Supreme Court limits the Confrontation Clause of the Sixth Amendment in Michigan v. Bryant

On February 28, 2011, in Michigan v. Byrant, Justice Sotomayor writing for the United States Supreme Court held that a victims identification and description of the defendant and the location of the alleged crime were not testimonial statements because they had a “primary purpose . . . to enable police assistance to meet an on-going emergency.” Citing Davis v. Washington, 547 U. S., at 822. Therefore, the use of the identification at the Defendants trial did not violate the Confrontation Clause.

To make the “primary purpose” determination, the a criminal court must objectively evaluate the circumstances in which the out-of-court statement was given to the police and the parties statements and actions. The primary purpose inquiry is an objective analysis. The existence of an “ongoing emergency” at the time of the encounter is among the most important circumstances informing the interrogations “primary purpose.”

However Justice Scalia wrote a blistering dissent rejecting the majority’s opinion. The highlights of the dissent include the following passages:

Todays tale”a story of five officers conducting successive examinations of a dying man with the primary purpose, not of obtaining and preserving his testimony regarding his killer, but of protecting him, them, and others from a murderer somewhere on the loose”is so transparently false that professing to believe it demeans this institution. But reaching a patently incorrect conclusion on the facts is a relatively benign judicial mischief; it affects, after all, only the case at hand. In its vain attempt to make the incredible plausible, however”or perhaps as an intended second goal”todays opinion distorts our Confrontation Clause jurisprudence and leaves it in a shambles. Instead of clarifying the law, the Court makes itself the obfuscator of last resort.

The only virtue of the Courts approach (if it can be misnamed a virtue) is that it leaves judges free to reach the “fairest” result under the totality of the circumstances. If the dastardly police trick a declarant into giving an incriminating statement against a sympathetic defendant, a court can focus on the polices intent and declare the statement testimonial. If the defendant “deserves” to go to jail, then a court can focus on whatever perspective is necessary to declare damning hearsay nontestimonial. And when all else fails, a court can mix-and-match perspectives to reach its desired outcome. Unfortunately, under this malleable approach “the guarantee of confrontation is no guarantee at all.”

The full opinion can be found here: https://www.supremecourt.gov/opinions/10pdf/09-150.pdf

The attorneys at Fuerst Ittleman have extensive experience handling white collar criminal cases at both the trial and the appellate level. You can reach an attorney by emailing us at contact@fidjlaw.com.

FDA Announces Removal of Unapproved Cold, Cough, and Allergy Drugs from U.S. Market

On Wednesday of this week, the FDA announced its intent to remove approximately 500 unapproved prescription medicines from the U.S. market. The unapproved drugs are all intended for the relief of allergy, cough, and cold symptoms. The FDA alleges that none of these drug products have gone through an agency review of their safety and effectiveness.

Because these drug products have never undergone review for safety and effectiveness, the FDA believes that the products pose a risk to consumers. According to the FDA, because there are so many FDA-compliant over-the-counter (OTC) and approved prescription drug products available to consumers to treat cough, cold, and allergy symptoms, the unapproved drug products for these conditions are not necessary for the treatment of the public.

This ordered removal of cold medications is the latest wave of enforcement action by the FDA in the agencys attempt to remove unapproved drug products from the market. A large number of the targeted, unapproved drugs have been marketed in the U.S. since before the 1962 federal law requiring drugs to undergo federal review for safety and effectiveness.

FDA officials cited specific concerns regarding risky combinations of ingredients in the unapproved products as well as “time-released” products that may release active ingredients too slowly, too quickly, or inconsistently. Furthermore, the FDA has indicated that some of these unapproved products bear names that are similar to other products which could result in medication mix-ups or errors.

The manufacturers of the drugs ordered to be removed from the market have been given 90 days to stop manufacturing and 180 days to stop distribution of the drugs.

The FDAs list of unapproved drugs marketed in the United States can be found here.

FinCEN Amends and Clarifies FBAR Responsibilities

On February 24, 2011, the Financial Crimes Enforcement Network (FinCEN) issued a final rule amending and clarifying the Bank Secrecy Act (BSA) implementing regulations regarding the Report of Foreign Bank and Financial Accounts (FBAR). FBARs, which have existed since 1972, are used to report a financial interest in, or signature or other authority over, one or more financial accounts in foreign countries if the aggregate value of the accounts exceeds $10,000. The complete final rule, which is available here, will become effective on March 28, 2011.

