FROM: FEDERAL TRADE COMMISSION
FTC Notifies Facebook, WhatsApp of Privacy Obligations in Light of Proposed Acquisition
The director of the Federal Trade Commission’s Bureau of Consumer Protection notified Facebook and WhatsApp about their obligations to protect the privacy of their users in light of Facebook’s proposed acquisition of WhatsApp.
In a letter to the two companies, Bureau Director Jessica Rich noted that WhatsApp has made clear privacy promises to consumers, and that both companies have told consumers that after any acquisition, WhatsApp will continue its current privacy practices.
“We want to make clear that, regardless of the acquisition, WhatsApp must continue to honor these promises to consumers. Further, if the acquisition is completed and WhatsApp fails to honor these promises, both companies could be in violation of Section 5 of the Federal Trade Commission (FTC) Act and, potentially, the FTC’s order against Facebook,” the letter states.
In 2011, Facebook settled FTC charges that it deceived consumers by failing to keep its privacy promises. Under the terms of the FTC’s order against the company, it must get consumers’ affirmative consent before making changes that override their privacy settings, among other requirements.
The letter notes that before making any material changes to how they use data already collected from WhatsApp subscribers, the companies must get affirmative consent. In addition, the letter notes that the companies must not misrepresent the extent to which they maintain the privacy or security of user data. The letter also recommends that consumers be given the opportunity to opt out of any future changes to how newly-collected data is used.
Showing posts with label FACEBOOK. Show all posts
Showing posts with label FACEBOOK. Show all posts
Thursday, April 10, 2014
Tuesday, April 8, 2014
"JERK.COM" OPERATORS CHARGED BY FTC WITH DECEIVING CONSUMERS, HAVESTING PERSONONAL INFORMATION
FROM: FEDERAL TRADE COMMISSION
FTC Charges Operators of “Jerk.com” Website With Deceiving Consumers
Company Took Information from Facebook to Label Millions a “Jerk” or “Not a Jerk”
The Federal Trade Commission charged the operators of the website “Jerk.com” with harvesting personal information from Facebook to create profiles labeling people a “Jerk” or “not a Jerk,” then falsely claiming that consumers could revise their online profiles by paying $30. According to the FTC’s complaint, between 2009 and 2013 the defendants, Jerk, LLC and the operator of the website, John Fanning, created Jerk.com profiles for more than 73 million people, including children.
In its complaint, the FTC charges that the defendants violated the FTC Act by misleading consumers that the content on Jerk.com had been created by other Jerk.com users, when in fact most of it had been harvested from Facebook; and by falsely leading consumers to believe that by paying for a Jerk.com membership, they could access “premium” features that could allow them to change their “Jerk” profile.
The FTC is seeking an order barring the defendants’ deceptive practices, prohibiting them from using the personal information they improperly obtained, and requiring them to delete the information.
“In today’s interconnected world, people are especially concerned about their reputation online, and this deceptive scheme was a brazen attempt to exploit those concerns,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection.
According to the FTC’s complaint, Jerk.com profiles often appeared in search engine results when consumers searched for an individual’s name. Upon viewing their photos on Jerk.com, many believed that someone they knew had created their Jerk.com profile. Jerk reinforced this view by representing that users created all the content on Jerk.
But in reality, the defendants created the vast majority of the profiles by misusing personal information they improperly obtained through Facebook, the FTC alleged. They registered numerous websites with Facebook and then allegedly used Facebook’s application programming interfaces to download the names and photos of millions of Facebook users, which they in turn used to create nearly all the Jerk.com profiles.
In addition to buttons that allowed users to vote on whether a person was a “Jerk” or not, Jerk profiles included fields in which users could enter personal information about the subject or post comments about them. In some cases, the complaint alleges, the profile comment fields subjected people to derisive and abusive comments, such as, “Omg I hate this kid he\’s such a loser,” and, “Nobody in their right mind would love you … not even your parents love [you].”
The profiles also included millions of photos, including photos of children and photos that consumers claim they had designated on Facebook as private, the FTC complaint alleges. Some of them featured intimate family moments, including children bathing and a mother nursing her child.
