Exposing Fraud at a California POA

This letter was sent to the CA State Board of Equalization

Dear Board:

Please open an investigation into an entity known as Association Management Services and its registered agent, Nicholas Mitchell. I've gathered some evidence that points to an overwhelmingly obvious situation of tax fraud, embezzlement, and misappropriation of funds happening at a POA I accidentally became a member of when buying a lot from a county tax sale.

Background: When I bought a small parcel in a way-out-in-the-boonies place in 2014, I paid all the back/overdue taxes on it to Siskiyou County and was thus deeded title to the land. However. Shortly thereafter, I suddenly found myself assaulted with demands for POA payments (POA fees going back to 2013) from an entity known as "Association Management Services", operating from PO Box 307 in Weed, CA.

Aside from the fact I didn't know that by buying land I'd be bullied into paying some company annual dues and fees on the land I already have legal title to (Siskiyou County did not disclose this information to me when I purchased the lot), something just seemed off about the original invoice he sent me in 2014.  A $50 "transfer fee" tacked on...  POA fees being racked up before title is even legally transferred... other weirdness.

A small bit of research, and I discover something odd... this "company" demanding payment is actually just one person: one person named Nicholas Mitchell. I was not able to determine the legal organization of his business entity “Association Management Services,” in order to determine how to file complaints for invoicing mistakes; but my research did uncover many interesting things. Things that, when taken all together, point to not only misappropriation of funds, but also almost certainly, mail fraud and tax fraud.

Nicholas Mitchell is the Registered Agent of Association Management Services … however, he's also the registered agent of MSPOA, Inc. (source), and at LEAST two other HOAs.

This seems like a lot of HOAs and POAs to "manage," doesn't it? Mt. Shasta Vista alone describes itself as: "Some 1,640 far flung, mostly juniper and sage parcels averaging 2.5 acres each." So if we look at MSVPOA and Siskiyou Highlands Property Owners Association and Timberline Court Homeowners Association, there's something that doesn't sit quite right in terms of magnitude and ability to manage when you're just one person. My intuitive hackles detected a probable pattern of abuse and fraud at a rather large scale.... I bet his Realtor(TM) buddies are involved somehow...

143 Main Street vs PO Box 307 Weed, CA 96094

Mitchell is clearly trying to be a "smart" criminal. He's registered various business entities (listed below) to cover his tracks; some show up as a physical address and some show up as the PO Box.  All of them seem to operate – in one way or another -- out of a real estate agency. So let's look at all of these businesses in the context that he "manages" them, such that they can feed each other, maximizing his ability to embezzle ... "cooking the books" to minimize actual expense while maximizing reported expense.

NOTE: website URLs can be accessed on my website link @ end of letter.

(1)  "Mount Shasta Vista Property Owners Association"
File Number:    C0495803

(2) "Siskiyou Lake Highlands" POA, Inc.
File Number:      C1848778   

(3)  "Timberline Court Homeowners Association"
File Number:    C1930623

(4) "Elite Real Estate Group" Specializes in creating foreclosures, marketing foreclosures, collecting fees on foreclosed parcels/properties when they are resold or rented.  This company stands to benefit immensely if Mitchell's proposal to enact aggressive "foreclose" on POA fees in arrears gets passed.   (we're not going to link to this website from here, but it is "Get My Home Now . com" (without spaces))

(5) "Association Management Services"   The shadiest of them all in terms of legal entity, this appears to be Nicholas Mitchell's personal consulting business, how he collects his "salary" from MSVPOA?   

(6)  "Rental Management Services"  source    2 employees, eh?

(7) "Alpine Association Management"  (source)  (8) The "Wooly Sheep Inc" (source #1, source #2)  Not sure what this is... but if it's attached to PO Box 307, it is a definite IRS flag.

(9) "Siskiyou Lake Highlands Mutual Water Co" (source #1, source #2).

(10)  "Siskiyou Lake Highlands Property Owners Association" (source).

Yes. That's 10.

As I am sure your office is aware: "Post Office Expenses" are such a common tax deduction for businesses that most auditors wouldn't think twice about them being legitimate. However, given this setup, it's clear that there is only one P.O. Box funnelling numerous legal entities. One address for rent and lease expenses, too… are each of these POAs responsible for 1/10th of the agency's ACTUAL expense, or are all of the POA members being told theirs is the only “Association” being managed, and thus requiring full bill being footed by each of them?

Many times have I requested the financial statements of the POA I paid dues to to check the numbers myself; however at this point, Nick Mitchell is completely ignoring my communications.  

(As a heads up, I have been quite vocal in my discoveries (posting them on by blog) during my numerous attempts to get my concerns resolved… so I am slightly worried this might have given Nick Mitchell and his Realtor buddies time to destroy evidence, shuffle funds, fabricate receipts, etc. I am writing your office as a last resort).

In any case, it's clear that he is mixing up all these legal entities in one PO Box, that means there should be just exactly one PO Box bill being paid to our most wonderful United States Postal Service.  This also means that whatever "Postal Expense" is recorded on the legal books of each of these 10 entities (some of which are supposed non-profits) is indeed NOT TRACEABLE and is thus being FALSIFIED in records to the cities, states, and federal government --- to both the public and to members. Fraud indeed. Little markers that point to putrid, rotten corruption.

I am also concerned with his role in spreading misinformation regarding his inability to be “fired” when communicating with property owners.  

According to what they are touting to members Nick Mitchell has "bulletproof" job security… (NOTE: this information is not deemed factual; it is simply information MSPOA, Inc. wants parcel owners to believe; it is available on  here the ~33rd paragraph.) :

If we ever folded, the Association would not only face the ignominy of having failed to work together to preserve over 1500 parcel owners’ common interests, but have insult added to injury by paying some disinterested professional — often a bill-by-the-hour attorney, bankruptcy trustee or accountant — to take over current volunteer board decisions that could leave members voiceless in home front matters now taken for granted. All in addition to the salary already paid our professional manager, who’d stay on.

This is so wrong it should be criminal... the association folds, but he gets to keep his salary AND gets to decide which one of his Real Estate buddies will "profit" from the association folding? Or even  threatening to fold, as the case may be?

Is it coincidence that the REALTOR agency he works at specializes in the footwork needed to start foreclosing properties? There are plenty of people out there who make a buck on threats alone. How often does your office audit real estate companies that do this kind of terrible thing?