On February 26, 2010, FinCEN issued a Notice of Proposed Rulemaking (NPRM) addressing the FBAR rules. The final rule, which was issued following FinCENs receipt and review of 42 timely filed comment letters from the interested public, adopts the proposed rules proposed changes with slight modifications. Among the highlights of the final rule are the following critical points:

First, in the final rule, FinCEN clarified the issue of what constitutes a reportable account. According to FinCEN, “an account is not a foreign account under the FBAR if it is maintained with a financial institution located in the United States.” FinCEN also addressed cases where a bank in the United States acts “as a global custodian” holding the persons assets outside the United States. As it relates to these accounts (commonly referred to as “omnibus accounts”), FinCEN clarified that so long as the US person cannot directly access their foreign holdings maintained at the foreign institution, the US customer maintains an account with a financial institution located in the United States and thus “the US customer would not have to file an FAR with respect to assets held in the omnibus account and maintained by the global custodian.”

FinCEN next addressed the troublesome and oftentimes confusing question of the type of “signature or other authority” that a person must have over a foreign financial account to trigger a FBAR filing requirement. In addressing issue, FinCEN first revised the definition of “signature or other authority” to provide as follows:

Signature or other authority means the authority of an individual (alone or in conjunction with another) to control the disposition of money, funds or other assets held in a financial account by direct communication (whether in writing or otherwise) to the person with whom the financial account is maintained.

According to FinCEN, the test for determining whether an individual has signature or other authority over an account (and thus a filing obligation) “is whether the foreign financial institution will act upon a direct communication from that individual regarding the disposition of assets in that account.” Thus, as explained in the final rule, the reporting obligation extends even “to employees with signature authority over but no financial interest in their employers foreign financial accounts.” According to FinCEN, it had contemplated creating an exemption for such employees, but consultations with law enforcement authorities revealed that law enforcement interests would be better served by requiring employees and employers to file FBARs, despite the duplicative filings that will undoubtedly result. However, as it relates to employees or officers who file solely due to their signature authority over foreign financial accounts, FinCEN will not “expect such officers or employees to personally maintain the records of the foreign financial accounts of their employers.”

The final rule also addresses a variety of case specific issues in response to comments submitted by the interested public. It is worth reading in its entirety, especially if you have concerns about a possible FBAR filing obligation of your own. If you have questions about whether this FinCEN final rule may impact you, contact us at contact@fidjlaw.com.

President Obama Warns FDA That Overhaul and Modernization Are Necessary

Last week, the Financial Times reported that President Obama has warned the U.S. Food and Drug Administration (FDA) that it will be the target of a major overhaul due to its failure to keep up with advances in medicine and biotechnology. The President specifically mentioned the FDAs process for reviewing medical devices, implying that the process is outdated and in dire need of modernization. (We have previously discussed the controversy surrounding the FDAs medical device review process here and here.)

President Obama made these comments at a panel discussing jobs and the competiveness of the U.S. market. The President stated that his administration will try to make the U.S. economy more competitive by eliminating unnecessary regulatory burdens. During the panel, President Obama emphasized the importance of maintaining regulations necessary for the safety of the public but the need to eliminate regulations that create burdensome, unnecessary hurdles for advances and business.

For the FY 2012 budget, the President has proposed an increase of 33% of the FDAs budget to $4.3 billion. The Presidents complete budget for all of Health and Human Services (HHS), including FDA, can be viewed here.

With the recently passed Food Safety Modernization Act and the FDAs new Medical Device Innovation Initiative, in conjunction with the Presidents demand for the Agencys overhaul, a 33% increase of the FDA budget might not be enough. The FDA is not known for its quick action or adaptability so only time will tell whether these programs will bring about a modernized FDA.

New Food Safety Law Contains Protections for Whistleblowers

Food industry workers turned whistleblowers have been faced with retaliation from their employers. However, thanks to a new provision in the sweeping food safety law signed by President Barack Obama last month, workers have gained protection. President Obama signed the FDA Food Safety Modernization Act (FSMA) on January 4th, 2011. The FSMA imposes safety standards and allows the U.S. Food and Drug Administration (FDA) greater authority to regulate tainted food (see our previous blog here).

Included in the FSMA is a provision (Section 402) to ensure that food industry employees will not face retaliation for any participation in proceedings concerning violations of the Food, Drug, and Cosmetic Act (FD&C Act). This provision serves to encourage employees to come forward, as they may now disclose food safety concerns without the fear of being terminated for speaking out on what they believe are safety violations. The provision provides that “[n]o entity engaged in the manufacture, processing, packing, transporting, distribution, reception, holding, or importation of food may discharge an employee or otherwise [. . .]” alter the terms and conditions of employment as a result of the employees participation in providing information concerning a violation of the FD&C Act. This provision provides whistleblowers protection from various types of employment-related consequences that may otherwise result from disclosing violations. While the provision protects employees from retaliation after disclosing information directly to the FDA, it also extends to disclosures voiced to employers, as well as an employees refusal to perform any activity reasonably believed to be in violation of the FD&C Act. If an employee is terminated or otherwise discriminated against in violation of this section, various forms of injunctive and compensatory relief are available to make the aggrieved party whole. The types of relief that may be granted include reinstatement, back pay and other special compensation, such as attorneys fees and other costs associated with litigation.

