Miss Universe Pageant Scores Big Against Former Contestant

The Quaker State can be proud of many things.  The Liberty Bell.  Andy Warhol.  Tastykake.  Trading Places.  The Immaculate Reception.  But one part of its history that Pennsylvania may wish to forget (besides dog killer Michael Vick) is the garrulous young woman chosen to represent the state in the Miss USA pageant — Sheena Monnin.  Last month, a New York arbitrator found that Monnin defamed the Miss Universe organization when she claimed that the show had been rigged and ordered her to pay $5 million in damages.  Everyone knows that beauty pageants are big business (and were even before Honey Boo Boo tragically became a household name).  But how did they suddenly become the setting for big damages awards too?

“Fraudulent, Lacking in Morals, Inconsistent, and in Many Ways Trashy”

Monnin participated in the Miss USA competition and was not one of the semifinalists selected by the pageant judges.  A different panel of celebrity judges then chose the five finalists, including the eventual Miss Universe, Olivia Culpo of Rhode Island.

Sheena-MonninMoments after learning she had not been chosen as a semifinalist, Monnin sent an email to the director of the Miss Pennsylvania USA Pageant, Randy Sanders, claiming that the contest had been “f-ing rigged Randy.”  (Wouldn’t be surprised if this phrase becomes part of the vernacular.)  Monnin resigned as Miss Pennsylvania the next day.  As her reason, she stated that the pageant system had “removed itself from its foundational principles” by allowing transgendered contestants.  That night, she publicly announced her resignation on Facebook, stating that she wanted no affiliation with an organization that was “fraudulent, lacking in morals, inconsistent, and in many ways trashy” — a sentiment that sounds like it could just as easily be a review of the clientele at many Hollywood nightclubs.

In a second Facebook post, she provided a new rationale for her resignation:  the show had been rigged.  As evidence, Monnin gave details of a conversation with another contestant who purportedly had found a list naming the top five finalists prior to the final judging.

Not surprisingly, these comments received much media attention.  Monnin repeated her accusations on NBC’s Today Show, which is broadcast nationally.

Given that allegations of corruption in judging are nothing new and are rarely substantiated (the 2002 Winter Olympics figure skating scandal notwithstanding), the Miss Universe officials might have let this go after Monnin ignored the group’s offer to review the judging process with her.  Forgiveness, however, was no longer on the agenda after the organization allegedly lost a potential $5 million sponsor who purportedly pulled out after expressing concern about the “rigging” allegations.

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Free-to-play games are all the rage these days.  Many people while away their days playing Angry Birds, or Words with Friends before going home to watch Monday Night Football.  Nerds — and, increasingly, “normal people” — do the exact same thing, except instead of watching football, we play games like Super Monday Night Combat.  This teemosummer, the remarkable viability of the free-to-play business model gained extra attention when Forbes reported that the most-played PC game in the world is now a free-to-play game called League of Legends.  For those of you struggling to understand the profitability part, just take a look at League of Legends character Teemo (pictured left).  I mean, seriously, who can resist purchasing all the adorable “skins” for him?!  (Clearly, not me.)

Nevertheless, the business world of free-to-play gaming is not without its dark, seedy underbelly, where even the cute and cuddly characters are forced to work in digital sweatshops and sell virtual drugs on simulated street corners just to make ends meet.  Well, ok, maybe it’s not thatextreme.  But as a recent (and bitter) dispute between game makers Zynga and Kixeye demonstrates, the gaming business can be just as ugly (and fascinating) as some of the game battles themselves.

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Three French Hens, Two Turtle Doves, and Money for My Tax Lien

With the holiday season upon us, we all have so much to be thankful for: our health, happiness, Amazon Prime shipping, and — if you’re Lindsay Lohan — an extra $100k from your Uncle Charlie* (Sheen) to help you out of your tax troubles with your Uncle Sam.

