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New Taxes for France

The problem of taxation  tax reclaim solutions has always been complicated, no matter the times, no matter the countries.

The French media has recently been dominated by the news that Bernard Arnault, chief executive of Louis Vuitton Moët Hennessy tried to reducehistax bill by seeking Belgian citizenship.  The news truly sheltered the tycoon’s status who managed to split the French into two battlefields: the one for whom Arnault is a symbol of the “selfish rich” and the other one for whom he is the standard bearer for the tax-bludgeoned entrepreneur trying to create jobs and wealth.

Arnault’s visit to Brussels also generated questions and worries as once he has dual nationality, the businessman could theoretically renounce his French citizenship and move to the Riviera principality where Belgian nationals – but not French citizens – can live tax-free.

The 75% tax band for those earning over € 1m will give France the highest tax rate in Europe, while a a 45% band is to be introduced on incomes over €150,000 a year (up from 41%) and households will be limited to a maximum €10,000 savings on tax reduction schemes (down from €18,000), the Guardian informs us.

The most interesting reaction came from Jean-Philippe Delsol, a tax lawyer and member of the IREF economic think-tank which supports “economic freedom” who said that:  “If you are wealthy in the UK, there is no hate. There may be envy and scorn, but there is no hate, real hate like there is in France. We like everyone to be the same and if they are different we detest them.”

The real problem is that even low earners will pay more income tax after the household allowance is reduced from €2,336 to €2,000 a year.

Asked about Arnault, the French president resorted to what being a true French means, a patriot who, in order to win the battle against debt, must make the effort of higher taxes.

But Delsol said that “Even Henry IV’s minister Barthélémy de Laffemas in the 16th century understood that high taxes kill the total revenues.”

 

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UK pension funds have recently spearheaded class actions lawsuits against high profile multi-nationals. Should all schemes follow their lead? asks Matthew Craig

After suffering substantial investment losses at companies hit hard by the credit crunch, a number of UK pension funds have revealed their involvement in class actions aimed at winning compensation.

The Northern Ireland Local Government Officers’ Superannuation Committee and the Lothian Pension Fund are among the lead plaintiffs in a US class action being undertaken against Lehman Brothers. Three separate cases have been brought against Lehman and are being co-ordinated; a debt and equity case, a mortgage based securities case and a case under Employee Retirement Income Security Act (ERISA) legislation.

The Royal Bank of Scotland is also facing a US class action, with the North Yorkshire and Merseyside pension funds named as being among investors seeking redress. In this case, two major US pension funds have been named as lead plaintiffs ahead of UK pension funds, but as US class actions operate on an ‘opt-out’ basis, all investors meeting the qualifying criteria for holding stock may submit a claim unless they have opted out.

An exception to this is if the US courts dismiss the claims of foreign investors or when a foreign investor held stock in a foreign company on a foreign exchange. In a class action against Vodafone, the claims of foreign investors were dismissed at trial court level but this decision was later reversed at the court of appeal.

In this regard, a class action against Shell could be relevant for UK pension funds. Here a US court ruled that it did not have jurisdiction over European investors, but the creation of a settlement foundation under Dutch law could be an alternative. Spector

Roseman Kodroff & Willis partner Robert Roseman said: “We are waiting for the Amsterdam court of appeal. It is an important decision for European investors, as it will allow them to have their own settlement after they have been excluded from a US class action.”

According to Caroline Goodman, managing director of Institutional Protection Services (IPS), a firm that specialises in helping schemes monitor and participate in class actions, if a UK pension fund with £1bn in assets fails to participate in class actions, it could be missing out on as much as £200,000 in settlements each year.

Stephen Everard, managing director of the GOAL Group, said nearly $12bn was left on the table by institutional investors who did not take part in class actions between 2000 and 2007 and $3.6bn of this was attributable to European investors. Everard added: “With the new wave of class actions instigated in the wake of the credit crunch, these losses are likely to soar in 2009 if institutional investors do not claim their slice of the pie.”

For pension funds, a securities class action is a legal mechanism that collectively compensates a group of litigants when they have suffered a loss at a company they hold stock in, due to mismanagement or wrongdoing at the company.

Thomas Dubbs, senior partner at US law firm Labaton & Sucharow, said: “Given that UK pension schemes often have a significant percentage of their equity investments in US stocks, or stocks that are cross-listed in the US, schemes can look at the US courts to take jurisdiction over claims they may have.”