Clearly Nick Mitchell the "consultant" is abusing whatever power of attorney he has, using FUD to promote his and his cronies' highly unethical agenda which includes:   

• Imposing (what may be illegal) transfer fees that benefit no one but him and his companies, personally
• Accelerating the pace at which properties can be "foreclosed" upon for lack of paying these fees (which appear to start accumulating before a parcel owner even has legal title)... snowballing them before a parcel owner even has a chance to be aware they exist.
• Aggressively adding collection costs to a parcel owner's invoice at random intervals -- possibly dependent upon how much vengeance he has toward an individual entity.  He clearly does not like me and all my questions.
• Deliberately denying parcel owners a neutral channel of grievance for his (and his company's) invoicing mistakes or intentional inflations. 
• Continually refusing to provide clear and open book accounting to the parcel owners regarding use of their fees and funds.
• Probable mail fraud and tax fraud.
• Misrepresenting real estate expenses across multiple legal entities (only a gut feeling since I've been unable to audit the financial statements myself)

As a final note, regarding my latest invoice from Nick Mitchell's "Association Management Services"... I moved in October of last year, and paid for mail forwarding.  However, I never received these invoices they are claiming I was sent. I am certain they were not sent.

Last year at the members' meeting, the manager had a "brilliant idea” to help the association.. that plan is to start aggressively "foreclosing" on parcels, adding a weekly fee to parcel owners who have overdue invoices.  Absolutely disgusting. 

Real estate agents are by far the most sleazy, maleficence-intentioned people in existence. There seems to be no despicable thing they won't do to extort a few thousand dollars here and a few more there... it adds up so quickly. In my observation, REALTORS and their agents are by far the most deliberately tax-evading “professionals”, continually abusing the spirit of the law.  It is criminal what they do, gleefully marking up their "services" beyond what is fair and reasonable, forcing people to take out bigger loans to give them lump sum payments. 

Yet somehow, some way, they continually manage to pervert the system... over and over and over again.  This is wrong. I'm petitioning for MAXIMUM JAIL TIME for Nicholas Mitchell and for each and every individual who conspiring as part of his criminal scheme to defraud landowners. 
  


Sincerely,
L.S. Cook, MBA




Note:  Comments on this story disabled.  To participate in the discussion or to learn how to take action as a citizen taxpayer, POA, or litigant in a class action suit, please see:  https://groups.google.com/d/forum/mt-shasta-vista  which is where we're collecting facts, research and sources.  If you know of other POAs implementing similar schemes, please follow a similar path:  gather evidence, find others victimized in the similar way and report the facts when you contact the Attorney General or the tax fraud reporting entity of your state.

Fennica escorted out of Portland

Today was a day for the books, at least in terms of environmental activism.  The Fennica, an icebreaker employed by Shell Oil, received a police and coast guard escort as it exited the Port of Portland early Thursday evening.

A police and coast-guard escort. 

Protesters from Greenpeace who'd dangled suspended from mountaineering equipment under the St. John's Bridge ~40 hours or so prior to this escort were ready to attempt to slow down this boat's as it was in a hurry. 

Three of the 13 dangling protesters were forcibly removed from the bridge, so this boat could go underneath, and make its way back to the Arctic, where it will stand by in case one of the cap stacks blows a gasket.
  
Fennica got an escort because it was in a hurry, and under a deadline.  Yup.  Break out the big guns in law enforcement to ensure that corporate interests get where they're needing to go, when they need to get there.

Atrocious.

 

 


 

KwikPay and RenWeb -- Nelnet's malware exploits the student loan industry

Was your student loan debt acquired illegally?  How malicious is KwikPay?  The $133 Billion Dollar Questions...

If your student loan balance is going nowhere, and if you use or have been enticed by your loan "servicer" to use a little piece of software called KwikPay -- you may wish to read ahead.  Especially if your intentions are to minimize the actual dollar amount of interest (or interest + principle) paid. 

See:  http://www.huffingtonpost.com/2014/02/04/cfpb-student-loan-payment_n_4726052.html

Background: doing a little research on something only tangentially related to student loans, I happened across a couple intriguing posts on reddit... have a read  here, here and here.  Immediately my intuitive hackles went up:  something is not right.  And thus the "little" research led to more research, and some pretty interesting discoveries. 

First and foremost: be informed that any company that uses KwikPay or Renweb is, in some way, affiliated with Nelnet.  This is not good thing.   

Nelnet, AKA "National Education Loan Network, Inc." is a behemoth publicly-traded, for-profit company that operates under a vast number of names and pseudonyms.  Nelnet operates at least 47 subsidiaries (probably more today; but as of 2008 there were at least 47 -- see Footnote 1) and handles upward of $133.6 BILLION DOLLARS in student loans debts.

This might be an admirable or impressive feat but for the reality that most of the "business" associated with these student loans was obtained illegally.

Keep in mind that the $133.6 BILLION DOLLARS number does not include side deals where Nelnet has aggressively marketed its KwikPay malware and injected it into supposedly "competing" loan service companies such as Edfinancial, Charter One Bank, First Mark Credit Services, etc.   How on Earth one company has been "entrusted" with so much student loan debt-handling is beyond comprehension.   

The fundamental problem with KwikPay is exactly like this redditor mentioned -- that the portions of your payment getting applied to interest and principle are seemingly random, especially for borrowers with multiple kinds of "loans" bundled (aka "consolidated") under this one servicer.  

This malware is programmed to apply interest vs. principle in a way that forces borrowers to maximize interest payments paid to the banks; this, of course, increases both the amount and the lifespan of the loan and makes paying it down that much harder.  The formula for even "simple" interest:  I = prt is easily manipulated when you let them play with the other variables in whatever manner they wish.

Getting this straightened out is not only something they make difficult, but something that they actively discourage you from doing (or know how to do).

Facts: 

Some recent data about Nelnet from a recent earnings report:

"Nelnet Reports Fourth Quarter 2014 Results -

- Servicing $133.6 billion student loans for 5.9 million borrowers under government contract
- 30 percent increase in payment processing revenue driven by RenWeb acquisition
- Purchased $6.1 billion of loans during 2014"

Historical Facts: 

Nelnet was sued a few years ago under the False Claims Act. The details of this https://drive.google.com/file/d/0B1oOP-5e5fiSWXdoaVgydTV5cnM/view?usp=sharing

case were obtained through WikiLeaks, and links to the source documents have been included for convenience:

The TL;DR version of a 285 page suit:

As part of some incentive for "quick and dirty" regulation compliance, Nelnet was able to inject its malware into numerous Colleges, Universities, and alumni associations; students and graduates from over one hundred colleges and Universities (see list starting on page 14 or Footnote 2) ... were steered toward using Nelnet's exit counseling software -- software that was specifically designed to induce students into a transaction with Nelnet and JP Morgan / Citigroup for any FFELP consolidation loans.  Highlights from the case:

• Nelnet made fraudulent and misleading statements on its website that consolidating the FFELP loans with Nelnet entitled them to a 6 month forebearance.
  • By conducing them to consolidate FFELP-eligible loans before their grace period runs out, and by offering them forbearance for which they are not entitled, Nelnet yields loans with higher interest payments and loan balances that extend for longer than they otherwise would. JP Morgan and Citigroup delight in this.
  • Nelnet failed to reveal that by consolidating, borrowers would lose certain rights the government grants on Perkins loans (lower interest rates, ability to discharge) 
    

• JPMorgan and Citigroup were named as aiders and abettors to Nelnet for "knowingly assist[ing] in the improper acts, plans, schemes and transactions"
  •  There was a single plan for Nelnet, JP Morgan and Citigroup to obtain payment of US money by presenting as many FFELP claims as possible.  JP Morgan and Citigroup took advantage of this plan to obtain the maximum amount of US money, with overt wrongful acts

• Nelnet agents were required to make 100+ telephone calls per day soliciting people to complete loan consolidations; they were specifically instructed to present misleading statements regarding eligibility and savings over the life of the loan.
  
