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(Philly.com)   Vanguard would like it very much if the whistleblower that busted them for tax evasion was jailed and they were compensated for their trouble somehow   (philly.com) divider line 42
    More: Followup  
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4020 clicks; posted to Business » on 25 Aug 2014 at 12:22 PM (44 weeks ago)   |  Favorite    |   share:  Share on Twitter share via Email Share on Facebook   more»



42 Comments   (+0 »)
   
View Voting Results: Smartest and Funniest
 
2014-08-25 11:23:11 AM  
This sucks. Vanguard is usually a great company. That said, a lawsuit to silence someone like this should carry an instant penalty if someone losses.

For example: If you sue someone who is material to an ongoing lawsuit against you and you lose, the defendant should be compensated 10X any legal fees the incur.
 
2014-08-25 12:34:04 PM  
Which takes precedent: Whistle blower statutes or attorney-client privilege?
 
2014-08-25 12:36:19 PM  

b2theory: This sucks. Vanguard is usually a great company. That said, a lawsuit to silence someone like this should carry an instant penalty if someone losses.

For example: If you sue someone who is material to an ongoing lawsuit against you and you lose, the defendant should be compensated 10X any legal fees the incur.


Apparently, it's not all that great - it's just that, as far as we know, Vanguard had a good track history. This guy's whole case is that, on the contrary, Vanguard lied to state & federal regulators, hid money, and participated in multiple swindles, and are now attempting to use attorney/client privilege to keep it all quiet.

If he's right, and SEC whistle-blower rules trump attorney/client privilege, it'll be fun to watch as financial organizations panic because so many of them are doing the same damned thing.
 
2014-08-25 12:36:39 PM  

Spike Lee's Favorite Farker: Which takes precedent: Whistle blower statutes or attorney-client privilege?


FTFA: Danon and his attorney, Brian Mahany, say he is protected by whistle-blower laws that rate disclosure of illegal activity above attorney-client privilege.
 
2014-08-25 12:39:33 PM  

Spike Lee's Favorite Farker: Which takes precedent: Whistle blower statutes or attorney-client privilege?


That's the crux, and it appears that SEC whistle-blower statutes take precedence. However, he's not getting a dime:

The final rules provide that whistleblowers who voluntarily provide the SEC with original information regarding violations of federal securities law may be entitled to receive substantial cash awards. To be considered for an award, the information must lead to successful SEC enforcement of a federal court or administrative action in which the SEC obtains monetary sanctions totaling more than $1 million. Lawyers, however, will not be eligible to receive awards if the information they divulge is privileged or confidential information they obtained from clients during the course of their professional representation and is divulged in violation of a lawyer's ethical obligations.

Being a competent lawyer, and given that he hasn't actually asked for compensation, I think he also realizes this and feels that either a) he's avenging his termination or b) he's ethically obligated to highlight wrongdoing. Either way, the result is the same - he should be protected if the SEC finds that Vanguard did, indeed, do what he claims, as the damages should well exceed a million bucks.
 
2014-08-25 12:42:07 PM  

Spike Lee's Favorite Farker: Which takes precedent: Whistle blower statutes or attorney-client privilege?


All I know is I'm glad I my attorney moonlights as a hit-man.
 
2014-08-25 12:46:35 PM  

FormlessOne: b2theory: This sucks. Vanguard is usually a great company. That said, a lawsuit to silence someone like this should carry an instant penalty if someone losses.

For example: If you sue someone who is material to an ongoing lawsuit against you and you lose, the defendant should be compensated 10X any legal fees the incur.

Apparently, it's not all that great - it's just that, as far as we know, Vanguard had a good track history. This guy's whole case is that, on the contrary, Vanguard lied to state & federal regulators, hid money, and participated in multiple swindles, and are now attempting to use attorney/client privilege to keep it all quiet.

If he's right, and SEC whistle-blower rules trump attorney/client privilege, it'll be fun to watch as financial organizations panic because so many of them are doing the same damned thing.


I always wonderd why tax in America is delt with by lawyers and not accountants like in Britain. Then it hit me, accountants don't have any privilage status like lawyers do.
 
