Vanguard sued for [failing to charge market rates to and then paying taxes on services to its mutual funds]

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Vanguard sued for [failing to charge market rates to and then paying taxes on services to its mutual funds]

Post by Buysider »

[UPDATE - 11/18/2015. Danon's whistleblower lawsuit dismissed with prejudice due to his breach of attorney ethical requirements in state court. Jump ahead to viewtopic.php?f=10&t=143686&start=500#p2692155 for more info - admin alex] [updated 05/18/18 - admin LadyGeek]

[UPDATE - 04/02/2016 - The SEC has filed a "friend of the court" briefing on behalf of the whistle blower in federal court. A direct link to the post: here --admin LadyGeek]

[UPDATE - 04/10-2018 - The Philadelphia Inquirer has published an update on the testimony of the whistle blower, David Danon. A direct link to the post: here --admin LadyGeek]


[UPDATE - 05/18/2018 - See this post for a an overview of the timeline and latest status. --admin LadyGeek]

At least that's how I read the lawsuit:

http://www.philly.com/philly/business/2 ... taxes.html
Instead, Danon contends, Vanguard provides services to its mutual funds "at artificially low, 'at-cost' " prices. "As a result, Vanguard shows little or no profit and pays little or no federal or state income tax despite managing funds with nearly $2 trillion in assets."
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Re: Vanguard sued for charging too little

Post by RadAudit »

No good deed ever goes unpunished.

Thanks for the link
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Re: Vanguard sued for charging too little

Post by BigPrince »

What does "artificially low" mean? You mean they could operate at above cost instead? lol
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Re: Vanguard sued for charging too little

Post by TimeRunner »

There's Whistleblower motivation at work here, obtaining a reward for reporting (proven) tax fraud. According to this google search result, http://www.phillipsandcohen.com/Qui-Tam ... ards.shtml , the relator (the guy filing the lawsuit) is entitled to 15-25% of what the government recovers if the gov't joins the suit, or 25-30% if he goes it alone, and wins of course. See also: http://en.wikipedia.org/wiki/False_Claims_Act

I wouldn't blame VG for moving overseas....
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Re: Vanguard sued for charging too little

Post by letsgobobby »

I thought this would be an Onion article.
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Re: Vanguard sued for charging too little

Post by ResearchMed »

What implications might this have for "non-profit" organizations, who could have operated at profit and paid taxes on that profit?

And who would determine what the profit (Vanguard's or a non-profit org) "should" have had, on which they "should" have paid taxes?

Inquiring minds....

RM
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Re: Vanguard sued for charging too little

Post by bertie wooster »

While I don't know the details of this $1.5 billion Contigency Reserve, this sounds absurd. Hopefully nothing comes of it.
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Re: Vanguard sued for charging too little

Post by nisiprius »

Interesting. I am not a lawyer and can only watch the drama unfold.

Vanguard's structure, with "Vanguard providing services to its mutual funds at artificially low, 'at-cost' prices," is hardly a secret. Vanguard's been driving "at-cost cafe" coffee trucks around trumpeting it. And as Danon notes, its been going on for about 38 years now. I find it hard to believe that if Vanguard were really breaking "black-letter law" for 38 years that nobody in any state or federal department of revenue would have tried to do something about it.

The "competitive" issue seems ludicrous. I just can't imagine Putnam and Janus and Invesco saying "Oh, we were going to do it ourselves ages ago until our lawyers stopped us."
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Re: Vanguard sued for charging too little

Post by Trevor »

What effects could this lawsuit have on people invested in Vanguard?
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Re: Vanguard sued for charging too little

Post by Taylor Larimore »

Bogleheads:

One thing I know for certain: Jack Bogle, founder of Vanguard, would never knowingly break the law.

I doubt Vanguard's integrity has changed.