The defendants also told consumers they could “use Jerk to manage your reputation and resolve disputes with people who you are in conflict with,” according to the FTC’s complaint. They allegedly charged consumers $25 to email Jerk.com’s customer service department, and also falsely told consumers that if they paid $30 for a website subscription, they could access “premium features,” including the ability to dispute information posted on Jerk.com, and receive fast notifications and special updates. But according to the FTC, in many cases, consumers who paid the customer service or subscription fee often got nothing in return.
The Commission vote to issue the administrative complaint was 4-0. The evidentiary hearing is scheduled to begin before an administrative law judge at the FTC on January 27, 2015.
NOTE: The Commission issues an administrative complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The issuance of the administrative complaint marks the beginning of a proceeding in which the allegations will be tried in a formal hearing before an administrative law judge.
FTC Charges Operators of “Jerk.com” Website With Deceiving Consumers
Company Took Information from Facebook to Label Millions a “Jerk” or “Not a Jerk”
The Federal Trade Commission charged the operators of the website “Jerk.com” with harvesting personal information from Facebook to create profiles labeling people a “Jerk” or “not a Jerk,” then falsely claiming that consumers could revise their online profiles by paying $30. According to the FTC’s complaint, between 2009 and 2013 the defendants, Jerk, LLC and the operator of the website, John Fanning, created Jerk.com profiles for more than 73 million people, including children.
In its complaint, the FTC charges that the defendants violated the FTC Act by misleading consumers that the content on Jerk.com had been created by other Jerk.com users, when in fact most of it had been harvested from Facebook; and by falsely leading consumers to believe that by paying for a Jerk.com membership, they could access “premium” features that could allow them to change their “Jerk” profile.
The FTC is seeking an order barring the defendants’ deceptive practices, prohibiting them from using the personal information they improperly obtained, and requiring them to delete the information.
“In today’s interconnected world, people are especially concerned about their reputation online, and this deceptive scheme was a brazen attempt to exploit those concerns,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection.
According to the FTC’s complaint, Jerk.com profiles often appeared in search engine results when consumers searched for an individual’s name. Upon viewing their photos on Jerk.com, many believed that someone they knew had created their Jerk.com profile. Jerk reinforced this view by representing that users created all the content on Jerk.
But in reality, the defendants created the vast majority of the profiles by misusing personal information they improperly obtained through Facebook, the FTC alleged. They registered numerous websites with Facebook and then allegedly used Facebook’s application programming interfaces to download the names and photos of millions of Facebook users, which they in turn used to create nearly all the Jerk.com profiles.
In addition to buttons that allowed users to vote on whether a person was a “Jerk” or not, Jerk profiles included fields in which users could enter personal information about the subject or post comments about them. In some cases, the complaint alleges, the profile comment fields subjected people to derisive and abusive comments, such as, “Omg I hate this kid he\’s such a loser,” and, “Nobody in their right mind would love you … not even your parents love [you].”
The profiles also included millions of photos, including photos of children and photos that consumers claim they had designated on Facebook as private, the FTC complaint alleges. Some of them featured intimate family moments, including children bathing and a mother nursing her child.
The defendants also told consumers they could “use Jerk to manage your reputation and resolve disputes with people who you are in conflict with,” according to the FTC’s complaint. They allegedly charged consumers $25 to email Jerk.com’s customer service department, and also falsely told consumers that if they paid $30 for a website subscription, they could access “premium features,” including the ability to dispute information posted on Jerk.com, and receive fast notifications and special updates. But according to the FTC, in many cases, consumers who paid the customer service or subscription fee often got nothing in return.
The Commission vote to issue the administrative complaint was 4-0. The evidentiary hearing is scheduled to begin before an administrative law judge at the FTC on January 27, 2015.
NOTE: The Commission issues an administrative complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The issuance of the administrative complaint marks the beginning of a proceeding in which the allegations will be tried in a formal hearing before an administrative law judge.
