Here is a text exchange between me and a tenant who lives in a POH in my park in northern New York. Her husband or boyfriend is the brother of a woman named Fatima, who I have written about before (Fatima is the woman who hit the jackpot when her husband tried to kill himself with a Sawzall blade). Fatima’s sister-in-law – the tenant in question – is from Georgia originally. I do not know what brought her to the North Country; I believe she was in the military, and posted to the nearby Army base. She has the makings of a lawyer. Not the good kind of lawyer, who helps derivative traders bilk the government; rather, the bad kind, who chases ambulances and wastes judicial resources with frivolous claims.
Today is the 9th. Did you pay $746.18 yesterday, as agreed?
When I had dunned her and her HOB for rent in the last part of last month, they had said that they would pay their balance for October on November 8th, and their balance for November on November 22nd. On October 24, I texted them a statement clarifying that this was my understanding of what they had promised, asking, “Is that what you intend to do?”, and she had texted back, “Yup”. To preserve rights, on the first of the month, I sent them a ten-day letter informing them that, if they did not pay the full amount that they owed by the twelfth of the month, I would commence an action for money damages. If my arithmetic is correct, the eighth was yesterday; this morning, I sent my text to see if she had paid, as we had discussed. Here is her reply:
When you sent us a threat of small claims court unless we paid the FULL amount on the 12th, when we agreed to the 8th and 22nd, we assumed you wanted it on the 12th
So she wants to use the deadline in the 10-day letter to push back the deadline she had already agreed to. In a perfect world I’d call bullshit, but I have a debt to collect. I texted back,
By this I take it to mean that you will pay the full $1,520 no later than Friday 12/12.
Here is what came back:
Our original agreement was the 2nd half BY the 22nd at the latest
Our original agreement was the 2nd half BY the 22nd at the latest
Her strategy is to cherry-pick. Pay the first half on the 12th, because the 10-day letter set a deadline of the 12th, and the second half on the 22nd, because the original agreement had set a deadline for the second installment then. Conveniently ignore the fact that the 10-day letter’s 12/12 deadline is for payment of the entire amount, not just the first installment. In my former life, I helped bankers do something very similar to that, on a bigger scale. My colleagues and I would construct financial instruments, entities and holding arrangements that were euphemistically called “hybrids”. That meant that they were treated as one thing for United States federal income tax purposes and as something else for purposes of another jurisdiction’s tax laws. This inconsistent treatment yielded “double dip” benefits. In the canonical example, an instrument issued by a U.S. entity is debt for U.S. federal income tax purposes and equity for purposes of a jurisdiction in which equity holders receive a “participation exemption” from taxation on dividends. This means that payments on the instruments would be deductible for U.S. tax purposes and excludible for, say, Canadian tax purposes. Or an entity could issue preferred stock that is sold to a counterparty tax-resident in another jurisdiction subject to a repurchase obligation (a “repo”). The repo agreement makes the holding arrangement look like a secured loan for source-jurisdiction tax law purposes, but as a true sale for residence-jurisdiction tax purposes. Again, if the holder of the instrument is tax-resident in a country that allows a participation exemption, each dollar paid on the instrument yields a tax benefit on both sides of the border.
Since the early 2000s, the OECD and the U.S. Treasury Department has cracked down on transactions that take advantage of inconsistent cross-border treatment. They are now referred to as “double non-taxation”, “cherry-picking”, or, more plainly, “abuse”.
(One of my favorite movies during college and early adulthood was an under-appreciate classic called Repo Man, directed by Alex Cox, starring Harry Dean Stanton and Emilio Estevez. In it, an L.A. punk finds direction by learning the trade of car repossession. The story of his growth is intertwined with another story involving aliens (the interstellar kind, not the kind that cooks your food and delivers your groceries), Area 51, and a car with a trunk full of radioactive material. Near the beginning of the film, the Emilio Estevez character is tricked into repoing a car in a rough area in Los Angeles. After he and Harry Dean Stanton arrive at the repo lot, Stanton asks him if he would like to work for him full time. Estevez pours a beer on the floor and says, “Screw that, I ain’t gonna be no repo man”. A secretary then hands him a twenty-dollar bill and says, “You are now, kid”. Years of my life were taken up with the other kid of repo. I often thought that the words of the secretary remained true mutatis mutandis to people who entered the financial services industry. You graduate from law school wanting to save the world. You join a firm, set up a Cayman Islands company. You cite one of the early muni bond repo cases out of context. The firm deposits some money into your account. Now, you’re a repo man and there’s no going back.)
The old definition of chutzpah is a guy who shoots his parents and then says, “Take pity on me! I’m an orphan!” Cherry-picking is abuse, regardless of whether it is done by Goldman Sachs or a private citizen. This particular tenant and I are past pretty please, so I responded,
…and the first half yesterday. Please pay that today. Thank you.
She did not reply, but here’s what Mike, the manager of that park, sent me shortly thereafter. Zeb is the male of the pair:
I spoke with Zeb and he said the 16th he should be able to pay $450
There’s a lot wrong with that statement. First, the 16th is later than both the 8th and the 12th. Second, $450 is less than the first installment that they had promised by the 12th. Finally, I don’t like that modal verb “should”. But I understand that they are now trying to turbo-charge their cherry-picking efforts by moving the goalposts. I wish I had the resources of the Treasury Department, but with the remedy of eviction removed, I am kneecapped. All I can do is to insist on truth and validity in the paper trail and hope that the judicial system works eventually. Consistency is, after all, the hobgoblin of minds like mine.
I like Repo Man (the movie) too.