Pretextual Wiretapping: Raj Rajaratnam and Perfect Hedge

            What do Raj Rajaratnam and a mafioso have in common? While that might be a loaded question, to direct the discussion, both have received similar treatment from the Federal Bureau of Investigation (FBI). Rajaratnam’s recent conviction for securities fraud by way of insider trading came about through the use of evidence obtained by wiretapping. Wiretapping is a common technique used by the FBI to help build cases against members of organized crime under the Racketeer Influenced and Organized Crime Act (RICO). Referred to by the FBI as operation “Perfect Hedge,” the United States has begun to use wiretapping to prosecute insider trading. Just last year, a federal judge upheld the use of wiretapping against Rajaratnam. Even though insider trading is not a crime that can support a wiretapping application, Rajaratnam’s motion to suppress the evidence obtained from his wiretap was denied. The case of Raj Read the rest

Too Big to Fail v. Too Small to Survive

By: Daniel Scheeringa

The Congressional Oversight Panel for the Troubled Asset Relief Program (TARP) has issued its final report, and the TARP program is projected to cost much less than forecast.  Unfortunately, TARP didn’t solve the original problem of “too big to fail”.  The problem is worse today, and the legislative solution may make things even worse.   

Moral hazard is when rational actors take bigger risks than they otherwise would, in the knowledge that someone else will bear the risk.  Although there were previous examples of the moral hazard of bailouts[1], the greatest illustration of this concept came in 2008.  As the financial crisis broke, 18 large investment banks received $208 billion in TARP money to save them from insolvency after they made risky bets on CDO’s.  As the report states, in the case of AIG, the guarantee was extended not only to AIG itself but to its Read the rest

Dodd-Frank Credit Rating Agency Reform in the Crosshairs

By: Daniel Scheeringa

In the aftermath of the financial crisis, Congress passed the Dodd-Frank Financial Reform Act, which sought to prevent its repeat.  Yet the new House Republican majority is taking aim at a key provision of the law, which sought to give investors more accurate information by holding credit rating agencies legally liable for giving high ratings to low quality mortgage-backed bonds.  While there are other ways to ensure accurate credit ratings than enhanced liability, congressional Republicans are removing an imperfect protection without replacing it with anything better.

The financial crisis of 2008 provided enough blame to go around for almost everyone involved; big banks, mortgage lenders, government, and even homeowners.  But a great deal of responsibility for the crisis is allotted to the credit rating agencies (“CRA’s”), most famously Moody’s, S&P, and Fitch.  The CRA’s gave mostly favorable credit ratings to mortgage backed Collateralized Debt Obligations (CDO’s) which Read the rest

The Cayman Islands and the John Grisham Effect: Yes, Everything Changed


            In May 2009 American President Barack Obama spoke of how an address in the Cayman Islands housed 12,000 companies. Alluding to the possibility of illegal activity, he noted that this location was either the biggest building in the world or “the largest tax scam in the world.” This image of Offshore Financial Centers (OFCs) as havens for wrongdoing is generally held throughout the world.   Recent data indicates that the Cayman Islands holds over 670 billion American Dollars in banking assets from international investors.

            Because of such statistics, these small islands are considered a global villain, a haven for illegal capital. According to the OECD Harmful Tax Competition: An Emerging Global Issue (1998 Tax Report) jurisdictions that (a) imposes no or only nominal taxes, (b) lacks policy of effective exchange information, (c) lacks transparency and (d) has no requirement of “substantial activity” is Read the rest

Provena Covenant Medical Center v. Department of Revenue: The Decision That May End Charitable Exemptions for Nonprofit Hospitals

  I.  Introduction  

The recent decision by the Illinois Supreme Court regarding tax exemption for hospitals is troubling for the already volatile and uncertain future of many hospitals that are facing increasing difficulties in the current economic market.  The Illinois Supreme Court held that Provena Medical Center in Urbana does not provide enough charity care to qualify for the tax exemption provided for hospitals that care for uninsured and poor patients without generating a profit or collecting fees.[1]  The decision has generated significant criticism for relying on old precedent, failing to take into account current economic conditions, and for failing to provide clear guidelines for nonprofit hospitals that want to qualify for tax exemption in Illinois.[2]  The implications of this decision while not precisely known can have wide ranging consequences for hospital financing and access to healthcare for low income and uninsured Read the rest

