Alan Grayson: Lies, Tax Fraud and Deceit

Natural Born Conservative ^ | November 3, 2009 | Larry Walker, Jr.

[NaturalBornConservative]

Lies, Tax Fraud and Deceit

My theory is that Alan Grayson is a liar, a fraud, and a tax-cheat. Who is this guy? How did he really obtain his wealth? It’s certainly worth further investigation in light of the following.

Summary:

1. Roll Call lists Alan Grayson’s largest asset is a claim against Derivium Capital, the now bankrupt Ponzi scheme, in the amount of $34 million.
   
2. Central Florida Politics lists Alan Grayson as the Derivium Capital scams most frequent customer.
   
3. Roll Call lists Grayson’s net worth at $31.12 million. Grayson’s only other asset is said to be a trust fund worth $5 to $25 million.
   
4. Roll Call states that Grayson founded IDT Corp. in 1990. However, Wikipedia.org states that IDT was founded by Howard Jonas in 1990. An article from January 9, 1992, in the New York Times, entitled, “Hot-Wiring Overseas Telephone Calls”, backs up the fact that the company was founded by Howard Jonas, not Alan Grayson.
   
5. Per taxprophet.com, the IRS has targeted Derivium Capital’s loan transactions as taxable events.

Questionable Issues:

1. If Alan Grayson was not the founder of IDT Corp., then how did he obtain $29 million worth of stock between the years 2000 and 2005?
   
2. Since Alan Grayson was not the founder of IDT Corp., then why did he lie on his Congressional disclosure?
   
3. What was the cost basis of the stock which Alan Grayson sold to Derivium Capital for $26 million?
   
4. Did the IRS investigate Alan Grayson, and if so, how much was determined that Grayson owed in back taxes?
   
5. Did Alan Grayson voluntarily amend his tax returns to report the sale of stock to Derivium Capital?
   
6. What did Alan Grayson know about Derivium Capital at the time of the transaction?
   
7. Did Alan Grayson knowingly profit from an illegal Ponzi scheme?

Excerpts:

Rep. Alan Grayson (D-Fla.) $31.12 million

The Florida lawmaker’s largest asset stems from an apparent financial mistake.

Grayson lists a claim valued at $25 million to $50 million against Derivium Capital.

The now-bankrupt firm managed a Ponzi scheme in which investors, including Grayson, could turn over stock to Derivium in exchange for cash loans and redeem the value later if the stock prices increased. A South Carolina court ruled earlier this year that Derivium shareholders were collectively owed about $270 million in lost profits and that Grayson’s share would be about $34 million.

In addition to that claim, Grayson, an attorney who founded the telecommunications company IDT Corp. in 1990, lists a trust valued at $5 million to $25 million. The same trust was previously Grayson’s largest asset, with a value of $25 million to $50 million when he filed a candidate disclosure form in November 2008.

Scam’s Most Frequent Customer

Between 2000 and 2005, Grayson was the most frequent participant in Derivium’s “90-percent stock-loan” program, transferring about $29 million in stocks to Derivium and promptly receiving 90 percent of it – about $26 million – back in cash as “stock loans,” according to his court filings. In that sense, he lost only about $3 million out of pocket.

But Derivium had promised to pay Grayson profits on his stocks, if they appreciated enough over the three-year loan period to cover the amount of his “stock loans” plus interest. And Grayson picked some lucrative stocks. His $34 million in damages is based on the profits he should have received on stocks that rose in value – had Derivium not run out of cash and filed for bankruptcy.


Derivium Loan Update: IRS Targets Derivium Loan Transactions

Introduction: IRS has targeted taxpayers who have engaged in loan transactions through Derivium Capital by sending them Preliminary Notices, in late January, 2007, stating that the Derivium loan transaction may be a "tax avoidance" device.

In essence, IRS claims the Derivium loan transaction is really a taxable sale of securities at the time taxpayers received the proceeds, rather than a bona fide loan. IRS has an audit project underway in Sacramento, California, involving Derivium-type loans.

How It Works: In general, Derivium arranged loans for 90% of the value of a stock for an initial 3-year period at a compounded interest rate of approximately 10%. The loan is non-recourse, which means that at the end of the loan term, if the borrower cannot repay both principal and interest, the lender forecloses on the stock in full payment for the loan. The borrower has the option of rolling over the loan at maturity for an additional fee.

Note: Derivium has filed for bankruptcy and its client list has become public, thereby providing IRS with a road map of taxpayers who engaged in the loan transactions. Derivium is no longer in business.

Tax Consequences: IRS challenges the transaction and maintains a sale occurred in the initial year of the transaction on the following grounds:

1. The taxpayer was obligated to transfer the stock to Derivium, but repayment was optional because the purported loan was non-recourse to the taxpayer.
   
2. Taxpayers eliminated the risk of loss.
   
3. Principal payments are prohibited during the entire term of the transaction.
   
4. Legal title to the stock was transferred to Derivium.
   
5. The stock was treated as belonging to Derivium.
   
6. Derivium sold the stock to fund the transaction.

When the loan matures and if the borrower does not repay it, the lender forecloses on the security (the stock) and the borrower has a taxable event at that time. The stock is treated as sold for the full amount of principal and interest outstanding.

Thus, the borrower has a gain equal to the difference between the sales price (the full amount outstanding on the loan) and the borrower's basis in the security. The gain will usually meet long-term capital gain requirements under federal law and be taxed at 15%.

