed for your computer, iPhone, Blackberry, iPod, Kindle or iPad through ExecSense by clicking here.

For a private consultation regarding you company’s tax planning or tax issues, contact Mitchell Fuerst, Esq., and the Tax Planning practice of Fuerst Ittleman.

Mitchell Fuerst Featured Speaker at Upcoming Stem Cell and Age Management Medicine Conference and Meeting

FI - Fuerst Ittleman — 2010-11-09T18:38:04+01:00

Fuerst Ittleman’s Managing Partner, Mitchell S. Fuerst, Esq., is a featured speaker and participant at a series of upcoming meetings and conferences focused on stem cell medicine and age management medicine.

Tea Party May Throw Kink Into GOP Trade Policies

FI - Fuerst Ittleman — 2010-11-04T15:25:28+01:00

In an article entitled "Tea Party May Throw Kink Into GOP Trade Policies, Mr. Fuerst was interviewed and quoted by Law360 an online newswire publication for Business
Lawyers. The article concerned the impact of the 2010 election on anticipated international trade legislation.

Read the article

Miami Tax Preparer Found Guilty for Tax Fraud » Making Fraudulent Tax Returns

FI - Fuerst Ittleman — 2009-05-19T00:00:00+01:00

A former tax preparer for Jackson Hewitt was recently found guilty for making and filing fraudulent tax returns. According to the Indictment and court documentation, Providencia Llanos was hired as a tax preparer by Jackson Hewitt in Miramar, FL, to prepare clients tax returns. Ms. Llanos remains on bond until she receives sentencing before Judge Joan A. Leonard in Miami on August 24th. Llanos may be facing up to five years imprisonment and up to $250,000 in fines as well as a mandatory restitution.

Swiss Banking After the UBS Scandal » Is Swiss Banking Secrecy Over?

FI - Fuerst Ittleman — 2009-05-18T15:55:00+01:00

Switzerland is probably known best for maintaining it's commitment to banking secrecy for their financial institution's clientele. In the wake of the UBS scandal, it looks as though for those in the United States, the time of hiding assets in Swiss Banks may be over. However, with Swiss banking contributing to the country's 29 to 1 leverage ratio, the Swiss are not going to simply roll over and allow the U.S. to potentially cost the country billions, if not trillions in annual revenue. Recently, Switzerland filed an Amicus Brief that challenged the IRS's request for the release of 52,000 names of U.S. clients for Switzerland's largest bank, Union Bank of Switzerland (UBS).

The argument that the Swiss support is that the disclosure order provided by the IRS would potentially threaten an existing treaty for the mutual cooperation between Switzerland and the Unites States which is in place "to prevent the likelihood of tax fraud ... "

A Brief provided for the Swiss government's legal counsel stated that "A unilateral attempt by foreign authorities to compel the release of information from Switzerland without the participation or consent of the government of Switzerland would be an infringement of Swiss sovereignty,"

Switzerland's position relies on settling any legal conflicts which may arise between U. S. and Swiss law - focusing intently on the current tax treaty between the U.S. and the Swiss. Switzerland maintains that the treaty does not require it to reveal the names of those hiding assets as the IRS had requested. The treaty limits the exchange of information between Switzerland and the U.S. to criminal tax fraud, and fraudulent scams and transactions.

Switzerland holds fast to its interpretation of the tax policy stating that there have been no changes or agreements that would support the release of names for those hiding assets in Swiss banks. Assistant U.S. Attorney Stuart Gibson has been given the task of extensively reviewing the matter with the executive branch to qualify the U.S. position before moving ahead.

The recent IRS voluntary disclosure guidance allows U.S. taxpayers that have hidden assets in Swiss accounts to come forward until September 23rd, 2009 and only incur financial penalties. However, after the voluntary disclosure period, the IRS may not only assess severe financial penalties, but may also result in criminal charges for non- compliance with the voluntary disclosure guidance and may require criminal penalties, as well as jail time or both.

UBS Conviction for Tax Fraud by Filing False Tax Return

FI - Fuerst Ittleman — 2009-05-15T12:29:42+01:00

Florida Yacht Broker Plead Guilty to Tax Fraud with Offshore UBS Account

The Department of Justice and the IRS recently announced a guilty verdict for a Florida yacht broker that pleaded guilty to Tax Fraud charges tied to the UBS scandal. In February UBS agreed to give up the names of hundreds of their U.S. based clients and to pay up a $780 million penalty to enter into a deferred prosecution agreement with the U.S. governement. According to the indictment, Robert Moran concealed over $3 million in assets and hid transactions through a corporation in Panama. The courts could have sentenced him to up to 3 years in prison and a $250,000 fine.

U.S. Senate Amends Offshore Tax Avoidance to Money Laundering Criminal Statute

FI - Fuerst Ittleman — 2009-05-14T00:00:00+01:00

The U.S. Senate recently passed legislation for the Fraud Enforcement and Recovery Act of 2009 (S. 386). This bill introduces International Money Laundering Statute amendments that provide severe criminal and civil penalties for offshore money transfers that are intended to evade federal income taxes, or to commit an act of Tax Fraud.

Under the new law, those that violate the criminal statute may face up to twenty years in prison and fines of up to $500,000 or double the amount of the value of the transferred funds. This amendment increases the fine by 5 times the current $100,000 penalty, and 4 times the current rate of 5 years imprisonment. Furthermore, the Fight Fraud Act of 2009 (H.R. 1748); has been accepted by the House Judiciary Committee, though this resolution does not contain the tax provisions.

The FDA Warns Cheerios© Makers to Cease Cholesterol Claims

FI - Fuerst Ittleman — 2009-05-13T13:08:31+01:00

General Mills Receives Warning for Marketing Cheerios© as an Unapproved New Drug » Misbranded Food

The FDA recently sent a warning letter to Ken Powell, Chairman and CEO of General Mills, Inc., citing the marketing for Cheerios© is claiming the food is intended to treat the disease hypercholesterolemia. The product labeling contains specific claims to "Lower Cholesterol by 4 percent in 6 weeks" and that Cheerios© was "Clinically proven to lower cholesterol ... A clinical study showed that eating two 1 1/2 cup servings daily of Cheerios© cereal reduced bad cholesterol when eaten as part of a diet low in saturated fat and cholesterol."

General Mills responded by stating the claims were valid if the cereal was eaten in conjunction with a diet low in cholesterol and saturated fat. The Cheerios© cholesterol reduction claims go far beyond what the FDA considers approved food marketing.

The Head of the FDA's Center for Food Safety, Dr Steven Sundloff, stated the action was "not to impugn Cheerios©", which he claimed is "a product that can be part of a healthy diet." However, he said, "The packaging clearly carries a drug claim ... The industry is really looking at these health claims as a good marketing tool, and we’re seeing more and more companies trying to differentiate their product through health claims. As they do that, they do have a tendency to go too far ..."

Mr. Silverglade continued by stating, "This is the strongest action that the US FDA has taken against misleading health claims for food in almost a decade, and it represents a major reversal from the lack of consumer enforcement under the Bush administration ... "

According to General Mills, the cholesterol reduction claims for Cheerios© were "not in question" and the FDA's complaint targeted how "cholesterol-lowering information is presented on the Cheerios package and web site." The action for the FDA's complaint followed notification from The National Consumer League consumer advocacy group.

Modifying Agricultural Estate Tax Law In This Tough Economy

FI - Fuerst Ittleman — 2009-05-12T00:00:00+01:00

As with many Americans these days, the agricultural community is being affected by our country's current economic situation. However, ranchers and farmers have to face an even more burdensome fact: Dealing with Federal estate tax that are due in the event a family member passes.

Florida Senators Bill Nelson [D] and Mel Martinez [R] should be commended for their part in requesting Congress to consider improving the current estate tax laws to allow our farming communities to remain in operation after the death of the family leader. Of the 10 Senate Democrats that voted in favor of Arkansas' Blanche Lincoln and Arizona's Jon Kyl's much needed bipartisan amendment, was Senator Bill Nelson.

What may ultimately happen if Congress fails to act, will be a drop in estate-tax exemption to $1 million in 2011. The end result being families that are unable to afford the tax increase will be forced out and have to sell of the land to pay for the taxes from the acquisition of the deceased family members' assets. The would most like create a buying opportunity for real estate and business developers that would replace Florida farms with other land developments.

In a comparison to other economical sectors, estate taxes are the most signifcant on family owned farms and ranches. According to the U.S. Census Bureau, approximately 98 percent of all farms in the U.S. are family owned. If the estate tax exemption is not amended by Congress, the effects may have an impact on U.S. consumers that rely on U.S.- grown food and farming products.

President's FDA Budget Invests Substantially in Food and Medical Product Safety for 2010

FI - Fuerst Ittleman — 2009-05-11T20:02:31+01:00

$3.2 billion request reflects a 19 percent increase from FY 2009

The U.S. Food and Drug Administration is requesting a budget of $3.2B to protect and promote the public health as part of the President's fiscal year (FY) 2010 budget – a 19 percent increase over the current FDA fiscal year budget.

The FY 2010 request, which covers the period of Oct. 1, 2009, through Sept. 30, 2010, includes increases of $295.2M in budget authority and $215.4M in industry user fees. The FDA budget proposes two major initiatives for FY 2010: Protecting America's Food Supply and Safer Medical Products. It also includes increases for current law user fees and for infrastructure to support critical agency operations. The FDA is also proposing four new user fees to facilitate review of generic drugs, register and inspect food manufacturing and processing facilities, reinspect facilities that fail to meet Good Manufacturing Practices and other safety requirements, and issue export certifications for food and feed.

"This historic increase in the FDA's budget is a great investment in public health," said Joshua Sharfstein, M.D., acting commissioner of food and drugs.

The following are the FDA's key proposed budget increases:

Protecting America's Food Supply ($259.3M) – The goal of this effort is to protect American consumers by preventing intentional and unintentional contamination. This effort invests in priorities that strengthen the safety and security of the supply chain for foods. Supply chain safety and security relies on the principle of risk-based prevention with verification. Under this principle, the FDA holds all segments of industry accountable for ensuring that their products meet U.S. safety standards. The Protecting America's Food Supply initiative focuses on foreign and domestic sources of ingredients, components, and finished products at all points in the supply chain, including their eventual use by the American public. Within this initiative, the FDA proposes to collect a total of $94.4M in new user fees to register food facilities and increase food inspections, issue food and feed export certifications, and reinspect food facilities that fail to meet the FDA's safety standards.

Safer Medical Products ($166.4M) – This effort provides targeted resources to improve the safety of human and animal drugs, medical devices, vaccines, blood, and other medical products. It will allow the FDA to strengthen safety and security of the supply chain for medical products. The initiative also includes $46.6M in new user fees for generic drug review and new fees to reinspect medical product facilities that fail to meet safety standards.

Current Law User Fees ($74.4M) – In addition to the new user fees proposed for FY 2010, the FDA request also includes inflationary and other authorized increases for fees that support FDA review of applications for new human drugs (+$67.5M), animal drugs (+$2.3M), and medical devices (+$4.5M).

Follow-on Biologics & Drug Importation ($5M) – Within the Safer Medical Products initiative, the budget proposes a new authority for the FDA to approve follow-on biologics through a regulatory pathway that protects patient safety and promotes innovation, and includes $5M for the FDA to develop policies to allow Americans to buy drugs approved in other countries.

The Treasury Capital Assistance Program and the Supervisory Capital Assessment Program

FI - Fuerst Ittleman — 2009-05-08T00:00:00+01:00

Washington — During this period of extraordinary economic uncertainty, the U.S. federal banking supervisors believe it to be important for the largest U.S. bank holding companies (BHCs) to have a capital buffer sufficient to withstand losses and sustain lending even in a significantly more adverse economic environment than is currently anticipated. In keeping with this aim, the Federal Reserve and other federal bank supervisors have been engaged in a comprehensive capital assessment exercise--known as the Supervisory Capital Assessment Program (SCAP)--with each of the 19 largest U.S. BHCs.

The SCAP will be completed this week and the results released publically by the Federal Reserve Board on Thursday May 7th, 2009 at 5pm EDT. In this release, supervisors will report--under the SCAP “more adverse” scenario, for each of the 19 institutions individually and in the aggregate--their estimates of: losses and loss rates across select categories of loans; resources available to absorb those losses; and the resulting necessary additions to capital buffers. The estimates reported by the Federal Reserve represent values for a hypothetical ‘what-if’ scenario and are not forecasts of expected losses or revenues for the firms. Any BHC needing to augment its capital buffer at the conclusion of the SCAP will have until June 8th, 2009 to develop a detailed capital plan, and until November 9th, 2009 to implement that capital plan.

The SCAP is a complement to the Treasury’s Capital Assistance Program (CAP), which makes capital available to financial institutions as a bridge to private capital in the future. A strong, resilient financial system is necessary to facilitate a broad and sustainable economic recovery. The U.S. government reaffirms its commitment to stand firmly behind the banking system during this period of financial strain to ensure it can perform its key function of providing credit to households and businesses.

Understanding the Results of Supervisory Capital Assessment Program
The SCAP Focus on the Quantity and Quality of Capital

Minimum capital standards for a BHC serve only as a starting point for supervisors in determining the adequacy of the BHC’s capital relative to its risk profile. In practice, supervisors expect all BHCs to have a level and composition of Tier 1 capital well in excess of the 4% regulatory minimum, and also to have common equity as the dominant element of that Tier 1 capital.

Under the SCAP, supervisors evaluated the extent to which each of the 19 BHCs would need to alter either the amount or the composition (or both) of its Tier 1 capital today to be able to comfortably exceed minimum regulatory requirements at year-end 2010, even under an more adverse economic scenario.

The SCAP capital buffer for each BHC is sized to achieve a Tier 1 risk-based ratio of at least 6% and a Tier 1 Common risk-based ratio of at least 4% at the end of 2010, under a more adverse macroeconomic scenario than is currently anticipated.

The SCAP focuses on Tier 1 Common capital—measured by applying the same adjustments to “voting common stockholders’ equity” used to calculate Tier 1 capital--as well as overall Tier 1 capital, because both the amount and the composition of a BHC’s capital contribute to its strength. The SCAP’s emphasis on Tier 1 Common capital reflects the fact that common equity is the first element of the capital structure to absorb loss and offers protection to more senior parts of the capital structure. All else equal, more Tier 1 Common capital gives a BHC greater permanent loss absorption capacity and a greater ability to conserve resources under stress by changing the amount and timing of dividends and other distributions.

The Role of the SCAP Buffer

By its design, the SCAP is more stringent than a solvency test. First, each BHC’s capital was rigorously evaluated against a two-year-ahead adverse scenario that is not a prediction or an expected outcome for the economy, but is instead a “what if” scenario. In addition, the buffer was sized so that each BHC will have a cushion above regulatory minimums even in the stress scenario. Thus, any need for additional capital and/or a change in composition of capital to meet the SCAP buffer is not indicative of inadequate current capitalization. Instead, the SCAP buffer builds in extra capital against the unlikely prospect that the adverse scenario materializes.

The presence of this one-time buffer will give market participants, as well as the firms themselves, confidence in the capacity of the major BHCs to perform their critical role in lending, even if the economy proves weaker than expected. Once this upfront buffer is established, the normal supervisory process will continue to be used to determine whether a firm’s current capital ratios are consistent with regulatory guidance.

The SCAP and the Capital Planning Process

Over the next 30 days, any BHC needing to augment its capital buffer will develop a detailed capital plan to be approved by its primary supervisor, in consultation with the FDIC, and will have six months to implement that plan. In light of the potential for new commitments under the Capital Assistance Program or exchanges of existing CPP preferred stock, supervisors will consult with Treasury on the development and evaluation of the plans. The capital plan will consist of three main elements:

• A detailed description of the specific actions to be taken to increase the level of capital and/or to enhance the quality of capital consistent with establishing the SCAP buffer. BHCs are encouraged to design capital plans that, wherever possible, actively seek to raise new capital from private sources. These plans should include actions such as:

Issuance of new private capital instruments;

Restructuring current capital instruments;

Sales of business lines, legal entities, assets or minority interests through private transactions and through sales to the PPIP;

Use of joint ventures, spin-offs, or other capital enhancing transactions; and

Conservation of internal capital generation, including continued restrictions on dividends and stock repurchases and dividend deferrals, waivers and suspensions on preferred securities including trust preferred securities, with the expectation that plans should not rely on near-term potential increases in revenues to meet the capital buffer it is expected to have.

• A list of steps to address weaknesses, where appropriate, in the BHC’s internal processes for assessing capital needs and engaging in effective capital planning.
• An outline of the steps the firm will take over time to repay government provided capital taken under the Capital Purchase Program (CPP), Targeted Investment Program (TIP), or the CAP, and reduce reliance on guaranteed debt issued under the TLGP.

In addition, as part of the 30-day planning process, firms will need to review their existing management and Board in order to assure that the leadership of the firm has sufficient expertise and ability to manage the risks presented by the current economic environment and maintain balance sheet capacity sufficient to continue prudent lending to meet the credit needs of the economy.

Supervisors expect that the board of directors and the senior management of each BHC will give the design and implementation of the capital plan their full and immediate attention and strong support. Capital plans will be submitted and approved by supervisors by June 8th, 2009. Upon approval, these capital plans will be the basis for the BHC’s establishment of the SCAP capital buffer by November 9th, 2009.

Mandatory Convertible Preferred under the CAP

To ensure that the banking system has the capital it needs to provide the credit necessary to support economic growth, the Treasury is making capital available under its Capital Assistance Program as a bridge to private capital in the future. A BHC may apply for Mandatory Convertible Preferred (MCP) in an amount up to 2% of risk-weighted assets (or higher upon request). MCP can serve as a source of contingent common capital for the firm, convertible into common equity when and if needed to meet supervisory expectations regarding the amount and composition of capital. Treasury will consider requests to exchange outstanding preferred shares sold under the CPP or the Targeted Investment Program (TIP) for new mandatory convertible preferred issued under the CAP. In order to protect the taxpayer interest, the Treasury expects that any exchange of Treasury-issued preferred stock for MCP will be accompanied or preceded by new capital raises or exchanges of private capital securities into common equity.

The SCAP focused on the largest financial firms to ensure that they maintain adequate capital buffers to withstand losses in an adverse economic environment. Smaller financial institutions generally maintain capital levels, especially common equity, well above regulatory capital standards. There is no intention to expand the SCAP beyond the 19 BHCs that have recently completed this exercise.

The Treasury reiterates that the CAP application process remains open to these institutions under the same terms and conditions applicable to the 19 SCAP BHCs. The Treasury stands ready to review and process any applications received in an expedient manner. For those firms wishing to apply to CAP, supervisors will review those firms’ risk profiles and capital positions. In addition, supervisors will evaluate the firms’ internal capital assessment processes, including capital planning efforts that incorporate the potential impact of stressful market conditions and adverse economic outcomes.

Redeeming Preferred Securities Issued under the CPP

Supervisors will carefully weigh an institution’s desire to redeem outstanding CPP preferred stock against the contribution of Treasury capital to the institutions overall soundness, capital adequacy, and ability to lend, including confirming that BHCs have a comprehensive internal capital assessment process.

All BHCs seeking to repay CPP will be subject to the existing supervisory procedures for approving redemption requests for capital instruments.

The 19 BHCs that were subject to the SCAP process must have a post-repayment capital base at least consistent with the SCAP buffer, and must be able to demonstrate its financial strength by issuing senior unsecured debt for a term greater than five years not backed by FDIC guarantees, in amounts sufficient to demonstrate a capacity to meet funding needs independent of government guarantees.

IRS Voluntary Disclosure Program » New Voluntary Disclosure Guidance

FI - Fuerst Ittleman — 2009-05-07T00:00:00+01:00

The IRS Voluntary Disclosure Program is being made available to taxpayers with legally sourced income who make accurate and complete disclosure to the IRS by September 23, 2009 and pay (or make arrangements to pay), the taxes due. This program can be used by US taxpayers who failed to properly, timely and accurately file a tax return and pay income taxes on income earned on offshore accounts or failed to file information returns, know as FBAR returns) related to such accounts. Although voluntary disclosure does not guarantee immunity from prosecution, it is an effective way to try to avoid prosecution.

The modifications in IRS policy, announced on March 23, 2009, provide non-compliant taxpayers with a predictable and effective way to address their use of offshore accounts without proper disclosure or tax payments. The program is a direct result of the litigation between the IRS and UBS Bank and arises of the IRS UBS John Doe Summons litigation and UBSs Deferred Prosecution Agreement.

New Voluntary Disclosure Guidance

The new IRS program authorizes IRS personnel to apply a modified penalty framework to Voluntary Disclosure requests regarding unreported offshore accounts and entities. The new guidance is applicable for six-months, commencing March 23, 2009, so it will terminate, unless extended, on September 22, 2009. The new program is intended to resolve the tax liabilities of non-compliant US taxpayers who used offshore accounts to avoid or evade taxes and who are otherwise eligible to make a Voluntary Disclosure request.

Framework of the program:

The IRS will assess taxes and interest for the prior six years (except where an account or an entity was formed or acquired within the six year look-back period, in which case taxes and interest will be assessed starting with the earliest year in which an account was opened or acquired, or an entity was formed).

Taxpayers will be required to file or amend all returns for the applicable period, including FBARs.

The IRS will assess either an accuracy penalty (20 percent of the understatement of tax) or a delinquency penalty (up to 25 percent of the net tax required to be shown on the tax return) on taxes required to have been reported in years within the applicable period (without application of the reasonable cause exception).

In lieu of all other penalties that may apply, including FBAR and information return penalties; the IRS will assess a penalty equal to 20 percent of the amount in foreign bank accounts or entities in the year with the highest aggregate account or asset value. The penalty will be reduced to 5 percent in the case of certain inherited accounts provided the following conditions are satisfied:

The taxpayer did not open or cause any accounts to be opened or entities to be formed;

There has been no activity in any account or entity (such as deposits or withdrawals during the period the account or entity was controlled by the taxpayer); and

All applicable US taxes have been paid on the funds deposited in the accounts or transferred to the entities (except for taxes on income or earnings of the account or the entity).

FHIs analysis

The new Voluntary Disclosure program is intended to (1) incentivize noncompliant, eligible taxpayers to become compliant by setting forth a favorable penalty framework achieved by the much reduced FBAR penalty compared to that of current law and (2) to recoup lost tax revenues.

The new Voluntary Disclosure program is available only to taxpayers whose disclosure meets the "voluntary" requirements set out in Internal Revenue Manual 9.5.11.9. which have been in place, essentially unchanged, for over 20 years. Under the program all Voluntary Disclosure requests must pass initial screening with the Criminal Investigation Division. If the taxpayers initial eligibility for the program is apparent, the Voluntary Disclosure request will be forwarded to the offshore account identification unit in Philadelphia for civil processing.

This new program solidifies the IRS position on the off shore account cases in a number of ways. First, it limits the look back to a six-year period. Second, it provides for the imposition of either the accuracy or delinquency penalty for income tax understatements/underpayments. Third, it imposes a 20 percent (or a 5 percent in limited cases) FBAR penalty. The penalty rate is calculated on the highest amount of a non-compliant taxpayers account balance for one year, which is much less than the normally applicable FBAR penalty. The tax year of measurement is the year in the six year look back period in which the account had its highest balance. As you can see from the chart, the regular FBAR penalties, assessable for each tax year in which the taxpayer owned a reportable account that was not reported, are huge.

Negligent Violation	Up to $500
Non-Willful Violation	Up to $10,000 for each negligent violation
Pattern of Negligent Activity	In addition to penalty under IRC § 5321(a)(6)(A) with respect to any such violation, not more than $50,000
Willful - Failure to File FBAR or retain records of account	Up to the greater of $100,000, or 50 percent of the amount in the account at the time of the violation.
Willful - Failure to File FBAR or retain records of account while violating certain other laws	Up to the greater of $100,000, or 50 percent of the amount in the account at the time of the violation.
Knowingly and Willfully Filing False FBAR	Up to the greater of $100,000, or 50 percent of the amount in the account at the time of the violation.

The IRS announced that "offshore cases sent to the field are work of the highest priority. The program announcement stated that even IRS already has or will receive the name of the non-compliant taxpayer, if the taxpayer voluntary comes forward prior to the commencement of a criminal or civil investigation, the taxpayer may be able to benefit from Voluntary Disclosure program. A non-compliant taxpayer that elects not to make a voluntary disclosure faces a much more uncertain future, to include potential criminal prosecution and significantly greater penalties.

In that regard, Douglas Shulman, the Commissioner of Internal Revenue, stated about the new IRS Voluntary Disclosure Policy guidance:

My goal has always been clear -- to get those taxpayers hiding assets offshore back into the system. We believe the guidance represents a firm but fair resolution of these cases and will provide consistent treatment for taxpayers. The goal is to have a predictable set of outcomes to encourage people to come forward and take advantage of our voluntary disclosure practice while they still can.

In the guidance to our people, we draw a clear line between those individual taxpayers with offshore accounts who voluntarily come forward to get right with the government and those who continue to fail to meet their tax obligations. People who come in voluntarily will get a fair settlement.

We have instructed our agents to resolve these taxpayers' cases in a uniform, consistent manner. Those who truly come in voluntarily will pay back taxes, interest and a significant penalty, but can avoid criminal prosecution.

At the same time, we have also provided guidance to our agents who have cases of unreported offshore income when the taxpayer did not come in through our voluntary disclosure practice. In these cases, we are instructing our agents to fully develop these cases, pursuing both civil and criminal avenues, and consider all available penalties including the maximum penalty for the willful failure to file the FBAR report and the fraud penalty.

For taxpayers who continue to hide their head in the sand, the situation will only become more dire. They should come forward now under our voluntary disclosure practice and get right with the government.

$2 Billion in Florida Medicare Fraud Calls for Congressional Oversight

FI - Fuerst Ittleman — 2009-05-06T00:00:00+01:00

U.S. Attorney Acosta Tells Senate Committee That He's Absolutely Disgusted by Florida Scams.

The U.S. Senate Special Committee on Aging recently heard from U.S. Attorney Alexander Acosta at the Senate hearing on "Fraud in the Medicare and Medicaid Programs." Acosta provided testimony concerning the efforts of the Department of Justice to quell the increasing rate of Medicare and Medicaid Fraud in South Florida and across the U.S.

Acosta, stated that only 12 months after The Miami Strike Force's inception, the Health Care Fraud and Abuse Control Program (HCFAC) reduced Durable Medical Equipment (DME) fraud by $1.75 Billion in DME claim submissions, and $334 Million in DME claims paid, and last year prosecuted 245 individuals for more than $792 million in fraudulent Medicare billings. However, Acosta informed the Senate that prosecutions were not enough.

Acosta expressed in his statement, "If one wants to prevent traffic accidents, one puts up red lights, one puts up stop signs, one has good rules of the road that prevent accidents in the first place," he said. "The same applies for healthcare fraud. With additional resources my office could easily double or triple prosecutions ... but the best way by far to prevent fraud in the first place is to improve the rules of the road."

Acosta said, "When changes are going to be made, they should go beyond South Florida ... It's a problem in Florida, but in part because we are doing so much the problems have been identified. It has to be a nationwide set of solutions."

Acosta went on to say that though Florida has the highest rate of Medicare and Medicaid Fraud in the U.S., once prosecutors target the fraudulent activities of alleged criminals and criminal enterprises, they tend to spread out across the county to evade authorities.

Though the majority of concern was focused on Florida's enormous Home Health Care industry, Acosta provided startling facts; Even pharmaceutical giant Merck & Co., agreed to pay $399 million, with interest, for the fraudulent underpayment of Medicaid rebates for Zocor and Vioxx.

Daniel R. Levinson, of the U.S. Department of Health and Human Services stated, "We need to alter the criminals' cost-benefit analysis by increasing the risk of swift detection and the certainty of punishment."

Economic Recovery Tax Relief Act: Amending the IRS Code for Permanent Tax Incentives

FI - Fuerst Ittleman — 2009-05-05T15:10:12+01:00

It's no secret that many Americans are facing serious financial difficulties today. In recent reports, congress considered instituting public projects and programs that would cost trillions of U.S. dollars, with a questionable outcome for performance, and yet would not provide any long term benefit to our country's economic growth. However, there are very plausible solutions, and one of the most effective solutions is through tax relief. To encourage individual and small business spending is to provide a tax relief package aimed at the American family and business. Reducing the tax burden to the American public and the institution alike, will support long term economic growth and prosperity.

The Economic Recovery and Middle-Class Tax Relief Act of 2009 would permanently supplant the reductions in the capital gains and dividend tax enacted by the 2003 Tax Relief Reconciliation Act.

Some of the key points of H.R. 470 are:

For Individuals and Families:

Provide every income tax bracket with a rate cut of 5 percent
Increase the child tax credit from $1,000 to $5,000
Repeal the hated Alternative Minimum Tax
Make the lower capital gains/dividends tax rate of 15 percent permanent
Repeal mandatory distribution rules for retirement accounts
Increase tax deductions for student loans and education expenses
Make all withdrawals from retirement accounts tax- and penalty-free during 2009

For Businesses and Entrepreneurs:

Align the corporate tax rate with international competitors by cutting it from 35 percent to 25 percent
Allow immediate expensing for business purchases
Index the cost basis for capital gains to inflation
Extend the 15 percent capital gains tax rate to corporations
Make permanent the tax credit for research and development
Extend the carry back period for net operating losses to seven years.

What's unique about the Economic Recovery and Middle-Class Tax Relief Act is that no additional spending is needed, and would apply also to a one percent reduction for FY 2009 discretionary spending.

Could the Food and Drug Administration Globalization Act have Stopped the Salmonella Outbreak?

FI - Fuerst Ittleman — 2009-05-04T18:22:33+01:00

The Food and Drug Administration has received a good amount of public criticism regarding their apparent lack of effectiveness in handling threats to America's food safety, such as with the recent Salmonella outbreaks in peanut and pistachios products. The FDA does not currently have the authority to require food facility test results to be provided, or to be shared with the FDA. Furthermore, the FDA does not have the ability to impose a recall order should a facility not act in a timely or efficient manner. The current legislation aimed at empowering the FDA to enforce their orders has moved slowly through Congress.

In a recent comparison of food safety initiatives for two private food producers, the contrast between their food safety methods and procedures were significantly different. For instance, Kraft Foods took a proactive stance and voluntarily provided data which confirmed the presence of Salmonella in a trail mix made from Sexton Pistachio, and recalled the company's entire 2008 pistachio crop. However, Peanut Corporation of America's position was strikingly different. Though the company conducted Salmonella testing, there have been allegations that the company "shopped around" for desirable test results.

If the FDA was able to mandate testing and reporting, the likely hood for the distribution of contaminated food may be greatly reduced. Moreover, had regulation been supported, the Salmonella outbreak that caused the largest product recall to ever take place in the United States, with a direct correlation to an estimated 691 illnesses in 46 states, and according to the FDA, the death of nine people in the US, may have been prevented.

The need for reform is definitely a concern. The Center for Disease Control (CDC), has released a report that will call for the revamping of our country's food safety policy. Unfortunately Congress has been unsuccessful in moving the legislation that would empower the FDA with the authority to protect our nation's supply fast enough. Representative Diane DeGette (D-Colo), is supporting a bill that requires the FDA to create a monitoring program for our nation's food supply chain. The program would monitor the food distribution life-cycle from the farm to the table. Furthermore, Rep. John D. Dingell's (D-Mich.) sponsorship of The Food and Drug Administration Globalization Act, would mandate consistent test result reporting from a company to the FDA, and also empower the FDA with the ability to enforce a mandatory recall in the event of emergency situations.

Miami Trader Gulity of Mail, Wire and Securities Fraud for Hedge Fund Conspiracy

FI - Fuerst Ittleman — 2009-05-01T23:12:53+01:00

U.S. Attorney R. Alexander Acosta for the Southern District of Florida and Assistant Attorney General Lanny A. Breuer of the Criminal Division announced the former head securities trader for Lancer Group hedge funds pleaded guilty on April 28, 2009, to one count of conspiracy to commit mail, wire and securities fraud.

Eric Hauser, 65, pleaded guilty before U.S. District Court Judge Adalberto Jordan in Miami. Hauser admitted to participating in a scheme to manipulate trading of stocks owned by the Lancer Group hedge funds. Sentencing for Hauser is scheduled for July 10, 2009.

Hauser was one of five defendants charged in an indictment unsealed in February 2008 in Miami. Also charged in the indictment are Michael Lauer and Martin Garvey who, along with Hauser, were co-owners of management companies that directed Lancer Group hedge funds’ activities, and Laurence Isaacson and Milton Barbarosh, who the indictment alleges had financial interests in Boca Raton, Fla.-based “shell” companies in which the hedge funds invested. All of the defendants were charged with one count of conspiracy to commit mail, wire and securities fraud, and six counts of wire fraud. A trial date has not yet been set for Lauer, Garvey, Isaacson or Barbarosh.

According to the indictment, Lauer, as founder and primary manager, formed and directed several hedge funds, collectively known as the Lancer Group hedge funds. From October 1999 to July 2003, Lauer and others allegedly manipulated the closing market price of thinly-traded shell company securities to falsely inflate the value of the Lancer Group hedge funds. Lauer, Isaacson and Barbarosh allegedly identified “shell” companies, including ones owned by Barbarosh, in which the Lancer Group would buy large quantities of “restricted” stock at pennies per share in private transactions. According to the indictment, Lauer, Garvey and Hauser next allegedly directed brokers to buy a small amount of the same securities for the Lancer Group at a much higher open market price and to make additional small purchases to drive up the price to a closing “target price.” Lauer then allegedly falsely valued all of the securities held by the Lancer Group, including those restricted shares obtained for pennies per share, at the much higher closing price, which falsely boosted the 20 percent performance fees paid to the management companies; induced new investors to buy into the funds; and kept existing investors in the funds.

To cover up and perpetuate the scheme, the indictment alleges, Lauer also created fake portfolios of the securities supposedly held by the Lancer Group and allegedly obtained falsely inflated appraisals of the shell companies through Isaacson and Barbarosh.

FBI Anti Trust Division Cracks Down on Asian LCD Price Fixing Fraud

FI - Fuerst Ittleman — 2009-04-30T15:03:02+01:00

Over $616 Million in Fines to Four Companies and Nine Executives Charged with Fraud

Washington - A high-level Korean executive from LG Display Co. Ltd. (LG) has agreed to plead guilty and serve a year in jail in the United States for participating in a global conspiracy to fix prices in the sale of Thin Film Transistor-Liquid Crystal Display (TFT-LCD) panels, the U.S. Department of Justice announced today.

According to a one-count felony charge filed today in U.S. District Court in San Francisco, Bock Kwon, an executive of LG, conspired with employees from other TFT-LCD panel makers to suppress and eliminate competition by fixing the prices of TFT-LCD panels from on or about Sept. 21, 2001, to on or about June 1, 2006. During the charged conspiracy, Kwon, a citizen of the Republic of Korea, held several high-level positions at LG, including president of LG's Taiwan subsidiary, vice president of notebook sales, vice president of sales planning, and executive vice president of sales and marketing. Under the plea agreement, which must be approved by the court, Kwon has agreed to serve a 12-month prison sentence in the United States and to pay a $30,000 criminal fine.

"The participants in the LCD conspiracy committed a serious fraud upon American consumers by fixing the prices of a product that is in almost every American home," said Christine A. Varney, Assistant Attorney General in charge of the Department's Antitrust Division. "The charges against top-level executives who participated in the LCD conspiracy show the commitment of the Department of Justice to finding and prosecuting those at the highest levels, no matter where they live or where these crimes against American consumers were committed."

Including today's charges, four companies and nine individuals have been charged in the Department's ongoing antitrust investigation into the TFT-LCD industry. To date, more than $616 million in criminal fines have been imposed, or agreed to, as a result of this investigation, and four individuals have pleaded guilty and have been sentenced to serve jail time.

TFT-LCD panels are used in computer monitors and notebooks, televisions, mobile phones and other electronic devices. In 2006, the worldwide market for TFT-LCD panels was approximately $70 billion.

Kwon was charged with participating in a conspiracy that was accomplished by:

Participating in meetings, conversations and communications in Taiwan, Korea and the United States to discuss the prices of TFT-LCD panels;
Agreeing during these meetings, conversations and communications to charge prices of TFT-LCD panels at certain predetermined levels;
Issuing price quotations in accordance with the agreements reached;
Exchanging information on sales of TFT-LCD panels for the purpose of monitoring and enforcing adherence to the agreed-upon prices; and
Authorizing, ordering and consenting to the participation of subordinate employees in the conspiracy.

On Dec. 15, 2008, LG pleaded guilty to participating in a worldwide conspiracy to fix the price of TFT-LCD panels and was sentenced to pay a $400 million criminal fine — the second-largest fine in Antitrust Division history. On Dec. 16, 2008, Sharp Corp. pleaded guilty to participating in three separate conspiracies to fix the prices of TFT-LCD panels sold to Dell, Apple Computer Inc. and Motorola Inc. and was sentenced to pay a $120 million criminal fine. On Jan. 14, 2009, Chunghwa Picture Tubes Ltd. (Chunghwa) pleaded guilty to participating in the same worldwide conspiracy as LG, and was sentenced to pay a $65 million criminal fine. On March 10, 2009, Hitachi Displays Ltd. was charged with participating in a conspiracy to fix the prices of TFT-LCD panels sold to Dell Inc. for use in desktop monitors and notebook computers from April 1, 2001, to March 31, 2004. Hitachi Displays Ltd. has agreed to plead guilty and pay a $31 million fine.

In February 2009, former Chunghwa CEO Chieng-Hon "Frank" Lin and two Chunghwa executives, Chih-Chun "C.C." Liu and Hsueh-Lung "Brian" Lee, pleaded guilty to and were sentenced for participating in the same conspiracy as LG and Chunghwa. Lin was sentenced to serve nine months in prison and pay a $50,000 criminal fine. Liu was sentenced to serve seven months in prison and pay a $30,000 criminal fine. Lee was sentenced to serve six months in prison and pay a $20,000 criminal fine. Also in February 2009, LG executive Chang Suk "C.S." Chung pleaded guilty for his role in the same conspiracy as LG and Chunghwa. Chung was sentenced to serve seven months in prison and pay a $25,000 criminal fine.

On Feb. 3, 2009, a federal grand jury in San Francisco returned an indictment against a former LG executive, Duk Mo Koo, and two former Chunghwa executives, Cheng Yuan Lin, aka C.Y. Lin and Wen Jun Cheng, aka Tony Cheng, for their participation in the same conspiracy as LG and Chunghwa. On March 31, 2009, a federal grand jury in San Francisco returned an indictment against Sakae Someya, an executive at Hitachi, for his participation in the same conspiracy as Hitachi.

FinCEN Guidance on the Definition of Money Transmitter for Currency and Commodity Brokers

FI - Fuerst Ittleman — 2009-04-29T13:04:06+01:00

The Financial Crimes Enforcement Network (FinCEN) is issuing this guidance to assist banks in determining the appropriateness of exempting from currency transaction reporting requirements non-listed business customers that derive some portion of their annual gross revenues from ineligible business activities.

Pursuant to the Bank Secrecy Act, a bank is required to file a Currency Transaction Report for each transaction in currency of more than $10,000 by, through, or to that bank. Additionally, multiple currency transactions totaling more than $10,000 during any one business day must be treated as a single transaction if the bank has knowledge that they are by or on behalf of the same person.

Nonetheless, a bank may exempt certain customers from currency transaction reporting requirements providing that those customers meet criteria specified in the governing regulation. For example, a bank may exempt a customer (to the extent of its domestic operations and only with respect to transactions conducted through its exemptible accounts) that qualifies as a "non-listed business" – that is, a customer that: (1) has maintained a transaction account at the bank for at least two months or upon which the bank has conducted an appropriate risk-based analysis of the legitimacy of the customer's transactions prior to the customer having maintained such a transaction account for two months; (2) frequently engages in transactions in currency in excess of $10,000 with the bank; and (3) is incorporated or organized under the laws of the United States or a State, or is registered as and eligible to do business within the United States or a State.

Various businesses (e.g., a business engaged primarily in: serving as a financial institution or as an agent for a financial institution of any type; chartering or operation of ships, aircraft, or buses; operating a real estate brokerage; etc.) are ineligible for treatment as exempt non-listed businesses. However, a customer that engages in multiple business activities may qualify for an exemption as a non-listed business provided that no more than 50 percent of its annual gross revenues are derived from one or more ineligible business activities.

Reasonable Determination

Although there is no expectation that a bank will be able to establish the exact percentage of a non-listed business customer's annual gross revenues that is derived from ineligible business activities, a bank must consider and maintain materials and other supporting information that allow it to substantiate that the decision to exempt the customer from currency transaction reporting was based upon a reasonable determination that the customer derives no more than 50 percent of its annual gross revenues from ineligible business activities. Such a reasonable determination should be based upon its understanding of the nature of the customer's business, the purpose of the customer's accounts, and the actual or anticipated activity in those accounts.

In instances where it is apparent – through a bank's implementation and application of due diligence policies, procedures, and processes to all customers – that a non-listed business customer derives a clear minority of its annual gross revenues from ineligible business activities, the bank could reasonably and appropriately exempt that customer from currency transaction reporting based solely upon materials and information collected and considered in the ordinary course of conducting customer due diligence.

However, in those instances where it is less clear whether a non-listed business customer derives no more than 50 percent of its annual gross revenues from ineligible activities, a bank should obtain such additional supporting materials and information that would allow it to make a reasonable determination that it may appropriately exempt that customer from currency transaction reporting.

In particular, in such cases a bank could reasonably make such a determination based upon customer completion of a bank checklist/form or receipt of a self-certification statement/letter signed by the customer containing credible information regarding its annual gross revenues, which checklist/form or statement/letter would be substantiated by corroborating information.

If available, a bank is encouraged to request and review a business customer's audited financial statements; however, other information may be similarly relied upon providing that it allows the bank to make a reasonable determination regarding the portion of the customer's annual gross revenues that is derived from ineligible business activities.

For example, in many cases a bank could – again, based upon its understanding of the nature of the customer's business, the purpose of the customer's accounts, and the actual or anticipated activity in those accounts – also come to such a reasonable determination based upon reviewing other reliable information, such as: the customer's most recent tax returns that have been filed with the applicable federal and state authorities; the customer's unaudited financial statements; or documents relating to a bank's lending relationship with the customer.

In certain exceptional instances – although there is no requirement to do so – a bank might consider, when deciding to exempt certain business customers, visiting a customer's place of business to develop a greater understanding of the nature of the customer's business activities and then recording relevant information in the customer's file.

The information supporting each designation of an exempt non-listed business customer must be reviewed and verified by a bank at least once per year.

No Effect on Other Regulatory Requirements

Banks are reminded that exempting a customer from currency transaction reporting requirements has no effect on compliance with other Bank Secrecy Act/anti-money laundering programmatic, recordkeeping, and reporting requirements. In particular, banks are reminded of the requirement to implement appropriate risk-based policies, procedures, and processes, including conducting customer due diligence on a risk-assessed basis to aid in the identification of potentially suspicious transactions – and that, if a bank knows, suspects, or has reason to suspect that a transaction involves funds derived from illegal activity or that a customer has otherwise engaged in activities indicative of money laundering, terrorist financing, or other violation of law or regulation, it should file a Suspicious Activity Report.

Tax Avoidance in Europe May Call for Regulatory Tax Reform

FI - Fuerst Ittleman — 2009-04-28T11:50:13+01:00

European Parliament members have created a group of 20 nations to "close down all tax and regulatory havens" and put a stop to the regulatory loopholes that are contributing to widespread tax avoidance in several of Europe's major financial centers.

Following the outcome of the G20 Summit commitment to support reform for remuneration schemes, the European Parliament accepted a resolution for financial regulatory review. The proposed resolution calls the next G20 Summit even further in to action than the last April 09' Meeting, when several of the leading nations suggested implementing sanctions to "protect public finances and financial systems" from offshore and lower tax jurisdictions.

A press release by the European Parliament on April 24th, stated, "Parliament welcomes and fully supports the request made by the EUROLAT Parliamentary Assembly on April 8, 2009 to the EU-LAC (Latin American and Caribbean) countries 'to act at once to abolish all tax havens on their territory' and to work at international level for the abolition of the rest and for sanctions against companies and individuals resorting to their services."

Although the European Parliament showed favor to the G20's announcement that the "era for banking secrecy is over" and supported the reduction of tax avoidance through the automatic exchange of information, Members of the European Parliament suggest that the European Union should create "an appropriate legislative framework regarding tax havens" and also request their international partners to do so as well.

The G20 was considered a reprieve for many of the offshore financial hubs after they had been accused of nearly crippling the entire world economy down due to allowing risky business transactions to go on outside of the control of onshore regulation. Of all of the countries involved, only four were named on the OECD blacklist; Costa Rica, The Philippines, Malaysia and Uruguay. Furthermore, those countries have since been removed from the list for agreeing to follow minimum tax transparency standards.

Daniel J. Mitchell from the Cato Institute stated that the actions of the "high tax" states such as the "Old" member states of the EU and the United States, and the OECD, will oppose those that support financial privacy and international tax competition. Mr. Mitchell also stated, "These so-called havens are being assaulted by international bureaucracies such as the OECD ... These events do not bode well for supporters of fiscal sovereignty and financial privacy."