Thursday, March 6, 2014
COURT ACTS TO STOP FRAUDULENT PYRAMID SCHEME ON FACEBOOK, TWITTER
FROM: U.S. SECURITIES AND EXCHANGE COMMISSION
The Securities and Exchange Commission announced an emergency enforcement action to stop a fraudulent pyramid scheme by phony companies masquerading as a legitimate international investment firm.
The SEC has obtained a federal court order to freeze accounts holding money stolen from U.S. investors by Fleet Mutual Wealth Limited and MWF Financial – collectively known as Mutual Wealth. The SEC alleges that Mutual Wealth has been exploiting investors through a website and social media accounts on Facebook and Twitter, falsely promising extraordinary returns of 2 to 3 percent per week for investors who open accounts with the firm. Mutual Wealth purports to invest customer funds using an “innovative” high-frequency trading strategy that allows “capital to be invested into securities for no more than a few minutes.” In classic pyramid scheme fashion, Mutual Wealth encourages existing investors to become “accredited advisors” and recruit new investors in exchange for a referral fee or commission.
According to the SEC’s complaint filed in U.S. District Court for the Central District of California, almost nothing that Mutual Wealth represents to investors is true. The company does not purchase or sell securities on behalf of investors, and instead merely diverts investor money to offshore bank accounts held by shell companies. Mutual Wealth’s purported headquarters in Hong Kong does not exist, nor does its purported “data-centre” in New York. Mutual Wealth also lists make-believe “executives” on its website, and falsely claims in e-mails to investors that it is “registered” or “duly registered” with the SEC. Approximately 150 U.S. investors have opened accounts with Mutual Wealth and collectively invested a total of at least $300,000.
“Mutual Wealth used Facebook and Twitter as well as a team of recruiters to spread a steady stream of lies that tricked investors out of their money,” said Gerald W. Hodgkins, an associate director in the SEC’s Division of Enforcement. “Fortunately we were able to quickly trace the fraud overseas and obtain a court order requiring Mutual Wealth to shut down its website before the scheme gains more momentum.”
According to the SEC’s complaint, Mutual Wealth operates through entities in Panama and the United Kingdom and uses offshore bank accounts in Cyprus and Latvia and offshore “payment processors” to divert money from investors. Mutual Wealth’s sole director and shareholder presented forged and stolen passports and a bogus address to foreign government authorities and payment processors.
The SEC alleges that Mutual Wealth leverages the scope and reach of social media to solicit investors with its fraudulent pitch. Mutual Wealth maintains Facebook and Twitter accounts that link to its website and serve as platforms through which it lures new investors. Some of Mutual Wealth’s “accredited advisors” then use social media channels ranging from Facebook and Twitter to YouTube and Skype to recruit additional investors and earn referral fees and commissions. Mutual Wealth’s Facebook page spreads such misrepresentations as “HFT portfolios with ROI of up to 250% per annum. Income yield up to 8% per week.” A Facebook post on Aug. 12, 2013, boasted “$1000 investment into the Growth and Income Portfolio made on April 8th, 2013 is now worth $2,112.77.” Mutual Wealth regularly posts status updates for investors on its Facebook page, and the comment sections beneath the posts are often filled with solicitations by the accredited advisors. Mutual Wealth also tweets announcements posted on its Facebook page.
The SEC’s complaint charges Mutual Wealth with violations of Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. For the purposes of recovering investor money in their possession, the complaint names several relief defendants linked to offshore accounts to which investor funds were diverted from the scheme: Risort Partners Inc., Hullstar Capital LLP, Camber Alliance LLP, Kimrod Estate LLP, and Midlcorp Trade LTD.
The Honorable Dolly M. Gee has granted the SEC’s request for a court order deactivating Mutual Wealth’s website and freezing assets in all accounts at any bank, financial institution, brokerage firm, or third-payment payment processor (including those commercially known as SolidTrust Pay, EgoPay, and Perfect Money) maintained for the benefit of Mutual Wealth.