That’s right: ‘tis a season of giving and, like any holiday season, it will be filled with scrooges. The odd thing is that the scrooge Bah-Humbugging a gift is usually the giver, not the receiver. Maybe Lindsay is just not into the holiday spirit, but multiple reports have surfaced this week that Lindsay has yet to say, or even text, thank you to Charlie for his generous gift of $100,000 (maybe Charlie should have helped with her phone bill first). [Update: Lindsay finally thanked/apologized to Charlie, citing a “broken phone” and “lost contacts” for the delay — the modern social equivalent of “the dog ate my homework.”] Lindsay reportedly owes more than $200,000 in back income taxes, interest and penalties to the IRS, and Sheen had reportedlygifted Lindsay the money to help her pay off her IRS tax lien.

Generosity Is Taxing

You’re probably familiar with the concept that gifts of money or other property are subject to gift tax (if given during your lifetime) or estate tax (if given at your death), and that there is a certain amount you can give away without paying gift or estate tax (the credit against gift and estate tax). You might also know that there is an amount of money ($13,000 in 2012 but rising to $14,000 in 2013) that you can give each year to each of an unlimited number of individuals without using any part of your credit. What you might not know is that this applies to gifts of any kind and to any donor, not just to family members passing large amounts of money to each other for estate planning purposes.

That’s right — the $20 Starbucks gift card you gave your co-worker for the office’s gift exchange? Now you only have $12,980 left to give that person this year. The $10 check that grandma gave you for your birthday and that ugly sweater that your best friend bought you (on sale, of course) just because she was thinking about you? Gifts! Even those hand-me-downs that you gave your friend after you lost (or put on) that weight is considered by the IRS to be a “gift.” Generally, the IRS just doesn’t care until you hit $13,000 to the same person in one year. If the total value of all gifts you make to any one person exceeds $13,000 in one year, you are required to file a gift tax return reporting those gifts to the IRS.

Santa is very careful about keeping costs down by keeping his gifts small (and by hiring non-unionized Elves following the North Pole’s passage of a “Right to Work” bill). On the other hand, when you’re handing out $100k stocking stuffers, that’s a bit of a different story.

‘Tis Really the Season

If there has been any recent year in which to feel generous, 2012 has been that year.

Thanks to the some down-to-the-wire, eleventh-hour negotiations to avoid the fiscal cliff of December 2010 — yes, 2010 (déjà vu anyone?) — Congress gifted America the “2010 Tax Act,” bestowing upon us the well-known (and soon to expire) extensions of the 2001 Bush tax cuts. As part of the 2010 tax deal, the estate and gift tax credit was increased to $5 million for 2011 and $5.12 million for 2012. The 2010 Tax Act also unified the amount that could cumulatively be given away during lifetime (the gift tax credit) with the amount that could be passed at death (the estate tax credit), so that the wealthy-and-generous could take full advantage of the entire amount during their lifetimes. Prior to the 2010 Tax Act, only up to $1 million of credit could be used during lifetime.

But, as we prepare — again — to dive off the fiscal cliff, absent Congressional action, the estate and gift tax credit will go back to $1 million (pre-Bush era amounts) and the tax rate will increase to 55% (from its historically low rate of 35%). So, in the “use it or lose it spirit,” the proverbial 1%ers have jumped on the 2012 giving bandwagon and are racing to transfer assets to their kids before the rates change on January 1.

Say Thank You, Lindsay!

Charlie Sheen seems to follow the “use it or lose it” mentality in many areas of his life, including his giving. The good news for Charlie is that his gift of $100,000 to LiLo likely won’t cost him any gift tax — the first $13,000 will be sheltered by the annual exclusion from gift tax and the other $87,000 will probably fall within Charlie’s $5.12 million gift tax credit. This, of course, assumes that Charlie hasn’t jumped on the same bandwagon as the rest of the 1% and already given away $5.12 million over his lifetime through responsible planning under the advice of good tax advisors (stop laughing…it could happen).