Swine Influenza Press Briefing » White House » CDC » Dept Homeland Security

FI - Fuerst Ittleman — 2009-04-27T12:59:37+01:00

Secretary Napolitano, Department of Homeland Security
John Brennan, Assistant to the President for Homeland Security and Counterterrorism
Dr. Richard Besser, Acting Director, Centers for Disease Control and Prevention
Robert Gibbs, Press Secretary

Mr. Gibbs: Good afternoon, guys. Thank you for taking some time out of your Sunday afternoon. We wanted to bring together many of the people that have the primary governmental responsibility in dealing with the situation and to discuss the government's capacity and capability to discuss the steps the government is taking to address this.

Three people we'll hear from today and then we'll take some questions: First, John Brennan, Assistant to the President for Homeland Security and Counterterrorism; Dr. Richard Besser, the Acting Director of the Centers for Disease Control and Prevention, and Janet Napolitano, the Secretary of Homeland Security.

So with that I'll turn it over to Mr. Brennan.

Mr. Brennan: Thank you, Robert. And thank you, everyone, for coming here today.

Obviously, President Obama is very concerned about the recent cases of swine flu that have been identified in the United States, as well as the outbreak in Mexico. The President's thoughts are with those who have been affected by this illness. He is monitoring the situation very closely and has supported a very active, progressive and coordinated response by his administration.

The President wants Americans to be fully informed of the situation, which is why we have convened this press briefing today. The vast majority of these cases have occurred in Mexico. Building on the close bilateral cooperation that President Obama advanced during his recent visit to Mexico, he has asked me to publicly convey his full support to President Calderón, the Mexican government and the Mexican people in their efforts to contain the outbreak.

Both the U.S. and Mexican governments are taking steps to reduce the potential for further transmission. Our goal is simple: to communicate information quickly and clearly for our citizens, to rapidly address any new cases that emerge, and to have the capacity to effectively limit the spread.

At this point a top priority is to ensure that communication is robust and that medical surveillance efforts are fully activated. This will enable both the rapid identification and broad notification of any new cases that may occur in the U.S., as well as in Mexico.

We believe that our increased surveillance efforts have resulted in the identification of new cases over the last 24 hours. Early identification is vitally important to the overall effort. In the event that additional cases or sites of infection occur within the United States we want to recognize them quickly and then respond rapidly with appropriate guidance for the public health community and the general public in the infected area. We also want to ensure medical surveillance and testing and the provision of medications and medical supplies are distributed where necessary.

I would like to share with you some of the steps the administration has taken to ensure that information about this evolving event is flowing swiftly among federal, state and local partners, between U.S., Mexican, Canadian and other governments and with the World Health Organization.

First, the President is receiving regular updates and briefings on the situation. I updated the President earlier today. The President has reviewed our national capabilities to mitigate the effects of a broader outbreak in the United States and the steps we are taking to support state and local governments and their public health experts.

I am consulting closely with Secretary Napolitano, who is the principal federal official for domestic incident management with responsibility for spearheading our efforts. The Homeland Security Council has convened an interagency body of senior federal experts to facilitate coordination among the federal departments and agencies that have a role in recognizing, responding to, and communicating with domestic and international partners regarding health incidents that have the potential for significant impact to our nation's well-being.

This group has been conferencing daily to share updates and to identify actions we can take now to respond to developments in an accelerated and effective manner. The information and decisions of the group are reported daily to senior leaders in the federal government and throughout the White House. Additional reports are provided as new information of significance becomes available.

While the President and his administration are actively coordinating the overall government response, individual departments and agencies with specific responsibilities as well as unique expertise and experience in dealing with public health risks are leading key elements of the effort.

For example, the Department of Health and Human Services is responsible for the overall effort to coordinate disease surveillance, medical preparedness, and guidance to public health professionals in the event that further cases are detected. The Departments — Centers for Disease Control and Prevention has responsibility for identifying and tracking the spread of the disease and for communicating health-related information to the government, media, and public. To this end, the CDC has held regular public briefings since Friday.

In a moment, Dr. Richard Besser, the Acting Director of the Centers for Disease Control and Prevention, will provide an update on the situation in the United States and Mexico, as well as where health professionals and the public can go for reliable information and guidance on swine influenza.

As I mentioned, Secretary Napolitano and the Department of Homeland Security have the overall lead for coordinating the federal response to an influence epidemic in the United States. The department is closely coordinating with Health and Human Services and CDC to monitor the situation.

After Dr. Besser speaks, you will hear from Secretary Napolitano, who will update you on the department's efforts to coordinate response preparations and actions to date. The Secretary also will describe actions that are underway to ensure communication of timely and accurate information at land borders and at ports of entry as well as to travelers who seek additional information.

Clearly we all have individual responsibility for dealing with this situation. We should all be practicing good hygienic practices, such as hand-washing on a regular basis; if you feel sick, it makes sense to stay home; and then also following the other practices that are common sense when we deal with an outbreak of flu every year.

I would ask that you hold your questions until after Dr. Besser and Secretary Napolitano have finished their remarks.

Dr. Besser: Thank you, Mr. Brennan. First, I want to say that our hearts go out to the people in Mexico and the people in the United States who've been impacted by this outbreak. People around the country and around the globe are concerned with this situation we're seeing, and we're concerned as well. As we look for cases of swine flu, we are seeing more cases of swine flu. We expect to see more cases of swine flu. We're responding and we're responding aggressively to try and learn about this outbreak and to implement measures to control this outbreak.

Let me provide for you an update in terms of where we are today and what kinds of public health actions are being taken here as well as abroad. Today we can confirm that there are 20 cases of swine flu in the United States. We have five affected states: There are eight cases confirmed in New York City, there's one case confirmed in Ohio, two in Kansas, two in Texas, and seven in California.

And again, as we continue to look for cases, I expect that we're going to find them. We've ramped up our surveillance around the country to try and understand better what is the scope, what is the magnitude of this outbreak.

The good news — all of the individuals in this country who have been identified as cases have recovered. Only one individual had to be hospitalized. But I expect as we continue to look for cases, we are going to see a broader spectrum of disease. What we know about this virus is it looks to be the same virus as is causing the situation in Mexico. And given the reports out of Mexico, I would expect that over time we're going to see more severe disease in this country.

There are some things that it's important people understand: Flu viruses are extremely unpredictable and variable; outbreaks of infectious disease are extremely unpredictable and variable. And so over time what we say about this and what we learn will change. Expect changes in terms of the number of cases. We're going to try and give you consistent information and have it on our web site once a day, so that we don't get into the situation where you're hearing different numbers of cases throughout the day — we're going to report that daily.

We expect that we're going to be changing our recommendations over time based on what we learn. And that's an important thing. You'll start to see different activities taking place in different parts of the country, depending on the local outbreak picture — and that's good. You want people to respond based on what the situation is in their community, based on what situations are in particular countries.

Because of this speed in which things are progressing, you will at find — at times find inconsistent information, and we're going to work really hard to make sure that that doesn't stay up for long. But as we're updating recommendations and they're going out through various sources, you may find some inconsistency and we will work to minimize that.

This is moving fast, but I want you to understand that we view this more as a marathon. We do think that this will continue to spread, but we are taking aggressive actions to minimize the impact on people's health.

It's important that people understand that there's a role for everyone to play when there's an outbreak going on. There are things that individuals do, there's things that families do, communities do to try and reduce the impact. At the individual level, it's important people understand how they can prevent respiratory infections. Very frequent hand-washing is something that we talk about time and time again and that is an effective way to reduce transmission of disease. If you're sick, it's very important that people stay at home. If your children are sick, have a fever and flu-like illness, they shouldn't go to school. And if you're ill, you shouldn't get on an airplane or another public transport to travel. Those things are part of personal responsibility in trying to reduce the impact.

It's important that people think about what they would do if this outbreak ramps up in their community. We understand that in New York City there's a cluster of disease in a school and New York City has announced that they're not having those children come back to school on Monday, so that they can understand better about transmission in that school. There's a similar situation in Texas. Those are very smart public health decisions. If there are other communities where we saw cases in a school, we would be recommending that they take those actions as well.

So it's time for people to be thinking — forward-thinking about, well, if it were my child's school, what would I do, how would I be prepared for that kind of an event. We view the public as partners in the efforts to try and control what's going on.

There are a number of sources of information. I want people to know that the CDC web site — www.cdc.gov — has our latest information on swine flu. There's a link from there to very current information and there's a link there to a Spanish language site as well.

So let me talk about some of the public health actions that are going on. We are working very closely with state and local public health on the investigations going on around the country. We're providing both technical support on the epidemiology as well as support on the laboratory in terms of confirming cases.

We're also doing a lot of work with the World Health Organization, the Pan American Health Organization, and the governments of Mexico and Canada on this outbreak. There's a tri-national team that is working in Mexico to try and understand better the spread — why are they seeing more severe disease in Mexico than we are here? That's a critical question. We're working to assist Mexico in establishing more laboratory capacity in-country. That, again, is very important because when you can define someone as a truly confirmed case, what you understand about how they acquire disease takes on much more meaning.

We issued two days ago an outbreak notice on our web site regarding travel to Mexico. It indicated that if you are traveling to Mexico, that you look at that to see what precautions could you take as an individual to reduce the likelihood that you became ill. We're going to continue to evaluate the situation in Mexico, and if need be we will increase the warnings based on what the situation warrants.

Later today we're going to be putting out some additional community guidance so that public health officials will know what our general recommendations are should they see cases in schools or additional cases in their community.

And I think that the last thing I want to mention is that whenever we see a novel strain of influenza, we begin our work in the event that a vaccine needs to be manufactured. So we've created that seed stock, we've identified that virus, and discussions are underway so that should we decide to work on manufacturing a vaccine, we can work towards that goal very quickly.

Our support to the states and locals will continue. We provide epidemiologic support, laboratory support, and we provide them support in terms of their medications and other material that they need to work on this outbreak.

So thank you very much, and I'll turn it over to the Secretary.

Secretary Napolitano: Thanks, Dr. Besser. A number of things going on and the purpose of today, this briefing, is to give you the most current information about what is happening. And as has been mentioned before, this is a changing picture. And so we intend to conduct these types of briefings daily for a while so that, you know, it can help up communicate to the public what is happening and so that with knowledge people know what kind of issue we're dealing with.

The first thing I want to announce today is that the Department of Health and Human Services will declare today a public health emergency in the United States. That sounds more severe than really it is. This is standard operating procedure and allows us to free up federal, state, and local agencies and their resources for prevention and mitigation; it allows us to use medication and diagnostic tests that we might not otherwise be able to use, particularly on very young children; and it releases funds for the acquisition of additional antivirals.

So you'll see those declarations coming out today. And when I say "standard operating procedure," that's exactly what I mean. We issued similar declarations for the recent floods in Minnesota and North Dakota and for the inauguration.

Second, I want to give you some information about where we are with respect to antiviral drugs. These are the kinds of things you would take should you get sick with this strain of flu. We have 50 million treatment courses of antiviral drugs — Tamiflu and Relenza — in the strategic national stockpile. We are releasing 25 percent of those courses, making them available to all of the states, but particularly prioritizing the states where we already have confirmed incidents of the flu. In addition, the Department of Defense has procured and strategically prepositioned 7 million treatment courses of Tamiflu.

The United States Department of Agriculture is heavily involved in monitoring and testing to ensure that there is no issue with our food supply, and everything looks fine. I want to underscore that you cannot get the swine flu from eating pork. So that's very important. And we're screening and testing livestock to monitor any developments there.

Next, in the Department of Homeland Security, we have a number of components with direct responsibility here. The CBP is inventorying for every duty station and every employee our resources, personal protective equipment, and so forth, to make sure that we have adequate supplies on hand at the borders themselves.

Secondly, we have implemented passive surveillance protocols to screen individuals who may arrive at our borders. All persons entering the United States from a location of human infection of swine flu will be processed through all appropriate CBP protocols. Right now those are passive. That means that they're looking for people who — and asking about, are you sick, have you been sick, and the like; and if so, then they can be referred over for further examination.

Travelers who do present with symptoms, if and when encountered, will be isolated per established rules. They will be provided both with personal protective equipment and we will continue to emphasize universal health measures like hand-washing and gloves. And if and when the situation develops all CBP sites can implement and we can deploy additional personnel to the borders.

In addition, at the TSA, many of the similar measures are being implemented there with respect to the protection of our TSA workers and also their experience with travelers. To date, the State Department has not issued official travel advisories for particularly Mexico, but again, as I said earlier, these situations are very fluid and so you need to keep up to date on that. In addition to the CDC website, the Department of State has a website that will keep travelers posted on what the situation is not only with our neighboring countries, but with countries around the world.

As I said earlier, our intent is to update you daily on this situation so that you can know what is happening within the federal government. State and local governments obviously now are in the loop. State and local public health authorities obviously are working very hard and will be working hard, because as the doctor said, this will be a marathon, not a sprint, and even if this outbreak is a small one, we can anticipate that we may have a subsequent or follow-on outbreak several months later, which we will be prepared for.

And again, the government can't solve this alone. We need everybody in the United States to take some responsibility here. If you are sick, stay home. Wash your hands, take all of those reasonable measures; that will help us mitigate, contain how many people actually get sick in our country.

Thank you.

Mr. Gibbs: With that, let's take a few questions.

Q: Thanks, Robert. Are there any U.S. clusters that suggest this is easily spread? Have we seen any pockets of suspected cases in the U.S. that suggest this could be on the scale of Mexico? And you say it's a marathon. How long is this marathon going to be?

Dr. Besser: Thanks for those questions. In terms of duration, my comment earlier about every outbreak is unique is really important to remember. And so it's very hard to say. There's one thing in our favor; we're nearing the end of the flu season, we're nearing the end of the season in which flu viruses tend to transmit very easily. And so we would expect to see a decline in cases, just like we're seeing a decline in cases of seasonal flu, at some point.

The issue of clusters is an important one, and New York City earlier talked about their school cluster, and that's important. Some of our early epidemiologic investigations are showing that contacts of people who have been diagnosed have a significant rate of respiratory infection — not confirmed to be this; we only have one documented by viral isolate case in this country of person-to-person spread — and that was an individual who had gone to Mexico and came back, and then there was a spouse who was diagnosed as well, and both are doing well.

Q: Robert, how concerned are you about the potential for this outbreak to set back the hopeful economic recovery both here in the United States and globally? And secondly, what if anything are we meant to read into the fact the President Obama decided to go golfing today? Is this part of your effort to reassure Americans that there's no need to panic?

Mr. Gibbs: I'm not sure I would draw a direct conclusion between the news today and the President's golf. (Laughter.)

I think as Mr. Brennan said, the President has been updated regularly on this and we'll continue to do so as we will continue to regularly update you.

In terms of anything that is affected economically both here and worldwide, I think it's probably far too early to determine whether that will be a case or whether that will have some factor. We just want to ensure that people understand the steps that are being taken both here and throughout government to address the situation, as well as, as each of these speakers have said, understand the individual responsibilities that people have. If you have questions, go to the CDC website at cdc.gov. And as the doctor mentioned, there's also a Spanish version of that site.

Q: First to you, Robert. Why was it necessary to have the President checked this morning?

Mr. Gibbs: The President hasn't been checked this morning.

Q: Ms. Jarrett indicated today on a Sunday morning program that he had been.

Mr. Gibbs: I will double-check. I don't know of any reason why he would have been.

Q: And Dr. Besser —

Mr. Gibbs: Let me expand that a little bit. I think these guys obviously have more medical degrees than I do, but the incubation period for this is a 24-48 hour incubation period. The doctors advised us that the President's health was never in any danger. We've been gone from Mexico for now more than nine days.

Q: Dr. Besser, you mentioned seed stock for vaccines. What is the threshold that you have to meet before you consider developing that vaccine and deploying that vaccine?

Dr. Besser: There are a number of things that we look at going into the decision as to whether to make a vaccine. One is the severity of the strain, its sustainability in the community; do we anticipate that it's a virus that will be here next flu season — so you want to prepare for that. Then there are issues in terms of production. Currently manufacturers are working on seasonal flu vaccine for next season, which has three types of influenza virus — or influenza antigen in it. We have to have discussions to determine could they add a fourth; would it require substituting or changing production in another way?

All of those discussions are underway, so that if there's a decision to move in that direction we'd be ready.

Q: I notice that you're not recommending that people, even if they're ill, become vaccinated. Has the President been vaccinated by Tamiflu or Relenza? And at what level does this have to get before we go from a public health emergency to a federal pandemic plan?

Dr. Besser: I wanted to clarify a couple things you said. Oseltamivir and zanamavir are not vaccines. Those are antiviral drugs that can be used to treat somebody who is ill.

One of the points I didn't make before is that if someone is ill with flu-like symptoms, in particular if they've traveled to an area that's been involved, they need to contact their doctor and determine what type testing and treatment is indicated.

At this point there is not a vaccine for this swine flu strain. It's a new strain of influenza. And so what we're talking about is whether it's warranted at this point to move toward manufacturing a vaccine.

Q: Two questions. First, I want to know if the public health emergency declaration allows the federal government to invoke any kind of quarantine powers. And if so, how would that be used? And second, we've been hearing for years that we could have another 1918-like pandemic. So based on what you know right now, how likely is it that this could be a very, very severe outbreak?

Secretary Napolitano: The public health declaration does not, in and of itself, convey quarantine authority. And most quarantine authority is held at the local and state level, and we're nowhere near that sort of a decision. The decisions that have been made to date are the common-sense ones, the few places where we've had a U.S. outbreak, to close a school here, close a school there. But most quarantine authority is held at the state and local level. And this declaration does not, in and of itself, provide that.

Dr. Besser: The other part of your question had to do with 1918 and what we're seeing here. One of the very important issues that we're looking at is how severe is this outbreak that's taking place. What we're seeing in this country so far is not anywhere near the severity of what we're hearing about in Mexico, and we need to understand that.

It's also important to recognize that there have been enormous efforts going on around the country and around the world for pandemic preparedness and that our detection of this strain in the United States really came out as part of that. There was work going on in San Diego in terms of developing a point of care test kit, something that could be used in doctors' offices, that detected a strain they couldn't identify, and that was identified in our laboratories as the swine flu strain. And so that — really some of the preparedness activities, the laboratory capability that we have now is not what it was five years ago, let alone in 1918. We understand a lot about how flu should be managed and treated.

Q: And if I could just follow with one other question. Relenza and Tamiflu, how effective are they in treating this particular strain, if at all?

Dr. Besser: At this point, it's premature to talk about how effective they are. Those are some of the studies that we would want to undertake and assist Mexico in undertaking. We do know from seasonal flu that early treatment with antivirals can shorten the course of illness. But in terms of this situation, we know that the strain is susceptible, it's not resistant to those drugs. It is resistant to other drugs, amantadine and rimantadine. But it's not resistant to oseltamivir and zanamavir, which are the drugs that we've been stockpiling.

Secretary Napolitano: I just wanted to clarify — on the declaration of emergency, I wish we could call it declaration of emergency preparedness, because that's really what it is in this context. It's similar to what we do, for example, when we know — when a hurricane may be approaching a site, we will go ahead and issue an emergency declaration that allows us to preposition — frees up money, resources to get pre-positioned, to get ready. A hurricane may not actually hit a particular landfall, but it allows you to undertake a number of preparatory steps. And really that's what we're doing right now, the government. We're leaning forward, we're preparing in an environment where we really don't know ultimately what the size or seriousness of this outbreak is going to be.

Q: Dr. Besser, you said we were likely to see more cases and the CDC's Dr. Ann Schuchat said yesterday, "We do not think we can contain the spread of this virus." What exactly does that mean?

Dr. Besser: In strategies for outbreak control there's a concept of containment where if you can detect it very quickly in one community, that you could swoop in and try and quench it and knock it out so it doesn't go further. We don't think that that's a possibility, but we do think that it's very possible to mitigate or reduce the impact of this infection around the country.

In terms of detection, what we're seeing in this country is mild disease — things that would never have been detected if we weren't ramping up our surveillance. And so my comment there is that by our efforts of asking doctors to culture — we are asking doctors when they see someone who has flu-like illness who has traveled to an affected region to do a culture — take a swab in their nose and send it to the lab so we can see, is it influenza, is it this type. And I expect that as we do that we're going to find cases all — in many different parts.

When I mentioned the states we're seeing cases in right now, they're not all contiguous. The travel patterns of people now are such that we would expect that we're going to see cases in more states.

Q: If I could follow up on that, is it true that it took a week until after Mexico had invoked its own protective measures before the U.S. was notified of this? And is it a significant concern that HHS is in charge of this at a time when it doesn't have a Secretary?

Dr. Besser: In terms of detection and reporting, you know, the confirmation of swine flu from Mexico was shared with us immediately. There was great collaboration between Canada and Mexico on doing that testing. I'm in daily communication with their public health leadership and the collaborations have been absolutely superb. We share information about what we're seeing here and they're sharing information about what they're seeing in Canada and in Mexico.

Q: They sent those tests to Canada rather than the U.S., apparently because of paperwork?

Dr. Besser: Well, we have — there are quite a number of isolates that we've tested here from Mexico as well.

Mr. Gibbs: In terms of a Secretary, I think these guys have given you a pretty good indication of the response mechanisms that are in place and that have been activated relating to this. So I think it's all hands on deck and we're doing fine. I would say we're hopeful that we have a new Secretary very shortly.

Yes, ma'am.

Q: Secretary Napolitano, I believe Japan and South Korea have both now announced that they're going to begin testing on passengers coming in from the U.S. Why is the U.S. not doing that with passengers coming in from Mexico? And then also, do you have any indications — I know it's still very early yet — but any indications that perhaps this might have been caused by bioterrorism, this new strain of flu?

Secretary Napolitano: I'll let John answer the second part. With respect to that, we're doing, as I said, passive surveillance now. Right now we don't think the facts warrant a more active testing or screening of passengers coming in from Mexico, although obviously we are letting air carriers and our employees at the gates on those flights make sure that they are asking people if they're sick; and if they're sick, that they shouldn't board the plane — you know, that sort of thing, passively.

But again, this is a changing dynamic that we may increase or decrease that as the facts change over the next 24, 48, 72 hours.

Dr. Besser: Yes, the question about the strain that we're seeing here, we analyzed that strain and are continuing to do further analysis of that strain and we expect to see the emergence of new flu strains. That's something that we are continually watching for to ensure that we're ready should a strain emerge that there's not immunity and protection in the community for it. This strain is not unlike other new strains that have emerged. It's an assortment — it's got genetic components from a number of sources, including human, swine, and avian sources. And that's something that you see with new strains.

And so there's nothing that we have seen in our work that would suggest anything but a naturally occurring event.

Q: But from a security perspective, nothing to rule it out either — the possibility of bioterrorism?

Mr. Brennan: We are looking at all different aspects here, but as the doctor said, there is no evidence whatsoever that we have seen. But clearly, in order to make sure that we're doing everything possible, we're looking at all potential explanations here — but no evidence whatsoever on the bioterrorism ...

Q: How do the — Madam Secretary, how do the stocks of effective antivirals today compare to previous outbreaks — SARS, for example? And will DOD stocks be available for the public, or are those just for DOD?

Secretary Napolitano: Right now the DOD stocks I believe are for the DOD personnel, but I'll have to confirm that for you later. I believe that to be the case. We have 50 million courses that are in the national stockpile. As I said, we're freeing up a quarter of those for use by the states, in addition to whatever state stockpiles they have, should they need it. Priority will go to the states that have confirmed outbreaks of disease. And I don't have the history on how that compares to what we had on hand for SARS.

Dr. Besser: The strategic national stockpile has considerable assets for treating flu. In addition to the antivirals, there's the supplies should we see hospitalizations that would warrant support. SARS is a different picture in that there were — there was not a medication that people could take to treat it, and so this is a very different situation.

And as part of our planning for a large outbreak this pre-deployment of availability is a leaning-forward step. We know that many states aren't seeing any cases, but it was our belief that having things there ahead of time was the way to go, rather than waiting until it got to a point where people were asking.

Q: Secretary Napolitano, you mentioned the quarantine power and, you know, that's really a state and local issue. What additional authority does the President have, what other powers does he have to contain this, to mitigate it, whatever. What else can he do?

Secretary Napolitano: I don't want to give you a legal brief on that right now, but that's —

Q: Perhaps later? (Laughter.)

Secretary Napolitano: Yes, exactly. (Laughter.)

We want to make sure that it's very precisely explained to you and to the public. So perhaps we could brief that to you later on this week.

Q: But there are additional things? You guys are confident that — measures that you can take, beyond a declaration of emergency — things that you can do at the federal level?

Secretary Napolitano: Yes.

Q: Okay. And Robert, actually, can you follow up on that eco question, on the eco trade. I just want to be clear, you're not at all studying this, measuring what sort of effect this could have economically — you're just not at that level yet?

Mr. Gibbs: I'll check with NEC. I don't know of anything related to that at this point, but we can certainly check.

Yes, ma'am.

Q: What haven't you banned U.S. travel to Mexico and why haven't you changed the U.S. alert level in the face of this — unless the declaration of public health emergency is doing that?

Dr. Besser: I can comment. We have at CDC posted an outbreak notification regarding Mexico, and we're continuing to watch the situation there and evaluate. And should it be warranted, we would make a change in that regard.

In terms of the stages and phases of pre-pandemic situations, the real important take-away is that we have an outbreak of a new infectious disease that we're approaching aggressively. And it matters much less what you call it. Those things are designed to trigger actions, but we trigger our actions based on what we're seeing here in-country as well as what we see around the globe. And given that this new strain is something we're experiencing here on the ground, we're being very aggressive and addressing that based on what we're seeing in each community.

Q: What has been discovered so far about why people in Mexico have died, but not elsewhere?

Dr. Besser: That's an unanswered question. We have folks on the ground and we haven't been able to find an answer for that. There are a number of different hypotheses and I'm hoping that we'll be able to shed some light on that as these teams get more established and continue their studies.

Q: For Dr. Besser, is there evidence of ongoing transmission in Mexico, or are the cases being picked up there ones that happened in the last couple of weeks and are over? Or are there new chains of transmission being generated?

Dr. Besser: Again, I don't want to comment on the situation on the ground in Mexico. I've not heard that it is stopping. Their overall flu surveillance is only showing a small increase from what they would see annually, which, again, makes it difficult to use some of the surveillance tools to measure the impact of a new strain when you're in the midst of another flu season.

Q: Just to follow up on what the President — for you, Robert — what the President — did you say that he has not been treated with any kind of —

Mr. Gibbs: I said yesterday that he had not been. I will recheck with the doctor. Again, based on the incubation period, neither he, nor anybody that he traveled with, nor anybody in the press corps that I'm aware of would have exhibited any symptoms that would have caused any heightened awareness.

Q: But the doctor didn't check him out —

Mr. Gibbs: No. Again, in the absence of symptoms — I think this probably goes without saying, too — in the absence of symptoms, you shouldn't go get tested. That's going to crowd any sort of either public health or private health infrastructure. If you are sick or you do have symptoms, then you should take precautions. But there's not reason to believe that his — or anybody that traveled with him — health was in any sort of jeopardy.

Q: Just to follow up on the HHS question. Apparently, HHS —- CDC, Surgeon General assured there are no —

Mr. Gibbs: I thought he was doing a pretty good job. (Laughter.)

Q: But it raises a political question about how movement there has been stalled because of HHS. I mean, do you have — has the President expressed concern about the fact that you don't have a team in place there, or at the —

Mr. Gibbs: No, because — I want to be very clear here. There is a team in place. The team is — part of it is standing behind me, and part of it is working as we speak to identify exactly what the doctor and others have talked about. I think this notion somehow that if there's not currently a Secretary, that there's not the function that needs to take place in order to prepare for this either this or any other situation is just simply not the case.

Thanks, guys.

Human Stem Cell Research Guideline Released by the National Institute of Health

FI - Fuerst Ittleman — 2009-04-24T13:33:10+01:00

I. Scope of Guidelines

These Guidelines describe the circumstances under which human embryonic stem cells are eligible for use in extramural NIH-funded research, and they also include a section on uses of human embryonic stem cells or human induced pluripotent stem cells that are ineligible for NIH funding For the purpose of these Guidelines, "human embryonic stem cells" are cells that are derived from human embryos, are capable of dividing without differentiating for a prolonged period in culture, and are known to develop into cells and tissues of the three primary germ layers. Although human embryonic stem cells are derived from embryos, such stem cells are not themselves human embryos.

II. Guidelines for Eligibility of Human Embryonic Stem Cells for Use in Research

A. The Executive Order:

Executive Order 13505, Removing Barriers to Responsible Scientific Research Involving Human Stem Cells, states that the Secretary of the Department of Health and Human Services (DHHS), through the Director of the NIH, may support and conduct responsible, scientifically worthy human stem cell research, including human embryonic stem cell research, to the extent permitted by law.

B. Eligibility of Human Embryonic Stem Cells Derived from Human Embryos:

Human embryonic stem cells may be used in research using NIH funds, if the cells were derived from human embryos that were created for reproductive purposes, were no longer needed for this purpose, were donated for research purposes, and for which documentation for all of
the following can be assured:

1. All options pertaining to use of embryos no longer needed for reproductive purposes were explained to the potential donor(s).

2. No inducements were offered for the donation.

3. A policy was in place at the health care facility where the embryos were donated that neither consenting nor refusing to donate embryos for research would affect the quality of care provided to potential donor(s).

4. There was a clear separation between the prospective donor(s)'s decision to create human embryos for reproductive purposes and the prospective donor(s)'s decision to donate human embryos for research purposes.

5. At the time of donation, consent for that donation was obtained from the individual(s) who had sought reproductive services. That is, even if potential donor(s) had given prior indication of their intent to donate to research any embryos that remained after reproductive treatment, consent for the donation should have been given at the time of the donation. Donor(s) were informed that they retained the right to withdraw consent until the embryos were actually used for research.

6. Decisions related to the creation of human embryos for reproductive purposes were made free from the influence of researchers proposing to derive or utilize human embryonic stem cells in research. Whenever it was practicable, the attending physician responsible for reproductive clinical care and the researcher deriving and/or proposing to utilize human embryonic stem cells should not have been the same person.

7. Written informed consent was obtained from individual(s) who sought reproductive services and who elected to donate human embryos for research purposes. The following information, which is pertinent to making the decision of whether or not to donate human embryos for research purposes, was in the written consent form for donation and discussed with potential donor(s) in the informed consent process:

a. A statement that donation of the embryos for research was voluntary;

b. A statement that donor(s) understood alternative options pertaining to use of the embryos;

c. A statement that the embryos would be used to derive human embryonic stem cells for research;

d. Information about what would happen to the embryos in the derivation of human embryonic stem cells for research;

e. A statement that human embryonic stem cells derived from the embryos might be maintained for many years;

f. A statement that the donation was made without any restriction or direction regarding the individual(s) who may receive medical benefit from the use of the stem cells;

g. A statement that the research was not intended to provide direct medical benefit to the donor(s);

h. A statement as to whether or not information that could identify the donor(s) would be retained prior to the derivation or the use of the human embryonic stem cells (relevant guidance from the DHHS Office for Human Research Protections (OHRP) should be followed, as applicable; see OHRP's Guidance for Investigators and Institutional Review Boards Regarding Research Involving Human Embryonic Stem Cells, Germ Cells, and Stem Cell-Derived Test Articles and Guidance on Research Involving Coded Private Information or Biological Specimens, or successor guidances)

i. A statement that the results of research using the human embryonic stem cells may have commercial potential, and a statement that the donor(s) would not receive financial or any other benefits from any such commercial development.

C. Prior to the use of NIH funds: Funding recipients must ensure that:

(1) The human embryonic stem cells were derived consistent with sections II.A and B of these Guidelines;

(2) The grantee institution maintains appropriate documentation demonstrating such consistency in accordance with 45 CFR 74.53, which also details rights of access by NIH. The responsible grantee institutional official must provide assurances with respect to (1) and (2) when endorsing applications and progress reports submitted to NIH for projects that utilize these cells.

III. Research Using Human Embryonic Stem Cells and/or Human Induced Pluripotent Stem Cells That, Although the Cells May Come From Allowable Sources, Is Nevertheless Ineligible for NIH Funding.

This section governs research using human embryonic stem cells and human induced pluripotent stem cells, i.e., human cells that are capable of dividing without differentiating for a prolonged period in culture, and are known to develop into cells and tissues of the three primary germ layers. There are some uses of these cells that, although they may come from allowable sources, are nevertheless ineligible for NIH funding, as follows:

A. Research in which human embryonic stem cells (even if derived according to these Guidelines) or human induced pluripotent stem cells are introduced into non-human primate blastocysts.

B. Research involving the breeding of animals where the introduction of human embryonic stem cells (even if derived according to these Guidelines) or human induced pluripotent stem cells may have contributed to the germ line.

IV. Other Non-Allowable Research

A. NIH funding of the derivation of stem cells from human embryos is prohibited by the annual appropriations ban on funding of human embryo research (Consolidated Appropriations Act, 2009, Pub. L. 110-161, 3/11/09), otherwise known as the Dickey-Wicker Amendment.

B. NIH funding for research using human embryonic stem cells derived from other sources, including somatic cell nuclear transfer, parthenogenesis, and/or IVF embryos created for research purposes, is not allowed under these Guidelines.

SEC Enforces Securities Law Violations to Investment Adviser Offering Fraudulent Hedge Funds

FI - Fuerst Ittleman — 2009-04-23T14:58:53+01:00

Washington, D.C., — The Securities and Exchange Commission charged New York-based investment adviser Hennessee Group LLC and its principal Charles J. Gradante with securities law violations for failing to perform their advertised review and analysis before recommending that their clients invest in the Bayou hedge funds that were later discovered to be a fraud.

In a settled administrative proceeding, the Commission issued an order finding that Hennessee Group and Gradante did not perform key elements of the due diligence that they had represented they would conduct prior to recommending investments in the Bayou hedge funds. The SEC also finds that they failed to conduct a reasonable investigation into red flags concerning Bayou. Hennessee Group and Gradante routinely represented to clients and prospective clients that they would not recommend investments in hedge funds that did not satisfy all phases of their due diligence evaluation.

"Forewarned is forearmed — investment advisers must make good on their promises or face the consequences of vigorous SEC enforcement action," said Robert Khuzami, Director of the SEC's Division of Enforcement.

"As the Commission found, these investment advisers failed to honor the representations they made to their clients and did not disclose these material departures from their advertised services," said Antonia Chion, Associate Director of the SEC's Division of Enforcement. "The advice that clients receive from hedge fund consultants is especially critical when the hedge funds are neither regulated nor transparent."

According to the Commission's order, approximately 40 clients invested millions of dollars in the Bayou hedge funds from February 2003 through August 2005 after the Hennessee Group recommended those investments. Most of the money was lost through trading or dissipated by Bayou's principals, who defrauded their investors by fabricating Bayou's performance in client account statements and year-end financial statements. The SEC charged the managers of the Bayou hedge funds with fraud in 2005.

The Commission's order finds that Hennessee Group and Gradante failed to conduct the portfolio and trading analysis that it had advertised to clients. Instead of analyzing Bayou's results and processes through a review of Bayou's historical trading methods to determine whether the fund was, in fact, successfully executing its purported day-trading strategy, Hennessee Group and Gradante decided not to perform any analysis after Bayou refused to produce its trading data. They relied entirely on Bayou's uncorroborated representations about its strategy and its purported rates of return.

The Commission's order also finds that despite conflicting reports from Bayou about the identity of their independent auditor, Hennessee Group and Gradante failed to verify Bayou's relationship with its auditor. In fact, the accounting firm that purportedly conducted Bayou's annual audit was a non-existent entity fabricated by one of Bayou's principals, who was identified in publicly available state accountancy board records as the registered agent for the bogus accounting firm.

According to the Commission's order, Hennessee Group and Gradante also failed to respond to red flags concerning Bayou that came to their attention while they were monitoring Bayou on behalf of their clients. In particular, they failed to inquire or investigate when Bayou provided contradictory responses regarding the identity of its auditor or to adequately inquire about a rumor that one of Bayou's principals was affiliated with Bayou's purported outside auditing firm.

The Commission's order finds that Hennessee Group and Gradante violated Section 206(2) of the Advisers Act. The order requires Hennessee Group and Gradante to pay $814,644.12 in disgorgement and penalties, and to cease and desist from committing or causing further violations. The parties also are required to adopt policies to ensure adequate disclosures in the future and to provide copies of the Commission's Order to all current and prospective clients for a period of two years.

Hennessee Group and Gradante consented to the entry of the Commission's order without admitting or denying the findings.

Florida Mortgage Fraud Fugitive to Face Federal Charges for Fraudulent Mortgage Loans

FI - Fuerst Ittleman — 2009-04-22T00:00:00+01:00

Connection to Operation "Whose House?", A $10,000,000 Mail Fraud, Wire Fraud and Identity Theft Scam

Miami - Southern District of Florida's US Attorney R. Alexander Acosta announced that fugitive mortgage broker Yvette Scott Patterson waived extradition and has been ordered extradited from Jamaica to face federal mortgage fraud charges in Fort Lauderdale, Florida. Patterson waived extradition on Tuesday, April 14, 2009.

Yvette Scott Patterson was arrested on March 8, 2008, and was detained in Kingston, Jamaica, pending extradition to the U.S.. Patterson had fled the U.S. in early 2006 after being arrested and released on separate state charges. Patterson was indicted by a federal grand jury in Fort Lauderdale on November 7, 2006 in connection with Operation "Whose House?", a multi-million dollar mortgage fraud scheme.

The 2006 Operation "Whose House?" indictment charged Yvette Scott Patterson and others with conspiracy to commit mail fraud, wire fraud, and identity theft in connection with the mortgage fraud on numerous properties in Broward County, FL, involving more than $10,000,000 in fraud. According to the Indictment, Patterson submitted fraudulent mortgage applications and false documentation to lenders around the United States using straw buyers and the stolen identity of innocent victims. To date, nine defendants have pled guilty as part of Operation Whose House. One additional defendant was convicted after trial and was sentenced to 87 months in jail.

U.S. Attorney Acosta thanked the Jamaican Fugitive Apprehension Team and the Jamaican prosecutors who handled the extradition on behalf of the U.S. for their work and cooperation in this matter. The Operation "Whose House?" investigation has been a joint investigative effort between the Florida Department of Law Enforcement, U.S. Secret Service, U.S. Postal Inspection Service, U.S. Diplomatic Security Service, and the State of Florida Office of Financial Regulation. The prosecution is being handled by Assistant U.S. Attorneys Jeffrey Kay and Jennifer Keene.

IRS Tax Break Advice From American Recovery Reinvestment Act

FI - Fuerst Ittleman — 2009-04-21T00:00:00+01:00

Branscome: Hi, everybody. I'm Theresa Branscome from the Internal Revenue Service. I'm sure you've heard about the American Recovery and Reinvestment Act. In it, there are some provisions that can make a big difference on how much or how little in tax you pay next year and beyond. It will all depend on some decisions you make this year and purchases, perhaps. And here to talk to us about this is John Lipold. He is a media-relations specialist at the IRS. John, thank you for joining us.

Lipold: You know, Theresa, 2009 is a big year for credits and deductions.

Branscome: Tell me how.

Lipold: Well, why don't we start with the first-time homebuyer's credit?

Branscome: Okay.

Lipold: If you're a first-time homebuyer and you buy a home this year, before December 1st, you may qualify for a tax credit of up to $8,000.

Branscome: That's a lot of money.

Lipold: It is. It could help a lot.

Branscome: So, how do you qualify?

Lipold: Well, first of all, you have to be a first-time homebuyer, and that means you haven't owned a home in the past three years, or, if you're married, your spouse hasn't owned a home in the last three years.

Branscome: When can you claim this credit?

Lipold: You have some choices. You can claim it on either your 2008 tax return or your 2009 tax return.

Branscome: Well, what if you've already filed your 2008 tax return?

Lipold: It's not a problem. You can amend that tax return using form 1040X.

Branscome: Now, what if you plan to buy a house later on this year?

Lipold: If you file for an extension, you have until October 15th of 2009 to both close on the house and to claim the credit.

Branscome: All right. Is there an advantage, one way or the other, claiming it on your 2008 tax return, versus your 2009 tax return?

Lipold: Well, everyone's tax situation is a little bit different. For example, if you have a big increase in income in 2009...

Branscome: Mm-hmm.

Lipold: ...you may want to think about claiming the credit on your 2008 tax return because, when it comes time to file your 2009 tax return, you may find that you no longer qualify for the credit.

Branscome: Why would that be?

Lipold: Well, there are some income restrictions here. If you are single and make more than $75,000 or if you're married, filing jointly, and you make more than $150,000, the credit begins to phase out for you.

Branscome: All right, so that's for homes. That's one big type of purchase. What about for vehicles?

Lipold: If you buy a new car in 2009, you can deduct the state and local sales and excise taxes on that purchase.

Branscome: Is that only for cars?

Lipold: It's for cars, light trucks, motorcycles, even motor homes.

Branscome: All the tax? 'Cause, you know, motor homes cost a lot of money.

Lipold: No, it's not all the taxes. You can only deduct the taxes paid on the first $49,500 of the purchase price.

Branscome: Okay, now, what about for people going to college?

Lipold: If you have college expenses, take a look at the American Opportunity Credit.

Branscome: Mm-hmm.

Lipold: It's a new credit that replaces and expands on the Hope Credit.

Branscome: How does it expand it?

Lipold: Well, it's worth up to $2,500, which is $500 more than under the Hope Credit.

Branscome: With the Hope Credit, you could only use it for two years of college. Is that the same thing with the American Opportunity Credit?

Lipold: No, the American Opportunity Credit takes that out to four years.

Branscome: Oh, so double the time?

Lipold: Yep.

Branscome: Now, I remember when I was a college student -- I usually didn't make enough money to have to file a tax return. Anything for students like that?

Lipold: Well, even if you don't make enough money where you have to file a tax return, you should consider filing to claim the American Opportunity Credit because you can get up to $1,000 back.

Branscome: Oh, that's pretty good. Anything else for college students?

Lipold: Well, if you have a section 529 college savings plan, you can use money from that plan to buy a computer for college work.

Branscome: And that's new?

Lipold: It's new, and it's for 2009 and 2010.

Branscome: Now, John, we've heard in the news that there are a lot of people who are getting unemployment compensation. Anything for them?

Lipold: Normally, unemployment compensation is taxable income.

Branscome: Mm-hmm.

Lipold: But under the new law, the first $2,400 of unemployment compensation that somebody receives in 2009 is tax-free.

Branscome: Well, that sounds like good news. John, thank you so much for this information.

Lipold: Thank you. And, remember, if you want more information, go to irs.gov.

Branscome: Well, you heard it from John -- go to the IRS's official website, irs.gov, and learn about these tax breaks and see what's in it for you.

HHS Releases Guidance for Securing Health Information and Preventing Harm from Breaches

FI - Fuerst Ittleman — 2009-04-20T00:00:00+01:00

The U.S. Department of Health and Human Services (HHS) recently published guidance regarding technologies and methodologies to secure health information and prevent harm by rendering health information unusable, unreadable, or indecipherable to unauthorized individuals. The American Recovery and Reinvestment Act required publication of the guidance by April 18. This builds on the existing requirements of the HIPAA Privacy and Security Rules, which are unchanged.

"Protecting patient privacy is a top priority and this guidance specifies proactive steps organizations can take to limit the potential harm a breach can cause," said HHS Spokesman Nick Papas.

The guidance issued today provides steps entities can take to secure personal health information and establishes the trigger for when entities must notify that patient data has been compromised. This guidance is related to “breach notification” regulations, which will be issued by HHS and the Federal Trade Commission (FTC) respectively. The HHS regulations will apply to entities covered by the Health Insurance Portability and Accountability Act of 1996 (HIPAA) and the FTC regulation will apply to vendors of personal health records and certain others not covered by HIPAA. The Recovery Act requires that these regulations be published within 180 days of enactment.

The guidance was developed through a joint effort by the HHS Office for Civil Rights (OCR), Office of the National Coordinator for Health Information Technology (ONC), and Centers for Medicare & Medicaid Services (CMS).

The guidance issued must be updated annually but HHS may update and reissue it this year, after public comment is considered and at the same time HHS’ breach notification regulation is published.

Is the End Near for the Pharmaceutical Search Marketing Industry?

FI - Fuerst Ittleman — 2009-04-17T00:00:00+01:00

The FDA Warns Over 14 Companies Regarding Search Marketing Ads

The FDA recently warned over 14 pharmaceutical companies about their marketing efforts of more than 40 drugs. Ten of the fourteen companies that received the FDA warning letters are classified as major drug producers. According to the FDA warning letters issued by the Center for Drug Evaluation and Research, (CDER), the companies are distributing Pay Per Click (P.P.C.) or paid search advertising for their drugs which do not comply with the FDA’s pharmaceutical marketing guidelines.

The FDA warnings below are taken from the FDA’s Center for Drug Evaluation and Research, (CDER).

Bayer Healthcare Pharmaceuticals, Inc.
Biogen Idec
Boehringer Ingelheim Pharmaceuticals, Inc.
Cephalon, Inc.
Eli Lilly and Co.
Forest Laboratories, Inc.
Genentech, Inc.
GlaxoSmithKline
Hoffman-LaRoche, Inc.
Johnson & Johnson Pharmaceutical Services
Merck & Co., Inc
Novartis Pharmaceuticals Corp.
Pfizer, Inc.
Sanofi Aventis, U.S.

An FDA spokesperson commented that the FDA said that they found, "A plethora of violations across all classes of drugs ..." and continued to state that it’s the FDA’s position to monitor and enforce policy throughout all forms of media. The FDA warnings focus on violations for occluding the following three requirements:

Information regarding the drugs possible side effects
Statement of the drug’s fully qualified name
Contraindications and demographic limitations

Google spokesperson Eric Obenzinger stated, "Google, is not going to get involved ... The FDA letters are directed at pharmaceutical search advertisers ... Obviously, these warning letters will change the format of the sponsored links that people see next to organic search results."