Because the FDA is unable to catch all food violations, whistleblowers are a critical resource to help warn the public of potential health hazards related to food. The new protections are designed to provide workers a greater sense of security in reporting problems to managers without fear of being fired, demoted or being subjected to other adverse employment actions. Ideally, the protections will allow companies to become aware of and provide quicker responses to potential issues before the problems can escalate to wide-spread public health concerns.

For more information on the FDA Food Safety Modernization Act and the Whistleblower protections, please contact us at contact@fidjlaw.com.

Final FASB Guidance on Troubled Debt Restructurings Due Out by March 31, 2011

At its board meeting on February 23, 2011, the Financial Accounting Standards Board (FASB) stated that it plans to issue its final guidance on Troubled Debt Restructurings (TDRs) by March 31, 2011.

At the present time there are no clear guidelines to assist creditors in determining whether a loan or other debt modification meets the criteria to be considered a TDR, both for debt recording and TDR disclosure purposes.  In announcing the guidance initiative last year, FASB Acting Chairman Leslie Seidman stated that the guidance should “result in more consistent application of GAAP for debt restructurings.”

On the basis of public comments and Board deliberations to the guidance initiative, FASB recommended earlier this year that the final guidance will feature:

  • a specification that the absence of a market rate for a loan with risks similar to the restructured loan is an indicator of a troubled debt restructuring, but not a determinative factor
  • >assessment of whether a restructuring reaches the level of a TDR should consider all of the modified terms of the restructuring, including any additional collateral or guarantees
  • >insignificant delays in cash flows are a factor to consider when determining whether a concession has been granted
  • >for purposes of determining whether a borrower is experiencing financial difficulty, creditors should consider whether default is “probable in the foreseeable future.”

At the February 23rd Board meeting, the FASB discussed many facets of TDRs including a lengthy analysis of the concept of “insignificant delays in cash flows,” in the context of restructurings.  The Board also discussed the transition provisions and effective date for the new guidance.

With respect to the latter issue, the FASB affirmed that the final guidance on TDRs will be prepared by March 31 of this year.  The Board also stated that the interim guidance proposed in the October 13, 2010 Exposure Draft would be effective on a prospective basis for interim and annual periods ending after June 15, 2011, with retrospective application permitted.  

U.S. Supreme Court to Decide if Internal Revenue Code Section 7206 Offenses are a Basis for Deportation

In November of 2010, the taxpayer at issue in Kawashima v. Holder, 615 F.3d 1043 (9th Cir. 2010) (available here), petitioned the Supreme Court for a Writ of Certiorari. The question presented to the Court in that petition was whether Code section 7206, available here, provides a basis for deportation. The Ninth Circuit has reached a different conclusion than the Third Circuit in Ki Se Lee v. Ashcroft, 368 F.3d 218, 224 (3d Cir. 2004) (available here) creating a split among the Circuits.

The law at issue, 8 U.S.C. §1101(a)(43)(M), available here, defines an aggravated felony as

(M) an offense that”

(i) involves fraud or deceit in which the loss to the victim or victims exceeds $10,000; or

(ii) is described in section 7201 of title 26 (relating to tax evasion) in which the revenue loss to the Government exceeds $10,000.

The split between the Circuits is whether an IRC section 7206 violation can be an aggravated felony when IRC section 7201 is exclusively referenced as an aggravated felony within the criminal provisions contained in Title 26 (the Internal Revenue Code). The significance of this issue is that if the Ninth Circuit’s decision is adopted by the Supreme Court, any crime contained in the Internal Revenue Code could in theory be used as a basis for deportation. As a result, any criminal tax offense must be studied for both criminal and immigration consequences.

The attorneys at Fuerst Ittleman, PL have extensive experience litigating criminal tax matters and have experience litigating ineffective assistance of counsel claims after a plea or conviction.

FDA Food Safety Modernization Act Adds Requirements for Grocery Stores

In addition to the key elements we have previously reported, the FDA Food Safety Modernization Act of 2010 adds new requirements for grocery stores. In Section 417 of the Federal Food, Drug, and Cosmetic Act, the FDA will now have to prepare a standardized one-page summary of critical information for a reportable food and publish it on the FDAs website in a format that can be easily printed by a grocery store for consumer notification. A reportable food is any article of food, other than infant formula, where there is a reasonable probability that the use of, or exposure to, such food will cause a serious adverse health consequence or death. 21 U.S.C. § 350f(a)(2).

