Business Without Borders – International Business and Tax Planning Blog

Posts Tagged ‘investigation’

As a result of ongoing investigations into allegations of facilitating tax evasion, U.S. officials have extended an offer to 11 Swiss banks, including Credit Suisse, Julius Baer, HSBC Switzerland, and Basler Kantonalbank, to end the investigations in exchange for a fine to be paid by each bank and the disclosure of U.S. client data.

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On February 8, 2011, the IRS announced the 2011 Offshore Voluntary Disclosure Initiative, which ends on August 31, 2011.  Participation in the program allows taxpayers to potentially avoid criminal investigation and fixes penalties at lower rates than those which would typically apply.

To participate, taxpayers must file amended tax returns for 2003 through 2010 that include any unreported income or gains from those years and pay the tax thereon plus a 20% accuracy related penalty.  There are additional penalties if taxpayers failed to file returns for any of the disclosure years.  In addition, taxpayers may be subject to an FBAR (Form TDF 90-22.1) penalty equal to 25% of the highest aggregate balance in the undisclosed foreign account from 2003 to 2010, which is reduced to 5% for certain taxpayers who either (1) did not open the account, had minimal contact with the account, did not withdraw more than $1000 in any year and can prove U.S. tax was paid on the principal deposited into the account or (2) are foreign residents unaware they were U.S. citizens. The FBAR penalty is also reduced to 12.5% for taxpayers with account balances less than $75,000.

New Jersey has also launched a Voluntary Compliance Program with a deadline of September 30, 2011.

Consult with an attorney to determine whether you are eligible to participate.

• Blackberry received some positive market growth following the demonstration of their new product, The Playbook, in Los Angeles last week. Research in Motion (RIM), a Canadian company, witnessed a growth of 6.2 percent in share price, shortly after the launch. The Playbook has received criticism from Apple for its size, measuring well over two inches smaller than the iPad. Countering this argument, RIM relied on the products attributes, including its alliance with Adobe Flash Player, which will provide enhanced video content for the new product, and remains unique to the Playbook. Significantly, RIM is channeling its efforts to provide an improved mobile device that can offer a professional experience. Notwithstanding this positive stock increase, RIM’ overall share price has fallen almost twenty three percent this year to date.
•  After ten years of service the popular entertainment file sharing company, Limewire is forced to cease business. The U.S. Federal District Court in Manhattan, ruled against the company following a lawsuit filed by the music industry. Shortly thereafter, the news was published on its official website and user downloading and file sharing was brought to a halt. Prior to this trial, Judge Kimba M. Wood ruled with thirteen music companies that claimed that Limewire had infringed upon their copyrights and engaged in unfair competition. Limewire, which was founded by Mark Gorton in 2000, is to find out the extent of damages as a result of the illegal downloading, file distribution and sharing service in the New Year. Limewire is determined to continue providing music to its users collaborating with copyright holders and bridging the gap between technology innovations and infringement.
•  This weekend the British government announced that Scotch Whisky, is to receive greater brand protection in China, to address the vast amount of imitations on the internationally known product. This announcement purports to make production of Scotch Whisky exclusive to Scotland. Furthermore, this move will seek to increase sales, and put an end to the three-year battle between the Scotch Whisky Association and China. Presently, with over two hundred counterfeit versions, the need to protect the brand has become more imperative than ever. The agreement will be signed in Beijing this coming week.
•  In pharmaceutical news, British based company GlaxoSmithKline PLC is to pay up to $750 million, pursuant to an investigation which established that GSK had knowingly produced impure, mislabeled, and incorrect drug dosages’ which were sold to consumers after production in its factory in Cidra, Puerto Rico. The violations of current Good Manufacturing Practices (cGMP) came to light following an inspection by the companies Quality Assurance manager.  Among the violations, include a contaminated air and water system, which led to cross contamination. However, the unrelated closure of the plant in 2009 was based on a decline in the local market for pharmaceutical products.
•  Covered bonds scheme, widespread in Europe, may provide a method for financing mortgages in the United States. Essentially, covered bonds are debt securities, which are backed by cash flows, typically mortgages. Notably, the key difference between these covered bonds and a securitized mortgage bond are the assets, which remain on the issuer’s consolidated balance sheet. The object of these covered bonds is to reduce the likelihood the issuer will underwrite risky loans. While there is no established current practice for covered bonds in the United States, the covered bonds business is estimated at $3 trillion in Europe. This past July, the House Financial Service Committee passed the bill, which narrowly missed inclusion in the Dodd-Frank Reform Act.
• Quiznos is projected to open 15 franchise stores in Kuwait. The store disclosed that it is working in collaboration with Foodco, Inc., taking advantage of Foodco’s familiarity with the target market, from consumer trends to cultural preferences.  The U.S. based company plans to adapt the sandwich shop to appeal to local tastes and needs. Furthermore, the chain intends to further extend this international expansion to Europe, the Middle East, Central and South America and Southeast Asia over the next few years.
• In pursuit of geographic expansion, ad agencies see a niche in African markets for advertising growth and as a prime market to begin global expansion after India, China and Latin America. Telecom companies, financial service firms and the makers of consumer products are among those influencing this surge of advertising growth in Africa. However, with Africa’s (although slightly improved) corruption, poverty, and language barriers in the mix, this expansion does not come without risk
• Unconventional terrorist threats stimulate a shift in Britain’s defense budget.  England is to adjust its security budget in response to the latest spell of terrorist internet threats to the country.  An estimated $1 trillion is spent worldwide on cyber crime a year. England’s preparation for the upcoming 2012 Olympic Games, to be staged in London, is certainly a driving force in the government’s proactive approach to this new type of threat and budgetary change.
• Finally, a look back in time to see the story behind; Sony, IBM, Gucci, DuPont, and others.

