Baseball91's Weblog

April 4, 2012

Removing the Claws from Clawback

Filed under: Bernie Maddoff,Minnesota — baseball91 @ 7:06 PM
Tags: , , , ,

Mark Dayton signed into law Tuesday legislation that shields Minnesota nonprofits which are being asked to return millions in tainted donations, in cases when time had elapsed after the donations were made and the money spent. The retroactive legislation overwhelmingly endorsed in House and Senate votes became controversial only in the days leading up to Governor Dayton’s signature – perhaps because after years of budget cuts at newspapers, no one was left to write thoughtful pieces about what soon would be public policy. According to the StarTribune, it was discovered this legislation seriously affects the potential for collection attempts such as those to existing clawback cases stemming from the Petters bankruptcy, in recovery of losses for victims of a Ponzi scheme like Tom Petters’; Petters’ alleged co-conspirator Frank Vennes Jr., their associates, and Mr. Petters made as much as $425 million in tainted donations, bankruptcy trustee Doug Kelley estimated.

The issue is tainted donations. Charities asked for a pass because they claim that they lack the resources to do due diligence on all of their contributors and, in some cases, already have unwittingly spent the money by the time criminal activity is associated with the donation. Because nonprofits did not have the time or staff that the rest of the world should have to look into why the return on investments were so high? Does the law shield Minnesota nonprofits, but the nonprofits from other states are not shielded? After years of having news presented with a local angle, thinking had developed here that some were better than others – in need of a shield as this law does give extended immunity to charitable and religious organizations that take donations and contributions unwittingly which are a result of ill-gotten gains.

Estimating the sought contributions total as much as $445 million in the case of Petters, Kelley said those funds should be returned to to creditors of Petters’ business operations as well as the investors who were victims of Petters’ $3.65 billion scheme. Under the signed law, only half of the $445 million may be collectible under the new law.

The morality of keeping tainted money has nothing to do with the number of years after donations were made and the money spent, unwittingly. There is a lot of irony here to have a governor who comes from one of the most generous families in Minnesota history to be left to decide the issue of tainted money. Legislative supporters of the bill – charitable groups like Big Brothers/Big Sisters of the Twin Cities (Attorney Robert McCollum who sits on the board of Big Brothers Big Sisters of the Twin Cities called Dayton’s action “a significant day in the history of the state for nonprofits.”) and chemical addiction treatment program Minnesota Teen Challenge, along with representatives of bankruptcy trustee Doug Kelley – were in the governor’s office Tuesday morning as the governor considered his last-minute options on the bill.

So no legislator knew how the issue of the rape of Europa was handled at the end of WW II, concerning stolen art? The Minnesota legislature was not much better than those two generations ago considering what happened to all the art hijacked by the Nazis — because they were of Aryan blood — or, about what happened to all the perpetrators involved with crimes against humanity who were never punished. And it was left to private citizens who survived like Simon Wiesenthal with the inner passion to seek real justice.

So legislators have no idea about the current state of fund-raising? A charity keeps dossiers on who their benefactors are before the head of a charity solicits a gift. There is a bit of irony of the timing of this piece, as Benedict XVI last week referred to the reality of “human evil and ignorance,” within even his church. He was alluding to a cozy relationship some clergy appear to have in Mexico with the overlords of drug cartels who sometimes give money to the church to demonstrate their Catholic bona fides. Maybe a lot like Tom Petters. So when it comes to inheritance, birthrights, and being the receiver of goodness, how are the Big Brothers/Big Sisters going to teach these kids how to live when faced with the hard decisions. Because Minnesota nonprofits did not have the time or staff or money that the rest of the world was expected to have to look into why the return on investments were so high? After years of having news presented with a local angle, thinking had developed here that some were better than others, and a law was need to shield Minnesota nonprofits – without comment on nonprofits from other states.

