Consider the Linda and Ken Lay Family Foundation of Houston. Mr. Lay was chairman of Enron, and 90 percent of the foundation assets, valued at $52.2 million at the end of 2000, were in Enron stock.
The foundation could comfortably afford a full-time director, Heather H. Herrold, whose salary was $83,684. Mr. Lay got a tax deduction based on the value of Enron stock when he gave it to the foundation.
Enron went bankrupt amid scandal in late 2001, and the foundation recently reported that its assets had fallen to $2.4 million, forcing it to postpone many pledges. The Internal Revenue Service may not, however, retroactively revoke part of Mr. Lay's deduction to reflect the decline in the foundation's value.
Bear Left!, in an excellent overview, reports that Lay donated over $20.5 million in stock in 1999 and 2000. Tax deductions are only useful when applied against income, which suggests that Ken Lay had substantial income to protect in 2000. Since we know that his insider trades prior to the Enron bankruptcy amounted to roughly $70 million, this means that not only did he lie to analysts and shareholders while he was selling his shares, but, adding injury to insult, he also underpaid taxes on his insider plunder.
Ken Lay created a foundation out of Enron stock worth about $52.2 million in 2000 — which he was simultaneously selling to the tune of about $70 million.
Ken Lay did this while urging stock analysts and employees to invest in the stock for investment growth and 401(k) participation.
Ken Lay took a multimillion tax deduction for the donation of the stock.
The foundation recently reported that its assets had fallen to $2.4 million.
The foundation is reneging on its pledges to the charitable causes it would supposedly help.
The IRS "may not" retroactively revoke part of the deduction to reflect the decline in the foundation's value.
Ken "Kenny Boy" and Linda "Jus' Stuff" Lay received the full benefit of a multimillion tax deduction on now near-worthless stock used to fund a charity foundation which has helped no one. No one but them.
Meanwhile, close friend Bush's "stimulus package," half of which is tax elimination on dividend (i.e., unearned) income, benefits the wealthy who don't need help, already have figured out all the loopholes, and are playing the existing shell game of insider trades, charitable foundations and tax deductions in their favor.