Currently the FDA does not have specific guidelines for the online marketing industry. The FDA mentioned that they found the inappropriate search ads "through our routine monitoring of promotion done on the internet ... " This type of response may be a call to action to the FDA in the form of requiring policy and regulations to be for announced for the pharmaceutical marketing industry.

Fuerst Ittleman Sponsors Fourth Annual Latin America Conference

FI - Fuerst Ittleman — 2009-04-16T23:25:29+01:00

Fourth Annual Latin America Conference

Wednesday, April 22, 2009
JW Marriott Miami

1109 Brickell Avenue
Miami, Florida

7:45 a.m. – 2:45 p.m.
7:45 a.m. – 8:15 a.m. – Registration and Continental Breakfast
8:15 a.m. – 2:45 p.m. – Program and Luncheon

CONFERENCE AGENDA

7:45 a.m. – Registration & Continental Breakfast

8:15 a.m. – Welcome Remarks by Susan Kaufman Purcell, Director, Center for Hemispheric Policy

8:20 a.m. – Opening Keynote Speaker: Enrique García, President, Corporación Andina de Fomento (CAF)

"Latin America’s Challenges Beyond the Global Crisis"

Q & A Session

8:50 a.m. – The Global Economic Downturn and its Impact on Latin America

Moderator: J. Antonio Villamil, Dean, School of Business, St. Thomas University of Florida;
Principal Advisor, The Washington Economics Group, Miami

Panelists:
Javier González Fraga, Former President, Central Bank of Argentina
Theresa Paiz-Fredel, Senior Director, Fitch Ratings, New York
Oscar Sánchez, Senior Economist, Latin America, Scotiabank, Toronto

Q & A Session

10:00 a.m. – Featured Speaker: David Rothkopf, Visiting Scholar, Carnegie Endowment for International Peace;
President and CEO, Garten Rothkopf, Washington, D.C.

“The Crises to Come: The Political and Security Consequences of the Global Economic Meltdown”

Q & A Session

10:30 a.m. – Coffee Break

10:45 a.m. ̶ Keynote Speaker: Thomas A. Shannon, Jr. Assistant Secretary, Western Hemisphere Affairs,
U.S. Department of State

11:15 a.m. – Reducing the Hemisphere’s Carbon Footprint: A Debate

Moderator: David Rothkopf, Visiting Scholar, Carnegie Endowment for International Peace;
President and CEO, Garten Rothkopf, Washington, D.C.

Panelists:
Jed Bailey, Managing Director, Asia and Latin America Energy Groups, Cambridge Energy Research Associates (CERA),
Cambridge
Kenneth Green, Resident Scholar, American Enterprise Institute, Washington, D.C.
George Philippidis, Energy Director, Applied Research Center, and Co-Director, Energy Business Forum, Florida International
University, Miami
Alvaro Ríos Roca, Director, Gas Energy Latin America; Former Executive Secretary, Latin American Energy Organization (OLADE);
Former Minister of Hydrocarbons, Bolivia

Q & A Session

12:25 p.m. – The Obama Administration and Latin America: New Rules of Engagement?

Moderator: Susan Kaufman Purcell, Director, Center for Hemispheric Policy, University of Miami

Panelists:
Amb. Luiz de Araujo Castro, Consul General, Consulate General of Brazil, Miami;
Former Ambassador of Brazil to Mexico, Peru and Uruguay
Stephen Johnson, Former Deputy Assistant Secretary for Western Hemisphere
Affairs, U.S. Department of Defense
Ignacio Walker, Researcher, Corporación de Estudios para América Latina (CIEPLAN), Santiago, Chile;
Former Minister of Foreign Affairs, Chile

Q & A Session

1:30 p.m. – Break for luncheon

Luncheon and Program

1:30 p.m. – Luncheon served

2:00 p.m. – Opening Remarks and Introduction: Donna E. Shalala, President, University of Miami

Luncheon Keynote: H.E. José Miguel Insulza, Secretary General, Organization of American States

Q & A Session

2:45 p.m. – Conference concludes

Corporate Sponsor: Fuerst Ittleman

Supporting Organizations: Argentine – Florida Chamber of Commerce, The Beacon Council, CAMACOL, Chile-U.S. Chamber of Commerce, Colombian American Chamber of Commerce,
Coral Gables Chamber of Commerce, Enterprise Florida, Gateway Florida,
Georgetown University Club of Miami, Greater Miami Chamber of Commerce,
The Jay Malina International Trade Consortium, Oxford University Society,
The Spain – U.S. Chamber of Commerce and U.S. – Mexico Chamber of Commerce

Media Partners: AméricaEconomía, Hispanic Target Magazine, Latin Business Chronicle, LatinFinance, LATIN TRADE, Mercado de Dinero and WorldCityBusiness

Program Fee: $125; Academics and students –special consideration with valid ID
Registration: By email to chp-rsvp@miami.edu or by fax at (305) 284-9871.
Payment: Please make check payable to Center for Hemispheric Policy. Mail check with registration form to: Center for Hemispheric Policy; P.O. Box 248297; Coral Gables, FL 33124-6535.
Cancellation policy: By email, fax or telephone, before 5:00 p.m., Monday, April 20, 2009

For more information, please call Isabel Artime at (305) 284-9918, or visit our website at www.miami.edu/chp

Tax Fraud Charges Announced Against DCPBA Contractor

FI - Fuerst Ittleman — 2009-04-16T10:31:07+01:00

R. Alexander Acosta, United States Attorney for the Southern District of Florida, and Daniel W. Auer, Special Agent in Charge, Internal Revenue Service, Criminal Investigation Division, announced the unsealing of a four-count Indictment against defendant John A. Gullett, of Parkland, FL, on charges that he filed false income tax returns.

Specifically, the Indictment charges that Gullett knowingly and willfully made and subscribed to false Form 1040 Individual Income Tax Returns, statements, and documents for tax years 2002 through 2005. Gullett is charged with underreporting his true gross receipts in 2002 through 2005, and filing the tax returns with the Internal Revenue Service knowing that the returns were not accurate as to every material matter, in violation of Title 26, United States Code, Section 7206(1).

Defendant Gullet made his initial appearance in court before U.S. Magistrate Judge Robin S. Rosenbaum. According to statements made during the hearing, Gullet contracted with the Broward County Police Benevolent Association (BCPBA) and the Dade County Police Benevolent Association (DCPBA) to solicit local businesses to buy advertisements in a book that Gullett published listing local businesses. The book was distributed to PBA members. In exchange, Gullett paid BCPBA and DCPBA between $3,000 and $5,000 each per month and he kept whatever funds he raised in excess of these amounts. Defendant Gullett failed to report approximately $3 million dollars of income received from this operation over the four years charged in the Indictment. Gullett allegedly used these monies to purchase expensive items, including a Lamborghini and a Ferrari.

Mr. Acosta commended the investigative efforts of the Internal Revenue Service, Criminal Investigation Division. This case is being prosecuted by Assistant U.S. Attorney Bertha R. Mitrani.

Treasury Department Requests Federal Beneficiaries to Elect Direct Deposit

FI - Fuerst Ittleman — 2009-04-14T15:23:56+01:00

Direct Deposit Would Save Americans Millions of Dollars

Washington – As America confronts the most severe financial crisis in generations, the Obama Administration remains committed to ensuring government action is administered as quickly and efficiently as possible. That is why the Treasury Department is calling on all Americans who are federal benefit recipients and still get checks in the mail to sign up for direct deposit, a small step that will help the government save millions, lessen the possibility for check fraud and benefit the environment.

Under the American Recovery and Reinvestment Act, the Treasury Department's Financial Management Service (FMS) will issue more than 64 million one-time $250 payments to Social Security, Supplemental Security Income, Railroad Retirement and Veteran Affairs benefit recipients to make tough economic times a bit easier. An estimated 80% of these payments will be made electronically, leaving the remaining recipients until April 20 to switch from checks to direct deposit before the first disbursements are made in early May. Those individuals who switch to direct deposit will experience safer, more secure delivery of their economic recovery payment, as well as all future benefit payments, and will receive their payment sooner than those who wait for the mail delivery of a check.

"I know a lot of folks like seeing that paper check in the mail - but with direct deposit, the money gets out faster and with more security," said Vice President Biden. "With the Recovery Act, we're trying to get money in people's pockets, but also streamline our government's processes and root out excess costs. Direct deposit accomplishes both those goals, so I urge all those receiving federal benefits each month to sign up for it by April 20th."

"These $250 payments are a direct result of this Administration's unprecedented effort to get the economy back on track." said Treasury Secretary Tim Geithner. "When these payments begin next month, the recipients already using direct deposit will save taxpayers an estimated $13 million in paper and postage costs. Today we're asking all Americans to join the effort. Direct deposit is good for the government, good for the environment and greatly enhances the security around benefit payments, protecting against check fraud and identity theft."

The announcement was part of an ongoing effort by the Treasury Department to switch all federal benefit recipients to direct deposit, which will save taxpayers approximately $130 million each year.

FDA Bars Two Companies for Distributing Unapproved Drugs

FI - Fuerst Ittleman — 2009-04-13T00:00:00+01:00

The U.S. Food and Drug Administration announced that it had obtained a permanent injunction barring Neilgen Pharmaceuticals Inc. of Westminster, Md., its parent company, Advent Pharmaceuticals, Inc. (Advent), of East Windsor, N.J., and two of their officers, Bharat Patel and Pragna Patel, from manufacturing and distributing any unapproved, adulterated or misbranded drugs.

Both Neilgen, which does business as Unigen Pharmaceuticals Inc. (Unigen), and Advent are contract manufacturers and distributors of more than 25 different unapproved drug products each. The more than 50 unapproved drug products primarily include prescription cough and cold products. The unapproved drugs manufactured by Unigen and/or Advent include, but are not limited to:

Histex SR
D-Tann CT Tablets
B-Vex D Suspension
RE All 12 Suspension
BP Allergy Junior Suspension
BP New Allergy DM Suspension
PE Tann 20 mg/CP Tann 4 mg Suspension
Chlorpheniramine Maleate 12 mg/Pseudoephedrine HCl 120 mg LA Tablets.

The unapproved drugs manufactured by these companies have not undergone the FDA's drug approval process, so their safety and effectiveness have not been established and the FDA has not reviewed the adequacy and accuracy of the directions for use and warnings on the labeling.

Consumers in possession of any of these products should discontinue using them and discuss FDA-approved treatments with their health care professional. Pharmacists should discontinue dispensing these products.

The defendants signed a consent decree that orders them to destroy their existing drug supply, and prohibits them from commercially manufacturing and distributing any new drugs without the FDA's approval. Further, the firms must retain outside experts who will advise them on appropriate compliance standards with U.S. current Good Manufacturing Practice (cGMP) requirements for drugs, and obtain written authorization from FDA to resume operations. The consent decree also authorizes the FDA to order the defendants to cease operations or take other corrective action in the event of future violations and further subjects the defendants to liquidated damages of $1,000 for each violation. An additional $5,000 per day, up to $1 million per year, can be levied for each violation, if the defendants fail to comply with any of the provisions of the decree. The consent decree was entered by Chief Judge Benson E. Legg in the U.S. District Court of Maryland on April 9, 2009.

Michael Chappell, acting associate commissioner for the FDA's Office of Regulatory Affairs said,

“The FDA's key enforcement priorities include shutting down manufacturers and distributors of unapproved drugs. Drugs not in compliance with cGMP cause great risk to public health,”

The FDA sought an injunction after the defendants failed to comply with previous warnings and continued to manufacture drugs in violation of federal law. Multiple FDA inspections of both the Unigen and Advent facilities found that the companies continued to manufacture unapproved new drugs. FDA inspections also revealed numerous and recurring violations of the cGMP requirements for drugs in violation of the Federal Food, Drug, and Cosmetic Act (FD&C Act). Both Unigen and Advent failed to respond adequately to issues raised by the FDA's inspection findings.

“To protect the American public, companies that continue to market unapproved drugs must be required to cease that illegal activity,” said Janet Woodcock, M.D., director, the FDA's Center for Drug Evaluation and Research. “It is critical that only drugs that are safe, effective and manufactured in accordance with good manufacturing practices be allowed into the U.S. marketplace.”

In June 2006, the FDA issued a guidance document titled, “Marketed Unapproved Drugs - Compliance Policy Guide” (CPG). The CPG makes clear that companies may not market drugs that require approval without first establishing in applications that the products are safe and effective. Among priorities in the CPG are enforcement actions against manufacturers that violate provisions of the FD&C Act.

USDA Loan Assistance Repayment Program for Commodities

FI - Fuerst Ittleman — 2009-04-10T16:10:00+01:00

Improved Method Will Minimize Potential Forfeitures

Washington - Agriculture Secretary Tom Vilsack said that USDA will begin using an improved and more stable system for determining non-recourse marketing assistance loan repayment rates and loan deficiency payment rates for wheat, feed grains, pulse crops, oilseeds, wool, mohair and honey.

Vilsack said,

"The new method will moderate fluctuations of the loan repayment rate ... In keeping with President Obama's commitment to American agriculture, this decision reduces the effects daily market volatilities have on loan repayment rates and provides more certainty for producers who have taken advantage of marketing assistance loans or loan deficiency payments."

The 2008 Farm Bill provides Vilsack the authority to establish a loan repayment rate that may be determined as the lesser of the loan rate plus interest and a rate based on: 1) average market prices during the previous 30 days, or 2) an alternative method the secretary may develop.

Beginning April 15, 2009, for wheat, corn, grain sorghum, soybeans, barley, oats, canola, flaxseed and sunflower seed, USDA's Commodity Credit Corporation (CCC) will determine and publish daily loan repayment rates based on the average market prices during the preceding 30 days. At the same time, CCC will begin announcing each day a repayment rate based on the preceding five days. The new method will replace the current one, which is based on the previous day's market rates. The effective alternative repayment rate will be the lower of either the 30-day average or the 5-day average.

The 30-day method will reflect a 30-day moving average of all terminal market prices for the crop, adjusted by the difference between the applicable national loan rate and the county loan rate. The 5-day method will reflect a 5-day moving average of applicable terminal market prices adjusted by applicable county differential and terminal adjustments.

Vilsack said this new loan repayment method will minimize potential forfeitures, accumulation of CCC stocks, CCC storage costs, market impediments and discrepancies in benefits across state and county boundaries.

Currently, the loan repayment rate for a county is based on the daily posted county price for the commodity, and this rate is adjusted by any premiums and discounts made to a non-recourse marketing assistance loan at the time the loan was made.

Starting on or after April 15, for pulse crops (lentils, dry peas, small chickpeas and starting with the 2009 - crop year, large chickpeas), crambe, mustard seed, rapeseed, safflower, sesame seed, wool, mohair and honey, CCC will determine and publish loan repayment rates once a week based on average market prices during the preceding 30 days. CCC will also announce an alternative repayment rate using current methodology each week. The effective repayment rate will be the lower of either the 30-day average or the alternative repayment rate. No alternative repayment rate will be available for honey.

No changes are being made to the loan repayment system for cotton, peanuts and rice.

Additionally, the 2008 Farm Bill removed the requirement for the secretary to establish loan and loan repayment rates based on feed grade for peas, and number 3 grade for lentils and small chickpeas. Effective on or after April 15, loan repayment rates for 2008-crop pulse marketing assistance loans will be based on U.S grade #1.

DOJ Tax Division Assistant Attorney General Nominee Announced by Obama

FI - Fuerst Ittleman — 2009-04-09T14:43:18+01:00

President Obama Announces More Key Administration Posts

"Assistant Attorney General, Tax Division, Department of Justice Nominee, Mary L. Smith"

Washington, DC – President Barack Obama announced his intent to nominate the following individuals for key administration posts: Mary L. Smith, Assistant Attorney General, Tax Division, Department of Justice; Robert R. Beers, Under Secretary for National Protection and Programs, Department of Homeland Security; Peter M. Rogoff, Administrator, Federal Transit Administration, Department of Transportation; and Jane Oates, Assistant Secretary for Employment and Training Administration, Department of Labor.

President Obama said,

"At this crucial moment in our nation’s history, the American people will be well-served by the dedication and expertise of these fine public servants. I am grateful for their decision to serve, and I look forward to working with them in the months and years ahead."

President Obama announced his intent to nominate the following individuals:

Mary L. Smith, Nominee for Assistant Attorney General, Tax Division, Department of Justice

Mary L. Smith currently is a Partner at Schoeman, Updike, Kaufman & Scharf LLP, a women-owned firm. Smith specializes in complex litigation, regulatory practice, and government investigations. Earlier in her career, she served as Senior Litigation Counsel at Tyco International (US) Inc. where she managed the securities class action multi-district litigation – one of the largest cases pending in the country. While at Tyco, Smith interacted with the tax department on a range of issues including employee benefits and more strategic issues involving litigation and the company’s corporate reorganization. Prior to Tyco, she was an attorney at Skadden, Arps, Slate, Meagher & Flom LLP in Washington, D.C. Prior to her time at Skadden, Smith served in the Clinton White House as Associate Counsel to the President and Associate Director of Policy Planning where she was responsible for a number of policy areas including domestic violence, tax issues, equal pay, Internet gambling, Native American issues, and civil rights issues. She was the highest-ranking Native American in the White House during the Clinton Administration. From 1994-96, Smith served as a trial attorney for the United States Department of Justice Civil Division. Smith graduated from the University of Chicago School of Law, cum laude, where she was a member of the Law Review. Smith clerked for the Hon. R. Lanier Anderson III of the United States Court of Appeals for the Eleventh Circuit. She received a B.S., magna cum laude, from Loyola University of Chicago. Smith is a member of the American Bar Association’s Commission on Women in the Profession and a member of the Board of Managers for the Chicago Bar Association.

Robert R. Beers, Nominee for Under Secretary for National Protection and Programs, Department of Homeland Security

Rand Beers has spent 35 years as a senior civil servant. After serving as a Marine officer and rifle company commander in Vietnam, he entered the Foreign Service in 1971 and the Civil Service in 1983. From 1988 to 1998 he served on the NSC staff at the White House as Director for Counter-terrorism and Counter-narcotics, Director for Peacekeeping, and Senior Director for Intelligence Programs. From 1998 to 2003 he was Assistant Secretary of State for International Narcotics and Law Enforcement Affairs. From 2002 to 2003 he was Special Assistant to the President and Senior Director for Combating Terrorism. He was most recently the President of the National Security Network, a group of national security experts committed to talking about sensible national security policy with the American public.

Peter M. Rogoff, Nominee for Administrator, Federal Transit Administration, Department of Transportation

Peter M. Rogoff has served for 22 years on the staff of the Senate Appropriations Committee, including 14 years as the Democratic Staff Director of its Transportation Subcommittee. He is an acknowledged expert in the area of federal infrastructure budgeting and finance, having had an active role in the financing of each of the last three comprehensive surface transportation reauthorization bills dating back to the Intermodal Surface Transportation Efficiency Act of 1991. He was instrumental in the establishment of new user fee regimes to finance expanded security measures following the tragedy of September 11, 2001. Rogoff has had an instrumental role in advising policy makers on the operating and capital needs of Amtrak, including the initiation and financing of high speed Acela service, as well as the financing of dozens of new light rail and bus rapid transit systems across the United States. Rogoff has been active in overseeing and reforming troubled procurements in the FAA, Coast Guard, FTA, and FHWA. He was the principal staff strategist for both the .08 blood alcohol content (BAC) law and the youth drunk driving "zero tolerance" law. Together, these laws are credited with saving tens of thousands of lives. Rogoff has also been centrally involved in efforts to strengthen safety inspections of substandard trucks, cargo vessels, and pipelines. Rogoff is a recipient of the U.S. Coast Guard Distinguished Public Service Award and the Lester P. Lamm Memorial Award for outstanding leadership and dedication to U.S. highway transportation programs. He earned his MBA degree, with honors, at the McDonough School of Business at Georgetown University and his B.A. degree in American Studies at Amherst College.

Jane Oates, Nominee for Assistant Secretary for Employment and Training Administration, Department of Labor

Jane Oates is the Executive Director of the New Jersey Commission on Higher Education and Senior Policy Advisor to Governor Jon S. Corzine. Since her arrival in New Jersey in March, 2006, she has concentrated on linking higher education with K-12 education and the workforce. The Commission has engaged in work with the Commissioner of Labor on linking the college with the workforce investment system, increasing opportunities to align workforce programs with college credit, and the establishment of Innovation Partnership Institutes – working collaborations between business sectors and colleges to increase the relevance of coursework to the work of New Jersey businesses. Oates currently serves on the State Employment and Training Commission (SETC), the State Commission on Adult Literacy and Education (SCALES), New Jersey High School Redesign Task Force, the Public Sector Work Group and chairs the State Educators Health Benefits Commission and the Governor’s Schools Board of Overseers. Prior to joining Governor Corzine, Oates was the Senior Policy Advisor on higher education, national service, adult literacy, education research and workforce issues to Senator Edward M. Kennedy on the United States Senate Committee on Health, Education, Labor and Pensions.

UBS Tax Fraud Accountant Hides Assets Files False Tax Return

FI - Fuerst Ittleman — 2009-04-09T13:51:23+01:00

Boca Raton, Fla., Resident Hid Income and Assets in Secret Swiss Bank Account

Washington - The Internal Revenue Service (IRS) and Justice Department announced Steven Michael Rubinstein, of Boca Raton, Fla., has been charged, via criminal complaint, with filing a false income tax return. Rubinstein made his initial appearance this morning before Magistrate Judge Barry S. Seltzer in Ft. Lauderdale, Fla. The defendant was temporarily detained, pending a bond hearing scheduled for Tuesday, April 7, 2009, at 10:00 a.m. before Magistrate Judge Seltzer.

According to court records, Rubinstein is a chartered accountant who works for an international company that assists clients to build, buy and sell yachts. On or about April 9, 2008, Rubinstein filed a U.S. Individual Income Tax Return Form 1040 for tax year 2007 which he signed under the penalties of perjury. The tax return failed to report that Rubinstein had an interest in, or signature authority over, a financial account at UBS in Switzerland. Additionally, Rubinstein failed to report the income he earned on any UBS Swiss bank accounts.

According to court records, Rubinstein was the beneficial owner of UBS accounts in the name of Hybridge International Ltd., a nominee British Virgin Island corporation. From 2001 through 2008, it is alleged that Rubinstein communicated with bankers at UBS via e-mail, telephone and in person about the purchase and sale of securities worth more than 4.5 million Swiss Francs, the conversion of investments from U.S. dollars to British Pounds, the deposit and transfer of funds into and out of the UBS Swiss accounts and the repatriation of approximately $3 million into the United States to purchase property and build Rubinstein’s personal residence in Boca Raton. Additionally, it is alleged that Rubinstein deposited and sold more than $2 million in South African Krugerrands through his UBS Swiss bank accounts.

In Feburary 2009, UBS entered into a deferred prosecution agreement in which the bank admitted to helping U.S. taxpayers hide accounts from the IRS. As part of their agreement, UBS agreed to provide the U.S. government with the identities of, and account information for, certain U.S. customers of UBS’s cross-border business.

"Six weeks ago, through the efforts of the Department of Justice and the Internal Revenue Service, UBS, the largest bank in Switzerland, admitted to illegally helping United States citizens evade their income taxes, and disclosed names of individual taxpayers. We expect that this prosecution is just the first of the prosecutions that will be brought, as we continue to review the information we have received from all sources," said Acting Assistant Attorney General John A. DiCicco of the Justice Department’s Tax Division. "The Tax Division is committed to helping the IRS to ferret out and hold accountable taxpayers who are hiding assets in undisclosed foreign accounts."

"On February 19, 2009, we reached an agreement with UBS that included, for the first time, the disclosure of the identities of taxpayers that were illegally using Swiss bank accounts to evade U.S. taxes. Today is the first of the prosecutions resulting from that disclosure, but it will not be the last," said R. Alexander Acosta, U.S. Attorney for the Southern District of Florida. "It is our duty to those who pay their legal share of taxes to ensure that others do not use offshore schemes to evade payment of their taxes."

"Combating offshore tax evasion has been and will continue to be one of the IRS's top priorities," said IRS Commissioner Doug Shulman. "Today’s actions show the IRS is committed to pursuing people hiding income offshore. Anyone in this situation needs to immediately come in through our voluntary disclosure process before it’s too late. It's better to come clean now instead of waiting and facing a heavier price later."

Acting Assistant Attorney General DiCicco and U.S. Attorney Acosta commended the investigative efforts of the IRS agents involved in this case. The prosecution is being handled by Senior Litigation Counsel Kevin M. Downing and Trial Attorney Michael P. Ben’Ary of the Tax Division, and Assistant U.S. Attorney Jeffrey A. Neiman.

U.S. citizens who have an interest in, or signature or other authority over, a financial account in a foreign country with assets in excess of $10,000 are required to disclose the existence of such account on Schedule B, Part III of their individual income tax return.

Offshore Tax Compliance » Tax Enforcement » Joint Committee on Taxation

FI - Fuerst Ittleman — 2009-04-07T09:41:38+01:00

"Tax Compliance and Enforcement Issues with Respect to Offshore Accounts and Entities" (PDF)

The Subcommittee on Select Revenue of the House Committee on Ways and Means recently scheduled a public hearing on issues relating to banking secrecy practices and wealthy American taxpayers. The staff of the Joint Committee on Taxation prepared the document, "Tax Compliance and Enforcement Issues with Respect to Offshore Accounts and Entities" provides background on withholding and information reporting requirements applicable to payments of U.S. source portfolio investment income to nonresidents, the Internal Revenue Service (“IRS”) Qualified Intermediary program, the effect of bank secrecy laws and practices on U.S tax compliance and enforcement efforts involving offshore accounts, and information exchange procedures under U.S. income tax treaties and tax information exchange agreements.

Under present law, nonresidents who receive payments of U.S. source investment income are generally subject to U.S. withholding tax imposed at a 30 percent rate. This withholding tax serves as the only mechanism for collection of tax in the case of payments made to foreign persons who are not otherwise required to file a U.S. income tax return. There are, however, a number of significant statutory exemptions from the 30-percent withholding tax (including for interest paid on bank deposits, portfolio interest and most capital gains), and income tax treaties typically provide additional withholding tax relief.

Payments of U.S. source “fixed and determinable annual or periodic” income, including interest, dividends, and similar types of investment income, that are made to foreign persons are subject to U.S. withholding tax at a 30 percent rate, unless the withholding agent can establish that the beneficial owner of the amount is eligible for an exemption from withholding or a reduced rate of withholding under an income tax treaty.

The principal statutory exemptions from the 30-percent nonresident withholding tax apply to interest on bank deposits, portfolio interest and capital gains. Since 1984 the United States has imposed no tax on “portfolio interest” received by a nonresident individual or foreign corporation from sources within the United States. Portfolio interest includes generally any interest (including original issue discount) other than interest received by a 10-percent shareholder, certain contingent interest, interest received by a controlled foreign corporation from a related person, and interest received by a bank on an extension of credit made pursuant to a loan agreement entered into in the ordinary course of its trade or business.

Pistachio Salmonella Contamination » Pistachio Product Recall

FI - Fuerst Ittleman — 2009-04-06T00:00:00+01:00

"Pistachio and Pistachio Containing Product Recall Companies List" (PDF)

The FDA and the California Department of Public Health continue to investigate Salmonella contamination in pistachios and pistachio products. Setton Pistachio of Terra Bella Inc., Terra Bella, Calif., is voluntarily expanding its recall of roasted pistachios to include all lots of roasted in-shell pistachios and roasted shelled pistachios that were produced from nuts harvested in 2008. The firm is also recalling those raw shelled pistachios from the 2008 crop that are not subsequently roasted prior to retail sale. The pistachios may be contaminated with Salmonella.

Initially, the firm’s recall was limited to certain lots of roasted pistachios. Information from the joint FDA and California Department of Public Health inspection indicates the presence of Salmonella in critical areas of the facility and the potential for cross-contamination between raw and roasted products. After this information was shared with Setton, the firm decided to expand its recall.

Because the pistachios were used as ingredients in a variety of foods, this expanded recall will affect many products and is expected to result in other recalls. The FDA has created a searchable database of recalled products at http://www.fda.gov/pistachios/ and will continue to update the public as its investigation progresses. Consumers should not eat pistachios or food products containing them (such as pistachio bakery goods and pistachio ice cream) until they can determine that the products do not contain pistachios recalled by Setton.

The FDA is advising wholesalers, retailers, and operators of restaurants and food service establishments not to sell or serve any pistachios or pistachio-containing products until the source of the pistachios can be determined. Firms should check with their suppliers to determine whether the source of the pistachios is Setton. If the source is Setton and the products are subject to this recall, then the pistachios and pistachio products should not be sold.

The FDA is helping the pistachio industry address the public health risks associated with Salmonella and to understand appropriate control procedures to prevent contamination. As part of this effort, on April 3, 2009, the FDA issued a letter to pistachio processors in the United States reminding them of their legal responsibility to ensure that the products they are providing are safe for consumption. The FDA intends to examine current pistachio industry practices and issue guidance to the industry that provides additional information on measures to be taken to prevent Salmonella contamination.

Ponzi Scheme Crackdown SEC Stops a Multi Million Dollar Scam

FI - Fuerst Ittleman — 2009-04-03T16:07:49+01:00

The SEC Thwarted a Multi-Million Dollar Ponzi Scheme and Froze The Assets of A Long Island Investment Adviser.

Washington - The SEC alleges that Edward T. Stein preyed upon long-time friends and acquaintances to move more than $55 million through the accounts of his investment funds - Gemini Fund I, L.P. and DISP LLC - selling interests in those entities to more than 80 investors. Stein produced false statements for investors reflecting healthy returns over the life of those investments, while he instead used the money to pay off prior investors, pay personal expenses, and fund a failed magazine venture. The SEC alleges that in the past several months, Stein resorted to stealing client funds to continue his scheme, converting millions of dollars from a single client to pay off selected investors and purchase a million-dollar condominium for himself in Manhattan.

"Halting Ponzi schemes and freezing assets of the perpetrators continues to be an important enforcement priority for the SEC," said Robert Khuzami, Director of the SEC's Division of Enforcement. "The SEC has halted more than 75 Ponzi-related schemes in the past two years and charged more than 300 individuals since 2002 in such enforcement actions."

James Clarkson, Acting Director of the SEC's New York Regional Office, said, "Today's enforcement action alleges that a trusted adviser defrauded long-standing clients for his personal financial gain. Stein allegedly used false statements to make his clients believe they were earning substantial returns, when in fact he was using their money to pay off prior investors and enrich himself."

According to the SEC's complaint, filed in federal court in Manhattan, Stein set up Gemini in 1992 as an investment fund and began to market limited partnership interests to clients. Stein described Gemini to prospective investors as a feeder fund to other investment vehicles engaging in arbitrage and hedge trading. Instead, the primary investment Stein made with Gemini money was in Detour Media Group, Inc., an entity that published a fashion magazine called Detour. In a petition signed by Stein as its President, Detour Media filed for protection under Chapter 7 of the bankruptcy laws in 2003. However, Stein continued to solicit investments in Gemini and has continued to issue statements to his investors reflecting healthy returns over the life of their investments.

According to the SEC's complaint, Stein set up DISP in 2002 as an investment fund to invest in life settlement policies. While DISP did buy some life insurance policies with investor funds, it has not bought any since at least 2004 and Stein transferred the portfolio of policies DISP held to another Stein-controlled entity without disclosing the transfer to existing or prospective DISP investors. Stein also used DISP investor funds to pay off Gemini investors.

The SEC's complaint charges Stein for violations of the antifraud provisions of the Securities Act of 1933, the Securities Exchange Act of 1934 and the Investment Advisers Act of 1940. The SEC has charged Gemini, DISP, and Vibrant Capital Corp. as relief defendants along with the following other entities: Edward T. Stein Associates, Ltd.; G&C Partnership Joint Venture; Prima Capital Management Corp.; and Vibrant Capital Funding I LLC.

Judge Lynch of the U.S. District Court for the Southern District of New York granted the Commission’s request for an order temporarily restraining Stein, freezing his assets and those of the relief defendants, and ordering accountings of Stein and the relief defendants. The SEC’s complaint also seeks a final judgment permanently enjoining Stein from future violations of the federal securities laws, ordering him to pay financial penalties and to disgorge ill-gotten gains with prejudgment interest.

Tax Time 09 Depreciation and Section 179 Expense for Businesses

FI - Fuerst Ittleman — 2009-03-31T14:10:00+01:00

Increased Section 179 limits. The maximum section 179 deduction you can elect for qualified section 179 property you placed in service in tax years that begin in 2008 has increased to $250,000 ($285,000 for qualified enterprise zone property and qualified renewal community property). This limit is reduced by the amount by which the cost of section 179 property placed in service in the tax year exceeds $800,000. For qualified section 179 Gulf Opportunity (GO) Zone property placed in service in certain counties and parishes of the GO Zone, the maximum deduction is higher than the deduction for most section 179 property.

Special depreciation allowance for certain property - You may be able to take an additional first year special depreciation allowance for certain qualified property (defined below). The allowance is an additional deduction of 50% of the property’s depreciable basis (after any section 179 deduction and before figuring your regular depreciation deduction).

Property that qualifies for this special depreciation allowance include the following.

Tangible property depreciated under the modified accelerated cost recovery system (MACRS) with a recovery period of 20 years or less.
Water utitiliy property.
Off-the-shelf computer software.
Qualified leasehold improvement property.

Qualified property must also meet all of the following tests.

You must have acquired qualified property by purchase after December 31, 2007, and before January 1, 2009. If a binding contract to acquire the property existed before January 1, 2008, the property does not qualify.
Qualified property must be placed in service after December 31, 2007, and before January 1, 2009 (before January 1, 2010, for certain transportation property and certain property with a long production period).
The original use of the property must begin with you after December 31, 2007.

Property that does not qualify for special depreciation allowance include the following.

Property placed in service and disposed of in the same tax year.
Depreciation limits on business qualified GO Zone property.
Property required to be depreciated under the alternative depreciation system (ADS).
Property included in a class of property for which you elected not to claim the special depreciation allowance.

Depreciation limits on business vehicles - The total depreciation deduction (including the section 179 deduction) you can take for a passenger automobile (that is not a truck or a van) you use in your business and first placed in service in 2008 is $2,960 ($10,960 for automobiles for which the special depreciation allowances applies). The maximum deduction you can take for a truck or a van you use in your business and first placed in service in 2008 is $3,160 ($11,160 for trucks or vans for which the special depreciation allowance applies).

Caution. These limits are reduced if the business use of the vehicle is less than 100%

Money Laundering in Venezuela Parallel Market

FI - Fuerst Ittleman — 2009-03-31T00:00:00+01:00

The U.S. Drug Enforcement Agency was recently granted a court order to freeze the funds of Miami-based Rosemont Finance Corporation. Rosemont handled a large portion of business in Venezuela’s parallel market. The freeze order is the result of a money laundering indictment brought in Massachusetts against Rosemont’s principal, Rama Vyasulu. The indictment appears to have originated from an ongoing undercover investigation by the DEA.

According to several accounts, an estimated $900,000 in illegal drug proceeds have been tied to Rosemont’s Bank of America umbrella account which consists of more than 50 subordinate accounts that belong to foreign exchange brokers. More than sixty percent of those accounts operate in Venezuela’s parallel market. This scenario suggests that Rosemont was running the account as a money laundering and/or payable through arrangement.

The emergence of the Venezuelan parallel market is due in part largely to the enforcement of exchange controls imposed by President Hugo Chavez. Those exchange controls restrict the free trade of foreign currency in Venezuela.

The Venezuelan parallel market was devised to circumvent the exchange controls through loopholes in Venezuela’s exchange regulations. The parallel market allows traders the exchange of Venezuelan bolivars to U.S. dollars at a much higher exchange rate than currently allowed by the Venezuelan government. Since the freeze of Rosemont’s account the exchange rate of the U.S. dollar in the parallel market has skyrocketed 300%. The current rate is reported at 6.8 to one.

The next move the U.S. government will likely make is the seizure of Rosemont’s accounting records to determine the sources of the funds and the financial institutions responsible for the illicit transactions.

Serological Test Guidance for Human Cell Tissue Based Products

FI - Fuerst Ittleman — 2009-03-30T09:57:38+01:00

Use of Serological Tests to Reduce the Risk of Transmission of Trypanosoma cruzi Infection in Whole Blood and Blood Components for Transfusion and Human Cells, Tissues, and Cellular and Tissue-Based Products (HCT/Ps)

DRAFT GUIDANCE

This guidance document is for comment purposes only.

Submit comments on this draft guidance by the date provided in the Federal Register notice announcing the availability of the draft guidance. Submit written comments to the Division of Dockets Management (HFA-305), Food and Drug Administration, 5630 Fishers Lane, Rm. 1061, Rockville, MD 20852. Submit electronic comments to http://www.regulations.gov. You should identify all comments with the docket number listed in the notice of availability that publishes in the Federal Register.

Guidance for Industry

This draft guidance, when finalized, will represent the Food and Drug Administration’s (FDA’s) current thinking on this topic. It does not create or confer any rights for or on any person and does not operate to bind FDA or the public. You can use an alternative approach if the approach satisfies the requirements of the applicable statutes and regulations. If you want to discuss an alternative approach, contact the appropriate FDA staff. If you cannot identify the appropriate FDA staff, call the appropriate number listed on the title page of this guidance.

I. INTRODUCTION

We, FDA, are notifying you, establishments that manufacture Whole Blood and blood components intended for use in transfusion, and establishments that make eligibility determinations for donors of HCT/Ps, about FDA approval of a Biologics License Application (BLA) for an enzyme-linked immunosorbent assay (ELISA) test system for the detection of antibodies to Trypanosoma cruzi (T. cruzi). This test is intended for use as a donor screening test to reduce the risk of transmission of T. cruzi infection by detecting antibodies to T. cruzi in plasma and serum samples from individual human donors, including donors of Whole Blood and blood components intended for use in transfusion, and HCT/P donors (living and cadaveric (non-heart beating)). This guidance document does not apply to the collection of Source Plasma.

In addition, we are providing you with recommendations for unit and donor management, labeling of Whole Blood and blood components, and procedures for reporting implementation of a licensed T. cruzi test at your facility or at your contract testing laboratory, as required for blood establishments under Title 21 Code of Federal Regulations 601.12 (21 CFR 601.12). For establishments that make donor eligibility determinations for HCT/P donors, we are notifying you that we have determined T. cruzi to be a relevant communicable disease agent under

21 CFR 1271.3(r)(2), and are providing you with recommendations for testing and screening donors for antibodies to T. cruzi.

The recommendations made in this guidance with respect to HCT/Ps are in addition to recommendations made in the document entitled “Guidance for Industry: Eligibility Determination for Donors of Human Cells, Tissues, and Cellular and Tissue-Based Products (HCT/Ps),” dated August 2007 (Ref. 1).

We recommend that you implement the recommendations provided in this guidance within one year after a final guidance is issued.

FDA’s guidance documents, including this guidance, do not establish legally enforceable responsibilities. Instead, guidances describe FDA’s current thinking on a topic and should be viewed only as recommendations, unless specific regulatory or statutory requirements are cited. The use of the word should in FDA’s guidances means that something is suggested or recommended, but not required.

II. BACKGROUND

Chagas disease is caused by the protozoan parasite, T. cruzi. The disease is found primarily in Mexico and Central and South America; the pathogenic agent has rarely been reported to cause human infection in the United States (U.S.) by natural vector transmission (Ref. 2). Natural infections are transmitted mainly when the feces of certain blood sucking insects (triatomine bugs, commonly referred to as kissing or chinch bugs) that harbor the infection are rubbed into a bug bite, other wound, or directly into the eyes or mucous membranes. Other primary forms of transmission include congenital (mother to unborn infant), organ transplantation, and blood transfusion. Current estimates are that at least 11 million persons in Mexico and Central and South America carry the parasite chronically and could present a potential source of infection should they become donors. The presence of the pathogenic agent in U.S. and Canadian donors is increasing due to immigration of infected individuals from endemic areas. Some experts estimate that there may be as many as 100,000 persons unknowingly infected with T. cruzi, who reside in the U.S. and Canada.

Vector-borne infections are mostly mild in the acute phase and then persist throughout life, usually without symptoms. Acute infection in patients with compromised immune systems, for example, from cancer therapy or organ transplantation, can be very serious and sometimes fatal. Treatment options are limited, but are most effective early in the infection. The lifetime risk of severe cardiac complications (cardiomegaly, heart failure and arrhythmias) or intestinal disorders (megacolon, megaesophagus) in infected individuals averages about 30% (range of 10 to 40% depending on a variety of factors) and may occur many years after the initial infection. During the acute phase of vector-borne Chagas disease, parasites are found in skin lesions at the site of transmission. The parasites are then spread through the bloodstream to various tissues, particularly skeletal muscle (Ref. 3). During the chronic stage of Chagas disease, most persons who harbor the parasite are asymptomatic and unaware of their infection. During this phase, parasites have been demonstrated in muscle (especially cardiac muscle), nerves, and digestive tract, but there has been very little investigation of tissue distribution during that phase (Refs. 3 through 10).

A. Donor Screening Tests for Chagas Disease in the United States

At the September 1989 Blood Products Advisory Committee (BPAC) meeting, the committee recommended testing donors of Whole Blood and blood components for Chagas disease when a suitable test became available. In a 1995 BPAC meeting, the committee considered whether the performance characteristics of the two FDA-approved tests then available for diagnosis of Chagas disease would be suitable for blood donor screening. The committee concluded that the tests discussed were not suitable for blood donor screening. Furthermore, the committee sought clarification of the criteria that FDA would use to license a Chagas test for donor screening. At the September 2002 meeting of BPAC, FDA presented its current considerations on the regulatory pathway and standards for licensing a donor screening test for Chagas disease and encouraged manufacturers to develop tests based on those considerations (Ref. 11).

In December 2006, FDA granted a license to one manufacturer of an ELISA test system for the detection of antibodies to T. cruzi in individual living blood and HCT/P donors. Since the end of January 2007, a number of blood centers representing a large proportion of U.S. blood collections have been testing donors using this licensed assay. In February 2009, FDA licensed this ELISA test system for the detection of antibodies to T. cruzi in cadaveric (non-heart beating) HCT/P donors.

Blood donor testing by an ELISA test system identifies donors that are repeatedly reactive for antibodies to T. cruzi. The presence of antibodies to T. cruzi is strong evidence that a donor is infected with this parasite. Most donors that are repeatedly reactive by an ELISA test system for antibodies to T. cruzi have chronic, asymptomatic infections acquired years earlier during residence in areas endemic for T. cruzi. Therefore, prior donations from a donor who is repeatedly reactive on an ELISA test system were likely to harbor T. cruzi parasites.

At the April 2007 BPAC meeting, FDA requested comments on scientific issues related to the implementation of blood donor testing for infection with T. cruzi (Ref. 12). Issues discussed by the committee included the need for additional data on the incidence and risk of transmission of T. cruzi by transfusion, the severity of Chagas disease, the performance of the antibody test, and, the lack of a licensed supplemental test for confirmatory testing.

The committee also commented on the design of research studies to validate a strategy for selective testing of repeat blood donors. The committee noted that a period of universal testing of all blood donors would generate critical data on the prevalence of T. cruzi infections in donors and that donor questions for selective donor screening needed validation.

B. Risk of T. cruzi Infection from Transfusion of Whole Blood and Blood Components

Blood donations from individuals from endemic areas are the primary source of risk for T. cruzi infection from transfusion. Studies in the mid-1990s (Ref. 1) estimated that the rate of seropositive blood donors in the U.S. ranged from 1 in 5400 to 1 in 25,000, depending on where the studies were conducted. However, more recent studies suggest that these rates have increased in the areas where donor testing has been performed over a period of time. For example, a rate of 1 in 2000 was found recently in the Los Angeles metropolitan area (Ref. 14). Transfusion transmission in endemic areas has been a major public health concern, and many countries considered endemic for T. cruzi infection screen blood donors for the presence of antibody. Therefore, in response to changes in donor demographics, we are now recommending blood donor testing in the U.S.

In the U.S. and Canada, only seven cases of transfusion-transmitted T. cruzi infections (Refs. 15 through 19) and five cases of infection from organ transplantation (Refs. 20 and 21) have been documented. However, transmission in immunocompetent patients is not likely to be apparent, and in many cases, even if symptoms appear, infection may not be recognized (Ref. 22).

Studies in blood centers which question donors about birth and/or residence in a T. cruzi-endemic country have shown such questions to be incompletely effective at identifying the seropositive donors. Studies also have looked at the rate of transfusion transmission from T. cruzi antibody-positive individuals. Published lookback studies in the U.S. and in Mexico of 22 transfusion recipients of seropositive donations, identified five of these recipients (22.7%) who later tested positive for antibodies suggesting transfusion transmission of T. cruzi (Refs. 18, 23 and 24). This transmission rate of 22.7% is consistent with the literature from Latin America on rates of blood-borne transmission from seropositive donors in Mexico and Central and South America (Ref. 25). However, we are aware that lookback studies conducted using the licensed ELISA test indicate that the risk of T. cruzi by transfusion of a seropositive unit in the U.S. may be much lower risk than previously thought. We note that these studies have confirmed the demographic characteristics of the typical seropositive donor as described in the first two paragraphs of section II. However, the data also suggest that there are seropositive individuals who acquired their infections within the U.S. (Ref. 26). Despite this new data, the rate of transfusion transmission of T. cruzi in the U.S. continues to be uncertain because of the limited number of studies conducted to date and the rate of transfusion transmission remains under investigation.

