More Hypocrisy from Warren Buffett as He Structures Deal to Avoid $400 Million in Taxes

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Warren Buffett epitomizes everything that is wrong with the global economy, and the U.S. economy specifically. He is the consummate crony capitalist, a brilliant yet conniving oligarch who intentionally plays on the gullibility of the masses to portray himself as one thing, when in reality he is something else entirely.

He publicly talks about how rich people need to pay more in taxes, then turns around and pioneers new ways for his company Berkshire Hathaway to avoid hundreds of millions in taxes. He thinks that by going on television stuffing ice cream cones and hamburgers in his mouth and acting all grandfatherly that no one will notice who he is really is and the incredible hypocrisy of his actions.

I’ve pointed out “Uncle” Warren’s hypocrisy previously on these pages, most recently in my post from last March titled: Crony Capitalist “Uncle” Warren Buffett Drives Company Profits Using Derivatives.

While that was pretty blatant hypocrisy, Buffett’s latest elaborate scheme to avoid $400 million in capital gains taxes from the disposition of a large chunk of Berkshire Hataway’s Washington Post stake (which was acquired in the 1970s for $11 million) absolutely takes the cake.

The Street published an excellent article on the topic. Their conclusion at the end of the piece says it all:

Bottom Line: Warren Buffett is pioneering new ways to avoid capital gains tax, even as he is President Obama’s richest spokesperson for progressive income tax policy. 

More from The Street:

NEW YORK (TheStreet) – Berkshire Hathaway may have avoided about $400 million in taxes by exiting its long-time stake in Graham Holdings – formerly known as The Washington Post Company – through an asset swap with the company that will add Miami-based TV station WPLG and hundreds of millions in cash to Berkshire’s coffers. Wednesday’s transaction also may also break new ground in how large investors structure deals to avoid taxes on their investment gains.

Berkshire’s deal with Graham Holdings is structured in a way that may allow the Warren Buffett-run conglomerate to exit a multi-decade investment in Graham Holdings without paying any capital gains tax, Robert Willens, an independent tax expert, said in a Friday telephone interview.

The cost-basis for Berkshire’s 1,727,765 million shares was $11 million, Warren Buffett said in Berkshire’s 2000 annual letter to shareholders. Now, Berkshire is seeking to exit Graham Holdings at a value in excess of $1.1 billion.

Applying a 38 percent tax rate (federal plus state and local taxes) would bring Berkshire to about $400 million in tax liability, Willens said. The swap orchestrated between Berkshire and Graham Holdings, however, is likely to reduce Berkshire’s tax liability to $0.

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Law Schools Now Paying Their Graduates’ Salaries to Look Better in School Rankings

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I knew that the legal market was in bad shape last summer when I came across the story that top law firm Weil, Gotshal & Manges announced its first mass layoffs in 82 years, but I had no idea it was this bad.

As most of you will be aware, U.S. News & World Report publishes a widely anticipated ranking of undergraduate as well as graduate schools. I recall how closely my peers scrutinized these rankings back when I was a high school senior and, apparently, a similar obsession continues to this day.

In fact, law schools are so consumed with performing well in these rankings that they are going to outrageous lengths to make it look like their students are performing better financially after graduation than they actually are. One of the most ridiculous ways they achieve this is by paying the salaries of their graduates upon graduation. This way, students can take on employment at non-pofits and government agencies, positions they would never otherwise consider in light of their mountains of student debt. In return, their alma maters can pretend their graduates got real jobs. It is the academic equivalent of GM automobile channel stuffing.

This isn’t just a minor trend of one-offs being exaggerated by the media either. For example, George Washington University paid the starting salaries of 22% of its graduates in 2012, while the University of Virginia paid for 15%.

These programs even have a name that reminds me of a financial derivative packed full of worthless securities. These programs are being called “bridge to practice” schemes and according to The Economist “in a recent survey by the National Association for Law Placement (NALP), 45 of the 94 schools that responded now run such programs.”

Now more from The Economist:

EACH YEAR when U.S. News, an American publisher, releases its league table of law schools, potential students seize on it and the universities decry it for oversimplifying a personal and unquantifiable decision. But the schools can ill afford to ignore it, since not just applicants but donors and even credit-rating agencies pay close attention to the scores.

Among the ranking’s most important components is the share of graduates who find jobs. The 2014 table, announced on March 11th, shows that the University of Virginia (UVA) and George Washington University (GW) do especially well on this. Although UVA’s law students are only in ninth place for their scores in standard admission tests, 97.5% of the class of 2012 had a job on graduating—the best mark in the country. At GW the discrepancy was even more striking: its 85% graduate-employment rate ranked ninth, whereas its admission-test scores were 21st.