Best wishes.
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Re: Vanguard sued for charging too little

Post by GerryL »

So what is the fix? Vanguard should move the money in ways that will trigger higher taxes so investors get lower returns ... and pay lower taxes on those reduced returns?
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Re: Vanguard sued for charging too little

Post by abuss368 »

$1.5 BILLION contingency fund? Interesting to see how this will develop.

Thank you for sharing.
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Re: Vanguard sued for charging too little

Post by Professor Emeritus »

The key is not the charging too little , it is the use of non arms length transactions to accumulate of a 1.5 billion dollar fund on which no taxes have been paid. As an analogy Think of a for profit entity that controls a non profit and uses the non profit to accumulate untaxed revenues that are then used effectively for the benefit of the for profit.

I have no Idea whether the facts are there for vanguard , but the concept is well known. It was one of the issues in the Erickson assisted case livinghttp://www.washingtonpost.com/wp-dyn/content/a ... 0040303919
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Re: Vanguard sued for charging too little

Post by pennstater2005 »

Somehow I see this lawsuit not making it very far.
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Re: Vanguard sued for charging too little

Post by cfs »

Distraction.

Concur, it is possible that this lawsuit is not going to make it very far, but it is a bad distraction for Vanguard's managers.

Thanks for reading.
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Re: Vanguard sued for charging too little

Post by sscritic »

Professor Emeritus wrote:The key is not the charging too little , it is the use of non arms length transactions to accumulate of a 1.5 billion dollar fund on which no taxes have been paid. As an analogy Think of a for profit entity that controls a non profit and uses the non profit to accumulate untaxed revenues that are then used effectively for the benefit of the for profit.

I have no Idea whether the facts are there for vanguard , but the concept is well known. It was one of the issues in the Erickson assisted case livinghttp://www.washingtonpost.com/wp-dyn/content/a ... 0040303919
Thank you for seeing that there is a real issue here concerning arms length transactions, whether it applies to Vanguard or not.

Here is a link that works (and points to page 1, not page 5).
http://www.washingtonpost.com/wp-dyn/co ... 05010.html
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Re: Vanguard sued for charging too little

Post by Christine_NM »

So maybe this Contingency Reserve is Vanguard's version of a dark pool?

What next, will Wall Street firms have to pay taxes too?
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Re: Vanguard sued for charging too little

Post by TIAX »

Actually, the suit invokes New York State's False Claims Act, not the federal Act. The complaint is available here.

Perhaps a Tax Lawyer can offer an opinion on the merits. I would guess it's not meritorious since the "New York Attorney General's Office chose not to prosecute Vanguard."
TimeRunner wrote:There's Whistleblower motivation at work here, obtaining a reward for reporting (proven) tax fraud. According to this google search result, http://www.phillipsandcohen.com/Qui-Tam ... ards.shtml , the relator (the guy filing the lawsuit) is entitled to 15-25% of what the government recovers if the gov't joins the suit, or 25-30% if he goes it alone, and wins of course. See also: http://en.wikipedia.org/wiki/False_Claims_Act

I wouldn't blame VG for moving overseas....
Last edited by TIAX on Sat Jul 26, 2014 11:39 pm, edited 2 times in total.
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Re: Vanguard sued for charging too little

Post by joe8d »

Christine_NM wrote:So maybe this Contingency Reserve is Vanguard's version of a dark pool?

What next, will Wall Street firms have to pay taxes too?
:happy
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Re: Vanguard sued for charging too little

Post by Tanelorn »

Here's a bit about the background of the whistleblower. He's got a decent pedigree anyway.
In an interview with The Inquirer, Danon, a 1998 magna cum laude graduate of Fordham Law School who worked at Sullivan & Cromwell L.L.P., Cleary Gottlieb Steen & Hamilton L.L.P., and other New York corporate law firms before joining Vanguard in 2008, said he had voiced his concerns to Vanguard officials and finally went outside the company when they refused to take steps to comply with the law as he viewed it.

