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Why I did not go to jail (2014)

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Re: Why I did not go to jail (2014)

#141

Post by nradov »

throwaway8581 wrote: post #138
nradov wrote: post #40

Earlier quoted context omitted.

If you think you have found a legal loophole or gray area then the correct course of action is to send a letter to the responsible federal agency (like the IRS) and request a formal opinion letter as to the legality of your scheme. Once you have it in writing then you're in the clear and won't be prosecuted.

I don’t think they’re in the business of giving formal opinion letters.

They actually are. This is standard practice and they do it all the time. You can find thousands of such letters. Here's one example.

https://www.sec.gov/Archives/edgar/data/1360951/000119312506...

Re: Why I did not go to jail (2014)

#142

Post by lenkite »

AlexTWithBeard wrote: post #131
lenkite wrote: post #118

This is why I firmly believe that ALL law - every single piece of it should be written as a formal model with code so that assertions can be tested to see if something is illegal or not.

Would be nice. But that will require a very serious rewriting of all the laws. For example, many crimes require a specific kind of intent. I don't know at this point how a piece of code can determine an intent. 1* Burglary is an act of breaking and entering of the dwelling place of another with the intent to commit a felony therein

Code doesn't determine intent - a judge/jury decides that. The model will merely state that if there is intent to do X => consequence of intent X.

The code atop the model should be an open source inference engine.

Re: Why I did not go to jail (2014)

#143

Post by lenkite »

chii wrote: post #126
lenkite wrote: post #118

This is why I firmly believe that ALL law - every single piece of it should be written as a formal model with code so that assertions can be tested to see if something is illegal or not.

that's ideal. But what happens if there's a bug? Who decides such an interaction of the law is a bug?

A senate sub-committee should hear all filed bug reports and decide on rule modifications to fix bugs. Major amendments should be passed by both houses like its already the case today.

If one has a formal model for law, most bugs and conflicts can be found out via a formal verification engine itself. Like TLA+.

Re: Why I did not go to jail (2014)

#144

Post by rhizome »

emeraldd wrote: post #53
dang wrote: post #17

If curious, past threads: Why I Did Not Go to Jail (2014) - https://news.ycombinator.com/item?id=18026790 - Sept 2018 (152 comments) Why I Did Not Go to Jail (2014) - https://news.ycombinator.com/item?id=11240717 - March 2016 (13 comments) Why I Did Not Go To Jail - https://news.ycombinator.com/item?id=7191642 - Feb 2014 (182 comments)

I thought I'd read this before. Still, there's this little tidbit that bears repeating: Secondly, I would regularly give a speech to the finance employees that went like this: “In this business, we may run into trouble. We may miss a quarter. We may even go bankrupt, but we will not go to jail. So if somebody asks you to do something that you think might put you in jail, call me.”

Creeps gonna creep.

Re: Why I did not go to jail (2014)

#145

Post by dec0dedab0de »

richardwhiuk wrote: post #72
dec0dedab0de wrote: post #33

Earlier quoted context omitted.

So lying about the date, and not reporting properly was the problem not the price in and of itself. That makes much more sense.

No. The date is correct (they were issued at the end of the month), but the price chosen is the best price for the grantee. This is roughly theft from the other stockholders.

No. The date is correct (they were issued at the end of the month), but the price chosen is the best price for the grantee. This is roughly theft from the other stockholders.

If you look at the link in akeck's comment its actually tax evasion. There is(was?) a tax break if stock options were granted at the same price as the day they were issued. So by lying about the date they were able to get the cheaper price, and also get the tax break.

It's no more theft than paying a salary, the company could set the price at anything they wanted. They could also just give away securities for free, as long as all laws are being met. In this case they were reporting the incorrect date, and owing less in taxes because of it.

Re: Why I did not go to jail (2014)

#146

Post by phonon »

toss1 wrote: post #139
phonon wrote: post #127

Earlier quoted context omitted.

1. You seem to be over-reacting...if you got stock at a discount, at most you would pay tax on the attributed income from the difference between what you paid and FMV. 2. Employee Stock Purchase Plans where you buy company stock at a discount (tax free) are a thing https://www.plancorp.com/blog/the-untold-advantages-of-your-...

