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IRS’ Dirty Dozen Tax Scams of 2017

On February 17, 2017, the Internal Revenue Service announced the conclusion of its annual “Dirty Dozen” list of tax scams. The annual list highlights various schemes that taxpayers may encounter throughout the year, many of which peak during tax-filing season. Taxpayers need to guard against ploys to steal their personal information, scam them out of money or talk them into engaging in questionable behavior with their taxes.

“We continue to work hard to protect taxpayers from identity theft and other scams,” said IRS Commissioner John Koskinen. “Taxpayers can and should stay alert to new schemes which seem to constantly evolve. We urge them to do all they can to avoid these pitfalls – whether old or new.”

Perpetrators of illegal schemes can face significant fines and possible criminal prosecution. IRS Criminal Investigation works closely with the Department of Justice to shut down scams and prosecute the criminals behind them. Taxpayers should keep in mind that they are legally responsible for what is on their tax return even if it is prepared by someone else.

Here is a recap of this year’s “Dirty Dozen” scams:

Phishing: Taxpayers need to be on guard against fake emails or websites looking to steal personal information. The IRS will never initiate contact with taxpayers via email about a bill or refund. Don’t click on one claiming to be from the IRS. Be wary of emails and websites that may be nothing more than scams to steal personal information. (IR-2017-15)

Phone Scams: Phone calls from criminals impersonating IRS agents remain an ongoing threat to taxpayers. The IRS has seen a surge of these phone scams in recent years as con artists threaten taxpayers with police arrest, deportation and license revocation, among other things. (IR-2017-19)

Identity Theft: Taxpayers need to watch out for identity theft especially around tax time. The IRS continues to aggressively pursue the criminals that file fraudulent returns using someone else’s Social Security number. Though the agency is making progress on this front, taxpayers still need to be extremely cautious and do everything they can to avoid being victimized. (IR-2017-22)

Return Preparer Fraud: Be on the lookout for unscrupulous return preparers. The vast majority of tax professionals provide honest high-quality service. There are some dishonest preparers who set up shop each filing season to perpetrate refund fraud, identity theft and other scams that hurt taxpayers. (IR-2017-23)

Fake Charities: Be on guard against groups masquerading as charitable organizations to attract donations from unsuspecting contributors. Be wary of charities with names similar to familiar or nationally known organizations. Contributors should take a few extra minutes to ensure their hard-earned money goes to legitimate and currently eligible charities. IRS.gov has the tools taxpayers need to check out the status of charitable organizations. (IR-2017-25)

Inflated Refund Claims: Taxpayers should be on the lookout for anyone promising inflated refunds. Be wary of anyone who asks taxpayers to sign a blank return, promises a big refund before looking at their records or charges fees based on a percentage of the refund. Fraudsters use flyers, advertisements, phony storefronts and word of mouth via community groups where trust is high to find victims. (IR-2017-26)

Excessive Claims for Business Credits: Avoid improperly claiming the fuel tax credit, a tax benefit generally not available to most taxpayers. The credit is usually limited to off-highway business use, including use in farming. Taxpayers should also avoid misuse of the research credit. Improper claims often involve failures to participate in or substantiate qualified research activities and/or satisfy the requirements related to qualified research expenses. (IR-2017-27)

Falsely Padding Deductions on Returns: Taxpayers should avoid the temptation to falsely inflate deductions or expenses on their returns to pay less than what they owe or potentially receive larger refunds. Think twice before overstating deductions such as charitable contributions and business expenses or improperly claiming credits such as the Earned Income Tax Credit or Child Tax Credit. (IR-2017-28)

Falsifying Income to Claim Credits: Don’t invent income to erroneously qualify for tax credits, such as the Earned Income Tax Credit. Taxpayers are sometimes talked into doing this by con artists. Taxpayers should file the most accurate return possible because they are legally responsible for what is on their return. This scam can lead to taxpayers facing large bills to pay back taxes, interest and penalties. In some cases, they may even face criminal prosecution. (IR-2017-29)

Abusive Tax Shelters: Don’t use abusive tax structures to avoid paying taxes. The IRS is committed to stopping complex tax avoidance schemes and the people who create and sell them. The vast majority of taxpayers pay their fair share, and everyone should be on the lookout for people peddling tax shelters that sound too good to be true. When in doubt, taxpayers should seek an independent opinion regarding complex products they are offered. (IR-2017-31)

Frivolous Tax Arguments: Don’t use frivolous tax arguments to avoid paying tax. Promoters of frivolous schemes encourage taxpayers to make unreasonable and outlandish claims even though they have been repeatedly thrown out of court. While taxpayers have the right to contest their tax liabilities in court, no one has the right to disobey the law or disregard their responsibility to pay taxes. The penalty for filing a frivolous tax return is $5,000. (IR-2017-33)

Offshore Tax Avoidance: The recent string of successful enforcement actions against offshore tax cheats and the financial organizations that help them shows that it’s a bad bet to hide money and income offshore. Taxpayers are best served by coming in voluntarily and getting caught up on their tax-filing responsibilities. The IRS offers the Offshore Voluntary Disclosure Program  to enable people to catch up on their filing and tax obligations. (IR-2017-35)

2017-02-24T19:19:15-07:00February 24th, 2017|Tax Issues|0 Comments

ACC Stops $4.9 Million Investment Scam

The following is the text of a February 3, 2015, Arizona Corporation Commission press release:

The Arizona Corporation Commission today ordered Tucson residents Michael and Betsy Feinberg and their affiliated company, Catharon Software Corporation, to pay $4,926,559 in restitution and a $250,000 administrative penalty for defrauding investors with an unregistered investment program. The Commission found that the Feinbergs, formerly of Sedona, represented that they had created and owned a patented computer language technology named “V∆Delta”that would enable Catharon to compete with Microsoft and other computer language systems manufacturers.