2014-08-25 12:49:37 PM  

FormlessOne: Spike Lee's Favorite Farker: Which takes precedent: Whistle blower statutes or attorney-client privilege?

That's the crux, and it appears that SEC whistle-blower statutes take precedence. However, he's not getting a dime:

The final rules provide that whistleblowers who voluntarily provide the SEC with original information regarding violations of federal securities law may be entitled to receive substantial cash awards. To be considered for an award, the information must lead to successful SEC enforcement of a federal court or administrative action in which the SEC obtains monetary sanctions totaling more than $1 million. Lawyers, however, will not be eligible to receive awards if the information they divulge is privileged or confidential information they obtained from clients during the course of their professional representation and is divulged in violation of a lawyer's ethical obligations.

Being a competent lawyer, and given that he hasn't actually asked for compensation, I think he also realizes this and feels that either a) he's avenging his termination or b) he's ethically obligated to highlight wrongdoing. Either way, the result is the same - he should be protected if the SEC finds that Vanguard did, indeed, do what he claims, as the damages should well exceed a million bucks.


He just has to prove the info was not privileged.
 
2014-08-25 12:59:08 PM  
Wait, didn't they do one of those stupid undercover Bosses with this company?   Sounds like they need to do another one to trick people into thinking the CEO is really a nice guy
 
2014-08-25 01:01:05 PM  

mcreadyblue: FormlessOne: Spike Lee's Favorite Farker: Which takes precedent: Whistle blower statutes or attorney-client privilege?

That's the crux, and it appears that SEC whistle-blower statutes take precedence. However, he's not getting a dime:

The final rules provide that whistleblowers who voluntarily provide the SEC with original information regarding violations of federal securities law may be entitled to receive substantial cash awards. To be considered for an award, the information must lead to successful SEC enforcement of a federal court or administrative action in which the SEC obtains monetary sanctions totaling more than $1 million. Lawyers, however, will not be eligible to receive awards if the information they divulge is privileged or confidential information they obtained from clients during the course of their professional representation and is divulged in violation of a lawyer's ethical obligations.

Being a competent lawyer, and given that he hasn't actually asked for compensation, I think he also realizes this and feels that either a) he's avenging his termination or b) he's ethically obligated to highlight wrongdoing. Either way, the result is the same - he should be protected if the SEC finds that Vanguard did, indeed, do what he claims, as the damages should well exceed a million bucks.

He just has to prove the info was not privileged.


Given that Vanguard's already claiming violation of privilege, and that his lawyer isn't arguing that the information wasn't privileged, but that he can't be prosecuted for violating the privilege due to SEC whistle-blower laws, it's probably safe to say that the info was privileged. It's privileged enough to scare Vanguard into trying to hush it up. It's privileged enough for the lawyer to lawyer up.
 
2014-08-25 01:20:41 PM  
"In the Vanguard...(of hiding money)"

I really pissed about this. They didn't offer me a taste of any of that money and I do most of my investing through them.
 
2014-08-25 01:24:37 PM  

FormlessOne: mcreadyblue: FormlessOne: Spike Lee's Favorite Farker: Which takes precedent: Whistle blower statutes or attorney-client privilege?

That's the crux, and it appears that SEC whistle-blower statutes take precedence. However, he's not getting a dime:

The final rules provide that whistleblowers who voluntarily provide the SEC with original information regarding violations of federal securities law may be entitled to receive substantial cash awards. To be considered for an award, the information must lead to successful SEC enforcement of a federal court or administrative action in which the SEC obtains monetary sanctions totaling more than $1 million. Lawyers, however, will not be eligible to receive awards if the information they divulge is privileged or confidential information they obtained from clients during the course of their professional representation and is divulged in violation of a lawyer's ethical obligations.

Being a competent lawyer, and given that he hasn't actually asked for compensation, I think he also realizes this and feels that either a) he's avenging his termination or b) he's ethically obligated to highlight wrongdoing. Either way, the result is the same - he should be protected if the SEC finds that Vanguard did, indeed, do what he claims, as the damages should well exceed a million bucks.