UK pension funds taking part in a US class action may become lead plaintiffs if they are the largest investors in the stock in question. Dubbs said this can be a good thing: “The active involvement of public pension schemes can enhance the size of any settlement dramatically; sometimes by a factor of six.”

In theory, a scheme’s global custodian is responsible for monitoring any class actions that a scheme has an interest in, but this is not a core function for custodians and they may not be pro-active in monitoring class actions. As a result, US law firms specialising in class actions are developing relationships with pension funds in the UK and specialist services which monitor and process class action claims for pension funds are also springing up. David Paterson, the head of corporate governance at the National Association of Pension Funds (NAPF) says: “Do not underestimate the time and effort involved in leading a claim.”

In terms of time, Everard said the average class action settlement period was 17 months, from filing the claim to receiving payment, but the odd cases have gone on for over five years. While a class action may take some time to go through the courts, the nature of the US legal system means that pension funds should not be out of pocket. Dubbs says: “In the US, the lawyers work on a contingent fee mechanism whereby fees and costs come out of any settlement amounts at the end of the case. There is also no risk of the shifting of adverse legal costs to the other side if the case if unsuccessful.”

In contrast, it is possible for all legal costs to be awarded against one side in the UK. In addition, there is a more onerous duty on the plaintiff to demonstrate that it has a case, according to Paterson.

Some UK pension schemes may feel that securities class actions belong in a more confrontational US legal culture. Nevertheless, more schemes are now taking part in class actions. Picking up extra income for relatively little effort is one reason and some lawyers, like Dubbs, believe taking advantage of class actions is a fiduciary duty for trustees. “A claim in litigation, whether it is in the US or elsewhere, is an asset like any other and trustees need to take steps to be aware of what claims their scheme may have. The best way to do that is by monitoring their portfolio.” But Paterson is more circumspect on this point: “It is not all clear whether funds have a fiduciary duty to make a claim or participate in a settlement. It certainly makes practical sense, however.”

While some may see scheme involvement in class actions as a matter of good governance, there is also an argument that these cases can play a role in improving poorly managed companies. The NAPF’s Paterson said that the most effective tool for improving corporate governance was engagement with management, while class actions could inhibit this dialogue. But he added: “They do have their place, especially in the US, and can and should be used to achieve lasting changes in governance practices.”

For UK pension funds, class actions are not quite a free lunch, but they look like being a low cost, low risk source of useful additional income in today’s difficult climate.

Download the .pdf article Here
Source: Pensions Insight

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AIG will be the next major class action case of interest for UK pension funds, according to a leading litigation lawyer.

Patrick Daniels, partner at Coughlin Stoia Geller Rudman & Robbins, said that while the door to becoming a lead plaintiff in a class action against the Royal Bank of Scotland (RBS) is now closed, he was certain cases would next be brought against struggling US insurer AIG.

“I can’t even count how many class actions there already are against AIG,” said Daniels. “AIG is one big litigation machine, it’s an unbelievable mess.”

He said that while he’s not involved with putting UK pension funds into a class action against AIG yet, he would be in the future.

Daniels is leading the securities case against RBS on behalf of three lead plaintiffs: Merseyside Pension Fund, North Yorkshire Pension Fund and Dutch fund manager MN Services.

His case hinges on the actions of RBS Greenwich Capital, a US-based subsidiary that housed the majority of RBS’s US sub-prime mortgage assets and used them to raise the capital to buy ABN Amro.

Daniels said he was confident that the courts would grant permission to pursue a class action, and “optimistic” that non-US investors would be able to participate as lead plaintiffs. Should the class certifications be issued, class representatives, or passive investors, could become involved within eight to 12 months.

The Tyne and Wear Pension Fund is currently involved in a class action dispute against UBS. Acting as a named plaintiff and class representative, Tyne and Wear is awaiting a decision from the courts to determine if the class actions will take place. Tyne and Wear’s investment officer Ian Bainbridge said UBS had filed a motion to dismiss, which the plaintiffs had challenged, and they were now awaiting a decision to be made by the US courts.