While not registered to offer or sell securities in Arizona, the Feinbergs induced investors to purchase Catharon stock by repeatedly representing that Catharon would launch its technology within months of the investors’ investment, Catharon would generate $2 billion in revenue within three years and investors would receive returns of between 400 and 1,572percent.  The Commission found, however, that the Feinberg never launchedCatharon’s technology.

The Commission found, and the Feinbergs admitted, they did not have any reasonable factual basis for the projected launch dates, the projected $2 billion revenue figure and investment returns, or their representations that Catharon would compete with Microsoft and similar companies. Further, the Commission found that the Feinbergs failed to disclose their use of investor monies to pay for personal living expenses, including a bird-watching trip to Mexico, as well as the transfer of more than $891,000 to their personal bank account. In settling this matter, the Feinberg admitted to the Commission’s findings for the purposes of its administrative proceeding and any other proceeding in which the Commission is a party and consented to theentryof the consent order.

For more details about this case, view the full text of the Commission’s order S-20905A-14-0061. The Commission’s final order against the named respondents will be posted online as soon as it is signed by all of the Commissioners.

2019-07-04T10:28:52-07:00February 3rd, 2015|AZ Corporation Commission|0 Comments

Arizona Corporation Commission Takes Action Against Sellers of Unregistered Securities

Commission Fines Fountain Hills Company for Unregistered Investment Sales, Sanctions Others for Securities Fraud and Revokes Registration of Fountain Hills Broker

The Arizona Corporation Commission today fined a Fountain Hills limited liability company for its unregistered investment sales in connection with a residential real estate development. Also, the Commissioners sanctioned multiple individuals and their affiliate d companies for committing securities fraud and revoked a Fountain Hills stockbroker’s registration for making unsuitable investments with a couple’s retirement funds.

Promise Land Properties, LLC. The Commission issued a default order against Promise Land Properties, LLC, requiring the payment of $958,000 in restitution and a $25,000 administrative penalty for offering and selling unregistered securities in connection with a residential real estate development. The Commission found that Promise Land Properties—a manager-controlled, Arizona limited liability company based in Fountain Hills—w as not registered to offer or sell securities in Arizona when it offered and sold LLC membership interests to six investors in order to fund the acquisition and development of 1,280 acres near Tombstone, Arizona. The Commission found that the Promise Land Properties’ manager met potential investors through a network of acquaintances, including individuals from Arizona, Nebraska and Minnesota. Additionally, the Commission found that an institutional lender eventually foreclosed on the Tombstone real estate development project.

Patrick B. Hammons, et al. In a separate case, the Commission ordered Patrick B. Hammons of Mesa and his affiliated companies to pay $174,000 in restitution and a $20,000 administrative penalty for committing securities fraud and transacting business as an investment adviser without a license. The Commission found that Hammons and the company he managed, Pacific Ventures & Trading, LLC, fraudulently offered and sold unregistered LLC membership interests to investors. The Commission found that Hammons failed to use investor funds as promised and to disclose aspects of the payments made by Pacific Ventures & Trading to another company Hammons managed, TF6 Advisors, LLC. The Commission found that Hammons and TF6 Advisors violated the Arizona Investment Management Act by providing investment advice for a fee without being licensed. Additionally, the Commission found that Hammons and TF6 Advisors committed fraud in connection with their investment advisory services by failing to do the following: use investor money as promised, follow required auditing procedures while having control over client funds, act in the best interests of their client, accurately disclose the compensation structure of TF6 Advisors, and by misrepresenting the market value of the assets of TF6 Advisors. In settling this matter, Hammons and his companies neither confirmed nor denied the Commission’s findings, but agreed to the entry of the consent order.

Morrie S. Friedman, et al. In another matter, the Commission ordered Morrie S. Friedman of Scottsdale to pay $79,625 in restitution and a $5,000 administrative penalty for fraudulently offering and selling unregistered stock shares to investors. The Commission found that, while not registered to offer or sell securities in Arizona, Friedman offered and sold unregistered stock in connection with two companies, Beyond Juice, Inc. and VIP* ComLink, Inc. The Commission found that Friedman told the Beyond Juice investors that the company stock would soon be going public, resulting in an increase in stock value, but had no factual basis for the prediction. To date, Beyond Juice has yet to become a publicly traded company. Also, the Commission found that Friedman failed to provide stock certificates to a VIP* ComLink investor and to disclose the prior legal actions taken against him in regards to Beyond Juice. In settling this matter, Friedman neither confirmed nor denied the Commission’s findings, but agreed to the entry of the consent order.

