Rusty Law

Madoff Raises Unemployment

Bernie Madoff’s former assistant is now a hairdresser.  She went to cosmetology school over the summer for an extreme make-over on her career path.  She is not going to work in finance any more, and that is true for many other former Madoff employees as well.  

Twenty years’ experience in a successful Ponzi scheme does not play well on a job interview if you got caught the twenty-first year.  After book rights and fraud allegations, there is not much for these people to do except increase the unemployment rate.  

And Madoff is not in a position to write recommendations.  He is residing in a different kind of gated community, with extra tight security for the next 150 years.  Even members of his family who were involved in the business could face criminal charges relating to aiding and abetting the fraud.  They may have been a-betting they would not get caught!  

Until the government offers a tax incentive to hire former Madoff employees, Manhattan’s Lipstick Building is the kiss of death for Madoff’s staff, except his assistant, and she is moving on in style.   

Balloon Boy

Ninety-one percent of an Apollo rocket is fuel, four percent of a ’69 Corvette is fuel, and zero percent of the Balloon Boy story was truth.  Slower than a speeding bullet, cheaper than a Super Bowl ad, the publicity stunt may not have hurt anyone, but it will cost big bucks plus jail time.  

The Falcon has landed.  Actually he never took off.  The Heene’s amateur aeronautics landed in astronomical trouble on the family scale—it’s a bird, it’s a plane, it’s a hoax!  Richard and Mayumi Heene met at acting school, got married, had a family, and launched an unmanned balloon. Viewers around the world watched the publicity stunt lift-off, thinking the flying saucer balloon carried six-year-old Falcon Heene.  Child abducted by aliens—not!  

Countdown to restitution has begun, and the tab is mounting for the Heene’s.  For starters, there is a $42,000 scramble fee from the police, National Guard, and Federal Aviation Administration.  Then there is the investigation bill, which could exceed $50,000.  

Falcon’s chance at being an astronaut was probably shot down in the balloon he did not fly.  His parents are prohibited from rebuilding his college fund with earnings from that stunt for four years.  By then, Falcon will be ten, so maybe there is still time.  In the interim, mommy and daddy are going to take turns serving jail time.  

This loss to NASA potential may set back steps they had planned to make on the moon, unless the space agency is willing to enact a lunar work release program for the Heene parents.  

Hidden Stimulus Behind Strategic Default

Ten million Americans owe more on their homes than what those homes are worth.  That number is expected to rise to 21 million by the end of this year.  If one fifth of those folks default on their loans, the banks and investors stand to lose as much as they did in the savings and loan crisis of the 1980’s and ‘90’s.  Plus taxpayers would be out more in bailout money, and credit would be trashed for years for borrowers who defaulted, but there is up side.  

Strategic default is not the NFL’s latest way to avoid head injury debate.  A strategic default is when a homeowner simply walks away from a home and its mortgage.  It sounds like a last resort, an act of desperation if refinancing or mortgage modification do not work out.  It does not seem very strategic at all, but strategic default comes with a hidden stimulus for the borrower and the US economy alike:  cash flow.  

If people can right themselves from upside down mortgages and go rent at a lower monthly payment, that puts cash in hands, which could amount to more than the Obama tax breaks over the long term.  Already this money is moving through restaurants and vacation spots.  With money not bogged down in mortgage payments, the US former homeowner can enjoy living it up a bit, while contributing to a trickle-up effect of economic regeneration.  

App For That

Federal copyright code is one of the cheapest apps available for legal research and reference.  For a buck ninety-nine, you can read it without infringement.  Purchasing music online is similarly easy and comparatively inexpensive, making piracy less excusable.  

You may disassociate music with the media it comes on.  Unlike vinyl, cassette tape, and 8-track, digital media copy very well, making downloading feel like a normal function.  Piracy is easy, but it is still stealing.  