  • However, the facts have shown that "individuals who consolidate their student loans with Nelnet end up paying more interest over the life of their loans and make payments for longer periods of time"
    

Very sadly and quite unfortunately... Nelnet, JP Morgan and Citibank's attorneys + lobbyists were (and still are) very powerful.  They weaseled the judicial system to get this lawsuit thrown out (albeit from one man, not from anybody else who wishes to pursue it).   The bad guys got a small victory -- it was “settled” for a measly $55 million (http://www.huffingtonpost.com/2010/08/13/nelnet-lawsuit-settled-st_n_681856.html), none of which went to distressed students who were taken by this scam.

The original whistleblower – Rudy Vigil – had worked for Nelnet in the heyday of scamming students out of college – he ended up financially destitute and is reported to have filed bankruptcy. 

Now, About RenWeb...

So with that little whistleblower blip taken care of, and the asset of a formula that has been "proven" to work with little or no takedown by the government, Nelnet now sets its sights on target: RenWeb.

RenWeb is a recent acquisition.  It at first appears to be an innocent and simple tool that can allow parents to track their childrens' school involvement; however, it is much more than that.  Pieces of RenWeb allow students to apply for tuition and financial assistance... and it gathers both performance and income-sensitive data, data that is surely very valuable for targeting likely defaulters.  Given Nelnet's historical actions, it's highly likely that this is an attempt to duplicate former success by getting the malware injection even sooner into the process -- by going after students' parents and a number of private or religious-based institutions.

To Do:  

The CFPB is soliciting borrowers’ complaints. The agency invites borrowers to submit complaints online or call a toll-free number: (855) 411-2372.

Senator Elizabeth Warren is just about the only political person who can be counted on to stand up for the rights of student borrowers.  But if you know of any more, please mention them...

Expect to see a lot of lawsuits on the horizon for Nelnet and its cronies.    





KeyWords:  EdFinancial, Nelnet, Kwikpay, Student Loans, 5280 Solutions, Firstmark, Renweb

 Footnote 1:  Some of Nelnet Subsidaries (direct + indirect) are known as Education Solutions, Inc (Lincoln, NE); First National Life Insurance Company of the USA (Lincoln, NE); Lincoln Square Funding, LLC; Nelnet Student Asset Funding Extendible CP;  M &P Building LLC (Lincoln, NE); Peterson's Nelnet LLC (Lawrenceville, NJ); CUnet, LLC (Wyckhoff, NJ); Loanstar Assets Partners, LP (Delaware); Loanstar Assets GP (Delaware + Nebraska); Chela Education Funding, Inc. (NE); College Bound Loans, Inc. (Warwick, RI); National Honor Roll, L.L.C. (Lynbrook, NY); Student Marketing Group, Inc. (Lynbrook, NY);  FACTS Management (Lincoln, NE); infiNET Integrated Solutions (NE);  Shockley Financial Corp (Aurora, CO); SLAAA Acquisition Corp (Lincoln, NE);  Student Loan Acquisition Authority of Arizona, LLC (Delaware + Nebraska); National Education Loan of New England, Inc. (Warwick, RI); MELMAC, LLC (organized in Delaware - based in Portland, ME); MELMAC, Inc. (organzied in Nevada - Portland, ME); NHELP, Inc. (various states and cities); InTutition, Inc. (organized in Florida, based in Lincoln, NE); ClassCredit, Inc. (organized in Florida, based in Lincoln, NE), FirstMark Services, LLC (Woodbury, MN); 5280 Solutions (direct subsidiary Littleton, CO);  National Higher Loan Education Program, Inc (Lincoln, NE);  

Footnote 2:  Schools targeted by Nelnet between 1998 - 2008:  Boise State University; Bowie State University; Central Michigan University; Cleary University; Clemson University; Cleveland State University; College of Charleston; Colorado State University; CC of Baltimore County; ECU; Eastern University; Washington University; Embry-Riddle; Emporia State U; Florida Coastal School of Law; Florida International University; Fort Hays State; Georgia College & State University; Georgia State U; Georgia Tech; Grand Canyon U; Hawaii Pacific U; Idaho State U; Indiana University; Iona College; James Madison University; The U of Kansas; Kansas State U; Langston University; Le Moyne College; Life University; Louisiana State University; Manhattan College; Medical University of OH; Miami University; Midland Lutheran College; North Carolina State; Northeastern State U; Northern Illinois U; Northern Kentucky U; Northern Michigan U; Northwestern State U; Norwich University; Ohio University; Oklahoma Christian University; Old Dominion University; Prescott College; Queens University of Charlotte; San Jose State U (SJSU); South Dakota State U (SDSU); Tarleton; Texas A&M; Texas Tech; Troy University; University of California Santa Cruz (UCSC); Union College; The University of Akron; U of Alaska - Fairbanks; U of Arizona; University of Central OK; U of Colorado; U of Dayton; U of Detroit-Mercury; University of Illinois; University of Kentucky; U of Louisiana; U of Missouri;  U of Maryland; The University of Memphis; University of Nevada; University of New England; University of New Mexico; University of North Florida; University of South Alabama; The University of South Dakota; University of South Florida; University of Toledo; University of Wisconsin; University of Nebraska at Kearney; University of New Orleans; Washburn; Wilkes University;   

Footnote 3:   This author believes that you should never trust website software that uses ".aspx" in its URL bar.

Footnote 4:  Malware is computer software that injects itself into a system and adds significant transactional burden and "load" to systems.  It does not go away on its own and must be forcefully removed.  

Why I'm a boat rocker.

"You're rocking the boat.  They don't like that."  

A comment I heard just this week... one woman chatting with another woman about how she did it... how was she able to overcome the overwhelming gender bias in this industry and join a team with an employer who actually cares?

How did she do it?  By not rocking the boat.