Donna Kay Beers Finally, the Commission revoked the securities registration of Fountain Hills resident Donna Kay Beers for her dishonest and unethical conduct, requiring the payment of $86,815 in restitution and a $15,000 administrative penalty. The Commission found that Beers, who was also a former investment adviser representative, recommended unsuitable investments for a senior couple who was searching for a safe and prudent way to invest their retirement funds. The Commission found that Beers recommended the couple sell their well-known stock holdings such as Wal-Mart and Costco and invest the proceeds plus additional cash into multiple private placement investments and direct participation programs, which were risky and illiquid. The Commission found that one of the investments, Fountain Hills Town Square, LLC, involve d a 12.67 acre real estate development in which Beers had an undisclosed financial interest. The Commission found that, despite knowing the real estate project had difficulty obtaining financing, Beers touted the investment as good and safe and pressured her clients to invest. In settling this matter, Beers neither confirmed nor denied the Commission’s findings, but agreed to the entry of the consent order.

More caution for investors: Even when selling a legitimate product, some promoters do not recognize the investment program they have created is a security. Determining whether an alternative investment program is a security is not always easy to determine and depends upon the unique facts and circumstances of the transaction and not on what a promoter calls the investment product. Even when investing with someone they know, investors should verify the registration of sellers and investment opportunities and investigate disciplinary histories by contacting the Arizona Corporation Commission’s Securities Division at 602-542-4242 or toll free in Arizona at 1-866-VERIFY-9. The Division’s investor education website also has helpful information at www.azinvestor.gov .

Arizona Corporation Commission Enforcement Actions

The Arizona Corporation Commissioners voted to require three individuals and their affiliated companies to stop offering and selling unregistered securities and to pay penalties. The Commission entered into two consent orders, one involving a Mesa man who sold unregistered stock and promissory notes issued by his start-up, air ambulance service company, the other involving a Peoria man who fraudulently sold membership interests in an oil and gas venture. The third order involved a Gilbert man who defrauded investors with an options and foreign currency trading investment scam.

Thomas F. Kelley and International Air Medical Services, Inc. The Commission ordered Thomas F. Kelley of Mesa and his Scottsdale start-up company to pay $1,406,300 in restitution and a $50,000 administrative penalty for offering and selling an unregistered investment program involving a long-range, jet-air ambulance business. The Commission found that, while not registered to offer or sell securities, respondents Kelley and International Air Medical Services, Inc. (International Air) offered and sold stock and promissory notes to at least 14 investors. The Commission found that the majority of investors who were issued promissory notes have not been paid as required under the terms of their notes, and some investors who purchased stock were not issued stock certificates or the issuance of the stock certificates was significantly delayed. Additionally, the Commission found that the respondents failed to provide stockholders the voting rights to which they were entitled under International Air’s bylaws. Further, the Commission found that Kelley, as well as one other International Air officer, used investor funds for their own personal expenses, despite the fact that the board of directors had not approved compensation or salaries for International Air’s officers. In settling this matter, Kelley and International Air neither admitted nor denied the Commission’s findings, but agreed to the entry of the consent order.

Christopher D. Dedmon and SDC Montana Consulting, LLC. The Commission sanctioned Peoria resident Christopher D. Dedmon and his affiliated company, SDC Montana Consulting, LLC, with a $25,000 administrative penalty for fraudulently offering and selling membership interests in an oil and gas venture. The Commission found that, while not registered to offer or sell securities, Dedmon and SDC raised $547,500 from 13 investors, most of whom lived in Arizona. The Commission found that Dedmon and his company failed to disclose to investors a 2005 Commission consent order that prohibited Dedmon and SDC from selling securities or exercising control over an entity that sells securities. To date, each membership interest investor has received distributions from SDC that exceed the investor’s original investment. In settling this matter, Dedmon neither admitted nor denied the Commission’ s findings, but agreed to the entry of the consent order and has paid the administrative penalty in full to the state of Arizona.

Tyrone L. Brooks and 3T Options, LLC.  The Commission issued a default order against a Gilbert man and his affiliated company who defrauded investors with an options and foreign currency trading investment scam. The Commission ordered Tyrone L. Brooks and 3T Options, LLC to pay $95,013 in restitution and a $25,000 administrative penalty. The Commission found that, while not licensed to provide investment advice, Brooks and his company pooled together the funds of at least eight investors from Arizona, California and Nevada, promising certain clients a guaranteed monthly return of at least six percent. The Commission found that Brooks used only a small percentage of his client’s funds to conduct options and foreign currency trading, depositing most of the money into his personal bank account. Moreover, the Commission found that Brooks issued account statements to investors that reflected fictitious value

 

Arizona Corporation Commision Enforcement Actions

The Arizona Corporation Commission sanctioned multiple individuals and their affiliated companies whose unregistered investment programs caused investors to lose over $7.8 million. The Commission also revoked the securities registration of a Lake Havasu securities salesman who borrowed money from his brokerage clients, ordering him to pay restitution and penalties for his dishonest and unethical conduct. In total, the Commission ordered over $7.8 in restitution and $291,500 in administrative penalties.