The San Francisco Symphony Orchestra paired with heavy metal rock band, Metallica, in 1999.  In 2000, Metallica paired with the Supreme Court to put Napster out of business.  Metallica continues to rock on, receiving two Grammy’s in 2009, while Napster discontinued service eight years ago.    

If you steal a CD from Wal-Mart, you are going to get arrested.  If you download, you could get sued.  You get caught quicker stealing from a store, but either way, it is morally wrong and criminal.  If you like the music, support the musician by purchasing the song or CD.  

With iTunes, you do not have to buy the whole CD.  You can buy a single song without purchasing 12 songs you do not want, plus you do not have to go to the store, or pay for shipping and handling.  Buying music has never been easier!   

And by the way, the Constitution of the United States is at your fingertips as a free app on your iPhone, but paying for an attorney to interpret it…that is another matter.  

Morality Claws

Ninety million people Googled John 3:16 the night Tim Tebow wore it in his eye-black at the national championships last year.  As one of the most well-known verses in the Bible (“For God so loved the world that He gave His only son….”), it is doubtful Tebow was preaching to the choir, and thus pulled off one of the most highly effective TV evangelism stunts.  Sports marketing is seeking the same kind of penetration and the same height of morality.  

College football players are prohibited from advertising products, but golfers and other professional athletes are not.  They can be, however, subject to a morality clause in endorsement arrangements.  The rising popularity of camera phones and blogs has caused the rising popularity of morality clauses, and intensified scrutiny of the private lives of American athletes.   

A morality clause gives an advertiser a way out and can include immediate withdrawal of sponsorship or even terminate a player’s agreement in team sports, depending on the contract.  Endorsers are seeking shelter against negative publicity brought on by off-field behavior.  Ultimately the behavior itself may not be as bad as the publicity, but advertisers want to avoid both.  

Tiger Woods is one of the Masters of sports marketing, formerly weighing in at about $100 million a year in endorsements.  But sports marketing relies on image, and Woods’ fall from grace leaves the world wondering what will happen to Buick, Nike, Gillette, etc. without him.  

This is NOT the End

By October 21, 2010 all lawyers will be abolished according to the movie, Back to the Future II.  The CERN may accelerate the apocalypse, though the ancient Mayans have annihilation engraved for 2012.  Right now, though, this is NOT the end of the world.  

Shakespeare has been trying to get rid of lawyers since Henry VI, yet the American Bar Association membership is at about 400,000.  Not everything people say comes true.  Even Nostradamus missed the creation of his own website.  

The unemployment rate is over 11%, which is not the 25% of the Great Depression.  Over 100 banks have failed this year, but we do not have a run on the banks.  Since the creation of the FDIC, money is more secure.  

Leave science and technology to manufacture the end of the world, not the economy, and certainly not the lawyers!  

Have a safe and happy New Year!  

Ever After

Divorce and foreclosure are often together as the winter and foul weather.  Regrettably, suicide sometimes figures in also.  While financial ruin and marital dissolution are biologically survivable, death is not.  Suicide may negate the need and expense of divorce, but it is really not the happiest state in the union.  

Suicide rates traditionally increase in correlation to economic down-ticks; however, they usually lag a little.  Records from the Great Depression show 15.3 suicides per 100,000 people in 1929, rising to 17 in 1930 and 18.6 in 1932.  Also the rate is related to unemployment, with a rise of 1.3% increase in suicides for every 1% increase in a state’s unemployment.  In Florida last year suicides were up 6% with unemployment near 10%.  The highest suicide rate ever was reported in 1933 when unemployment was almost at 25%.  

These are not happy figures.  They are something to watch out for.  Please note that the government funds the National Suicide Prevention Lifeline at 1-800-273-TALK.  

Tiger Woods is not in financial ruin, but he is in a bad lie.  His ad former campaign for Accenture is hopeful, though:  “It’s what you do next that counts.”  In golf and life, in divorce and foreclosure—this is an appropriate slogan.  No one should go through foreclosure alone.  