Sources:

http://centralfloridapolitics.com/2009/07/10/rep-alan-grayson-loses-millions-in-ponzi-scheme/

http://www.taxprophet.com/archives/Derivium_loan_2007_update.shtml

http://www.rollcall.com/features/Guide-to-Congress_2009/guide/38181-1.html?page=4#alangrayson

http://www.nytimes.com/1992/01/09/business/hot-wiring-overseas-telephone-calls.html

http://en.wikipedia.org/wiki/IDT_Corp.

http://innovation.cqpolitics.com/cq-rollcall/richest_members_of_congress_2008

[Typical_Whitey]

The IRS should use a Microscope on all Congressman and Obama too...

[Signalman]

My theory is that Alan Grayson is a liar, a fraud, and a tax-cheat.

And those are his good points.

[bilhosty]

This idiot also claims to have graduated with honors like in the upper 1-2% of Harvard and to of had among the highest SAT scores in the universe. Is there any way this can be proved? I bet he is a total phoney.

[NaturalBornConservative]

There is no proof of any of his bio. I find it hard to believe that he graduated from Harvard in 1983, worked for the Supreme Court in 1984, founded the Alliance for Aging Research in 1986, and then mysteriously became a telecommunications guru and founded IDT Corp in 1990. There is no mention of Grayson in any of IDT’s documents. I don’t believe any of it, and then there’s the part about the mysterious $29 million in stock he accumulated while helping the elderly (His master’s degree thesis was on improving elderly Americans’ health).

http://www.whorunsgov.com/Profiles/Alan_Grayson

http://www.idt.net/about/management.aspx

http://www.graysonforcongress.com/page.asp?PageId=2

[True Republican Patriot]

Shucks! That sounds like Grayson has the same Mother and Father as Obama HUSSEIN was gotten from....... Hate to use the word “BORN” as that appears to be a Terrible Desecration of the Word Describing a Usually Most Blessed Event...:-(

[NaturalBornConservative]

And did Grayson not state that he was an “economist” when he called Linda Robertson a “K-Street Whore”? When did this lawyer ever study economics? He must have forgotten to add that lie to his biography.

[smokingfrog]

An interesting area of Alan Grayson’s history concerns his dealing with a small South Carolina financial firm named Derivium Capital LLC. In 2005, Grayson claimed he was the victim of a Ponzi scheme that Derivium engineered.

The Florida Congressman took part in what was known as a “90% stock-loan” program. Participants in the program received three-year loans of up to 90% of the value of any stock they put up as collateral. Upon maturity, participants paid back the loan plus interest and received the stock back. Any gain the stocks made during the loan term belonged solely to the participant. Derivium purportedly only made its money from interest on the loans.

The best part? If stock prices went down during the loan term, investors could surrender the stock and walk away with their 90% payment.

Over five years Congressman Grayson placed $29 million of his personal holdings, mostly deriving from his stint as President of IDT, with Derivium, for which he received $26 million in cash. Grayson used the money for various investments in Latin America.

Derivium made over $1 billion worth of “90% stock-loans” to more than 1,400 clients from 1997-2005. In 2005 Derivium unexpectedly went bankrupt. When the dust settled Grayson was out $3 million in cash plus $30+ million in paper profits. Grayson, a private attorney at the time, said, “It’s beginning to look like it may have been a very sophisticated Ponzi scheme.” Before going belly-up, Derivium claimed to have paid Grayson $600,000 in gains when he paid back his initial loans with the firm.

The IRS took a sightly different view of the whole affair and stated that while potentially a Ponzi scheme, Derivium’s practices also amounted to a “tax fraud scheme.”

http://www.usdoj.gov/tax/txdv07727.htm

[bilhosty]

I don’t believe he was born either. I think he was hatched.

[Ann Archy]

Of COURSE he’s a TAx Cheat and a LIAR....He’s a DEMOCRAT!! Plus he’s an anti-Christian Jew.....NOT GOOD.

[NaturalBornConservative]

From reading this, it sounds like Grayson most likely owes the IRS a few million, rather than Derivium owing him. The interest and penalties are accruing every minute. Questions are was he audited, did he pay taxes, and was he knowingly trying to evade income taxes? I hear there’s no statute of limitations on FRAUD.

[NaturalBornConservative]

So it turns out Grayson did receive IDT Stock Warrants with a cost basis of $1.00 per share on February 2, 1996. Still no mention, other than his own words, that he founded the company. IDT Stock peaked at around $70.00 per share in 2004 (currently worth $3.84 per share). With a cost basis of $1.00, if he sold all shares at the 2001 low of $25, (most likely) his taxable gain would have been $13.8 million with taxes due of $2.1 million at 15% Capital Gains Tax Rates.

See Exhibit 4.03 for Cost Basis

http://yahoo.brand.edgar-online.com/DisplayFilingInfo.aspx?Type=HTML&text=%2526lt%253bNEAR%252f4%2526gt%253b(%22ALAN+M.%22%2c%22GRAYSON%22)&FilingID=1406353&ppu=%2fPeopleFilingResults.aspx%3fPersonID%3d2358805%26PersonName%3dALAN%2520M.%2520GRAYSON

IDT Stock Charts

http://www.marketwatch.com/investing/stock/IDT/charts?countryCode=US&submitted=true&intflavor=advanced&origurl=%2Ftools%2Fquotes%2Fintchart.asp&time=13&freq=1&comp=Enter%20Symbol(s)%3A&compidx=aaaaa~0&compind=aaaaa~0&uf=7168&ma=1&maval=50&lf=1&lf2=4&lf3=0&type=2&size=1&optstyle=1013

Other Reference: Edgar Online

http://yahoo.brand.edgar-online.com/PeopleFilingResults.aspx?PersonID=2358805&PersonName=ALAN%20M.%20GRAYSON

[lonestar]

Since Alan Grayson was not the founder of IDT Corp., then why did he lie on his Congressional disclosure?

Because Algore had already taken the Internet.