C. Risk of T. cruzi Infection to Recipients of Donated HCT/Ps

Based on the risk of transmission, severity of effect, and availability of appropriate screening measures and/or tests, we have determined T. cruzi, the agent for Chagas disease, to be a relevant communicable disease agent or disease under 21 CFR 1271.3(r)(2). This determination was based on the following information.

1. Risk of Transmission

There is a risk of transmission of T. cruzi by HCT/Ps and there has been sufficient incidence and/or prevalence to affect the potential donor population.

Recognizing the risk of transmission from donated HCT/Ps, countries endemic for T. cruzi infection have instituted various practices to minimize transmission through transfusion or transplantation including screening donors for the presence of T. cruzi antibodies. Further, when human leukocyte antigen-matched bone marrow is obtained from an infected individual, the donor receives anti-parasitic treatment before the bone marrow is taken for transplantation. The World Health Organization recommends that:

A heart from an infected donor not be transplanted.
A liver from an infected donor only be transplanted. to recipients already positive for Chagas disease, except in emergency cases.
When other organs are transplanted from a Chagas-positive donor, the recipient should receive prophylactic treatment for Chagas disease (Ref. 3).

Published data regarding the transmissibility of T. cruzi indicate that vertical transmission (congenitally from mother to infant), oral transmission (through breast milk or contaminated food) and conjunctival transmission (from contact with contaminated hands) have occurred (Ref. 3). In animal studies, T. cruzi has been shown to infect multiple tissues, including skeletal muscle, heart, bladder, peripheral nerve, liver, spleen, adrenal gland, brain, adipose tissue, ocular tissue, osteoblasts, chondroblasts, macrophages, and fibroblasts (Refs. 27 through 30). Human placental cells also have been experimentally infected with T. cruzi (Ref. 31). As noted previously in this section, T. cruzi has been transmitted via blood transfusions and organ transplantation (Refs. 20 through 22, and 32).

At the BPAC meeting of April 26, 2007, the committee noted that, though some HCT/Ps are processed in a manner that might inactivate T. cruzi in HCT/Ps from seropositive donors, current data are insufficient to identify specific effective processing methods that consistently render HCT/Ps free of T. cruzi. The committee concluded that, absent such data, it would be prudent to test HCT/P donors to decrease the risk of transmitting infection with T. cruzi (Ref. 12).

Information about prevalence of T. cruzi in the U.S. is provided in section II.B. of this document.

2. Severity of Effect

T. cruzi infections can be fatal or life-threatening, result in permanent impairment of a body function or permanent damage to a body structure, and/or necessitate medical or surgical intervention to preclude permanent impairment of a body function or permanent damage to a body structure.

3. Availability of Appropriate Screening and/or Testing Measures

Appropriate screening measures have been developed for T. cruzi, such as the medical history interview. (Screening measures for T. cruzi are discussed in section IV.A. of this document.)

A donor screening test for T. cruzi has been licensed and labeled for use in testing blood specimens from living and cadaveric donors of HCT/Ps (see section IV.B. of this document). You must use a donor screening test for T. cruzi that is specifically labeled for cadaveric specimens instead of a more generally labeled donor screening test when applicable and when available (21 CFR 1271.80(c)). Current FDA-licensed, cleared or approved donor screening tests for use in testing HCT/P donors are listed at http://www.fda.gov/cber/tissue/prod.htm.

III. RECOMMENDATIONS FOR DONORS OF WHOLE BLOOD AND BLOOD COMPONENTS INTENDED FOR USE IN TRANSFUSSION

A. Blood Donor Testing and Management

1. Donor Testing

We recommend testing of all donations of allogeneic units of blood using a licensed test for antibodies to T. cruzi. You must follow the regulations under 21 CFR 610.40(d) for determining when autologous donations must be tested.

2. Donor Deferral

We recommend that all donors who are repeatedly reactive on a licensed test for T. cruzi antibody or who have a history of Chagas disease be indefinitely deferred and notified of their deferral.

3. Confirmatory Testing and Donor Reentry

At this time, there is no FDA licensed supplemental test for antibodies to T. cruzi that can be used for confirmation of true positive screening test results. FDA is not recommending reentry criteria for blood donors deferred indefinitely on the basis of a repeatedly reactive screening test for antibodies to T. cruzi due to the absence of a licensed supplemental test for antibodies to T. cruzi.

4. Donor Counseling and Physician Referral

We recommend that donors who are repeatedly reactive using a licensed test for antibodies to T. cruzi be informed about the likelihood and medical significance of infection with T. cruzi. Additional medical diagnostic testing may provide information useful in donor counseling.

All repeatedly reactive donors should be referred to a physician specialist. It also may be useful to refer them to their state and local health departments or to other appropriate community resources.

5. Further Testing of Repeatedly Reactive Donors for Cross–Reacting Diseases

Because the licensed test has demonstrated some reactivity in donors infected with pathogens other than T. cruzi, we recommend that medical follow up be considered for donors who are repeatedly reactive by the licensed test for antibodies to T. cruzi but who have no apparent basis for exposure to T. cruzi or who have negative results on more specific medical diagnostic tests. For example, testing for leishmaniasis may be appropriate in persons with geographic risk for exposure to Leishmania parasites and who appear to have a falsely reactive screening test for antibodies to T. cruzi.

B. Product Management

1. Index Donations

We recommend that blood components from repeatedly reactive index donations be quarantined and destroyed or used for research. Components determined to be unsuitable for transfusion must be prominently labeled: “NOT FOR TRANSFUSION,” and the label must state the reason the unit is considered unsuitable (e.g., the component is positive for T. cruzi (21 CFR 606.121(f)).

2. Lookback (Product Retrieval and Recipient Notification)

Within 3 calendar days after a donor tests repeatedly reactive by a licensed test for T. cruzi antibody, you should:

Identify all in-date blood and blood components previously donated by such a donor, going back either 10 years (or indefinitely where electronic records are available), or else 12 months prior to the most recent time that this donor tested negative with a licensed test for T. cruzi antibody, whichever is the lesser period (the lookback period).
Quarantine all previously collected in-date blood and blood components held at your establishment.
Notify consignees of all previously collected in-date blood and blood components to quarantine and return the blood components to you or to destroy them.

In addition, when you identify a donor who is repeatedly reactive by a licensed test for T. cruzi antibodies and for whom there is additional information indicating risk of T. cruzi infection, such as geographical risk for exposure in an endemic area, or medical diagnostic testing of the donor, we recommend that you:

Notify consignees of all previously distributed blood and blood components collected during the lookback period.
If blood or blood components were transfused, encourage consignees to notify the recipient’s physician of record of a possible increased risk of T. cruzi infection.

We recommend that when there is additional information indicating risk of T. cruzi infection you make such notifications within 12 weeks of obtaining the repeatedly reactive test result.

There currently is no licensed T. cruzi supplemental test. When such a test is available, a positive test result will provide additional information indicating risk of T. cruzi infection.

Retrospective Review of Records

If you are a blood establishment that implemented screening with a licensed test for antibodies to T. cruzi prior to the effective date of this guidance, you may wish to perform a retrospective review of records to identify donors:

With repeatedly reactive test results by a licensed test for T. cruzi antibodies.
For whom there is additional information indicating risk of T. cruzi infection, such as geographical risk for exposure in an endemic area, or medical diagnostic testing of the donor.

If a donor is identified at risk of infection during the retrospective review, you may want to consider performing all the lookback actions described above.

3. Autologous Donations

Although autologous use of blood does not increase a patient’s/donor’s risk of illness from a pre-existing infection, FDA regulations under 21 CFR 610.40(d) and (e) require testing of autologous blood donors under certain circumstances to prevent inadvertent allogeneic exposures to unsuitable units.

a. We recommend that blood components from autologous donors that are repeatedly reactive by a licensed test for T. cruzi antibody be released for autologous use only with approval of the autologous donor’s referring physician. Establishments should provide the results of additional testing for antibodies to T. cruzi, as available to the autologous donor’s referring physician.

b. Each autologous donation must be labeled as required under 21 CFR 610.40(d)(4), as appropriate. Given the seriousness of T. cruzi infections, autologous donations that are repeatedly reactive by a licensed test for T. cruzi antibody must bear a biohazard label as required under 21 CFR 610.40(d)(4).

4. Circular of Information

Consistent with other donor screening tests, the instruction circular, also known as the “Circular of Information” must be updated to state that a licensed test for antibodies to T. cruzi was used to screen donors and that the results of testing were negative (21 CFR 606.122(h)).

5. Biological Product Deviation Report and Fatality Report Under 21 CFR 606.171, licensed manufacturers, unlicensed registered blood establishments, and transfusion services must report any event and information associated with the manufacturing, if the event either represents a deviation from current good manufacturing practice, applicable regulations, applicable standards, or established specifications that may affect the safety, purity, or potency of the product; or represents an unexpected or unforeseeable event that may affect the safety, purity, or potency of the product, and it occurs in your facility or another facility under contract with you and involves distributed blood or blood components. For additional information regarding reporting, you may refer to FDA guidance, “Guidance for Industry: Biological Product Deviation Reporting for Blood and Plasma Establishments,” dated October 2006 (Ref. 33). Also, when a complication of blood collection or transfusion (e.g., involving T. cruzi) is confirmed to be fatal, you must notify FDA in accordance with 21 CFR 606.170(b).

C. Reporting the Test Implementation

1. If you are a licensed blood establishment and you begin using a licensed serological test for the detection of antibodies to T. cruzi according to the manufacturer’s product insert at your facility, then you must notify us of the testing change in your Annual Report (AR), in accordance with

21 CFR 601.12(d). If you already have an approved supplement to your BLA to use a contract laboratory to perform infectious disease testing of blood products, and the contract laboratory will now perform a serological test for antibodies to T. cruzi, you must report this change in your AR (21 CFR 601.12(d)).

2. If you are a licensed blood establishment and you use a new contract laboratory to perform a serological test for antibodies to T. cruzi (and the laboratory already performs infectious disease testing for blood products), then you must report this change by submission of a “Changes Being Effected” supplement, in accordance with 21 CFR 601.12(c)(1) and (c)(5). If your contract laboratory has not previously performed infectious disease testing for blood products, then you must report this change as a major change in a prior approval supplement, in accordance with 21 CFR 601.12(b).

IV. RECOMMENDATIONS FOR DONORS OF HCT/Ps

A. Donor Screening—Risk Factors or Conditions

Under 21 CFR 1271.75(d), you must determine to be ineligible any potential donor who is identified as having a risk factor for or clinical evidence of relevant communicable disease agents or diseases. Ineligible potential donors include those who exhibit one or more of the following conditions or behaviors.

Persons who have had a medical diagnosis of T. cruzi infection based on symptoms and/or laboratory results.
Persons who have tested positive or reactive for T. cruzi antibodies using an FDA-licensed or investigational T. cruzi donor screening test (Ref. 1).

B. Donor Testing

1. You must test blood specimens from all HCT/P donors for antibodies to T. cruzi using an FDA-licensed donor screening test (21 CFR 1271.80(c)).

2. Any HCT/P donor whose specimen tests negative (or non-reactive) for antibodies to T. cruzi may be considered to be negative (or non-reactive) for purposes of making a donor eligibility determination.

3. Any HCT/P donor whose specimen tests positive (or reactive) for antibodies to T. cruzi is ineligible to be a donor (21 CFR 1271.80(d)(1)).

Clean Plant Memorandum Signed by USDA Network

FI - Fuerst Ittleman — 2009-03-27T09:32:58+01:00

Washington - Three U.S. Department of Agriculture agencies announced that a National Clean Plant Network (NCPN) has been established at the department. USDA's Animal and Plant Health Inspection Service (APHIS), Agricultural Research Service (ARS) and Cooperative State Research, Education and Extension Service (CSREES) have signed a memorandum of understanding to cooperatively support NCPN research, quarantine and outreach activities.

Under the agreement, APHIS, ARS and CSREES will work closely together, as well as with university, nonprofit and industry stakeholders to create new, and support existing, NCPN activities. Some of these activities include:

Developing the science needed to support pest-free status in plants, by improving molecular diagnostic technologies, therapy and relevant taxonomy and systematic studies.
Identifying plant diseases and supporting the disease-free status of plants in national plant germplasm collections.
Developing the methods and technologies to treat diseased plants.
Establishing and supporting a general outreach program, including regional and specific plant/commodity centers, networks and working groups.

The NCPN, as required by the 2008 Farm Bill, is a collaborative venture, composed of diagnostic, therapeutic and horticultural expertise. NCPN’s goal is to ensure the availability of high quality propagated plant material that is free of plant pests, helping to ensure the global competitiveness of specialty crop producers. The NCPN promotes pest and disease free specialty crops, the rapid and safe introduction of new varieties from foreign sources and hygienic U.S. products for export.

Regulatory Reform Framework Outlined by US Treasury

FI - Fuerst Ittleman — 2009-03-26T12:09:25+01:00

Washington - The crisis of the past 18 months has exposed critical gaps and weaknesses in our financial regulatory system. As risks built up, internal risk management systems, rating agencies and regulators simply did not understand or address critical behaviors until they had already resulted in catastrophic losses. These failures have caused a dramatic loss of confidence in our financial institutions and have contributed to severe recession. Our financial system failed to serve its historical purpose of helping families finance homes and college educations for their children or of providing affordable capital for entrepreneurs and innovators – enabling them to turn new ideas into jobs and growth that raise our living standards. The President's comprehensive regulatory reform is aimed at reforming and modernizing our financial regulatory system for the 21st century, providing stronger tools to prevent and manage future crises, and rebuilding confidence in the basic integrity of our financial system – for sophisticated investors and working families with 401(k)s alike.

As Secretary Geithner stated in his testimony, "To address these failures will require comprehensive reform -- not modest repairs at the margin, but new rules of the road. The new rules must be simpler and more effectively enforced and produce a more stable system, that protects consumers and investors, that rewards innovation and that is able to adapt and evolve with changes in the financial market."

Four Broad Components of Comprehensive Regulatory Reform:

1. Addressing Systemic Risk: This crisis – and the cases of firms like Lehman Brothers and AIG – has made clear that certain large, interconnected firms and markets need to be under a more consistent and more conservative regulatory regime. It is not enough to address the potential insolvency of individual institutions – we must also ensure the stability of the system itself.

2. Protecting Consumers and Investors: It is crucial that when households make choices to invest their savings we have clear rules of the road that prevent manipulation and abuse. While outright fraud like that perpetrated by Bernie Madoff is already illegal, these cases highlight the need to strengthen enforcement and improve transparency for all investors. Lax regulation also left too many households exposed to deception and abuse when taking out home mortgage loans.

3. Eliminating Gaps in Our Regulatory Structure: Our regulatory structure must assign clear authority, resources, and accountability for each of its key functions. We must not let turf wars or concerns about the shape of organizational charts prevent us from establishing a substantive system of regulation that meets the needs of the American people.

4. Fostering International Coordination: To keep pace with increasingly global markets, we must ensure that international rules for financial regulation are consistent with the high standards we will be implementing in the United States. Additionally, we will launch a new, three-pronged initiative to address prudential supervision, tax havens, and money laundering issues in weakly-regulated jurisdictions.

A Focus on One of the Four Components of Regulatory Reform: Systemic Risk: In the coming weeks, Secretary Geithner will present detailed frameworks for each of these areas. His testimony focused on systemic risk – both because financial stability is critical to economic recovery and growth, and because systemic risk is expected to be a primary focus for discussions at the G20 Leaders' Meeting in London on April 2.

Addressing The First Component of Regulatory Reform: Systemic Risk

1. A Single Independent Regulator With Responsibility Over Systemically Important Firms and Critical Payment and Settlement Systems.
2. Higher Standards on Capital and Risk Management for Systemically Important Firms.
3. Registration of All Hedge Fund Advisers With Assets Under Management Above a Moderate Threshold.
4. A Comprehensive Framework of Oversight, Protections and Disclosure for the OTC Derivatives Market
5. New Requirements for Money Market Funds to Reduce the Risk of Rapid Withdrawals.

I. A Single Independent Regulator with responsibility over Systemically Important Firms and Critical Payment and Settlement Systems:

While we strengthen prudential oversight for all firms, we must also create higher standards for all systemically important financial firms – regardless of whether they own a depository institution – to account for the risk that the distress or failure of such a firm could impose on the financial system and the economy. We will work with Congress to enact legislation that defines the characteristics of covered firms; sets objectives and principles for their oversight; and assigns responsibility for regulating these firms.

1) Defining a Systemically Important Firm:In identifying systemically important firms, we believe that the characteristics should include:

The financial system's interdependence with the firm;
The firm's size, leverage (including off-balance sheet exposures), and degree of reliance on short-term funding;
The firm's importance as a source of credit for households, businesses, and governments and as a source of liquidity for the financial system.

2) Focusing On What Companies Do, Not the Form They Take:These institutions would not be limited to banks or bank holding companies, but could include any financial institution that was deemed to be systemically important in accordance with legislative requirements. These provisions will focus on what companies do and their potential for systemic risk – and no longer on the form they take – to determine who will regulate them.

3) Clarifying Regulatory Authority Over Payment and Settlement Activities:Federal authority for payment and settlement systems is incomplete and fragmented. Weaknesses in key funding and risk transfer markets, notably over-night and short term lending markets and OTC derivatives, increased uncertainty as major institutions such as Bear Stearns neared failure. This created a pathway for large financial institutions to spread financial distress between institutions and across borders.

While some progress was made in the markets for CDS and other OTC derivatives under Secretary Geithner's leadership at the New York Fed, regulators have been forced to rely heavily on moral suasion to encourage market participants to strengthen these markets.
We need to clarify and expand authority over these systems and activities, giving a single entity the ability to supervise, examine, and set prudential requirements for these critical parts of our financial system.

II. Higher Standards on Capital and Risk Management for Systemically Important Firms:

1. Setting More Robust Capital Requirements:Capital requirements for these firms must be more conservative than for other institutions and be sufficiently robust to be effective in a wider range of deeply adverse economic scenarios than is typically required.

2. Imposing Stricter Liquidity, Counterparty and Credit Risk Management Requirements:Supervisors will also need to impose liquidity, counterparty, and credit risk management requirements that are more stringent than for other financial firms. For instance, supervisors should apply more demanding liquidity constraints; and require that these firms are able to aggregate counter-party risk exposures on an enterprise-wide basis within a matter of hours.

3. Creating Prompt-Corrective Action Regime: The regulator of these entities will also need a prompt-corrective action regime that would allow the regulator to force protective actions as regulatory capital levels decline, similar to the powers of the FDIC with respect to its covered agencies.

III. Requiring All Hedge Funds Above A Certain Size to Register:

U.S. law generally does not require hedge funds or other private pools of capital to register with a federal financial regulator, although some funds that trade commodity derivatives must register with the Commodity Futures Trading Commission and many funds register voluntarily with the Securities and Exchange Commission. As a result, there are no reliable, comprehensive data available to assess whether such funds individually or collectively pose a threat to financial stability. The Madoff episode is just one more reminder that, in order to protect investors, we must close gaps and weaknesses in the regulation and enforcement of broker-dealers, investment advisors and the funds they manage.

1. Requiring Registration of All Hedge Funds: All advisers to hedge funds (and other private pools of capital, including private equity funds and venture capital funds) whose assets under management exceed a certain threshold should be required to register with the SEC.

2. Mandating Investor and Counterparty Disclosure: All such funds advised by an SEC-registered investment adviser should be subject to investor and counterparty disclosure requirements and regulatory reporting requirements.

3. Providing Information Necessary to Assess Threats to Financial Stability:The regulatory reporting requirements for such funds should require reporting, on a confidential basis, information necessary to assess whether the fund or fund family is so large or highly leveraged that it poses a threat to financial stability.

4. Sharing Reports With Systemic Risk Regulator:The SEC should share the reports that it receives from the funds with the systemic risk regulator, which would then determine whether any hedge funds could pose a systemic threat and should be subjected to the prudential standards outlined above.

IV. A Comprehensive Framework of Oversight, Protection and Disclosure for the OTC Derivatives Market:

The current financial crisis has been amplified by excessive risk-taking by certain insurance companies and poor counterparty credit risk management by many banks trading Credit Default Swaps on asset-backed securities. Neither counterparties to these trades nor regulators identified the risk that these complex products could threaten to bring down a company of the size and scope of AIG or the stability of the entire financial system, in part because these markets lacked transparency.

1. Regulating Credit Default Swaps and Over-the-Counter Derivatives for the First Time:In our proposed regulatory framework, the government will regulate the markets for credit default swaps and over-the-counter derivatives for the first time.

2. Instituting a Strong Regulatory and Supervisory Regime:We will subject all dealers in OTC derivative markets to a strong regulatory and supervisory regime as systemically important firms.

3. Clearing All Contracts Through Designated Central Counterparties:We will force all standardized OTC derivative contracts to be cleared through appropriately designed central counterparties (CCPs) and encourage greater use of exchange traded instruments. These CCPs will be subject to comprehensive settlement systems supervision and oversight, consistent with the authority outlined above.

4. Requiring Non-Standardized Derivatives to Be Subject to Robust Standards: We will require that all non-standardized derivatives contracts report to trade repositories and be subject to robust standards for documentation and confirmation of trades; netting; collateral and margin practices; and close-out practices.

5. Making Aggregate Data on Trading Volumes and Positions Available:Central counter-parties and trade repositories will be required to make aggregate data on trading volumes and positions available to the public and make individual counterparty trade and position data available on a confidential basis to appropriate federal regulators.

6. Applying Robust Eligibility Requirements to All Market Participants:Finally, we will apply robust eligibility requirements and, where appropriate, standards of care; and will require that they meet recordkeeping and reporting requirements.

V. New Requirements for Money Market Funds to Reduce the Risk of Rapid Withdrawals: In the wake of Lehman Brothers' bankruptcy, we learned that even one of the most stable and least risky investment vehicles – money market mutual funds – was not safe from the failure of a systemically important institution. These funds are subject to strict regulation by the SEC and are billed as having a stable asset value – a dollar invested will always return the same amount. But when a major prime MMF "broke the buck," the event sparked a run on the entire prime MMF industry. The run resulted in severe liquidity pressures, not only on prime MMFs but also on financial and non-financial companies that relied significantly on MMFs for funding. In response, we commit to:

1. Strengthening the Regulatory Framework Around Money Market Funds:We believe that the SEC should strengthen the regulatory framework around MMFs in order to reduce the credit and liquidity risk profile of individual MMFs and to make the MMF industry as a whole less susceptible to runs.

VI. A Stronger Resolution Authority to Protect Against the Failure of Complex Institutions: We must create a resolution regime that provides authority to avoid the disorderly liquidation of any nonbank financial firm whose failure would have serious adverse effects on the financial system or the U.S. economy. This authority should include:

1. Covering Financial Institutions That May Pose Systemic Risks:We must cover financial institutions that have the potential to pose systemic risks to our economy but that are not currently subject to the resolution authority of the FDIC. This would include bank and thrift holding companies and holding companies that control broker-dealers, insurance companies, and futures commission merchants, or any other financial firm that could pose substantial risk to our economy. This resolution authority would be undertaken through the following process:

i. A Triggering Determination:Before any of the emergency measures specified could be taken, the Secretary, upon the positive recommendations of both the Federal Reserve Board and the FDIC and in consultation with the President, would have to make a triggering determination that (1) the financial institution in question is in danger of becoming insolvent; (2) its insolvency would have serious adverse effects on economic conditions or financial stability in the United States; and (3) taking emergency action as provided for in the law would avoid or mitigate those adverse effects.

ii. Choice Between Financial Assistance or Conservatorship/Receivership:The Secretary and the FDIC would decide whether to provide financial assistance to the institution or to put it into conservatorship/receivership. This decision will be informed by the recommendations of the Federal Reserve Board and the appropriate federal regulatory agency (if different from the FDIC).

Options for Financial Assistance: The U.S. government would be permitted to utilize a number of different forms of financial assistance in order to stabilize the institution in question. These include making loans to the financial institution in question, purchasing its obligations or assets, assuming or guaranteeing its liabilities, and purchasing an equity interest in the institution.
Options for Conservatorship/Receivership:Depending on the circumstances, the FDIC and the Treasury would place the firm into conservatorship with the aim of returning it to private hands or a receivership that would manage the process of winding down the firm. The trustee of the conservatorship or receivership would have broad powers, including to sell or transfer the assets or liabilities of the institution in question, to renegotiate or repudiate the institution's contracts (including with its employees), and to deal with a derivatives book. A conservator would also have the power to restructure the institution by, for example, replacing its board of directors and its senior officers. None of these actions would be subject to the approval of the institution's creditors or other stakeholders.

iii. Taking Advantage of FDIC/FHFA Models:This authority is modeled on the resolution authority that the FDIC has under current law with respect to banks and that the Federal Housing Finance Agency has with regard to the GSEs. Here, conservatorships or receiverships aim to minimize the impact of the potential failure of the financial institution on the financial system and consumers as a whole, rather than simply addressing the rights of the institution's creditors as in bankruptcy.

2) Requiring Covered Institutions to Fund the Resolution Authority: The proposed legislation would create an appropriate mechanism to fund the limited exercise of these resolution authorities. This could take the form of a mandatory appropriation to the FDIC out of the general fund of the Treasury and/or through a scheme of assessments, ex ante or ex post, on the financial institutions covered by the legislation. The government would also receive repayment from the redemption of any loans made to the financial institution in question, and from the ultimate sale of any equity interest taken by the government in the institution. The Deposit Insurance Fund will not be used to fund such assistance.

DOJ Provides Resources to Fight Mexican Drug Cartels

FI - Fuerst Ittleman — 2009-03-25T12:22:14+01:00

Washington – Deputy Attorney General David Ogden announced increased efforts and reallocation of DOJ personnel to combat Mexican drug cartels in the United States and to help Mexican law enforcement battle cartels in their own country. Deputy Attorney General Ogden was joined in announcing a comprehensive response to the situation on the Southwest border by Department of Homeland Secretary Janet Napolitano and Deputy Secretary of State Jim Steinberg.

“For more than a quarter century, U.S. law enforcement agencies have recognized that the best way to fight the most sophisticated and powerful criminal organizations is through intelligence-based investigations to target the greatest threats,” said Deputy Attorney General David Ogden. “The Department’s Mexican Cartel Strategy confronts those cartels as criminal organizations. As we’ve found with other large criminal groups, if you take their money and lock up their leaders, you can loosen their grips on the vast organizations they use to carry out their criminal enterprises. The Department of Justice is committed to taking advantage of all available resources to target the Mexican cartels and to help our Mexican counterparts in their courageous effort to take on these criminal organizations.”

The United States announced it will be investing $700 million this year in enhancing Mexican law enforcement and judicial capacity and working closely to coordinate efforts against the cartels. The Department of Justice—through the FBI; the U.S. Drug Enforcement Administration (DEA); the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF); the U.S. Marshals Service (USMS); and the Criminal Division and the Office of Justice Programs—will work to investigate and prosecute cartel members for their illegal activities in the United States and with law enforcement colleagues to disrupt illegal flows of weapons and bulk cash to Mexico.

The Mexican Cartel Strategy, led by the Deputy Attorney General, uses federal prosecutor-led task forces that bring together all law enforcement components to identify, disrupt and dismantle the Mexican drug cartels through investigation, prosecution, and extradition of their key leaders and facilitators and seizure and forfeiture of their assets. The Department is increasing its focus on investigations and prosecutions of the southbound smuggling of guns and cash that fuel the violence and corruption and attacking the cartels in Mexico itself, in partnership with the Mexican Attorney General’s Office (PGR) and the Secretariat of Public Security (SSP).

DEA, already the largest U.S. drug enforcement presence in Mexico with 11 offices in that country, is placing 16 new positions in its Southwest border field divisions. With this increase, 29 percent of DEA’s domestic agent positions (1,180 agents) are now allocated to its Southwest border field divisions. DEA is also forming four additional Mobile Enforcement Teams (METs) to specifically target Mexican methamphetamine trafficking operations and associated violence, both along the border and in U.S. cities impacted by the cartels.

ATF is increasing its efforts by relocating 100 personnel to the Houston Field Division in the next 45 days as part of a new ATF intelligence-driven effort known as Gunrunner Impact Teams (GRITs). The teams will focus ATF’s violent crime-fighting and firearms trafficking expertise, along with its regulatory authority and strategic partnerships, to combat violence along the U.S.-Mexico border.

As part of the Recovery Act funding, ATF received $10 million for Project Gunrunner efforts aimed at disrupting arms trafficking between the U.S. and Mexico, to include hiring 25 new special agents, six industry operations investigators, three intelligence research specialists, and three investigative analysts. The funding will establish three permanent field offices dedicated to firearms trafficking investigations in McAllen, Texas; El Centro, California; and Las Cruces, New Mexico (including a satellite office in Roswell, New Mexico). Project Gunrunner has resulted in ATF referring more than 1,500 defendants for prosecution involving more than 12,000 weapons.

ATF will also continue its eTrace initiative with Mexican officials, which allows law enforcement agencies to identify trafficking trends of drug trafficking organizations and other criminal organizations funneling guns into Mexico from the United States, as well as to develop investigative leads in order to stop firearms traffickers and straw purchasers (people who knowingly purchase guns for prohibited persons) before they cross the border. In FY08, Mexico submitted more than 7,500 recovered guns for tracing, showing that most originated in Texas, Arizona, and California.

The FBI is stepping up its efforts along the Southwest border by creating a Southwest Intelligence Group (SWIG) that will serve as a clearinghouse of all FBI activities involving Mexico. The FBI will also increase its focus on public corruption, kidnappings, and extortion relating to Southwest border issues.

Already, the FBI has undertaken successful initiatives in Mexico and Central America, including the Central American Fingerprint Exchange (CAFÉ) initiative. The FBI will continue this initiative, which was developed to collect, store, and integrate biometric data from El Salvador, Guatemala, Belize, Honduras, and the Mexican state of Chiapas into a central database accessible to U.S. law enforcement, as well as the Transnational Anti-Gang initiative, which coordinates the sharing of gang intelligence between the U.S. and El Salvador.

The USMS has stepped-up its efforts along the Southwest border, deploying 94 additional Deputy U.S. Marshals during the last eight months and sending four additional deputies to Mexico City to assist the Marshals Service Mexico City Foreign Field Office.

The USMS is increasing its efforts in the Southwest border region under the Mexico Investigative Liaison Program, a cross-border violent fugitive apprehension initiative where USMS personnel, through daily contact with Mexican law enforcement, provide a rapid international response to law enforcement agencies on both sides of the border in the apprehension of fugitives who commit crimes and flee across the international border.

Twenty-five new Criminal Investigators-Asset Forfeiture Specialists have been placed in USMS asset forfeiture units in the field. The new positions are unique in that they will be solely dedicated to the USMS Asset Forfeiture Division and will support U.S. Attorneys Offices and investigative agencies in investigations of cartels and other large-scale investigations.

In addition, DOJ’s Organized Drug Enforcement Task Forces Program (OCDETF) is adding analyst personnel to its strike force capacity along the Southwest border, and the Office of Justice Programs will be investing $30 million in stimulus funding to assist with state and local law enforcement to combat narcotics activity coming through the southern border and in high intensity drug trafficking areas. State and local law enforcement organizations along the border can apply for COPS and Byrne Justice Assistance grants from the $3 billion provided for those programs in the stimulus package.

US Treasury Details on Public Private Partnership Investment Program

FI - Fuerst Ittleman — 2009-03-24T00:00:00+01:00

Public-Private Investment Program

The Financial Stability Plan – Progress So Far: Over the past six weeks, the Treasury Department has implemented a series of initiatives as part of its Financial Stability Plan that – alongside the American Recovery and Reinvestment Act – lay the foundations for economic recovery:

Efforts to Improve Affordability for Responsible Homeowners: Treasury has implemented programs to allow families to save on their mortgage payments by refinancing, assist responsible homeowners in avoiding foreclosure through a loan modification plan, and, alongside the Federal Reserve, help bring mortgage interest rates down to near historic lows. This past month, the 30% increase in mortgage refinancing demonstrated that working families are benefiting from the savings due to these lower rates.
Consumer and Business Lending Initiative to Unlock Frozen Credit Markets: Treasury and the Federal Reserve are expanding the TALF in conjunction with the Federal Reserve to jumpstart the secondary markets that support consumer and business lending. Last week, Treasury announced its plans to purchase up to $15 billion in securities backed by Small Business Administration loans.
Capital Assistance Program: Treasury has also launched a new capital program, including a forward-looking capital assessment undertaken by bank supervisors to ensure that banks have the capital they need in the event of a worse-than-expected recession. If banks are confident that they will have sufficient capital to weather a severe economic storm, they are more likely to lend now – making it less likely that a more serious downturn will occur.

The Challenge of Legacy Assets: Despite these efforts, the financial system is still working against economic recovery. One major reason is the problem of "legacy assets" – both real estate loans held directly on the books of banks ("legacy loans") and securities backed by loan portfolios ("legacy securities"). These assets create uncertainty around the balance sheets of these financial institutions, compromising their ability to raise capital and their willingness to increase lending.

Origins of the Problem:The challenge posed by these legacy assets began with an initial shock due to the bursting of the housing bubble in 2007, which generated losses for investors and banks. Losses were compounded by the lax underwriting standards that had been used by some lenders and by the proliferation of complex securitization products, some of whose risks were not fully understood. The resulting need by investors and banks to reduce risk triggered a wide-scale deleveraging in these markets and led to fire sales. As prices declined, many traditional investors exited these markets, causing declines in market liquidity.
Creation of a Negative Economic Cycle: As a result, a negative cycle has developed where declining asset prices have triggered further deleveraging, which has in turn led to further price declines. The excessive discounts embedded in some legacy asset prices are now straining the capital of U.S. financial institutions, limiting their ability to lend and increasing the cost of credit throughout the financial system. The lack of clarity about the value of these legacy assets has also made it difficult for some financial institutions to raise new private capital on their own.

The Public-Private Investment Program for Legacy Assets

To address the challenge of legacy assets, Treasury – in conjunction with the Federal Deposit Insurance Corporation and the Federal Reserve – is announcing the Public-Private Investment Program as part of its efforts to repair balance sheets throughout our financial system and ensure that credit is available to the households and businesses, large and small, that will help drive us toward recovery.

Three Basic Principles: Using $75 to $100 billion in TARP capital and capital from private investors, the Public-Private Investment Program will generate $500 billion in purchasing power to buy legacy assets – with the potential to expand to $1 trillion over time. The Public-Private Investment Program will be designed around three basic principles:

Maximizing the Impact of Each Taxpayer Dollar: First, by using government financing in partnership with the FDIC and Federal Reserve and co-investment with private sector investors, substantial purchasing power will be created, making the most of taxpayer resources.
Shared Risk and Profits With Private Sector Participants: Second, the Public-Private Investment Program ensures that private sector participants invest alongside the taxpayer, with the private sector investors standing to lose their entire investment in a downside scenario and the taxpayer sharing in profitable returns.
Private Sector Price Discovery: Third, to reduce the likelihood that the government will overpay for these assets, private sector investors competing with one another will establish the price of the loans and securities purchased under the program.

The Merits of This Approach: This approach is superior to the alternatives of either hoping for banks to gradually work these assets off their books or of the government purchasing the assets directly. Simply hoping for banks to work legacy assets off over time risks prolonging a financial crisis, as in the case of the Japanese experience. But if the government acts alone in directly purchasing legacy assets, taxpayers will take on all the risk of such purchases – along with the additional risk that taxpayers will overpay if government employees are setting the price for those assets.

Two Components for Two Types of Assets: The Public-Private Investment Program has two parts, addressing both the legacy loans and legacy securities clogging the balance sheets of financial firms:

Legacy Loans:The overhang of troubled legacy loans stuck on bank balance sheets has made it difficult for banks to access private markets for new capital and limited their ability to lend.
Legacy Securities: Secondary markets have become highly illiquid, and are trading at prices below where they would be in normally functioning markets. These securities are held by banks as well as insurance companies, pension funds, mutual funds, and funds held in individual retirement accounts.

Public-Private Investment Program

The Legacy Loans Program: To cleanse bank balance sheets of troubled legacy loans and reduce the overhang of uncertainty associated with these assets, the Federal Deposit Insurance Corporation and Treasury are launching a program to attract private capital to purchase eligible legacy loans from participating banks through the provision of FDIC debt guarantees and Treasury equity co-investment. Treasury currently anticipates that approximately half of the TARP resources for legacy assets will be devoted to the Legacy Loans Program, but our approach will allow for flexibility to allocate resources where we see the greatest impact.

Involving Private Investors to Set Prices: A broad array of investors are expected to participate in the Legacy Loans Program. The participation of individual investors, pension plans, insurance companies and other long-term investors is particularly encouraged. The Legacy Loans Program will facilitate the creation of individual Public-Private Investment Funds which will purchase asset pools on a discrete basis. The program will boost private demand for distressed assets that are currently held by banks and facilitate market-priced sales of troubled assets.

Using FDIC Expertise to Provide Oversight: The FDIC will provide oversight for the formation, funding, and operation of these new funds that will purchase assets from banks.

Joint Financing from Treasury, Private Capital and FDIC: Treasury and private capital will provide equity financing and the FDIC will provide a guarantee for debt financing issued by the Public-Private Investment Funds to fund asset purchases. The Treasury will manage its investment on behalf of taxpayers to ensure the public interest is protected. The Treasury intends to provide 50 percent of the equity capital for each fund, but private managers will retain control of asset management subject to rigorous oversight from the FDIC.

The Process for Purchasing Assets Through The Legacy Loans Program: Purchasing assets in the Legacy Loans Program will occur through the following process:

Banks Identify the Assets They Wish to Sell: To start the process, banks will decide which assets – usually a pool of loans – they would like to sell. The FDIC will conduct an analysis to determine the amount of funding it is willing to guarantee. Leverage will not exceed a 6-to-1 debt-to-equity ratio. Assets eligible for purchase will be determined by the participating banks, their primary regulators, the FDIC and Treasury. Financial institutions of all sizes will be eligible to sell assets.
Pools Are Auctioned Off to the Highest Bidder: The FDIC will conduct an auction for these pools of loans. The highest bidder will have access to the Public-Private Investment Program to fund 50 percent of the equity requirement of their purchase.
Financing Is Provided Through FDIC Guarantee: If the seller accepts the purchase price, the buyer would receive financing by issuing debt guaranteed by the FDIC. The FDIC-guaranteed debt would be collateralized by the purchased assets and the FDIC would receive a fee in return for its guarantee.
Private Sector Partners Manage the Assets:Once the assets have been sold, private fund managers will control and manage the assets until final liquidation, subject to strict FDIC oversight.

Sample Investment Under the Legacy Loans Program

Step 1: If a bank has a pool of residential mortgages with $100 face value that it is seeking to divest, the bank would approach the FDIC.

Step 2: The FDIC would determine, according to the above process, that they would be willing to leverage the pool at a 6-to-1 debt-to-equity ratio.

Step 3: The pool would then be auctioned by the FDIC, with several private sector bidders submitting bids. The highest bid from the private sector – in this example, $84 – would be the winner and would form a Public-Private Investment Fund to purchase the pool of mortgages.

Step 4: Of this $84 purchase price, the FDIC would provide guarantees for $72 of financing, leaving $12 of equity.

Step 5: The Treasury would then provide 50% of the equity funding required on a side-by-side basis with the investor. In this example, Treasury would invest approximately $6, with the private investor contributing $6.

Step 6: The private investor would then manage the servicing of the asset pool and the timing of its disposition on an ongoing basis – using asset managers approved and subject to oversight by the FDIC.

The Legacy Securities Program: The goal of this program is to restart the market for legacy securities, allowing banks and other financial institutions to free up capital and stimulate the extension of new credit. The resulting process of price discovery will also reduce the uncertainty surrounding the financial institutions holding these securities, potentially enabling them to raise new private capital. The Legacy Securities Program consists of two related parts designed to draw private capital into these markets by providing debt financing from the Federal Reserve under the Term Asset-Backed Securities Loan Facility (TALF) and through matching private capital raised for dedicated funds targeting legacy securities.

1. Expanding TALF to Legacy Securities to Bring Private Investors Back into the Market: The Treasury and the Federal Reserve are today announcing their plans to create a lending program that will address the broken markets for securities tied to residential and commercial real estate and consumer credit. The intention is to incorporate this program into the previously announced Term Asset-Backed Securities Facility (TALF).

Providing Investors Greater Confidence to Purchase Legacy Assets:As with securitizations backed by new originations of consumer and business credit already included in the TALF, we expect that the provision of leverage through this program will give investors greater confidence to purchase these assets, thus increasing market liquidity.
Funding Purchase of Legacy Securities: Through this new program, non-recourse loans will be made available to investors to fund purchases of legacy securitization assets. Eligible assets are expected to include certain non-agency residential mortgage backed securities (RMBS) that were originally rated AAA and outstanding commercial mortgage-backed securities (CMBS) and asset-backed securities (ABS) that are rated AAA.
Working with Market Participants: Borrowers will need to meet eligibility criteria. Haircuts will be determined at a later date and will reflect the riskiness of the assets provided as collateral. Lending rates, minimum loan sizes, and loan durations have not been determined. These and other terms of the programs will be informed by discussions with market participants. However, the Federal Reserve is working to ensure that the duration of these loans takes into account the duration of the underlying assets.

2. Partnering Side-by-Side with Private Investors in Legacy Securities Investment Funds: Treasury will make co-investment/leverage available to partner with private capital providers to immediately support the market for legacy mortgage- and asset-backed securities originated prior to 2009 with a rating of AAA at origination.

Side-by-Side Investment with Qualified Fund Managers: Treasury will approve up to five asset managers with a demonstrated track record of purchasing legacy assets though we may consider adding more depending on the quality of applications received. Managers whose proposals have been approved will have a period of time to raise private capital to target the designated asset classes and will receive matching Treasury funds under the Public-Private Investment Program. Treasury funds will be invested one-for-one on a fully side-by-side basis with these investors.
Offer of Senior Debt to Leverage More Financing: Asset managers will have the ability, if their investment fund structures meet certain guidelines, to subscribe for senior debt for the Public-Private Investment Fund from the Treasury Department in the amount of 50% of total equity capital of the fund. The Treasury Department will consider requests for senior debt for the fund in the amount of 100% of its total equity capital subject to further restrictions.

Sample Investment Under the Legacy Securities Program

Step 1: Treasury will launch the application process for managers interested in the Legacy Securities Program.

Step 2: A fund manager submits a proposal and is pre-qualified to raise private capital to participate in joint investment programs with Treasury.

Step 3: The Government agrees to provide a one-for-one match for every dollar of private capital that the fund manager raises and to provide fund-level leverage for the proposed Public-Private Investment Fund.

Step 4: The fund manager commences the sales process for the investment fund and is able to raise $100 of private capital for the fund. Treasury provides $100 equity co-investment on a side-by-side basis with private capital and will provide a $100 loan to the Public-Private Investment Fund. Treasury will also consider requests from the fund manager for an additional loan of up to $100 to the fund.

Step 5: As a result, the fund manager has $300 (or, in some cases, up to $400) in total capital and commences a purchase program for targeted securities.

Step 6: The fund manager has full discretion in investment decisions, although it will predominately follow a long-term buy-and-hold strategy. The Public-Private Investment Fund, if the fund manager so determines, would also be eligible to take advantage of the expanded TALF program for legacy securities when it is launched.

Tainted Diet Drug Ingredients Discovered by FDA

FI - Fuerst Ittleman — 2009-03-23T00:00:00+01:00

Consumers are alerted to the FDA's new undeclared drug ingredient findings

The U.S. Food and Drug Administration is expanding, for the second time, its nationwide alert to consumers about tainted weight loss products containing undeclared, active pharmaceutical ingredients.

The FDA has identified additional weight loss products (Herbal Xenicol, Slimbionic, and Xsvelten) and new undeclared active pharmaceutical ingredients (fenproporex, fluoxetine, furosemide, and cetilistat). The current list now includes the following 72 products:

2 Day Diet	Fatloss Slimming	Slim 3 in 1 M18 Royal Diet
2 Day Diet Slim Advance	GMP	Slim 3 in 1 Slim Formula
2x Powerful Slimming	Herbal Xenicol	Slim Burn
3 Day Diet	Imelda Fat Reducer	Slim Express 4 in 1
3 Days Fit	Imelda Perfect Slim	Slim Express 360
3x Slimming Power	JM Fat Reducer	Slim Fast*
5x Imelda Perfect Slimming	Lida DaiDaihua	Slim Tech
7 Day Herbal Slim	Meili	Slim Up
7 Days Diet	Meizitang	Slim Waist Formula
7 Diet	Miaozi MeiMaoQianZiJiaoNang	Slim Waistline
7 Diet Day/Night Formula	Miaozi Slim Capsules	Slimbionic
8 Factor Diet	Natural Model	Sliminate
Eight Factor Diet	Perfect Slim	Slimming Formula
21 Double Slim	Perfect Slim 5x	Somotrim
24 Hours Diet	Perfect Slim Up	Starcaps
999 Fitness Essence	Phyto Shape	Super Fat Burner
BioEmagrecim	Powerful Slim	Superslim
Body Creator	ProSlim Plus	Super Slimming
Body Shaping	Reduce Weihgt	Trim 2 Plus
Body Slimming	Royal Slimming Formula	Triple Slim
Cosmo Slim	Sana Plus	Venom Hyperdrive 3.0
Extrim Plus	Slim 3 in 1	Waist Strength Formula
Extrim Plus 24 Hour Reburn	Slim 3 in 1 Extra Slim Formula	Xsvelten
Fasting Diet	Slim 3 in 1 Extra Slim Waist Formula	Zhen de Shou

* This product should not be confused with the line of meal replacement and related products that are marketed as conventional foods under the brand name "Slim-Fast®". The manufacturer of Slim-Fast®, Unilever United States, Inc., maintains that the Slim Fast product which appears on this list is not in any way associated with, sponsored or approved by, or otherwise related in any way to the Slim-Fast® brand of meal replacement and related products.