1. Nope - the attny explicitly pointed to massive penalties and interest, that go far beyond the shortfall. Once they got a hold of this scheme, they REALLY did not want it to continue, and were happy to make examples of anyone stupid enough to keep trying it, or anything like it. 2. Yes, these may be possible under some circumstances, depending on the details, e.g., perhaps the program explicitly counts the not-disc…

I presume he is referring to 409a penalties. That's for options/deferred income.

https://www.equityeffect.com/blog/409a-penalties/

(Possibly they were offering you options in your story--I'm not sure).

But if the company wants to give you stock directly--say for free! You would pay tax, as regular employment income, on the difference in value between what you pay (say $0) and the FMV.

Re: Why I did not go to jail (2014)

#147

Post by Viliam1234 »

m-p-3 wrote: post #136
croh wrote: post #120

Earlier quoted context omitted.

I never like the whole sentiment about taxation. Why is the taxation so complicated with full of weird language and many complicated clauses ? Ideally it should be very simple, so any layman (even not educated) can understand it. Most people I see either scared and pay taxes without understanding anything or people always looking for cheat. People who understand whole process thorougly and proud tax-payers are rare.…

Because you can't just rebuild the financial system from scratch in a single day, and most of that complexity comes from new rules or exceptions to patch a loophole or an unintended consequence It's basically a legacy software that is kept alive with patches upon patches until it collapses.

> It's basically a legacy software that is kept alive with patches upon patches until it collapses.

Also where hackers can lobby against some bugs getting fixed.

Re: Why I did not go to jail (2014)

#148

Post by dan-robertson »

lmm wrote: post #104
dan-robertson wrote: post #55

Earlier quoted context omitted.

PwC are a big company and probably are pretty good at avoiding liability for themselves. Once upon a time companies with a partnership structure (eg law firms, accounting firms, private investment banks) were legally partnerships. In a partnership, partners have unlimited joint and several liability, which means that every partner could be held liable to an unlimited amount for anything any partner (or the partnershi…

> which means that every partner could be held liable to an unlimited amount for anything any partner (or the partnership) did. Technically I believe there's an exception for things that are very clearly the responsibility of a single partner (i.e. done without anyone else's knowledge or consent). > It’s not obviously a bad thing Disagree. We've seen a huge surge in accounting scandals since these accounting firms be…

The firm you’re thinking of is Wachtell, Lipton, Rosen & Katz, but I’d include them in the category of partnerships rather than other examples of unlimited liability.

Re: Why I did not go to jail (2014)

#149

Post by TheCoelacanth »

H8crilA wrote: post #113

> One area where she thought we were less than competitive was our stock option granting process. She reported that her previous company’s practice of setting the stock option price at the low during the month it was granted yielded a far more favorable result for employees than ours. Whether it's legal or not - not my area, but this is obviously disadvantageous to the shareholders. The strike price is what you get (…

Or do the weird compensation scheme, but just correctly report that you're giving the employees more compensation.

It's not the extra compensation that's illegal, it's the lying to shareholders/IRS that's illegal.

Re: Why I did not go to jail (2014)

#150

Post by toss1 »

phonon wrote: post #146
toss1 wrote: post #139

Earlier quoted context omitted.

1. Nope - the attny explicitly pointed to massive penalties and interest, that go far beyond the shortfall. Once they got a hold of this scheme, they REALLY did not want it to continue, and were happy to make examples of anyone stupid enough to keep trying it, or anything like it. 2. Yes, these may be possible under some circumstances, depending on the details, e.g., perhaps the program explicitly counts the not-disc…

I presume he is referring to 409a penalties. That's for options/deferred income. https://www.equityeffect.com/blog/409a-penalties/ (Possibly they were offering you options in your story--I'm not sure). But if the company wants to give you stock directly--say for free! You would pay tax, as regular employment income, on the difference in value between what you pay (say $0) and the FMV.

Yup, exactly, it was indeed 409a penalties and options/deferred income.

Also right, if it's straight-up realtime income, and you declare the full arms-length exchange / full & fair market value (minus whatever you paid or have as basis), and pay tax on that, you're probably ok (but IANAL, this is not legal advice).

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