FinCEN Assesses Civil Money Penalty Against Unregistered Money Transmitter

Full News Release

The Financial Crimes Enforcement Network (FinCEN) assessed civil penalties totaling $40,000 against two brothers for non-compliance with Bank Secrecy Act (BSA) money transmitter registration requirements. The brothers, doing business as Halal Depot of Wyoming, Michigan operated a money transmission business at their grocery store by sending funds on behalf of their customers to beneficiaries in Yemen, Somalia, Sudan, Kenya, Saudi Arabia, Uganda, Ethiopia, Qatar, Europe and the United Arab Emirates. At no time did the Sufi brothers register with FinCEN as a money services business (MSB) as required by the BSA.

FinCEN Assesses Civil Money Penalty Against Oregon-Based Unregistered Money Transmitter

Full Announcement.

The Financial Crimes Enforcement Network (FinCEN) today announced assessment of a $25,000 civil money penalty against Victor Kaganov of Tigard, Oregon, for violating Bank Secrecy Act (BSA) requirements for money transmitters. FinCEN determined that Kaganov violated BSA registration, anti-money laundering program, and suspicious activity reporting requirements while conducting an independent money transmitter business from his residence.

From July 2002 through March 2009, Kaganov conducted more than 4,200 funds transfers in the United States, involving total dollars amounting to more than $172 million, to and from a number of locations in Europe and Asia.

See also:
Department of Justice Press Release
FBI News Story March 7, 2011

Patent Joint Ownership Issue

Joint ownership can arise from joint inventorship, such as where two or more individuals directly or indirectly collaborate as inventors. This often times happens unwittingly, as the two inventors may not have worked on the development of the invention together or at the same time. Sometimes, the primary inventor does not realize that the other inventor’s contribution raises that individual to the level of inventor. This is because the inventors do not have to make the same type or amount of contribution and the inventors do not have to contribute to every claim in the patent application.

Ethicon was the exclusive licensee of the “sole” inventor of the patent and Ethicon sued U.S. Surgical for infringement. U.S. Surgical investigated and located a “missing” (ie. unnamed) joint inventor and then proceeded to negotiate a license from him. Ethicon challenged the validity of the license. The courts upheld the validity of the license because the “missing” inventor, as a joint inventor, was a joint owner of the entire patent. Ethicon v. U.S. Surgical Corp., 135 F.3d 1456 (Fed. Cir. 1998), cert. denied, 525 U.S. 923 (1998).

The cautionary tale here is that even a one percent contributor to a patent will be a joint owner of the entire patent. An owner of a patent who believes that he has exclusive control of the patent may be sadly mistaken and find himself suddenly competing with another company.

The key for the “sole” inventor is to make sure that all others (ie. employees, etc.) who may work on any aspect of the invention have valid employement agreements or valid joint venture agreements that contain the proper assignment clauses. These agreements must be entered into prior to any work by the employee or contractor.

For the purchaser of a patent, proper due diligence will be key to understanding where the potential risks may arise. Due diligence should include review of agreements with employees or contractors working on the development of the intellectual property. Drafting strong purchase agreements and transaction documents can help protect the purchaser. Effective guarantees, warranties, indemnification and assignment clauses can lessen the financial impact, if something unpleasant occurs following the purchase of the intellectual property.

FREE Non-Profit Company Information

The Nonprofit Association of Oregon

This association is a statewide network that provides resources to nonprofit organizations.  They provide training, classes, and other resources.

 Web Site:  http://www.nonprofitoregon.org/

 They also publish a great handbook titled The Oregon Nonprofit Corporation Handbook.  This is highly recommended for all non-profit clients.

Print copies may be available at:

5100 SW Macadam Avenue, Suite 360
Portland, Oregon 97239
P: 503-239-4001

 Please call to confirm pricing and that they have copies available.

Oregon Secretary of State

The forms for incorporating your nonprofit can be found at:

http://www.filinginoregon.com/pages/forms/business/dnc.html

The Secretary of State also has a resource page for nonprofits:

http://www.filinginoregon.com/pages/business_registry/nonprofit.html

FinCEN Advisory Warns of Elder Abuse and Financial Exploitation

The Financial Crimes Enforcement Network has released an advisory to financial institutions regarding spotting and reporting on activities involving elder financial exploitation. FinCEN released the advisory because financial institutions may be uniquely positioned to observe such exploitation.

The following examples are “red flags” that may necessitate the filing of SAR reports:

Erratic or unusual banking transactions, or changes in banking patterns:

  • Frequent large withdrawals, including daily maximum currency withdrawals from an ATM;
  • Sudden Non-Sufficient Fund activity;
  • Uncharacteristic nonpayment for services, which may indicate a loss of funds or access to funds;
  • Debit transactions that are inconsistent for the elder;
  • Uncharacteristic attempts to wire large sums of money;
  • Closing of CDs or accounts without regard to penalties.

Interactions with customers or caregivers:

  • A caregiver or other individual shows excessive interest in the elder’s finances or assets, does not allow the elder to speak for himself, or is reluctant to leave the elder’s side during conversations;
  • The elder shows an unusual degree of fear or submissiveness toward a caregiver, or expresses a fear of eviction or nursing home placement if money is not given to a caretaker;
  • The financial institution is unable to speak directly with the elder, despite repeated attempts to contact him or her;
  • A new caretaker, relative, or friend suddenly begins conducting financial transactions on behalf of the elder without proper documentation;
  • The customer moves away from existing relationships and toward new associations with other “friends” or strangers;
  • The elderly individual’s financial management changes suddenly, such as through a change of power of attorney to a different family member or a new individual;
  • The elderly customer lacks knowledge about his or her financial status, or shows a sudden reluctance to discuss financial matters.

