Tales from the IRS
Red Card!
Picture a greedy cabal of shameless officials lording over a famously corrupt international cartel. Add suitcases full of cash bribes, and multimillion-dollar payoffs coursing through a shadowy network of shell companies and offshore accounts. Throw in a loud, colorful “mole” celebrating a life of private jets, Michelin-starred restaurants, and vintage wines. Now stir in an ongoing investigation, secret indictments, and a pre-dawn stakeout leading to a series of arrests at a luxury hotel in Zurich, Switzerland.
It sounds like the plot from the latest Jason Bourne movie, right? The only thing missing is the car chase. But it’s no big-screen thriller. It’s the real-life tale of 20 years of bribery and corruption inside FIFA, international soccer’s governing body. Last week, the Justice Department indicted 14 targets on 47 charges of racketeering, wire fraud, and money laundering. And would it surprise you to hear that the goalkeepers at the IRS helped blow the whistle on the fouls?
Chuck Blazer — the “mole” at the heart of the story — began his unlikely journey as a suburban “soccer dad” coaching his 6-year-old son outside New York city. He worked his way up through the soccer hierarchy to general secretary of the Confederation of North, Central American and Caribbean Association Football (CONCACAF), becoming the only American ever to serve on FIFA’s executive committee. Blazer used his position to extract bribes from countries hoping to host tournaments and broadcasters hoping to cover the proceedings.
Blazer and his FIFA henchmen used the proceeds from those bribes to live like kings. He charged $29 million on his expense account credit cards and pocketed another $20 million more. He grew, literally, to 450 pounds — he got so big he needed a collection of motorized scooters to navigate his homes in Miami, the Bahamas, and New York’s Trump Tower, where he kept not one but two apartments: an $18,000/month three-bedroom unit for himself, and a $6,000/month one-bedroom unit, right next door, for his cats. (Apparently, crime really does pay. Until it doesn’t.)
Blazer even kept a blog bragging about his travels and his life. Apparently, however, he was too busy partying to pay taxes on the profit he made from selling his organization’s integrity. In 2011, agents from the IRS and FBI stopped him while he was riding his scooter on Fifth Avenue. And right there, they presented him with a stark choice: “We can take you away in handcuffs now — or you can cooperate.” Turns out they wanted more than just a few million in back taxes. They wanted to “flip” him, to secretly record conversations with crooked soccer officials from across the world. Those tapes, which he recorded using a specially-modified key chain, helped lead to last week’s arrests.
IRS Criminal Investigation head Richard Weber made the obvious pun after the arrests, announcing “This is the World Cup of fraud, and today we are issuing FIFA a red card,” he said. But really, the headlines just write themselves. How about “Corrupt soccer officials just couldn’t keep their hands off the cash”? Maybe “Co-conspirators headed to jail for terms up to 20 years”? How about “Prosecutors score a GOOOOOOOAAAAAAALLLLLLLL against corruption”? (Sometimes we crack ourselves up.)
Most Americans don’t get fired up about soccer. But they do get excited about tax savings. If you need extra help guarding the net against IRS strikers, call us for a plan. Who knows . . . you might even save enough to afford an apartment for your cats, too!
Related Sources
1. Dan’s Coaching Chat
2. Technology and You
In The Headlines
Gold Prices: In Search of a Bottom
For much of the previous decade, gold prices were on the rise. Buying picked up after global central banks fought the 2008 financial crisis with unprecedented stimulus, stoking fear of accelerating inflation. Futures gained more than six-fold in 12 straight years of gains through 2012.
An improving U.S. economy spurred a shift in sentiment, driving bullion into a bear market in April 2013. About 60% of respondents in a Bloomberg News survey of 27 traders and analysts say that the precious metal will post a third straight annual loss this year. That would be the worst rout since 1998, when gold was last out of favor and languished near a 19-year low.