However, the two schools’ performance is not as stellar as it seems. A close look at the online employment database of the American Bar Association reveals that GW and UVA are among the leaders in a striking trend: law schools paying the salaries of their alumni when they go to work in legal firms, non-profits or the government. GW paid the starting salaries of a whopping 22% of its 2012 graduates; at 15%, UVA was not far behind.

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Only 3 Weeks Left Until the Inside Bitcoins Conference in NYC

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The Inside Bitcoins conference in NYC last summer was one of the highlights of 2013 for me. I was able to meet some of the smartest, determined and friendly people in the Bitcoin space, as well as significantly advance my understanding of the still young crypto-currency. Fortunately, this conference will be back in less than … Read more

Here’s What the Richest Man in the World Thinks About Snowden and NSA Surveillance

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So Bill Gates recently gave an interview to Rolling Stone magazine. The vast majority of the interview focused on his philanthropic efforts, with a particular focus on poverty and climate change. However, several questions were brought up on illegal NSA surveillance in general, and Edward Snowden in particular.

His answers reveal one of the biggest problems facing America today, which is the fact that the billionaire class as a whole does not question or rock the boat whatsoever. They criticize only when it is convenient or easy to do so, never putting themselves at risk for the sake of civil liberties and the Constitution.

In mosts cases, this is due to the fact that they themselves are the characters pulling the strings of the political class in Washington D.C. So when it comes down to it, their policies ultimately become our policies.

It is also important to note that Microsoft was a particularly eager participant in NSA spying from the very beginning. For example, according to the following PRISM slide provided by Edward Snowden, we see that Gates’ company was the first to become involved. In fact, they were participating a full six months before Yahoo!, while Apple didn’t join until a year after Steve Jobs died.

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What a tangled web we have weaved. Now from Rolling Stone:

Question: When people think about the cloud, it’s not only the accessibility of information and their documents that comes to mind, but also their privacy – or lack of it.

Gates: Should there be cameras everywhere in outdoor streets? My personal view is having cameras in inner cities is a very good thing. In the case of London, petty crime has gone down. They catch terrorists because of it. And if something really bad happens, most of the time you can figure out who did it. There’s a general view there that it’s not used to invade privacy in some way. Yet in an American city, in order to take advantage of that in the same way, you have to trust what this information is going to be used for.

Do they really catch terrorists because of it in London? Because in the U.S., the NSA chief already admitted that the entire spy program has stopped essentially zero terrorist attacks. It certainly didn’t stop the Boston bombings. So what are we giving up our privacy for exactly?

Question: Thanks to Edward Snowden, who has leaked tens of thousands of NSA documents, we are. Do you consider him a hero or a traitor?

Gates: I think he broke the law, so I certainly wouldn’t characterize him as a hero. If he wanted to raise the issues and stay in the country and engage in civil disobedience or something of that kind, or if he had been careful in terms of what he had released, then it would fit more of the model of “OK, I’m really trying to improve things.” You won’t find much admiration from me.

Sorry Billy boy, but we have had many whistleblowers in the past who went through the system and they ended up in jail or their lives were ruined. For example, the only person imprisoned for torture in the USA is the guy who exposed the torture program, John Kiriakou.

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Blackstone’s Home Buying Binge Drops 70% from its Peak Last Year

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The whole story about how private equity firms and hedge funds have steamrolled into the residential home market to become this decade’s slumlords is a story covered on this blog before mainstream media even knew it was happening. I first identified the trend in January of last year in one of my most popular posts of 2013: America Meet Your New Slumlord: Wall Street.

Since then, I’ve done my best to cover the various twists and turns in this fascinating and disturbing saga. Some of my follow up pieces can be read below:

March 2013: Is the “Buy to Rent” Party Over?
May 2013: Carrington Bails: More Smart Money Leaves the “Buy to Rent” Game
July 2013: The Las Vegas Housing Market has Gone Full Chinese
August 2013: Welcome to the Housing Recovery: Rents are Rising, Incomes are Falling
October 2013: A Closer Look at the Decrepit World of Wall Street Rental Homes
February 2014: Is “Buy to Rent” Dead? – Rents on Blackstone Housing Bonds Plunge 7.6%

With all that in mind, let’s now take a look at the latest article from Bloomberg, which points out that Blackstone’s home purchases have plunged 70% from their peak last year. Perhaps they overestimated the rental cash flow potential of indebted youth living in their parents’ basements?

From Bloomberg:

Blackstone Group LP is slowing its purchases of houses to rent amid soaring prices after a buying binge made it the biggest U.S. single-family home landlord.

