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Thursday, March 26, 2009

Cadwalader Tax Memo: The Manny Ramirez Tax

MannyRamirez In a humorous jibe at the AIG bonus tax, Steven D. Lofchie, co-chair of Cadwalader's Financial Services Department, has posted a "Clients & Friends"  tax memo on the firm's web site:  The Manny Ramirez Lightbulb: Also (2 Ideas in 1 Memo) Putting Pay in Perspective:

I am enraged! and outraged! plus morally reprehensibled (did I say I am outraged!), that Manny Ramirez has inked another huge contract -- this time with the Los Angeles Dodgers. For those of you who do not follow baseball, know this: Manny Ramirez was getting paid about $20 million or so a year last season (which is nowhere near a year) by the BoSox. In the middle of a close pennant race, Manny decides to assault a team official, fake phony knee injuries in both his knees, and duck out of playing in crucial games until he forces a trade and costs the Sox the World Series.

My Idea. Lightbulb! Goes off! A lightbulb in my mind shining for all the world see my brain's idea! Why not a tax! Because the BoSox receive State Aid (all MLB sports teams do), Massachusetts Secretary of State Galvin, whom I would bet is a huge BoSox fan, should drop a big tax like a bombshell on Manny's salary, which is basically Stolen Money from State Revenues. And I'm not talking about some lame 90% tax either that lets Manny walk all the way (the guy wouldn't even run there on his fake bad knees) laughing out loud to the bank with $2MM (10% of 20MM). Boston has no place for 90% ballplayers. I am looking for the big three digits (110%!).

A Lightbulb in New York
. New York State may also use My Idea. Getting back some of that Stephon Marbury money would help the Knicks' salary cap and leave money on the side to pay to put solar panels in Madison Square Garden so as to cook "green" [environmentally conscious and friendly] hot dogs.

Alex, Meet Andrew. Can you just imagine next year, one Sunday morning, Alex Rodriguez, reading the New York Times, goes out in his bathrobe to pick up the newspapers, in his fuzzy Yankee Slippers and robe that he got either for free or at a big discount, and there is a tax lien on his illgotten McMansions in his mailbox. Because Alex somehow "forgot" to withhold to pay the taxes that Mr. Cuomo is going to impose on him for letting down the Yankees (who receive major funding from the City and can't even make the playoffs paying ten times more in salary and "bonuses" than Tampa Bay). You say Mr. A.G. Cuomo can not put a lien on Alex's houses because the tax bill hasn't been passed yet by our lame legislature. That is a lame excuse, kind of like Alex's hitting in the big games in a Stadium built with taxpayer money (your taxpayer money and mine). If Alex isn't getting himself prepared for the big tax bill, he needs to wake up and smell the coffee. (Maybe Madonna can brew him some.)

[T]he tax system is completely messed up. ...

A Good Offense. Also, if some team was coming to town that had a dirty player on it, or who talked too fast, or tried to show you up, hit them with the old 200% tax. I’m talking to you, Payton Manning. Double tax. Plus a tax on all products you advertise. And invalidate all the Master Cards.

Do you remember the time Arlen Specter, the Senator from the Steelers, tried to put a tax on the greatest Football Mind of all Time (“FMT”—it’s not you anymore, Vince), Bill Belichick? But Teddy Kennedy, my main man from South Boston,2 completely shot Arlen down. That should teach you a lesson, Arlen: Don’t try to legislate with the big dogs! ...

Earned Income Tax Credit. Should go to guys like Dustin Pedroia: Still on his rookie contract and he is both RoY and MVP. Also to Amir Sadollah, the best ultimate Fighting Champion, ever. Plus, to good art that is not boring. Give an EITC to Beavis and Butthead: Speaking Truth to Power!

As someone who grew up in Boston and had a Bruno Sammartino poster on my bedroom wall, I loved the closing footnote:

Steven Lofchie was raised in Boston, Massachusetts. He believes the land of Bill Russell, Bob Cousy, and Larry Bird; of Bill Belichick and Tom Brady and Rodney Harrison; of Bobby Orr; of Doug Flutie; of Bruno Sammartino; of Ted Williams and David Ortiz, must not be trounced on by Manny Ramirez.

http://taxprof.typepad.com/taxprof_blog/2009/03/cadwalader-tax-memo-the-manny-ramirez-tax.html

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Comments

I'm from Boston and got interested in baseball in the late 1930s with the Boston Red Sox and Boston Braves, more so with the latter because of the Knot Hole Gang cheap seats. Back then Ted Williams of the Red Sox had his problems with the massive Boston newspapers' sports writers, usually Dave Eagen (Egan?). It took a long time, despite Williams' hitting abilities, for taking him to heart in Boston, after WWII and in particular the Korean War. Williams had a Mexican mother but looked more Anglo than Mexican. He was not referred to as a Mexican, Latino, etc. Baseball has changed quite a bit, with so many players from foreign countries. Look at the World World Series results in recent years.