US law firm Gilman and Pastor are currently seeking a lead plaintiff for investors affected by AIG’s 0% bond between November 17, 2006 and April 10, 2008. Over 30 sales agents are named as co-defendants including Barclays Capital, Goldman Sachs, Lehman Brothers and UBS. The closing date for applicants is March 30, 2009. Stephen Everard, managing director of class actions solutions provider Goal Group, said: “It is very possible that further cases will be launched in similar AIG bonds, which were issued from 2005 onwards.”

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MN Services, the Dutch pension fund and investment manager, has confirmed it has joined the class action case against Royal Bank of Scotland as a co-lead plaintiff.

Speaking to Professional Pensions, MN Services head of corporate governance Chris Douma said the company had decided to join the action based on the losses it had incurred through its exposure to RBS, but also to reaffirm the position of European investors in such cases.

He explained: “We see a growing number of class action cases where European investors are excluded from class action cases by US judges – we are convinced that European investors in European investors should be taken on board in cases such as these.”

Douma also refused to rue out participating in further actions in the US, although he conceded the company would probably not be a lead or co-lead plaintiff in other cases.

MN Services will join the UK’s Merseyside and North Yorkshire pension funds in the class action against the bank, which is seeking damages for alleged “materially false and misleading” statements about the bank’s financial health, which led to huge losses for investors (PP Online, March 16 2009).

Goal Group, which works alongside UK pension schemes and other institutional investors on class action cases, urged other schemes to follow suit and join the action.

Goal Group Managing Director Stephen Everards said: “Local authorities not participating in US class actions such as the RBS case risk losing out on a massive opportunity to seek compensation and plug their escalating pension gap.

“There remains a common misconception that the effort involved in filing a claim outweighs the benefits, however this is simply not true.”

He added: “This case is a real wake-up call for all UK local authorities that they can no longer afford to ignore their legal right – and indeed responsibility – to participate in US class actions. Local authorities are particularly exposed in the credit crisis because of their widespread investments in banks.”

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Shareholders and pension funds mull legal action against Lloyd’s Banking Group and other banks to recoup investment losses.

Local authorities with investments in RBS have been urged to join a class action suit against the disgraced bank.

Councils in Merseyside and North Yorkshire have reportedly joined forces to file a class action law suit against RBS alleging that the bank misled investors about its financial position.

Nathan Skinner

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ROYAL Bank of Scotland faces legal action from three big local authority pension funds to reclaim some of the millions they have lost in the near- collapse of the bank.

The trio include Strathclyde Pension Fund, Scotland’s biggest, which estimates RBS’s woes have cost it about £50 million. It has more than 180,000 members, including staff at 12 councils. The Falkirk and Highland pension funds have also told The Scotsman they are watching an attempt to launch a “class action” against RBS in courts in the United States. The action is being led by Cherie Booth, QC, the wife of the former prime minister Tony Blair.

Peter Murphy: How system works to allow small investors their day in court against the corporate giants

If it goes ahead, a New York court will hear a claim the bank and Sir Fred Goodwin, its former chief executive, are liable for “massive losses” incurred by pension funds as a result of false information allegedly provided by RBS.

The case revolves around an allegation that RBS failed to inform prospective investors of the dire state of its balance sheet, in the aftermath of the takeover of parts of Dutch bank ABN Amro, when it mounted a £12 billion shares issue last year.

In Scotland, there are 11 public-sector pension funds, loosely based on the old system of regional councils. Most are thought to hold shares, or to have sold shares, in RBS. Members of these funds are typically the employees of the 32 current councils, plus civilian staff of the police and fire services.

Richard McIndoe, the head of pensions at Strathclyde Pension Fund, estimated losses to be “something in the region of £50 million” as a result of its investment in RBS. Strathclyde’s assets are invested by some 20 pension fund managers, but it appears that few – if any – shares continue to be held in RBS.

The fund’s total value has been tumbling in line with collapses in the FTSE 100 index. In December, the pension fund was valued at £8.1 billion; this fell to £7.7 billion in January.

Mr McIndoe said Strathclyde was considering whether to become more active in class actions after details of the US challenge to RBS emerged. This could involve action targeting RBS.

He said: “We don’t like to be a leading plaintiff, but we are keen on reviewing our participation in class actions. Our normal participation is that we let somebody else fight the case, but we would still collect at the end of the day. We are reviewing whether we should be more active.”