Danon said other Vanguard principals who disagreed with the company's tax position had also left Vanguard.
That last part is a bit disturbing as well since it suggests his view isn't totally off the wall.
TIAX wrote:I would guess it's not meritorious since the "New York Attorney General's Office chose not to prosecute Vanguard."
Not to put too fine a point on it, but NY AG Schneiderman is angling for governor and as such he's been taking on cases that play well to the headlines rather than purely on merit (like subpoenaing all the major HFT firms, without having any evidence of wrongdoing). Suing Vanguard on a technicality, even if they were in the wrong, isn't going to play as well to the public since they're big, well respected, and seen as standing up for the common person.
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Re: Vanguard sued for charging too little

Post by denovo »

Reading the article, it raises a lot of novel questions. As we know, Vanguard's inverted structure is unusual, with the funds owning Vanguard, and it may raise some legal issues.
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Re: Vanguard sued for charging too little

Post by IlliniDave »

Well, either VG fund investors make 100% of the net "profit" and pay taxes on it or VG retains a portion of the profit as its own profit and pays taxes on it. So it's mostly a question of who has paid the taxes, not whether the money has been taxed.

The "contingency fund" is interesting, but do other non-profits that accumulate some amount of capital reserve get taxed on it? It seems like a lot of money but it is less than 0.1% of the assets they manage and seems like a reasonable operating reserve to keep on hand, even for a nonprofit.
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Re: Vanguard sued for charging too little

Post by dodecahedron »

WSJ reporting:
http://online.wsj.com/articles/former-e ... ns_markets

WSJ posted it Friday around 5pm and none of their readers has posted a comment yet. Odd given the liveliness of past comment exchanges I have seen in that newspaper, and the number of folks who care about Vanguard.

Fascinating to me as tax policy economist. I would have to imagine that TIAA-CREF will pay close attention to how this plays out in the courts. Corporate tax law is immensely complex and application to nonprofits, especially those that compete in same markets as for-profit corporations (hospitals are another market where this happens), adds another layer of complication.
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Re: Vanguard sued for charging too little

Post by in_reality »

nisiprius wrote:Interesting. I am not a lawyer and can only watch the drama unfold.

Vanguard's structure, with "Vanguard providing services to its mutual funds at artificially low, 'at-cost' prices," is hardly a secret.
I predict a narrow ruling that Vanguard's structure is not breaking Section 482 that is effectively inapplicable to anyone else who doesn't have the same structure.
Section 482 of the Internal Revenue Code, and most state's laws, require that transactions between related companies take place at the same price as if the companies were unrelated.

Instead, Danon contends, Vanguard provides services to its mutual funds "at artificially low, 'at-cost' " prices. "As a result, Vanguard shows little or no profit and pays little or no federal or state income tax despite managing funds with nearly $2 trillion in assets."
I think it might get looked at eventually by a court just because of the political implications of how it could be twisted to mislead people that somebody is cheating... And nobody would want to be accused of letting that happen.
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Re: Vanguard sued for charging too little

Post by dodecahedron »

I truly don't know. This reminds me of challenges to TIAA-CREf's nonprofit status well over a decade ago. A lot of tricky issues involved. Nothing this complex is cheap to work out properly in the courts. I can see why the NYS AG declined (because he has limited staff and strictly budgeted funds that he must carefully allocate and there are many other cases and potential cases that may need those resources) but I can also imagine why private attorneys would pursue this. There are a lot of underemployed lawyers in the private sector with time on their hands these days.

More generally, the issue of transfer pricing (I.e., the internal accounting prices charged by one sub-unit of a company to another) is a very contentious issue under a lot of scrutiny these days because it is at the heart of tax avoidance schemes avidly pursued by multinational corporations such as Google and General Electric. As a result, I imagine courts will tread very carefully here.

