Spontaneous Exclamations: Do not take Blagojevich to Vegas

Adam Katz is a senior associate at Harrison & Held LLP.  He concentrates his practice on federal & state tax matters, mergers & acquisitions, entity structure and formation, commercial finance, and non-profit law.  Adam can be reached at (312) 753-6110 or akatz@harrisonheld.com.  Comments on all posts are welcome!

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If by chance you happen to find yourself elected governor of the great state of Illinois, you might as well buy a bright orange jumpsuit and handcuff yourself to the nearest stationary object.  Odds are you’re going to the slammer.  But if you make it out of office scot-free, make sure that stationary object is a lottery ticket machine because you hit the jackpot, baby.

Yes, this week’s topic is former Gov. Rod Blagojevich and his 14-year prison sentence for crimes including wire fraud, attempted extortion, solicitation of bribes, bribery conspiracy, and false statements.

Statistics show that Blagojevich’s arrest and sentence should be a surprise to no one.  Over approximately the last 200 years, seven Illinois governors have been arrested or indicted.  A great many people have wondered why Illinois governors frequently have such legal troubles.  In my opinion, the late genius, Douglas Adams, put it best in his novel, “The Restaurant at the End of the Universe”:

“The major problem — one of the major problems, for there are several — one of the many major problems with governing people is that of whom you get to do it; or rather of who manages to get people to let them do it to them.  To summarize: it is a well known fact that those people who most want to rule people are, ipso facto, those least suited to do it. To summarize the summary: anyone who is capable of getting themselves made President should on no account be allowed to do the job. To summarize the summary of the summary: people are a problem.”

If people are the problem with respect to crime, how do governments deter said people and governors from committing crimes?  Incarceration is one answer.  Among other things, prisons sentences are meant to remove troublemakers from society, rehabilitate, and deter others from committing crime.  However, the question is, how long should these sentences be?  George Ryan was sentenced to six and one-half years and Blagojevich was sentenced to 14 years.

Was Blagojevich’s sentence too long given 18 corruption convictions? Some people think so given certain physically malicious crimes can carry shorter sentences.  It’s staggering to realize that a person who is convicted of a third DUI, a class 2 felony in Illinois, may serve a sentence of only seven years.  A person who is convicted of Aggravated DUI, a class 4 felony in Illinois, which occurs following a crash resulting in great bodily harm or permanent disfigurement, may serve a sentence of only twelve years.

Yet, Blagojevich was sentenced to more years because he breached the public’s trust.  Thus, we come to the question: is the public’s trust worth more than great bodily harm or permanent disfigurement?  It’s certainly fair to argue that one person’s health is more valuable than imprisoning one state official for taking money under the table and some quid pro quo.

Instead of focusing on whether Blagojevich’s sentence is too long, we should concentrate on the positives that may come out of the lengthy sentence.  Clearly, a sentence of six and one-half years is not grave enough to deter an elected official from committing crimes of corruption.  Fourteen years, on the other hand, may be just what it takes to dissuade the next few governors from breaking the law like seven of our previous governors.  When the risks outweigh the benefits for brainless crooks who are interested in reaching office in order to abuse their power, perhaps those far more suited to hold office will begin to run.  And what we may end up with are smarter, more ethical, and all around more capable politicians who are, ipso facto, the best type of people for the job.

Spontaneous Exclamations: Super rumors from a super committee

Adam Katz is a senior associate at Harrison & Held, LLP.  He concentrates his practice on federal & state tax matters, mergers & acquisitions, entity structure and formation, commercial finance, and non-profit law.  Adam can be reached at (312) 753-6110 or akatz@harrisonheld.com.  Comments on all posts are welcome!

2010 was a wild one.  Not much more could put all tax lawyers on the edge of their seats more than the possibility of zero estate tax for an extended period of time.  Well, we already know the end of this fairytale: It happened and our collective jaws dropped.  A number of high profile figures passed away and utterly massive quantities of wealth passed to their heirs tax-free.  Finally, in December of 2010, Congress signed into law the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010.

The Act set the federal estate, gift, and generation-skipping transfer tax rate at 35 percent and established an exemption from the same at $5 million a person for the years 2011 and 2012.  In years prior to 2010, the gift tax exemption was $1 million and separate from the $3.5 million estate and generation-skipping transfer tax exemptions.  In an ideal world, that increase in the exemption for 2011 and 2012 allows for an increase in the amount of untaxed wealth that can be passed to heirs whether during a person’s lifetime or upon their passing.

Yet, a frightful shroud hangs on the horizon in the form of those eager senators and representatives who make up the Joint Select Committee on Deficit Reduction, otherwise known as the “Super Committee.”  No, the Super Committee is not comprised of your favorite superheroes in bright neon spandex (though that would make C-SPAN infinitely more entertaining), but they were tasked with saving the nation through issuing recommendations on how to reduce the deficit by at least $1.5 trillion over the next 10 years.  For some time, a mysterious rumor has been floating around that the Super Committee may issue a recommendation that the $5 million gift tax exemption be returned to $1 million.  Furthermore, the rumor asserts that the gift tax reduction may occur before 2013 or as soon as November 23, 2011… i.e. next week.  Other than one million attorneys, accountants, and financial planners speculating, there is little or no evidence that this rumor is anything more than a rumor.

Now, I believe this rumor has minimal bite.  The odds that Congress approves legislation reducing the gift tax is unlikely to me.  However, this whole situation and the fact that so many tax professionals are speculating to the point of informing their clients with formal letters of a possible change based on a simple toothless rumor raises interesting questions for attorneys.  First, is it our job to keep track of every rumor about new tax legislation when these rumors are likely false?  Second, if we are supposed to keep track of new tax legislation rumors, how does that affect attorney liability if we are wrong about the rumors?

While I believe attorneys should keep abreast of legitimate tax legislation proposals, I think keeping track of the simple rumors is not our duty.  Our duty is to act upon what the law is and what the law reasonably could be.  It is impossible to keep track of all of the baseless and almost baseless rumors and, further, advising clients on rumored legislation that never materializes could incur liability.  Conversely, if it is our duty to track rumors, how do we account for the legislation that passes without any prior news leaks?  Are we liable then for not having known what actions Congress would take?  Are we liable for being wrong about what actions Congress takes?  Attorneys are not handed a crystal ball with their diploma.

In this case, I am confident in saying it is unlikely a reduction in the gift tax or any other tax exemption would occur with less than one week’s notice.  It would simply be too difficult for people to adjust their estate and gifting plans.  However, like I said before, a shroud hangs on the horizon and our collective jaws have dropped before.  While attorneys are not given crystal balls in law school, we must be prepared for any and all possibilities…duty or not.