I've had this ... I guess we could call it a "conversation" with myself at various points in my life.  Usually it's when I'm getting washed ashore and clinging to dear land, gasping for air:  Oh, geeze. I rocked the boat too hard, again!  And everybody, like, freaked out.  They threw me overboard!  How dare they!?  

Why did they do that?  Because I rocked the boat.

Yes, rather than risk their boat getting toppled by little me, they decided that the smartest thing to do is just throw the boat rocker overboard.  Gee thanks.  But the interesting thing is that never has any team member from any boat I've been thrown from stopped with pause to think or ask logical questions about things like physics or wind, materials science, currents or compass...

Because all they can see is that their boat is getting rocked.   

If only they could see... logical questions have logical answers.  It's not the boat rocker who ultimately destroys the boat and ruins everything; it's the boat rocker who exposes the vulnerabilities of the boat and can help everybody be more prepared.  Before it's too late.  But the key is that ... you've gotta let the boat rocker stay on the boat.  Having somebody who's not afraid to push the limits of our boat is a good thing. 

The dearth of women and women in leadership roles in technology is obvious to anybody who has worked in technology.  Once in a while somebody will create a little movement ... some noise or a "non profit" or a summit or something.  But these blips are hardly ever noticed on the larger radar.  They fade and disappear.  People forget.  Men keep getting promoted over women, and they almost never have to fight quite as hard for the raises or pay they deserve.  Venture capitalists keep gladly seed-funding extras from The Social Network.   Firms from A...Z (pardon the pun) keep gladly throwing millions at startups which have been documented to willfully discriminate and retaliate against women.

My two cents for the conversation is pretty simple:  there are only two different kinds of humans in the world:  Those who actively exploit women, and those who actively speak out against the exploitation of women.   Keeping your mouth shut for fear of rocking the boat -- this is a form of apathy all its own.  

The exploiters have general strategies:  when she's smart, competent, hard working, and nice, underpay her.  She's easy to take advantage of.  Besides, when we really drill down and look at things, she just doesn't  deserve the same basis as the guys on her team.   Or better yet -- why allow her to be part of the company at all?  Why not make sure she's thoroughly plundered of her wages by a middleman "temp agency" or headhunter?  The more fear and job insecurity you can instill in her, the harder she'll try. 

The other strategy the exploiters take is this:  when she's  smart, competent, hard working, and strong enough to stand up for herself, the exploitation takes the form of failure to hire, hiring with a longer "probation" period, bullying, biased performance reviews, or the ultimate insult of getting fired.

I've tried both the "nice" and the "strong" approach, and the unfortunate reality is that neither one really works.   The number of people who actively exploit women is still too big, and the quantitative number of women who aren't afraid to rock the boats is still too small.

But I'm not about to stop rocking boats.

Because it's not the boat rocker who ultimately destroys a boat.  It's the boat rocker who exposes boats that simply do not possess enough integrity to handle the seas.  And those are boats I don't wanna be on anyway.

Crowdfunding IS too expensive - the payments processing cartel everybody needs to know about

Crowdfunding IS too expensive
The payments processing cartel everybody needs to know about 


Crowdfunding is kind of a broadly-generic term.  As a recurring topic and point of discussion among hackers, startup entrepreneurs and "the biz guys", it deserves a special teasing-out.  Just what are people talking about when they talk about "crowdfunding"  ... is it like a Kickstarter campaign for a snazzy newfangled electric skateboard?  Is it a plea for funds that takes the form of a "donate now" button or post on Facebook to help that friend's doggie after it was hit by a car? Her dog needed emergency surgery - it was expensive and urgent.  Or, is crowdfunding some sort of "offering" of equity, like a stake in a potentially-profitable company that dangles future lucrative payout for some initial investment?

For the purposes of this post, let's define crowdfunding specifically as:

Any effort by an individual, group, or organization to raise money through an online campaign.  

Online campaigns where money is handled, authorized, and transferred online?  That's easy enough:  Everybody wants to do everything online these days -- seems so easy, and it should be so much cheaper, right?  Besides, who hasn't seen an online campaign to raise money? 

These campaigns take many possible forms.  As online campaigns go, what do they all have in common?

What they all have in common is the built-in, industry-crafted scam of payment processing fees as cents + percent.  And inflated over-the-top rates where foreign currency exchange is involved.  (But that's another post for another day).
  
Some of the time the do-gooder crowdfunding site doesn't even know it is being subjected to this scam... but sometimes it does, thinking it has no other options.  The most important thing to do is first find out which one of the evil^1* Payments Processing Companies (PPCs) your crowdfunding site used or will be using.  Crowfunding sites usually charge BOTH "platform fees" and "bank fees" -- and sometimes crowdfunding sites glue these together to confuse people.  But let's assume, for simplicity purposes, that if they say they have to pay 2.9 percent + $0.30, it's (wittingly or unwittingly) bankrolling the cartel.  A few examples of such players are in the graphic to the left... but there are others.

1* The word "evil" as it is used by the author of this blog means: Anything  incomprehensibly wrong and despicable.
 
PPCs  have figured out that the less you know of the truth about their doings and money-shuffling behind the scenes, the better.  

Players in the cartel cahoot will attempt to claim that by golly, their hands are tied -- look at how everybody charges basically the same thing.  This is "standard".  They pin the blame on "the banks" and how gosh-darn complicated this industry is... those banks sure do deserve to be rewarded handsomely for not only making it so complicated, but also streaming all those transactions.   When they say these rates are not negotiable, they are lying to you.    And if you attempt to ask them why ...  you will probably be given the used car salesman pitch where, oh... it's based on volume or some other equation where they actually control / manipulate one of the measuring variables -- be it time, individual transaction numbers, or sales volume -- to their benefit to make it seem like what they require is "standard".  Their biz guys are smooth talkers... they know exactly what they're doing.  

The truth is that:

(1)  There is NOTHING standard about Interchange.  The findings of a federal investigation concluded that because banks were allowed to set Interchange at whatever they wished, their incentive was to collude and charge the highest as default:  "The interchange fee can be a flat fee, a percentage of the transaction price, or a combination of the two." 

(2) There is NO NEED to collect an additional "percentage" of transaction amount ... this practice was invented by banks, for banks.   It does not benefit consumers, brick + mortar stores, people who sell online, people who buy online, or even large companies like Target, Walmart and Amazon.  It benefits banks, financial institutions, and all the evil PPCs out there who get their cut first.  It's AKA double dipping (charging both the payees and payors).  

(3) Back in about 2009 when the market was a literal MONOPOLY with "basically" just PayPal running the show, PayPal on a whim doubled rates to 2.9% + $0.30 and that's why it is what it is today.

"This double-dipping — charging both sellers and receivers for transactions — will result in a major increase in fee revenue for eBay Inc. which owns PayPal."