The SEC’s investigation, which is continuing, has been conducted by H. Norman Knickle and Mark M. Oh and supervised by Conway T. Dodge. The SEC’s litigation will be led by Melissa Armstrong and Mr. Knickle. The SEC appreciates the assistance of the Federal Bureau of Investigation, Financial and Capital Market Commission of Latvia, Ontario Securities Commission, and Cyprus Securities and Exchange Commission.
The Securities and Exchange Commission announced an emergency enforcement action to stop a fraudulent pyramid scheme by phony companies masquerading as a legitimate international investment firm.
The SEC has obtained a federal court order to freeze accounts holding money stolen from U.S. investors by Fleet Mutual Wealth Limited and MWF Financial – collectively known as Mutual Wealth. The SEC alleges that Mutual Wealth has been exploiting investors through a website and social media accounts on Facebook and Twitter, falsely promising extraordinary returns of 2 to 3 percent per week for investors who open accounts with the firm. Mutual Wealth purports to invest customer funds using an “innovative” high-frequency trading strategy that allows “capital to be invested into securities for no more than a few minutes.” In classic pyramid scheme fashion, Mutual Wealth encourages existing investors to become “accredited advisors” and recruit new investors in exchange for a referral fee or commission.
According to the SEC’s complaint filed in U.S. District Court for the Central District of California, almost nothing that Mutual Wealth represents to investors is true. The company does not purchase or sell securities on behalf of investors, and instead merely diverts investor money to offshore bank accounts held by shell companies. Mutual Wealth’s purported headquarters in Hong Kong does not exist, nor does its purported “data-centre” in New York. Mutual Wealth also lists make-believe “executives” on its website, and falsely claims in e-mails to investors that it is “registered” or “duly registered” with the SEC. Approximately 150 U.S. investors have opened accounts with Mutual Wealth and collectively invested a total of at least $300,000.
“Mutual Wealth used Facebook and Twitter as well as a team of recruiters to spread a steady stream of lies that tricked investors out of their money,” said Gerald W. Hodgkins, an associate director in the SEC’s Division of Enforcement. “Fortunately we were able to quickly trace the fraud overseas and obtain a court order requiring Mutual Wealth to shut down its website before the scheme gains more momentum.”
According to the SEC’s complaint, Mutual Wealth operates through entities in Panama and the United Kingdom and uses offshore bank accounts in Cyprus and Latvia and offshore “payment processors” to divert money from investors. Mutual Wealth’s sole director and shareholder presented forged and stolen passports and a bogus address to foreign government authorities and payment processors.
The SEC alleges that Mutual Wealth leverages the scope and reach of social media to solicit investors with its fraudulent pitch. Mutual Wealth maintains Facebook and Twitter accounts that link to its website and serve as platforms through which it lures new investors. Some of Mutual Wealth’s “accredited advisors” then use social media channels ranging from Facebook and Twitter to YouTube and Skype to recruit additional investors and earn referral fees and commissions. Mutual Wealth’s Facebook page spreads such misrepresentations as “HFT portfolios with ROI of up to 250% per annum. Income yield up to 8% per week.” A Facebook post on Aug. 12, 2013, boasted “$1000 investment into the Growth and Income Portfolio made on April 8th, 2013 is now worth $2,112.77.” Mutual Wealth regularly posts status updates for investors on its Facebook page, and the comment sections beneath the posts are often filled with solicitations by the accredited advisors. Mutual Wealth also tweets announcements posted on its Facebook page.
The SEC’s complaint charges Mutual Wealth with violations of Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. For the purposes of recovering investor money in their possession, the complaint names several relief defendants linked to offshore accounts to which investor funds were diverted from the scheme: Risort Partners Inc., Hullstar Capital LLP, Camber Alliance LLP, Kimrod Estate LLP, and Midlcorp Trade LTD.
The Honorable Dolly M. Gee has granted the SEC’s request for a court order deactivating Mutual Wealth’s website and freezing assets in all accounts at any bank, financial institution, brokerage firm, or third-payment payment processor (including those commercially known as SolidTrust Pay, EgoPay, and Perfect Money) maintained for the benefit of Mutual Wealth.