The Payoff

Extortion has become an increasingly popular crime.  High profile cases such as those of David Letterman and John Travolta have come forward on a national scale, but on a smaller celebrity degree, the caseload of such threats has increased to five times what it used to be for a security and investigation firm in New York.  Also increased is the number of debt servicing ambiguities—companies collecting for debts they do not own.  

You may owe the money, but who owns the debt?  Often in small claims court, credit card collections go uncontested; defendants start making payment arrangements before verifying that the company they are paying is really the company whom they owe.  This can be the situation for credit card debt and mortgage debt alike, where we have “show me the note” cases.  If you are unclear on the servicer trying to collect, ask.  Seek legal counsel.  Furthermore, there may be other options available to you besides what the bank or financial institution will offer.  A second look could be worth it.  

Security experts advise against unguarded use of electronic communication as a thwart to blackmail.  That is a lot to give up in this age of personal technology.  Your life does not have to come to a halt in the case of credit card debt or foreclosure, but you may want to have your case reviewed by an attorney.  

Facing South

You cannot shout “Let’s get ready to rumble!” on the radio without getting a bill.  You cannot mimic Toys R Us using a backwards R in a business name.  Cyber squatting on domain names is a no no.  Even news used to be copyrighted as it travelled from the East Coast to the West.  Now we have a clothes debate:  South Butt started as a joke and escalated into a Federal lawsuit about trademark infringement on North Face.  We have yet to see how the anatomy of this case will play out.  

The South Butt offers a direct opposite in name and logo to the well-established, The North Face.  The North Face claims there is customer confusion with brand ambiguity.  This is in South Butt’s favor in establishing a paradoxical stance, in which the original must be recognizable, but communicate satire, ridicule, or amusement.  In other words, North Face has got to be the butt of the joke.  

The South Butt also has the Goliath effect in its favor—the American way, free market where the little man can compete against the big company.  South Butt made about $4000 in profit last year.  (Fortunately South Butt is enjoying free legal representation.)  Thus South Butt has very little to lose in the lawsuit except the recent sales spike prompted by North Face’s threat.  

South Butt was founded to encourage alternatives, to break the status symbol of North Face clothes.  This may be the weak point of the defense, where “alternative” may fade to “knock-off” in courtroom lighting.  South Butt is selling the same type of items to the same group of customers; whereas, in the Louis Vuitton v. Chewy Vuiton case, the former sold high-priced handbags in exclusive boutiques while the later was selling dog toys in pet shops.  Chewy Vuiton prevailed—dogs can distinguish between a tote and a toy and will always maul the more expensive.  However, the similarity of product and consumer target may cause South Butt to lose face.  

Meanwhile, eighteen-year-old owner and founder of The South Butt, Jimmy Winkelmann, continues to pursue his degree in biomedical engineering with a business minor.  He may not be old enough to drink in Old Milwaukee, but we will see who prevails in Federal Court there, and who gets fleeced.  

Minding The Store

This year’s His & Her gift from Neiman Marcus is an ICON A5 Sports Aircraft.  It runs on gas or aviation fuel, is designed to take off and land on water as easily as ground, has an MP3 player dashboard dock, and boasts a streamlined two-seat interior, but do not expect that in leather.  

Neimans, once renowned for its fine furs, is looking to cotton pelts and other fabrics to cinch the waistline of its falling sales.  The stores are generally among the most successful retailers per square foot, but they have stepped into $3 billion in debt while waiting for luxury to be the new black again.  

Prada’s got a hobo bag going for $400 less than its average priced tote.  And the crocodile’s cousin may show up as a woolen handbag.  The trend away from high-dollared items appears in other industries as well.  Jack Daniels is turning to premixed products to offset declining revenues.  And Champagne bottling is down 44% by the world’s top Champagne producer.  You may be ringing in the New Year with a toast of Southern Comfort.  

The ICON A5 Sports Aircraft retails at $250,000, but production will not be completed until late 2011.  Maybe economic times will be better by then.