As a Vanguard fund holder, I hope this case is resolved in their favor, because I want to believe they have been following proper practices all along. But the fact is that tax law is so convoluted and arcane and there are inevitably grey areas where it is impossible to be 100% sure about certain issues. Nonprofit status raises some especially complex issues. It is the job of our court system to make those careful interpretations of the law and resolve at least some of the ambiguities here. I guess we will have to wait and see. Anyone can bring a lawsuit and I can certainly see some merit in Vanguards' competitors likely point of view on the contingency fund issue. I wonder if Fidelity et al will file amicus briefs supporting the plaintiff. There are fair play, level playing field issues at stake. Their contingency funds presumably come out of after tax remains of taxable retained earnings.
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Re: Vanguard sued for charging too little

Post by Gropes & Ray »

The title of the post is a little misleading. Vanguard wasn't sued for charging investors too little. The allegation is that the underlying company (which is a subsidiary of the funds, and not a parent company) charged the funds too little for the services it provides, so that it did not earn a profit, and therefore owed no taxes.

This is an interesting claim. I see logically how they avoided paying taxes, but I would be surprised if that were really illegal. I know that related companies give each other discount services all the time. But, I am not a tax lawyer, just a corporate lawyer. I just set the companies up and run them the way the tax guys tell me to.
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Re: Vanguard sued for charging too little

Post by dodecahedron »

Trevor wrote:What effects could this lawsuit have on people invested in Vanguard?
Effect on us investors: for sure, Vanguard will have legal fees. "Vigorous defense" in a case this complex is expensive. And it is possible that in some grey areas, it may be less expensive to concede on some minor issues than to defend. Since they are charging us fees based on their costs, E.R. of our funds may rise because of those legal costs and/or tax concessions. But Vanguard funds are so huge that hopefully this will not have much impact. Who knows?

TIAA CREF raised its fees considerably after it lost its fight to retain all the tax benefits it had been claiming as a result of its nonprofit status. I hope the same does not happen here

I am certainly not moving my funds as a result of what I have read thus far.
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Re: Vanguard sued for charging too little

Post by hiddensee »

This reminds me of a quote about anti-trust law: if you're charging above market, it means you're a monopoly; if you're charging below market, it means you're trying to become a monopoly; and if you're charging market, it means you're colluding!
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Re: Vanguard sued for charging too little

Post by johnubc »

If he wants to go after a Non-Profit that brings in a ton of money, he should look at the NFL - a non-profit that brings in revenue of $9.5 Billion per year.
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Re: Vanguard sued for charging too little

Post by Index Fan »

If he wants to go after a Non-Profit that brings in a ton of money, he should look at the NFL - a non-profit that brings in revenue of $9.5 Billion per year.
Ah, but how much money has Vanguard given to politicians to get their tax exemption written into law? (sad, I know)
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Re: Vanguard sued for charging too little

Post by sscritic »

johnubc wrote:If he wants to go after a Non-Profit that brings in a ton of money, he should look at the NFL - a non-profit that brings in revenue of $9.5 Billion per year.
He will, after he works as one of their tax attorneys for five years. Just wait.
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Re: Vanguard sued for charging too little

Post by midareff »

pennstater2005 wrote:Somehow I see this lawsuit not making it very far.

Somehow I see someone with their tongue hanging out looking for a settlement offer.
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Re: Vanguard sued for charging too little

Post by skylar »

So I'm not a tax expert, but if Vanguard charged its owning mutual funds too little to pay taxes, wouldn't that just mean the funds retain more earnings, and the funds' shareholders would be liable for more taxes (if held in a taxable account)? Doesn't seem like a problem to me.
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Re: Vanguard sued for charging too little

Post by stlutz »

After reading a few different articles, I think I have it figured out. What Vanguard should be doing tax-wise is charging the funds market prices for the services it provides, paying taxes on those profits, and then distributing those profits back to the funds. In fact, it is doing neither. On one hand it is charging below market prices to avoid paying taxes but on the other hand it has accumulated $1.5B in profits over the years that have not been distributed back to the owners (i.e. the funds). It has to be one or the other.