The SEC’s investigation, which is continuing, has been conducted by H. Norman Knickle and Mark M. Oh and supervised by Conway T. Dodge. The SEC’s litigation will be led by Melissa Armstrong and Mr. Knickle. The SEC appreciates the assistance of the Federal Bureau of Investigation, Financial and Capital Market Commission of Latvia, Ontario Securities Commission, and Cyprus Securities and Exchange Commission.
Wednesday, April 3, 2013
SEC REPORT SAYS COMPANIES CAN USE SOCIAL MEDIA TO ANNOUNCE COMPLIANCE WITH REGULATION FD INFORMATION
FROM: U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C., April 2, 2013 — The Securities and Exchange Commission today issued a report that makes clear that companies can use social media outlets like Facebook and Twitter to announce key information in compliance with Regulation Fair Disclosure (Regulation FD) so long as investors have been alerted about which social media will be used to disseminate such information.
The SEC’s report of investigation confirms that Regulation FD applies to social media and other emerging means of communication used by public companies the same way it applies to company websites. The SEC issued guidance in 2008 clarifying that websites can serve as an effective means for disseminating information to investors if they’ve been made aware that’s where to look for it. Today’s report clarifies that company communications made through social media channels could constitute selective disclosures and, therefore, require careful Regulation FD analysis.
"One set of shareholders should not be able to get a jump on other shareholders just because the company is selectively disclosing important information," said George Canellos, Acting Director of the SEC’s Division of Enforcement. "Most social media are perfectly suitable methods for communicating with investors, but not if the access is restricted or if investors don’t know that’s where they need to turn to get the latest news."
Regulation FD requires companies to distribute material information in a manner reasonably designed to get that information out to the general public broadly and non-exclusively. It is intended to ensure that all investors have the ability to gain access to material information at the same time.
Lona Nallengara, Acting Director of the SEC’s Division of Corporation Finance, added, "Companies should review the Commission’s existing guidance — it is flexible enough to address questions that arise for companies that choose to communicate through social media, and the guidance does so in a straightforward manner."
The SEC’s report of investigation stems from an inquiry the Division of Enforcement launched into a post by Netflix CEO Reed Hastings on his personal Facebook page stating that Netflix’s monthly online viewing had exceeded one billion hours for the first time. Netflix did not report this information to investors through a press release or Form 8-K filing, and a subsequent company press release later that day did not include this information. Neither Hastings nor Netflix had previously used his Facebook page to announce company metrics, and they had never before taken steps to alert investors that Hastings’ personal Facebook page might be used as a medium for communicating information about Netflix. Netflix’s stock price had begun rising before the posting, and increased from $70.45 at the time of the Facebook post to $81.72 at the close of the following trading day.
The SEC did not initiate an enforcement action or allege wrongdoing by Hastings or Netflix. Recognizing that there has been market uncertainty about the application of Regulation FD to social media, the SEC issued the report of investigation pursuant to Section 21(a) of the Securities Exchange Act of 1934.
The report of investigation explains that although every case must be evaluated on its own facts, disclosure of material, nonpublic information on the personal social media site of an individual corporate officer — without advance notice to investors that the site may be used for this purpose — is unlikely to qualify as an acceptable method of disclosure under the securities laws. Personal social media sites of individuals employed by a public company would not ordinarily be assumed to be channels through which the company would disclose material corporate information.
The SEC’s inquiry was conducted by Cameron P. Hoffman, Michael E. Liftik, and Assistant Regional Director Cary S. Robnett in the San Francisco Regional Office.
Washington, D.C., April 2, 2013 — The Securities and Exchange Commission today issued a report that makes clear that companies can use social media outlets like Facebook and Twitter to announce key information in compliance with Regulation Fair Disclosure (Regulation FD) so long as investors have been alerted about which social media will be used to disseminate such information.