I was there when the Celtics came to town. In the early years, I could show up 5 minutes before game time and get a great affordable seat (especially when they played at the Boston Arena because the Bruins had the priority ice at Boston Garden.) As the year went on and the Celtics became successful, seats were harder to come by, so TV replaced going to the games.

But it should be kept in mind that sports are games. Let's enjoy them without attacking the players. Williams was not a bad person when the sports press treated him badly. So picking on Manny is easy. But does Manny care? He'll still be hitting when this memo turns yellow, if it hasn't already.

Posted by: Shag from Brookline | Mar 26, 2009 4:21:46 AM

One of the problems is that investment is seen as a game.

That is fine so long as they loose their own shirt. Their own money.

But when they pollute the USA and the world with their mindless banter and play pretend games ("lets pretend this is sound economics and really worth something") then there should be very dire consequences.

Like with Madoff and Ken Lay.

Posted by: Dredd | Mar 26, 2009 6:38:52 AM

Arlen Specter is an Eagles fan, not a Steelers fan

Posted by: Tartan69 | Mar 26, 2009 10:29:47 AM

Dodger Dream Foundation....and the Nightmare

Frank McCourt and mandatory volunteerism....too bad George Carlin died - he could have told McCourt about "jumbo shrimp" and "military intelligence".

http://www.latimes.com/business/la-fi-friedman6-2009mar06,0,412723.story

Is this indictment why they leaned on Manny – the expected contributions and matching funds were being vaporized? Yes, Manny signed 4th March (pending a physical) , but what did the McCourts know and when did they know it? Did their pressure not allow Manny to do due diligence on the Foundation, its management and its donors? Was the idea to only tender contracts to players who donated to the owner’s charity a result of the indictment of Friedman?

Would Rob Manfred and the MLB labor attorneys still believe that being linked to a Foundation with known criminal donors is something that accrues to a player's benefit?

---------
SECURITIES
SEC charges L.A. businessman Bruce Friedman with securities fraud
The agency accuses Friedman, convicted of grand theft in 1981, of stealing $17 million from investors. A judge freezes the assets of two Sherman Oaks firms he owns.
By Stuart Pfeifer
March 6, 2009
A federal judge in Los Angeles froze the assets Thursday of two Sherman Oaks companies owned by a convicted felon accused of stealing $17 million from investors and spending it on personal luxuries and high-profile charitable donations.

The judge's order was sought by the Securities and Exchange Commission, which sued Bruce Fred Friedman, who heads two investment firms, Diversified Lending Group Inc. and Applied Equities Inc. The SEC accused him of diverting investors' money to himself and to a charity he founded and operates.
Friedman, 59, is best known for his charitable activities in recent years, including a $5-million pledge to help the Dodgers Dream Foundation build 42 youth baseball fields and a $10-million gift to help build the Children's Museum of Los Angeles in Lakeview Terrace.

Neither Friedman nor his son and business partner, Daryn Friedman, could be reached for comment.

The lawsuit said that since 2004 Friedman had sold $216 million of "secured investment notes" to hundreds of investors across the United States, many of whom the SEC described as "older Americans." No investors were named in the lawsuit.
He attracted investors to his companies by describing his notes as a "safe, guaranteed, solid investment," according to the lawsuit, and offered a return of 9% to 12%. He sent investors monthly mailings in which he said he continued to invest their money in real estate and loans, while he was secretly diverting millions of dollars, the SEC said.

Friedman promised to invest the money in real estate and mortgage lending, but at least $17 million of it was diverted for Friedman's personal use, the SEC contended.

According to the lawsuit, he spent much of the money on luxuries that included a $6.5-million Malibu home, vacations, cars, jewelry and designer clothing. The SEC said Friedman gave at least $1.8 million of investor money to his charity, the Friedman Charitable Foundation.

The lawsuit comes 28 years after Friedman was convicted of grand theft and sentenced to 40 months in state prison for stealing $300,000 from Avery International Corp., according to court records.

Friedman pleaded no contest to the felony charge during a January 1981 hearing in Pasadena, court records show. Avery International, now Avery Dennison Corp., is a Pasadena manufacturer of labels and self-adhesive products.

Avery Dennison spokesman Jeffrey Pina said he was unable to provide any information about the theft or Friedman's employment with the firm.

The Friedman Charitable Foundation, founded in 2006, became a well-known Dodgers sponsor after pledging $100 to a team charity each time a player scored a run. In 2007, that amounted to a $37,600 contribution, according to a Dodgers news release.