John M. McNeil, Peter Pocklington, and Crystal Pistol Resources, LLC, et al. The Commission ordered former Scottsdale resident John M. McNeil, California resident Peter Pocklington and their affiliated companies to pay $5,149,316 in restitution and a $100,000 administrative penalty for committing securities fraud in connection with a gold mining venture. The Commission found that, while not registered as securities salesmen or dealers in Arizona, respondents McNeil, Pocklington and their affiliated companies—Crystal Pistol Resources, LLC, Crystal Pistol Management, LLC, and Liberty Bell Resources I, LLC—told at least 120 investors that they had obtained mineral rights to a placer mine outside of Quartzite, Arizona, and would begin mining and processing gold on the site within a short period of time. The Commission found that the respondents obtained at least some investors by making unsolicited telephone calls to them and that some investors were taken to the mine site, which was located on U.S. Bureau of Land Management land. Additionally, the Commission found that Crystal Pistol prepared newsletters in which it claimed to be offering one of the most lucrative dividend plans in the mining business and that hedge funds and banks were interested in the project. The Commission found, however, that the estimates of gold resources on the respondents’ website were not supportable with the methods currently available in the industry. In settling this matter, the respondents neither admitted nor denied the Commission’s findings, but agreed to the entry of the consent order.

Casimer Polanchek.In a separate case, the Commission issued a default order against Casimer Polanchek of Chandler, ordering him to pay $2,558,832 in restitution and a $175,000 administrative penalty for defrauding investors with a promissory note scheme. The Commission found that Polanchek was the manager of Pangaea Investment Group, LLC, which was doing business as Arizona Investment Center. The Commission found that Polanchek was not registered as a securities salesman in Arizona when he fraudulently offered and sold promissory notes issued by Tri-Core Companies, LLC and C&D Construction Services, Inc. The Commission also found that Polanchek was jointly and severally liable as the control person of Pangaea for the promissory notes Pangaea fraudulently offered and sold issued by ERC Compactors, LLC and Tri-Core Companies, LLC. The Commission found that on multiple occasions Polanchek participated as a host or presenter on an Arizona radio program called “The Investment Roadshow,” offering alternative investment opportunities and urging prospective investors to attend seminars and webinars about the alternative investments. The Commission found that, among the multiple, material omissions and misrepresentations made to investors, Polanchek or his company represented the alternative investments as being secured by property or equipment, but failed to provide any collateral or other mechanism to securitize the promissory notes.

Lynn R. Goldney. In another matter, the Commission revoked the securities registration of Lake Havasu resident Lynn R. Goldney for borrowing money from his brokerage clients, ordering him to pay $98,8 35 in restitution and a $10,000 administrative penalty. The Commission found that Goldney obtained 45 distinct loans from 26 of his customers, none of whom were family members or persons in the business of lending money to the public. Further, the Commission found that Goldney’s activity constitutes dis honest conduct or unethical practices in the securities industry. In settling this matter, Goldney agreed to the entry of the consent order and admitted to the Commission’s findings only for purposes of the administrative proceeding.

Robert R. Cottrell and RSC Adventures, LLC. A separate matter involved former Peoria resident Robert R. Cottrell and his affiliated company who agreed to pay a $6,500 administrative penalty for offering and selling unregistered limited liability memberships in an oil and gas exploration and development company. The Commission found that Cottrell and his Arizona-based company, RSC Adventures, LLC, were not registered to offer or sell securities in Arizona when they sold to five investors—most of whom lived in Arizona—unregistered membership interests in SDC Montana Consulting, LLC, an Arizona-based oil and gas exploration and development company, which also procured the sale of oil, gas and mineral rights. In settling this matter, Cottrell neither ad mitted nor denied the Commission’s findings, but agreed to the entry of the consent order.

ACC Goes After Radical Bunny Managers

The Arizona Corporation Commission entered an order that requires the prior managers of Radical Bunny, LLC and Horizon Partners, LLC to pay more than $189.8 million in restitution for committing securities fraud in connection with two unregistered deed of trust investment programs. In other cases, the Commission fined a Tucson man and his affiliated company for securities fraud and halted an unregistered real estate program totaling over $1.9 million.

Radical Bunny, LLC and Horizon Partners, LLC. The Commission ordered respondents Tom Hirsch, Harish Shah, Howard Walder and Berta “Bunny” Walder, the former managers of Radical Bunny LLC, and Horizon Partners, LLC, an affiliated entity, to pay $189.8 million in restitution and a total of $4.65 million in administrative penalties for defrauding investors. The Commission found that, while not registered as securities salesmen or dealers, Horizon Partners LLC, Hirsch, Shah, and the Walders raised funds from approximately 900 investors across the U.S. and in four foreign countries. Investors were told that their money would be used by Radical Bunny LLC to purchase fractionalized interests in promissory notes secured by real estate deeds of trust. The Commission found, however, that respondents Bunny pooled investor funds to make unsecured loans to Mortgages Ltd., a Phoenix-based originator of high-interest, short-term loans to real estate developers. Additionally, the Commission found that the respondents continued to raise investor funds despite being advised by lawyers that they had or were engaged in unregistered securities offerings in violation of Arizona securities laws. “The securities statutes were flagrantly, and repeatedly, violated in this case, and the Commission’s actions today demonstrated zero tolerance for this sort of behavior in Arizona,” said Chairman Bob Stump. “The message should be heard loudly and clearly: If you commit securities fraud, this Commission will hold you to account.” Radical Bunny, LLC previously agreed, without admitting or denying the Commission findings, to the entry of a consent order, which order was signed by the Commission on April 28, 2010 as Decision No. 71682.