"These tainted weight loss products pose a great risk to public health because they contain undeclared ingredients and, in some cases, contain prescription drugs in amounts that greatly exceed maximum recommended dosages," said Janet Woodcock, M.D., director of the FDA's Center for Drug Evaluation and Research. "Consumers have no way of knowing that these products contain dangerous drugs that could cause serious consequences to their health."

The FDA recently warned consumers not to purchase or consume 28 different products marketed for weight loss. The FDA also recently expanded the list of tainted weight loss products to include 41 additional tainted products. The FDA will continue to update this list as warranted.

The products listed above, some of which are marketed as dietary supplements, are promoted and sold on various Web sites and in some retail stores and beauty salons. Some of the products claim to be "natural" or to contain only "herbal" ingredients, but actually contain potentially harmful ingredients not listed on the products' labels or in promotional advertisements. These products have not been approved by the FDA, are illegal, and include the following undeclared active pharmaceutical ingredients:

fenproporex – a controlled substance not approved for marketing in the United States;
fluoxetine – an antidepressant available by prescription only;
bumetanide – a potent diuretic available by prescription only;
furosemide – a potent diuretic available by prescription only;
rimonabant – a drug not approved for marketing in the United States;
cetilistat – an experimental obesity drug not approved for marketing in the United States;
phenytoin – an anti-seizure medication available by prescription only; and
phenolphthalein – a solution used in chemical experiments and a suspected cancer-causing agent that is not approved for marketing in the United States.

The FDA has inspected a number of companies associated with the sale of these illegal products and is currently seeking product recalls. Based on the FDA's inspections and the companies' inadequate responses to recall requests, the FDA may take additional enforcement steps, such as issuing warning letters or initiating seizures, injunctions, or criminal charges.

The FDA advises consumers who have used any products containing these ingredients to stop taking them and consult their health care professional immediately. The FDA also encourages consumers to seek guidance from a health care professional before purchasing weight loss products.

The health risks posed by these products can be very serious and include high blood pressure, seizures, tachycardia (rapid heartbeat), palpitations, heart attack, and stroke. Sibutramine, a controlled substance, was found in many of these products at levels much higher than the maximum daily dosage for Meridia, the only FDA-approved drug product containing sibutramine. These higher levels of sibutramine can increase the incidence and severity of these health risks. Fenproporex, another controlled substance, can cause arrhythmia and possible sudden death.

U.S. International Trade in Goods and Services January 2009

FI - Fuerst Ittleman — 2009-03-20T12:14:01+01:00

The U.S. Census Bureau and the U.S. Bureau of Economic Analysis, through the Department of Commerce, announced that total January exports of $124.9 billion and imports of $160.9 billion resulted in a goods and services deficit of $36.0 billion, down from $39.9 billion in December, revised. January exports were $7.6 billion less than December exports of $132.5 billion. January imports were $11.5 billion less than December imports of $172.4 billion.

In January, the goods deficit decreased $4.3 billion from December to $47.0 billion, and the services surplus decreased $0.4 billion to $10.9 billion. Exports of goods decreased $6.5 billion to $82.2 billion, and imports of goods decreased $10.9 billion to $129.2 billion. Exports of services decreased $1.1 billion to $42.7 billion, and imports of services decreased $0.6 billion to $31.8 billion.

In January, the goods and services deficit decreased $23.1 billion from January 2008. Exports were down $24.4 billion, or 16.4 percent, and imports were down $47.6 billion, or 22.8 percent.

Goods

The December to January change in exports of goods reflected decreases in capital goods ($3.0 billion); automotive vehicles, parts, and engines ($2.2 billion); consumer goods ($0.9 billion); industrial supplies and materials ($0.7 billion); and other goods ($0.3 billion). An increase occurred in foods, feeds, and beverages ($0.1 billion).

The December to January change in imports of goods reflected decreases in industrial supplies and materials ($4.6 billion); automotive vehicles, parts, and engines ($3.3 billion); capital goods ($1.9 billion); consumer goods ($0.4 billion); other goods ($0.3 billion); and foods, feeds, and beverages ($0.3 billion). The January 2008 to January 2009 change in exports of goods reflected decreases in industrial supplies and materials ($7.8 billion); capital goods ($6.4 billion); automotive vehicles, parts, and engines ($4.8 billion); consumer goods ($1.9 billion); foods, feeds, and beverages ($1.5 billion); and other goods ($0.4 billion).

The January 2008 to January 2009 change in imports of goods reflected decreases in industrial supplies and materials ($26.0 billion); automotive vehicles, parts, and engines ($9.7 billion); capital goods ($5.7 billion); consumer goods ($3.4 billion); other goods ($0.6 billion); and foods, feeds, and beverages ($0.2 billion).

Services

Services exports decreased $1.1 billion from December to January. The decrease was mostly accounted for by decreases in travel, other transportation (which includes freight and port services), and passenger fares. Changes in other categories of services exports were small.

Services imports decreased $0.6 billion from December to January. The decrease was mostly accounted for by decreases in other transportation, travel, and passenger fares. Changes in other categories of services imports were small.

The January 2008 to January 2009 decrease in exports of services was $2.0 billion. The largest decreases were in other transportation ($1.0 billion), travel ($0.8 billion), and transfers under U.S. military sales contracts ($0.6 billion). Increases in royalties and license fees ($0.2 billion) and other private services ($0.1 billion), which includes items such as business, professional, and technical services, insurance services, and financial services, were partly offsetting. Within other private services, the largest increase was in business, professional, and technical services, and the largest decrease was in financial services.

The January 2008 to January 2009 decrease in imports of services was $1.5 billion. The largest decreases were in other transportation ($1.0 billion), travel ($0.5 billion), and royalties and license fees ($0.2 billion). An increase in other private services ($0.3 billion) was partly offsetting. Within other private services, the largest increase was in business, professional, and technical services, and the largest decrease was in financial services.

Goods and Services Moving Average

For the three months ending in January, exports of goods and services averaged $132.7 billion, while imports of goods and services averaged $172.2 billion, resulting in an average trade deficit of $39.5 billion. For the three months ending in December, the average trade deficit was $46.8 billion, reflecting average exports of $141.0 billion and average imports of $187.8 billion.

Selected Not Seasonally Adjusted Goods Details

The January figures showed surpluses, in billions of dollars, with Hong Kong $1.0 ($1.0 for December), Singapore $0.7 ($0.7), Australia $0.6 ($0.7), and Egypt $0.2 ($0.2). Deficits were recorded, in billions of dollars, with China $20.6 ($19.9), Japan $4.3 ($5.3), OPEC $4.0 ($4.7), the European Union $3.5 ($7.0), Mexico $2.7 ($4.1), Canada $2.5 ($2.8), Korea $1.9 ($1.4), Taiwan $1.3 ($1.3), and Venezuela $1.1 ($1.2).

Advanced technology products (ATP) exports were $18.7 billion in January and imports were $20.7 billion, resulting in a deficit of $2.0 billion. January exports were $3.3 billion less than the $22.1 billion in December, while imports were $3.6 billion less than the $24.3 billion in December.

Revisions

Goods carry-over in January was $0.1 billion (0.1 percent) for exports and $0.8 billion (0.6 percent) for imports. For December, revised export carry-over was $0.1 billion (0.1 percent), virtually unrevised. For December, revised import carry-over was $0.3 billion (0.2 percent), revised down from $1.1 billion (0.8 percent).

Goods and services exports and imports for all months in 2008 were revised in order to align the seasonally adjusted monthly estimates with the annual totals.

Services exports and imports for July through December 2008 reflect the incorporation of more comprehensive and revised quarterly and monthly data. For services exports, the largest monthly revisions were in royalties and license fees and other private services. For services imports, the largest monthly revisions were in other transportation, other private services, and royalties and license fees.

Services exports for December were revised down $1.3 billion to $43.8 billion. The revision was mostly accounted for by downward revisions in royalties and license fees and other private services. Services imports for December were revised down $1.0 billion to $32.4 billion. The largest downward revisions were in other transportation, other private services, and royalties and license fees.

Investigational New Drug Multaq (dronedarone) Receives FDA Advisory Approval

FI - Fuerst Ittleman — 2009-03-19T00:00:00+01:00

Sanofi-aventis announced that the Cardiovascular and Renal Drugs Advisory Committee voted 10 to 3 in favor of the approval of Multaq® by the U.S. Food and Drug Administration (FDA) to treat patients with non-permanent atrial fibrillation (AF).

As demonstrated in the ATHENA trial, Multaq is the only anti-arrhythmic drug to have shown in a clinical study a significant reduction in morbidity and mortality in patients with atrial fibrillation/atrial flutter (AFL) or a recent history of these conditions.

“Sanofi-aventis is pleased with the outcome of today’s discussions and positive recommendation,” said Jean-Pierre Lehner, Chief Medical Officer, sanofi-aventis. “The panel’s insightful feedback which concluded with a positive vote, is an important step in gaining FDA approval of Multaq.”

The FDA is not bound by the Committee’s recommendation, but it takes its advice into consideration when reviewing new drug applications.
Atrial fibrillation is the leading cause of hospitalization for arrhythmia in the U.S. and represents one-third of hospitalizations for arrhythmia in Europe. Hospitalization due to AF has increased dramatically (two-to-three fold) in recent years in the U.S. Atrial fibrillation is a complex disease that increases the risk of stroke up to five-fold, worsens the prognosis of patients with cardiovascular risk factors, and doubles the risk of mortality. There are approximately 2.5 million Americans and 4.5 million people in the European Union with atrial fibrillation and it is emerging as a growing public health concern due to an aging population.

About dronedarone (Multaq®)

Multaq®, an investigational treatment discovered and developed by sanofi-aventis, has been studied in a clinical development program including more than 6,700 patients. Multaq® is one of the major therapeutic innovations in atrial fibrillation for the last twenty years. Multaq® has been granted a priority review by the U.S. Food and Drug Administration (FDA) and a registration dossier is also under regulatory review by the European Medicines Agency (EMEA).

Florida Trader Pleads Guilty in Manipulation Scheme

FI - Fuerst Ittleman — 2009-03-18T12:13:46+01:00

Securities Fraud and Conspiracy to Commit Securities Fraud

Jupiter, Florida — A Florida stock trader pleaded guilty to engaging in a market manipulation scheme involving several publicly traded companies, Acting Assistant United States Attorney General Rita M. Glavin announced.

Paul M. Gozzo, 33, pleaded guilty before U.S. District Judge Donald L. Graham in Miami to one count of conspiracy to commit securities fraud and one count of securities fraud. In his plea, Gozzo admitted to engaging in a market manipulation scheme with two co-conspirators for the purpose of artificially inflating the prices of several publicly traded stocks. Gozzo also admitted that he and his co-conspirators manipulated the stock price of several stocks by, among other things, creating the false appearance that there was a greater investor interest in the stocks than actually existed and by creating the false appearance that there was greater liquidity in the stocks than actually existed. In return for his assistance in manipulating the stock prices of these companies, Gozzo admitted that he received approximately $540,000.

According to the plea documents, Gozzo conspired with a purported investment banker, who owned large amounts of stock in several public companies, and the investment banker’s son to artificially increase the stock price of those companies. They did so, according to court documents, by creating the false appearance that there was a greater investor interest in the stock prices they were manipulating by providing support bids for shares of those companies and by engaging in coordinated trades with each other and others for the purpose of keeping the stock price artificially inflated and further inflating the stock price. This created the impression that there was a greater investor interest in the stock than truly existed, which allowed Gozzo and his co-conspirators to sell that stock at an artificially high price. Gozzo admitted that he and his co-coconspirators also bought and sold stock through numerous broker-dealers to make it appear that there were several investors trading in the stocks they were manipulating, when in fact there were not additional investors. In return for Gozzo’s assistance in manipulating the stock prices of these companies, the investment banker compensated Gozzo in the form of cash retainer payments and both free-trading and restricted stock.

Gozzo faces a maximum sentence of five years in prison on the conspiracy charge and five years in prison on the securities fraud charge. Sentencing is scheduled for June 5, 2009.

Shulman's Testimony on Ponzi Schemes and Offshore Tax Evasion

FI - Fuerst Ittleman — 2009-03-18T11:35:32+01:00

Prepared Testimony of Doug Shulman, Commissioner Internal Revenue Service, Before the Senate Finance Committee on Tax Issues Related to Ponzi Schemes and an Update on Offshore Tax Evasion Legislation

Introduction

Mr. Chairman, Ranking Member Grassley and Members of the Committee, I want to thank you for the opportunity to testify today on tax issues related to Ponzi schemes and the Internal Revenue Service’s ongoing efforts to detect and stop unlawful offshore tax avoidance.

It is unfortunate in these otherwise difficult economic times that we are here today to discuss a situation where thousands of taxpayers have been victimized by dozens of fraudulent investment schemes.

These too-good-to-be true investment ruses have often taken the form of so-called "Ponzi schemes." The perpetrator of the fraud promises returns, and sometimes even provides official-looking statements showing interest, dividends, or capital gains, some or all of which is fictitious.

According to news reports, the recent Madoff scandal has affected a very large and diverse pool of investors, some of whom are reported to have lost most of their life savings. Beyond the toll in human suffering – as entire life savings and retirements appear to have been wiped out – the Madoff case raises numerous tax and pension implications for the victims.

To help provide clarity in this very complicated and tangled matter and to assist taxpayers, the IRS is today issuing guidance articulating the tax rules that apply and providing “safe harbor” procedures for taxpayers who sustained losses in certain investment arrangements discovered to be criminally fraudulent. I will discuss each one separately. The IRS will provide a copy of the guidance for the hearing record.

Mr. Chairman, turning to the second subject of today’s hearing, international issues are a major strategic focus of the IRS. It is of paramount importance to our system of voluntary compliance with the tax law that citizens of this country have confidence that the system is fair. We cannot allow an environment to develop where wealthy individuals can go offshore and avoid paying taxes with impunity. As you will hear from my testimony today, the IRS is aggressively pursuing these individuals and institutions that facilitate unlawful tax avoidance.

These issues are so important to the IRS that I have both increased the number of audits in this area over the last five months and prioritized stepped-up hiring of international experts and investigators. This occurred during a time when staffing levels were effectively frozen because of the Continuing Resolution.

While it is true that IRS agents and investigators will ultimately generate net enforcement revenues for the government, we view our international compliance strategy to date as much more focused on protecting approximately $2 trillion in revenue that the IRS collects than the incremental enforcement revenue that we collect from these specific activities. We cannot allow corrosive behavior to undermine the fundamental fairness of our tax system. Going forward, the administration will be outlining further initiatives to step up international tax enforcement and improve our revenue collection.

Moreover, seen through the prism of the current economic crisis, it is scandalous that wealthy individuals are hiding assets overseas and unlawfully avoiding US tax. It is an affront to the honest taxpayers of America, many of whom are struggling to pay their bills, who play by the rules and expect others to do the same.

Ponzi Scheme Released Guidance

Summary

The IRS is issuing two guidance items to assist taxpayers who are victims of losses from Ponzi-type investment schemes. While I recognize that the Committee is today focused on one specific case, the IRS guidance is not specific to this case. The first item is a revenue ruling that clarifies the income tax law governing the treatment of losses in such schemes. The second is a revenue procedure that provides a safe-harbor method of computing and reporting the losses.

The revenue ruling is important because determining the amount and timing of losses from these schemes is factually difficult and dependent on the prospect of recovering the lost money (which may not become known for several years). In addition, it clarifies the reach of older guidance on these losses that is somewhat obsolete.

The revenue procedure simplifies compliance for taxpayers (and administration for the IRS) by providing a safe-harbor means of determining the year in which the loss is deemed to occur and a simplified means of computing the amount of the loss.

Revenue Ruling

The revenue ruling sets forth the formal legal position of the IRS and Treasury Department:

The investor is entitled to a theft loss, which is not a capital loss. In other words, a theft loss from a Ponzi-type investment scheme is not subject to the normal limits on losses from investments, which typically limit the loss deduction to $3,000 per year when it exceeds capital gains from investments.

The revenue ruling clarifies that “investment” theft losses are not subject to limitations that are applicable to “personal” casualty and theft losses. The loss is deductible as an itemized deduction, but is not subject to the 10 percent of AGI reduction or the $100 reduction that applies to many casualty and theft loss deductions.

The theft loss is deductible in the year the fraud is discovered, except to the extent there is a claim with a reasonable prospect of recovery. Determining the year of discovery and applying the “reasonable prospect of recovery” test to any particular theft is highly fact-intensive and can be the source of controversy. The revenue procedure accompanying this revenue ruling provides a safe-harbor approach that the IRS will accept for reporting Ponzi-type theft losses.

The amount of the theft loss includes the investor's unrecovered investment – including income as reported in past years. The ruling concludes that the investor generally can claim a theft loss deduction not only for the net amount invested, but also for the so-called “fictitious income” that the promoter of the scheme credited to the investor’s account and on which the investor reported as income on his or her tax returns for years prior to discovery of the theft.

Some taxpayers have argued that they should be permitted to amend tax returns for years prior to the discovery of the theft to exclude the phantom income and receive a refund of tax in those years. The revenue ruling does not address this argument, and the safe-harbor revenue procedure is conditioned on taxpayers not amending prior year returns.

A theft loss deduction that creates a net operating loss for the taxpayer can be carried back and forward according to the timeframes prescribed by law to generate a refund of taxes paid in other taxable years.

Revenue Procedure

In light of the number of investment arrangements recently discovered to be fraudulent and the number of taxpayers affected, the revenue procedure is intended to: (1) provide a uniform approach for determining the proper time and amount of the theft loss; (2) avoid difficult problems of proof in determining how much income reported from the scheme was fictitious, and how much was real; and (3) alleviate compliance burdens on taxpayers and administrative burdens on the IRS that would otherwise result.

The revenue procedure provides two simplifying assumptions that taxpayers may use to report their losses:

Deemed theft loss. Although the law does not require a criminal conviction of the promoter to establish a theft loss, it often is difficult to determine how extensive the evidence of theft must be to justify a claimed theft loss.

The revenue procedure provides that the IRS will deem the loss to be the result of theft if: (1) the promoter was charged under state or federal law with the commission of fraud, embezzlement or a similar crime that would meet the definition of theft; or (2) the promoter was the subject of a state or federal criminal complaint alleging the commission of such a crime, and (3) either there was some evidence of an admission of guilt by the promoter or a trustee was appointed to freeze the assets of the scheme.

Safe harbor prospect of recovery. Once theft is discovered, it often is difficult to establish the investor’s prospect of recovery. Prospect of recovery is important because it limits the amount of the investor’s theft loss deduction. Prospect of recovery is difficult to determine, particularly where litigation against the promoter and other potentially liable third parties extends into future taxable years.

The revenue procedure generally permits taxpayers to deduct in the year of discovery 95 percent of their net investment less the amount of any actual recovery in the year of discovery and the amount of any recovery expected from private or other insurance, such as that provided by the Securities Investor Protection Corporation (SIPC). A special rule applies to investors who are suing persons other than the promoter. These investors compute their deduction by substituting “75 percent” for “95 percent” in the formula above.

IRS Enforcement: Tightening the Net

Mr. Chairman, I am also pleased to be here today to describe the unprecedented focus that the Internal Revenue Service has placed on detecting and bringing to justice those who unlawfully hide assets overseas to avoid paying tax.

In today’s economic environment, it is more important than ever that citizens feel confident that individuals and corporations are playing by the rules and paying the taxes that they owe.

When the American public is confronted with stories of financial institutions helping US citizens to maintain secret overseas accounts involving sham trusts to improperly avoid US tax, they should be outraged, as I am. But they should also know that the US government is taking new measures, and there is much more in the works.

In the wake of some recent well-publicized cases, the media has been full of speculation from those who are advising US taxpayers who have undeclared offshore accounts and income.

My advice to those taxpayers is very simple. The IRS has been steadily increasing the pressure on offshore financial institutions that facilitate concealment of taxable income by US citizens. That pressure will only increase under my watch. Those who are unlawfully hiding assets should come and get right with their government through our voluntary disclosure process

An Integrated Approach

Mr. Chairman, there is no “silver bullet” or one strategy that will alone solve the problems of offshore tax avoidance. Rather, an integrated approach is needed, made up of separate but complementary programs that will tighten the net around these tax cheats.

I am pleased to discuss several proposals that we are currently considering to improve our existing administrative programs.

First, I can also tell you that offshore issues are high priority to the President and his Administration. The President’s budget committed to identifying $210 billion in savings over the next decade from international enforcement, reforming deferral and other tax reform policies. It also includes funding for a robust portfolio of IRS international tax compliance initiatives. The Administration will have more detailed and specific announcements in this area in the near future.

Second, the IRS is already devoting significant resources to international issues. As previously noted, I have both increased the number of audits in this area over the last five months and prioritized stepped-up hiring of international experts and investigators.

Third, the IRS is exploring how to improve information reporting and sharing. In this regard, the IRS is looking closely at how to continue to improve our Qualified Intermediary – or Q.I. – program. QI gives the IRS an important line of sight into the activities of US taxpayers at foreign banks and financial institutions that we previously did not have.

As with any large and complex program, we must strive to continuously improve the QI system, and address weaknesses as they become apparent. Accordingly, the IRS and Treasury Department are considering enhancements to strengthen the QI program, including:

Expanding information reporting requirements to include more sources of income for US persons with accounts at QI banks.
Strengthening documentation rules to ensure that the program is delivering on its original intent.
Requiring withholding for accounts with documentation that is considered insufficient.

Additionally, the IRS has already proposed changes that would shore up the independent review of the QI program in substantial ways. This proposal is currently out for comment, and the IRS looks forward to reviewing these comments.

As you can see, the IRS and Treasury are considering a wide range of measures to ensure that the QI program is working as intended. However, there will always be instances where the IRS discovers a potential violation of the tax law after the fact. In these cases, there are administrative and legislative changes that may be helpful to the IRS as we investigate potential wrongdoing.

Draft Legislation

Mr. Chairman, we understand that you are considering legislation designed to improve tax compliance with respect to offshore transactions.

My staff and I look forward to working with you and other members of this committee on such legislation.

Conclusion

Mr. Chairman, I want to thank you for this opportunity to provide an update on IRS’ efforts to clarify issues relating to issues involving Ponzi schemes and also our activities to combat illegal tax avoidance schemes relating to offshore accounts and transactions. I would be happy to respond to your questions.

New Tax Law Extends Net Operating Loss Carryback for Small Businesses

FI - Fuerst Ittleman — 2009-03-17T11:34:18+01:00

Washington — The Internal Revenue Service announced that small businesses with deductions exceeding their income in 2008 can use a new net operating loss tax provision to get a refund of taxes paid in prior years.

To accommodate the change in tax law, the IRS updated the instructions for two key forms — Forms 1045 and 1139 — that small businesses can use to make use of the special carryback provision for tax year 2008. These forms are used to accelerate the payment of refunds.

The new provision, enacted as part of the American Recovery and Reinvestment Act of 2009, enables small businesses with a net operating loss (NOL) in 2008 to elect to offset this loss against income earned in up to five prior years. Typically, an NOL can be carried back for only two years. The IRS released legal guidance today in Revenue Procedure 2009-19 outlining specific details. Some taxpayers must make the election to use this special carryback by April 17, 2009.

“The new net operating loss provisions could throw a lifeline to struggling businesses, providing them with a quick infusion of cash,” said IRS Commissioner Doug Shulman. “We want to make it as easy as possible for small businesses to take advantage of these key tax benefits.”

With the economic downturn and the new law, the IRS expects record numbers of small businesses to be eligible for the refunds. The IRS is putting in special steps to ensure timely processing of these refunds to help small businesses during this difficult period.

Small businesses with large losses in 2008 may be able to benefit fully from those losses now, rather than waiting until claiming them on future tax returns.

The normal two-year carryback remains available if the small business does not elect the special carryback provision. If the loss exceeds the income for the carryback period, the taxpayer can continue to carry forward the remaining balance of the NOL for up to 20 years.

For small businesses that use a fiscal year, this special carryback may be used for an NOL in either a tax year that ends in 2008 or a tax year that begins in 2008. Once a taxpayer makes this election, it may not be changed.

To qualify for the new five-year carryback provision, a small business must have no greater than an average of $15 million in gross receipts over a three-year period ending with the tax year of the NOL. Businesses with more than $15 million in gross receipts still qualify to carry back their 2008 NOL for two years.

There are several methods that a small business uses to elect the new provision as detailed in the Revenue Procedure.

If a small business previously elected to waive the carryback of 2008 NOL but now wants to elect this special carryback, the small business may revoke its previous election to waive the carryback. The election revocation must be made on or before April 17, 2009.

Generally small businesses that are not corporations (including sole proprietorships filing schedule C with their Form 1040) may accelerate a refund by using Form 1045, Application for Tentative Refund.

Corporations with NOLs may also accelerate a refund by using Form 1139, Corporation Application for Tentative Refund.

The IRS will be closely monitoring these filings and will provide additional staff as needed to process these forms. The IRS will work to issue refunds within 45 days or even earlier to the degree possible.

Corporations can contact the IRS at: 1-800-829-4933 with NOL questions.

Form 1045 or Form 1139, whichever the taxpayer uses, generally must be filed within one year after the end of the tax year of the NOL. In addition, the current year’s tax return must be filed by the date the Form 1045 or Form 1139 is filed. Form 1045 and Form 1139 are filed at the same place the taxpayer’s return is filed, as listed on the return instructions.

Accelerated refunds paid via Form 1045 or Form 1139 is described as “tentative” because the applications for refunds are potentially subject to review at a later date. Form 1045 Instructions and Form 1139 Instructions provide more information on the accelerated refund option.

First DNA Test Approved for Papillomavirus by FDA

FI - Fuerst Ittleman — 2009-03-16T20:09:30+01:00

Agency also approved second DNA test for wider range of HPV types

The U.S. Food and Drug Administration approved the first DNA test that identifies the two types of human papillomavirus (HPV) that cause the majority of cervical cancers among women in the United States.

The test, called Cervista HPV 16/18, detects the DNA sequences for HPV type 16 and HPV type 18 in cervical cells. Differentiating these HPV types gives health care professionals more information on a patient’s risk of subsequently developing cervical cancer.

A positive Cervista 16/18 test result indicates whether HPV type 16, 18 or both types are present in the cervical sample.

The FDA also approved the Cervista HPV HR test, which is the second DNA test that detects essentially all of the high-risk HPV types in cervical cell samples. The Cervista HPV HR test uses a method similar to the Cervista HPV 16/18 test to detect the DNA sequences of these HPV types.

In women age 30 and older or women with borderline cytology, the Cervista HPV 16/18 test can be used together with cytology and the Cervista HPV HR test to assess risk of cervical disease.

“Results from these two tests, when considered with a physician’s assessment of the patient’s history, other risk factors, and professional guidelines, can help physicians better determine risk and could lead to better patient management,” said Daniel G. Schultz, M.D., director of the FDA’s Center for Devices and Radiological Health.

HPV is the most common sexually transmitted infection in the United States. The U.S. Centers for Disease Control and Prevention estimates that more than 6 million Americans become infected with genital HPV each year and that more than half of all sexually active women and men become infected at some time in their lives.

For most women, the body's own defense system clears the virus and infected women do not develop related health problems. However, some HPV types can cause cell abnormalities on the lining of the cervix that later can become malignant. While there are many different types of HPV, types 16 and 18 cause about 70 percent of all cervical cancers.

Customs Agents Discover 150 Pounds of Marijuana in New Mexico

FI - Fuerst Ittleman — 2009-03-13T14:17:14+01:00

Columbus, N.M. - U.S. Customs and Border Protection officers working at the Columbus port of entry seized 146.5 pounds of marijuana Wednesday morning. The seized drugs have an estimated street value of $117,200.

CBP officers made the seizure just before 10 a.m. after a 1988 Chevrolet pickup truck arrived at the port from the neighboring community of Palomas, Mexico. CBP officers selected the vehicle for a secondary exam. During their search, CBP officers used a fiber optic scope to peer into the fuel tank and noticed anomalies in the appearance. CBP drug sniffing dog “Dollar” searched the vehicle and alerted his handler to the presence of narcotics.

CBP officers continued their exam by removing the fuel tank. They dismantled the tank and discovered five sealed metal boxes inside. The boxes were open revealing a total 146.5 pounds of marijuana. CBP officers arrested the driver, Ramon Humberto Magallanez, a 55-year-old U.S. resident from Douglas, Ariz. U.S. Immigration and Customs Enforcement special agents took custody of the subject and secured federal

prosecution on drug smuggling charges.

“This seizure was a text book example of the layered enforcement CBP officers at the Columbus port utilize,” said Charles Wright, CBP Columbus port director. “CBP officer expertise, technology and canines all played a role in securing this seizure.”

In addition to the Columbus bust, CBP officers working at the El Paso port of entry made six additional marijuana seizures Wednesday totaling 170 pounds. For the second day in a row, CBP officers in El Paso intercepted two juvenile males with drugs strapped to their bodies. Both seizures occurred Wednesday night at the Ysleta port of entry and involved 15-year-old U.S. citizens who reside in Juarez. Both offenders were turned over to the El Paso Police Department for prosecution. The two seizures netted 10 pounds of marijuana.

While anti-terrorism is the primary mission of U.S. Customs and Border Protection, the inspection process at the ports of entry associated with this mission generates substantial numbers of enforcement actions in all categories.

FDA Guidance for Manufacturers of Peanut Products

FI - Fuerst Ittleman — 2009-03-13T14:13:10+01:00

CDC Reminds Consumers to Avoid Eating Recalled Products

The U.S. Food and Drug Administration recommends that manufacturers obtain any peanut-derived ingredient only from suppliers who use production processes that have been demonstrated to adequately reduce the presence of Salmonella species (Salmonella spp.), or that they ensure that their own manufacturing process would adequately reduce the presence of Salmonella species.

The recommendations are in FDA’s "Guidance for Industry: Measures to Address the Risk for Contamination by Salmonella Species in Food Containing a Peanut-Derived Product As An Ingredient."

This guidance is intended for manufacturers who use a peanut-derived product as an ingredient in a food product. Peanut-derived products include peanuts, peanut butter, peanut paste, peanut meal, and peanut granules. Recent Salmonellosis outbreaks such as the outbreak associated with Salmonella Typhimurium involving the Peanut Corporation of America (PCA) demonstrate the potential for foodborne illness from the consumption of foods containing peanut-derived products if those products are contaminated with Salmonella.

According to CDC, illnesses are still being reported among people who have eaten recalled peanut-derived products contaminated with Salmonella bacteria. The Agency is concerned that illnesses will continue to occur if people eat these peanut products that may still be on their shelves at home.

Investigational New Drug Application Allows Patients with ALS to Iplex

FI - Fuerst Ittleman — 2009-03-12T14:38:52+01:00

IND's Allow Patients Iplex Access » The Food and Drug Administration is sharing with the public its decision to allow patients with Amyotrophic Lateral Sclerosis, a fatal neurodegenerative disease also known as Lou Gehrig’s Disease, or ALS, to have access to a drug called Iplex under an Investigational New Drug (IND) application. Iplex (mecasermin rinfabate [rDNA origin] injection), is a combination of two substances: human insulin-like growth factor 1 (IGF-1) and human insulin-like growth factor-binding protein-3 (rhIGFBP-3). Iplex is approved by the FDA only for the treatment of growth failure in children with severe primary IGF-1 deficiency (Primary IGFD) or with growth hormone (GH) gene deletion who have developed neutralizing antibodies to GH. The drug is currently not marketed because of a court order related to patent infringement. Iplex is made by Insmed, a biologics company headquartered in Richmond, Virginia.

FDA’s Decision

The FDA and Insmed have agreed that access to Iplex for investigational use in patients with ALS will occur in two ways under Investigational New Drug applications (INDs):

1. Single-patient INDs requesting “compassionate use” of Iplex for treatment of named patients with ALS, received and date-stamped by FDA’s document room by close of business on March 6, 2009, will be allowed to proceed, and Insmed has agreed to supply Iplex to those patients; and

2. The remaining supply of Iplex, which is very limited, will be used by Insmed to conduct a clinical trial under an IND in which other patients with ALS who are interested in receiving Iplex treatment will be randomly assigned to receive drug through a lottery system.

All patients who receive Iplex under either a single-patient IND or in the Insmed clinical trial must be adequately informed by their treating physician of the possible benefits and risks of the treatment. To facilitate the informed consent process, FDA is making available other documents, as described below, to ensure that healthcare providers and patients have access to more complete information related to the potential risks and benefits of Iplex treatment.

FDA has agreed to allow Insmed to submit a request for cost recovery under existing IND regulations to offset the costs associated with conducting the planned clinical trial. The physicians who submitted the single-patient INDs for “compassionate use” of Iplex will be asked to participate in the data collection for the Insmed clinical trial in order to maximize the collection of data from the very limited supply of drug.

Rationale for FDA’s Decision

The FDA’s decision comes after serious consideration of the needs of patients with ALS and the practical limitations posed by the extremely limited supply of the drug. The agency has carefully reviewed all available studies and data on the potential benefits and risks to patients with ALS, as well as the need to have as fair a plan as possible for allocating the limited supply of the drug among the patients who want to receive it.

FDA has received a number of single-patient IND requests from physicians to allow “compassionate use” of Iplex for named patients with ALS. In reaching its decision on permitting investigational use of Iplex in patients with ALS, FDA recognized that solely granting access to the drug under single-patient INDs would rapidly deplete the limited supply of Iplex and make it virtually impossible to conduct a controlled clinical trial. This is critical, because without adequate controlled clinical trials, it is not be possible to determine whether Iplex is effective, or harmful, in patients with ALS.

The FDA believes its decision represents the fairest way possible to provide access to Iplex, first, because Insmed does not have enough drug for every patient who may request it and, second, because it is important to maximize what can be learned from the remaining supply of drug in case it does have benefit, and could be further developed for widespread use by patients with ALS.

FDA has attempted to balance the needs of individual patients who are desperately seeking treatment options for this devastating disease with the need to learn if the drug is in fact beneficial, or harmful, in treating patients with ALS. These considerations were weighed over the last few weeks by FDA scientists and physicians, who held a series of meetings with Insmed and internal meetings to discuss the best path forward.

Hitachi Pleads Guilty in LCD Price Fixing Conspiracy » Agrees to $31 Million Fine

FI - Fuerst Ittleman — 2009-03-11T16:17:04+01:00

Hitachi Pleads Guilty to Fixing Prices for LCD Panels Sold to Dell Inc.

Washington – Japanese electronics manufacturer Hitachi Displays Ltd., agreed to plead guilty and pay a $31 million fine for its role in a conspiracy to fix prices in the sale of Thin Film Transistor-Liquid Crystal Display panels (TFT-LCD) sold to Dell Inc., the U.S. Department of Justice announced today.

A one-count felony charge filed today in U.S. District Court in San Francisco charges Hitachi Displays Ltd., a subsidiary of Hitachi Ltd., with participating in a conspiracy to fix the prices of TFT-LCD sold to Dell for use in desktop monitors and notebook computers from April 1, 2001, through March 31, 2004. According to the plea agreement, which is subject to court approval, Hitachi Displays has agreed to cooperate with the Department’s ongoing antitrust investigation.

"Hitachi joins three other multinational companies who have admitted to their involvement in fixing prices for LCD panels sold to U.S. companies and that have already paid criminal fines totaling more than $585 million," said Scott D. Hammond, Acting Assistant Attorney General in charge of the Department’s Antitrust Division. "This case should send a strong message to multinational companies operating in the United States that when it comes to enforcing the U.S. antitrust laws we mean business."

Including today’s filing, four companies and seven individuals have been charged in the Department’s ongoing antitrust investigation into the TFT-LCD industry. To date, more than $585 million in criminal fines have been imposed as a result of this investigation, and four individuals have pleaded guilty and have been sentenced to serve jail time.

TFT-LCD panels are used in computer monitors and notebooks, televisions, mobile phones and other electronic devices. In 2006, the worldwide market for TFT-LCD panels was approximately $70 billion. Hitachi Displays Ltd., based in Tokyo, Japan, reported $1.75 billion in total revenue for the fiscal year ending March 2008.

Hitachi Displays is charged with carrying out the conspiracy by:

Participating in bilateral meetings, conversations and communications in Japan, Korea and the United States to discuss the prices of TFT-LCD to be sold to Dell;
Agreeing, during those bilateral meetings, conversations and communications, to charge prices of TFT-LCD to be sold to Dell at certain predetermined levels;
Issuing price quotations in accordance with the agreements reached; and Exchanging information on sales of TFT-LCD sold to Dell, for the purpose of monitoring and enforcing adherence to the agreed-upon prices.

This is the fourth plea agreement by a company charged with participating in conspiracies to fix the prices for TFT-LCD. On Dec. 15, 2008, LG Display Co. (LG) pleaded guilty to participating in a worldwide conspiracy to fix the price for TFT-LCD and was sentenced to pay a $400 million criminal fine – the second-largest fine in Antitrust Division history. On Dec. 16, 2008, Sharp Corp. pleaded guilty to participating in three separate conspiracies to fix the prices of TFT-LCD sold to Dell, Apple Computer Inc. and Motorola Inc. and was sentenced to pay a $120 million criminal fine. On Jan. 14, 2009, Chunghwa Picture Tubes Ltd. (Chunghwa) pleaded guilty to participating in the same worldwide conspiracy as LG, and was sentenced to pay a $65 million criminal fine.

In February 2009, former Chunghwa CEO Chieng-Hon "Frank" Lin and two Chunghwa executives, Chih-Chun "C.C." Liu and Hsueh-Lung "Brian" Lee, pleaded guilty to and were sentenced for participating in the same conspiracy as LG and Chunghwa. Lin was sentenced to serve nine months in prison and pay a $50,000 criminal fine. Liu was sentenced to serve seven months in prison and pay a $30,000 criminal fine. Lee was sentenced to serve six months in prison and pay a $20,000 criminal fine. Also in February 2009, LG executive Chang Suk "C.S." Chung pleaded guilty for his role in the same conspiracy as LG and Chunghwa. Chung was sentenced to serve seven months in prison and pay a $25,000 criminal fine.

Money Laundering, Bribery, Fraud » Public Corruption in Alaska

FI - Fuerst Ittleman — 2009-03-11T16:07:31+01:00

Washington – John Cowdery, a former elected member of the Alaska state senate, was sentenced to three years probation with a special condition requiring him to serve six months of home confinement for conspiring to bribe another Alaska state legislator. U.S. District Judge Ralph Beistline for the District of Alaska also ordered Cowdery to pay a $25,000 fine.

On Dec. 19, 2008, Cowdery pleaded guilty to one count of conspiracy to commit bribery concerning programs receiving federal funds. In court documents, Cowdery admitted to conspiring with Bill J. Allen, the former chief executive officer of VECO Corporation (VECO), a now-defunct multinational oil field services company, and Richard L. Smith, a former VECO vice president, to offer at least $10,000 in purported campaign contributions to State Senator A
in exchange for State Senator A’s support of a proposed petroleum profits tax, or PPT, that VECO wanted the Alaska state legislature to pass in 2006. Cowdery admitted that he and Allen met State Senator A on June 25, 2006, at an Anchorage restaurant to offer State Senator A the bribe. Cowdery admitted that he and Allen specifically conditioned receipt of the bribe, which State Senator A did not accept, on State Senator A’s support for the PPT legislation sought by
VECO and Allen. Allen and Smith both pleaded guilty to multiple federal corruption charges in May 2007 and both are awaiting sentencing.

Including Cowdery’s guilty plea and those of Allen and Smith, there have been ten criminal convictions to date arising out of the ongoing investigation into public corruption in the state of Alaska. Thomas T. Anderson, a former elected member of the Alaska House of Representatives, was convicted in July 2007 and sentenced to five years in prison for extortion, conspiracy, bribery and money laundering for soliciting and receiving money from an FBI confidential
source in exchange for agreeing to perform official acts to further a business interest represented by the source. Peter Kott, a former speaker of the Alaska House of Representatives, was convicted in September 2007 and sentenced to six years in prison for extortion, bribery and conspiracy. Victor H. Kohring, a former elected member of the Alaska House of Representatives, was convicted at trial in November 2007 for attempted extortion, bribery and conspiracy, and was sentenced to three and a half years in prison.

In March 2008, James Clark,chief of staff to a former governor of Alaska, pleaded guilty to conspiracy to commit honest services mail and wire fraud. Former Anchorage lobbyist William Bobrick pleaded guilty in May 2007 to felony public corruption charges. U.S. Sen. Theodore F. Stevens was convicted at trial on Oct. 27, 2008, of making false statements regarding his required U.S. Senate financial disclosures for 2001 through 2006. Former Alaska businessman William Weimar was sentenced to six months in prison on Nov. 12, 2008, after pleading guilty on Aug. 12, 2008, to conspiracy to commit honest services mail and wire fraud and structuring financial transactions. The case was prosecuted by trial attorneys Nicholas A. Marsh and Edward P. Sullivan of the Criminal Division's Public Integrity Section, headed by Chief William M. Welch, II, and Assistant U.S. Attorneys Joseph W. Bottini and James A. Goeke from the District of Alaska. The case was investigated by the FBI and the Internal Revenue Service Criminal Investigative Division.

Early Filing Taxpayers Banking Larger Refunds in 09

FI - Fuerst Ittleman — 2009-03-10T11:17:04+01:00

Washington — Taxpayers are filing earlier and receiving larger refunds so far this year, according to early filing season statistics released by the Internal Revenue Service.

As of Feb. 27, 2009, the IRS had received 56 million individual tax returns, a slight increase over the previous year. And, the average individual refund was $2,869, a 9 percent increase or $232 more than the same time last year.

The IRS notes that possible reasons for the larger refunds may include taxpayers benefiting from the recovery rebate credit and other tax breaks such as the first-time homebuyer credit and the additional standard deduction for real estate taxes. The average refund amount generally will decrease slightly as the filing season progresses.

More taxpayers choose to receive their refunds through direct deposit each year. As of Feb. 27, more than 84 percent of all refunds were issued through direct deposit, up from 81 percent for the same period last year.

While the IRS has issued almost 3 percent more refunds this year compared to the same time last year, the number of taxpayers who choose to receive their refunds quickly and safely through direct deposit is up almost 7 percent compared to the same time last year. On Feb. 27, the average direct deposit refund totaled $3,063.

The IRS cautioned that year-to-year analysis of total returns filed will be an anomaly this year because last year’s results include those returns filed for the economic stimulus payment. As the year progresses, the IRS expects to receive and process more individual income tax returns during 2009 than in 2007 but fewer than in 2008.

$30 Million "Fund of Funds" Investment Scheme Halted by the SEC

FI - Fuerst Ittleman — 2009-03-09T13:56:32+01:00

Washington — The Securities and Exchange Commission charged Mark Bloom and his firm North Hills Management LLC with securities fraud, and obtained an emergency court order to freeze their assets and halt an alleged investment scheme involving the marketing of a "fund of funds" investment vehicle.

According to the SEC's complaint, filed in federal court in Manhattan, the SEC alleges that Bloom, through North Hills, raised approximately $30 million from 40 to 50 investors between 2001 and 2007 by representing that the assets would be invested in a diverse group of hedge funds. Instead, Bloom misappropriated more than $13.2 million of investor funds to furnish a lavish lifestyle that included the purchase of luxury homes, cars and boats for himself and his wife, who is named as a relief defendant. The remaining funds were invested in a single fund which itself turned out to be fraudulent.

Scott Friestad, Deputy Director of the SEC's Division of Enforcement, said, "We allege a blatant investment scheme, and today's action shows that the Commission will act decisively to preserve assets for investors."

James Clarkson, Acting Director of the SEC's New York Regional Office, added, "As today's emergency action demonstrates, the SEC will bring aggressive enforcement action against individuals who defraud innocent investors."

The SEC alleges that the defendants solicited investments in North Hills, L.P. (the "Fund"), which is named as a relief defendant, by making misleading representations. Bloom and North Hills represented that the Fund's assets would be allocated across multiple funds and fund managers to ensure diversification and moderate risk. They sent investors false monthly account statements that portrayed their investments as profitable when, in reality, Bloom was systematically looting the Fund's trading account by making "loans" to himself and by investing in contravention of the Fund's stated investment strategy in an investment known as the Philadelphia Alternative Asset Fund (PAAF). Bloom received undisclosed commissions from PAAF in excess of $355,000 over a 16-month period. PAAF itself was uncovered as a fraudulent scheme in June 2005.

According to the SEC's complaint, beginning in November 2007, one of the Fund's largest investors, a charitable trust (the "Trust") that funds children's schools began to serve Bloom with redemption requests, which Bloom repeatedly evaded. To date, Bloom has failed to honor the Trust's redemption requests in full and claims that he does not have the means to do so. The Trust is owed more than $9.5 million on its investment.

The SEC complaint charges violations of the anti-fraud provisions of the Securities Act of 1933, the Securities Exchange Act of 1934 and the Investment Advisers Act of 1940.