He just has to prove the info was not privileged.

Given that Vanguard's already claiming violation of privilege, and that his lawyer isn't arguing that the information wasn't privileged, but that he can't be prosecuted for violating the privilege due to SEC whistle-blower laws, it's probably safe to say that the info was privileged. It's privileged enough to scare Vanguard into trying to hush it up. It's privileged enough for the lawyer to lawyer up.


A lawyer who represents himself has a fool for a client.
 
2014-08-25 01:28:19 PM  
The fun part about a lot of these whistleblower stories is that, every once in a while, the "whistleblower" is the guy who pretty much thought up and managed the actual crime, but managed to obfuscate the evidence enough so it looks like they're the good guy when they turn the company in...
 
2014-08-25 01:43:58 PM  
Vanguard Group "has never sought a ruling or approval from any U.S. tax authority [for its] at-cost pricing scheme," under which Vanguard charges its own mutual funds minimal fees for providing them with fund management services. Danon alleged this practice illegally reduces the group's income taxes.

Someone mind explaining why this is illegal?

I thought minimizing expenses was pretty much their whole shtick.
 
2014-08-25 01:48:47 PM  
You know... even if the allegations are true, I'll probably still invest with Vanguard.

Their fees are generally so much lower than their competitors that I'll continue to use their index funds and ETFs.

Unless somebody convinces me "both sides are bad, so give your money to Merrill-Lynch!"
 
2014-08-25 02:10:08 PM  

Parthenogenetic: You know... even if the allegations are true, I'll probably still invest with Vanguard.

Their fees are generally so much lower than their competitors that I'll continue to use their index funds and ETFs.

Unless somebody convinces me "both sides are bad, so give your money to Merrill-Lynch!"


I will still stick with Vanguard since they have the lowest cost index funds around. Fidelity is a close second. I would rather give less money to a company that partakes in illegal stuff than any other company that partakes in illegal stuff (they all do it).

At least unlike Edward Jones, Vanguard only stuck it to the IRS instead of its customers. EJ got the crap fined out of them for failing to disclose that they get kickbacks from American Funds and others that they recommend.
 
2014-08-25 02:11:11 PM  

Parthenogenetic: Vanguard Group "has never sought a ruling or approval from any U.S. tax authority [for its] at-cost pricing scheme," under which Vanguard charges its own mutual funds minimal fees for providing them with fund management services. Danon alleged this practice illegally reduces the group's income taxes.

Someone mind explaining why this is illegal?

I thought minimizing expenses was pretty much their whole shtick.


Yeah, I don't get it, either. "We take in less money because we charge less fees, so we pay less taxes because we have less profit" seems legit, actually
 
2014-08-25 02:20:10 PM  

machoprogrammer: Parthenogenetic: Vanguard Group "has never sought a ruling or approval from any U.S. tax authority [for its] at-cost pricing scheme," under which Vanguard charges its own mutual funds minimal fees for providing them with fund management services. Danon alleged this practice illegally reduces the group's income taxes.

Someone mind explaining why this is illegal?

I thought minimizing expenses was pretty much their whole shtick.

Yeah, I don't get it, either. "We take in less money because we charge less fees, so we pay less taxes because we have less profit" seems legit, actually


I think it's similar to when Toyota would sell cars to Toyota USA at full retail price, allowing Toyota USA to lose money every year and avoid paying any taxes.
 
2014-08-25 02:55:07 PM  

Spike Lee's Favorite Farker: Which takes precedent: Whistle blower statutes or attorney-client privilege?


IANAL, but I believe that asking you to break the law, then discharging you if you don't, would void privilege.
 
2014-08-25 03:06:39 PM  

GDubDub: Spike Lee's Favorite Farker: Which takes precedent: Whistle blower statutes or attorney-client privilege?

IANAL, but I believe that asking you to break the law, then discharging you if you don't, would void privilege.


Perhaps, like the story the other day about it being legal for the Koch brothers company to deceive its employees, Vanguard may just claim they were lying to the guy when they told him to break the law.
 