David Shorey and Westcap Energy, Inc. The Commission ordered David Shorey of Tucson and Westcap Energy, Inc, to pay a $10,000 administrative penalty and to make rescission payments available to investors who want their money returned. The Commission found that Shorey, chairman and chief executive officer of Westcap, and Westcap were not registered to offer or sell securities in Arizona when they fraudulently raised at least $388,495 from 24 investors. The Commission found that Shorey and Westcap failed to disclose in to investors commissions of up to 70%, paid to those salespeople who sold Westcap stock. Parker Skylar and Associates, LLC The Commission issued a default order against Parker Skylar & Associates, LLC, requiring the payment of $1,942,000 in restitution and a $50,000 administrative penalty for its securities violations. The Commission found that, while not registered as a securities dealer, Parker Skylar fraudulently offered and sold membership interests to at least 17 investors. The Commission found that, among the multiple, material omissions and misrepresentations made to investors, Parker Skylar failed to tell investors that a lender claimed to have encumbered all of Parker Skylar ‘s property, failed to transfer all investor funds to the real estate development entity for which Parker Skylar was raising funds, and touted the acumen of Parker Skylar’s manager when, in fact, several of the manager’s creditors had sued him

Arizona Corporation Commission Shuts Down LLCs for Violating Securities Laws

The Arizona Corporation Commission shut down two unregistered investment programs—one involving gold mining and the other concerning bonds.  In total, the Commission ordered the respondents to pay $641,016 in restitution and $60,000 in administrative penalties.

Brian Langebach and Earth Explorations, LLC

The Commission issued a default order against Brian Langebach of Mesa and his affiliated company, Earth Explorations, LLC, requiring them to pay $322,000 in restitution and $50,000 in administrative penalties for fraudulently offering and selling an unregistered gold mining investment program.  The Commission found that Langebach and his affiliated company—while not registered as a securities salesman or dealer—offered and sold the unregistered gold mining investment program to 23 investors in Arizona, Ohio and Utah.  The Commission found that Langebach and his company misrepresented multiple facts, including claiming that he owned and operated a mine with one of the largest gold reserves in the U.S. and that he could extract gold from the rock material or aggregate material on a cost-effective or economically viable basis by placer mining.

Marvin Wilson and True North Business Ventures, LLC

The Commission ordered Marvin Wilson of Phoenix and his Scottsdale-based company, True North Business Ventures, LLC, to pay $319,016 in restitution and $10,000 in administrative penalties for fraudulently offering and selling an unregistered bond investment program.  The Commission found that, while not registered as a securities salesman or dealer, Wilson and True North issued unregistered bonds to six investors.  The Commission found that Wilson, who was the president and chief executive officer of True North, failed to disclose to investors that his company’s sales were rapidly declining and the business was on the verge of closing.  In settling this matter, Wilson neither admitted nor denied the Commission’s findings, but agreed to the entry of the consent order.

Arizona Corporation Commission Halts Unregistered Securities Sales

The Arizona Corporation Commission sanctioned multiple individuals and their affiliated companies for offering and selling unregistered investment programs concerning wind energy development and gold mining. The Commission ordered more than $16. 3 million in restitution and $130,000 in administrative penalties.

The Commission ordered Arizona residents Edward L. Mazur and Ronnie Williams to pay a total of $16,347,279 in restitution and $125,000 in administrative penalties for fraudulently promoting an unregistered investment program involving the development of wind energy. The Commission found that, while not registered to offer or sell securities, Mazur and Williams offered and sold to over 300 investors throughout the U.S. interests in a proposed wind energy development project. The Commission found, however, that Mazur and Williams failed to disclose that almost half of the investor funds raised would pay for sales commissions and not for the development of the wind turbine technology or energy development projects described in the private placement memoranda. In settling this matter, Mazur and Williams neither admitted nor denied the Commission’s findings, but agreed to the entry of the consent order.

In a separate case, the Commission ordered Larry Goldman of Tucson and his affiliated company, MT Explorations, LLC to pay a $5,000 administrative penalty for promoting an unregistered gold mining investment program. The Commission found that, while not registered as a securities salesman or securities dealer, Goldman and his affiliated company raised $322,0 00 from at least 25 investors who were located in Arizona, Ohio and Utah. The Commission found that Goldman subsequently forwarded investor monies to an individual who represented that he owned and operated various gold mines throughout the United States, including Congress, Arizona and Helena, Montana. In settling this matter, Goldman neither admitted nor denied the Commission’s findings, but agreed to the entry of the consent order.

Ohio LLC’s Incentive Compensation Creates Partnership With Former Employee

LLC Law Monitor:  “Business acquirors sometimes give the acquired company’s management financial incentives to enhance the acquired company’s value. These are often structured as bonus compensation for achieving defined milestones, and sometimes include equity in the acquired company or in the buyer.  In a recent Ohio case the buyer of a company’s assets provided incentive compensation to the company’s management, based on the profits of a division of the company. The employee was later terminated, and claimed the company had entered into a partnership with him and then breached its fiduciary obligations.”

KEYTLaw recommendation:  This type of provision should be in a written employment agreement that provides for a compensation bonus in an amount equal to the profits of a specific entity or division of an entity.  Be sure to define profits precisely.  The agreement should state that the provision does not create a partnership, joint venture, ownership interest in the entity or any other arrangement other that the employer / employee relationship and that it does not cause the employer (or the entity if it is not the employer) to owe any fiduciary duties to the employee.

