Word: regan
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Imagine how much worse it must be to get a really big government mad at you -- like the U.S. Government, in the person of former U.S. Attorney Rudolph Giuliani. That's what money manager James Sutton ("Jay") Regan, 47, seems to have done. His firm, Princeton/Newport Partners, was charged with making a series of bogus trades in 1984 and '85 to claim tax losses. The trades were shams, argued the Government, because though Princeton/Newport really did sell securities in which it really did have losses, the firm didn't really sell them because it had an unwritten deal...
...this, Regan and five others were charged with racketeering and effectively put out of business even before the trial began. Last week he was sentenced to six months in prison and fined $325,000, on top of more than $5 million in legal fees he'd incurred...
...Regan would argue that he didn't violate the tax law. (A former IRS commissioner was prepared to testify to much the same thing, but the jury was not allowed to hear this because the judge accepted the Government's argument that his views might blur the issue.) Regan's trades were part of a hedging strategy under which you buy and sell related securities at the same time. You lose on one and gain on the other, but if you've done the math right, you'll usually lose a little less than you gain. Yippee...
...Government argued that Regan and Princeton/Newport did violate the tax law, but -- worse -- tried to disguise what they did by breaking up their repurchases into odd amounts at varying prices. What perhaps got Regan into the hottest water, though -- and it's kind of scary the Government might work this way -- is that he refused to provide damning evidence against Drexel and others: "Cooperate and we'll go easy on you. Stonewall us and we'll kill you." We've seen it on TV a thousand times...
...start with, the mortgage interest deduction has the National Association of Realtors (NAR), one of the richest and most powerful lobbies in the nation, steadfastly behind it. When former Treasury Secretary Donald T. Regan's tax reform plan proposed eliminating the the mortgage interest deduction for vacation homes, NAR president David Roberts denounced it as a prescription for "less growth in the American standard of living and a lower quality of life...