Why did this happen, and why has the introduction of numerous forces of supposed competition not changed anything?  Why are consumers not more riled up by this?  Lack of knowledge is one reason.  PBS Frontline's documentary: The Card Game is an interesting peek into this world of unethical businessmen, although it's a little outdated now, here ~ early 2015.  Following the payment card settlement for fixed pricing, economists predicted that consumers wouldn't see the benefits.  Retailers aren't seeing the benefits either.  But all of the companies in the cartel are.

Everybody wants to blame everybody else for why things are they way they are.  Indeed, depending on who you're talking to, the details about Interchange get skewed.   Let's take this apart piece by piece:

"One of the problems with interchange fees, say merchants, is that the rates vary depending on the type of card used in the transaction, making it very difficult for businesses to know what they'll end up paying at the point of sale. Debit cards have cheaper interchange fees than credit cards."  

Um, it's either a debit card or a credit card.  For the record, MOST online payment processors have been treating debit card transactions like credit card transactions, and therefore charge the higher interchange -- even when they have no legal right to do so.   Companies in the screenshot charge 2.9 percent + 30 cents ... even when donations are made with a debit card. In fact, you can have an online campaign made entirely by debit cards for a non-profit cause, and still get charged this amount.  Nobody is any the wiser.

"Another problem, say critics, is that unless you're an industry insider, it's almost impossible to figure out how they come up with the interchange rates, how much money is being made, and where it all goes.

Ah ha!  Well, here I am... former industry insider to tell you all about it.  At the company whose CEO set literal fire to literal paper cash to make a point about his delusions of power, it's clear:  these companies see Interchange as free, burnable money in their pockets. If funds are tight, they and their cronies can simply raise the rates in the network.  And because there's no incentive to lower rates (that is - ZERO COMPETITION among these companies) rates will inevitably edge higher and higher... unless something changes.  

"We don't have a lot of data on this," said Adam Levitin, an associate law professor at Georgetown University, who writes frequently about interchange. "There is no data from Visa and MasterCard, and the best way to make policy is to do it on an informed basis."

So who has the data?  The banks do, but they're not about to disclose how profitable this model is for them.  The payments processing companies would, too, right?

Find out from the crowdfunding website -- which evil payments company is it shackled to.  And then go out there and make a difference.

(1)  File complaints with the US Department of Justice + Start a Class Action lawsuit ... file complaints with the United States Department of Justice on behalf of individuals, non-profits or 501(C)(3)s that overpaid fees to Visa, Mastercard, PPCs and banks.  The payment card settlement lawsuit prohibits RETAILERS who accepted part of the 6 billion dollar settlement from suing the "Plastic Card Network", but it does not and cannot prohibit any other organizations who were unfairly subjected to the same plundering.  Why?  Because lawsuits are the only thing that these guys respond to for their wrong and unethical tactics. 

#indiegogo #kickstarter #gofundme #crowdtilt #crowdrise #giveforward

(2)  Demand competition among PPCs ... There is no reason that startups who want to process payments should have ZERO CHOICE in the fees they are required to pay.   There is no reason they should be taking such a hefty cut of money you're donating to good causes, to "the underdog" Kickstarter campaign, or any other transaction online.  Call them out on their baloney, and tell them it's not right.   

Crowdfunding IS too expensive.  But there is something you can do about it... arm yourself with the facts.  And remember, Simba ....

(blog comments disabled - see them here or here)

Information asymmetry yields Inequality for All

Where did the information asymmetry in stock options come from? 

"Bill Clinton in 1992, one of his campaign causes, was that no company should be able to deduct the cost of executive compensation in excess of $1,000,000.

But when it came to actually implementing, the treasury department decided:  As long as CEO pay is linked to company performance, you could deduct over a million dollars. Well, that was a signal to a lot of these executives and to their boards of directors to make more and more of executive pay into stock options. That's where the whole stock option thing came from. It was a kind of a perversion of Bill Clinton's promise in the 1992 election." 

-- Robert Reich,  Inequality for All  ~ :47 minutes 

Executives -- especially unethical executives -- thrive on information asymmetry. In fact, many will go out of their way to create as much asymmetry as possible and to prevent employees from being able to access or get the data that helps them understand the full value of their earnings. The less employees "know", the more executives can take without fear of scrutiny or retribution. But intentionally harming the workers as a means to prevent them from receiving the value they've earned is the most unethical thing a company can do.   It's happening every day to innocent and hard-working employees, but it doesn't have to. Private firms with too much unchecked and unregulated power are the primary scammers; executives and their BODs defrauding, manipulating, and setting the stage for hyped IPOs is essentially fraud perpeutated by the elite for the elite. This really is a covert form of tax evasion. The stronger and more financial retribution we can push on these unethical scammers, the sooner the gap between the 1% and the rest of us can begin to shrink.

What the JOBS Act means for startup funding: beware the cookie lickers

photo credit:  http://www.flickr.com/photos/42621781@N08/

Seed money.  Angel investing.  Venture capital.  Funding start-ups that aspire to be "big business" has become a strange beast.   Today is the official effective date for Title II of the JOBS Act, which many are hopeful can kick off a New Great Era of fundraising.   But in many ways, this is a huge red herring.

Once upon a time pretty much any company that wanted to could raise money according to a broad array of "blue sky" laws which varied by state:

Blue sky laws developed in the frenzied years leading up to the Great Depression, in response to fact that more and more ordinary investors were losing money in highly speculative or fraudulent schemes promising high investment returns, such as oil fields and exotic investments in foreign countries. 

But after the hype, boom, bust and onset of the Great Depression, thinking changed a bit.  The passing of the Securities Act of 1933 was done with the belief that selling such "risky" early-stage investments to the general public left too much room for swindling.  You know -- bad guys running off with Grandpa's life savings (Which never happens today.  Right, Bernie Madoff?).  Accredited investors are the only ones who can 'afford' to lose, so let's make rules that allow only them take risk that yields high reward -- apparently this was the logic behind Rule 501 of Section D of the Securities Act of 1933, a rule which states that entities need a certain "net worth" to participate in investments which potentially might go public.

But of course, by shielding "small time" potential investors from swindlers, so too were those small- time investors denied opportunities to reap rewards earned from their decision to take risk.   As a result, the next 80 years or so saw an entire profiteering industry sprout up around capital finance, start-ups and highbrow private investing -- an industry "for the elite, by the elite" -- hedged on early access and exclusive access, it is essentially wealth funneling wealth.  It perpetuates by protecting first (usually via preferred stock) the wealth of the wealthiest "if and only if; then and only when" a tiny bit might "trickle" down to common shareholders -- including founders themselves!