2018-05-22T18:46:19-07:00December 19th, 2011|Lawsuits, Operating LLCs|0 Comments

How Much Compensation must an Entity Taxed as an S Corporation Pay to Owners to Keep the IRS Happy?

The Tax Advisor:  “S corporation shareholders [and owners of LLCs taxed as S corporations] generally prefer dividend distributions of their S corporations’ [or LLC’s] profits over compensation payments from the S corporations [LLCs] because the compensation payments are subject to payroll taxes and dividend distributions are not. To prevent S corporations and their shareholders from avoiding payroll taxes by maximizing distributions and minimizing compensation payments, the IRS requires S corporations to pay shareholders who provide substantial services reasonable compensation. Disputes between the IRS and taxpayers have required courts to determine on a regular basis whether an S corporation has paid reasonable compensation to its shareholder(s).

2018-05-22T19:06:15-07:00August 23rd, 2011|Tax Issues|0 Comments

Online Cash Advance Payday Loan

This is a very fast guide to everything that you need to know as to why you should get an online cash advance payday loan. This article will provide you with several tips on how you can immediately get the money that you are in urgent need of. You should be able to get the funds as soon as possible since payday loans involve very fast and simple steps.

The first thing that you need to do to find a good payday loan is to look for a website that has a good list of lenders. The purpose of doing this is so that you only have to fill out a single application form in return for more than one offer from various lenders who will look at your present money emergency. An online cash advance payday loan is simple for everyone if you do it this way because you do not have to waste time on filling out a few dozen application forms just hoping that one of them will be the perfect lender to borrow money from. This can help you to save a lot of time and help you to immediately get the money that you really need. This way, the lenders are the ones looking for you instead of you being the one looking for them.

The second thing you need to remember is that you have to fill out every field in the application form. This is not something that you want to skimp out on. The information that you get is what the lenders will use to determine whether they will approve you or not. When you leave out information from your application form, you are slowing down the procedures necessary for you to get approved. When you omit something important, you are hurting your chances of getting approved. So give the lender the information that they need right away.

The third thing for you to remember is that you should stay by the phone line that you put in the application form since they might have to call and ask you for added details. There are people who apply for the loans but do not stay by their phone lines so it takes longer for the loan to get processed. An online cash advance payday loan is easy as long as these tips are followed.

2019-06-15T07:03:09-07:00July 17th, 2011|Forming LLCs|0 Comments

Can an Arizona LLC Have Officers Such as a President?

Question:  Can an Arizona limited liability company have a President, Vice President, Chief Executive Officer or personnel with other titles?

Answer: Yes.  Arizona’s statutes that authorize the creation of LLCs do not restrict the titles a company may give to its employees or personnel.

Technically, corporations have presidents and CEO, but Arizona LLCs do not.  Arizona law mentions only three types of people or entities associated with an AZ LLC:  members (owners), managers (equivalent to the president of a corporation) and noneconomic members (neither a member nor a manager, but a special character that is not defined in Arizona law).

You LLC has Articles of Organization.  Corporations have Articles of Incorporation.

Arizona law provides for two types of LLCs:  member managed and manager managed.  Only member managed AZ LLCs have managing members.  In fact, AZ law provides that all members of a member managed LLC are managing members and have management power.

If you have a manager managed AZ LLC and you sign as manager on behalf of the LLC, you are complying with Arizona law and clearly indicating to the other party the capacity in which you sign the document.  This is important to avoid personal liability.

Arizona law does not say that your LLC cannot have a president or a CEO.  It’s your company and as the controlling member you can create any LLC office you desire and call it whatever you want to call it.  The problems with calling somebody the President of your AZ LLC are:

1.  People who understand Arizona law will not accept the signature of a person whose title is President because they know that a member must sign for a member managed Arizona LLC and a manager must sign for a manager managed Arizona LLC.  Prudent people will look up the LLC on the Arizona Corporation Commission’s website to see if the LLC is member managed or manager managed and insist that the contract be signed by the appropriate person named in the LLC’s Articles of Organization on file with the Arizona Corporation Commission.

2.  There is a risk that if the contract results in a lawsuit, the other party could claim they thought they were dealing with a corporation rather than an LLC and therefore your company would be required to prove it complied with AZ corporate law rather than AZ LLC law to get the protection afforded by Arizona law to the owners of those types of entities.

3.  The other party to the contract might also claim the signer misrepresented the signer’s capacity to sign the contract.

Read about the perils of signing contracts on behalf of an entity in my article called “President of Corporation Personally Liable for Signing Contract.”

I do not recommend mixing corporate terms with LLC terms so you avoid the problems mentions above.

Graduate Essay Structure

Students on various educational levels are faced with professor’s expectations. These expectations push the students to achieve more and grab as much information about life and their professional background as possible. The same applies to the essay writing as they are supposed to meet teachers’ expectations as well.

The studies do also include the world contest of development and progress and students are required to participate in those as well. The students at the graduate level are required to perform on higher level and to cope with a greater number of assignments, courseworks, dissertation writing, etc. These assignments include graduate essays, graduate papers, research papers and term papers. One of the reasons that students are being assigned a greater number of papers to write is to teach them to manage and value their time. Pushing to their limits will definitely bring certain results that are going to be much appreciated in the workplace or real life. Otherwise, students may never got to know what they are truly capable of.