2014-08-25 03:17:20 PM  

HempHead: GDubDub: Spike Lee's Favorite Farker: Which takes precedent: Whistle blower statutes or attorney-client privilege?

IANAL, but I believe that asking you to break the law, then discharging you if you don't, would void privilege.

Perhaps, like the story the other day about it being legal for the Koch brothers company to deceive its employees, Vanguard may just claim they were lying to the guy when they told him to break the law.


I believe that it was DuPont that lied to the employees (while they were arrange the idea to sell to the Kochs on the sly).
 
2014-08-25 03:35:05 PM  

cirby: The fun part about a lot of these whistleblower stories is that, every once in a while, the "whistleblower" is the guy who pretty much thought up and managed the actual crime, but managed to obfuscate the evidence enough so it looks like they're the good guy when they turn the company in...


Looks like you work for Vanguard.
 
2014-08-25 03:47:48 PM  

machoprogrammer: At least unlike Edward Jones, Vanguard only stuck it to the IRS instead of its customers. EJ got the crap fined out of them for failing to disclose that they get kickbacks from American Funds and others that they recommend.


fark edward jones. Had a dude come try to sell me on american funds for our 401k plan at work. With a straight face he recommended a fund lineup that would have insured that every employee would have been piping 5% off the top to the broker. For every fund and every dollar every employee ever put into their 401k plan.

That that is completely legal while we fark around with all these other regulations completely mystifies me.
 
2014-08-25 03:48:30 PM  

HempHead: machoprogrammer: Parthenogenetic: Vanguard Group "has never sought a ruling or approval from any U.S. tax authority [for its] at-cost pricing scheme," under which Vanguard charges its own mutual funds minimal fees for providing them with fund management services. Danon alleged this practice illegally reduces the group's income taxes.

Someone mind explaining why this is illegal?

I thought minimizing expenses was pretty much their whole shtick.

Yeah, I don't get it, either. "We take in less money because we charge less fees, so we pay less taxes because we have less profit" seems legit, actually

I think it's similar to when Toyota would sell cars to Toyota USA at full retail price, allowing Toyota USA to lose money every year and avoid paying any taxes.


Bingo.
 
2014-08-25 04:05:12 PM  

FormlessOne: That's the crux, and it appears that SEC whistle-blower statutes take precedence. However, he's not getting a dime:

The final rules provide that whistleblowers who voluntarily provide the SEC with original information regarding violations of federal securities law may be entitled to receive substantial cash awards. To be considered for an award, the information must lead to successful SEC enforcement of a federal court or administrative action in which the SEC obtains monetary sanctions totaling more than $1 million. Lawyers, however, will not be eligible to receive awards if the information they divulge is privileged or confidential information they obtained from clients during the course of their professional representation and is divulged in violation of a lawyer's ethical obligations.



That's the critical piece there.  Not asking for compensation is actually an interesting tactical move on his part.  Since he's an attorney, it's almost certain that Vanguard would file a complaint against him with the disciplinary body of the state where he is (or was) licensed.  However, since he's not asking for compensation the issue of an ethical violation is still undetermined.  So if they pursued him to encumber his license he could counter by requesting compensation through his lawsuit and fighting the ethical issue in court.
 
2014-08-25 04:13:16 PM  

machoprogrammer: Parthenogenetic: Vanguard Group "has never sought a ruling or approval from any U.S. tax authority [for its] at-cost pricing scheme," under which Vanguard charges its own mutual funds minimal fees for providing them with fund management services. Danon alleged this practice illegally reduces the group's income taxes.

Someone mind explaining why this is illegal?

I thought minimizing expenses was pretty much their whole shtick.

Yeah, I don't get it, either. "We take in less money because we charge less fees, so we pay less taxes because we have less profit" seems legit, actually


That's not quite how I parsed that.
It sounds more like they assess corporate "management" fees on their own mutual funds and write the fees off as an expense for tax purposes.
 
