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While the media is sensationalizing Intel CEO Brian Krzanich’s recent stock sales as unusual given the recently disclosed security weakness in Intel’s chips,  a closer look reveals excellent tax planning, to the benefit of the company.

One of the key changes in the new tax law, a good one, is to expand the definition of compensation subject to the annual $1 million limit with respect to receiving a tax deduction.  Previously, only cash compensation was subject to the limit yet now all equity based compensation is also included, including stock options.

What this means is that if Intel’s CEO, for example, would have waited until after January 1st to exercise $25 million in options, the company would receive no tax deduction yet exercising prior to January 1 provides Intel a $25 million tax deduction.

Remarkably, not even the Wall Street Journal has reported this key fact.   Throughout the month of December, whenever called by reporters, I asked why no one was convering this new rule.  The obvious reason being that after December 31st the deductions are lost.

See key WSJ story excerpt below followed by summary of new legal change from independent tax related website.   This is an excellent story yet like many such stories they are too focused upon supporting the reporters “angle” and not respective of all supporting facts.

Yes, the new law was not technically approved by the Senate until December 2nd and the sales were November 29th yet clearly this change was one that was coming.  So rather than make hay for class action attorneys looking to milk shareholders for contingent fees in return for a few pennies a share settlement for shareholders, how about recognizing how beneficial this was to the company.

Sadly, the business media refused to do a high profile story in December that might have encouraged many other top execs to do the same, greatly benefiting their respective companies.  Especially in those cases where the sales would have occurred with 18 months anyway.


Summary Description of New Executive Compensation Rules


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In order to understand Robert Mercer’s brilliant financial engineering,  let’s begin our analysis using three outstanding local Portland beers.  They are Rogue Brewery’s Shakespeare Stout, Widmer’s Hefeweizen and Deschutes Breweries Fresh Squeezed IPA.  All are distributed by Portland based Columbia Distributing, one of the nations largest beer distributors, which was purchased by the Jim Simons controlled investment fund Meritage in 2012.  Simons along with Robert Mercer are Co-CEO of the $100 billion Rentec hedge fund.

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This analysis will unravel the relationship between Rentec’s Medallion fund, its company retirement plan,  the Meritage private equity fund, which purchased Columbia Distributing in 2012, and numerous tax exempt foundations including those of Jim Simons, Nat Simons and Robert Mercer.


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See prior September 18. 2017 blog post  for important background regarding PERS adoption of age weighted IAP accounts.

Once again, it appears that younger workers are being short changed by PERS in the adoption of age weighted IAP accounts.  Remarkably, there was no opportunity for public discussion on vendor selection or strategy regarding how the age based portfolios would be constructed.

Rather, it was announced in September that the French insurance conglomerate AXA’s subsidiary Alliance Bernstein, what some call the AIG of France, would be awarded the contract to manage more than $8.2 billion in participants IAP accounts.   Some will argue that this isn’t really an $8.2 billion contract since it will simply involve reshuffling assets among participants internally.  My thought would be, tell that to the participants.

Paris Based AXA and Le Vie Bonne Courtesy of Oregon PERS

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One obvious question to PERS directors and Democratic State Treasurer Tobias Read is why a domestic vendor was not chosen for this important public contract.  All sitting members of the Oregon Investment Council were appointed by Democratic Governors.   And where were the labor unions?


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In 2004 the State of Oregon decided to isolate the “employee contribution” part of PERS and put these amounts into what are called IAP (Individual Account Program) accounts. These 200,000 IAP accounts are essentially a defined contribution program, not unlike a 401K, for which members earn returns based upon market results with no guaranteed rate of return.


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Doris is 85 and suffers from moisture build up in her eye, what some call wet eye.   She is on Medicare and gets treated with Eylea, a Regeneron product, every 4-5 weeks.  Each treatment costing $6,200.   That is more than $70,000 per year even though Doris never made more than $40,000 while working.   Her total out of pocket cost is $10.29 per treatment.


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    Senator McConnell’s Dilemma:   To Serve Patients or Investors?

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When evaluating health care investments it is important to analyze the structure of leading drug and medical equipment companies.  A close look indeed reveals a derivative driven system in which private equity and hedge funds increase demand for drug payments by purchasing the rights to the cash flows from key drugs.  Patients are indeed unaware that many of the drugs they consume are now owned in part by private equity investors.


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Trump Mercer Simons Koskinen Bharara

See Latest Post on Nov 27 For Significant Updates After Release of the “Paradise Papers” – Access Via Blog Search for   Trump Patron

President Trump’s most significant backer, Robert Mercer (CEO of the giant hedge fund Renaissance Technologies), is Deutsche Bank’s largest customer.   Deutsche Bank is indeed also President Trump’s and Jared Kushner’s largest lender.  One phone call from Mercer and either should be able to refinance or gain a new loan, as both did in 2016.


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