Not everyone is heading for the exit. Bullion still has a place in portfolios as “insurance,” said Frank Holmes, a San Antonio-based money manager at U.S. Global Investors, which oversees $818 million. The International Monetary Fund said Monday developments in Greece remain a risk for the euro area, and warned that authorities should not become complacent about the scale of the threat after the nation reached a deal with its creditors.
Physical demand can also help support prices. Sales of American Eagle gold coins at the U.S. Mint in July are heading for the biggest monthly total since April 2013. Buying has also increased at the Royal Canadian Mint, while Perth Mint Treasurer Nigel Moffatt said demand had surged since the price fell below $1,100. “Gold is a weird relic of antiquity. It’s pretty, so people use it for jewelry. But it’s unlike iron ore or oil, or copper, or corn. There’s no specific end-use for it.”
“As an investor, you should have gold,” Holmes said. “There are lots of systemic risks out there.” Hedge funds are not convinced. Speculators held a net-short position, or wagers on declines, of 11,345 contracts in the week ended July 21, according to the most-recent data from the U.S. Commodity Futures Trading Commission. That is the first net-bearish outlook since the data began in 2006.
Analysts who have been right in the past are forecasting more losses. Goldman Sachs Group Inc.’s Jeffrey Currie, who told investors to sell before the 2013 slump, has said the metal could fall below $1,000. Overseas-Chinese Banking Corp.’s Barnabas Gan, the most-accurate forecaster of precious metals over the past two years based on rankings compiled by Bloomberg, predicts $1,050 by December. More than $5.7 billion has been wiped from the value of global gold exchange traded funds (ETFs) in July. Investors cut holdings for a ninth day to about 1,539 metric tons, the smallest hoard since 2009. They have been selling for three straight months.
“Gold is a weird relic of antiquity,” said Brian Barish, who helps oversee about $12.5 billion at Denver-based Cambiar Investors LLC. “It’s not a commodity that has much fundamental demand. It’s pretty, so people use it for jewelry. But it’s unlike iron ore or oil, or copper, or corn. There’s not a specific end-use for it. People just like it, so it becomes a discussion about fervor.”
Citations
1. http://bloom.bg/1DNQ8Ly – Bloomberg
2. http://cnnmon.ie/1M5ucDO – CNN Money
Microsoft Aims to Reverse Its Fortunes with Windows 10
Over the past 20 years, releases of new Windows operating systems have been marked by midnight sales parties, junkets crammed with reporters, and Microsoft’s biggest marketing campaigns. The introduction of Windows 10 on July 29 was much quieter—no ringing the Nasdaq opening bell, no promotions with sitcom stars or Rolling Stones songs—just 13 parties around the world to thank volunteers who have helped debug and refine the operating system during the past year. “Having a big launch with celebrities, it might be newsworthy, but it’s not necessarily the step to a billion happy and engaged Windows users,” says Windows chief Terry Myerson.
Microsoft has promised shareholders that Windows 10 will reach 1 billion users within three years—which would give it the fastest adoption rate ever—even as the company shifts its focus to other products. It is relying in large part on the 5 million volunteer bug testers, known as Windows Insiders, not only to make Windows 10 better but also to build loyalty for the OS. It is a humbling acknowledgment that as consumers shift from PCs to smartphones and tablets, the software synonymous with Microsoft is not the required tool it once was. In 2000, Windows ran on 97% of the world’s consumer computing devices including phones and tablets, Goldman Sachs estimates. Today, it is under 20%.
Under Chief Executive Officer Satya Nadella, Microsoft has begun to recognize that the biggest competition for a new version of Windows is no longer the previous version of Windows. To better spread Microsoft’s influence beyond its own operating systems, the company has acquired several makers of iOS and Android business apps and introduced new versions of MSOffice apps on iOS and Android first. The OS division’s marketing chief, Yusuf Mehdi, is talking about winning customers back from “other ecosystems,” such as those created by Apple and Google. To do that, Microsoft has tried to make Windows 10 as intuitive and inviting as possible. Windows 8, released in 2012, annoyed users by making the PC into a tablet, eliminating familiar features like the Start Menu in favor of a touchscreen system based on taps and swipes that only a small percentage of PCs could take advantage of or accommodate at all. The new edition restores the Start Menu and lets users switch more easily between the touchscreen setup and a more traditional point-and-click interface. It is a lot more natural than the Windows 8 setup, if not exactly revolutionary.