Judge John G. Koeltl of the U.S. District Court for the Southern District of New York, entered an order temporarily restraining the defendants, freezing their assets, ordering accountings, and approving the appointment of a receiver. The SEC's complaint also seeks a final judgment permanently enjoining the defendants from future violations of the federal securities laws and ordering them to pay financial penalties and disgorge ill-gotten gains with prejudgment interest.

The U.S. Attorney's Office (USAO) for the Southern District of New York announced parallel criminal charges against Bloom earlier today, and the U.S. Commodity Futures Trading Commission (CFTC) filed related charges against Bloom and North Hills.

Recent Supreme Court Ruling Rejects Limits on Drug Related Injury Lawsuits

FI - Fuerst Ittleman — 2009-03-07T10:26:59+01:00

The U.S. Supreme Court recently ruled that patients that are injured by a drug may be able to sue the manufacturer of the drug for damages, even though the drug has received FDA approval.

In the Wyeth v. Levine lawsuit decision, the U.S. Supreme Court awarded $6.7 million in damages to Diana Levine, a Vermont musician who had her arm amputated after contracting gangrene after Wyeth's Phenergan hit one of her arteries.

Thought the complication that caused her damages were rare, it is acknowledged on the drug's labeling. Wyeth's argument that the warning on the drug was sufficient and accepted by the U.S. Food and Drug Administration.

At a press conference after the decision was announced, Levine, who was injured in April 2000, said: "I'm on the ceiling, I'm just so high about this, I'm so glad, it's such a good decision and, next to getting my hand, it's the best they could do, and it's the least they could do. I'm in a state of almost shock and almost unrestrained joy."

The consumer watchdog group, Public Citizen hailed the decision as a triumph.

"It's a terrific decision, because it understands both the importance of compensation for people who are harmed by defective or mislabeled drugs and also understands that the tort system is a complement to the federal regulatory system, that it is not an obstacle to that system," said Brian Wolfman, director of the litigation group at Public Citizen in Washington, D.C.

Wolfman served as one of Levine's attorneys.

Bert Rein, an attorney for Wyeth, said the company "fully complied with federal law" in its labeling, and that the FDA "is in the best position to weigh the risks and benefits of a medicine," The New York Times reported.

In a news release, the Pharmaceutical Research and Manufacturers of America (PhRMA), said the group "is still reviewing the various opinions in the Wyeth v. Levine case. We continue to believe that the expert scientists and medical professionals at the Food and Drug Administration are in the best position to evaluate voluminous information about a medicine's benefits and risks and to determine which safety information to include in the drug label."

The high court's decision is likely to unleash a torrent of similar lawsuits around the country.

"The court opinion not only declined to tell pharmaceutical companies that they could have this kind of immunity, it, in fact, pushed somewhat in the other direction," said Benjamin C. Zipursky, professor of law at Fordham Law School in New York City and visiting professor at Harvard Law School in Boston.

"Some trial lawyers who had been hesitant to bring claims against pharmaceutical companies are now going to be more willing to do so," Zipursky said.

"A number of cases that were stayed in state and federal court pending this decision will now go forward and go forward with a more plaintiff-oriented posture. This is going to change the balance of incentives for lawyers who are thinking about suing pharmaceutical companies to make them more willing to sue and make trial judges and appellate courts less willing to throw out weak cases."

Wolfman added: "In general, it's going to mean that these claims are not pre-empted and that people with drug and injury claims are going to be able to sue for damages and get to a jury and, if the jury agrees, be compensated for that."

The high court's 6-3 decision essentially upended moves by the Bush administration to protect drug makers from lawsuits as long as the product was FDA-approved.

Many watchers had predicted that the court would decide the other way, Zipursky said.

"It was a surprise in two respects," he said. People had believed "that whatever the court did, it would rule narrowly and, in fact, the decision is quite broad."

Watch this Space for a detailed analysis of the Supreme Court decisions in Wyeth and Medtronic

Florida Stockbroker Charged with $4.7 Million in Securities Fraud by SEC

FI - Fuerst Ittleman — 2009-03-06T11:57:12+01:00

The Securities and Exchange Commission filed a complaint against a former Florida stockbroker of Fareri Financial Services, Inc. Amerifinancial ("FFS"), and Relief Defendant Anthony Fareri & Associates, Inc. ("AFAI") for their involvement in a market manipulation and kickback scheme that defrauded customers of the Boca Raton brokerage firm.

The SEC complaint, filed in the United States District Court for the Southern District of Florida, alleges that in 2004 and 2005:

Fareri defrauded his customers of more than $4.7 million by purchasing and otherwise acquiring for their accounts worthless shares of two shell companies as part of a fraudulent scheme to manipulate the companies' stock.
Fareri worked together with a Florida investor, Paul Harary, to create an artificial market for the two stocks. Fareri created the demand for the stocks by purchasing them for FFS's customers. Harary controlled the supply of the unrestricted shares and sold them.
Fareri and Harary manipulated the price of the two stocks using pre-arranged matched orders to move up the price and to create the illusion of market demand.
As part of the scheme, Fareri received kickbacks totaling more than $1 million. He also received more than $160,000 in commissions and/or markups.
Fareri's defrauded customers included retirees who had limited investment experience and relied exclusively on Fareri to invest their money in accordance with their conservative risk tolerance and investment objectives.

According to the complaint, the two shell companies were Secure Solutions Holdings, Inc. (SSLX) and American Financial Holdings, Inc. (AFHJ). Each traded on the over-the-counter market and was quoted on the Pink Sheets.

The Commission's complaint alleges that Fareri and FFS violated Section 17(a) of the Securities Act of 1933, Sections 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder and that FFS also violated Section 15(c)(1) of the Exchange Act. The complaint seeks permanent injunctions, disgorgement plus prejudgment interest and civil penalties. AFAI is not alleged to have engaged in any federal securities law violations, but is alleged to hold or control funds that represent fruits of violations committed by the defendants.

In 2007, Paul Harary consented to a final judgment that permanently enjoined him from violating the antifraud and securities registration provisions of the federal securities laws and directed him to pay approximately $4 million in disgorgement and prejudgment interest. See Securities and Exchange Commission v. Paul Harary, Civil Action No. 07-80875-CIV (S.D. Fla., Sept. 24, 2007). Harary also pleaded guilty to conspiracy to commit mail and wire fraud in parallel criminal actions brought in the United States District Court for the District of Columbia. See United States v. Harary, Crim. No. 07-Cr.-209 (EGS) (D.D.C.).
2037 (July 15, 2005).

The Commission acknowledges the assistance of the U.S. Attorney's Office for the District of Columbia, the Federal Bureau of Investigation, the United States Postal Inspection Service, NASD (now known as the Financial Industry Regulatory Authority), and the British Columbia Securities Commission.

FDA Warns About Risk of Wearing Medicated Patches During MRIs

FI - Fuerst Ittleman — 2009-03-05T00:00:00+01:00

Certain adhesive patches that deliver medication through the skin have been found to be a risk to patient safety. The patches, if worn while undergoing magnetic resonance imaging scans or MRIs, can cause skin burns, says the U.S. Food and Drug Administration today.

The patches of concern include both brand name and generic products and patches purchased over the counter without a prescription.

The FDA issued the Public Health Advisory on transdermal drug patches after learning that a warning was missing on some patches that contain aluminum or other metals in their non-adhesive backing. The backing is the portion of the patch not in direct contact with the skin. While not attracted to the magnetic field of the MRI, the metal can conduct electricity, generating heat which can cause burns. Users of the patches reported receiving skin burns at their patch site when wearing the patch during an MRI scan.

"The risk of using a metallic patch during an MRI has been well-established, but the FDA recently discovered that not all manufacturers include a safety warning with their patches," said Janet Woodcock, M.D., director of the FDA's Center for Drug Evaluation and Research. "Because the metal in these patches may not be visible and the product labeling may not disclose the presence of metal, patients should tell both their health care professional and their MRI facility that they wear a medicated adhesive patch."

The FDA was alerted to the missing MRI warning on Teva Pharmaceutical's fentanyl transdermal system in January. The FDA investigated and found that a similar warning was also missing on a variety of skin, or transdermal, patches delivering medications.

The FDA is reviewing the labeling and composition of all medicated patches to ensure that those made with materials containing metal provide a warning to patients undergoing an MRI and will alert the public when this information has been added. Until then, the agency recommends that people wearing medicated skin patches, including nicotine patches, talk to a health care professional about their patch at the time they receive their MRI referral. The professional will advise the patient about when to remove the patch before the procedure and about replacing it after the procedure.

Patients should also tell their MRI facility that they are using a patch when they call to schedule their appointment and should repeat this information when filling out their health history questionnaire after arriving for their appointment.

Colombian Paramilitary Leader Extradited to the United States to Face U.S. Drug Charges

FI - Fuerst Ittleman — 2009-03-04T00:00:00+01:00

Washington – Miguel Angel Mejia-Munera, a/k/a "El Mellizo," was extradited from Colombia to the United States on March 4th to face narcotics trafficking charges, announced Acting Assistant Attorney General Rita M. Glavin of the Criminal Division and Acting Administrator Michele M. Leonhart of the U.S. Drug Enforcement Administration (DEA).

According to the indictment, Miguel Angel Mejia-Munera, together with his twin brother Victor, led a major Colombian narcotics trafficking organization known as "the Twins" or "Los Mellizos" Organization. Victor Mejia-Munera was killed in April 2008 in a gun battle with the Colombian military. Miguel Angel Mejia-Munera was also allegedly a leader of the Autodefensas Unidas de Colombia (AUC), a Colombian right-wing paramilitary and drug-trafficking organization, designated by the U.S. State Department as a Foreign Terrorist Organization. Miguel Angel Mejia-Munera, the alleged leader of the Bloque Arauca of the AUC, is an Organized Crime Drug Enforcement Task Force (OCDETF)-designated Consolidated Priority Organizational Target (CPOT).

According to the indictment, returned in the District of Columbia on Jan. 29, 2004, Miguel Angel Mejia-Munera and his organization were responsible for exporting multi-thousand kilogram quantities of cocaine from Colombia to Central America, Mexico and the United States from January 1994 to January 2004.

Miguel Angel Mejia-Munera is charged in the indictment with conspiracy to import five kilograms or more of cocaine into the United States and conspiracy to manufacture and distribute five kilograms or more of cocaine, with the intent to import the cocaine into the United States. He is also charged with conspiracy to possess with intent to distribute five kilograms or more of cocaine on board a vessel subject to the jurisdiction of the United States, and with possessing and attempting to possess five kilograms or more of cocaine on board a vessel subject to the jurisdiction of the United States. Mejia-Munera also faced charges in Colombia for his alleged criminal acts.

"Through today’s extradition, Miguel Angel Mejia-Munera can now be held accountable in a U.S. court for the very serious crimes he is charged with committing," said Acting Assistant Attorney General Rita M. Glavin. "His arrival in the United States sends a message that neither the United States nor Colombia will tolerate this kind of criminal activity. The Department will continue to work in close cooperation with our Colombian law enforcement partners in combating the drug trafficking that has claimed victims in both our nations."

"The extradition of this drug kingpin closes the book on another major Colombia-based drug trafficking organization that not only was responsible for exporting massive quantities of cocaine destined for the United States, but also funded terrorist activities," said DEA Acting Administrator Michele M. Leonhart. "Miguel Angel Mejia-Munera’s claim to have demobilized under Colombia’s Justice and Peace Process is without legal merit since he refused prison confinement as is required by the Colombian Justice and Peace Law. His capture by the valiant efforts of the Colombian National Police and his extradition today underscore the resolve of our Colombian counterparts to continue working closely with us to dismantle drug and terrorist organizations."

U.S. Treasury and Federal Reserve Board Announce Participation in AIG Restructuring Plan

FI - Fuerst Ittleman — 2009-03-03T00:00:00+01:00

Washington, DC – The U.S. Treasury Department and the Federal Reserve Board announced a restructuring of the government's assistance to AIG in order to stabilize this systemically important company in a manner that best protects the US taxpayer. Specifically, the government's restructuring is designed to enhance the company's capital and liquidity in order to facilitate the orderly completion of the company's global divestiture program.

The company continues to face significant challenges, driven by the rapid deterioration in certain financial markets in the last two months of the year and continued turbulence in the markets generally. The additional resources will help stabilize the company, and in doing so help to stabilize the financial system.

As significantly, the restructuring components of the government's assistance begin to separate the major non-core businesses of AIG, as well as strengthen the company's finances. The long-term solution for the company, its customers, the U.S. taxpayer, and the financial system is the orderly restructuring and refocusing of the firm. This will take time and possibly further government support, if markets do not stabilize and improve.

Given the systemic risk AIG continues to pose and the fragility of markets today, the potential cost to the economy and the taxpayer of government inaction would be extremely high. AIG provides insurance protection to more than 100,000 entities, including small businesses, municipalities, 401(k) plans, and Fortune 500 companies who together employ over 100 million Americans. AIG has over 30 million policyholders in the U.S. and is a major source of retirement insurance for, among others, teachers and non-profit organizations. The company also is a significant counterparty to a number of major financial institutions.

AIG operates in over 130 countries with over 400 regulators and the company and its regulated and unregulated subsidiaries are subject to very different resolution frameworks across their broad and diverse operations without an overarching resolution mechanism. Within the options available, the restructuring plan offers a multi-part approach which brings forward the ultimate resolution of the company, has received support from key stakeholders and the rating agencies, and provides the best possible protection for taxpayers in connection with this commitment of resources.

The steps announced today provide tangible evidence of the U.S. government's commitment to the orderly restructuring of AIG over time in the face of continuing market dislocations and economic deterioration. Orderly restructuring is essential to AIG's repayment of the support it has received from U.S. taxpayers and to preserving financial stability. The U.S. government is committed to continuing to work with AIG to maintain its ability to meet its obligations as they come due.

Treasury has stated that public ownership of financial institutions is not a policy goal and, to the extent public ownership is an outcome of Treasury actions, as it has been with AIG, it will work to replace government resources with those from the private sector to create a more focused, restructured and viable economic entity as rapidly as possible. This restructuring is aimed at accelerating this process. Key steps of the restructuring plan include:

Preferred Equity

The U.S. Treasury will exchange its existing $40 billion cumulative perpetual preferred shares for new preferred shares with revised terms that more closely resemble common equity and thus improve the quality of AIG's equity and its financial leverage. The new terms will provide for non-cumulative dividends and limit AIG's ability to redeem the preferred stock except with the proceeds from the issuance of equity capital.

Equity Capital Commitment

The Treasury Department will create a new equity capital facility, which allows AIG to draw down up to $30 billion as needed over time in exchange for non-cumulative preferred stock to the U.S. Treasury. This facility will further strengthen AIG's capital levels and improve its leverage.

Federal Reserve Revolving Credit Facility

The Federal Reserve will take several actions relating to the $60 billion Revolving Credit Facility for AIG established by the Federal Reserve Bank of New York (New York Fed) in September, 2008, to further the goals described above.

Repayment by Preferred Stock Interests

The Revolving Credit Facility will be reduced in exchange for preferred interests in two special purpose vehicles created to hold all of the outstanding common stock of American Life Insurance Company (ALICO) and American International Assurance Company Ltd. (AIA), two life insurance holding company subsidiaries of AIG. AIG will retain control of ALICO and AIA, though the New York Fed will have certain governance rights to protect its interests. The valuation for the New York Fed's preferred stock interests, which may be up to approximately $26 billion, will be a percentage of the fair market value of ALICO and AIA based on valuations acceptable to the New York Fed.

Securitization of Life Insurance Cash Flows

The New York Fed is authorized to make new loans under section 13(3) of the Federal Reserve Act of up to an aggregate amount of approximately $8.5 billion to special purpose vehicles (SPVs) established by domestic life insurance subsidiaries of AIG. The SPVs would repay the loans from the net cash flows they receive from designated blocks of existing life insurance policies held by the parent insurance companies. The proceeds of the New York Fed loans would pay down an equivalent amount of outstanding debt under the Revolving Credit Facility. The amounts lent, the size of the haircuts taken by the New York Fed, and other terms of the loans would be determined based on valuations acceptable to the New York Fed.

Restructuring of Other Terms

After the transactions described above, the total amount available under the Facility will be reduced from $60 billion to no less than $25 billion. In addition, the interest rate on the Facility, which is three-month LIBOR plus 300 basis points, will be modified by removing the existing floor (3.5 percent) on the LIBOR rate. The Facility will continue to be secured by a lien on a substantial portion of AIG's assets, including the businesses AIG plans to retain. The other material terms of the Facility remain unchanged.

Issuance of Preferred Stock

As required by the credit agreement governing the Revolving Credit Facility, AIG has agreed to issue on March 4, 2009, shares of convertible preferred stock representing an approximately 77.9% equity interest in AIG to an independent trust for the sole benefit of the United States Treasury.

AIG must be in compliance with the executive compensation and corporate governance requirements of Section 111 of the Emergency Economic Stabilization Act, including the most stringent limitations on executive compensation as required under the newest amendments to the Emergency Economic Stabilization Act. Additionally, AIG must continue to maintain and enforce newly adopted restrictions put in place by the new management on corporate expenses and lobbying as well as corporate governance requirements.

FDA Files Permanent Injunction Against KV Pharmaceutical Company

FI - Fuerst Ittleman — 2009-03-02T00:00:00+01:00

Making, Marketing and Distributing Adulterated and Unapproved Drugs

The FDA announced a Consent Decree of permanent injunction enjoining KV Pharmaceutical Company, its subsidiaries ETHEX Corporation and Ther-Rx Corporation, and its principal officers from making and distributing adulterated and unapproved drugs. The injunction against KV and the other defendants, once entered by the court, will prevent them from manufacturing and shipping drugs until the firm obtains FDA approval. It will remain in place until the defendants sustain continuous compliance with FDA's current Good Manufacturing Practice (cGMP) and new drug approval requirements for six years.

The Consent Decree also enjoins KV’s officers David A. Van Vliet, president and chief executive officer; Rita E. Bleser, president of the pharmaceutical division; Jay S. Sawardeker, vice president of corporate quality, and Marc S. Hermelin, former chief executive officer and a member of KV's Board of Directors, from manufacturing and distributing any drug at or from KV’s facilities until the company's procedures and products are brought into compliance with the law.

KV Pharmaceutical manufactures, processes, packages, labels, holds, and distributes drugs from various locations in St. Louis, Mo., and the surrounding area. FDA inspected KV between December 2008 and February 2009, and found that the company had significant cGMP violations and continued to manufacture unapproved drugs. As a result of those inspections, which led to this action, KV recalled all products manufactured and distributed from its facilities.

“The FDA requires companies to manufacture drugs in accordance with the current good manufacturing practice standards and to comply with FDA approval requirements,” said Janet Woodcock, M.D., director of FDA’s Center for Drug Evaluation and Research (CDER). “Consumers need to be confident that drugs meet our manufacturing requirements for identity, strength, purity, and quality, and have been evaluated by the FDA for safety and efficacy.”

Under the terms of the Consent Decree, the defendants cannot resume manufacturing and distributing drugs until both an independent expert and FDA officials conduct inspections of their facilities and certify that they are in compliance with the Federal Food, Drug, and Cosmetic Act (the Act), its implementing regulations, and the decree. The Consent Decree also requires the defendants to destroy all drugs they recalled between May 2008 and Feb. 3, 2009. Those drugs are currently in their possession.

If the defendants fail to comply with any provision of the Consent Decree, the Act, or FDA regulations, FDA may order the firm to again stop manufacturing and distributing drugs, recall the products, or take other corrective actions.

“The FDA will carefully monitor the provisions of this injunction against the KV Pharmaceutical Company to ensure compliance,” said Michael Chappell, the acting associate commissioner of FDA’s Office of Regulatory Affairs. “Companies should know that FDA will investigate and take action against other marketers of unapproved drugs."

Secretary Locke Speaks About the Department of Commerce's Role on the Economy

FI - Fuerst Ittleman — 2009-02-27T00:00:00+01:00

"Gary knows the American Dream. He's lived it. And that's why he shares my commitment to do whatever it takes to keep it alive in our time," President Obama said this morning in announcing former Washington governor Gary Locke as his choice to lead the Commerce Department.

"It is the task of the Department of Commerce to help create conditions in which our workers can prosper, our businesses can thrive, and our economy can grow," he said. "That's what Gary did in Washington state, convincing businesses to set up shop and create the jobs of the 21st century -- jobs in science and technology; agriculture and energy -- jobs that pay well and can't be shipped overseas. That's what he did by establishing favorable markets abroad where Washington state's businesses could sell their products. That's what he did by unleashing powerful partnerships between state and local governments, between labor and business -- all with an eye toward prosperity and progress for all those in his state who had dreams of their own."

"The Department of Commerce plays a critical role in nurturing innovation, expanding global markets, protecting and managing our ocean fisheries, and fostering economic growth," Secretary-designate Locke said. "The Department of Commerce can and will help create the jobs and the economic vitality our nation needs."

He told the story of his family's journey to the United States and their struggle for success, and offered it is an example of American ingenuity and determination.

"My family's story is America's story," Locke said. "Our story is just one of hundreds of millions since the birth of our nation, of people coming from every part of the world in pursuit of the American Dream of freedom, hope and opportunity. In hard times, Americans have rallied together, sacrificed and even given their lives for our country, because they believe in the essential goodness and promise of America."

Metoclopramide Containing Drugs Now Require Warning and Mitigation Strategy by the FDA

FI - Fuerst Ittleman — 2009-02-27T00:00:00+01:00

Agency warns against chronic use of these products to treat gastrointestinal disorders

The U.S. Food and Drug Administration announced that manufacturers of metoclopramide, a drug used to treat gastrointestinal disorders, must add a boxed warning to their drug labels about the risk of its long-term or high-dose use. Chronic use of metoclopramide has been linked to tardive dyskinesia, which may include involuntary and repetitive movements of the body, even after the drugs are no longer taken.

Manufacturers will be required to implement a risk evaluation and mitigation strategy, or REMS, to ensure patients are provided with a medication guide that discusses this risk.

“The FDA wants patients and health care professionals to know about this risk so they can make informed decisions about treatment,” said Janet Woodcock, M.D., director of the FDA’s Center for Drug Evaluation and Research. “The chronic use of metoclopramide therapy should be avoided in all but rare cases where the benefit is believed to outweigh the risk.”

Current product labeling warns of the risk of tardive dyskinesia with chronic metoclopramide treatment. The development of this condition is directly related to the length of time a patient is taking metoclopramide and the number of doses taken. Those at greatest risk include the elderly, especially older women, and people who have been on the drug for a long time.

Tardive dyskinesia is characterized by involuntary, repetitive movements of the extremities, or lip smacking, grimacing, tongue protrusion, rapid eye movements or blinking, puckering and pursing of the lips, or impaired movement of the fingers. These symptoms are rarely reversible and there is no known treatment. However, in some patients, symptoms may lessen or resolve after metoclopramide treatment is stopped.

Metoclopramide works by speeding up the movement of the stomach muscles, thus increasing the rate at which the stomach empties into the intestines. It is used as a short-term treatment of gastroesophageal reflux disease in patients who have not responded to other therapies, and to treat diabetic gastroparesis (slowed emptying of the stomach’s contents into the intestines). It is recommended that treatment not exceed three months.

Metoclopramide is available in a variety of formulations including tablets, syrups and injections. Names of metoclopramide-containing products include Reglan Tablets, Reglan Oral Disintegrating Tablets, Metoclopramide Oral Solution, and Reglan Injection. More than two million Americans use these products.

Recently published analyses suggest that metoclopramide is the most common cause of drug-induced movement disorders. Another analysis of study data by the FDA showed that about 20 percent of patients in that study who used metoclopramide took it for longer than three months. The FDA has also become aware of continued spontaneous reports of tardive dyskinesia in patients who used metoclopramide, the majority of whom had taken the drug for more than three months.

FBI Takes Down Mexican Drug Traffickers in Sinaloan Cartel

FI - Fuerst Ittleman — 2009-02-25T00:00:00+01:00

Washington — Attorney General Eric H. Holder, Jr. announced the arrest of more than 750 individuals on narcotics-related charges and the seizure of more than 23 tons of narcotics as part of a 21-month multi-agency law enforcement investigation known as “Operation Xcellerator.” The Attorney General was joined in announcing the current results of Operation Xcellerator by DEA Acting Administrator Michele M. Leonhart.

52 individuals in California, Minnesota and Maryland were arrested as part of Operation Xcellerator, which targeted the Sinaloa Cartel, a major Mexican drug trafficking organization, through coordination between federal, state, and local law enforcement, as well as cooperation with authorities in Mexico and Canada.

The Sinaloa Cartel is responsible for bringing multi-ton quantities of narcotics, including cocaine and marijuana, from Mexico into the United States through an enterprise of distribution cells in the United States and Canada. The Sinaloa Cartel is also believed to be responsible for laundering millions of dollars in criminal proceeds from illegal drug trafficking activities. Individuals indicted in the cases are charged with a variety of crimes, including: engaging in a continuing criminal enterprise by violating various felony provisions of the Controlled Substances Act; conspiracy to import controlled substances; money laundering; and possession of an unregistered firearm.

“International drug trafficking organizations pose a sustained, serious threat to the safety and security of our communities,” said Attorney General Holder. “As the world grows smaller and international criminals step up their efforts to operate inside our borders, the Department of Justice will confront them head on to keep our communities safe.”

To date, Operation Xcellerator has led to the arrest of 755 individuals and the seizure of approximately $59.1 million in U.S. currency, more than 12,000 kilograms of cocaine, more than 16,000 pounds of marijuana, more than 1,200 pounds of methamphetamine, more than 8 kilograms of heroin, approximately 1.3 million pills of Ecstasy, more than $6.5 million in other assets, 149 vehicles, 3 aircraft, 3 maritime vessels and 169 weapons.

“We successfully concluded the largest and hardest hitting operation to ever target the very violent and dangerously powerful Sinaloa drug cartel,” said DEA Acting Administrator Michele M. Leonhart. “From Washington to Maine, we have disrupted this cartel’s domestic operations—arresting U.S. cell heads and stripping them of more than $59 million in cash—and seriously impacted their Canadian drug operations as well. DEA will continue to work with our domestic and international partners to shut down the operations of the Sinaloa cartel and stop the ruthless violence the traffickers inflict on innocent citizens in the U.S., Mexico and Canada.”

The 21-month investigation began shortly after the culmination of Operation Imperial Emperor, an investigation which resulted in the indictment of Organized Crime Drug Enforcement Task Force (OCDETF)-designated Consolidated Priority Organizational Target (CPOT) Victor Emilio Cazarez-Salazar, believed to be a command and control leader within the Sinaloa Cartel. CPOT Victor Cazarez-Salazar remains a fugitive.

As a result of today’s arrests, federal charges were unsealed against numerous individuals in California, Minnesota and Maryland. Cases resulting from Operation Xcellerator are being handled by prosecutors in 11 judicial districts, including the: Central District of California; Southern District of California, District of Minnesota; District of Maryland; Southern District of New York; District of Arizona; District of Massachusetts; Middle District of Pennsylvania; Northern District of Ohio; Western District of Texas; and Eastern District of California. Assistance for Operation Xcellerator was provided by the Criminal Division’s Narcotic and Dangerous Drug Section and Office of International Affairs. Additionally, local prosecutions will occur in Los Angeles, Orange County, Calif., and Riverside, Calif.

The investigative efforts in Operation Xcellerator were coordinated by the multi-agency Special Operations Division, comprised of agents and analysts from the DEA, FBI, U.S. Immigration and Customs Enforcement, Internal Revenue Service, U.S. Customs and Border Protection, U.S. Marshals Service, as well as attorneys from the Criminal Division’s Narcotic and Dangerous Drug Section. More than 200 federal, state, local and foreign law enforcement agencies contributed investigative and prosecutorial resources to Operation Xcellerator through OCEDTF.

Three Miami Physicians Charged in $10 Million Medicare Fraud Scheme

FI - Fuerst Ittleman — 2009-02-25T00:00:00+01:00

Six Miami-Dade County residents have been indicted in connection with an alleged $10 million Medicare fraud scheme operated out of Midway Medical, a Miami clinic that purported to specialize in treating HIV/AIDS patients, Acting Assistant Attorney General Rita M. Glavin of the Criminal Division and U.S. Attorney R. Alexander Acosta of the Southern District of Florida announced.

Carmen Lourdes del Cueto, M.D., 65, Roberto Rodriguez, M.D., 54, Carlos Garrido, M.D., 69, Gonzalo Nodarse, 38, Alexis Carrazana, 41, and Alexis Dagnesses, 44, were all indicted by a grand jury in Miami on February 12, 2009, for conspiracy to commit health care fraud. Del Cueto, Rodriguez, Garrido and Nodarse were also charged with conspiracy to launder health care fraud proceeds, as well as three counts each of substantive money laundering. The indictment seeks the forfeiture of assets from all named defendants.

According to the indictment, the three physicians, del Cueto, Rodriguez and Garrido, were part-owners of Midway Medical. Midway Medical purported to be an infusion clinic that specialized in providing infusions and injections to HIV-positive patients. The indictment alleges that the physicians ordered medically unnecessary infusions and injections, and falsify medical records to make it appear that the HIV services were necessary. The indictment also alleges that many of the infusions or injections were never actually provided.

The indictment also alleges that medical assistants Nodarse and Carrazana assisted the physicians in falsifying the medical records to make it appear that the services were needed. As part of the scheme, Dagnesses is alleged to have manipulated HIV-positive blood samples in order to obtain laboratory reports indicating that the patients had illnesses that they in fact did not have.

Del Cueto, Rodriguez, Garrido and Nodarse are further charged with distributing the proceeds of the fraud through a series of financial transactions involving more that $10,000 in tainted funds.

The indictment alleges that the physicians at Midway Medical billed more than $10 million to the Medicare program for services that were medically unnecessary and not actually provided between September 2002 and June 2005. During that time frame, Medicare paid more than $4.8 million on those fraudulent claims submitted by Midway Medical. If convicted on all charges, Del Cueto, Rodriguez, Garrido and Nodarse each face maximum prison sentences of 50 years. Carrazana and Dagnesses face 10 year maximum terms in prison.

An indictment is merely a charge and defendants are presumed innocent until proven guilty.

The case is being prosecuted by Trial Attorney John K. Neal and Deputy Chief Kirk Ogrosky of the Criminal Division’s Fraud Section. The case was investigated by the FBI and the Department of Health and Human Services, Office of Inspector General. The case was brought as part of the Medicare Fraud Strike Force, supervised by the Criminal Division’s Fraud Section and U.S. Attorney Acosta of the Southern District of Florida. Since strike force operations began in March of 2007, 107 cases with 196 defendants have been indicted. Collectively, these defendants fraudulently billed the Medicare program for more than $600 million.

The U.S. Treasury, FDIC, OCC, OTS and the Federal Reserve Release a Joint Statement

FI - Fuerst Ittleman — 2009-02-24T00:00:00+01:00

Washington, DC – The U.S. Department of the Treasury, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, the Office of Thrift Supervision, and the Federal Reserve Board recently issued the following joint statement:

"A strong, resilient financial system is necessary to facilitate a broad and sustainable economic recovery. The U.S. government stands firmly behind the banking system during this period of financial strain to ensure it will be able to perform its key function of providing credit to households and businesses. The government will ensure that banks have the capital and liquidity they need to provide the credit necessary to restore economic growth. Moreover, we reiterate our determination to preserve the viability of systemically important financial institutions so that they are able to meet their commitments.

"We announced on February 10, 2009, a Capital Assistance Program to ensure that our banking institutions are appropriately capitalized, with high-quality capital. Under this program, which will be initiated on February 25, the capital needs of the major U.S. banking institutions will be evaluated under a more challenging economic environment. Should that assessment indicate that an additional capital buffer is warranted, institutions will have an opportunity to turn first to private sources of capital. Otherwise, the temporary capital buffer will be made available from the government. This additional capital does not imply a new capital standard and it is not expected to be maintained on an ongoing basis. Instead, it is available to provide a cushion against larger than expected future losses, should they occur due to a more severe economic environment, and to support lending to creditworthy borrowers. Any government capital will be in the form of mandatory convertible preferred shares, which would be converted into common equity shares only as needed over time to keep banks in a well-capitalized position and can be retired under improved financial conditions before the conversion becomes mandatory. Previous capital injections under the Troubled Asset Relief Program will also be eligible to be exchanged for the mandatory convertible preferred shares. The conversion feature will enable institutions to maintain or enhance the quality of their capital.

"Currently, the major U.S. banking institutions have capital in excess of the amounts required to be considered well capitalized. This program is designed to ensure that these major banking institutions have sufficient capital to perform their critical role in our financial system on an ongoing basis and can support economic recovery, even under an economic environment that is more challenging than is currently anticipated. The customers and the providers of capital and funding can be assured that as a result of this program participating banks will be able to move forward to provide the credit necessary for the stabilization and recovery of the U.S. economy. Because our economy functions better when financial institutions are well managed in the private sector, the strong presumption of the Capital Assistance Program is that banks should remain in private hands."

Seafood Processing Company Receives FDA Injunction

FI - Fuerst Ittleman — 2009-02-23T00:00:00+01:00

Injunction is result of FDA enforcement action to protect seafood safety

At the request of the U.S. Food and Drug Administration, the U.S. District Court for the District of Minnesota entered an order of permanent injunction against a seafood processor in Minneapolis, Minn., and its co-owners.

The defendants are charged with repeatedly violating the Federal Food, Drug, and Cosmetic Act (FD&C Act) and the FDA's Hazard Analysis Critical Control Point (HACCP) regulations for seafood processors.

The court held that the evidence presented by the FDA showed a lengthy and undisputed history of violations from 2004 through at least early 2008, during which time the company did not have a HACCP plan that complied with the FDA's regulations. The FDA's HACCP regulations require that all seafood processors develop and implement adequate plans that identify all food safety hazards likely to occur for each kind of seafood product, and contain preventative measures that the processor can implement to control those hazards. The court held that failure to have a compliant HACCP plan established that the defendants violated the FD&C Act on countless occasions by handling food in a manner that rendered it adulterated.

"While there are no reported illnesses associated with consuming the company's Seafood products, we cannot allow a company to put the public's health at risk by not having adequate procedures and plans to produce safe food," said Michael Chappell, the FDA's acting associate commissioner for regulatory affairs. "The FDA will take action against companies and against their executives who violate the law and endanger public health."

The order of permanent injunction requires that either the FDA or a federal district court must first approve the defendants' HACCP plans before any of the defendants can resume operating any food-supply business, or any food-related business involving seafood.

Robert Khuzami Named SEC Director of Enforcement

FI - Fuerst Ittleman — 2009-02-20T00:00:00+01:00

Washington — The Securities and Exchange Commission Chairman Mary L. Schapiro announced that former federal prosecutor Robert Khuzami has been named Director of the Division of Enforcement.

Previously, Mr. Khuzami served as a federal prosecutor for 11 years with the United States Attorney's Office for the Southern District of New York. As Chief of that Office's Securities and Commodities Fraud Task Force for three years, Mr. Khuzami prosecuted numerous complex securities and white-collar criminal matters, including those involving insider trading, Ponzi schemes, accounting and financial statement fraud, organized crime infiltration of the securities markets, and IPO and investment adviser fraud. Mr. Khuzami most recently served as General Counsel for the Americas at Deutsche Bank AG.

"I'm pleased to have Rob join the SEC in such an important role at this crucial time," said Chairman Schapiro. "As we work to improve investor confidence in the markets, our enforcement efforts are vital. Throughout his career, Rob has demonstrated an unwavering commitment to prosecuting wrongdoers and protecting citizens. As a former federal prosecutor, Rob is well-suited to lead the SEC's Division of Enforcement as we continue to crack down on those who would betray the trust of investors."

Mr. Khuzami said, "As head of the SEC's Division of Enforcement, the staff and I will relentlessly pursue and bring to justice those whose misconduct infects our markets, corrodes investor confidence and has caused so much financial suffering. I am honored to join Chairman Schapiro, the Commissioners and the dedicated SEC staff in this critical effort."

Under Mr. Khuzami's supervision, the Task Force brought numerous noteworthy securities fraud prosecutions. In U.S. v. Lino and related cases, more than 100 defendants were arrested in an undercover sting operation, which constituted the largest simultaneous arrest in a securities fraud case in Department of Justice history. Charges in the cases included racketeering, securities fraud, a scheme to defraud union pension plans, extortion, and the solicitation of murder. The case concerned the publicly traded securities of 19 companies and the private placements of 16 other companies. Those charged included 11 members and associates of all five New York City crime families.

In another case, U.S. v. Bennett, 11 defendants were convicted of running a Ponzi scheme for fraudulently selling more than $1.0 billion worth of equipment leases and related debt instruments to more than 12,000 investors. Defendant Patrick Bennett was sentenced to 30 years in prison.

During his tenure with the Task Force, Mr. Khuzami significantly increased coordination and joint prosecution of securities fraud cases in the New York City area, including among the New York County District Attorney, the U.S. Attorney's Office for the Eastern District of New York, and the New York State Attorney General, as well as the SEC and FINRA.

Mr. Khuzami also prosecuted the "Blind Sheik" Omar Ahmed Ali Abdel Rahman in what was then the largest terrorism trial in U.S. history. Following a 10-month trial, 10 defendants were convicted of operating an international terrorist organization responsible for, among other things, the 1993 bombing of the World Trade Center, the assassination of Meir Kahane (the founder of the Jewish Defense League), and planning the virtually simultaneous bombing attacks on the FBI's New York Headquarters, the Lincoln and Holland Tunnels and the United Nations Headquarters. Mr. Khuzami also supervised various aspects of the initial investigations in New York following the terrorist attacks of Sept. 11, 2001.

Mr. Khuzami has been awarded the Attorney General's Exceptional Service Award (1996), given for "extraordinary courage and voluntary risk of life in performing an act resulting in direct benefits to the Department of Justice or the nation." He also has been awarded the Federal Law Enforcement Foundation's Federal Prosecutor Award (1997), and the Henry L. Stimson Award for Outstanding Public Service (2001).

Since 2004, Mr. Khuzami, 52, has been General Counsel for the Americas at Deutsche Bank. In that role, he has supervised more than 100 lawyers supporting the bank's various businesses in the Americas, and has overseen Americas-based litigation and regulatory enforcement actions. From 2002 to 2004, he served as Global Head of Litigation and Regulatory Investigations for the bank.

Mr. Khuzami served as a law clerk for the Honorable John R. Gibson of the U.S. Court of Appeals for the Eighth Circuit in Kansas City, Mo. He received his J.D. from the Boston University School of Law, and graduated magna cum laude from the University of Rochester, where he was elected to Phi Beta Kappa.

$4 Million Ponzi Scheme Halts Billion Coupons Inc

FI - Fuerst Ittleman — 2009-02-19T00:00:00+01:00

The Securities and Exchange Commission recently obtained a court order halting an alleged $4 million Ponzi scheme perpetrated by Hawaii-based Billion Coupons, Inc. ("BCI") and its CEO Marvin R. Cooper.

'Securities and Exchange Commission v. Billion Coupons, Inc. (aka Billion Coupons Investment) and Marvin R. Cooper, Civil Action No. CV 09-00068 JMS LEK (D. Haw.)'

The Complaint alleges that BCI and Cooper raised $4.4 million from 125 investors since at least September 2007 and specifically targeted members of the Deaf community in the United States and Japan.

The Complaint, filed in federal court in Honolulu, Hawaii, alleges that BCI and Cooper represented to the investors that their funds would be invested in the foreign exchange ("Forex") markets, that investors would receive returns of up to 25% compounded monthly from such trading, and that their investments were safe. According to the Complaint, BCI and Cooper actually used only a net $800,000 (cash deposits minus cash withdrawals) of investor funds for Forex trading, and they lost more than $750,000 from their Forex trading. The Complaint further alleges that BCI and Cooper failed to generate sufficient funds from their Forex trading to pay the promised returns and operated as a Ponzi scheme by paying returns to existing investors from funds contributed by new investors. The Complaint also alleges that Cooper misappropriated at least $1.4 million in investor funds to pay for a new home and other personal expenses.

The Complaint alleges that the defendants have violated the registration and antifraud provisions of the federal securities laws, Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933, and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. In its lawsuit, the Commission obtained an order temporarily enjoining BCI and Cooper from future violations of these provisions. The Commission also obtained an order: (1) freezing the assets of BCI and Cooper; (2) appointing a temporary receiver over BCI; (3) preventing the destruction of documents; (4) granting expedited discovery; and (5) requiring BCI and Cooper to provide accountings. The Commission also seeks preliminary and permanent injunctions, disgorgement, and civil penalties against both defendants. A hearing on whether a preliminary injunction should be issued against the defendants and whether a permanent receiver should be appointed is scheduled for March 2, 2009, at 9:00 a.m. HST.

The Commodity Futures Trading Commission ("CFTC") also filed an emergency action against BCI and Cooper, alleging violations of the antifraud provisions of the Commodity Exchange Act, and the State of Hawaii's Department of Commerce and Consumer Affairs ("DCCA"), Office of the Commissioner of Securities, issued a preliminary order to cease and desist against BCI and Cooper.

UBS Agrees to Pay $780 Million and Enters into a Deferred Prosecution Agreement

FI - Fuerst Ittleman — 2009-02-18T00:00:00+01:00

Washington – UBS AG, Switzerland’s largest bank, has entered into a deferred prosecution agreement on charges of conspiring to defraud the United States by impeding the Internal Revenue Service (IRS), the Justice Department announced.

As part of the deferred prosecution agreement and in an unprecedented move, UBS, based on an order by the Swiss Financial Markets Supervisory Authority (FINMA), has agreed to immediately provide the United States government with the identities of, and account information for, certain United States customers of UBS’s cross-border business. Under the deferred prosecution agreement, UBS has also agreed to expeditiously exit the business of providing banking services to United States clients with undeclared accounts. As part of the deferred prosecution agreement, UBS has further agreed to pay $780 million in fines, penalties, interest and restitution. Earlier today, the agreement was accepted in Ft. Lauderdale, Fla. by U.S. District Judge James I. Cohn.

A criminal information was unsealed today that charges UBS with conspiring to defraud the United States by impeding the IRS. According to court documents, in 2000, after it purchased the brokerage firm Paine Webber, UBS voluntarily entered into an agreement with the IRS that required UBS to report to the IRS income and other identifying information for its United States clients who held United States securities in a UBS account. Court documents allege that the agreement also required UBS to withhold income taxes from United States clients who directed investment activities in foreign securities from the United States. The information further asserts that, in order to evade those new reporting requirements, employees and managers within the cross-border business, with the knowledge of certain UBS executives, helped United States taxpayers open new UBS accounts in the names of nominees and/or sham entities. According to court documents, the assets of the individual’s accounts were then transferred to the newly created accounts, as to which the U.S. taxpayer would not be identified as a beneficiary.

The information asserts that this device was used by UBS to justify evading its reporting obligations and helped United States taxpayers to continue to conceal their identities and assets from the IRS.

The information also alleges that Swiss bankers routinely traveled to the United States to market Swiss bank secrecy to United States clients interested in attempting to evade United States income taxes. Court documents assert that, in 2004 alone, Swiss bankers allegedly traveled to the United States approximately 3,800 times to discuss their clients’ Swiss bank accounts. The information further alleges that UBS managers and employees used encrypted laptops and other counter-surveillance techniques to help prevent the detection of their marketing efforts and the identities and offshore assets of their U.S. clients. According to the information, clients of the cross-border business in turn filed false tax returns which omitted the income earned on their Swiss bank accounts and failed to disclose the existence of those accounts to the IRS.

In light of the bank’s willingness to acknowledge responsibility for its actions and omissions, its cooperation and remedial actions to date, and its promised continuing cooperation and remedial actions, the government will recommend dismissal of the charge, provided the bank fully carries out its obligations under the agreement.

In November 2008, UBS executive Raoul Weil was indicted by a federal grand jury in Fort Lauderdale and charged with conspiring to defraud the United States for his alleged role in overseeing the United States cross-border business. The district court recently declared him to be a fugitive.

In June 2008, former UBS private banker Bradley Birkenfeld pleaded guilty to a charge of conspiring to defraud the United States for similar conduct. Birkenfeld is scheduled to be sentenced on May 1, 2009. Also, in June 2008, the U.S. District Court in Miami authorized the Internal Revenue Service to serve upon UBS a so-called "John Doe" summons seeking records that would identify United States taxpayers with accounts at UBS in Switzerland who have elected to conceal the existence of their accounts from the IRS.

"Today’s agreement is but one milestone in an ongoing law enforcement effort to reassure hard-working and law-abiding taxpayers who pay their fair share of taxes that those who don’t will pay a heavy price," said John A. DiCicco, Acting Assistant Attorney General of the Justice Department’s Tax Division. "The veil of secrecy has been pulled aside and we will continue to aggressively pursue those who shirk their federal tax obligations or assist others in doing so."

"UBS executives knew that UBS’s cross-border business violated the law," said R. Alexander Acosta, U.S. Attorney for the Southern District of Florida. "They refused to stop this activity, however, and in fact instructed their bankers to grow the business. The reason was money - the business was too profitable to give up. This was not a mere compliance oversight, but rather a knowing crime motivated by greed and disrespect of the law."

First Monthly Bank Lending Survey Released by The U.S. Treasury Department

FI - Fuerst Ittleman — 2009-02-17T00:00:00+01:00

The first data offering health care professionals a better look into the genetic basis of certain types of adverse drug events was released by the FDA and the International Serious Adverse Event Consortium (SAEC). The data are focused on the genetics associated with drug-induced serious skin rashes, such as Stevens-Johnson syndrome and toxic epidermal necrolysis, and helps better predict an individual’s risk of developing these reactions.