Last year, Friedman stood with Dodgers owner Frank McCourt and Los Angeles Mayor Antonio Villaraigosa at events where his charitable donations were saluted.

At a news conference in November, McCourt announced a joint venture between the Dodgers Dream Foundation and the Friedman Charitable Foundation to build baseball fields throughout the greater Los Angeles region.

Friedman pledged to match the Dodgers' spending dollar for dollar, up to $5 million. In a video available on the Dodgers website, Friedman said the project "is a big effort for everyone who is involved."

Dodgers spokesman Charles Steinberg said the team had not started construction on the 42 ball fields it announced in November, so it had not yet asked Friedman for any of the money he had pledged.

Steinberg said the SEC's lawsuit "certainly raises a subject that we will look into." He said the team was unaware that Friedman was convicted of grand theft in 1981 and sentenced to more than three years in prison.

"The Friedmans have been good fans of the Dodgers and we hope that these allegations aren't true," Steinberg said.

At a separate news conference in November, Daryn Friedman disclosed that the foundation had been the anonymous donor that pledged $10 million in 2007 to help build the children's museum. Cecilia Aguilera Glassman, the museum's chief executive, said $10 million represented a significant portion of the $58.5 million budgeted for the museum, scheduled to open in June.

Of the Friedman family, she said: "As donors, they were incredibly interested in this project and its success and what it would mean to the children of Los Angeles."

"I understand what's been charged and I will be looking into it," she said. "I have no knowledge other than what I've read in an article. At this point, I have to seek counsel."

In addition to the money spent on himself and charity, the SEC said, Friedman spent $500,000 to help produce a rock documentary and gave $275,000 to his girlfriend, Tina Placourakis.

According to the Internet Movie Database, Bruce Friedman is an executive producer of "Rock Prophecies," a documentary featuring Carlos Santana and ZZ Top scheduled for direct release on DVD in October.

--

2007 990's

http://www.guidestar.org/FinDocuments/2007/954/623/2007-954623022-041bb7f8-9.pdf

Page 5 - it is not arm's length. Frank McCourt is President of the Foundation. His wife, the newly named CEO of the Dodgers, is VP. Ask Rob Manfred who is really receiving the benefits of any contribution.

Page 10 - who is Howard Sunkin and why does he get $ 400,000 or 40% of the cash donations during the 2007 fiscal year? Why, he's the senior VP of public affairs for the Dodgers.

http://tigers.mlb.com/la/community/executives/sunkin.html

"Most notably, Sunkin oversees the outreach of the Dodgers Dream Foundation, spearheads ongoing development of the organization’s relationship with its neighboring community, and maintains open lines of communication with local, city, county and state officials."

"He joined the Dodgers after nearly 20 noteworthy years as Vice President of Local Public Affairs with Cerrell Associates Inc., one of Los Angeles’ oldest and most reputable public affairs firms. At Cerrell, Sunkin headed the local government affairs unit, primarily working with the Los Angeles City Council and other Los Angeles County cities and agencies. Sunkin has been a key figure in strategically building relationships, formulating and implementing strategies, and providing advocacy services for Cerrell clients. He is experienced in legislative matters at all levels of government."

Funny, but there's no lobbying money listed being spent by the Foundation...(Page 15).

He received $ 139,242 in 2006 (40 hours work) and $178,242 in 2005 (20 hours work and listed as executive director). What did he do for this money, especially that bonus of 200% in 2007 for his work? Was he paid by the not for profit AND the Dodger front office payroll? Was his salary placed into the not for profit's expenses for some reason - and if so, it should have listed the lobbying that he does for the team on the 990 – he’s a lobbyist born and bred.

Please advise....


Posted by: Bob Tufts | Mar 26, 2009 10:43:14 AM

Two quibbles:

Bruno Sammartino was born in Italy and moved to Pittsburgh as a teenager, where he learned to wrestle by working out with the U of Pittsburgh's team.

1. What makes Bruno a Boston product?

2. Why only a 110% tax?

Otherwise, this is an excellent post.

Posted by: Third-rate-economist-in-flyover-country | Mar 26, 2009 11:16:57 AM

Let's also have a 110% tax on all Hollywood stars and all Union officials that make over $250K/year. It's only fair!

Posted by: KSM | Mar 26, 2009 11:20:19 AM

Since this lazy @#$%^&* won't even run out ground balls, wouldn't it be easier (and maybe even, you know, Constitutional) to sue him for simple breach of contract? He signed on to provide baseball services, but reneged via refusal to play. Any jury New England would convict, except perhaps Fairfield County. BTW, I'm a season ticket holder... can I sue him myself?

Posted by: Jim | Mar 26, 2009 12:03:19 PM

Peyton Manning dirty? What have you been smoking??

Posted by: George | Mar 26, 2009 3:31:58 PM