Commentary from a practical perspective
page includes posts from July 21-27, 2002 in the usual reverse order. Each week's postings
on the home page are perma-linked to these pages.
The gift that keeps on giving
Many years ago, state and local government pension "systems" hardly deserved the term. They typically werent fully funded on an actuarially sound basis, and the benefits werent much to live on, either.
As the non-federal governments grew to handle an ever-increasing demand for services, their personnel budgets tended to keep pace. The unfunded pension liabilities began to grow at an even faster rate.
(This discussion should sound familiar to those following the Social Security debate. The difference, of course, is that only the U.S. Treasury can print money. The non-federal governments dont have that luxury.)
Eventually, rating agencies such as S&P and Moodys conducted what Foreign Service diplomats call "full and frank discussions" with many such governments. They explained the consequences to government bond ratings and interest payments of failing to provide today for the pension fund needs of tomorrow.
Most governments took the hint, and made significant reforms in their pension systems.
One major legal change was to inhibit the natural tendency of the legislatures to increase benefits or create exceptions to the pension rules, without earmarking the money to pay for the changes.
The Delaware General Assembly learned that lesson a long time ago. After they passed a bill to provide a pension to someone who didnt meet the usual standards, the Supreme Court ruled against them. The court ruled that while the legislature could change the rules or create exceptions to them for particular persons, they were required at the same time to appropriate the necessary funds to pay for the change. The state pension fund couldnt be made to handle the extra costs of such changes from its existing sources.
By definition, any such amendments would turn the pension fund away from the path toward being fully funded, leading to the predictable nasty financial effects.
Since that decision, the General Assembly tended to follow its dictates, at least for the occasional deserving constituent. When these bills are filed now, they include an appropriation to handle the cost of the change.
The legislators had a little more difficulty, however, in following the law when it came to their own pensions.
During the administration of Governor (now-Congressman) Mike Castle, about a dozen years ago, the General Assembly slipped a pension increase for legislators into the epilogue language of one of the major appropriation bills. These bills are typically passed without any floor amendments in the last days of the session.
Unfortunately for the legislators, two little problems affected this special provision:
After a tense few hours after midnight on the last day of the session, and facing a veto threat from the Governor, the General Assembly voted to remove the offending section from the bill.
The legislators were not happy.
Apparently the urge to give yourself the gift that keeps on giving continues to be hard to resist, as reported in an AP story from Kentucky.
Kentuckys Attorney General Ben Chandler brought the suit, and was less than magnanimous in his remarks about the victory:
Based on those comments, Im sure Chandlers next budget request will be given careful consideration by the legislature in the next session.
Very careful consideration.
Doing violence to the meaning of words
My professional career requires the careful use of language. The words utilized in the legislation or agreements that I draft, for example, can produce serious long-term unintended consequences if misconstrued.
Im a little sensitive, therefore, when someone butchers the commonly accepted meaning of a word or phrase for his or her own purposes.
On some occasions, admittedly, there is ample room for varying interpretations.
For example, during my law school course in insurance many years ago, we studied a case construing the word "accident" under fairly unusual circumstances.
Dictionaries typically define the term as follows:
In the case we studied, a man died due to autoerotic asphyxiation involving a noose and a doorknob. The insurance law question centered on the policy definition of "accident", especially since the policy also contained an exclusion from coverage for "intentional acts". Determining the proper interpretation was critical, because the policy also included a double indemnity provision that required meeting the "accident" definition in order to increase the benefits to be paid to his survivors.
As I recall, the eventual decision was that the asphyxiation was an accident, although the acts that led to the mans demise were obviously intentional. No suicide note or other evidence existed that gave any indication of a death wish.
In other words, there was no proof that the deceased ever intended to come and go at the same time.
On other occasions, however, there really isnt any doubt as to the right word to be used for the situation, no matter what someone tries to say otherwise.