A SAR (Suspicious Activity Report) must be filed if a financial institution knows, suspects, or has reason to suspect that a transaction has no business or apparent lawful purpose or is not the sort in which the particular customer would normally be expected to engage, and the financial institution knows of no reasonable explanation for the transaction after examining the available facts, including the background and possible purpose of the transaction, the financial institution should then file a Suspicious Activity Report.  See, e.g., 31 CFR § 103.18(a) (future 31 CFR § 1020.320(a))

CPI Report – January 2011 – 0.4%/1.6%

From Bureau of Labor Statistics – LINK

Consumer Price Index – January 2011

The Consumer Price Index for All Urban Consumers (CPI-U) increased  0.4 percent in January on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today.  Over the last 12 months, the all items index increased 1.6 percent before seasonal adjustment.

Increases in indexes for energy commodities and for food accounted for over two thirds of the all items increase.  The indexes for gasoline and fuel oil both increased in January, continuing their recent strong upward trend.  The index for food at home posted its largest increase in over two years with all six major grocery store food group indexes rising.

The index for all items less food and energy also rose in January.  The indexes for apparel, shelter, airline fares, and recreation all posted increases.  In contrast, the indexes for new vehicles and for used cars and trucks declined in January.

Over the last 12 months, the food index has risen 1.8 percent with the food at home index up 2.1 percent; both 12-month changes are the highest since 2009.  The energy index has increased 7.3 percent over the last 12 months, with the gasoline index up 13.4 percent.  The index for all items less food and energy has risen 1.0 percent.

Collecting Attorney Fees under the Lanham Act

The Seventh Circuit has clarified its standard for finding a case “exceptional” under the Lanham Act for purposes of awarding attorney fees. A case is “exceptional” if a defendant is the prevailing party and the plaintiff was guilty of abuse of process in suing, or if a plaintiff is the prevailing party and the defendant persisted in a meritless defense in order to impose costs on the plaintiff. The court stated that it is not required to inquire after the state-of-mind of the non-prevailing party. Nightingale Home Healthcare Inc. v. Anodyne Therapy, LLC, ____ F3d____, 2010 WL 4721581 (C.A.7 (Ind.)), (7th Cir. Nov. 23, 2010.

Though not binding here in the 9th Circuit, this case and its standards have the potential to become the norm nationally.

Dissenting/Minority Shareholders – Rights

State statutes give certain rights to minority and dissenting shareholders.  Some of these rights can be enhanced or modified by the company’s corporate documents such as the bylaws or articles.

Dissenter’s rights in Oregon are covered in ORS 60.551 to 60.594.  The statute gives a shareholder the right to dissent from and obtain the fair market value of the shareholder’s shares following certain corporate acts.  These acts are: Consummation of a merger; consummation of a plan of share exchange; consummation of the sale of all or substantially all assets of the company; amendment of the articles that materially affects the rights of the dissenter; and conversion of the company to a non-corporate business entity.

If a proposed corporate action, which could create dissenters’ rights, is submitted to the vote of shareholders, the statutes gives very specific requirements for giving notice to shareholders.

If the action is taken without shareholder vote, the corporation again must give a statutory notice to the shareholders regarding their dissenters’ rights.

Generally, A shareholder entitled to dissenters’ rights is not entitled to challenge the corporate action unless the action is unlawful or fraudulent with respect to the shareholder or the corporation.

Besides Dissenters’ rights, there are other potential causes of action that shareholders and the corporation must be aware of.  These include minority shareholder oppression and deadlock, breach of fiduciary duty, derivative actions, and others.

If you or your business have concerns regarding shareholder rights and current or potential disputes caused by an action of a company, please contact us to discuss your options and develop a plan for moving forward.

Expired Patents: Update

On June 10, 2010, the Federal Circuit, in Pequignot v. Solo Cup Co., No. 2009-1547 (Fed. Cir. June 10, 2010), affirmed the judgment of the U.S. District Court for the Eastern District of Virginia, which had entered summary judgment in favor of Solo for “false marking” related to Solo’s practice of marking expired patents on its beverage cup lids.

The Federal Circuit held that, under 35 U.S.C. § 292(a), a product embodying an expired patent is indeed an “unpatented article”, but a plaintiff must demonstrate that the defendant intended to deceive the public in order to succeed under § 292. The court stated that a rebuttable presumption is created when a plaintiff shows that the defendant knowingly made false statements.  The defendant may rebut this presumption by showing by a preponderance of the evidence that it did not intend to deceive the public.  The court also noted that the presumption is weaker in cases where the markings are for expired patents that once covered the marked products.  Solo, which had relied on advice of counsel and weighed the high costs of removing the markings, was able to rebut Pequignot’s evidence that it intended to deceive.

In its holding, the court reasoned that Solo acted in good faith by seeking advice of counsel, and that it had been driven by a desire to avoid the high costs and business disruption that retooling would have created.  The court also reasoned that by adding to the “may be covered” language to its products’ packaging, Solo had acted in good faith to provide a truthful representation of the patent coverage for its products.

This decision will put a damper on the false-marking claims.  However, some defendants may not have the same advice-of-counsel excuse.