But let’s just say Charlie is getting good tax planning advice and has made his $5.12 million of lifetime gifts already — the $100,000 gift to LiLo is going to cost Charlie about another $30,000 in gift tax. That’s a tax Charlie is going to owe the IRS, not Lindsay. So, really, Lindsay, you should thank Charlie twice. You just got an extra $100k from Considerate Charlie….and he is footing the tax bill, if any!

It Was a Gift, Right?

According to recent reports, it seems that maybe Charlie felt Lindsay was owed this money for work relating to Scary Movie 5, in which she appeared with Charlie, that was never paid to her. Careful, Charlie: sounds like you’re saying this is income that Lindsay earned, which would mean she has to pay income tax on it! Lucky for Lindsay, unless the IRS can demonstrate that Lindsay was employed by Charlie, this probably won’t constitute taxable earned income to Lindsay and really is just a nice gift.

Maybe this wasn’t really a gift and Charlie just loaned Lindsay the money? Well, that’s double the benefit for the IRS. Either Lindsay has to pay interest to Charlie, which is taxable interest income for him (but no gift), or Charlie will be treated as if he received the interest income and then gifted it back to Lindsay! In other words, option A is that Charlie pays income tax on the interest he receives, and Option B is that Charlie pays income tax and gift tax on the interest he foregoes (double whammy!), but every option is money in the bank — for the IRS. And if it is a loan, Lindsay better add that $100k principal debt to her liability sheet — and Charlie will take backseat to the IRS in being repaid.


So, if you are lucky enough to be like Lindsay and receive a large gift from someone who cares, thank that someone not only once, but 1.35 times, because that gift may be costing more than just the price of the gift itself — that someone may be paying the gift tax on the gift as well. On the other hand, if you, like most people, are stuck in the $10 check or ugly sweater category, you can simply thank them once (or not at all, depending on how ugly the sweater really is).


*We should note that Charlie Sheen is not actually Lindsay’s uncle. The fact that they are not related makes a difference. In addition to gift tax, the IRS imposes a “generation-skipping transfer tax” (an additional 35% tax) on any gifts made to someone who is two generations or more below you (such as in the case of grandma’s check). In the case of a non-relative, that means someone more than 37.5 years younger than the donor. Lindsay is only 21 years younger than Charlie, so Charlie is safe. Playboy mogul Hugh Hefner isn’t as lucky…the ginormous engagement ring he gave fiancé Crystal Harris (who, at only 26, is 60 years his junior) is technically a gift (subject to 35% gift tax rate) to someone two generations below (resulting in an additional 35% tax). The only way to fix this is to actually marry her, because spouses are exempt from this gift tax and generation-skipping transfer tax. Is that one of the ways Crystal convinced Heff to say “I do?” Crafty woman!

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The Secret World of Copyright

What do Avril Lavigne cover songs, Dish Network’s AutoHop feature, celebrity sex tapes, apartment hunting websites, and ad-serving browser skinning programs have in common?

Each of them is a window into how copyright, an 18th century concept, drafted into a 20th century law, impacts the products we use and the way we experience life in a 21st century world.

The Simplest, Most Complicated Law You Know

Non-lawyers usually think of copyright as a pretty simple and intuitive area of the law, and in many ways, it’s one of the easiest areas to break down into easy, digestible (if somewhat oversimplified) terms.  What’s a copyright?  The exclusive right to control and exploit creative works.  How do you infringe a copyright?  Copy or perform a work without permission/payment, or steal it to create your own new, too-similar work.  Putting aside people’s chronic tendency to confuse copyrights and trademarks — helpful hint:  copyrights are for creative works, trademarks are for brand name, logos, and slogans — copyright is an area of law that, at least initially, the general public can intuitively “get.”

