eNews January 12, 2010

January 12, 2010

News Briefs

  1. IRS Lien Use Doing More Harm Than Good
  2. Headwear Manufacturer Challenges NFL in Antitrust Suit
  3. Taiwan Ban on U.S. Beef Angers Industry, Regulators
  4. Securities Litigation Fears Escalate as Compliance, Internal Audit Professionals Ranks Decrease: Deloitte Poll
  5. 2009 Costliest Year Ever for Bank Failures
  6. Louisiana Delegation Requests the U.S. Export-Import Bank Open New Orleans Regional Office
  7. New Surveys Offer Key Job-hunting and Resume Insights

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IRS Lien Use Doing More Harm Than Good

In her annual report to Congress, National Taxpayer Advocate Nina Olson recently noted that liens used by the Internal Revenue Service (IRS) as a tax enforcement strategy were ineffective and potentially did more harm than good to the taxpayer and to the agency itself.

According to Olson, lien filings by the IRS experienced a meteoric 475% increase between 1999 and 2009, jumping from 168,000 in FY1999 to nearly 966,000 a decade later. On the other hand, during the same period, inflation-adjusted collection revenue fell by 7.4%.

Olson also noted that the automated system the IRS uses to file liens doesn't account for the taxpayer's ability to actually pay down the debt, meaning the liens only have the effect of making the taxpayer less eligible for credit and damaging their already wounded financial viability. By failing to consider the other debts owed by the taxpayer, she noted, the IRS has involuntarily led many into long-term noncompliance.

"Any taxpayer with these debts will tell you that these creditors don't go away," Olson said. "Taxpayers are placed in the intolerable position of agreeing to pay the IRS more than they can actually afford, given their other debts, and then defaulting on the IRS payment arrangements when they channel payments to unsecured creditors in order to get some peace. Thus, the IRS itself fosters noncompliance by its failure to take a holistic approach to the taxpayers' debt situation."

Criticism of the agency came quickly from Capitol Hill. "The point of IRS restructuring and the creation of the taxpayer advocate's office itself was to restore taxpayers' rights after the IRS had engaged in heavy-handed enforcement tactics," said Senator Chuck Grassley (R-IA), ranking member of the Senate Finance Committee, whose jurisdiction includes tax policy. "I worry that the IRS is reverting to some old habits to taxpayers' detriment."

Grassley also criticized the gap between the IRS' treatment of larger firms and their treatment of smaller businesses. "There seems to be more interest at the highest levels of Treasury and the IRS in helping big banks than working with small business owners and average taxpayers," he said. "The placement of liens on the little guys shouldn't be automatic and computer-generated while the big banks get the benefit of agency discretion and concern in the executive offices. One, it's unfair, and two, it's bad for the economy. Small businesses create 70% of all net new jobs."

Jacob Barron, NACM staff writer

Understanding the Customer

If the best source of information about a customer is the customer itself, then nothing can help credit professionals understand the customer more than a face-to-face visit. Join Susan Delloiacono, CCE on January 20th at 3:00pm EST for her NACM teleconference, "Customer Visits." Susan will draw on her decades of experience as a credit professional to illuminate how to get the most out of a customer visit and just how valuable they can be.

To learn more about this teleconference, or to register, click here.

Headwear Manufacturer Challenges NFL in Antitrust Suit

Although antitrust issues usually do not affect credit professionals outside of the milieu of trade creditors'/industry group meetings, a recent case that will be argued before the U.S. Supreme Court on Wednesday, January 13, 2010, may potentially have far-reaching implications depending on its outcome.

American Needle, Inc. v. NFL offers an interesting entry point into defining a "separate entity" based on Section 1 of the Sherman Act (15 U.S.C. 1). In this case, American Needle, a manufacturer of sports hats, uniforms and related apparel located in Buffalo Grove, IL, is suing the National Football League, NFL Properties and all NFL teams after losing the bid for an exclusive license to produce and sell hats and other headgear to Reebok in 2000. Prior to 2000, American Needle was among several companies that had been licensed by the NFL to offer such products.