The SEC’s report of investigation confirms that Regulation FD applies to social media and other emerging means of communication used by public companies the same way it applies to company websites. The SEC issued guidance in 2008 clarifying that websites can serve as an effective means for disseminating information to investors if they’ve been made aware that’s where to look for it. Today’s report clarifies that company communications made through social media channels could constitute selective disclosures and, therefore, require careful Regulation FD analysis.
"One set of shareholders should not be able to get a jump on other shareholders just because the company is selectively disclosing important information," said George Canellos, Acting Director of the SEC’s Division of Enforcement. "Most social media are perfectly suitable methods for communicating with investors, but not if the access is restricted or if investors don’t know that’s where they need to turn to get the latest news."
Regulation FD requires companies to distribute material information in a manner reasonably designed to get that information out to the general public broadly and non-exclusively. It is intended to ensure that all investors have the ability to gain access to material information at the same time.
Lona Nallengara, Acting Director of the SEC’s Division of Corporation Finance, added, "Companies should review the Commission’s existing guidance — it is flexible enough to address questions that arise for companies that choose to communicate through social media, and the guidance does so in a straightforward manner."
The SEC’s report of investigation stems from an inquiry the Division of Enforcement launched into a post by Netflix CEO Reed Hastings on his personal Facebook page stating that Netflix’s monthly online viewing had exceeded one billion hours for the first time. Netflix did not report this information to investors through a press release or Form 8-K filing, and a subsequent company press release later that day did not include this information. Neither Hastings nor Netflix had previously used his Facebook page to announce company metrics, and they had never before taken steps to alert investors that Hastings’ personal Facebook page might be used as a medium for communicating information about Netflix. Netflix’s stock price had begun rising before the posting, and increased from $70.45 at the time of the Facebook post to $81.72 at the close of the following trading day.
The SEC did not initiate an enforcement action or allege wrongdoing by Hastings or Netflix. Recognizing that there has been market uncertainty about the application of Regulation FD to social media, the SEC issued the report of investigation pursuant to Section 21(a) of the Securities Exchange Act of 1934.
The report of investigation explains that although every case must be evaluated on its own facts, disclosure of material, nonpublic information on the personal social media site of an individual corporate officer — without advance notice to investors that the site may be used for this purpose — is unlikely to qualify as an acceptable method of disclosure under the securities laws. Personal social media sites of individuals employed by a public company would not ordinarily be assumed to be channels through which the company would disclose material corporate information.
The SEC’s inquiry was conducted by Cameron P. Hoffman, Michael E. Liftik, and Assistant Regional Director Cary S. Robnett in the San Francisco Regional Office.
Saturday, May 19, 2012
SENATOR LEVIN ON FACEBOOK TAX LOOPHOLE
FROM: U.S. SENATOR CARL LEVIN'S WEBSITE
SPEAKING FROM THE SENATE FLOOR
Thursday, May 17, 2012Mr. President, tomorrow will be a day in tax history – when Facebook goes public, it will get a $16 billion tax deduction, which is the largest tax deduction ever taken by any corporation exploiting the stock option tax loophole.
Facebook's recent filings in anticipation of its upcoming stock offering provide new facts about its plans to use stock option tax deductions, not only to help it avoid future taxes for years and years to come, but to get a refund of taxes it's already paid.
Facebook’s recent registration statement shows that, due to hundreds of millions of stock options handed out to its founders and top executives, it plans to claim stock option tax deductions worth a whopping $16 billion. That’s more than twice as much as estimates a few months ago, and many, many times larger than the stock option expenses shown on Facebook’s ledgers.
Facebook is a booming, successful company. Its securities filing boasts of double-digit increases in Facebook’s average revenue per user, citing a 32 percent increase in 2010, and another 25 percent increase in 2011, with “growth across all regions.” Despite trumpeting those revenue increases to investors, Facebook is planning at the same time to tell Uncle Sam it has no taxable income, offsetting its revenues with stock option tax deductions.
Facebook’s recent registration statement shows that, due to hundreds of millions of stock options handed out to its founders and top executives, it plans to claim stock option tax deductions worth a whopping $16 billion. That’s more than twice as much as estimates a few months ago, and many, many times larger than the stock option expenses shown on Facebook’s ledgers.