^{Compiled and summarized by Muireann O’Keeffe.}

• U.S. Moves to Block New BP Oil Leases.  Following the BP Deepwater Horizon oil spill catastrophe in the Gulf of Mexico, U.S. lawmakers are pushing an amendment to ban the U.K. company from obtaining any further oil leases, due to safety concerns.  In addition to being under intense scrutiny in Congress, BP is under investigation by the U.S. Department of Justice and environmental regulators for ignoring safety failures and could face billions of dollars in fines.  Lawmakers may have to be more lenient than some of their constituents are demanding, as the amendment to the oil rig safety bill could harm both jobs and the country’s ability to access domestic resources. 
• Meanwhile, in other U.S./U.K. news, AMR Nears British Airways Alliance as EU Backs Deal.  With the European Union’s antitrust approval, British Airways Plc and AMR Corp’s American Airlines have moved one step closer to forming a trans-Atlantic alliance between the two airlines that will control nearly 50 percent of the flights at London’s Heathrow Airport.  The plan will give both carriers the equal footing and similar advantages that other airlines, such as Air France and Lufthansa, already possess.  BA and AMR have already agreed to relinquish 10 flight slots in the U.S. and U.K., but are still awaiting approval of the antitrust alliance from the U.S. Transportation Department.  The two have been attempting this alliance for years.  Critic and competitor Virgin Atlantic Airways Ltd. says this monster monopoly will only hurt consumers.
• A “success story” offers a case study on How Not to Run a Business in China.  Lessons can be learned from the broken business venture between American Olaf Kristoffer Bauer and Chinese Yuan Jie, “partners” in the Chinese pizza chain Kro’s Nest.  As a first rule, you need to be clear on ownership structure of the business, which plagued Bauer and Jie.  Second rule, as a foreigner, be fully aware of the rules and follow them accordingly.  You should not let the legal and political intricacies of the Chinese business world lead to disregard for the rules, for that will surely lead to government action.  Finally, foreign entrepreneurs should pay careful attention to establishing their guanxi, or trust network.  Building a solid and trusting guanxi takes years, but the pay off will undoubtedly make it easier to do business in China.
• Google Escapes with Apology in Australia- May Not Be So Lucky Elsewhere.  U.S. company Google’s apology to Australia gets them out of some hot water for violating privacy, namely inadvertently collecting personal data from unprotected wireless networks via its Street View cars, the device which captures real street views for GoogleMaps imagery.  However, an apology likely will not cut it for everyone or everywhere.  Google is still facing potential legal action in Australia, as well as the U.S. and various European countries.   Governments in these various jurisdictions are undertaking investigations that may result in criminal penalties and various government sanctions against the internet search-engine giant.

^{Compiled and summarized by Aylin S. Khor}

Endorsements on social networking websites can be a valuable marketing tool for companies.  They can also lead to potential liability according to guidelines issued by the Federal Trade Commission (“FTC”).  Effective December 1, 2009, the FTC issued revisions to its endorsement guidelines which provide guidance on how to avoid deceptive advertising.  Section 5 of the FTC Act (15 U.S.C. 45) prohibits businesses from engaging in unfair or deceptive acts or practices affecting commerce, and the FTC has interpreted this prohibition as covering false and misleading advertising practices.  The newly revised guidelines, called the Guides Concerning the Use of Endorsements and Testimonials in Advertising (16 C.F.R. § 255), address the application of Section 5 to the use of endorsements on the Internet and social networking websites, such as Facebook, Twitter, LinkedIn, MySpace, and personal blogs.

Pursuant to Section 5, advertisers are subject to liability for false or unsubstantiated statements made through endorsements, or for the failure to disclose a material connection between themselves and their endorsers.  Endorsers also may be liable for statements made in the course of their endorsements.  According to the new guidelines, an individual can have a “material connection” with a company not only if he or she is employed by the company whose products or services are discussed, but also if the individual receives free goods, services or special privileges in connection with commenting about a company.

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