Thursday, September 23, 2010

Shock: 409A Central to Silicon Valley Price-Fixing Conspiracy

According to Felix Salmon, writing for Seeking Alpha Blog, powerful Silicon Valley angel investors may have attended a meeting to discuss the pricing of 409A equity valuations, colluding to apply downward pressure on the pricing.

"It seems to me that Arrington is right, and that this dinner was an attempt by some very powerful angel investors, led by Ron Conway, to collude with each other on a number of different fronts. Quite possibly including 409a stock option pricing. Arrington’s a lawyer by training, and if he says this is illegal, then it’s worth investigating the accusation seriously, rather than trying to dismiss it in a blog entry featuring lots of swearing along with multiple font colors and sizes."


Tuesday, September 21, 2010

Court Rejects Federal Jurisdiction for 409A Dispute

Executive Claims Potential Breach of Employment Agreement Raises 409A and ERISA Issues. Court remands to state court.

"Scharnweber is attempting to enforce the employment security agreement as he views it. And whether the employment security agreement is to be enforced according to his views does not depend on section 409A of the Internal Revenue Code. A state court's handling of Scharnweber's claims that entails references to the fact that Scharnweber might be subjected to a federal tax penalty would not disturb the "congressionally approved balance of federal and state judicial responsibilities." See id. at 914 (internal quotations and citation omitted) ("[I]nsofar as the state court may have occasion to consider the [federal issue] in adjudicating [the plaintiff's] state law claims, we do not think that the state court's consideration of the [federal issue] disturbs the `congressionally approved balance of federal and state judicial responsibilities[.]'"). Thus, the court finds that the complaint's references to a potential federal tax penalty do not raise a sufficient federal issue for purposes of establishing federal jurisdiction."

Court Decision Here

Saturday, September 11, 2010

IRS Presents Informal Guidance on 409A

The Service Presents to ABA Joint Committee on Employee Benefits

Disagrees with ABA on certain issues. Non-compliant plans that expire worthless still subject to a additional tax.