2014-08-25 04:19:52 PM  

JK47: FormlessOne: That's the crux, and it appears that SEC whistle-blower statutes take precedence. However, he's not getting a dime:

The final rules provide that whistleblowers who voluntarily provide the SEC with original information regarding violations of federal securities law may be entitled to receive substantial cash awards. To be considered for an award, the information must lead to successful SEC enforcement of a federal court or administrative action in which the SEC obtains monetary sanctions totaling more than $1 million. Lawyers, however, will not be eligible to receive awards if the information they divulge is privileged or confidential information they obtained from clients during the course of their professional representation and is divulged in violation of a lawyer's ethical obligations.


That's the critical piece there.  Not asking for compensation is actually an interesting tactical move on his part.  Since he's an attorney, it's almost certain that Vanguard would file a complaint against him with the disciplinary body of the state where he is (or was) licensed.  However, since he's not asking for compensation the issue of an ethical violation is still undetermined.  So if they pursued him to encumber his license he could counter by requesting compensation through his lawsuit and fighting the ethical issue in court.


He's no longer licensed - at the end of the article, he states that he's let his bar memberships lapse and that he's no longer expecting to work as a corporate law attorney. Even if he had, who'd hire him? He committed career suicide by doing this, and the activity apparently so disgusted him that, in the end, he's walked away from a career in corporate law.

This country doesn't care if he's right. Assange is still fleeing, Manning's still in prison, and Snowden's still in exile, and far too many folks are screaming for their heads because loyalty matters more than ethics. This guy basically ended his career on this one, and he knows it - now, it's up to the IRS, the SEC, and NY to investigate and either confirm that he didn't waste it, or confirm that we're too far gone to care.
 
2014-08-25 04:27:25 PM  

Parthenogenetic: Vanguard Group "has never sought a ruling or approval from any U.S. tax authority [for its] at-cost pricing scheme," under which Vanguard charges its own mutual funds minimal fees for providing them with fund management services. Danon alleged this practice illegally reduces the group's income taxes.

Someone mind explaining why this is illegal?

I thought minimizing expenses was pretty much their whole shtick.


If you read the whole article it's one charge he laid down among others that where far more heinous, like not reporting earnings and a slush fund.

I think he is just throwing as much as he can, see what sticks.

That charge seems more like due diligence than anything illegal.
 
2014-08-25 05:58:04 PM  
I worked at Vanguard for years.  I left after getting a grad degree and a professional certification that they paid for.  Having those made me unwelcome.  Vanguard is the lowest cost investment company, which means they pay the less.  The people that stay there are there because they can't hack it anywhere else.  My take; Vanguard wouldn't have done something like this on purpose.  However, the kind of employees they have there could have easily made mistakes leading to this.

As for them being a great investment company, go compare Vanguard's 500 index ticker VFINX against Guggenheim S&P 500 ticker RSP.
 
2014-08-25 06:14:46 PM  

darcsun: I worked at Vanguard for years.  I left after getting a grad degree and a professional certification that they paid for.  Having those made me unwelcome.  Vanguard is the lowest cost investment company, which means they pay the less.  The people that stay there are there because they can't hack it anywhere else.  My take; Vanguard wouldn't have done something like this on purpose.  However, the kind of employees they have there could have easily made mistakes leading to this.

As for them being a great investment company, go compare Vanguard's 500 index ticker VFINX against Guggenheim S&P 500 ticker RSP.


You can't compare RSP to VFINX since RSP is equal weighted S&P 500, while Vanguard's is market-weight. Since the smaller S&P500 caps have done better lately, so has RSP. They aren't following the same index
 
2014-08-25 06:21:59 PM  

nocturnal001: "In the Vanguard...(of hiding money)"

I really pissed about this. They didn't offer me a taste of any of that money and I do most of my investing through them.


They're not in the business of making money for you. Just making money.
 
2014-08-25 06:31:25 PM  

darcsun: I worked at Vanguard for years.  I left after getting a grad degree and a professional certification that they paid for.  Having those made me unwelcome.  Vanguard is the lowest cost investment company, which means they pay the less.  The people that stay there are there because they can't hack it anywhere else.  My take; Vanguard wouldn't have done something like this on purpose.  However, the kind of employees they have there could have easily made mistakes leading to this.