If you think this logic sounds a little hokey, you're not alone. Several arguments for scrapping the "accredited investor" rules have floated around, but during the last 80 years, exactly zero headway has been made.   Fred Wilson commented in a May, 2012 Forbes article:

The biggest issue: there is simply too much money. Although $30 billion continues to flow unabated into venture-backed companies annually in the U.S., venture capital as an asset class hasn’t outperformed the market since the early 90’s, when only $10 billion was put to work.

What's happening?  In plain English what's happening is this -- that "exclusive access" members' only club is getting fat, tired and cranky.  Despite the fact that it already has too much on its plate and not enough time to chew, its people just won't stop licking cookies.  Many of those licked cookies are going to waste.

Enter the JOBS Act to "Jumpstart our Business Startups", a plan to help those little guys with freshly baked cookies -- what can be done to change things and help them get their cookie empires off the ground?   Should we make it easier for these guys to advertise their cookies?  Yes!  But first we should probably get rid of the law that makes it illegal to advertise cookies.

September 23 is the official effective date for Title II of the JOBS Act, which many are hopeful can kick off a New Great Era of fundraising.  But in many ways it's a huge red herring:  all it permits is the mere existence of information.  Start-ups now may "legally" use the Internet and/or public airwaves to inform the public that they're looking for capital to grow their business!  Then, with whatever attention their hype is able to attract, those start-ups may be asked to get in line to have their cookies licked by an authorized VC cookie licker.

Of course, the trends threatening VC’s bode well for entrepreneurs. More competition among investors means easier financing and better terms for startups. The eye-popping valuations of some companies may already be a reflection of this phenomenon. Wilson admits that this glut of funding is also probably good news for the economy, job creation and the proliferation of new goods and services.

But whoa. . .  big caveat here --  if a cookie seller accidentally let their cookies get licked by somebody who isn't "legally" allowed to lick cookies, they may get in #BigLegalTrouble and have to wait an entire year to get in the back of the line again.  Seriously.

The spin on this from the VC side seems to be that there 'ought' to be  more competition among VC's ... but is that the issue?  Last time we checked, competition among VCs wasn't the problem; as Paul Graham stated in his recent essay, it's competition for that "first" bit of VC attention that every entrepreneur needs to get the ball rolling:

The biggest factor in most investors' opinions of you is the opinion of other investors. Once you start getting investors to commit, it becomes increasingly easy to get more to. But the other side of this coin is that it's often hard to get the first commitment.

Obviously, we need a larger pool of potential investors / cookie-lickers to woo.  How, exactly can this happen?

The problems that existed at the time of the Securities Act of 1933 -- and the subsequent red tape and paperwork formalities to protect Grandpa's life savings -- surely these were well-intentioned protections.  But the reality of the world today is such that there are too many cookies going to waste.  The professional cookie-lickers of the world just don't have time to sample all the great cookies today's entrepreneurs are making.   Gambling halls and casinos (which certainly are just as likely to swindle Grandpa's life savings) don't require minimum net worth or income limits for patrons, so why are they imposed on investors, where the potential for Return on Investment (ROI) is significantly more feasible?

Title II doesn't address the core problem, but hopefully it can attract more attention and scrutiny to the issues preventing many small and medium-sized businesses from taking root.  Namely -- "accredited investor" rules are antiquated and unnecessary, and they do more harm than good for many small and medium-sized businesses that just want to sell cookies.

Re-Engineering the Tax Code: Part II

Part II -- Closing Compensation Loopholes

In Part I we established that for this thought experiment, we need a new way of thinking about our be-loathed tax system.  It just doesn't make sense to keep gluing new doodads (exclusions / extensions) onto the old one; the best thing we can do with the rusted old contraption is to toss it out and start over from scratch.  Starting from scratch, we can implement 21st century concepts, materials, and thinking applicable to our 21st century economy.

Because this new system of taxation is being designed specifically to encourage businesses, organizations and/or entities with excessive profits to more generously reward the "low men on the totem pole," the progressive tax bracket system makes the most sense. 

A business can choose to minimize total tax payments by paying its workforce more, or it can voluntarily pay more in tax than it must to when it chooses to keep profits concentrated among the few at the top.  This system rewards benevolence and discourages greed, both at a corporate and individual level.  

This progressive idea is the core strength of our system.   Granted, our current system is progressive, but it's aggressive in the wrong direction... it's aggressive against low, medium, and even moderately well-off earners.

Continuing with our bicycle analogy, let's liken it to a design innovation -- visualize this fantastically awesome carbon fiber frame reinforced with Kevlar.  This frame has made the "guts" the lattice for increased capacity to wear and tear with none of the dead weight of its predecessor; it does more with less, and it provides a good framework to hold together the rest of our moving parts.      

Traditionally, the "corporate" tax rate structure has been different from the "individual" tax rate structure.   Corporations create "jobs," right?  That's why we have two different systems?  Well that's what we're taught.  In the industrial manufacturing economy, this was more true; it made sense to tax a corporation more aggressively on its profit (which does not include payments to workers; these numbers have already been subtracted out on the Income Statement).  

Quick accounting concept here:  income (AKA revenue) is not profit.  At a very basic level, profit is what is left over after various business expenses have been subtracted.   Yes, including the salaries of the executives and the wages paid to the employees.  Companies like WalMart demonstrate a prime example of how the books can be cooked... A company like WalMart earns and extraordinary amount of income; it has very low costs of merchandise; and yet, it concentrates the majority of its profit among Sam Walton's heirs.

There are all kinds of lovely accounting / finance acronyms (NOPLAT, EBITDA) outside the scope of this article, but  for the purpose of this discussion, the main point to take away is that the US tax code historically ignores business revenue and treats corporate profits differently from individual income, even though both are essentially the same when we think of them in the context of earned dollars with the potential to be taxed.  

Historically, taxing business profit differently than worker pay, did NOT stop executives from underpaying workers; budget accountants have almost always had an incentive to minimize DL -- or "Direct Labor" costs (typically workers on the floor of the manufacturing plant / construction workers / wage-hour slaves)  -- lower labor costs  imply better efficiency, and greater efficiency means larger bonuses to managers and executives.   Because of this practice, companies have always sought to pay laborers as little as possible, and erroneously rewarded executives and managers who erroneously and egotistically presume they are responsible for the "efficiency". 

Plant managers and executives, driven by the need to minimize "costs," would run through workers, with no heed to overtime, working conditions or general welfare of the workers.   Perhaps the only good thing to come out of this historical treatment is the federal minimum wage (which is another can of worms for another day).

So how to close the compensation loopholes?   Here is one idea.


Key:  Tax revenue inclusive of salaries and wages.  