Hospitals in Distress: How the Economy has Affected Financing of Health Care

I.  Introduction

In the current financial crisis borrowers are finding it increasingly more difficult to access capital for their investments.  This is affecting one of the most important industries in our society, heath care.  Hospitals are a vital part of the health care industry and they are facing especially hard times in today’s economy.  It is not a surprise to many people that hospitals are facing financial difficulties.  Hospitals have consistently faced financial difficulties even in a good economy.  However, the current credit crisis is affecting hospitals more than any other organization because of the high levels of uninsured seeking health care services, low reimbursement rates from Medicaid and Medicare, and staff shortages.[1]  Now more than ever before hospitals are facing increasing debt and are unable to gain more capital or refinancing their existing loans because it is more difficult to obtain Read the rest

Microcredit Part 2

Microcredit Part 2

Application of Microcredit in the United States


In my last segment, I introduced the concept of microcredit and explained it’s basic foundations. As I explained before, micro-credit is one such way in which stimulating development from below in the societal totem pole also serves to advance democracy and human rights.[1] Now I will put the system into perspective and confront the issues and problems of applying such a system to the United States. The United States in any given year has 10% to 17% living below the poverty threshold as determined by the US Census. [2] This number translates to about 30-40 million individuals. Furthermore, most Americans (58.5%) will spend at least one year below the poverty line at some point between ages 25 and 75.[3] These statistics seem to suggest that a microcredit system established in the United States would be very successful. Read the rest

Regulation E: Are the problems with overdraft protection properly addressed?

I. Introduction

                In 1984, in the earliest days of the debit card, legal commentators were already considering the need for the legislature to curtail the banking practice of “Insufficient Fund Check Charges,” now colloquially referred to as overdraft fees. [1] The battle against overdraft fees failed in the 1980s when the courts largely agreed that overdraft fees were a competitively-priced "service" and therefore not subject to rules against unconscionability or penalties. [2] The battle against such fees, however, is ongoing. Twenty five years later, the latest battle in the war against overdraft fees came to a victorious end when the Federal Reserve Board, at the behest of President Obama, created a new regulation limiting the practice in significant ways. [3] This article will begin by summarizing the overdraft protection scheme typically used by banks. It will then consider the arguments against these practices, and finally, consider whether the Federal Read the rest

2008/9 Financial Crisis: A Lot to Learn On Bailouts and Too Big To Fail Companies In Order To Draft New Regulation

I.                 Introduction

Some basic financial concepts and the facts surrounding the 2008/9 economic crisis constitute the first stage of this article.

The analysis of certain characteristics and effects of the Bailouts and of having Too Big To Fail Companies in the market is what follows.

Finally, I will go into different opinions and strategies addressing main issues that are a challenge for the regulation to be enacted in order to prevent these kind crises and deal with the legacy of the bailouts. What to do with Too Big To Fail Companies is part of that approach.

It is a side goal of this article to make the topic in question and the issues arising from it, accessible not only to those with a background in law and finance but especially to people without it.


II.               Concepts: MoneyMarketsBubbles

Read the rest

Microcredit – Part 1


The Nobel Peace Prize for 2006 was awarded to Muhammad Yunus and the Grameen bank for the expansion of microcredit. [1] As the Nobel committee said, “lasting peace cannot be achieved unless large population groups find ways in which to break out of poverty.” [2] Micro-credit is a way in which development can be stimulated in a matter that also serves to advance democracy and human rights. [3] 


Microcredit is a topic that has been fairly underexplored in regards to business law. In this multipart essay, I will first introduce the foundations and workings of microcredit. Then, I will explore how microcredit can be applied to the poor in present day society in the United States and the barriers that stand in its way. A big constraint to the expansion of microcredit programs is the absence of a legal framework. However, before a comprehensive legal framework Read the rest