He said the use of class actions had begun as a US phenomenon but had become more widespread in Europe. “We would automatically be eligible for any part of any settlement,” he said. “You don’t have to fight the case, as long as you are part of the class that held the shares.”

Alastair Redpath, the treasury manager at Falkirk Council, said the pension fund – which incorporates Stirling and Clackmannanshire councils – included 5.8 million RBS shares.

He was unable to calculate the loss on those shares, but said fund managers had begun to purchase RBS shares again as a long-term investment.

He said of the US action: “We are currently watching the situation. If there is a class action that is formally approved to go forward, we would certainly be pitching in as well.

“Until such time as the judge in the case announces whether he is going to allow it as a valid class action, we, like any other pension fund, would anticipate lodging a claim.”

The Falkirk fund is worth about £800 million, compared with £950 million a year ago.

Highland Council holds a direct RBS shareholding of more than 1.2 million shares, valued yesterday at £262,557.

A spokeswoman said further RBS shares were held in a general fund linked to FTSE 100 companies, although it was impossible to quantify easily the value and size of this shareholding.

She said of the possibility of a class action: “We are interested in the news about that, but we would need to consider it.”

A fourth council pension fund, Lothian, also admitted holding shares in RBS. But the fund said it believed it would be unable to join the US claim, as the shares had been bought in London rather than New York.

Legal experts warned that UK councils and other investors should not be complacent about fighting to recover some of their losses. Stephen Everard, the managing director of Goal group, a class-action specialist, said: “Local authorities not participating in US class actions, such as the RBS case, risk losing out on a massive opportunity to seek compensation and plug their escalating pension gap.”

He said there were many precedents for authorities claiming compensation for financial losses incurred in the credit crunch.

Two council pension funds were leading a US class action against Lehman Brothers over subprime losses, while the West Midlands fund had recovered more than £355,000 in lawsuits against corporations and banks.

Mr Everard said a quarter of all claims that could have been filed by local authorities between 2000 and 2007 were not submitted to US courts, resulting in a loss of £200 million.

He added: “The RBS case is a real wake-up call for all UK local authorities, and they can no longer afford to ignore their legal right – and indeed responsibility – to participate in US class actions.”

Patrick Daniels, a founding partner of the firm Coughlin Stoia, which is taking the action through the New York courts, said last night: “The filing of the applications for the appointment for lead plaintiffs is the first step towards achieving justice for those hundreds of thousands of investors who have suffered huge financial losses.”

A spokesman for RBS declined to comment when contacted by The Scotsman last night.

JOBS CRISIS

THERE are ten applicants for every vacancy, underlining the jobs crisis in the UK, according to new figures. One of the worst-affected areas is the Western Isles, where 44 people are claiming jobseekers’ allowance for every new post available. Argyll and Bute has a ratio of 31 to one.

However, the Trades Union Council statistics show the worst place in Britain to find work is the Isle of Wight, where there are 60 claimants for every post. Brendan Barber, the TUC general-secretary, said: “The government can no longer claim there is plenty of work available.”

Jim Mather, the Scottish enterprise minister, claimed this showed that the UK government should set up a similar stimulus package to the one put together by the Obama administration in America.

He was already alarmed that the last figures showed UK unemployment numbers had topped more than two million for the first time in a decade, although proportionally Scotland has a lower rate of joblessness than the rest of Britain.

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GOAL Group, the leading class actions and tax reclamation services specialist, today announced the appointment of Saghar Bigwood to the Board of Directors.

Bigwood joined GOAL Group in 2003 from Citigroup, and has since played an instrumental role in developing the Company’s core marketplaces in securities services – helping customers reclaim withholding tax on cross-border securities income and providing securities litigation services.

Stephen Everard, Managing Director, GOAL Group, comments,

Saghar has made an enormous contribution to the Company over the past six years, managing our market development with insight and effectiveness. She brings her wealth of industry contacts, market knowledge and tax expertise to the Board, further strengthening our management team to take us through our current phase of strong market growth. The international financial markets crisis has generated a new wave of subprime-related class action lawsuits, with European and Asian investors seeking redress for their losses, and this has created increased market demand for the products and services offered by GOAL Group.

Saghar joined GOAL Group with an already considerable track record in tax services, having worked with Dai-Ichi Kangyo, Bank of America and Citigroup. In her latter role, she headed up the tax department, which was responsible for global tax services in all parts of the world except Asia.

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