Lower courts, including the Seventh Circuit Court, have ruled in favor of the NFL, et al., agreeing with their premise that the NFL and its 32 teams are a single entity. While Section 1 of the Sherman Act "outlaws 'every contract, combination in the form of trust or otherwise, or conspiracy' that seeks to restraint commercial activity among the states, if an entity sued is considered a single operation, though, there is no one to 'combine' or 'conspire' with but itself, so the Act does not apply, as a general rule."

In its petition to the Supreme Court, however, American Needle noted that in a 1957 decision (Radovitch v. NFL) the Justices ruled that the NFL was liable for antitrust violations based on the Sherman Act's Section 1. More widely anticipated is the possible revisiting of a 1984 ruling (Copperweld Corp. v. Independence Tube Corp.) where "the Court ruled that a parent corporation and its wholly-owned subsidiary can be treated as a single entity for antitrust purposes."

It remains to be seen what kind of reception American Needle and the NFL will receive before the Roberts' court. To stay abreast of this case, and to read additional information and analyses about other cases before the Supreme Court, visit SCOTUSblog.com (http://www.scotusblog.com/wp/), an online resource developed by the Supreme Court Practice Group of Akin Gump Strauss Hauer & Feld LLP.

Additionally, please join Wanda Borges, Esq. on Monday, January 25th at 3:00pm EST for a teleconference that will explore antitrust issues that specifically affect trade creditors. To learn more about this teleconference, or to register, click here.

Laura Redcay, NACM Staff Writer

Coming Soon! Credit Words Contest Winners

Winners will be announced in next week's edition of eNews!

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Taiwan Ban on U.S. Beef Angers Industry, Regulators

U.S. beef producers are up in arms over Taiwan's decision to violate trade protocol and ban some U.S. beef imports.

Despite a recent agreement between the two countries that reopened the Taiwan market to U.S. producers, lawmakers in the Asian nation cited alleged safety concerns as they placed additional restrictions on beef imports. "In our view, the issues expressed by politicians in Taiwan have absolutely no basis in scientific fact and fly in the face of Taiwan's own risk assessment," said Gregg Doud, chief economist of the National Cattlemen's Beef Association (NCBA). "To suggest that there are any safety concerns related to U.S. beef is outrageous."

Following two years of negotiations, the U.S. and Taiwan finalized an agreement last October that brought Taiwan into compliance with the science-based World Organization for Animal Health (OIE) guidelines and allowed imports of U.S. beef and beef products from cattle of all ages. Taiwan's decision to restrict imports from the U.S., according to the NCBA, flies in the face of sound science.

"This is purely a domestic political issue in Taiwan," said Doud. "U.S. beef producers are sick and tired of being used as a political football."

U.S. beef exports to Taiwan have hit record levels over the last three years, hitting $101 million in 2006, $107 million in 2007 and $128 million in 2008. The record is expected to be broken again in 2009, with $114 million in beef sales through October.

Officials in Congress, the U.S. Department of Agriculture (USDA) and the Office of the U.S. Trade Representative (USTR) also weighed in on the matter, decrying Taiwan's decision as disappointing and baseless. "It calls into question Taiwan's credibility as a reliable U.S. trading partner," said Chuck Grassley (R-IA), ranking member of the Senate Finance Committee, which has jurisdiction over international trade. "And it raises serious concerns regarding Taiwan's commitments as a member of the World Trade Organization."

"We are deeply disappointed with the decision by Taiwan's Legislative Yuan to amend the Food Sanitation Act (FSA) to unjustifiably bar the import of certain U.S. beef and beef products," said Deputy Trade Rep Demetrios Marantis and Undersecretary for Farm and Foreign Agricultural Services Jim Miller. "This action will undermine Taiwan's credibility as a responsible trading partner and will make it more challenging for us to conclude future agreements to expand and strengthen bilateral trade and economic ties."