Microsoft has also replaced its Web browser, Internet Explorer, with a new one called Edge, which is missing some customization options at launch but otherwise compares favorably with Chrome and Safari. The company’s Siri-like virtual assistant, Cortana, is built in, so you can say, “Tell Tim I’m running late,” and the OS will send an e-mail. Say, “Add milk to the grocery list,” and, with the help of GPS, Cortana texts your phone a reminder to buy milk when you are in the parking lot at the grocery store. For its first year on the market, Windows 10 is free for consumers who have an earlier version of the OS, or $119 for those who do not.
The biggest change was last September’s creation of the Windows Insider program, the group of consumers and business customers who agreed to download a series of early versions of the OS and try them out. Members sent feedback on each after using it for about 10 hours, shaping Windows 10 to a degree that would have been unimaginable for Microsoft a few years ago. The new OS has received a “surprisingly positive response” from companies, says Steve Kleynhans, an analyst at research firm Gartner. Easing people into the new interface has helped assuage fears about the notorious bugginess of past Windows releases.
Microsoft could use a hit. On July 21 the company announced a record $3.2 billion quarterly loss on $22.2 billion in revenue, owing to an almost total write-off of the Nokia phone business it bought for $9.5 billion in 2014. Microsoft is scaling back its in-house phone production and cutting about 7,800 jobs. And while it will be time for holiday shopping before Dell and Hewlett-Packard have new PCs ready to take full advantage of Windows 10’s new features, the OS still brings in serious money. Chief Financial Officer Amy Hood said in April that it is now worth about $15 billion a year, down from about $19 billion in 2013, the last time Microsoft disclosed Windows division revenue. Ninety-two percent of the 300 million PCs sold around the world each year run Windows, Gartner estimates, down from 95% two years ago. Following his earnings report, Nadella told analysts that while Windows 10 would restore the OS division’s revenue growth, its effects would mostly be felt at least two quarters from now. He appears more focused on the company’s future beyond Windows. In June he distributed a mission statement to employees that listed the OS third among the three priorities of his tenure, behind “productivity services” (including Microsoft Office) and cloud platforms. “Windows has moved from a lead role to a support role,” Gartner’s Kleynhans says.
The Windows team continues to invest in research and development, including on projects beyond the PC, such as augmented-reality goggles that display holograms, and 84-inch touchscreen computers for a $20,000 corporate conference room setup. Windows chief Myerson says he is trying to make sure Microsoft’s OS will be “the best home” for Office and Skype, among other company products. In part, he says, that means following the process of regular updates and improvements that began with Windows Insider, as opposed to rolling out a new version of Windows every few years. (Corporate users who don’t want to be bothered to regularly update their systems can opt out.) It’s possible there won’t ever be another update so big that it requires a kickoff party. “Let’s put it this way,” Myerson says. “There’s nobody working on Windows 11.”
Citations
1. http://bloom.bg/1Jv4G91 – BusinessWeek
The Good News Is . . .
• U.S. economic growth accelerated in the second quarter as a pick-up in consumer spending offset the drag from soft business spending on equipment, suggesting a steady momentum. Gross domestic product expanded at a 2.3% annual rate, the Commerce Department said. First-quarter GDP, previously reported to have shrunk at a 0.2% pace, was revised upward to show it rising at a 0.6% rate.
