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Just Call This Deal Hoosier Baroque

Publication Date: 
December 21, 2008
Source: 
The New York Times
Author: 
Gretchen Morgenson

Joseph A. Bankman is quoted in The New York Times in an article about collateral damages from the current financial crisis affecting Hoosier Energy Rural Electric Cooperative:

Collateral damage from the credit crisis continues to crop up in the most unlikely places. Consider southern Indiana, where the Hoosier Energy Rural Electric Cooperative, serving 800,000 farm, small-business and residential customers, is under threat.

Unlike many other enterprises today, Hoosier is not in financial distress. It is, in fact, thriving.

What imperils the cooperative is the kind of financial alchemy that has magnified our money mess: an atrociously convoluted deal that Hoosier struck with the John Hancock Life Insurance Company in 2002.

Because part of that deal is now in jeopardy, John Hancock is trying to force a termination payment of $120 million that could push Hoosier into bankruptcy protection.

...

“The I.R.S. will certainly deny the tax benefits that Hancock is claiming,” testified Alan Joseph Bankman, an expert witness in the case who is a professor at Stanford Law School. He told the court that the I.R.S. has offered tax amnesty to entities that have struck SILO deals, if they give up future benefits and return 80 percent of deductions taken.