Both skin conditions appear as allergic-like skin reactions associated with blistering and peeling, and are considered life-threatening. Medications causing these serious allergic reactions should be discontinued; and if such signs and symptoms are not quickly recognized, these reactions can be fatal.

“The SAEC has fulfilled a key goal of the Critical Path Initiative by providing the research community with public access to new genomic data on adverse drug events,” said Janet Woodcock, M.D., director, the FDA’s Center for Drug Evaluation and Research. “This consortium has taken a significant step forward by promoting open sharing of drug safety data. This type of cooperation has the potential to lead to more personalized approaches to medicine that can reduce a patient’s risk for experiencing an adverse drug event.”

The SAEC is a nonprofit partnership of pharmaceutical companies, the Wellcome Trust, and academic institutions focused on research relating to the genetics of drug-induced serious adverse events. The samples from the initial serious skin rash cases and matched controls were collected by GlaxoSmithKline plc, London, U.K., and donated to the consortium for this research.

By pooling these samples, the SAEC has identified numerous genetic associations that may contribute to an individual’s risk of developing serious drug-induced skin reactions. The data was compiled and analyzed just 16 months after the consortium was launched.

“We are pleased to be able to provide these invaluable data to the research community to both improve the productivity of drug development and to begin the critical process of developing validated biomarkers to forecast patients who may be at risk for drug-induced serious adverse events,” said Arthur Holden, founder and chairman of the SAEC. “We continue to believe the application of genomics to research the genetic basis of serious adverse events will prove to be one the most productive early applications of this technology.”

Researchers who enter in to a data use agreement can obtain free access to the data to generate custom data inquiries and obtain immediate results on the genetic basis of adverse drug events.

First Data on Genetic Basis of Adverse Drug Events Released by the FDA

FI - Fuerst Ittleman — 2009-02-16T00:00:00+01:00

Miami Customs and Border Patrol Seizes Counterfeit Designer Merchandise Valued at $5.7 Million

FI - Fuerst Ittleman — 2009-02-13T00:00:00+01:00

Miami — U.S. Customs and Border Protection import specialists at Miami International Airport seized a shipment of counterfeit merchandise. More than 25,000 shirts with a MSRP value of $5.7 million bearing trade marks of Armani, Dolce & Gabana, Dior and Hugo Boss were seized due to trademark violations.

CBP officers with the Trade Enforcement Team discovered the merchandise during a warehouse sweep of airline parcel shipments. The shipment, 212 cartons of bogus brand name shirts originated in China and were destined for the Dominican Republic.

“Our CBP officers are working diligently at our airports and seaports to protect businesses and consumers every day by combating the trade in counterfeit and pirated goods through an aggressive Intellectual Property Rights enforcement program,” said Harold Woodward, Miami director of field operations.

National statistics:

    The domestic value of counterfeit goods seized for Intellectual Property Rights violations in fiscal year 2008 increased by 38.7 percent to $272.7 million and increase of more than $72 million from FY 2007.
    The number of IPR seizures increased almost 10 percent, from 13,657 to 14,992.
    China was the top trading partner for IPR seizures with a domestic value of counterfeit goods of $221 million, accounting for 81 percent of the total value.
    IPR seizures of products posing safety and security risks increased by more than 124 percent in domestic value, from $27.8 million to $62.5 million.

$100 Million Fraud Scam Fugitive Arrested by Customs and Border Protection Agents

FI - Fuerst Ittleman — 2009-02-13T00:00:00+01:00

The U.S. Customs and Border Protection Agency announced the apprehension of a United States citizen wanted in California on a multi-million dollar mortgage and bank fraud scam.

Customs and Border Protection officers encountered Christopher Warren, a 26-year-old United States citizen from Sacramento, Calif., as he applied for admission into the United States as a passenger in a taxi cab at the Peace Bridge border crossing in Buffalo, N.Y. Warren presented a genuine U.S. passport in the name of Andrew Seagrave as proof of citizenship and identity. A primary name query by CBP revealed that the passport bearing the name Seagrave may have been obtained fraudulently and may be used by Christopher Warren, who has an active felony warrant in California. Warren was then escorted to CBP secondary for verification of his immigration status and verification of the active warrant.

Additional name and electronic fingerprint queries of Warren by CBP officers verified that he was in fact the subject of an active nation-wide no bond warrant issued February 4, by the United States District Court, Eastern District of California. The warrant charges Warren with bank fraud, mail fraud and financial crimes and being involved in a $100 million mortgage fraud scam. A search of Warren revealed $70,700 concealed in his shoes. CBP officers also found four one ounce pieces of pure platinum worth approximately $1000.00 each as well as approximately $1 million in Swiss Bank Certificates showing ownership of pure gold.

Warren admitted to Agents from Immigration and Customs Enforcement and CBP officers that he fraudulently obtained the presented U.S. passport. He further claimed that he chartered a flight from Las Vegas through Mexico and Ireland with a final destination of Lebanon. He was returning to the United States from Lebanon via Pearson International Airport in Toronto, Canada, where he paid a cab driver $300 to take him to the international border in Buffalo.

Warren was arrested by CBP and turned over to the custody of the Federal Bureau of Investigation for extradition to California. The currency and personal effects were seized and turned over to the FBI.

“This fugitive apprehension was the direct result of CBP’s efforts to secure our nations borders by increasing the number of name queries during primary inspections at land border crossings,” said James T. Engleman, CBP director of field operations for the Buffalo Field Office. “It further illustrates CBP’s ability to intercept criminals who obtain and use counterfeit documents or legitimate documents obtained by fraud.

SEC Files Settled Charges with ITT Corporation for Foreign Corrupt Practices Act Violations

FI - Fuerst Ittleman — 2009-02-12T00:00:00+01:00

The Securities and Exchange Commission filed a settled civil injunctive action in the U.S. District Court for the District of Columbia against ITT Corporation ("ITT"), a New York-based global multi-industry company, alleging violations of Section 13(b)(2)(A) and (B) of the Securities Exchange Act of 1934 ("Exchange Act"). Those provisions are part of the Foreign Corrupt Practices Act books and records and internal controls provisions. The Commission's complaint alleges that ITT's violations of the provisions resulted from payments to Chinese government officials by ITT's wholly-owned Chinese subsidiary, Nanjing Goulds Pumps Ltd. ("NGP"). From 2001 through 2005, NGP's illicit payments to employees of numerous Chinese state-owned entities ("SOEs") totaled approximately $200,000. The customers associated with those illicit payments generated over $4 million in sales to NGP, from which ITT realized improper profits of more than $1 million.

According to the Commission's Complaint:

ITT's subsidiary, NGP, is based in Nanjing, China and is part of ITT's Fluid Technology division. NGP distributes a variety of water pump products that are sold to power plants, building developers, and general contractors throughout China. During the years 2001 through 2005, NGP directly through certain employees, or indirectly through third-party agents, made illicit payments to SOEs to influence the purchase of NGP water pumps for large infrastructure projects in China. The projects were developed, constructed, and owned by SOEs ("project SOEs"). NGP made the payments to employees of Design Institutes, some of which were SOEs, that assisted in the design of the projects to ensure that the Design Institutes recommended NGP water pumps to the project SOEs. In at least one instance, a third-party agent made a payment directly to employees of a project SOE. The payments made by NGP were disguised as increased commissions in NGP's books and records. The improper NGP entries were consolidated and included in ITT's financial statements contained in its filings with the Commission for the company's fiscal years 2001 through 2005.

ITT did not make or keep books, records, and accounts which, in reasonable detail, accurately and fairly reflected the illicit payments by NGP employees and the related disposition of its assets. ITT also failed to devise and maintain a system of internal accounting controls sufficient to provide reasonable assurances that: (i) transactions were executed in accordance with management's general or specific authorization; (ii) transactions were recorded as necessary to maintain accountability for its assets; and (iii) access to its assets was permitted only in accordance with management's general or specific authorization.

ITT, without admitting or denying the allegations in the Commission's complaint, consented to the entry of a final judgment permanently enjoining it from future violations of Section 13(b)(2)(A) and (B) of the Exchange Act; ordering the company to pay disgorgement of $1,041,112, together with prejudgment interest thereon of $387,538.11; and imposing a $250,000 civil penalty, pursuant to Section 21(d)(3) of the Exchange Act. The Commission considered that ITT self-reported, cooperated with the Commission's investigation, and instituted subsequent remedial measures.

Kellogg Brown & Root Agrees to $402 Million Criminal Fine and Pleads Guilty to Foreign Bribery Charges

FI - Fuerst Ittleman — 2009-02-11T00:00:00+01:00

Enforcement Actions by DOJ and SEC Result in Penalties of $579 Million for KBR’s Participation in a Scheme to Bribe Nigerian Government Officials to Obtain Contracts

Wasington – Kellogg Brown & Root LLC (KBR), a global engineering, construction and services company based in Houston, pleaded guilty today to charges related to the Foreign Corrupt Practices Act (FCPA) for its participation in a decade-long scheme to bribe Nigerian government officials to obtain engineering, procurement and construction (EPC) contracts, Acting Assistant Attorney General Rita M. Glavin of the Criminal Division announced. The EPC contracts to build liquefied natural gas (LNG) facilities on Bonny Island, Nigeria, were valued at more than $6 billion.

KBR entered guilty pleas to a five-count criminal information in federal court in Houston before U.S. District Judge Keith P. Ellison. As part of the plea agreement, KBR agreed to pay a $402 million criminal fine.

According to court documents, KBR was part of a four-company joint venture that was awarded four EPC contracts by Nigeria LNG Ltd. (NLNG) between 1995 and 2004 to build LNG facilities on Bonny Island. The government-owned Nigerian National Petroleum Corporation (NNPC) was the largest shareholder of NLNG, owning 49 percent of the company.

KBR pleaded guilty to conspiring with its joint-venture partners and others to violate the FCPA by authorizing, promising and paying bribes to a range of Nigerian government officials, including officials of the executive branch of the Nigerian government, NNPC officials, and NLNG officials, to obtain the EPC contracts. KBR also pleaded guilty to four counts of violating the FCPA related to the joint venture’s payment of tens of millions of dollars in "consulting fees" to two agents for use in bribing Nigerian government officials.

KBR admitted that, at crucial junctures before the award of the EPC contracts, KBR’s former CEO, Albert "Jack" Stanley, and others met with three successive former holders of a top-level office in the executive branch of the Nigerian government to ask the office holder to designate a representative with whom the joint venture should negotiate bribes to Nigerian government officials. Stanley and others negotiated bribe amounts with the office holders’ representatives and agreed to hire the two agents to pay the bribes. According to court documents, the joint venture paid approximately $132 million to the first agent, a consulting company incorporated in Gibraltar, and more than $50 million to the second agent, a global trading company headquartered in Tokyo, Japan, during the course of the bribery scheme. KBR admitted that it had intended for these agents’ fees to be used, in part, for bribes to Nigerian government officials.

Under the terms of the plea agreement, KBR agreed to retain an independent compliance monitor for a three-year period to review the design and implementation of KBR’s compliance program and to make reports to KBR and the Department of Justice. KBR also agreed to cooperate with the Department in its ongoing investigations.

In a related criminal case, Stanley pleaded guilty in September 2008 to conspiring to violate the FCPA for his participation in the bribery scheme. Stanley’s sentencing is currently scheduled for May 6, 2009.

Today, KBR’s parent company, KBR Inc., and its former parent company, Halliburton Company, also reached a settlement of a related civil complaint filed by the U.S. Securities and Exchange Commission (SEC). The SEC's complaint charged KBR Inc. with violating the FCPA’s anti-bribery provisions, and charged KBR and Halliburton with engaging in books and records and internal controls violations related to the bribery. KBR Inc. and Halliburton jointly agreed to pay $177 million in disgorgement of profits relating to those violations.

"Today's guilty plea by KBR ends one chapter in the Department’s long-running investigation of corruption in the award of $6 billion in construction contracts in Nigeria. This bribery scheme involved both senior foreign government officials and KBR corporate executives who took actions to insulate themselves from the reach of U.S. law enforcement," said Acting Assistant Attorney General Rita M. Glavin of the Criminal Division. "The successful prosecution of KBR, and its agreement to pay a more than $400 million fine, demonstrates that no one is above the law, and that the Department is determined to seek penalties that are commensurate with, and will deter, this kind of serious criminal misconduct."

"This case, which represents the second largest fine ever in an FCPA prosecution, demonstrates the FBI’s continued commitment to aggressively investigate violations of this law," said Andrew R. Bland III, Special Agent in Charge of the FBI’s Houston Field Office. "We will continue to investigate these matters by working in partnership with other law enforcement agencies, both foreign and domestic, to ensure that corporate executives who have been found guilty of bribing foreign officials in return for lucrative business contracts, are punished to the full extent of the law."

"FCPA violations have been and will continue to be dealt with severely by the SEC and other law enforcement agencies," said SEC Chairman Mary Schapiro. "Any company that seeks to put greed ahead of the law by making illegal payments to win business should beware that we are working vigorously across borders to detect and punish such illicit conduct."

The criminal case is being prosecuted by Senior Trial Attorneys William J. Stuckwisch and Patrick F. Stokes of the Criminal Division’s Fraud Section, with investigative assistance from the FBI and IRS-Criminal Investigation in Houston. The Criminal Division’s Office of International Affairs provided substantial assistance in gathering evidence abroad and facilitating international cooperation. Significant assistance was provided by the SEC’s Division of Enforcement and by the authorities in France, Italy, Switzerland and the United Kingdom.

NYPD Officer Arrested in Connection with Money Laundering Scam

FI - Fuerst Ittleman — 2009-02-11T00:00:00+01:00

More than $230,000 cash deposited into 9 bank accounts

A New York City police department officer was arrested by U.S. Immigration and Customs Enforcement (ICE) agents and New York Police Department (NYPD) Internal Affairs detectives.

Yaniris Balbuena, 31, of Otisville, New York was charged by the U.S. Attorney for the Southern District of New York with conspiracy to commit money laundering. She has served as an NYPD officer since March 2000. During the time of the conspiracy, she was the common law wife of a known narcotics trafficker who operated in the Bronx, New York.

According to cooperating witnesses, during the time of the conspiracy Balbuena received thousands of dollars in drug proceeds and laundered the money by depositing the cash into bank accounts she controlled. Banking records for approximately nine accounts owned or controlled by Balbuena show that she received and deposited more than $230,000 of unexplained cash into her bank accounts, an amount which far surpassed her legitimate income.

"Seizing and disrupting large cash payments such as this is a vital part of our nation's fight to stop illegal drugs, and prevents drug traffickers from realizing profits," said Peter J. Smith, special agent in charge for ICE's Office of Investigations in New York. "ICE's unique investigative authority allows our special agents to track down these individuals and roll-up money laundering operations to substantially stem the flow of drug money."

In addition to ICE, the Strike Force is comprised of agents and officers of the U.S. Drug Enforcement Administration, the NYPD, the United States Internal Revenue Service Criminal Investigation Division, the Federal Bureau of Alcohol, Tobacco, Firearms and Explosives, the Federal Bureau of Investigation, the United States Marshals Service, the United States Secret Service and the New York State Police. It is partially funded by the New York/New Jersey High Intensity Drug Trafficking Area, which is a federally-funded crime fighting initiative.

U.S. Treasury Zero's in on Fernando Zevallos Gonzales Financial Network

FI - Fuerst Ittleman — 2009-02-10T00:00:00+01:00

Washington, DC - The U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) designated 26 companies and 14 individuals tied to Peruvian drug kingpin Fernando Zevallos Gonzales. This financial network, based in Peru, Panama and the British Virgin Islands, is now subject to financial sanctions pursuant to the Foreign Narcotics Kingpin Designation Act ("Kingpin Act").

"Our action demonstrates the importance of following the changing networks of major drug kingpins, like Fernando Zevallos," said OFAC Director Adam J. Szubin. "This designation identifies additional front companies and supports the Peruvian authorities' ongoing efforts to shut down the Fernando Zevallos criminal organization."

Fernando Zevallos Gonzales, currently imprisoned in Peru, has been a major figure in Peruvian narcotics trafficking activities since 1980. On June 1, 2004, President Bush named Fernando Zevallos Gonzales as a significant foreign narcotics trafficker pursuant to the Kingpin Act. At the same time, OFAC blocked, pending investigation, six companies and six individuals, including the Peruvian airline Aerocontinente S.A. On November 10, 2004, OFAC formally designated Aerocontinente S.A., which subsequently changed its name to Nuevo Continente S.A. Finally, on July 27, 2007, Fernando Zevallos Gonzales was indicted on money laundering and multiple violations of the Kingpin Act in the Southern District of Florida.

Despite Fernando Zevallos Gonzales's imprisonment, the OFAC sanctions investigation found that his financial network has continued to function under the leadership of key family members and close business associates. Key Fernando Zevallos family members designated today include his sisters Lupe Maritza Zevallos Gonzales, Sara Marilyn Zevallos Gonzales, Maria del Rosario Zevallos Gonzales, and Milagros Angelina Zevallos Gonzales; his brother Winston Ricardo Zevallos Gonzales; and his mother, Sara Maria Gonzales Garbancho de Zevallos. Key business associates designated today are Maximo Zadi Desme Hurtado, John Ivan Mejia Magnani, Ricardo Hernandez San Martin, Jose Manuel Mejia Regalado, Enrique Canaval Landazuri, Luis Miguel Carrillo Rodriguez, Percy Dangello Aranibar Castellanos, and Jorge Portilla Barraza.

The financial network designated today principally consists of aviation and travel companies in Peru, including four air transportation service companies - Aviandina S.A.C., Lasa Peru S.A.C., Vuela Peru S.A.C, and Transportes Aereos Unidos Selva Amazonica S.A.; three travel agencies - Peru Global Tours S.A.C., Oriente Tours S.R.L., and Representaciones Oriente Tours S.R.L. In addition, two aviation cleaning service companies - Lucero Import S.A.C. and Peru Total Market E.I.R.L., and two printing press companies - Editora Transparencia S.A. and Empresa Editora Continente Press S.A. were designated. Finally, the OFAC investigation targeted key offshore companies in Panama - Bellosom Enterprise Inc. and Blissey Panama Inc. and the British Virgin Islands - La Crosse Group Inc. that supported the Fernando Zevallos financial network.

This action is part of ongoing efforts under the Kingpin Act to apply financial measures against significant foreign narcotics traffickers worldwide. Including today's action, 580 entities and individuals associated with 75 drug kingpins have been designated pursuant to the Kingpin Act since June 2000.

Today's designation would not have been possible without key support from the Drug Enforcement Administration (DEA) Miami Field Division.

Today's action freezes any assets the designated individuals may have under U.S. jurisdiction and prohibits U.S. persons from conducting financial or commercial transactions involving those assets. Penalties for violations of the Kingpin Act range from civil penalties of up to $1,075,000 per violation to more severe criminal penalties. Criminal penalties for corporate officers may include up to 30 years in prison and fines of up to $5 million. Criminal fines for corporations may reach $10 million. Other individuals face up to 10 years in prison for criminal violations of the Kingpin Act and fines pursuant to Title 18 of the United States Code.

FDA Regulatory Meeting Regarding Users of Bisphenol A Containing Materials

FI - Fuerst Ittleman — 2009-02-09T00:00:00+01:00

The U.S. Food and Drug Administration and Health Canada’s Health Products and Food Branch hosted a meeting of representatives of U.S. and Canadian manufacturers and users of food packaging materials containing bisphenol A (BPA) to discuss what is being done to help minimize the levels of the chemical in food. The meeting was also part of FDA’s efforts to assist industry in its voluntary BPA reduction efforts.

The meeting provided a forum for:

Updating the industry on the FDA’s and Health Canada’s current activities and planned research to further assess the exposure to BPA and manage any potential risks from the chemical.
Describing manufacturers’ research activities, their work to refine packaging manufacturing practices to minimize migration of BPA into food, and recent marketplace developments.
Dialogue by the participants about further information from regulated industry stakeholders that would be helpful to the FDA and Health Canada in updating and refining their BPA risk assessments.
Dialogue about the different uses of BPA in food contact applications and the variation in availability of fully functional and evaluated alternative substances.
Discussion of the expectation that, because of availability of alternative products, polycarbonate baby bottles could cease to be a substantial component of the North American market in the future.

With regard to BPA generally, based on all available evidence, the consensus of regulatory agencies in the United States, Canada, Europe, and Japan is that the current levels of exposure to BPA through food packaging do not pose an immediate health risk to the general population, including infants and young children.

Health Canada’s Health Products and Food Branch has concluded that current dietary exposure to BPA through food packaging uses is not expected to pose a health risk to the general population, including newborns and infants. However, using a precautionary approach, the Government of Canada has taken steps to reduce exposure to BPA for infants and young children.

The FDA is currently preparing a detailed response to the October 2008 review by the FDA Science Board of the agency's draft assessment of the safety of BPA for use in food contact applications. The draft assessment focused on the concerns for developmental toxicity identified in recent assessments of BPA, including those of the National Toxicology Program and their expert panel. For example, the FDA is reviewing research about the potential low-dose effects of BPA and will carefully evaluate the findings of these studies.

International Business Opportunity Fraud Operation Connected to Miami

FI - Fuerst Ittleman — 2009-02-04T13:38:04+01:00

Washington » A U.S. citizen charged in connection with the operation of a series of fraudulent business opportunities was arrested in Costa Rica following his indictment by a Miami federal grand jury on Nov. 20, 2008, the Justice Department and the U.S. Postal Inspection Service announced.

Two men purported to sell beverage and greeting card business opportunities, including assistance in establishing, maintaining and operating such businesses. The charges form part of the government’s continued nationwide crackdown on business opportunity fraud.

The two defendants are alleged to have fraudulently induced purchasers in the United States to buy business opportunities in USA Beverages Inc., Twin Peaks Gourmet Coffee Inc., Cards-R-Us Inc., Premier Cards Inc., The Coffee Man Inc., and Powerbrands Distributing Company. According to the indictment, the business opportunities the defendants sold cost thousands of dollars each, and most purchasers paid at least $10,000. Each company operated for several months, and after one company closed, the next opened. The various companies used bank accounts, office space, a printing company and other services in the Southern District of Florida and elsewhere.

The defendants, using aliases, employed Voice Over Internet Protocol (VoIP) phone service and virtual offices in the U.S. to handle mailings to make it appear to potential purchasers that the defendants were located in the United States. In reality, the defendants operated out of Costa Rica to fraudulently induce potential purchasers in the United States to buy the purported business opportunities.

According to the indictment, the companies made numerous false statements to potential purchasers of the business opportunities. Among the misrepresentations alleged in the indictment are that the companies were based in and operated out of the United States; that purchasers would likely earn substantial profits; that prior purchasers of the business opportunities were earning substantial profits; that purchasers would sell a guaranteed minimum amount of merchandise, such as greeting cards and beverages; and that the business opportunity worked with locators familiar with the potential purchaser’s area who would secure or had already secured high-traffic locations for the potential purchaser’s merchandise stands. Potential purchasers also were falsely told that the profits of the companies were based in part on the profits of the business opportunity purchasers, thus creating the false impression that the companies had a stake in the purchasers’ success and in finding good locations.

In addition, potential purchasers were falsely told that the companies were established years earlier, had a significant number of distributors across the country, and had a track record of success. Potential purchasers also were told that they would receive their merchandise racks, merchandise and locations promptly, even though many purchasers received nothing at all. Potential purchasers were referred to references who, according to the indictment, told false tales of their success as business opportunity owners.

Gregory G. Katsas, Assistant Attorney General for the Justice Department’s Civil Division said "Business opportunity fraud is a very serious crime. The laws are designed to protect potential purchasers from being defrauded ... Fraudulent promoters typically use fake names and handpicked references. The law requires that a list of prior purchasers of business opportunities be provided by the company before entering into a contract with the prospective buyer ..."

"Business opportunity promoters need to realize that this type of fraud will be detected and prosecuted vigorously," said R. Alexander Acosta, U.S. Attorney for the Southern District of Florida. "This is true even if they operate from abroad, as the charges allege these defendants did."

Each of the companies was registered as a corporation and rented office space to make it appear to potential purchasers that its operations were fully in the United States.

USA Beverages was registered as a Florida and New Mexico Corporation and rented office space in Las Cruces, N.M.

Twin Peaks was registered as a Florida and Colorado corporation and rented office space in Fort Collins, Colo.

Cards-R-Us was registered as a Nevada corporation and rented office space in Reno, Nev.

Premier Cards was registered as a Colorado and Pennsylvania corporation and rented office space in Philadelphia.

The Coffee Man was registered as a Colorado corporation and rented office space in Denver.

Powerbrands was registered as a Wisconsin corporation and rented office space in Glendale, Wis., and Palm Beach Gardens, Fla.

"The United States Postal Inspection Service is dedicated to eliminating the use of U. S. Mail to commit fraud. This international and domestic investigation illuminates our resolve to protect the American public from investment scams," said U. S. Postal Inspector in Charge Henry Gutierrez.

The United States intends to seek the extradition of Pearson from Costa Rica.

Assistant Attorney General Katsas and U.S. Attorney Acosta commended the investigative efforts of the Postal Inspection Service. The case is being prosecuted by trial attorneys Alan Phelps and Jeffrey Steger with the U.S. Department of Justice Office of Consumer Litigation.

Former Sengal PM Charged with Money Laundering and Faces Fraud Charges

FI - Fuerst Ittleman — 2009-01-28T08:32:21+01:00

Ex-Prime Minister Macky Sall Implicated in a Money Laundering Network

DAKAR - The police in Sengal have summoned an opposing politician regarding suspicions of money laundering, a position which sheds light on an environment of harassment to those that oppose President Abdoulaye Wade.

The former Prime Minsiter of Sengal, Macky Sall, has been implicated in a "money-laundering network" according to the Interior Ministry. Sall, is also a former parliament speaker that parted with Wade to head up the Alliance for the Republic.

Though many turned up to support Sall in central Dakar as he was being questioned about the allegations, the police were forced to fire tear gas to stifle the crowds and deter rioting.

Critics believe that these charges are being brought about by Wade's Democratic Party (PDS) to sabbotage any threats that may stand against the quickly approaching municipal elections.

Wade's intentions are to have his son, Karim to become the successor to him to maintain his current grip of power.

The Interior Ministry recently stated that they had evidence that proved Sall was involved in a Sengalese money laundering network.

Sengal has previously done well with both economic and political stability due to it's thriving mining industries. However, it too has seen it's share of wealth from the Ivory Coast which has attracted many organizations and international businesses.

In the previous year, the rising pressures of social and economic tensions due to increased fuel and food costs have taken it's toll and the country has seen an increase in rioting and violence. The consensus amongst many is that Wade seeks to find guilt in any one that opposes his campaign by having them brought up on charges.

Regarding Karim Wade, Alioune Tine, the president of regional rights body RADDHO, told Rueters,

"There isn't a single 'eligible' person who might threaten the dauphin who is not currently facing legal charges,"

The spokesperson for Sall's councel, Moustapha Diop stated that the interrogation was nothing more than an attempt by Wade to have the opposing politician encarcerated during the election, and that they intend to fight the charges.

U.S. Treasury Invests $386 Million in 23 Banks

FI - Fuerst Ittleman — 2009-01-27T21:49:51+01:00

Washington - The U.S. Treasury Department announced investments of approximately $386 million in 23 banks across the nation as part of its Capital Purchase Program (CPP), a means to directly infuse capital into healthy, viable banks with the goal of increasing the flow of financing available to small businesses and consumers. With additional capital, banks are better able to meet the lending needs of their customers, and businesses have greater access to the credit that they need to keep operating and growing.

Since its inception in October 2008, Treasury has strengthened regional, small and large financial institutions as well as Community Development Financial Institutions through total CPP investments of $194.2 billion in 317 institutions in 43 states and Puerto Rico. To date, the largest investment was $25 billion and the smallest investment was approximately $1 million.

Among the most recent banks to receive Treasury funding through the CPP is the United Labor Bank, which provides cash management services to unions, multi-family lending and small commercial real estate loans throughout California.

"With the addition of this capital, we will expand our branch network from five branches to seven or eight in the Pacific Northwest. We also plan to expand our lending platform with the addition of residential loan products. Our lending goals for the 2009 business year will exceed $50 million of new loan growth," said Malcolm Hotchkiss, President and Chief Executive Officer, First ULB Corp and United Labor Bank.

Under the CPP, Treasury is purchasing up to a total of $250 billion of senior preferred shares from viable U.S. financial institutions. Institutions that participate in the CPP must comply with restrictions on executive compensation during the period that Treasury holds equity issued through the CPP and agree to limitations on dividends and stock repurchases. Banks participating in the CPP will pay the Treasury a five percent dividend on senior preferred shares for the first five years following the investment and a rate of nine percent per year thereafter. Banks may repay Treasury under the conditions established in the purchase agreements, and Treasury may sell these shares when market conditions stabilize.

FDA Strengthens Beef Consumer Safeguards

FI - Fuerst Ittleman — 2009-01-27T16:46:47+01:00

Regulations on Animal Feeds with Improved Safeguards Against BSE

The U.S. Food and Drug Administration recently issued a final regulation barring certain cattle materials from all animal feed, including pet food. The final rule further protects animals and consumers against bovine spongiform encephalopathy (BSE, also known as "mad cow disease").

"This FDA action serves to further protect the U.S. cattle population from the already low risk of BSE," said Dr. Bernadette Dunham, Director of FDA's Center for Veterinary Medicine. "The new rule strengthens existing safeguards."

The new measure builds on FDA's 1997 feed regulation, which prohibited the use of certain mammalian proteins in ruminant feed.

The materials that can no longer be used in animal feed are the tissues that have the highest risk for carrying the agent thought to cause BSE. These high risk cattle materials are the brains and spinal cords from cattle 30 months of age and older. The entire carcass of cattle not inspected and passed for human consumption is also prohibited, unless the cattle are less than 30 months of age, or the brains and spinal cords have been removed. The risk of BSE in cattle less than 30 months of age is considered to be exceedingly low.

The removal of high-risk materials from all animal feed will further protect against inadvertent transmission of the agent thought to cause BSE, which could occur through cross-contamination of ruminant feed (intended for animals with four-chambered stomachs, such as cattle) with non-ruminant feed or feed ingredients during manufacture and transport, or through misfeeding of non-ruminant feed to ruminants on the farm. The added measure of excluding high-risk materials from all animal feeds prevents any accidental feeding of such ingredients to cattle.

Today's regulation finalizes a proposed rule that the FDA issued for public comment in October 2005. The final rule is effective 12 months from today to allow the livestock, meat, rendering, and feed industries time to adapt their practices to comply with the new regulation. Under the new requirements of the final rule, renderers that process cattle not inspected and passed for human consumption must make available for FDA inspection their written protocols for determining the age of cattle and demonstrating that the brain and spinal cords of cattle have been effectively removed.

Scientific studies have linked BSE to cases of variant Creutzfeldt-Jakob Disease (vCJD) in humans, an invariably fatal disease that most likely results from human consumption of infectious material from cattle with BSE. Rules issued in 2004 prohibited specified risk materials from use in the human food supply. There have been no vCJD cases linked to consumption of U.S. beef and the risk of BSE among U.S. cattle is low.

Enormous Data Security Breach of Major Payment Processor

FI - Fuerst Ittleman — 2009-01-23T18:56:05+01:00

An Enormous Data Security Breach of Heartland Payment Systems may have revealed confidential information in tens of millions of debit and credit card transactions. In 2008, Princeton, N.J., based Heartland Payment Systems announced there was a security breach in their payment network. If that announcement is found to be accurate, this will be one of the largest data security breaches ever.

The president and C.F.O. of Heartland, Robert Baldwin stated that Heartland began receiving fraudulent reports from MasterCard and Visa in late 2008.

Heartland currently provides merchant payment processing for more than 250,000 companies. Furthermore, according to Baldwin, 40 percent of the transactions that Heartland processes are from small to medium-sized restaurants. However, he declined when asked to reveal the names of Heartland's larger or well known clients. In defense of his silence he argued that "It would be unfair to mention any one of his company's customers."

Baldwin continued: "No merchant of ours represents even [one-tenth of one percent] of our volume, and to put out any name associated with what is obviously an unfortunate incident is not fair ... Their customers might end up having their cards used fraudulently, but that fraud might turn out to have come from their store, or it might be from another Heartland store and no one will ever really know."

After informing the Secret Service, Heartland retained two forensic teams to further investigate the matter. However, Baldwin stated that the primary source of the breach was not revealed until mid January of 2009. The investigators found software inside Heartland's processing network that is designed to steal the payment card data during the payment process. This network is responsible for the processing of thousands of Heartland's clients.

Baldwin also stated that Heartland is unaware how long the data security breach has been in effect, how long the software was in place, how the software got into the network, or the volume of information that may have been compromised. This data security breach has exposed the names, credit and debit card numbers and expiration dates of an untold amount of payments made through Heartland's payment network. According to Baldwin: "At this point, though, we don't know the magnitude of what was grabbed ... The transactional data crossing our platform, in terms of magnitude... is about 100 million transactions a month." However, the company states that there was no merchant information, cardholder social security numbers or personal identification numbers (PIN's), telephone numbers or personal addresses revealed in the data security breach.

The information that was stolen includes the encoded data on the magnetic strips of debit and credit cards. Once thieves have this information they can then create counterfeit cards. In defense of the company's position Baldwin stated, "The nature of the [breach] is such that card-not-present transactions are actually quite difficult for the bad guys to do because one piece of information we know they did not get was an address ... the prospect of thieves using the stolen data to rack up massive amounts of fraud at online merchants is not impossible ... but much less likely."

In responding to whether Heartland will offer affected customers identity theft reconciliation protection or credit protection, Baldwin stated, "It was not appropriate ... Identity theft protection is appropriate when there is enough personal information lost that identity theft is possible ... In this case, the amount of information we know they did not get is long enough that except in very circumscribed cases identity theft is just not possible. At the same time, we recognize and feel badly about the inconvenience this is going to cause consumers ..."

In a statement made on behalf of Gartner Inc., Avivah Litan questioned the timing Heartland’s disclosure which, coincidentally, was during the inauguration of Barack Obama. Litan stated: "This looks like the biggest breach ever disclosed, and they're doing it on inauguration day? I can't believe they waited until today to disclose. That seems very deceptive." However, Baldwin defended the timing of the company's disclosure: "Due to legal reviews [and] discussions with some of the players involved, we couldn't get it together and signed off in time ... We considered holding back another day, but felt in the interests of transparency we wanted to get this information out to cardholders as soon as possible, recognizing of course that this is not an ideal day from the perspective of visibility."

Sarasota Man Charged with Securities Fraud by the Securities Exchange Commission

FI - Fuerst Ittleman — 2009-01-22T09:44:33+01:00

Washington - Recently the Securities and Exchange Commission filed securities fraud charges against Arthur Nadel with in connection with six hedge funds where he role acted as the principal investment advisor. According to the SEC’s complaint, Nadel mislead investors by providing false information about the funds’ historical returns and grossly overstated the value of the investments by nearly $300 million.

According to the SEC’s complaint, the funds appear to have total assets of less than $1 million. The complaint also alleges that Nadel recently transferred at least $1.25 million from two of the funds to secret bank accounts that he controlled. Nadel reportedly has been missing since Jan. 14, 2009. The SEC also alleges that two entities with which Nadel was associated, Scoop Capital LLC and Scoop Management, Inc., provided investment advice to all of the funds and also engaged in fraud as a result of Nadel’s actions. The SEC has obtained an emergency court order freezing defendants’ assets and appointing a receiver.

Director of the SEC’s Miami Regional Office, David Nelson, said,

"Investors should be able to rely on the truthfulness of an account statement and offering materials. Mr. Nadel’s alleged actions deceived investors, and we are seeking to hold him accountable for that misconduct."

The six hedge funds and two other investment management companies are charged as relief defendants in the SEC’s complaint. The SEC alleges that Nadel provided false and misleading information to the relief defendants for dissemination to investors through account statements and through offering memoranda. For example:

Offering materials for three of the funds represented that they had approximately $342 million in assets as of Nov. 30, 2008. In fact, those funds had a total of less than $1 million in assets at that time.

Offering materials for at least several of the funds represented monthly returns of around 11 to 12 percent between January and November 2008. In fact, at least three of the funds had negative returns during that time and another fund had lower than reported returns.

One investor in one fund received an account statement for November 2008 indicating that her investment was valued at almost $420,000. In fact, the entire fund had less than $100,000 at that time.

The SEC filed its emergency action in the U.S. District Court for the Middle District of Florida alleging that the defendants violated Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder and seeking, among other things, injunctions, disgorgement plus prejudgment interest, and civil money penalties.

United States District Judge Richard A. Lazzara granted all of the emergency relief requested by the SEC, including a temporary restraining order, asset freeze, and other relief against Nadel.

Without admitting or denying the allegations of the SEC’s complaint, Scoop Capital and Scoop Management consented to the entry of, among other things, preliminary injunctions, asset freezes, and the appointment of a receiver. The SEC is seeking disgorgement plus prejudgment interest against each of the relief defendants (advisers Valhalla Management, Inc. and Viking Management, LLC and hedge funds Scoop Real Estate, L.P., Valhalla Investment Partners, L.P., Victory IRA Fund, Ltd., Victory Fund, Ltd., Viking IRA Fund, LLC, and Viking Fund, LLC). Without admitting or denying the allegations of the complaint, they consented to asset freezes and the appointment of a receiver.

The SEC recognizes cooperation that has been provided by Scoop Capital and Scoop Management, and by the relief defendants. The SEC’s investigation is continuing.

Three Designated as FARC Commission by US Treasury

FI - Fuerst Ittleman — 2009-01-21T14:26:37+01:00

Washington, DC - Three international representatives of the Revolutionary Armed Forces of Colombia (FARC), a suspected narco-terrorist organization, were designated by the U.S. Department of Treasury's Office of Foreign Assets Control (OFAC). The OFAC action was taken pursuant to the Foreign Narcotics Kingpin Designation Act (Kingpin Act), which applies financial sanctions against significant foreign narcotics traffickers and organizations, such as FARC.

OFAC’s director, Adam J. Szubin, commented:

"Today's action exposes three additional members of the FARC's International Commission ... The FARC is one of the world's largest suppliers of cocaine and continues to be Colombia's most notorious and vicious narco-terrorist organization. This is the seventh action over the past year that OFAC has taken against this group and we will continue our efforts to financially isolate the FARC, its leaders and their support network."

The three individuals designated are identified as key members of the FARC's International Commission:

Omar Arturo Zabala Padilla (alias "Lucas Gualdron")
Maria Remedios Garcia Albert (alias "Soraya" and "Irene")
Vlaudin Rodrigo Vega (alias "Carlos Vlaudin")

These International Commission members represent the FARC in France, Italy, Switzerland, Spain, and Australia.

In 2003, President George W. Bush identified the FARC as a significant foreign narcotics trafficker, or "drug kingpin," pursuant to the Kingpin Act. This followed the State Department's designation of the FARC as a Specially Designated Global Terrorist in 2001 pursuant to Executive Order 13224, and its 1997 designation of the FARC as a Foreign Terrorist Organization. To date, OFAC has designated 77 individuals and 10 entities for their support to the FARC. This OFAC action continues ongoing efforts under the Kingpin Act to apply financial measures against significant foreign narcotics traffickers and their organizations worldwide. In addition to the 75 drug kingpins that have been designated by the President, 530 businesses and individuals have been designated by OFAC pursuant to the Kingpin Act since June 2000.

Today's action freezes any assets the designated individuals may have under U.S. jurisdiction and prohibits U.S. persons from conducting transactions or dealings in the property interests of the designees. Penalties for violations of the Kingpin Act range from civil penalties of up to $1,075,000 per violation to more severe criminal penalties. Criminal penalties for corporate officers may include up to 30 years in prison and fines of up to $5,000,000. Criminal fines for corporations may reach $10,000,000. Other individuals face up to 10 years in prison, and fines pursuant to Title 18 of the United States Code, for criminal violations of the Kingpin Act.

Risk Management Guidance Released by FFIEC on Remote Deposit Capture

FI - Fuerst Ittleman — 2009-01-20T00:00:00+01:00

Washington - Risk Management Guidance » The Federal Financial Institutions Examination Council (FFIEC) issued guidance for examiners, financial institutions, and technology service providers to identify risks, evaluate controls, and assess risk management practices related to remote deposit capture (RDC) systems.

RDC enables customers to make deposits from their homes or businesses instead of taking the deposits to their financial institutions. Digital information captured at the home or business is transmitted to the financial institution or its service provider for clearing and settlement. Financial institutions might also use RDC in their branches and automated teller machines (ATMs) to facilitate deposit processing.

When properly managed, RDC can reduce processing costs, support new and existing products by financial institutions, and accelerate the availability of customers’ funds. However, RDC also introduces new risks and increases existing risks in processing deposits originated by an institution’s commercial or retail customers, or by customers of other financial institutions domestically and abroad.

The guidance, Risk Management of Remote Deposit Capture, addresses the essential elements of RDC risk management: identifying, assessing, and mitigating risk, as well as measuring and monitoring residual risk exposure. The guidance also discusses the responsibilities of senior managers in overseeing the development, implementation, and operation of RDC in their financial institutions. Interagency RDC examination procedures will be published in an updated FFIEC Retail Payment Systems booklet scheduled for release in early 2009.

FDA Food Feed and Drug Industry Guidance to Improve Safety

FI - Fuerst Ittleman — 2009-01-19T18:50:22+01:00

Recently the FDA announced three guidances created to address safety concerns with FDA regulated products. Those guidances include:

Final Guidance for Industry on Voluntary Third-Party Certification Programs for Foods and Feeds
Draft Guidance for Industry on Submission of Laboratory Packages by Accredited Laboratories
Draft Guidance for Industry on Standards for Securing the Drug Supply Chain – Standardized Numerical Identification for Prescription Drug Packages

Jeffrey Shuren, M.D., J.D., associate commissioner for policy and planning stated,

"The guidance documents reflect the FDA's continued vigorous efforts to minimize the chances of unsafe products reaching American consumers,"

The Final Guidance for Industry on Voluntary Third-Party Certification Programs for Foods and Feeds discusses the attributes of a third-party certification program that would merit the FDA's confidence in the quality of the program's audit. The guidance, finalizing a draft published on July 10, 2008, is intended as one of the steps in the FDA's future recognition of voluntary third-party certification programs for foods and animal feeds. The document makes clear that it applies to any third-party certification body, including a private entity or a non-FDA federal, state, local or foreign regulatory body. Third-party certification programs can augment the ability of the FDA and the importing community to verify product safety.

The Draft Guidance for Industry on Submission of Laboratory Packages by Accredited Laboratories is intended to enhance the quality and reliability of test results submitted by importers to demonstrate that their products meet the FDA's requirements. The guidance advises importers how to use accredited -- rather than non-accredited -- laboratories and makes recommendations about the quality and type of test data and information that these laboratories should produce in support of test results submitted to the FDA. The draft guidance is also intended to reduce the likelihood that an importer will select only favorable test results to submit to the FDA.

The Draft Guidance for Industry on Standards for Securing the Drug Supply Chain – Standardized Numerical Identification for Prescription Drug Packages is the first of several guidances and regulations that the FDA may issue to implement Section 913 of the Food and Drug Administration Amendments Act of 2007. This guidance recommends the standards that industry should use for the identification of individual packages containing prescription drugs. These standards will facilitate the adoption of a uniform electronic track and trace system for prescription drugs to further improve their safety and security. Both draft guidances have a 90-day comment period.

All three guidances support the FDA's import strategy emphasizing prevention of harm, intervention when risks are identified, and rapid response after harm has occurred.

The FDA's guidance documents do not establish legally enforceable responsibilities. Instead, guidances describe the agency's current thinking on a topic and should be viewed only as recommendations, unless specific regulatory or statutory requirements are cited.

Genetically Engineered Animals Regulation the FDA's Proposal

FI - Fuerst Ittleman — 2009-01-16T11:12:54+01:00

Genetically Engineered Animals - The U.S. Food and Drug Administration issued a final guidance for industry on the regulation of genetically engineered (GE) animals under the new animal drug provisions of the Federal Food, Drug and Cosmetic Act (FFDCA). The guidance, titled "The Regulation of Genetically Engineered Animals Containing Heritable rDNA Constructs," clarifies the FDA's statutory and regulatory authority, and provides recommendations to producers of GE animals to help them meet their obligations and responsibilities under the law.

Genetic engineering generally refers to the use of recombinant DNA (rDNA) techniques to introduce new characteristics or traits into an organism. When scientists splice together pieces of DNA and introduce a spliced DNA segment into an organism to give the organism new properties, it is called rDNA technology. The spliced piece of DNA is called the rDNA construct. A GE animal is one that contains an rDNA construct intended to give the animal new characteristics or traits.

“Genetic engineering is a cutting edge technology that holds substantial promise for improving the health and well being of people as well as animals. In this document, the agency has articulated a scientifically robust interpretation of statutory requirements," said Randall Lutter, Ph.D., deputy commissioner for policy. “This guidance will help the FDA efficiently review applications for products from GE animals to ensure their safety and efficacy."

The FDA released the draft guidance in September 2008 with a 60-day public comment period, and received about 28,000 comments. The agency has summarized and responded to these comments on the Web site listed below.

The FDA's Center for Veterinary Medicine (CVM) has been working with developers of GE animals on both early stage and more mature applications.

“At this time, it is our intent to hold public scientific advisory committee meetings prior to making decisions on GE animal-related applications" said Bernadette Dunham, D.V.M., Ph.D., director of CVM.