This issue can frequently arise in the criminal law context, as reported by the AP today from Houston, Texas:
Upon her release on $30,000 bail, Ms. Harris met the media and immediately abused the English language:
Pardon me, ma'am, but I don't think so.
I expect an eventual plea bargain.
The New Bruce Willis Movie
World-famous action movie star Bruce Willis took advantage of his political connections, and convinced President George W. Bush to join him at the recent press conference announcing Willis newest movie project based on Proctor & Gambles famous multi-purpose superhero, Mr. Clean.
Fox Corporations "Buff Hard" features Willis as a mild-mannered janitor working at a new apartment complex in Newport Beach, California.
Complications ensue when a group of Middle Eastern terrorists move into Apartment 3-G. Mr. Clean is forced to not only clean the bathrooms, but also to wipe the floor with the bad guys before they can take over the nearby John Wayne Airport.
"I think in some ways I'll be able to portray Mr. Clean somewhat like my character in Unbreakable," Willis said. "He was a quiet working man, who became caught up in something larger than he thought he could handle."
Willis also believed that he could meet the difficult demands of portraying a character familiar to millions of people, but about whom not much is really known: "The fact is that nobody's ever really heard Mr. Clean before. Just the same, I don't think there'll be any problem convincing people I was right for this part."
Proctor & Gamble expects to recover its investment in dozens of product placements throughout the film within a few weeks of the movies Summer 2003 release. In an uncommon marketing move, the Mr. Clean action doll is already in production for shipping in time for this years Christmas crush, when the trailers for the new movie will be on screens nationwide and on the Web.
Note: At least, thats what I thought when I saw the picture above. The real story is a bit different.
More than half a billion reasons supporting the US version of the Cayman Islands
A local angle on the Enron debacle is now making the news:
Its also been reported that Citigroups current chairman of its executive committee might not be asked to testify before Congress.
While Mr. Rubin may be safe from inquiring minds, that hasnt stopped congressional staffers from taking a shot or two at Delawares laws relating to Enron entities:
The usual comments about the benefits of incorporation (confidentiality and legal protection) and the inevitable potential for abuse (money laundering and other evils) then follow.
Whats left out of the story is the financial impact of Delawares popular incorporation statutes, whether those entities take the form of business trusts or some other structure that permits confidentiality of ownership interests.
In FY2001, just over $2.3 billion flowed into the states general fund coffers from all sources.
The personal income tax stream was the largest contributor, netting out at $718 million.
The next highest source of general funds was our good friend the corporate franchise tax, with a whopping $533 million added to the mix.
The companion bank franchise tax chipped in an additional $96.7 million, much of which comes from the now-famous Delaware-based credit card operations (Usery? Such an ugly word, don't you think?).
On a smaller but still significant scale, the equivalent fees from limited partnerships and LLCs, which have their own confidentiality provisions, added up to a nice little $18.4 million.
These sums do not include corporate income tax revenues, by the way, which is how business trusts are taxed under 12 Del.C. Section 3809.
In essence, then, the First State depends on the attractiveness of its corporation and banking laws for well over 25% of its total general funds.
Accordingly, Delawares keen lack of interest in reforming these laws, such as by making the ownership records completely transparent, should not be too surprising. If the First State were to take the lead in adopting such changes, South Dakota or some other state would gladly welcome the thousands of departing enterprises (and their franchise taxes) seeking a more business-friendly environment.
Of course, there are also the offshore incorporation opportunities as well, provided by our Caribbean friends in the Cayman Islands, among other enticing locales.
With that kind of money at stake, its easy to see why there theres no groundswell of local opinion in favor of killing these particular corporate geese. The golden eggs that Delaware receives from them are just fine, thank you.
July 24, 2002
Its often been said that bank robbers are among the dumbest criminals out there.
After all, with exploding dye in the bags, cameras all over the building, and hidden police signals the tellers can buzz, the chances of actually scoring big are between slim and none, with none in the lead.