“Organizations can now move forward without the fear that they one day may have to pay back what was donated to them,” Attorney McCollum who does volunteer his time to sit on the board of Big Brothers Big Sisters of the Twin Cities, said in a StarTribune interview Tuesday. The signed legislation makes organizations liable to return tainted contributions received unwittingly within two years of a donation. The StarTribune vaguely stated that any questionable contributions — ill-gotten gains –discovered after two years are not affected by the law. In an e-mail Tuesday, bankruptcy trustee Doug Kelley told the StarTribune he would probably challenge the constitutionality of the new law.

On issues of tainted money, lobbyists were actively involved in this legislation, in the system set up financing elections. Note the magic in coming to a period of time, just like those legislative elections. What was so magical about two years?

It has been previously reported that Governor Dayton’s chairman of the METROPOLITAN SPORTS FACILITIES COMMISSION, Ted Mondale, had started a company with money loaned from the ill-gotten gains of Tom Petters. Perhaps placed in charge to lead the charge to collect tainted public tax money so that athletes, in the age of free agency, can play their games in a place and receive their riches way above the working women and working men — without any claws to fight back — before they leave Minnesota, so much better than the rest of us. This same prevalent thinking was what allowed churches and the Boy Scouts to be above the law, as if charities and their employees did not have to be watched over — so much better than the society that they served.

In a world more and more with thoughtless leaders. In a world more and more surrounded by thoughtless people, the recipients of charity thought they were entitled — after a certain period of time — to all of the perceived to be goodness from their beneficiaries with money. In a world more and more with thoughtless charities, there was so little thought put into the justice issues concerning the morality of law in Minnesota. Yes, Attorney Robert McCollum called Dayton’s action “a significant day in the history of the state for nonprofits.” And as a result there was justifiably more and more doubt if charity and love would — or should — prevail.

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  1. Comment by baseball91 — April 5, 2012 @ 4:28 AM | Reply

  2. FromMinnPost By Marlys Harris | 08/23/13

    “Seven questions about the Vikings stadium deal that need answers”

    My Question Number One: Is it possible to get blood out of a turnip if you own an NFL franchise?

    To take a hand-off from the original question raised by Marly Harris which does not go far enough concerning the repercussions of the New Jersey lawsuit against Minnesota Vikings owner Zygi Wilf and family in civil court: “How do we know whether the Wilfs will have any money left by the time that the Wilfs get done paying damages in this twenty-year old lawsuit?” The lawyer representing the Viking owner as well as brother Mark Wilf and cousin Leonard lost the lawsuit recently which resulted in findings of fact in favor of the plaintiffs. Those findings included that the Wilfs had “committed fraud, breach of contract and breach of fiduciary duty. On top of that, they violated New Jersey’s civil racketeering statute. Though damages have not yet been determined, Harris thinks that the Wilfs’ family enterprises could be on the hook for $100 million or so, with no comment concerning the treble damage aspect of a RICO action. “That would take a major bite out of Zygi Wilf’s fortune,” writes Ms. Harris. As to the count based upon racketeering, that RICO count is subject to treble damages — that is, that the verdict will be multiplied times three, if it would be under federal law. There has been little mention whether the plaintiffs are also entitled to interest on the overall judgment incurred over 20 years as well as during any duration of time of appeal.

    ‘Question Number Two: How do we know that the Wilfs will really put the $477 million they’ve pledged into the stadium?”

    This articles leaves an unbiased impression {mine} that once the court in New Jersey levies damages in litigation which “accused Zygi and Mark (Wilfs) of cooking the books to cheat the plaintiffs out of millions of dollars—a charge the brothers have denied,” the Wilfs are judgement-proof. {The StarTribune mentioned this litigation in an article two years ago, per Marlys Harris.} Based on evidence judged under the probable cause standard in the New Jersey, the ‘former partners in a large apartment complex’ as plaintiffs did prevail, and the court did not believe the denial. “If somebody did know {about the litigation} shouldn’t he or she have brought it up in the conversation when the Legislature was debating the stadium deal last year?” Ms. Harris asks. If, as Marly Harris states, the Wilfs are worth $310 million, they do not have enough money to make a $477 million contribution to building a new stadium and they leave the state of Minnesota exposed to all kinds of liabilities under the law as joint tortfeasors. If RICO damages are levied in this litigation, having “cheated the plaintiffs out of millions of dollars” per the findings of fact, the Wilfs’ family fortune is gone and they have little money to operate in the NFL. And when your partner has no assets left and is judgement-proof, the state carries responsibility for everything in building a new stadium.