Can any of the tax/legal experts confirm if I have that right?
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Re: Vanguard sued for charging too little

Post by TimeRunner »

TIAX wrote:Actually, the suit invokes New York State's False Claims Act, not the federal Act. The complaint is available here.

Perhaps a Tax Lawyer can offer an opinion on the merits. I would guess it's not meritorious since the "New York Attorney General's Office chose not to prosecute Vanguard."
TimeRunner wrote:There's Whistleblower motivation at work here, obtaining a reward for reporting (proven) tax fraud. According to this google search result, http://www.phillipsandcohen.com/Qui-Tam ... ards.shtml , the relator (the guy filing the lawsuit) is entitled to 15-25% of what the government recovers if the gov't joins the suit, or 25-30% if he goes it alone, and wins of course. See also: http://en.wikipedia.org/wiki/False_Claims_Act

I wouldn't blame VG for moving overseas....
Correction noted, thank you. Don't forget to mention the Whistleblower money the relator is seeking, as noted on pages 38-40 of the complaint referenced above. Mucho dinero....
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Re: Vanguard sued for charging too little

Post by riskreward »

Vanguard's CPA firm has undoubtedly vetted this issue and advised that VG is in compliance with the tax laws.
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Re: Vanguard sued for charging too little

Post by dratkinson »

Believe Vanguard can truthfully claim they are not avoiding taxes, just passing greater profits to clients... who then pay greater fed/state taxes.

Maybe this exercise demonstrates that Danon has cause to sue Fordham Law School for what he paid for the magna cum laude.
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Re: Vanguard sued for charging too little

Post by SpringMan »

This reminds me of the days when you could take your burnt out light bulbs back to Detroit Edison and get free replacements. Some pharmacy sued and won and the policy was abolished. A dumb law suit in my opinion.
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Re: Vanguard sued for charging too little

Post by sscritic »

riskreward wrote:Vanguard's CPA firm has undoubtedly vetted this issue and advised that VG is in compliance with the tax laws.
And look at who is paying them. How did things work out for Enron's accounting firm? I knew people who used to work at Arthur Andersen; they don't anymore. How about you?
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Re: Vanguard sued for charging too little

Post by LAlearning »

Interesting topic considering the amount of assets held. Will follow peripherally but my guess it all ends up being smoke and mirrors.

Diversification though is still not a bad thing...
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Re: Vanguard sued for charging too little

Post by Levett »

dodecahedron,

I appreciate your commentary, especially being both a TIAA-CREF and VG investor. :wink:

Lev
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Re: Vanguard sued for charging too little

Post by KyleAAA »

I'm not a lawyer, but it unfortunately sounds to me as if there's at least SOMETHING to this lawsuit. These transactions certainly aren't arms-length transactions. On the other hand, the law is stupid and poorly written in the first place if it doesn't allow something like this. Mutual companies aren't exactly rare. State Farm is another example.

Does the mutual structure give some companies an unfair advantage when competing with other for-profit companies in the same space? Yeah, probably.
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Re: Vanguard sued for charging too little

Post by riskreward »

sscritic wrote:
riskreward wrote:Vanguard's CPA firm has undoubtedly vetted this issue and advised that VG is in compliance with the tax laws.
And look at who is paying them. How did things work out for Enron's accounting firm? I knew people who used to work at Arthur Andersen; they don't anymore. How about you?
Do you really think a national CPA firm would risk the death penalty today for issuing fraudulent tax audits after Arthur Andersen's dismantlement because of Enron?