The FFDCA defines “articles (other than food) intended to affect the structure or any function of the body of man or other animals" as drugs. An rDNA construct that is in a GE animal and is intended to affect the animal's structure or function meets the definition of an animal drug, whether the animal is intended for food, or used to produce another substance. Developers of these animals must demonstrate that the construct and any new products expressed from the inserted construct are safe for the health of the GE animal and, if they are food animals, for food consumption.

The guidance also describes the manufacturer's responsibility in meeting the requirements for environmental review under the National Environmental Policy Act.

Losses From Madoff Ponzi Scheme Closing in on HSBC and UBS for $3.2 Billion

FI - Fuerst Ittleman — 2009-01-15T12:23:54+01:00

Two of the largest banks in Europe, HSBC and UBS may soon find themselves responsible for approximately $3.2 billion from the Madoff Ponzi Scheme through their part as custodians of accounts in Luxemborg as well as Ireland.

Acting as custodians, the banks are held responsible for the management and oversight of the accounting of funds and any transfer of either cash or assets from or to investors. Several private institutions and individuals are reporting that HSBC and UBS alike failed to maintain their responsibility of the assets.

Furthermore, Bloomberg reported that legal counsel for retail and institutional investors that suffered losses, Isabelle Wekstein-Steg, wrote the regulator of Luxemburg with a request for the reimbursement of funds for her clients.

However, the bank's lawyer, Paul Mousel, claims that the banks had a small contribution as custodians and that the investors created an arrangement with Madoff which was specifically intended for investment with him.

Furthermore, the AFP claims that the Madoff Ponzi Scheme has also created a combined exposure to three Luxemburg investment funds totalling between five billion ($6.6 Billion) and seven billion euros, this information was cited from a Luxemburg parliament financial crisis commission.

Stock in HSBC plummeted 4.4 percent Thursday though UBS's rose 1.3 percent for European banks. If HSBC or UBS found responsible for the losses to the investors of the Madoff Ponzi Scheme, their exposure to the scheme would increase significantly.

Neither HSBC or UBS is readily accepting responsibility for the Madoff Ponzi Scheme. In a December statement, HSBC claimed that they have approximately $1 billion in exposure to the scandal.

Previously UBS claimed that they did not have any exposure to the Madoff Ponzi Scheme.

Rite Aid Corporation Agrees to $5 Million for Controlled Substances Violations

FI - Fuerst Ittleman — 2009-01-14T09:18:25+01:00

WASHINGTON - The Rite Aid Corporation (Rite Aid) and several of Rite Aid's subsidiaries will pay pay $5 million in a settlement for penalties regarding allegations of violating the Controlled Substances Act. Furthermore, Rite Aid has agreed to comply with the U.S. Drug Enforcement Administration regarding the compliance of requirements of the CSA and DEA regulations which prevent diversions of controlled substances. Rite Aid is also required to implement a regulatory compliance tracking system for psuedoephedrine and ephedrine - two substances that remain on the DEA's watched substances list for the production and manufacture of methamphetamine.

In a DEA investigation of 53 Rite Aid locations patterns of violations were uncovered revealing illegal activities dating back to 2004. Some of the Rite Aid violations include:

Rite Aid knowingly filled prescriptions for controlled substances that were not issued for a legitimate medical purpose pursuant to a valid physician-patient relationship in Kentucky and in New York.
Rite Aid did not notify the DEA properly regarding significant theft and loss of controlled substances, which allowed the diversion of controlled substances to continue and undermining DEA’s ability to investigate such thefts and/or losses in 22 pharmacies; five in Maryland, four in New York, and thirteen in California.
At pharmacies in California, Pennsylvania and Maryland, Rite Aid either failed to maintain or failed to furnish to the DEA upon request records that are required to be kept under the CSA for a period of two years.
At all 53 pharmacies in all eight states, Rite Aid failed to properly execute DEA forms used to ensure that the amount of Schedule II drugs ordered by Rite Aid were actually received.

Additionally, the DEA conducted accountability audits of controlled substances at 25 of the 53 stores investigated to determine whether Rite Aid could properly account for Schedule II and III controlled substances purchased and dispensed. The results of the accountability audits revealed significant shortages or surpluses of the most highly abused drugs, including oxycodone and hydrocodone products, reflecting a pattern of non-compliance with the requirements of the CSA and federal regulations that lead to the diversion of controlled substances in and around the communities of the Rite Aid pharmacies investigated.

High Fructose Corn Syrup » FDA Claims Is Not Natural

FI - Fuerst Ittleman — 2009-01-13T15:31:14+01:00

High Fructose Corn Syrup » Though the FDA has not formally announced their decision to define the term 'Natural', there has been a ruling in the case of High Fructose Corn Syrup, (HFCS) ... The FDA states that High Fructose Corn Syrup is not 'Natural'.

This is a major decision and may have serious implications for the food and beverage industry. Many companies rely upon consumer confidence by having 'natural' statements on the product labeling. The Corn Refiners Association, (CRA), is 'naturally' defending High Fructose Corn Syrup and claims that it is a natural sweetener. However, the Sugar Association, which is a competitor of the CRA, does not agree.

After being threatened with lawsuit, Kraft and Schweppes made the decision to have the 'natural' label removed from their products that contained High Fructose Corn Syrup.

The true question being considered is whether a chemically altered product derived from a natural product such as corn can be deemed natural after having had the chemical composition changed in the process of manufacturing.
FoodNavigator-USA.com previously inquired to the FDA the current condition for High Fructose Corn Syrup and whether it would be appropriate for the product to use the term 'natural'.

Geraldine June, from the Office of Nutrition Product Evaluation and Labeling stated,

"We would object to the use of the term 'natural' on a product containing HFCS ... "

She continued by saying ...

"The use of synthetic fixing agents in the enzyme preparation, which is then used to produce HFCS, would not be consistent with our policy regarding the use of the term 'natural'. Moreover, the corn starch hydrolysate ... used in the production of HFCS, may be obtained through the use of safe and suitable acids or enzymes. Depending on the type of acid(s) used to obtain the corn starch hydrolysate, this substrate itself may not fit within the description of 'natural' and, therefore, HCFS produced from such corn starch hydrolysate would not qualify for a 'natural' labeling term."

According to the FDA, the only requirement for a product labeled as containing 'natural' ingredients is that they may not contain artificial flavors, colors or any other types of additives.

In 2006 Harris Interactive took a survey which reported that 83 percent of the U.S. population would prefer the government define 'natural'. The root of this is based on the increase in consumer awareness to maintain all natural diets. In a survey taken by the Natural Marketing Institute in 2004, The amount of people that prefer consuming all natural food and beverages is 63 percent.

According to Mintel Global New Products reports, the term 'All Natural' was present in 2,617 food products and 542 beverages in the United States. That put the term 'All Natural' the third largest claim for foods and the fourth largest claim for beverages.

Taxpayer Advocate Urges Tax Simplification Due To Recession

FI - Fuerst Ittleman — 2009-01-13T12:14:14+01:00

WASHINGTON — Nina Olson, A National Taxpayer Advocate, produced an annual report requesting that Congress significantly simplify the tax code and recommended measures to reduce the tax burden on citizens that are struggling to pay their taxes.

Her report makes note of how serious the current financial conditions are for many Americans during this difficult economic period. Olson stated ...

“It is imperative for the IRS to consider the circumstances of taxpayers facing economic hardship before initiating enforcement actions”.

When the Internal Revenue Service contemplates an enforced collection action such as a levy, a lien or an asset seizure, both the tax code and IRS procedures require that IRS personnel take considration whether the collection action will impose an economic hardship on the taxpayer. Despite these requirements ...

“Current IRS guidance provides little direction to help IRS employees identify taxpayers who are experiencing economic hardship and prevent undue economic burden,” Olson stated.

Tax Simplification Is Needed

The report designates the complexity of the tax code as the most serious problem facing taxpayers. According to data compiled by Olson’s office, U.S. taxpayers and businesses spend about 7.6 billion hours a year complying with tax-filing requirements.

“If tax compliance were an industry, it would be one of the largest in the United States,” the report says. “To consume 7.6 billion hours, the ‘tax industry’ requires the equivalent of 3.8 million full-time workers ...”

The report estimates that U.S. taxpayers spend $193 billion a year complying with income tax requirements, an amount that equals 14 percent of the total amount of income taxes collected. One count shows the number of words in the tax code has reached 3.7 million, and over the past eight years, changes to the tax code have been made at a rate of more than one a day – including more than 500 changes in 2008 alone. Individual taxpayers now find the tax rules so overwhelming that more than 80 percent pay transaction fees to help them file their returns – about 60 percent pay a preparer to do the job and another 22 percent purchase tax software.

FDA Waiting for Permanent Drug Manufacturing Injunction to Actavis

FI - Fuerst Ittleman — 2009-01-12T09:29:37+01:00

The FDA released that it filed a consent and is awaiting the entry of a permanent injunction against Actavis Totowa, LLC, Actavis, Inc., and their officers, Sigurdur Oli Olafsson and Douglas Boothe, from manufacturing and distributing drugs at the Actavis Totowa facilities. The injunction is to remain in effect until Actavis Totowa meets compliance with the United States Good Manufacturing Practice (cGMP) requirements, and then seeks to obtains the Food and Drug Administration's approval to again manufacture and distribute drugs in to the U.S.

The defendants had to sign a decree that permits them to resume operations for only three categories of drugs. Only after an expert certifies that the drugs comply with the CGMP requirements will they then be able to:

A) Have the approval of the Food and Drug Administration.
B) The Food and Drug Administration inspects to confirm compliance with the law.

The decree also mandates the defendants to comply with the destruction of any and all remaining pharmaceuticals which were recalled from the months of April to July 2008, that they are currently in possession of.

Janet Woodcock, M.D., and director for the Center for Drug Evaluation and Research, FDA. stated,

"The FDA will not allow manufacturers to put the public's health at risk ... These unapproved new drugs have not undergone FDA review for safety and efficacy and may pose potential health risks ..."

The consent decree also authorizes FDA to order the defendants to cease operations in the event of future violations. It further subjects the defendants to liquidated damages of $15,000 per day if they fail to comply with any of the provisions of the decree, and to the payment of an additional $15,000 for each violation, up to $7 million per year.

"The FDA will carefully monitor the provisions of this injunction to ensure compliance ... "

said Michael Chappell, FDA acting associate commissioner, Office of Regulatory Affairs.

"Companies should know that FDA will investigate and take action against other marketers of unapproved drugs ... "

The government's complaint, filed Nov. 14, 2008, by the U.S. Department of Justice in the District Court for the District of New Jersey, alleged that the defendants violated the Federal Food, Drug, and Cosmetic Act by not complying with cGMP requirements and failing to obtain FDA's approval of some of its drugs, two requirements designed to ensure the safety, effectiveness, and quality of pharmaceutical products.

Dept of Commerce Finds China's Electrode Dumping Unfair

FI - Fuerst Ittleman — 2009-01-08T13:39:56+01:00

The Department of Commerce announced a decision for the antidumping investigation of graphite electrode imports from China. The graphite electrodes are normally used in the metallurgical industry within foundry or steel refinery operation.

Acting Assistant Secretary for Import Administration Ronald K. Lorentzen, said “Foreign exporters unfairly undercut their American competitors by dumping imports of graphite electrodes ... The Department of Commerce is committed to aggressively enforcing America's trade remedy laws in order to help achieve a level playing field for American manufacturers and workers.”

The Dept of Commerce concluded that Chinese export companies distributed the electrodes throughout the US at below their normal value. According to the Dept of Commerce, Chinese mandatory respondents, Fushun Carbon Co., Ltd., Fangda Carbon New Material Co., Ltd., Beijing Fangda Carbon Tech Co., Ltd., and Chengdu Rongguang Carbon Co., Ltd. (all part of the Fangda Group), received a final dumping margin of 159.64 percent. In addition, 11 Chinese respondents qualified for a separate rate of 132.90 percent. All other Chinese exporters, including mandatory respondent Fushun Jinly Petrochemical Carbon Co., Ltd., are subject to the China-wide rate of 159.64 percent.

The petitioners for this investigation are SGL Carbon LLC (Charlotte, N.C.) and Superior Graphite Co. (Chicago, Ill.).

Dumping occurs when a foreign company sells a product in the United States at less than normal value. As a result of this final determination, Commerce will instruct U.S. Customs and Border Protection to continue to suspend liquidation of entries of subject merchandise and to collect a cash deposit or bond based on the final rates.

If the U.S. International Trade Commission (ITC) makes a final determination that imports of graphite electrodes from China materially injure, or threaten material injury to, the domestic industry, Commerce will issue an antidumping duty order.

Fuerst Ittleman alliance with M Squared strengthens support for BioFlorida

FI - Fuerst Ittleman — 2009-01-05T07:56:28+01:00

Fuerst Ittleman, PL and M Squared Associates announce an alliance and mutual support of Florida’s vibrant biosciences and device community. By design, both firms have shared a common mission: professional services provided by industry leaders with broad talent, and pragmatic, cost-effective strategies to achieve our client’s corporate and professional goals.

Fuerst Ittleman employs experienced attorneys and consultants from varied medical technology industry and government backgrounds which provide steadfast navigation through what can be a complicated bureaucracy like the FDA. Problem solving, strategizing and being a pro-active partner with each client makes the difference, and in the world of medical devices, M Squared operates in the same way.

M Squared Associate’s expertise in medical devices covers all aspects of regulatory and clinical services. The staff is a gathering of former device industry leaders and FDA expertise who work collaboratively, focusing on clients as individuals and sharing responsibilities. Creating team environments to assure nobody is in it alone.

M Squared is incorporated in Washington, D.C. and located in Alexandria, Virginia. For more information please visit their website: www.msquaredassociates.com

Companies sharing common visions for success and who understand the complexities and challenges of working with a changing regulatory atmosphere create solid, reliable guidance to an industry so creative and so important to our world. As a supporter to the biosciences & medical technology companies supported by BioFlorida, Fuerst Ittleman and M Squared Associates are excited to announce this alliance.

BioFlorida is made up of a growing alliance of organizations and companies dedicated to advancing Florida’s life sciences community. Providing resources, supporting business and helping to create new business are some of the important services shared by its members and sponsors.

Madoff Ponzi Scheme » Mitchell Fuerst Shares His Insight

FI - Fuerst Ittleman — 2008-12-23T11:40:06+01:00

The Bernie Madoff situation is all over the news, and the cleanup will take years. Clients of Bernard L. Madoff Investment Securities may not get their money back for a long time.

Miami tax attorney Mitchell S. Fuerst was quoted in the Palm Beach Post in a December 19, 2008, article by Jeff Ostrowski. Mr. Fuerst stated that the victims of the Madoff fraud should file amended tax returns immediately. Investors who never received checks from Madoff but reported income from Madoff should seek tax refunds for the phantom income that they paid taxes on for the past three years, which is as far back as the IRS allows amended returns. “That’s the fastest money any of these people are going to see. Get past the shock and awe and get those tax returns in,” Mr. Fuerst said.

The tax rules also allow investors who fall prey to criminal theft by their investment advisors or brokers to claim a tax deduction for their losses. These rules are intended to help investors cheated through pyramid schemes, embezzlement, extortion, or robbery, and could possibly put hundreds of millions or billions of dollars back into the pockets of Madoff’s investors.

Mr. Fuerst has experience in persuading the IRS to allow favorable treatment of taxpayer losses sustained by investors who fall victim to Ponzi schemes. He is quoted in an article by Janet Novack in Forbes Magazine, “Make the IRS Share Your Pain,” published on June 7, 2004. The article details how two investors who placed $5.9 million into investments managed by Reed Slatkin, who orchestrated a $600 million Ponzi scheme, believed that their investment had grown to $11.2 million, when in reality all of their money was taken by Slatkin. The IRS took the position that their embezzlement losses were not deductible until the investors knew precisely how much of the investment they would get back. Mr. Fuerst successfully argued that the investors should be allowed to write off their expected losses by amending their tax returns for the three prior years, and later report any recovery of embezzled funds as income. “Delaying the embezzlement loss is unfair,” Mr. Fuerst said.

Do you need to speak with an attorney regarding the Madoff Ponzi Scheme?
Contact us today for a consultation about fraud-related tax losses.

Andrew S. Ittleman, Esq. to be speaker at the Synergizing AML Solutions: Confronting the Emerging Trends conference on May 21 to 22, 2007.

FI - Fuerst Ittleman — 2007-04-11T13:33:46+01:00

Andrew S. Ittleman, Esq. to be speaker at the Synergizing AML Solutions: Confronting the Emerging Trends conference on May 21 to 22, 2007. His subject and special expertise is Cashless Laundering: Safeguarding Your Institutions and Your Customers.

Synergizing AML Solutions: Confronting the Emerging Trends
May 21 to 22, 2007 • Doubletree Metropolitan Hotel - New York, NY

The issue of anti-money laundering has been emerging consistently for the past six years. It's no longer a local or state problem, rather an international one in response to the Global War on Terror. Our financial and banking institutions are under intense scrutiny to remain compliant with evolving laws and regulations. In order to avoid, criminal prosecution, fines and bad press the industry must remain on the forefront of AML compliance and due diligence.

Our conference will cover the specific emerging trends in money laundering. This event will give delegates the appropriate steps to identify their customers, remain in compliance of regulations and prepare for future risks. Hear from the leading experts from banks, law enforcement agencies, policy makers and the consulting community.

A sample of topics to be covered include:

Beating Terrorism, A Dollar At A Time: A Study of the New Trends and Solutions
Foreign Correspondent Money Laundering
The Rise of Trade Related Money Laundering
AML strategies for Hedge Funds
Using Technology as a tool to combat Money Laundering

Supreme Court to Review Punitive Damages

FI - Fuerst Ittleman — 2007-03-13T14:37:44+01:00

CORPORATE NEWS: Supreme Court to Review Punitive Damages

"Lawyers for Philip Morris are asking the [Supreme Court] to strike down the punitive damage award as constitutionally excessive and fundamentally unfair," the Christian Science Monitor reports. "The case, Philip Morris v. Mayola Williams, is being closely watched to see whether a majority of justices are willing to issue strict guidelines to identify when a punitive damage award is unconstitutionally excessive."

The Cato Institute has filed an amicus brief in the Philip Morris case, which applies economic analysis to the punitive damages judgment. It is joined by noted economists A. Mitchell Polinsky of Stanford and Steven Shavell of Harvard, who have authored a number of influential academic studies of punitive damages.

"Trial lawyers often argue that the logic of deterrence requires large companies to pay more punitive damages than smaller companies," Cato legal scholar Mark Moller, a co-counsel for Cato in the case, explains. "Cato's brief demonstrates that punitive damages can't be justified based on a corporate defendant's wealth. Because companies make judgments based on profits, large companies and small companies generally have every incentive to take precautions necessary to avoid harm to others when damages are equal to the harm they cause. Adjusting the damages upward because a company is large or wealthy does little to deter, spawning excessive litigation and creating a tax on corporate success."
http://www.cato.org/view_ddispatch.php?viewdate=20061031

Make the IRS Share Your Pain FORBES Interviews Mitchell S. Fuerst, Esq.

FI - Fuerst Ittleman — 2007-03-13T14:34:07+01:00

Investment Guide

Make the IRS Share Your Pain

Fire? Theft? Bum investments? Yes, you can deduct some losses. But the rules are tricky, and not all losses get equal treatment.

Between 1992 and 2000 Clearwater, Fla. tech entrepreneur Michael Kaplan and wife Anita poured $5.9 million into investments managed by Reed Slatkin, a founder of Internet provider EarthLink. They never withdrew a penny, using other funds to pay taxes on the interest, dividends and gains Slatkin reported to them. By 2000 their balance stood at $11.2 million--or so Slatkin said.

Slatkin is now doing 14 years in the federal pen for orchestrating a $600 million Ponzi scheme, and the Kaplans are doing time in tax purgatory. The Internal Revenue Service insists they and other victims can't deduct their losses until they know precisely how much of their investment they'll get back. But that will take years more, says bankruptcy trustee R. Todd Neilson, who is trying to recover $188 million in net "profits" paid to 470 Slatkin investors who cashed out early and redistribute them to 340 losers.

Mitchell Fuerst, the Kaplans' lawyer, argues the IRS should allow the Kaplans and others to write off their expected losses first and report any recovery later as income. "Delaying the embezzlement loss is unfair," he says. After Fuerst sued, the IRS coughed up $958,000 in taxes the Kaplans paid in 1997, 1998, and 1999 on phantom Slatkin profits they'll never receive. (All Neilson is trying to recover is their original investment.) But the Kaplans can't claim refunds for taxes paid on bogus profits from earlier years since taxpayers have only three years to amend their returns. Their only options for the early years involve a writeoff of some sort against later income--either a capital loss or a casualty (theft) loss. As you will see below, neither option is as good as undoing the old tax returns.

When you've got gains, Uncle Sam is an eager partner. And when you've got losses? Sometimes you can force him to share your pain and sometimes not. Here's a guide.

Disasters and Thefts
Line 19 of Schedule A for Itemized Deductions sounds simple: "Casualty or theft losses"--until you see the 39-line Form 4684 needed to claim this break. The first $100 of any loss isn't deductible, and each loss is further reduced by insurance proceeds you get and the salvage value of your property and is then limited to your basis in the property. (If you spent $200,000 on a beach house, that's all the loss you can claim, even if it was worth $1 million before the hurricane wrecked it.) Finally, all your casualty and theft losses are tallied up and are deductible only to the extent that they exceed 10% of your adjusted gross income.

You can't save up losses to meet the 10% test; usually you must claim a casualty loss in the year it occurs. A theft loss must be claimed in the year you discover it or, if you have a reasonable prospect of recovery, when you know the size of your loss--the issue in the Slatkin case. While the law discourages the deduction of small losses, it's generous for big ones. A loss that exceeds your income creates a "net operating loss," which--just like the net operating loss from a business--can be carried back to claim refunds for the past 2 to 5 years and carried forward for up to 20 years.

What's a casualty loss?

Damage due to an unforeseeable sudden event--fire, flood, earthquake, even vandalism. Routine wear and tear doesn't qualify in itself, but can cause a casualty. Last year a U.S. Tax Court judge allowed a woman to deduct $27,920 in water damage to her house and possessions caused by a deteriorated washing machine hose. Damage must also be permanent. In 2000 another judge denied a $751,427 casualty loss claimed by a couple who had agreed to pay $2.8 million for a Brentwood Park , L.A. house adjacent to O. J. Simpson's--ten days before the murder of Simpson's ex-wife, Nicole. The judge concluded that the media hordes and "looky loos" were a nuisance but caused only minor physical damage and a temporary decline in the house's value.

As a general rule you can claim a theft loss only if someone could be prosecuted under state law for stealing from you. If your broker gets sticky fingers, that's theft. But the Treasury recently warned taxpayers that--rumors to the contrary--they can't deduct a drop in the value of publicly traded stock as theft just because fraud caused the company to collapse.

Individual Retirement Accounts
John D. Stoller, an Encino, Calif. CPA, delivered some bad news recently to a couple who had lost $780,000 in IRA funds to a crooked trustee: They couldn't deduct one cent of that loss. "They were not happy campers," Stoller says. Remember the rule about not claiming a theft or casualty loss that's greater than your basis? Since the money in a traditional deductible IRA or a 401(k) has never been taxed as income, the taxpayer has no basis for the purpose of claiming either investment or theft losses. Unfair? Not really. Say someone hires you to do work and skips town owing you $50,000. That's theft. But the only break you get is that you aren't taxed on the $50,000 of never-collected income.

Losses in Roth IRAs, which are funded with previously taxed earnings, can be deducted--sort of. First you must liquidate all of your Roth accounts, and then, assuming what's left is less than you originally put in, you can claim the decline as a miscellaneous itemized deduction. But such deductions are only allowed to the extent they exceed 2% of your adjusted gross income and are denied completely in the alternative minimum tax calculation. Worse, if the money in the Roth came from the conversion of a traditional IRA and hasn't been in the Roth for a full five years, and if you're under 591/2, you'll owe a 10% early distribution penalty on the entire liquidated balance, points out Chicago tax lawyer Kaye Thomas, author of the Fairmark Guide to the Roth IRA.

Portfolios
You could write a book on all the weird rules that relate to capital gains and losses. Partly because there are different maximum rates on gains (short-term, 35%; long-term, 15%; collectibles, 28%; some real estate gains, 25%), there are messy rules on how to handle losses. Your losses in each category are first netted against your gains in that group and then against gains in the other groups. If you don't have enough of any gains to sop up your capital losses, $3,000 in capital losses a year can be used to offset ordinary income (say, from your salary). That stingy $3,000 is why a big Enron loser would claim a theft loss, if he could. Mutual fund holders get a bum deal. Funds must pass on their net taxable gains at the end of each year to all current shareholders (even to a holder who may himself be sitting on a loss in the fund). But they can't pass on losses. To realize a loss in a fund, you must sell your stake.

Annuities and Insurance
Insurance salesmen sometimes use this pitch: If you ditch that old dog of a variable annuity and buy a new one from me, you can deduct your loss on the old annuity above the line--that is before you calculate your AGI. Can you? There appears to be "substantial authority" for it, meaning if your accountant or lawyer recommends this in writing, you shouldn't get penalized, says CPA Robert S. Keebler of Virchow, Krause & Co. in Green Bay, Wis. But a safer approach, he says, is to claim the loss as a miscellaneous itemized deduction. Losses in whole and variable life insurance policies aren't deductible. And Keebler advises against a ploy he's heard pitched: exchange your losing life policy for an annuity and then claim a loss on ditching the annuity a year later.

Passive Activities
Since Congress cracked down on partnership tax shelters in the 1980s, losses from "passive activities"--business activities in which you don't materially participate--have been subject to their own complicated and restrictive rules. Generally, passive losses can be deducted only to the extent you have passive income from similar activities, and losses that can't be used are carried forward until you sell the investment. At that point they are first used to offset any gain from the sale and then, if you still have losses, can be claimed against your other income.

If you own rental real estate, and if your income isn't too high, there's a small exception: You can claim up to $25,000 a year in losses from a rental you manage from afar (say by approving new tenants and big expenditures), as long as your AGI (with some weird modifications) isn't more than $100,000. After that, your allowed loss is phased out and disappears at $150,000.

Bad Loans
If you've made a personal loan that can't be repaid, you can deduct it as a short-term capital loss on Schedule D in the year you conclude you'll never collect. But watch out. The IRS is suspicious that such bad loans are really disguised gifts, particularly if they were made to a relative or friend. So you'll need to document that this was an enforceable loan and you tried to collect. Cupertino, Calif. tax adviser Claudia Hill says she was about to challenge a client who wanted to claim a $120,000 loss this year for a bad loan to his son--until he showed her the claim he had filed against his own flesh and blood in bankruptcy court. (He'd lent his now-insolvent son the cash to start a business.) Funds you lend your kids for living expenses are never deductible.

Your House
Yes, your primary residence can go down in value as well as up. And no, you can't claim a deduction if you do sell it at a loss.

Taxpayers sometimes think they can convert an underwater home to a rental property and sell a few years later at a loss, notes Hill. No dice. Your basis in the new rental property, for the purpose of claiming a loss, is its market value at the time you converted the house to commercial use, less any depreciation you later claim. The basis for the purpose of a gain, however, is the amount you paid for it, minus depreciation. Thus if you have to move and believe the market will rebound, it might make sense to convert your primary home to a rental until its value does come back.

Shares Given Away
You can't pass on loss carryforwards to heirs other than a spouse. But if you have stock that is deep underwater and will probably rebound, the smart move is to give it to the kids while you're alive rather than to leave it as part of your estate. Say you bought the shares for $100,000 and they're now worth $20,000. If your kids inherit, their basis is $20,000 and they'll owe capital gains tax on any value above $20,000 when they sell. But if you give the shares to your kids, they take on your $100,000 basis in them--for the purposes of gains, although not for losses. They can't sell the stock for $20,000 and claim an $80,000 loss. But if the shares recover and they sell for $100,000 or less, they'll have no taxable gain.

Kiddies
Children under 14 with investment income of more than $1,600 are taxed at their parents' higher tax rate, and their income can in some cases be reported on their parents' return. But this "kiddie tax" only works against you--if your kids have capital losses, they must file separately and you can't use their losses. Still, like other taxpayers, kids can shelter up to $3,000 in ordinary income a year by using up their capital loss carryforward. So if they've built up capital losses, you may want to put taxable bonds, real estate investment trusts or other highly taxed ordinary income investments in their accounts.

Hobbies
You can use losses from an avocation to offset your main income, but only if you can convince the IRS (or a judge) that you intended to make a profit. Otherwise, you are subject to the hobby-loss rule: Your expenses for the venture are only deductible to the extent you have revenues from it and, moreover, must be claimed as miscellaneous itemized deductions (which are allowed only to the extent they exceed 2% of your AGI and disallowed in the AMT). You could end up paying taxes on profits when you really had losses. One way to avoid falling into the hobby hole is to show a profit in at least three years out of five; if you do, you're presumed to be running a business, and it's up to the IRS to prove it's a hobby. Don't cook your books, but take steps to limit expenses in the "profit" years--cut back on business travel, postpone buying equipment, use your home office for personal stuff, too, so it won't be deductible.

Even if you never show a profit, you can claim your losses if you can show you had good reason to believe you might make money--a chance for a substantial profit in a speculative venture is enough--and adjusted your strategy or quit the business when it didn't pan out. But don't expect IRS auditors to like these losses, particularly if the venture smacks of a luxury activity.

Example: The IRS asserted $216,000 in extra taxes and penalties against a New York gynecological oncologist who lost money on a racing boat he intended to enter in the 's Cup. Last year a Tax Court judge ruled for the doc, concluding he had reason to believe he might make a profit, had made money buying and selling other boats and was done in by factors beyond his control. But this year another judge denied a Washington, D.C.-area plastic surgeon $4.1 million in business loss deductions for a 108-foot yacht, supposedly built for Henry Ford II, that the surgeon bought and restored. The judge found this doctor had no experience in yachts and hadn't made a "good faith, reasonable investigation" into the deal's profit potential.

Gambling
Gambling losses can be deducted to the extent you have gambling winnings--but not against any other income. (Remember, casinos and tracks must report large winnings to the IRS.) This rule sounds fair, but is something of a sucker loss. First, unless you're a professional gambler, you must claim gambling losses as a special type of miscellaneous itemized deduction; they're not subject to the same 2% of AGI haircut as other miscellaneous itemized deductions are, but they still aren't allowed in the AMT. Second, you need to have substantiation of your losses--either a diary recording your wagers, wins and losses or some credible paper, such as casino credit card receipts or frequent gambler card records.

Janet Novack, FORBES, 06.07.04

Fuerst Ittleman Launches New Branding AND ... Fuerst Ittleman Strategic Alliances

FI - Fuerst Ittleman — 2007-03-13T14:32:04+01:00

Fuerst Ittleman Launches New Branding AND Strategic Alliances

On behalf of our firm I would like to take this opportunity to introduce our existing clients and future clients to Fuerst Ittleman. Our firm is pleased to announce and share our new branding with you.

Fuerst Ittleman, LLP brings together specialists in the fields of regulatory compliance (FDA, USDA, other federal regulatory agencies, Customs and international trade law), tax and tax litigation, anti-money laundering business compliance and litigation, corporate commercial transactions and complex civil and white collar litigation related to these areas.

The firm is located in Miami and represents both domestic and foreign clients before the governmental and international agencies that regulate and influence international commerce and in the Federal and State courts that adjudicate these matters.

The firm is dedicated to providing its clients with the highest quality professional service as efficiently and effectively as possible. We are recognized for delivering timely, practical, cost-effective advice and counsel. We are committed to establishing responsive, proactive relationships with our clients and remain dedicated to providing the close, personal attention necessary to ensure long-lasting relationships.

We look forward to continuing to provide Miami with the highest quality professional service as efficiently and effectively as possible.

Very truly yours,

Mitchell S. Fuerst, Esq.
Fuerst Ittleman
Managing Partner
1001 Brickell Bay Dr.
Miami, FL 33131
Telephone (305)350-5690
Facsimile (305)371-8989

www.fuerstlaw.com

Fuerst Ittleman Strategic Alliances

Fuerst Ittleman is proud to announce new strategic alliances that encompass a staff representing over 200 years of FDA experience. Together with Guidelines and FDA consulting Services, LLC we provide FDA legal services drawing upon our staff of lawyers and consultant who provide counseling and consulting in the areas of HACCP, cosmetics, medical devices and drugs. To learn more visit our link Strategic Alliances.

Our official website will launch within the next month and include a myriad of strategic alliances that make our firm the right choice for experience in FDA Regulatory, Tax, Litigation and Corporate matters. To receive information on our firm and our new website launch, please respond to contact@fuerstlaw.com or call us at 305.350.5690.

Congress Likely To Consider FDA Postmarket Prescription Drug Safety Surveillance in 2007

FI - Fuerst Ittleman — 2007-03-13T13:50:42+01:00

REGULATORY NEWS: FDA Capitol Hill Watch | Congress Likely To Consider FDA Postmarket Prescription Drug Safety Surveillance in 2007

FDA's tracking system for reporting adverse side effects of approved prescription medications is likely to be among a series of safety issues considered by Congress in 2007, when FDA reform legislation will be on the agenda, the Newark Star-Ledger reports (Cohen, Newark Star-Ledger, 10/30). A Government Accountability Office report released in April found that FDA "lacks a clear and effective process" for tracking safety issues related to approved drugs (Kaiser Daily Health Policy Report, 4/24). A group of physicians in a recent Archives of Internal Medicine article came to similar conclusions, while an Institute of Medicine report released in September reported similar findings and made recommendations for improvement. Under the current system, drug makers are required to report serious adverse events to FDA within 15 days of discovery.

In addition, manufacturers must report other problems quarterly for the first three years upon market arrival and annually thereafter. Hospitals, physicians and individuals also can submit reports. Curt Furberg, a member of the FDA's drug safety and risk management advisory committee, estimates that reported events represent only about 10% of the serious side effects that occur annually and only about 1% of total side effects. Arthur Levin, director of the Center for Medical Consumers and the consumer representative on the FDA's drug safety advisory committee, said FDA's reporting system "wait[s] for problems to come in as data, not looking proactively, and there is vast underreporting, which everyone acknowledges." He added that FDA needs "real-time monitoring of large populations that are real users of drugs" (Newark Star-Ledger, 10/30). http://www.kaisernetwork.org/daily_reports/rep_index.cfm?DR_ID=40746

Financial Crimes Enforcement Network

FI - Fuerst Ittleman — 2007-03-13T13:44:14+01:00

AML NEWS: Financial Crimes Enforcement Network, Federal Deposit Insurance Corporation, and New York State Banking Department Assess Civil Money Penalty Against Israel Discount Bank of New York

The Financial Crimes Enforcement Network (FinCEN), Federal Deposit Insurance Corporation (FDIC), and the New York State Banking Department (NYSBD) today announced the assessment of civil money penalties of $12 million against Israel Discount Bank of New York for violations of federal and state anti-money laundering laws and regulations. This is in addition to the $8.5 million already paid to the New York District Attorney's Office pursuant to an agreement reached with the bank in December 2005. Israel Discount Bank of New York , without admitting or denying the allegations, consented to payment of the civil money penalties.

In taking these actions, FinCEN, FDIC, and NYSBD determined that Israel Discount Bank of New York failed to implement an adequate Bank Secrecy Act/anti-money laundering program, with internal controls and appropriate measures to detect and report money laundering and other suspicious activity in a timely manner. The agencies found that the deficiencies in the Bank Secrecy Act/anti-money laundering program included failure to establish appropriate, specific due diligence policies, procedures and controls reasonably designed to detect and report instances of money laundering through its correspondent accounts for non-U.S. persons, as required by section 312 of the USA PATRIOT Act and its implementing regulations.

"This joint civil money penalty is an example of extremely effective collaboration among federal and state agencies," said FDIC Chairman Sheila C. Bair. "The significant penalty assessed in this case emphasizes the importance for banks of having strong internal controls to assure compliance with anti-money laundering regulations and to detect and report potential money laundering or other illicit financial activities."

"I am very pleased we were able to reach a settlement in this case," said New York State Superintendent of Banks, Diana L. Taylor. "The size of the settlement should serve as a reminder to all financial institutions that detecting and reporting violations of Bank Secrecy Act and anti-money laundering regulations is necessary if we are to keep our financial system free from fraud and abuse."

"To be effective in combating illicit finance, federal and state agencies depend on our partners in the banking industry," noted FinCEN Director Robert W. Werner. "A solid anti-money laundering program not only enables banks to protect themselves, but also serves to generate information on illegal activity that can be used for investigative and regulatory purposes. When a program is deficient we have lost valuable data that may have been crucial to the protection of other institutions and individuals."

Copies of the agencies' enforcement actions are attached.

Attachments:

Federal Deposit Insurance Corporation
Order to Pay Civil Money Penalty
http://www.fdic.gov/bank/individual/enforcement/2006-10-00.pdf

New York State Banking Department
Order of Assessment of a Civil Money Penalty
http://www.banking.state.ny.us/ea061020.pdf

Financial Crimes Enforcement Network
Assessment of Civil Money Penalty
http://www.fincen.gov/fincen_assessment_of_civil_money_penalty.pdf

Media Contacts:

FDIC Tibby Ford 202-898-6993
FinCEN Steve Hudak 703-905-3770
NYSBD Jim Fuchs 212-709-1691

Contemporary Issues from the FDA: Food and Drug Administration Seminar

FI - Fuerst Ittleman — 2007-03-13T13:26:49+01:00

Bioflorida's South Florida Bioscience Consortium and
the South Florida Manufacturers Association present…

Contemporary Issues from the FDA:
Food and Drug Administration Seminar

Meet and Ask Questions of FDA Inspector, Legal, Regulatory and Compliance Experts

FDA inspectors, regulatory and compliance experts will gather for an exciting and dynamic panel discussion on the latest FDA issues affecting life science companies - including those in the medical device, pharmaceutical, biologics and biotech industry.

Panelists include:

LCDR Ileana Barreto-Petitt, FDA Investigator
Loui Silvestri, Ph.D., President, AccuReg, regulatory, compliance and technical consulting firm serving the healthcare manufacturing industries
David Simmons, M.S., ASQ Certified Quality Auditor, Senior Manager Quality Training Teva,
Stanley Satz, President, Bio-Nucleonics, Inc.
And other experts!

Plus:

The Florida Research Consortium and the iCoast are pleased to host a kick-off reception for their 4th Annual Florida Tech Transfer Conference at The Doral Golf Resort and Spa in Miami, Florida on May 29-30, 2007.

This Conference is the premier event for the exhibition of the state’s top research university technologies available for commercialization and licensing. This year's Conference theme - Translational Research: From Bench to Bedside - will offer significant opportunities for investors, entrepreneurs, and corporations alike.

Time:
4:30 - 5:00 pm - Program registration, refreshments and networking
5:00 - 6:30 pm - Program / Panel Discussion
6:30 - 7:30 PM - Florida Research Consortium / iCoast Reception

SFBC Meeting Note:
4:00 - 4:30 pm - South Florida Bioscience Consortium General Meeting
(Program guests are welcome to come early and attend this meeting.)

Registration:
Register for this event on the SFBC web site (Click Here)
For additional information contact Joseph White (561-626-1864 or jw@josephwhite.com)

BioFlorida and SFMA Members: No Charge
Non-Members: $15 (cash, check or credit card at the door)

Venue:
Nova Southeastern University, Health Professions Division,
Terry Building, 5th Floor Chancellor’s Dining Room

Directions:
Turnpike or I-95 to 595 West; exit at University Drive (south), left at NSU Drive (1 block south of 30th Street. The Terry Building is the first building on the left inside the main entrance. There is free parking in the adjacent parking structure.

FI - Fuerst Ittleman

Mitchell Fuerst Presents Webinar on Year-End Tax Planning for CFOs

Mitchell Fuerst Featured Speaker at Upcoming Stem Cell and Age Management Medicine Conference and Meeting

Tea Party May Throw Kink Into GOP Trade Policies

Miami Tax Preparer Found Guilty for Tax Fraud » Making Fraudulent Tax Returns

Swiss Banking After the UBS Scandal » Is Swiss Banking Secrecy Over?

UBS Conviction for Tax Fraud by Filing False Tax Return

U.S. Senate Amends Offshore Tax Avoidance to Money Laundering Criminal Statute

The FDA Warns Cheerios© Makers to Cease Cholesterol Claims

Modifying Agricultural Estate Tax Law In This Tough Economy

President's FDA Budget Invests Substantially in Food and Medical Product Safety for 2010

The Treasury Capital Assistance Program and the Supervisory Capital Assessment Program

IRS Voluntary Disclosure Program » New Voluntary Disclosure Guidance

$2 Billion in Florida Medicare Fraud Calls for Congressional Oversight

Economic Recovery Tax Relief Act: Amending the IRS Code for Permanent Tax Incentives

Could the Food and Drug Administration Globalization Act have Stopped the Salmonella Outbreak?

Miami Trader Gulity of Mail, Wire and Securities Fraud for Hedge Fund Conspiracy

FBI Anti Trust Division Cracks Down on Asian LCD Price Fixing Fraud

FinCEN Guidance on the Definition of Money Transmitter for Currency and Commodity Brokers

Tax Avoidance in Europe May Call for Regulatory Tax Reform

Swine Influenza Press Briefing » White House » CDC » Dept Homeland Security

Human Stem Cell Research Guideline Released by the National Institute of Health

SEC Enforces Securities Law Violations to Investment Adviser Offering Fraudulent Hedge Funds

Florida Mortgage Fraud Fugitive to Face Federal Charges for Fraudulent Mortgage Loans

IRS Tax Break Advice From American Recovery Reinvestment Act

HHS Releases Guidance for Securing Health Information and Preventing Harm from Breaches

Is the End Near for the Pharmaceutical Search Marketing Industry?

Fuerst Ittleman Sponsors Fourth Annual Latin America Conference

Fourth Annual Latin America Conference

Wednesday, April 22, 2009JW Marriott Miami

Tax Fraud Charges Announced Against DCPBA Contractor

Treasury Department Requests Federal Beneficiaries to Elect Direct Deposit

FDA Bars Two Companies for Distributing Unapproved Drugs

USDA Loan Assistance Repayment Program for Commodities

DOJ Tax Division Assistant Attorney General Nominee Announced by Obama

UBS Tax Fraud Accountant Hides Assets Files False Tax Return

Offshore Tax Compliance » Tax Enforcement » Joint Committee on Taxation

Pistachio Salmonella Contamination » Pistachio Product Recall

Ponzi Scheme Crackdown SEC Stops a Multi Million Dollar Scam

Tax Time 09 Depreciation and Section 179 Expense for Businesses

Money Laundering in Venezuela Parallel Market

Serological Test Guidance for Human Cell Tissue Based Products

B. Risk of T. cruzi Infection from Transfusion of Whole Blood and Blood Components

C. Risk of T. cruzi Infection to Recipients of Donated HCT/Ps

B. Donor Testing

Clean Plant Memorandum Signed by USDA Network

Regulatory Reform Framework Outlined by US Treasury

DOJ Provides Resources to Fight Mexican Drug Cartels

US Treasury Details on Public Private Partnership Investment Program

Tainted Diet Drug Ingredients Discovered by FDA

U.S. International Trade in Goods and Services January 2009

Investigational New Drug Multaq (dronedarone) Receives FDA Advisory Approval

Florida Trader Pleads Guilty in Manipulation Scheme

Shulman's Testimony on Ponzi Schemes and Offshore Tax Evasion

New Tax Law Extends Net Operating Loss Carryback for Small Businesses

First DNA Test Approved for Papillomavirus by FDA

Customs Agents Discover 150 Pounds of Marijuana in New Mexico

FDA Guidance for Manufacturers of Peanut Products

Investigational New Drug Application Allows Patients with ALS to Iplex

Hitachi Pleads Guilty in LCD Price Fixing Conspiracy » Agrees to $31 Million Fine

Money Laundering, Bribery, Fraud » Public Corruption in Alaska

Early Filing Taxpayers Banking Larger Refunds in 09

$30 Million "Fund of Funds" Investment Scheme Halted by the SEC

Recent Supreme Court Ruling Rejects Limits on Drug Related Injury Lawsuits

Florida Stockbroker Charged with $4.7 Million in Securities Fraud by SEC

FDA Warns About Risk of Wearing Medicated Patches During MRIs

Colombian Paramilitary Leader Extradited to the United States to Face U.S. Drug Charges

U.S. Treasury and Federal Reserve Board Announce Participation in AIG Restructuring Plan

FDA Files Permanent Injunction Against KV Pharmaceutical Company

Secretary Locke Speaks About the Department of Commerce's Role on the Economy

Metoclopramide Containing Drugs Now Require Warning and Mitigation Strategy by the FDA

FBI Takes Down Mexican Drug Traffickers in Sinaloan Cartel

Three Miami Physicians Charged in $10 Million Medicare Fraud Scheme

The U.S. Treasury, FDIC, OCC, OTS and the Federal Reserve Release a Joint Statement

Seafood Processing Company Receives FDA Injunction

Robert Khuzami Named SEC Director of Enforcement

$4 Million Ponzi Scheme Halts Billion Coupons Inc

UBS Agrees to Pay $780 Million and Enters into a Deferred Prosecution Agreement

First Monthly Bank Lending Survey Released by The U.S. Treasury Department

First Data on Genetic Basis of Adverse Drug Events Released by the FDA

Wednesday, April 22, 2009
JW Marriott Miami