Incumbents try to fight off the newbies - Again!

What can I say....D.C. Cab drivers did the best they could to shut down traffic around the municipal office building on Wednesday. And do you know why? If you have been reading my rants here you should be able to guess. Yes, the cab drives want the 'government' to shut down their competition by declaring Uber and other ride sharing apps illegal. The "Teamsters" union said that the folks offering ride sharing with the apps are operating illegal in the city and, more importantly, they "...are stealing work from D.C. taxi drivers."

The D.C. taxicab commission released the following statement:

“The DC Taxicab Commission (DCTC) is currently working on updated regulations that will ensure a fair, balanced, competitive, and safe system for passengers and drivers. The District’s City Council is also currently considering legislation regarding the role of private vehicles in public transportation. In the meantime, DCTC will continue to enforce against illegal street hails and violations of the reciprocity agreement between Virginia and Maryland. This includes private vehicles that are cited and fined as they have chosen not to register with DCTC; and without proper registration they are operating illegally.”

Just remember that the "government" is here to protect the public from everything.....how about the idea that the government should not be picking winners and losers?

Jerry

“It is not necessary to accept everything as true, one must only accept it as necessary.” - From The Trial by Franz Kafka

This story might have been sub-titled The Godfather IV, despite the probable copyright issues. In the 1974 Academy Award Winning movie The Godfather II, the US Senate is investigating the Corleone crime family.  Michael Corleone (Al Pacino) and his family are the subject of a Senate committee probe. Frank Pentangeli (Michael Gazzo), a former member of the Corleone family, has taken the stand to spill the beans about the Corleone’s criminal empire. Just then he notices that his brother (from Sicily) is sitting in the gallery, next to the Don. The threat is obvious; if Pentangeli cooperates with the government, his brother is dead.  

Fast forward to the early 2000’s after the bankruptcy of Enron and the Department of Injustice (I refuse to use the term “Justice” until they clean up their act) is prosecuting  Arthur Andersen, one Andersen partner, and executives of Merrill Lynch, NatWest and of course Enron (in what I refer to as The Godfather Part IV).  In the latest Godfather episode, the US Department of Injustice (DOI) is prosecuting former executives over the course of almost a decade in the Southern District of Texas, Houston, rather than before a US a Senate committee. And the DOI borrows a trick or two from Michael Corleone.

Of course one might ask how any of these defendants could possibly get a fair trial in a town as collectively pissed off as Houston? But fair trials were not a priority for the DOI or the Houston federal court system.

The DOI didn’t bring any long lost brothers to the courtroom. But their threat was nearly as terrifying—a federal indictment. An indictment is serious because the potential prison time is almost always decades, and the cost of paying for a legal defense will drain your last dollar (unless you are far richer than the average defendant or were one of the few defendants whose company would foot the bill). It was easy to envision that if you were indicted you would waste away in federal prison while your family had to move in with your in-laws. Even if you prevailed in court, your name would be ruined. And it would be impossible to earn a living while you worked overtime with your legal team on your underdog defense while no witness would speak to you for fear of being indicted and the prosecutors claimed they had no evidence favorable to your defense. 

In the case of the Enron Broadband trial, one of the defense witnesses that refused to be intimidated was Larry Ciscon (a real hero from my perspective). The prosecutors telephoned Ciscon three times the night before he was scheduled to testify to remind him that if he did testify, he would be indicted. Lucky for him it was a bluff.  This threat would be judged as witness tampering if made by the mafia but for some crazy reason it is an intimidation tactic often used by federal prosecutors today—even when they have no intention of indicting someone. 

An indictment meant a minimum of a half million dollars in legal fees (for the defendant) and if the prosecution went full-course through trial, a legal defense probably cost at least $5 million. And you knew that the prosecution would charge you with everything under the sun and threaten any witnesses that might vouch for you. In the case of former Enron Treasurer, Ben Glison, who plead guilty without agreeing to testify against others, they threw him in solitary confinement until he decided to “cooperate” with the DOI. Cooperation meant telling the prosecutors what they wanted to hear—consistent with their “view” of the “facts.” Any contrary view was met with threats of indictment for perjury, false statements, and obstruction of justice. They made good on enough of those threats to make a believer out of everyone.

In The Godfather II, the mafia threatened the witness, and it worked for the Corleones. In Houston this witness tampering worked for the DOI.