Sometimes just a little bit of initiative will do the trick all by itself, as reported in an AP story from Ocean Springs, Mississippi:
Personally, I blame the hapless robber's failure of nerve on the self-esteem movement. I doubt anyone had ever previously told him the bitter truth about his diminished penmanship skills.
Ms. Jacobs, what do you think?
Mr. Grumpy makes another appearance
If Anita Bryant were a lawyer and had my job, she might be tempted to remark in her brightest voice, "A day with 7 hours of depositions, with an ill-tempered lawyer on the other side, in a city 90 miles away from home, is just like a day without sunshine!"
July 22, 2002
My Uncle Tom would have enjoyed his own funeral.
It touched upon the major elements of his very active, very public life.
He was a Navy veteran of World War II and the Korean conflict, and so the service began with a playing of the Navy Hymn.
Tom worked as a union electrician, and rose through the ranks to the presidency of the Building and Construction Trades Council, and a related role in the AFL-CIO. He also served as a Secretary of Labor for Delaware under Governor Sherman Tribbitt, and later accepted federal appointments for the U.S. Department of Labor and OSHA.
One of the speakers at the service spoke movingly about Toms role in advancing the cause of working men and women and their families.
He was a founding member of the Delaware Veterans of World War II and Korea, and held a term or two as that organizations president. Tom took on similar roles for the local chapters of the Disabled American Veterans and American Legion.
One of the two remaining Del Vets founders described his pride at working with Tom on the creation of the organization and in the years they spent together.
Tom would have been pleased at his fellow veterans military salute with rifles, and their presentation of the colors to his widow. His eyes would have moistened, as did those of dozens in the audience, during the playing of "Taps."
My uncle was close to his God and his family. His brother, my father, read a passage from Isaiah, and added a funny anecdote about their childhood. Dad made the audience laugh when he said, "Tom would have rather teased me than eat." His sister read the 23rd Psalm, and added a light flourish to my fathers story.
Toms older daughter gave a wonderful eulogy, in which she captured the essence of the man as a father, husband, labor leader, and public official. His younger daughter, his two granddaughters, a niece, and several nephews then led the congregation in a series of prayers for intercession, based on the Book of Common Prayer.
My uncle always enjoyed bringing a smile to the faces of those he met. Those who attended his funeral were able to bring that memory to the forefront, even as we were saddened by his death.
Four Claudesas if you cared
Apparently there is a biological explanation for a phenomenon that I freely admit exists:
My wife also has a far better memory for exactly what was said during our conversations. I can reconstruct the subject and the tone, but am much worse in recounting the words actually used in discussing a given topic.
This difference between the sexes is not news to anyone who's been married for more than a few months.
Hence, the 4-Claude rating for the banal headline, recounting firm proof of a commonplace notion.
The limits of self-help
Sometimes the urge to take matters into your own hands can become overwhelming.
Even so, there are usually several good reasons to try even harder to avoid the potentially ugly consequences of resorting to self-help.
A frustrated businesswoman in Alexandria, Virginia is currently proving the point.
Cat Crosby owns assigned parking spaces at an office park. Unsatisfied with the local police efforts against illegal parkers filling her spots, Crosby has been booting the cars herself, and forcing the drivers to pay $25 to release their vehicles.
As one can imagine, these efforts are not well-received. Crosbys employees are now unable to use the assigned spaces, and shes forced to rent other parking for them,
The strain is evident on all concerned:
Crosby reportedly says she doesnt care.
When she loses employees and has trouble replacing them, however, perhaps she will reconsider.
Program Note: Weve had a death in the family (my fathers brother), and Ill be gone for a day or so for the viewing and funeral.
Official small print disclaimer: This is, after all, a personal web site. Any opinions or comments I express here are my own, and don't necessarily reflect the official position of my work as a government attorney or any of my clients.
That fact may become obvious later on, but it needs to be said here anyway.
© Frederick H. Schranck 2002