  1. RESPONSIBLE, SERIOUS, ORGANIZED AND CAREFUL. Your graduate essay leads to certain thoughts about you as a professional, student and a person. If you make foolish mistakes and have given yourself less time to proofread your writings, a line of certain conclusions may be done about you. In case if reader finds mistakes, you are considered to be irresponsible, careless, not serious enough and disorganized.
  2. BE PRECISE. By being precise we mean that you must put much effort into avoiding careless errors in your graduate essay structure and overall writing. Keep in mind, if you fail to do that your graduate essay will affect how you are perceived as a graduate student.
  3. THOROUGH PROOFREADING. You must include more time for proofreading in order to see if any errors are made including both grammar and punctuation mistakes.
  4. CAREFULL USE OF TERMINOLOGY. Make sure to clarify if you are using the right terms. You must have clear understanding of what particular terminology mean. See if you can figure out the difference “personal statement” and “personal statement”.
2017-07-02T22:29:01-07:00July 2nd, 2011|FAQs|0 Comments

Scottsdale’s Fleming’s Restaurant to Pay $250,000 in Sex-harassment Suit

Arizona Republic:  “Fleming’s Prime Steakhouse & Wine Bar at DC Ranch in Scottsdale will pay nearly a quarter-million dollars and furnish other relief to settle a same-sex sexual-harassment lawsuit filed by the U.S. Equal Employment Opportunity Commission, the agency announced.”

If you operate your business as a sole proprietorship or a general partnership, this story illustrates why a person should always operate a business through an LLC, corporation or limited partnership.  How would you like to owe the EEOC $750,000 for something your employee did?

Arizona Corporation Commission Orders Restitution for Real Estate Investors Defrauded by a Scottsdale Businessman

ARIZONA CORPORATION COMMISSION
FOR IMMEDIATE RELEASE:  December 6, 2010
CONTACT: Rebecca Wilder (602) 542-0844

Commission Orders Restitution for Real Estate Investors  Defrauded by a Scottsdale Businessman
Sanctions Others for Securities Fraud

PHOENIX, AZ—The Arizona Corporation Commission today issued a default order against a Scottsdale businessman and his company for defrauding investors in a million-dollar, real estate investment program.  In other cases, the Commission ordered two individuals and their affiliated companies to pay restitution and penalties for defrauding investors in an investment program involving music concerts.  In total, the Commission ordered over $3.44 million in restitution for investors and $85,000 in administrative penalties.

The Commission issued a default order against Nathan Nordstrom of Scottsdale and his affiliated company, Norstreet Portfolio, LLC, requiring them to pay $1,076,000 in restitution and a $50,000 administrative penalty for defrauding six investors in a real estate investment program.  The Commission found that, while not registered to offer or sell securities in Arizona, Nordstrom and his company offered and sold limited liability company memberships, telling investors that their money would fund the completion of two residential developments in Hawaii and Washington, D.C.  The Commission found that Nordstrom told investors their funds would be secured by the real estate when, in fact, Nordstrom lacked free-and-clear title to the properties and was unable to execute a deed of trust on behalf of the investors.  Additionally, the Commission found that Nordstrom failed to disclose to the investors that some of their money would be used for outstanding, mortgage interest payments owed on the real estate properties.

In a separate case, the Commission ordered Bobby G. Goodson of Chandler to pay $2,298,236 in restitution and a $25,000 administrative penalty for committing securities fraud.  The Commission found that Goodson, along with Malika S. Smith, formed CAA General Partnership and opened bank accounts solely for the purpose of handling banking transactions related to the so-called concert production activity of Goodson’s former son-in-law, Miko D. Wady.  The Commission found that Goodson and CAA not only received $2,298,236 of investor funds and transferred nearly $1 million dollars to Wady, but also failed to disclose that CAA was not the internationally known talent agency, Creative Artists Agency.  In April 2010, the Commission issued a default order against Wady for masterminding a multimillion-dollar investment scam related to the production of music concerts.  In November 2010, Smith and CAA were ordered to pay restitution and penalties in connection with their violations of the Arizona Securities Act.  In settling this matter, Goodson admitted to the Commission’s findings and agreed to the entry of the consent order.

In a related case, the Commission ordered Thurston Smith of Chandler and his affiliated company, B.Y.B. Entertainment, LLC, to pay $74,000 in restitution and a $10,000 administrative penalty for defrauding investors.  The Commission found that, as the manager of B.Y.B. Entertainment, LLC and the sole signer of its bank accounts, Smith handled banking transactions related to what he believed was the concert production activity of Miko D. Wady.  The Commission found that instead of funding music concerts, Smith transferred investor money received by B.Y.B. Entertainment, LLC to either Wady or to banks accounts controlled by Wady.  In settling this matter, Smith admitted to the Commission’s findings and agreed to the entry of the consent order.

More caution for investors:

Even when investing with someone they know, investors should verify the registration of sellers and investment opportunities and investigate disciplinary histories by contacting the Arizona Corporation Commission’s Securities Division at 602-542-4242 or toll free in Arizona at 1-866-VERIFY-9.  The Division’s investor education web site also has helpful information at www.azinvestor.gov.