Historically, if a business had, $2M in revenue and $1M in non-wage / non-salary expenses for a net profit of $1M ($2M - $1M = $1M), the corporate tax would be the same whether that business' $1M in payment expenses was $900,000 to the CEO and $20,000 to each of its five employees, or if the $1M was divided equally among all the workers.   With our new system, we tax revenue inclusive of salaries and wages; a business has tax liability on the full $1M to be distributed.  The actual tax payment due will vary, and depend upon how it's divvied up.   Thus, each dollar "paid out" in the form of wages and salaries  should be taxed only once; the leftover profit residual to keep the business going would be distributed tax-free to non-employee shareholders.  

The result -- when applying this idea in tandem with the low-burden tax rate discussed in Part I, truly minimizes the costs of payments to the government, eases tax burden on the business and truly rewards employees.  

Next time --  a discussion of reward-based risk for both employee and non-employee shareholders; dividends and "capital gains" for various investment vehicles. 

Re-Engineering the Tax Code: Part I

Part I:  Income Tax

One of my favorite time-killing activities is fairly nihilistic. It involves thought experiments where obviously broken systems are annihilated: figuratively blown apart, sending all the blazing, broken, smoking pieces careening into smithereens.  No more  WD-40 hastily applied to the rusting, booby-trapped secret compartments designed for special circumstances almost two centuries (or even two decades) ago.

Indeed, the defunct system we're talking about here is the US Tax Code.  Not just income tax (which gets most of the attention), but sales tax, property tax, the death tax, etc -- the whole shebang.  We need to re-engineer the very framework underlying concepts and philosophy of tax. In Part I today, we'll focus on the Income Tax, because income is the source of all the grease in the wheels in our economy. 

After studying and pondering the current tax code, which starts taxing AT 25 PERCENT ($70,700 for a married couple), every dollar of earnings at and above $35,350,  I realized that this tax thing is seriously SERIOUSLY broken.   Aside from the fact that there is no reason the tax code should be extra nice to married or child-bearing people (alas: another digression for another day), can we please just stop the insanity?   

Continuing with this analogy, our current tax code is antiquated and irrelevant.  Let's just acknowledge that no amount of WD-40 can save us now; for too long have we been focused on the framework, rather than seeing the big picture for what this machinery is supposed to do.  The tax code in its current form makes it far too easy for nefarious folks to get what practically amounts to a free ride on the efforts of humble, honest working people.   If you've studied the tax code as deeply as I have, it becomes pretty obvious the amount of money and manipulation that goes into getting people like Mitt Romney a tax break could be better used for something else. 

Indeed, is it almost impossible to have a discussion about tax without acknowledging the deep political contentions such discussions about tax seem to invoke.  But it is not the purpose of this article to create or stir any contentions.  Thought experiments are theoretical, and theoretically, we're starting over from scratch here. 

Presuming we don't have to spend time and energy arguing about, revising,  maintaining, and maintaining the revisions on the old system, we are finally free.  Free are we to implement the fortified carbon fiber version:  strong and lightweight, nothing but functional.   Let's focus on what this machinery is supposed to do, not the moving parts themselves. 

Income Tax 

Assumption:  Income Tax is a necessary good, not a necessary evil.  If the tax code in the US worked as it was supposed to work according to the original intentions of the tax, there would be minimal need for any kind of social welfare programs, and thus (paradoxically) less need for tax revenue to fund such social welfare.  Employers would benevolently pay employees their fair share of the profits and increases made as a direct result of their work, allowing them to accumulate savings and create their own safety nets through economic ups and downs.

But we've accumulated enough evidence through two centuries of economic activity: the sad truth is that virtually no employers pay their employees a fair portion; employers keep most of the profits and gains at the "top", and deny the "worker bee" the full value of what has been rightfully earned.   Because of this sad truth, a flat tax just doesn't work.  It is just plain necessary to tax higher incomes at a higher rate; the graduated income tax rate is imperative.   

Income Tax Brackets that just makes sense

The first strata here are the lowest income layer of America; they are most likely to be working families, so they deserve the biggest breaks.    No more different brackets for single, married, Head of Households, business structures, investment income, etc.  Cash is cash, and a dollar is a dollar.  Let's consolidate earnings into one single number, and tax low-digit earners with low-digit prime numbers (since primes really are the most beautiful and forgiving of numbers).

         $0 - $21,200                                  3.00  %  (7 percent decrease)
         $21,201 - $53,000                        7.00  %  (up to 18 percent decrease)
         $53,000 - $132,500                    11.00  %  (up to 17 percent decrease)


The next layer eases the burden on the strata most likely to be small to medium businesses -- the Mom and Pop shops, the startups just getting "started", etc.  Let's give them a break, too.

         $132,501 - $331,250                  23.30  %  (up to 5.7 percent decrease)
         $331,251 - $828,125                  29.70  %  (up to 5.3 percent decrease)
         $828,126 - $2,070,312               31.90  %  (up to 5.1 percent decrease)


The final layer of the tax cake here should apply only to businesses, though perhaps there are a few executives at very large corporations that have somehow beguiled the Board of Directors into paying them way too much.  The final layer of the tax cake increases the tax burden on income earned above $2 million + 70K only.   Lets give them the two prime numbers before and after the meaning to "Life, the Universe, and Everything Else".

         $2,070,313 - $5,175,781            41.00  %   (up to 6 percent increase) 
         $5,175,782 +                                43.00  %   (up to 10 percent increase)

-----------------------------------

The less intelligent out there would look at the above and zero in on the top tax rate of 43 percent and "freak out."  Puh-leaze.    Taxes work like a formula.  Using the above tax "brackets" it works like this:

The first $21,200 of income is taxed a rate of 3 percent (this is the same whether your total income is $15,000 or $15,000,000) so the most you can pay on $21,200 of income is $636.  In other words, if you earn less than 21,200 per year, you will not pay more than $636.

>> Here is the math. 

Examples

Ms. Simon earns $35,000 per year; her total tax bill will be $636 + (0.07 * ($35,000-21,200)) or a total of $1602 with the re-engineering.  Under the current system, Ms. Simon pays $4867.5.

Family Biz owner earns $125,000 per year in his shop that employs his wife and son.   Under the "broken" system, he pays just over $34K in taxes, but on the re-engineered system, he pays just $11K.

Old, young, married, single, caregiver of animals or the elderly -- for too long has the US tax system been biased toward people with children and just a bit too harsh on the "indie" business owner.    America is changing; people earn income from a variety of sources both online and off.   The number of people moving toward the "side" income model where they have supplemental income means that we can and should make things easier for people to be self-employed, if they need to.   

Stay tuned for Part II. 