Besides national CPA firms have thousands of clients, Vanguard would not be substantial enough to their overall profitability to risk the death penalty.
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Re: Vanguard sued for charging too little

Post by sscritic »

riskreward wrote:
sscritic wrote:
riskreward wrote:Vanguard's CPA firm has undoubtedly vetted this issue and advised that VG is in compliance with the tax laws.
And look at who is paying them.
Do you really think a national CPA firm would risk the death penalty today for issuing fraudulent tax audits after Arthur Andersen's dismantlement because of Enron?
No, but I think the advice firms give will bend in favor of the client. If the client doesn't like the opinion, the client will hire another firm; it happens all the time. It is in the financial interest of the accounting firm to bend just a little in order to keep the client. It's natural human (and corporate) behavior.
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Re: Vanguard sued for charging too little

Post by JDDS »

stlutz wrote:but on the other hand it has accumulated $1.5B in profits over the years

I'm trying to understand the magnitude of the 1.5B in terms of the Vanguard Group's size. 1.5B sounds like a lot but when you manage $2T maybe not so much. For example, an average expense ratio of 0.10% x $2T = $2B.

Vanguard often says:
In 2013, the average expense ratio of Vanguard mutual funds was 0.19%
I'm not sure if that's weighted.

I did a bit of Googling to understand a bit more about mutual companies. It is interesting reading.
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Re: Vanguard sued for charging too little

Post by Gropes & Ray »

stlutz wrote:After reading a few different articles, I think I have it figured out. What Vanguard should be doing tax-wise is charging the funds market prices for the services it provides, paying taxes on those profits, and then distributing those profits back to the funds. In fact, it is doing neither. On one hand it is charging below market prices to avoid paying taxes but on the other hand it has accumulated $1.5B in profits over the years that have not been distributed back to the owners (i.e. the funds). It has to be one or the other.

Can any of the tax/legal experts confirm if I have that right?
You are correct. Vanguard s charging allegedly below-market rates to the funds, ergo avoiding profits and taxes on those profits. It has simultaneously accumulated $1.5 billions in profits that it allegedly should have paid taxes on. I suppose the theory is that if vanguard charged market rates for the services it provides to the funds, it would have a lot more than $1.5 billion in profits. But the $1.5 billion in profits is a separate issue from under charging the funds for services. Also, the $1.5 billion has been accumulated over time, not all in one year.

How this would affect us as investors is: if vanguard were forced to charge the funds higher fees, then vanguard would have profits and have to pay part of those profits to the government. The rest of the profits could be distributed to the funds, but the funds would have lost the money paid as a tax expense. So, in order for the funds to make up for the tax expense, we get higher e/r. Still, worst case scenario you're looking at a 50% increase in e/r, which is very cheap compared to a lot of funds.

I see this as an attack on the very concept of a mutually held company. If your owners and customers are by definition the same class of people, then you can't operate for the maximum benefit of your ownership without operating for the maximum benefit of your customers. The only other option is for the taxing authority to come in and make business decisions, which is antagonistic to the very concept of capitalism (owners make their own choices with as little government interference as possible) and the foundation of corporate law (that ownership and control can be separated, but the owners choose the controllers).
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Re: Vanguard sued for charging too little

Post by TIAX »

Here's a related party transaction from a random Form 10-K:
Purchases from, and Sub-contracts with Related Parties

In connection with the Company’s tax planning strategies relating to VAT, raw materials are sourced by the Company in the PRC and shipped to related party contract manufacturers in Vietnam and Cambodia. The raw materials were originally purchased by the Company, and, through a series of transactions, were sold at cost to, and repurchased at cost from, Jiangsu Ever-Glory. These transactions amount to approximately $4.5 million (RMB30 million) during the year ended December 31, 2010, and have been netted against each other for financial reporting purposes.
You can find thousands of these related-pary transactions via EDGAR so the rule certainly can't be that at-cost transactions between related parties are impermissible.
Last edited by TIAX on Sun Jul 27, 2014 12:05 pm, edited 1 time in total.
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ResearchMed
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Re: Vanguard sued for charging too little

Post by ResearchMed »

Gropes & Ray wrote:
stlutz wrote:After reading a few different articles, I think I have it figured out. What Vanguard should be doing tax-wise is charging the funds market prices for the services it provides, paying taxes on those profits, and then distributing those profits back to the funds. In fact, it is doing neither. On one hand it is charging below market prices to avoid paying taxes but on the other hand it has accumulated $1.5B in profits over the years that have not been distributed back to the owners (i.e. the funds). It has to be one or the other.