2016-11-16T08:23:56-07:00December 7th, 2010|Lawsuits, LLCs & Securities Laws|0 Comments

Lifelock to Pay Federal Trade Commission $12 Million

Phoenix Business Journal:  “LifeLock Inc. has settled a lawsuit brought against it by the Federal Trade Commission and 35 states for $12 million, ending a lingering legal battle about what the company promised in its advertising versus what it could deliver in regards to preventing identity theft.”

If you operate your business as a sole proprietorship or a general partnership, this story illustrates why a person should always operate a business through an LLC, limited partnership or corporation.  How would you like to owe the FTC $12 million for something your employees did?

2016-11-16T08:23:57-07:00March 9th, 2010|Lawsuits, Why People Need an LLC|0 Comments

Veil-Piercing

Owners of corporations and limited liability companies worst nightmare is that a creditor will sue the company and its owners and ask the court to “pierce-the-corporate-veil” and hold the owners liable for the debts and obligations of the company.  Peter B. Oh, Associate Professor of Law at the University of Pittsburgh has written a scholarly article called “Veil-Piercing.”  Here is the abstract of the article:

From its inception veil-piercing has been a scourge on corporate law. Exactly when the veil of limited liability can and will be circumvented to reach into a shareholder’s own assets has befuddled courts, litigants, and scholars alike. And the doctrine has been bedeviled by empirical evidence of a chasm between the theory and practice of veil-piercing; notably, veil-piercing claims inexplicably seem to prevail more often in Contract than Tort, a finding that flouts the engrained distinction between voluntary and involuntary creditors.

With a dataset of 2,908 cases from 1658 to 2006 this study presents the most comprehensive portrait of veil-piercing decisions yet. Unlike predecessors, this study examines Fraud, a long-suspected accessory to veil-piercing, as well as specific sub-claims in Contract, Tort, and Fraud to provide a fine-grained portrait of voluntary and involuntary creditors. And this study analyzes the rationales instrumental to a piercing decision.

The findings largely comport with our legal intuitions. The most successful civil veil-piercing claims lie in Fraud or involve specific evidence of fraud or misrepresentation. Further, claims not only prevail more often in Tort than Contract, but adhere to the voluntary-involuntary creditor distinction. Surprisingly, though, veil-piercing presents a greater risk to individual shareholders than corporate groups.

Arizona Court of Appeals Finds Officers & Directors of Arizona Corporation Personally Liable for Corporation’s Debt

Arizona Republic:  “Corporate officers can be held personally liable in some situations when their defunct firms don’t pay suppliers, the Arizona Court of Appeals has ruled.  The judges maintained that lawsuits against a corporation for failing to pay a debt are valid only against the corporate entity. And when the corporation goes away, the creditors generally cannot go after the individual shareholders  or directors.”  The case is Arizona Tile, LLC, vs. Howard Steven Berger, Cynthia Berger and John McCarthy.

The general rule of Arizona law is that the shareholders, officers and directors of an Arizona corporation and the members and managers of an Arizona limited liability company are not liable for the debts and obligations of the company.  There are, however, many exceptions to this general rule.  This case illustrates one of those exceptions.  Arizona Revised Statutes Section 33-1005 requires contractors who receive payments intended for subcontractors and materialmen to hold the money in trust for the intended payee.  This statute is the basis for imposing liability on the corporation’s officers and directors beca1use they had a duty to see that the money was paid to the proper payee, but instead they paid other corporate debts that the officers and directors had personally guaranteed.  In short they used money intended for Peter to pay the corporation’s debt to Paul because if Paul did not get paid, Paul could collect the debt owed by the officers and directors under their guaranties.

2016-11-16T08:23:57-07:00February 12th, 2010|Asset Protection, Lawsuits, LLCs & Corporations|0 Comments

Must an Arizona CPA form a PLLC?

QuestionMust an Arizona CPA who desires to practice accounting in Arizona form a professional limited liability company (PLLC) or can the CPA form a standard vanilla limited liability company (LLC)?

Answer:  An Arizona CPA can form either an LLC or a PLLC to practice accounting in Arizona.  The following text is taken from the Arizona State Board of Accountancy’s website:

The use of the professional designation, such as PC (Professional Corporation) or PLLC (Professional Limited Liability Company), means that the service being offered may only lawfully be rendered by a person duly licensed in this state, such as those offered by attorneys and CPAs/PAs. The use of the designation, however, is not required to form a CPA firm; for example, if you are considering forming a limited liability company, you can license the firm as an LLC or as a PLLC, but you are not required to license your firm as a PLLC.

2016-11-16T08:23:57-07:00December 10th, 2009|LLCs & Corporations, PLLCs|0 Comments

Legislative Logjam Puts Arizona Corporation Commission in Limbo

Arizona Business Gazette:  “The ability of Arizonans to form new corporations could start to slow within days and come to a screeching halt unless lawmakers fix their budget, according to the chair of the Arizona Corporation Commission. Kris Mayes said her agency was willing to go along with plans by Gov. Jan Brewer and legislators to have its incorporating division become fiscally self-sufficient. The plan, as crafted in legislation, was to let the agency keep and use money it obtained in fees.”  The state legislature approved the plan, but for unrelated reasons, Governor Brewer vetoed the law that contained the funding for the Arizona Corporation Commission.