But witness tampering was only a small part of the DOI’s playbook of dirty tricks. The crime the prosecutors most consistently violated was hiding evidence from the defense, lying about it to the court, lying about it the legal defense team, and most importantly lying about it to the jury. The irony is that in Jim Brown’s case (the main protagonist of Licensed to Lie), one of the charges against him was perjury. I am yet to see any evidence that Jim Brown lied. But the prosecution clearly lied many times trying to convict this innocent man.

And when the unethical prosecution got caught lying, they ended up losing many of the cases and most of the charges. But the prosecutors never suffered any criminal prosecution themselves. In Jim Brown’s case, not only were the prosecutors never indicted (by their buddies at the DOI), they were promoted—to White House Counsel, General Counsel/Deputy Director of the FBI, and Acting Attorney General for the Criminal Division. The state bars refused to even investigate their wrongdoings. “Scott free” is the technical legal term for how these corrupt zealots (i.e. prosecutors) got away with these crimes.  According to the Urbandictionary.com, Scott Free means “to completely get away with something, like murder.”

The story that author Sidney Powell lays out is so riveting that it not only reminded me of the Godfather series, but also harkens back to a combination of John Grisham characters—ham-fisted judges and unethical and politically ambitious prosecutors. Unfortunately in many of these Enron-related cases, the federal appeals system was inconsistent and did little to reign in the DOI and the pliant district court judges.

Sidney Powell showed tremendous courage writing Licensed to Lie. Now it is time for America’s federal trial system to stop condoning this organized crime by the DOI. The DOI might, at times, have slightly better motives than Don Corleone, but their unethical methods are just as frightening and completely unacceptable for those who swore to uphold the Constitution, and who are entrusted with such power.

Download this book right now and make it your very next read!

Find Lucky and Good: Risks, Decisions and Bets for Investors, Traders and Entrepreneurs at Amazon.

Virginia fighting on behalf of incumbent taxi companies to limit competition

1. Well I guess I should have seen this comin'...oh wait, I did and I have written about it several times here at Lucky and Good.
   
   What is it you ask? Ok I will tell you. The DMV of Virginia has sent out cease and desist letters to the ride sharing companies Uber and Lyft urging them to stop doing business in the State. 
   
   Accordingly the Virginia DMV has already fined Uber $26,000 and Lyft $9,000 because Virginia law requires "for-hire passenger carriers to have proper operating authority,” and their business model — a model which allows passengers to conveniently look up driver ratings and connect with a part-time driver of their choice via smart phone mobile apps - doesn't fit the bill.
   
   The DMV Commissioner has suggested that the two companies should “focus (their) resources on participation in a DMV study rather than continue illegal operations in the meantime,” .
   
   Now why is the DMV bringing down the power of the State of Virginia on these two companies? Well, it turns out that a number of transportation companies [including taxis] have contacted the DMV to complain.
   
   OK, here is your economic lesson for today. Privileged existing firms will, if possible, stifle innovation which may cut into their profit margin. They will use the power of the government to limit consumer choice by making it more difficult and expensive for new companies, entrepreneurs and/or innovators to provide higher quality services at a lower cost.
   
   Of course the DMV is telling everyone that it is looking out for the best interest and safety of all consumers and the DMV has put out a notice that is warning the public to research any ride service before using it. And the way to do research is by looking at the DMV's website that list DMV approved companies. Guess which two companies are not on the list?
   
   Jerry

Avoiding the US Corporate Tax Bite

Pfizer, the maker of drugs like Viagra and Lipitor may have found a way to escape the US corporate income tax disadvantage. 

Pfizer has proposed to buy AstraZeneca and this would allow them to merge with the British company and reincorporate in Britain.  Voila – a British company rather than a US company.  The transaction has initially been rebuffed by AstraZeneca but the point is much broader than this one transaction.

The stated reason is that the combined companies will have economies of scale.  But it would also result in the surviving company being able to access tons of cash that is overseas without paying the US tax that is due when those funds are moved to the US.

America’s top-line corporate tax rate is the highest in the developed world.  Granted in some industries and circumstances, discounts have been granted to certain favored businesses.  But for a company that pays the full tax bite, US corporate income taxes are frequently their biggest expense.

The net result is that the United States will lose jobs, and tax revenue.  What is not nearly as visible are those new companies that are being incorporated outside the United States today because they want to avoid the added tax bite in the US from the get-go.