Of course, when the breakneck speed of technological development meets the languorous pace of national lawmaking, things can get a bit more complicated. For example, when the copyright infringement case against file-sharing service Grokster finally came before the Supreme Court in 2005, the Court’s nine justices required three separate opinions and the invention of an entire new theory of copyright liability to explain why Grokster was illegal, but other, less offensive services might not be illegal.  (Headline:  “Supreme Court Rules ‘Unanimously’ Against Grokster 3-3-3.”)

To be fair, though, things started getting wacky long before the Internet was invented.  For instance, most people know that any musician can cover any other musician’s song, without permission (for a small, statutorily-defined fee).  Why?  Because in 1909, Congress created a special “compulsory license” scheme to allow player piano roll makers to sell song rolls without having to separately seek permission from the original songwriters.  Somewhere along the way, some clever lawyer figured out the law was drafted broadly enough to allow for unauthorized cover songs, and now we all have to deal with Avril Lavigne defiling John Lennon’s “Imagine” in the name of Darfur relief.  (Miley Cyrus’s evisceration of Nirvana’s “Smells Like Teen Spirit” and Celine Dion’s desecration of AC/DC’s “You Shook Me All Night Long” were, to my knowledge, only ever performed live, and so we have adifferent quirk of copyright law — the proliferation of blanket “public performance” licenses  managed by performing rights organizations ASCAP and BMI — to blame for those abominations.)

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Magic Turkey Lawsuits

There is a lot to be thankful for in Los Angeles this Thanksgiving.  As I’m sure we can all agree, near the top of the list is the Lakers’ recent acquisition of superstars Dwight Howard and Steve Nash, as well as team USA Coach Mike D’Antoni, all in time for the holidays.  Of course, I’m guessing that the Buss family’s decision not to hire Coach Phil Jackson (who is dating Lakers executive and daughter-of-the-owner Jeannie Buss) is going to make things awfully awkward at the Buss family Thanksgiving dinner table.

Of course, that’s only going to the second most awkward turkey-related incident of the last month for a member of the Lakers family.  The dubious first prize goes to Laker great Magic Johnson, whose passion for turkey and other tasty treats has found its way into a civil lawsuit against him.

Just before Halloween, a woman named Latina Thomas — who, until recently, was Magic’s personal flight attendant — filed a wrongful termination action against Magic and the aviation company that had co-employed her.  Ms. Thomas alleges that she was fired for being seven minutes late to work after waiting an extra-long time at a deli counter trying to purchase “two types of specific turkey” for Magic’s sandwich.  Ms. Thomas claims that the turkey incident was a pretext for her firing so that Magic could replace her with a younger woman.

So who’s the real turkey here?  Magic Johnson or the flight attendant?

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Who’s Got the White Lightning?

sofia aguilar

If you’ve ever had the opportunity to travel through the great southern states of America, you will learn two things.  First, southern hospitality is real — no, the nice man asking “how is your day, miss?” is not going to ask for money or steal your purse.  And second, people really do make moonshine in their backyards.  If you had any doubt about that, then you haven’t seen Discovery Channel’sMoonshiners, a can’t-make-this-stuff-up series in its second season that “tells the story of those who brew their shine — often in the woods near their homes using camouflaged equipment — and the local authorities who try to keep them honest.”  There’s a ton more to learn about the South, but as I learned as a first-year law student in Nashville, Tennessee, nothing is as romantic as the tradition of moonshining (except, perhaps, the barbecue — maybe another post).

While an old classmate and I were reconnecting recently — reminiscing about the potency of the good ol’ Tennessee and whisky and wondering exactly what “keeping a moonshiner honest” actually entails — it hit us:  why not sell legal moonshine from Tennessee over the internet?  Just imagine the market boom, as trendy Angelino hipster homebrewers would throw mixology parties showcasing the wonder brew.  But how easy would it be to legally sell moonshine to Yankees and Angelinos?  Well, as I soon discovered, aside from the fact that making unauthorized moonshine in your backyard is highly illegal and dangerous (and in no way endorsed by the author), there is a serious patchwork of state and federal laws that any moonshiner who wants to go straight must contend with.

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