Jacob Barron, NACM staff writer

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Securities Litigation Fears Escalate as Compliance, Internal Audit Professionals Ranks Decrease: Deloitte Poll

In a Deloitte online poll of business professionals across various industries at the end of 2009, 37.5% say they are at least as concerned and 18.2% say they are more concerned about their company becoming a target of securities litigation as they were two years ago. Fueling this fear may be the fact that 27.4% of respondents report losing headcount in the compliance and internal audit function over the past 18 months.

Despite the reported decrease in the number of compliance and internal audit personnel, 49.7% of respondents believe their compliance and business ethics programs are strong and an additional 36% say they are adequate.

"With reduced headcount levels within compliance and internal audit, many organizations won't realize that they are not implementing sufficient fraud prevention programs until it is too late," said Kerry Francis, leader of the Corporate Investigations practice for Deloitte Financial Advisory Services LLP. "Executives and boards need to take a close look at their controls to mitigate litigation risks, because what worked prior to the financial collapse may not be adequate today."

Surveyed about which activities would most benefit their organization to reduce corruption and fraud risks, respondents cited more fraud awareness training (32.4%); expansion of internal audit monitoring procedures (23.1%); more robust fraud risk assessment (18.3%); and more oversight from the board and audit committee (7.5%).

"Company-wide fraud awareness training can be an extremely effective risk management tool, yet many organizations typically shy away from this activity since it can be time-consuming and difficult to organize," said Brian Huchro, principal, Deloitte Financial Advisory Services. "When you're trying to keep a vigilant eye on risk management, employee training, particularly in a down economy, is just too important to cross-off the list."

During a September 2009 Deloitte webcast on litigation risks resulting from mismanagement during a downturn, more than 1,790 business professionals from the financial services, consumer and industrial products, technology, media and telecommunications, banking and securities, health care and life sciences, public sector, and energy and resources industries responded to the poll questions.

Source: Deloitte

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2009 Costliest Year Ever for Bank Failures

According to its own estimates, the Federal Deposit Insurance Corporation (the "FDIC") will sustain losses exceeding $36 billion owing to the 140 banks that failed in 2009. By comparison, those losses will eclipse the total dollar amount of the losses the FDIC incurred during the six years spanning 1987 through 1992 (inclusive), when 1,049 banks failed at a total cost to the FDIC of $29.6 billion.

These latest findings are contained in a report produced by Meridian Group of Seattle. The Meridian report compares bank failure statistics from this latest banking crisis to bank failure statistics from the savings and loan crisis of 20 years ago and concludes that this latest banking crisis is the worst crisis the FDIC has ever faced and that 2009 was the costliest year ever for bank failures.

In the previous savings and loan crisis, the average failed banking institution had total assets of $205 million. In 2009, the average banking institution that failed had total assets of $1.2 billion. Perhaps more importantly, the average banking institution that failed during the savings and loan crisis cost the FDIC $28 million. In 2009, the average failed banking institution will cost the FDIC an estimated $261 million.

"Each time a bank failed in 2009, we heard that—bad as it seemed—2009 wasn't as bad as 1989, when 534 banks failed," said Meridian CEO Darren Berg. "But that's simply not true. In fact, 2009 was the worst year ever for bank failures. In 2009, the banks that failed were significantly larger, roughly six times larger on average, than the banks that failed during the savings and loan crisis. Worse yet, losses have skyrocketed—on average, the FDIC is sustaining losses of nearly 10 times more per failed financial institution than it sustained during the savings and loan crisis of 20 years ago."

The Meridian report stops short of making a prediction for 2010. Rather, it offers an "observation" for the future. "Given the secrecy surrounding the FDIC's Watch List, it's difficult to accurately predict the cost of looming bank failures," said Berg. "But in light of the fact that the FDIC continues to add staff at a frantic pace, we believe it's reasonable to assume the worst is yet to come."