Blackstone’s acquisition pace has declined 70 percent from its peak last year, when the private equity firm was spending more than $100 million a week on properties, said Jonathan Gray, global head of real estate for the New York-based firm. After investing $8 billion since April 2012 to buy 43,000 homes in 14 cities, the company has narrowed most of its purchasing to Seattle, Atlanta, Miami, Orlando and Tampa.

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Anti-Protest Law Passes in Australia – Punishment Includes Fines and Imprisonment

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The Australian state of Victoria has just passed an extremely anti-democractic law criminalizing protest (recall Japan and Spain moved to do the same late last year). For those of you unfamiliar with Australian geography, Victoria is one of Australia’s five states. It is the second most populous and includes the city of Melbourne (a city … Read more

Massive Fraud Has Been Unveiled at the EPA (Again)

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While I doubt anyone reading this will be shocked by major fraud at the Environmental Protection Agency (EPA), the potential extent of the fraud is huge, and we still have no idea how big it is.

A report released by the EPA’s Inspector General found that over 90% of sampled transactions were for “prohibited, improper, or erroneous purchases.” Worst of all, the sample size was extremely small at only 80 transactions out of 67,000 transactions during the sample period. Considering EPA cardholders spent $29 million in taxpayer dollars in 2012 with a potential 90% fraud rate, you do the math.

Oh, but the story gets even better (or worse, depending on your perspective). Examples of egregious fraud at the EPA have been well documented in the past, in fact as recently as in 2008. Absolutely nothing was done about it.

More from Americans for Tax Reform:

A report released by the Environmental Protection Agency’s Inspector General has found that EPA employees have improperly used federal charge cards to purchase everything from gym memberships to gift cards. The report indicated that over 90 percent of the sampled transactions were for prohibited, improper, or erroneous purchases, all paid for by American taxpayers. Ironically, Senate Democrats Monday night carried on an all-night filibuster in the hopes of generating even more power and funding for the EPA.

The report outlined nine specific internal control oversight issues, ranging from the approval of prohibited transactions by EPA officials to the outright failure to maintain transaction records.

Some specific instances of EPA employee misconduct were so egregious they are worth mentioning. In three instances, cardholders purchased gym memberships totaling $2,867. Two of those purchases were not even for EPA employees but for family members.

The report also found that the purchase of gift cards by EPA cardholders was also a problem in seven transactions. For example, in one transaction 20 American Express gift cards were purchased totaling $1,588. Additionally, the report highlighted an instance where EPA employees blatantly violated records keeping requirements in that:

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The Chief Operating Officer of Facebook Wants to Ban the Word “Bossy”

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No this is not a joke. When I first heard grumblings of this yesterday I ignored it as some sort of hyperbolic page-view hunting headline. Today, I finally decided to look into it and the story is even more outrageous than I imagined. The most hypocritical aspect of this whole campaign is that it was … Read more

The Most Evil and Disturbing NSA Spy Practices To-Date Have Just Been Revealed

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In some cases the NSA has masqueraded as a fake Facebook server, using the social media site as a launching pad to infect a target’s computer and exfiltrate files from a hard drive. In others, it has sent out spam emails laced with the malware, which can be tailored to covertly record audio from a computer’s microphone and take snapshots with its webcam. The hacking systems have also enabled the NSA to launch cyberattacks by corrupting and disrupting file downloads or denying access to websites.

The man-in-the-middle tactic can be used, for instance, to covertly change the content of a message as it is being sent between two people, without either knowing that any change has been made by a third party.

– From Glenn Greenwald’s latest article: How the NSA Plans to Infect Millions of Computers with Malware

The latest piece from Greenwald and company on the unconstitutional spy practices of the NSA may represent the most dangerous and disturbing revelations yet. It’s hard for shadiness at the NSA to surprise me these days, but there was only one word that kept repeating over and over in my head as I read this: EVIL.

As a quick aside, Greenwald points out in the quote above how spam emails are used by the NSA to bait you into clicking dangerous links. This is a timely revelation considering I received one such email yesterday from a friend of mine. The email was sent to a wide list of let’s say “liberty-minded people” and webmasters associated with very popular sites. The link seemed shady so I texted him to ask if he had sent it. He hadn’t.

Earlier this week, during a talk at SXSW, Edward Snowden pleaded with people to use encryption. While he admitted if the NSA targeted you individually they could almost certainly “own your computer,” he stated that if people use encryption on a massive scale it makes the NSA’s attempts to monitor everyone at the same time much more difficult.

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Conan O’Brien Does Bitcoin

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This is the second humorous Bitcoin related video I have posted within the past week. The last one being the very funny: Shit Bitcoin Fanatics Say. Well now the always hilarious Conan O’Brien is having a go at it. Unfortunately, the way he pokes fun at Bitcoin is actually how the majority of people out there … Read more