Facebook is a booming, successful company. Its securities filing boasts of double-digit increases in Facebook’s average revenue per user, citing a 32 percent increase in 2010, and another 25 percent increase in 2011, with “growth across all regions.” Despite trumpeting those revenue increases to investors, Facebook is planning at the same time to tell Uncle Sam it has no taxable income, offsetting its revenues with stock option tax deductions.
Facebook’s $16 billion stock option tax deduction is so huge, it will enable Facebook to claim a $500 million refund of taxes paid over the prior two years and wipe out this year’s tax bill. The company says it will also use its deduction to create a “net operating loss” that can be used to eliminate its profits and its taxes for up to 20 years into the future.
As with so much of our tax code, it’s not the law-breaking that shocks the conscience, it’s the stuff that’s allowed. For years, my Permanent Subcommittee on Investigations has identified this stock option tax loophole and tried to explain its cost, its unfairness, and why the loophole should be closed. Facebook’s $16 billion tax deduction brings the issue into sharp focus.
This profitable corporation will stop paying any federal corporate income taxes, simply because it gave hundreds of millions of stock options to its executives. It will go from a corporate citizen that paid its taxes, to one that not only pays no taxes to Uncle Sam on its profits, but gets a tax refund.
As with so much of our tax code, it’s not the law-breaking that shocks the conscience, it’s the stuff that’s allowed. For years, my Permanent Subcommittee on Investigations has identified this stock option tax loophole and tried to explain its cost, its unfairness, and why the loophole should be closed. Facebook’s $16 billion tax deduction brings the issue into sharp focus.
This profitable corporation will stop paying any federal corporate income taxes, simply because it gave hundreds of millions of stock options to its executives. It will go from a corporate citizen that paid its taxes, to one that not only pays no taxes to Uncle Sam on its profits, but gets a tax refund.
Some Facebook defenders claim the company’s nonpayment of taxes is offset by the taxes paid by its executives. But first of all, Facebook demands and receives government services that its executives don’t – from patent protection to cybersecurity to trade enforcement. Second, the fact that executives pay taxes doesn’t mean corporations shouldn’t pay taxes. Facebook should be paying its fair share, and it’s only through a tax loophole that it won’t be. Adding insult to injury is that one of its founders recently renounced his U.S. citizenship just to avoid paying his taxes.
Facebook is an American success story. Its ability to use a stock option loophole to zero out its U.S. tax bill, despite ample profits, makes no sense. It also isn’t fair to the rest of American taxpayers who will have to pay more because Facebook pays nothing.
In these tough economic times, Congress needs to make choices about where to spend taxpayer dollars. The stock option tax deduction, as demonstrated by Facebook, fuels excessive executive pay, shifts the tax burden from corporations to other taxpayers, and enables profitable corporations to get out of paying a dime toward the country that helped make their success possible.
What could our nation do with the billions of dollars it will lose when Facebook uses the stock-option loophole? Well, we could reduce the federal deficit. Or we could pay for programs to help kids go to college, or programs that protect our seniors and veterans, put cops on the beat, or teachers in classrooms.
In these tough economic times, Congress needs to make choices about where to spend taxpayer dollars. The stock option tax deduction, as demonstrated by Facebook, fuels excessive executive pay, shifts the tax burden from corporations to other taxpayers, and enables profitable corporations to get out of paying a dime toward the country that helped make their success possible.
What could our nation do with the billions of dollars it will lose when Facebook uses the stock-option loophole? Well, we could reduce the federal deficit. Or we could pay for programs to help kids go to college, or programs that protect our seniors and veterans, put cops on the beat, or teachers in classrooms.
The stock-option loophole should have been closed long before Facebook’s stock option bonanza. But surely the case of Facebook illustrates to the Senate, to the Congress, and to the American people why we should close this loophole. If Congress were to enact the Levin-Sherrod Brown bill, S. 1375, it would close an unjustified corporate tax loophole that boosts executive pay at the expense of everybody else.
Mr. President, I thank the Chair and yield the floor.
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