Of Death and Taxes

" They get away with this treatment of people because they call these men who work under them "sub-contractors," which essentially means that they need to have a CPA to understand all the wonderful tax deductions available to them.  If only those construction workers had business degrees!  "

My father was a construction worker. He measured out, cut, and lifted heavy sheetrock onto bare frames of houses, fitting things together like puzzle pieces with precision and speed. He did this manual labor in the most extreme climates from Las Vegas to Alaska to Utah to Florida. He wore flannels and had a beard, and drank whiskey to ease the pain of the dental work he needed, but couldn't afford. He passed away  too young, as a single parent: zero health insurance, no life savings, no life insurance.  He spent his life building houses for other people, but passed away in a small trailer that didn't even belong to him. Everything he'd worked for in his life: a tiny  amount of money in a savings account -- not enough for the dental work that he desperately needed, but wouldn't live to get.

It baffled me growing up, how my dad could work so hard and so long and so far away all over the place, and yet we could never make ends meet?  Not just anybody could do the work that he did;  drywall is not easy.

During the last 14 years of his life as a single parent of four children, he never accepted or even sought any kind of welfare handouts.

Are the real estate developers who fail to provide my father and other construction laborers with a decent living wage, with medical insurance for their physically exhausting work, with any means to provide even a small amount of savings for their children ... are those people ethical?  Although I'd love to make the judgment call, I won't say. In the grand scheme of things, I do know that in this world, there are good people and bad; that there is no law and nothing that society can do to "make" people behave ethically -- action (or lack of action) speaks for itself about the character of the person, and character is what defines people.  My father was perhaps the most honest and humble human being I've ever known, and he deserved so much better.

To each and every one with a functioning brain out there, considering voting for Mitt Romney "because he's Mormon" or because you think he can run America like an efficient business -- please don't. Please, don't.

Never has there been a nominee so delusional as Mitt Romney. The tragic thing is that there are people who could actually believe that "47 percent of Americans" would be "dependent upon government". Romney uttered his words at a $50,000 per-plate fundraising event in his efforts to become President of the United States.

What the GOP does not understand is that wealth obtained from the fruits of others' labors is not and never has been theirs.  They did not earn it; thy did not build it. It is just not possible to become as wealthy as they are without using people and denying them their share simply because it's LEGAL to deny people their fair share.  Somehow, somewhere along the way, the GOP has become indoctrinated with the false notion that ethics and legality are somehow linked; that "as long as it's not illegal, it's not unethical."
With platitudes for supposed "Christian" values, the GOP insists upon enforcements of laws to criminalize social problems while deregulating and un-criminalizing the very economic causes of those problems.

Truly ethical behavior does not come about from the constructs of government. Mr. Romney has been able to evade paying taxes on much of his income by keeping troves of it offshore . . . he's unashamed to declare that he pays not "a dollar" more in tax than what the IRS code mandates.  So, assuming that manipulation of tax code is legal -- maybe he's not broken any "laws" per-say -- but is this ethical behavior?

It brings up some interesting points about just how desperate the GOP is to destroy the very checks and balances that income tax provides.  Crying about taxes when there are so many less fortunate people in the world, the GOP is like a stubborn toddler whose face is covered in melted ice cream, throwing a rage of a tantrum because he can't have more.

A certain CEO of a real estate development company we once knew in Florida pays immigrants "under the table." Some of these immigrants do landscaping, others do painting and repairs and cleaning at the buildings and sites he's developing.  Once they are done with all the hard work, the Realtors flock in, snapping photos and finding charming little catch phrases to be displayed in colorful real estate brochures.   After having the properties spruced up by underpaid workers, his company is able to "flip" properties and the CEO is entirely convinced that he alone is entitled to the profits. Those workers he so "graciously" employed might not be legal yet, so no need to let the government know about them. CEO pats himself on the back for saving money in labor costs, avoiding paying income tax or health insurance for those workers, and considers that he's "done them a favor."  

It's a common theme in many circles that employing people in a "temp" fashion is somehow "doing them a favor".  Republicans love temporary things, which they rationalize absolves them of any moral duty: temp jobs for temp workers in temp housing. "It's not my problem" they say. Use people up and throw them away, kick 'em out if when they can't pay the rent. There are millions more where those came from, all eager to do dirty work for pennies on the dollar.

There are two main mechanisms stealing the wealth from the very people who are earning it:

• Underpayment of wages / denial of equity: "Underpaying" can qualify either "at" or "near" the minimum wage, but any worker at any pay rate can be considered underpaid when there is a significant discrepancy between the lowest-paid (even part-time employee, or contract worker) and the one at the top.  Most of the time, companies are built by groups of people working together as a team; it is not right for the person who calls himself "CEO" to keep the bulk of the economic value created by his team.  
• Overcharging housing:  My father and many of the construction workers he knew weren't able to make it to retirement from their lifelong endeavors of building of houses (and how ironic is it that men who build houses for a living cannot afford their own!)  . . . So, who gets all that money from houses that cost so much?   Real estate agents, landlords, and real estate developers --  these people have deluded themselves into thinking that they are the ones "entitled" to collect rents or commissions from the labors of other people's work. They collude and conspire, keeping rents high, robbing people of their very ability to build equity (and it really is a form of slavery).  But don't take my word for it; there's lots of proof out there that this form of modern slavery is working.

Ultimately, it's people -- not economics -- which are responsible for the theft.  Most members of the GOP are in a position to do at least one of the above items, and some are in a position to do both. When there is a political party that has so much influence over both sides of the coin, when there is a class of people whose very livelihood is actually derived from the control and manipulation of the availability of housing, democracy cannot work. People are unable to establish themselves (and thus their ability to govern in the fallout of greed) when they are continually driven out.

Although these problems are complex, can the solutions be simple?  Is it time to criminalize unethical behavior? Or is it time to economically incentivize ethical behavior? Perhaps the best solution lies in the right mix of both.

My father most certainly did pay income tax, and into Social Security.  But because he barely made $19,000 per year as a single parent, he got most of that money back at the end of the year.  I know this because I did his taxes the second-to-last full "tax" year of his life.   By the time I grew up and earned my degrees to help him figure out what was wrong, it was too late.

Not only do real estate developers fail to provide construction workers with medical insurance or any kind of health, dental, or vision benefits -- nor do they provide the men doing the backbreaking physical labor any kind of reimbursement for their tools, automobiles to drive out to the construction sites, gasoline.   They can get away with this treatment of people because they call these men who work under them "sub-contractors," (contractors who work for contractors) which essentially means that they need to have a CPA to understand all the wonderful tax deductions available to them.  If only those construction workers had business degrees!

Indeed, by the time I earned some accounting degrees and was able to do his taxes, it was too late.  My father didn't see the end of the tax year 2004; the years of physically debilitating work caught up with him, and he passed away on what should have been the celebratory day I was set to accept my Master's degree.

Not a day goes by where I don't think about my father.   Like many construction workers, he was used up and thrown away heedlessly by the mechanisms in the real estate industry, fueled by the insatiable greed of men with too much money and too few ethics.