• Reynolds American, Inc., a leading tobacco products company, reported earnings of $1.02 per share, an increase of 14.6% over year earlier earnings of $0.89 per share. The firm’s earnings topped the consensus estimate of analysts by $0.05. The company reported revenues of $2.4 billion, an 11.1% increase. Management attributed the company’s results to strong growth in the brands of its operating companies and improved operating margins.
• The auto parts supplier Delphi Automotive said on Thursday that it had agreed to acquire HellermannTyton Group, a British maker of electronic cable equipment, for $1.7 billion. HellermannTyton, which is based in Crawley, England, manufactures wire ties, insulation products, cable protection systems, and connectors for electronics. The deal is expected to complement Delphi’s existing business of providing electronics components to the auto industry and to enhance its business in Asia, where HellermannTyton has a 15-20% growth rate.
Citations
1. http://1.usa.gov/1eZ44Hx – Bureau of Economic Analysis
2. http://cnb.cx/1gct3xa – CNBC
3. http://bit.ly/1VVAp8o – Reynolds American, Inc.
4. http://nyti.ms/1IyuvQv – NY Times Dealbook
Planning Tips
Guidelines for Buying Pet Insurance
According to the American Pet Products Association, Americans spent about $15 billion on veterinary care for their pets in 2013. If you have taken a pet to the vet, you have probably experienced serious sticker shock from the cost of even minor issues. It can be scary to think about footing the bill to treat a major pet health problem. Buying pet insurance is one way to lower the cost of treating a sick pet. Whether you should buy pet insurance is a financial and an emotional decision. It hinges on many factors. Below are some things you should do before buying a pet insurance plan. By educating and preparing yourself, you will have much more success during your search for the most appropriate pet insurance.
Understand how best to use pet insurance – Pet insurance, like any other type of insurance, is best used to help manage financial risk. It should not be looked at as a way to save money, as you will pay more in premiums than you receive as reimbursements if your pet stays relatively healthy. Pet insurance is used to help soften a catastrophic financial hit. Make sure you are getting great medical and monetary coverage for the incidents that tend to be unexpected and financially catastrophic.
Evaluate the “worst case scenario” costs for your area – Veterinary costs vary across the country. In general, costs in urban areas tend to be more than the costs in rural areas. Ask your veterinarian to give you the costs for treatment of the conditions listed below. These represent the conditions most costly to treat in veterinary medicine.
Emergencies (e.g., fractures, foreign body ingestion, accidental poisonings, bloat, urinary blockage)
Chronic diseases (e.g., chronic renal failure, heart disease, liver disease, diabetes mellitus, cancer)
Sudden, severe diseases (e.g., acute renal failure, acute pancreatitis)
If after speaking with your veterinarian, you find that you cannot afford these costs or if paying these costs would create a catastrophic financial burden, you may want to consider pet insurance.
Consider all the factors in your evaluation – Make sure you do not pick pet insurance solely based on the cost of the premium. If you do, you will not get the right medical and monetary coverage for your individual situation. Consider your pet’s age, health history, the benefits offered by the plan, and any limits or exclusions. Also, check out customer reviews to see if there are any red flags.
Do your own research – While other people can give you their recommendations, it is important that you research the options. Find out which pet insurance companies and plans meet your medical coverage requirements, maximum payout requirements, and other important requirements. Read the terms and conditions of the policy you are planning to buy. The requirements and exclusions to the insurance policy are especially important information.
Check the list of exclusions based on your pet’s past medical history and breed – A medical review will give you a list of the exclusions you can expect based on your pet’s prior history. If you do not like what is on this list, you can cancel the policy within the money back guarantee period. Make sure that the pet insurance company will have this review done well before the money back guarantee expires so that you have adequate time to review it.
Citations
1. http://bit.ly/1K5W9u3 – Consumer Reports
2. http://bit.ly/1KKjIcG – PetMD.com
3. http://bit.ly/1VVAysj – EmbracePetInsurancecom
4. http://bit.ly/1KKyq0r – QuickandDirtyTips.com
5. http://bit.ly/1H4L32C – US News & World Report