Source: Meridian Group of Companies

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Louisiana Delegation Requests the U.S. Export-Import Bank Open New Orleans Regional Office

United States Senators Mary Landrieu, Chair of the Senate Committee on Small Business and Entrepreneurship, and David Vitter, along with Congressmen Rodney Alexander, Charlie Melancon, Charles Boustany, Steve Scalise, Ahn "Joseph" Cao, Bill Cassidy and John Fleming, recently sent a letter to the Chairman of the Export-Import Bank of the United States, Fred P. Hochberg, requesting he open a regional office of the organization in New Orleans.

"Despite the devastation caused by Hurricanes Katrina and Rita, Louisiana has experienced a tremendous growth in trade activity during the last five years," the delegation wrote in the letter. "For example, in 2008 alone, Louisiana exported nearly $41.9 billion dollars worth of goods and services, representing a 38% increase from 2007, more than triple the national export growth rate for that year. The establishment of an Export-Import Bank regional office would build upon excellent existing resources in New Orleans and provide the Gulf South region with a much needed Export-Import Bank presence in the coming years."

In June, Senator Landrieu convened a field hearing at the Port of New Orleans to examine small business trade opportunities. The Chairman of the Export-Import Bank noted, at the time, that the organization would have the tools to open one regional office in the country. A preliminary review of possible locations in high-export locations cited New Orleans as a top contender.

"The opening of a regional office in Louisiana would prove to be an easy transition given the presence the Export-Import Bank already has in the state," the members continued in the letter. "In 2008, the Bank supported more than $19,351,000 in insurance policies and over $18,693,776 in working capital to Louisiana businesses. Our state's vibrant small business community accounts for 84% of all exporting companies in Louisiana, and they have also benefited tremendously from the Bank's programs, receiving $13,949,437 in term loans and guarantees from the Bank."

"In closing, we note that currently the Bank covers the Gulf South region out of its Florida and Texas based offices. A regional office in New Orleans would be a logical and efficient hub focused on commerce in the Gulf South region. Furthermore, Louisiana's rail system and five deepwater ports along the lower Mississippi River form a strategic commercial corridor, connecting Louisiana to more than 30 states located in the heartland of the United States."

Source: U.S. Senate Committee on Small Business & Entrepreneurship

New Surveys Offer Key Job-hunting and Resume Insights

Many professionals overestimate how ready they would be to launch an employment search if they lost their jobs tomorrow, according to a recent survey by Robert Half International. Eighty-two percent of employees polled said they'd be prepared, yet only 20% had updated their resumes in the last three months. Forty-four percent hadn't revised their documents in more than a year.

If you suddenly needed to look for a new position, would you be equipped to do so? Get a personalized assessment and preparation tips by using the "Job-hunt Readiness Evaluator" from Robert Half International and Upwardly Mobile, Inc. The new online tool can be found at www.rhi.com/jobhuntreadiness.

Another survey from Robert Half International further underscores the importance of having an up-to-date, succinct and error-free resume. Executives now take six minutes, on average, to evaluate each resume they receive, according to the poll. Given the glut of applications that hiring managers receive today, six minutes (6.4 to be exact) is a significant time investment.

Concerned about costly hiring mistakes, busy employers are going over resumes with a fine-tooth comb to ensure that they select only the most qualified applicants to interview. Put simply, one typo can damage your chances. Guard against errors with these proofreading strategies:

Use Spell-check—As a Starting Point
Spell-check is great, but don't rely on a computer program to do all your proofreading for you. It won't catch every type of error, such as words that are spelled correctly but misused or misplaced.

Print It
Proofread your resume both on screen and on paper. It's easier to catch typos on a printed page than a monitor.

Edit Line by Line
Take a tip from professional proofreaders who frequently read each sentence in a document backwards to force them to zero in on each word. Also, some conscientious candidates proofread with a ruler in hand to focus on individual sentences or bullet points.

Ask for Help
As an added safeguard, request assistance from a trusted (and detail-oriented) friend, relative or member of your professional network. A fresh pair of eyes will often find mistakes or inconsistencies you inadvertently overlooked.

For more advice on management and career issues, listen to The Management Minute, Robert Half's podcast series at www.rhi.com/podcasts.

To view past eNews issues or to visit the NACM Archives, click here.



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