Respectfully submitted by Lawrence E. Rafferty (rafflaw)- Weekend Contributor
It should not surprise any of the regular visitors to this blog that I have written many articles detailing the abuses of many of the Big Banks and the resulting fines that they have paid on multiple occasions. When a taxpayer reads about Billion dollar settlements being paid by Banks and financial companies as a result of a Justice Department investigation, they probably assume that the entire amount of the fine is being paid.
Those very same taxpayers may be surprised to learn that in many cases, the Banks are able to deduct from their taxes up to 75% of the fines and settlements made with the Justice Department.
“Deep in the legalese weeds of the settlement documents lies buried treasure. Big banks such as Bank of America and JPMorgan Chase will receive deductions against the corporate tax that will amount to between half and nearly three-quarters of their multibillion-dollar settlements, at least. Meanwhile, midsized banks and nonbank lenders generally get to deduct the whole shebang.
Under Attorney General Eric Holder, whose agency has not prosecuted a single major bank or executive in the aftermath of the 2008 meltdown, the Justice Department has been criticized, not least by Democrats, for believing banks are too big to fail and their top brass too big to jail. But here’s the twist. It turns out that banks are also too big to tax: Windfall tax deductions set against the civil settlements imposed by the Justice Department total more than $44 billion, according to Newsweek estimates.” Reader Supported News
It may also be quite shocking to learn that the reason that the Big Banks agree to the large settlements is that they know that a large percentage of the fines are tax-deductible. Would it surprise you to learn that even the Justice Department can gain from these large multi-billion dollar “settlements”?
“But there’s another, more self-serving reason for the Justice Department to hike civil settlement payments while allowing for most of the sum to be tax-deductible. The agency receives a cut of up to 3 percent of its share of the total settlements for its Working Capital Fund, a slush fund common across major government agencies. For example, the Treasury Department’s fund, according to a 2012 Government Accountability Office report, ‘“is intended to provide increased efficiencies in how the department funds and offers shared services—such as payroll, telecommunications, financial services, mail, and publications—valued at over $1 billion annually.”’ Reader Supported News
The idea that the Justice Department can profit from agreeing to let Banks and Banksters deduct most of their “fines” is quite disturbing. While the SEC has disallowed any of its fines to be deducted by the “guilty” financial companies since 2003, the Justice Department continues to allow American companies to deduct a large portion of their fines.
When the Justice Department can gain up to 3% of the settlement amount as its fee, it begs the question if the Justice Department is allowing the Banksters to deduct their fines as a quid pro quo to hiking up the settlement amounts. As one tax law professor states, allowing the Banksters to deduct significant portions of their settlements and fines shifts a large portion of the “fine” to taxpayers!
“Federal law allows companies to deduct large portions of the costs of settling with federal agencies on their tax returns. But that effectively shifts part of the settlement’s burden to taxpayers, and some lawmakers and consumer advocates have expressed concerns that the public can be misled when regulators tout giant settlement amounts that companies aren’t fully paying. …” TaxProf
When the Banksters and financial companies are allowed to “pay” civil fines and penalties that can be deducted from their corporate taxes, just how is this process providing any incentive for the banks to stop breaking the law? Since the Justice Department itself can profit from the settlement designed to allow for the deduction of these fines, where is the incentive for the Justice Department to actually prosecute these Banksters on criminal charges?
There is some possible good news on the horizon. Legislation has been introduced to attempt to force disclosure of the true cost of these fines and settlements and to attempt to find out why the Justice Department has not forwarded any Banksters for criminal prosecution.
“It appears that some in Congress are taking notice of the gap between settlements and federal receipts. Last month, the House Committee on Oversight and Government Reform asked the Justice Department to provide internal documents detailing the reasons for its decisions not to prosecute banks through the criminal courts. “We’re trying to determine why these things were civil, not criminal,” says a committee staffer who declined to be named, adding that the Justice Department’s slush fund “raises eyebrows because it signals an institutional interest in getting big numbers.”
“Truth in Settlements” legislation that has been proposed in the House and Senate would force the Justice Department and other federal agencies to disclose hidden tax deductions in settlements and whether total numbers are inflated for “credits” that can be offset in other areas. “When government agencies reach settlements with companies that break the law, they should disclose the terms of those deals to the public,” Senator Elizabeth Warren, a co-sponsor of the Senate bill who chaired a congressional oversight panel for the bailout, tells Newsweek.” Reader Supported News
True accountability for financial crimes can only be had if criminal prosecutions are brought against the guilty individuals and the guilty institutions. It seems obvious that the financial industry is in bed with the Justice Department. I guess that should not surprise anyone since it has been reported that Citigroup actually wrote the amendment to the recent Omnibus bill that reduced the regulatory impact of the Dodd-Frank bill which benefits Big Banks.
Money talks and Washington is listening to the Banksters very carefully. Who listens to the regular taxpayer?
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