As for them being a great investment company, go compare Vanguard's 500 index ticker VFINX against Guggenheim S&P 500 ticker RSP.


The thing is, I don't *expect* Vanguard to provide alpha.  I am happy with accepting the market return.

They just have to be smart enough to minimize tracking error (which I realize is not all that easy).
 
2014-08-25 09:02:58 PM  
VBR has been doing just fine for me..

Go small caps go!!
 
2014-08-25 09:31:10 PM  
i291.photobucket.com

How about if I pay them in quarters?
 
2014-08-26 12:08:39 AM  

Thanks for the Meme-ries: [i291.photobucket.com image 224x256]

How about if I pay them in quarters?


I'be never seen the game Vanguard before. Looks like "Life Force".
 
2014-08-26 01:20:15 AM  

Sim Tree: Thanks for the Meme-ries: [i291.photobucket.com image 224x256]

How about if I pay them in quarters?

I'be never seen the game Vanguard before. Looks like "Life Force".


*UNDER 30-LIKE TYPING DETECTED*

:)
 
2014-08-26 02:47:48 AM  
Wait, i've seen American Funds mentioned two or three times in a corruption thread on fark now... I have an old 401k that's done decently well with them for the past decade. Should I be running away?

Granted, I put in 1k with matching employer cost, but it's around 3.5k now and I think i'm charged like $20/year.
 
2014-08-26 07:57:22 AM  

Mister Buttons: Wait, i've seen American Funds mentioned two or three times in a corruption thread on fark now... I have an old 401k that's done decently well with them for the past decade. Should I be running away?

Granted, I put in 1k with matching employer cost, but it's around 3.5k now and I think i'm charged like $20/year.


A long time ago, I had an advisor who strongly pushed American Funds.  Not knowing any better, I deferred to his advice.

I don't know if their fee structure is different now, but back then with the A shares, you paid about a 5 percent load up front.  With the B shares, you paid no up-front load, but the expenses were higher, and you paid a load upon redemption.

IIRC, he had me buy an American bond index fund with with a 12b-1 fee of 0.25%.  WTF?  I was an easy mark, I guess.
 
2014-08-26 08:56:59 AM  

Mister Buttons: Wait, i've seen American Funds mentioned two or three times in a corruption thread on fark now... I have an old 401k that's done decently well with them for the past decade. Should I be running away?

Granted, I put in 1k with matching employer cost, but it's around 3.5k now and I think i'm charged like $20/year.


Other than the load fees, the class A shares from American Funds aren't too bad. Often in a 401k, the load fee is waived, so if that is the case, you should be okay. Class B and class C shares should always be avoided, even in retirement accounts.

If you invest in them outside of 401k, you often pay a load fee, which starts at 5.75% and goes down as you get more money in American Funds. So, if you initially invest $10,000, it is like you are starting $9475. Load fees are like jean shorts; they went out of style in the 90s. Use index funds instead.
 
2014-08-26 02:14:52 PM  
Vanguard is not exactly an obscure 1980s arcade game, but it's not exactly common, either.

/Atari 2600 version was pretty good given the limitations of the console
 
2014-08-26 08:30:52 PM  

Thanks for the Meme-ries: Sim Tree: Thanks for the Meme-ries: [i291.photobucket.com image 224x256]

How about if I pay them in quarters?

I'be never seen the game Vanguard before. Looks like "Life Force".

*UNDER 30-LIKE TYPING DETECTED*

:)


We all know Life Force was actually the sequel to Gradius.
 
2014-08-26 11:10:15 PM  

s12.postimg.org

None of this matters. Legal advice is still privileged!



s24.postimg.org

Not if he was advised to act in a reckless manner.



s30.postimg.org

That is absurd! If Mr. McDowell sought the advice of counsel, how could he be considered reckless?



s30.postimg.org

The point of the crime-fraud exception is to discourage attorneys from dispensing advice that counsels people to engage in criminal conduct. Which is what your lawyer did when he advised you against background checks.



s8.postimg.org

Neither of them can hide behind the privilege shiat.

 
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