    “Question Number Three: Is there any way that the real story on the Wilfs will be obtained?

    “At Gov. Mark Dayton’s urging, the Sports Facilities Authority recently launched a belated due-diligence effort. They retained Peter W. Carter, the co-chair of the securities litigation and enforcement practice at Dorsey & Whitney, one of American Lawyer’s top 200 law firms. Also hired was FTI Consulting, a Palm Beach company that lists as one of its specialties forensic accounting. They will be examining the New Jersey case, hunt for other Wilf lawsuits, perform background checks, review the NFL owner application and the due diligence the league performed and conduct “financial due diligence.” {Wouldn’t such due diligence have been done before the state of Minnesota stepped forward from the beginning?} When this was first announced a few weeks ago, I asked Jennifer Hathaway, communications director for the Sports Facilities Authority, whether the investigation would require the Wilfs to open the books of their business, which is not a public company. I still wait to hear the answer.”

    “Question Number Four: How do we know that the Wilfs really have the $477 million that they’ve pledged into the stadium?

    “Zygi Wilf’s fortune has been estimated recently by Sports Illustrated at $310 million. I estimated that the Vikings would garner about $50 million to $60 million from selling seat licenses to season-ticket holders and $20 million a year for 20 years for naming rights, which would come to an upfront payment of about $91 million (on the backs of the taxpayers funding the publicly financed stadium of over a billion dollars); there are sponsorships and income from sales of nachos and hotdogs—though some of that has to go to pay for team expenses. The NFL is pledging a $50 million grant and a loan of as much as $150 million. If the Wilfs can’t get a loan, they’ll have to sell some of their shopping centers or apartment buildings to raise some cash.

    “That still leaves as much as $126 million to finance. Presumably, the Wilfs could borrow that much.”

    “Question Number Five: Is Dorsey Whitney the right firm to conduct the investigation?

    “Well, it already represents the Sports Facilities Authority—a job that brought it $1.2 million in revenues last year. Serving as special counsel is former U.S. veep and Democratic presidential candidate Walter Mondale. His son Ted is the CEO and executive director of the Sports Authority. That’s a pretty cozy arrangement. And while the Mondales have reputations of purest rectitude, the temptation to downplay any adverse information may be floating in the ether. Maybe the Authority should have recruited a law firm uninvolved in local politics.”

    “Question Number Six: If the Wilfs do renege, couldn’t the state sue the NFL? Surely the league checked them out when they bought the Vikings back in 2005, right?

    “You would think. However, judging by recent events, maybe due diligence by the NFL is not that diligent. For example: Jimmy Haslam III, CEO of Pilot Flying J, an empire of truck stops and travel centers, bought the Cleveland Browns for $1.05 billion last year. An FBI affidavit released a week or so ago contends that his company engaged in a scheme designed to keep money it owed to customers. Jimmy Haslam, who has not been charged, says he is not involved in any wrongdoing—though much of his spare time in the coming months will be spent giving depositions. The investigation had been ongoing for two years. Meanwhile, the NFL has said that it has no plans to ask Haslam to step down. When I called the league to find out how it vets owners, nobody provided an answer. If I get one, readers will be the first to hear.”

    “Question Seven: Could the state of Minnesota back out?

    “At this point, YES. So far the only written agreement is the legislation that was signed by the governor—all the terms that were negotiated were subsumed into the law. And, of course, laws can be changed. Should Dorsey & Whitney turns up something ugly, our legislators would have cover to back out. Taxpayers would still lose money. According to the Associated Press, the Stadium Authority has signed nearly two dozen contracts, the largest of which is with architects for $34 million. My suspicion is that everybody will plod forward, no matter what.”

    Comment by baseball91 — August 29, 2013 @ 9:26 PM | Reply

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