Can any of the tax/legal experts confirm if I have that right?
You are correct. Vanguard s charging allegedly below-market rates to the funds, ergo avoiding profits and taxes on those profits. It has simultaneously accumulated $1.5 billions in profits that it allegedly should have paid taxes on. I suppose the theory is that if vanguard charged market rates for the services it provides to the funds, it would have a lot more than $1.5 billion in profits. But the $1.5 billion in profits is a separate issue from under charging the funds for services. Also, the $1.5 billion has been accumulated over time, not all in one year.

How this would affect us as investors is: if vanguard were forced to charge the funds higher fees, then vanguard would have profits and have to pay part of those profits to the government. The rest of the profits could be distributed to the funds, but the funds would have lost the money paid as a tax expense. So, in order for the funds to make up for the tax expense, we get higher e/r. Still, worst case scenario you're looking at a 50% increase in e/r, which is very cheap compared to a lot of funds.

I see this as an attack on the very concept of a mutually held company. If your owners and customers are by definition the same class of people, then you can't operate for the maximum benefit of your ownership without operating for the maximum benefit of your customers. The only other option is for the taxing authority to come in and make business decisions, which is antagonistic to the very concept of capitalism (owners make their own choices with as little government interference as possible) and the foundation of corporate law (that ownership and control can be separated, but the owners choose the controllers).
And wouldn't that suggest that non-profits should pay their employees more, closer to the top "for profit" sector, so the employees would have more income, and pay more in taxes?

And thus... less for the non-profit purpose.

This could all lead just about anywhere, if "everyone" has to charge "top dollar" for "everything", or be accused of tax fraud.

In my consulting, I charged very small non-profits less that big corporations.
"Ooops!"

And what about pro bono work?
Just think of all the taxable revenue/income not charged, and taxes not paid. :wink:

RM
KyleAAA
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Re: Vanguard sued for charging too little

Post by KyleAAA »

riskreward wrote:
sscritic wrote:
riskreward wrote:Vanguard's CPA firm has undoubtedly vetted this issue and advised that VG is in compliance with the tax laws.
And look at who is paying them. How did things work out for Enron's accounting firm? I knew people who used to work at Arthur Andersen; they don't anymore. How about you?
Do you really think a national CPA firm would risk the death penalty today for issuing fraudulent tax audits after Arthur Andersen's dismantlement because of Enron?
Is that a rhetorical question? Yes, absolutely they would.
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dodecahedron
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Re: Vanguard sued for charging too little

Post by dodecahedron »

stlutz wrote:After reading a few different articles, I think I have it figured out. What Vanguard should be doing tax-wise is charging the funds market prices for the services it provides, paying taxes on those profits, and then distributing those profits back to the funds. In fact, it is doing neither. On one hand it is charging below market prices to avoid paying taxes but on the other hand it has accumulated $1.5B in profits over the years that have not been distributed back to the owners (i.e. the funds). It has to be one or the other.

Can any of the tax/legal experts confirm if I have that right?
I agree with Gropes and Ray. You have got this right.

After reading the really damning language of the complaint, I looked up the name of the plaintiff's lead attorney. He is a major big name in the whistleblowing law industry, with some very impressive credentials. He is someone who knows what he is doing and would have a lot to lose if this case were to be dismissed as frivolous. I think there is real potential for a very serious case here! But It would be premature to move funds elsewhere.

http://zffjlaw.com/about-zffj-law/dean-zerbe/

http://zffjlaw.com/dean-zerbe-honored-a ... -the-year/
Last edited by dodecahedron on Sun Jul 27, 2014 11:51 am, edited 2 times in total.
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