Grocery stores that are part of a chain of establishments with fifteen (15) or more physical locations that sold a reportable food, shall prominently display the one page summary of information no later than 24 hours after it was published by the FDA. The grocery store shall display the summary for fourteen (14) days. No later than one year from the date of enactment of the FDA Food Safety Modernization Act, the FDA must develop and publish a list of acceptable conspicuous locations, which grocery stores will use for providing consumer notification. The list must include the following items:

  • posting the notification at or near the register;
  • providing the location of the reportable food;
  • providing targeted recall information given to customers upon purchase of a food; and
  • other such prominent and conspicuous locations and manners utilized by grocery stores as of the date of the enactment of the FDA Food Safety Modernization Act to provide notice of such recalls to consumers as considered appropriate by the Secretary.

21 U.S.C. § 350f(h)(2). We will continue to monitor the FDA for promulgation of the list and manners to which grocery stores must use to provide consumer notification.

For more information on the FDA Food Safety Modernization Act, please contact us at contact@fidjlaw.com.

Tax Court Rules in Favor of Taxpayers in Foreign Tax Credit Cases

In PPL Corp. v. Commissioner, 135 T.C. No. 8 (Sept. 9, 2010), found here and Entergy v. Commissioner, T.C. Memo 2010-166 (Sept. 9, 2010), found here, the Tax Court addressed whether a Windfall Tax imposed by the U.K. government is a creditable income tax under the Internal Revenue Code. Under section 901 of the Code and related provisions, a U.S. taxpayer can elect to credit qualifying income taxes paid to a foreign country. Section 901 can be found here. Only income taxes are eligible for this credit, and the determination of whether a foreign tax is an income tax depends on whether it is the equivalent of an income tax as defined in the Internal Revenue Code.

The U.K. tax at issue is atypical because it was a one-time tax on formerly public utilities. The taxpayers argued that the creditability of the U.K. tax was the equivalent of an income tax imposed at a rate of roughly 50% on profits earned over a four-years, and as such, the taxpayers argued that the U.K. tax at issue was an income tax and subject to the foreign tax credit regime of the Internal Revenue Code.

Ultimately Judge Halpern ruled that “The United Kingdom windfall tax enacted on July 2, 1997, and imposed on certain British utilities is a creditable tax under sec. 901, I.R.C.”

The attorneys at Fuerst Ittleman, PL have extensive experience in international tax litigation including litigating foreign tax credits.

United States Tax Court Denied Motion to Interplead the Government of the Virgin Islands Regarding Tax Credits Under the Virgin Islands Economic Development Program

In a recent opinion, Judge Jacobs of the United States Tax Court refused to allow a taxpayer to interplead the Government of the Virgin Islands as a party to Tax Court litigation under U.S. Tax Court Rule 1(b), found here, and Federal Rule of Civil Procedure 22, found here. The case is captioned Huff v. Commissioner, 135 T.C. 30 (2010) and the text of the opinion can be found here.

The Huff case stems from the IRS audit of a taxpayer that took Virgin Islands Economic Development credits under Internal Revenue Code section 934, found here. The Virgin Islands Economic Development Program is administered by the Economic Development Commission (see, https://www.usvieda.org/) and is promoted by the United States Department of the Interior, see e.g. https://www.doi.gov/oia/press/2009/11192009.html.

Judge Jacobs ruled that because the Tax Court lacks jurisdiction to redetermine the taxpayer’s Virgin Islands tax liabilities, the taxpayer will not be permitted to interplead the Virgin Islands. The Court further held that 48 U.S.C. sec. 1612(a) explicitly provides that the District Court of the Virgin Islands is the sole court that may determine the correct amount of petitioners Virgin Islands tax liabilities for 2002, 2003, and 2004. The petitioner would consequently have to appear before that court to seek refunds from the Virgin Islands.

The result of the Tax Court’s decision is that there is now a distinct possibility that those taxpayers that were not bona fide Virgin Islands residents, or that did not have Virgin Islands sourced income or income effectively connected with at Virgin Islands trade or business will have to sue the Virgin Islands government in the District Court of the Virgin Islands to recoup taxes improperly paid to the Virgin Islands Bureau of Internal Revenue, found https://www.viirb.com/.

The attorneys at Fuerst Ittleman, PL have extensive experience handling tax litigation against the IRS, the United States government, and the Virgin Islands government.