It May Be the Biggest Tax Heist Ever. And Europe Wants Justice; Insys Founder Gets Five and a Half Years in Prison in Opioid Kickback Scheme; Clayton Christensen, Guru of 'Disruptive Innovation,' Dies at 67; Saudi Crown Prince Calls Jeff Bezos
1) Kudos to the New York Times for uncovering this $60 billion rip-off of European governments by various bankers, traders, lawyers, and investors: It May Be the Biggest Tax Heist Ever. And Europe Wants Justice. Excerpt:
Today, the men stand accused of participating in what Le Monde has called "the robbery of the century," and what one academic declared "the biggest tax theft in the history of Europe." From 2006 to 2011, and hundreds of bankers, lawyers and investors made off with a staggering $60 billion, all of it siphoned from the state coffers of European countries.
As one participant would later put it, taxpayer funds were an irresistible mark for a simple reason: They never ran out.
The scheme was built around "cum-ex trading" (from the Latin for "with-without"): a monetary maneuver to avoid double taxation of investment profits that plays out like high finance's answer to a David Copperfield stage illusion. Through careful timing, and the coordination of a dozen different transactions, cum-ex trades produced two refunds for dividend tax paid on one basket of stocks.
One basket of stocks. Abracadabra. Two refunds.
The process was repeated over and over, as word of cum-ex spread like a quiet contagion. Germany was hardest hit, with an estimated $30 billion in losses, followed by France, taken for about $17 billion. Smaller sums were drained away from Spain, Italy, Belgium, Austria, Norway, Finland, Poland, and others.
Outrage in these countries has focused on the City of London, Britain's answer to Wall Street. Less scrutinized has been the role played by Americans, both individual investors and branches of United States investment banks in London, including Morgan Stanley, JPMorgan Chase, and Bank of America Merrill Lynch.
American bankers didn't try cum-ex at home because they feared domestic regulators. So they moved operations to London and treated the rest of Europe as an anything-goes frontier.
If what this article asserts is even remotely true, then a lot of people need to go to prison – that, not fines, is the only thing that deters this kind of behavior in the future. I found this line particularly noticeable: "American bankers didn't try cum-ex at home because they feared domestic regulators." Europe needs to establish the same deterrent...
2) Speaking of which, this is great to see – but: a) prison sentences aren't nearly common enough... and b) in this particular case, regulators were far too slow to act (I was short the stock of this literally murderous company years ago). Insys Founder Gets Five and a Half Years in Prison in Opioid Kickback Scheme. Excerpt:
A federal judge sentenced John Kapoor, the founder of the opioid manufacturer Insys Therapeutics, to five and a half years in prison Thursday for his role in a racketeering scheme that bribed doctors to prescribe a highly addictive opioid and misled insurers.
The case had been closely watched because it represented a rare criminal inquiry into the practices of a drug company that aggressively sold painkillers while the nation was in the grip of a deadly opioid epidemic that killed thousands of people in the last decade...
Federal prosecutors have said that Insys, based in Arizona, embarked on an intensive marketing plan – including paying doctors for sham educational talks and luring others with lap dances – to sell its under-the-tongue fentanyl spray, Subsys, which was federally approved to treat patients with cancer.
Doctors were urged to write prescriptions for a much wider pool or patients, and to mislead insurance companies so they would pay for the expensive medication...
Judge Allison D. Burroughs of Federal District Court in Boston also sentenced other former Insys executives this week for their roles in the scheme.
3) Despite overlapping with him at Harvard Business School (he joined the faculty in 1992, right when I started there), I regret never having the pleasure of meeting Clayton Christensen, who passed away on Thursday. By all accounts, he was a great person and brilliant thinker. Here's his obituary in the New York Times: Clayton Christensen, Guru of 'Disruptive Innovation,' Dies at 67. Excerpt:
Clayton M. Christensen, a professor at Harvard Business School whose groundbreaking 1997 book, The Innovator's Dilemma, outlined his theories about the impact of what he called "disruptive innovation" on leading companies and catapulted him to superstar status as a management guru, died on Thursday at a hospital in Boston. He was 67.
The cause was complications of leukemia, Nitin Nohria, the dean of the school, said in a statement.
The Innovator's Dilemma, which The Economist called one of the six most important business books ever written, was published during the technology boom of the late 1990s. It trumpeted Professor Christensen's assertion that the factors that helped the best companies succeed – listening responsively to customers, investing aggressively in technology products that satisfied customers' next-generation needs – were the exact same reasons some of these companies failed.
These corporate giants were so focused on doing the very things that had been taught for generations at the nation's top business schools, he wrote, that they were blindsided by small, fast-moving, innovative companies that were able to enter markets nimbly with disruptive products and services and grab large chunks of market share. By laying out a blueprint for how executives could identify and respond to these disruptive forces, Professor Christensen, himself an entrepreneur and former management consultant, struck a chord with high-tech corporate leaders.
Here's a website posted by the Harvard Business Review with links to 11 of Christensen's seminal articles: The Essential Clayton Christensen Articles.
4) This cracked me up! Saudi Crown Prince Calls Jeff Bezos to Casually Ask Him About His First Pet, Mother's Maiden Name, and the Street He Lived on as a Child.
Best regards,
Whitney