CBS/Paramount sues to stop Axanar

[Search4]

Just a reality check about "reimbursing".

If you are paid by a company (Axanar) in 2015, they have to file forms, tax papers, pay payroll tax, etc FOR 2015. You get the $ in 2015 and have to report it as taxable income, take out social security etc, etc. Time always matters.

You absolutely were paid and received funds.

The future does not matter. If it is determined you were paid say in error at a later date - let's take a corporate example, you should have been a contractor and instead somehow made the payroll system - the errors are fixed in the year they happen e.g. say 2016. The company might restate 2015 results, and you personally might want to redo you taxes for that year, but these things have an annual cut off and you can't just say "oops i repaid it". There are real world financial consequences.

Let's say FOR EXAMPLE, Axanar paid Alec's heath care premiums in 2015. That's probably worth about $5-7,000. Its NOT income to him if he is an employee (a quirk of the tax laws) and it IS income to him if he is a contractor. In his 2015 tax returns. Similarly it is an expense to Axanar in 2015 and iF reimbursed a restatement of 2015 or an adjustment of 2016.

In no cases - none - does the original event just "go away". It can be corrected but the original event exists and if it is corrected in light of new information it was wrong and is now better. Hence Alec WAS paid by Axanar - they distinguish between 1099 and other so i assume as an employee - and Axanar was liable for payroll taxes etc. If he reimbursed, that's because he recognized the error and fixed it. Period.

 

[RedForman]

Legal theatrics and leaps of logic aside, I'm wondering what the realistic chances are of the IRS ever tossing LFIM over a barrel? I would think that any such move would be determined by the course of the legal proceedings (establishing intent on his part principally and then determining what specifically he did with the funds raised), but that the probability would be somewhat higher after the revelations of recent days

 

[QuantumMechanic]

Suffice it to say that being English I don't hold myself out as an expert in American IP law, but I nonetheless have trotted off and looked at some of the authorities. Of particular interest has been what constitutes transformative works, and there seems to be enough wiggle room that often the answer is only given at trial, and even then is subjective on the key elements of each case.

I can only ever apply my own professional experience, which is of course is in a foreign jurisdiction. But if I were making a summary judgment application to the court here I would be arguing that the law was beyond doubt, or, if for a defendant client, that there was no case to answer. Now, I can't say that it's exactly the same for the courts in California, but the spirit of the approach is the same, not least because your civil procedure is an evolution of my own - and for that reason I feel from what I have read that the law is not sufficiently settled on this to meet the parameters of summary judgment. I could be wrong

(Nitpick (it is the internet ) - it is a US federal court located in California, not a California court.)

IANAL, but from what I've read the ability to issue a summary judgement comes down to undisputed facts. It's not that the law needs to be "beyond doubt" but rather that the facts not in dispute need to be sufficient for the judge to render a decision. That doesn't mean the interpretation of the law needs to be a slam-dunk. It could be a really close call on the law. But there can't be any relevant fact in dispute. If any relevant fact is in dispute the judge needs to have a trial in order to make a finding of that fact.

 

[urbandefault]

I would add that Judge Klausner is as close to an expert in American IP law that we'll find in California.

 

[Squiggy]

That looks incredibly familiar.

It's moving so it's transformative.

 

[Red Shirt]

In AxaLand, that's not a bug, it's a feature!

 

[muCephi]

That does not compute! Error! Error!

Ok, lets try it this way. Let me preface this as a hypothetical from my armchair perspective, to be vetted by professionals:

1. receive donation into for profit corporation (you can do this), pay tax on it as income.
2. pass it through to someone as salary and expenses and get your taxes back at the deduction rate for payroll and writeoffs for expenses (probably canceling out the taxes in 1). Pay only enough that the employee will not incur their own income tax; while providing a generous expense budget on which they will not pay taxes if they can get the corporation to declare it 'overtime mandatory meals', compensation for business expenses, compensation for externally acquired but covered benefit of health insurance, etc.
3. that someone eventually donates the money back in. they can't take a writeoff, and the corporation pays taxes on the donation as income.
5. corporation, due to such expenses, reinforces its ability to claim tax writeoffs due to running at a loss (it costs so much to operate that we can't make a profit).

net: 1000 donation remains a taxable 1000 donation to the corporation, but generates:

- in effect, an interest free, tax free loan for someone in salary and perks
- the corporation's owner gets the benefit of the net worth being grown by the someone
- payroll and expense writeoffs for the corporation
- potential operating loss claims for the corporation
- separation of the money from accountability to the original donor. the original donor's money was spent on operating expenses. the corporation's liability profile is reduced since that donation was spent on 'a valid operating expense'.

Finally, if the someone owns the corporation, all the benefits of sending the money out and taking it back in accrues to that someone legally, and there's no one outside the loop who might want to reveal it to others. Its just a donation that allowed someone to work for the corporation, and another donation later. Its only incidental that the other benefits accrued, ignore them.

In the end, this may in principle be why one can't say that 'puttting the money back as donations' is a net zero result in every way. The original donor may see no net harm except a delay, but the owner of the IP that generated the money did not collect any of the utiliity value of that money during the time it was being put through this process.

Someone else may have accrued that benefit, in interest free personal loans, paid for facility resources and personnel to build their corporation's assets using other donations in additional leveraged ways like building out physical assets, providing free resources to other corporations of the owner, or the like, and additionally, opportunities to obtain tax advantages accruing to net worth of the corporation that would not have occurred in a volunteer operation.

The IRS may just see this as a small corporation's typical operation. I don't know. But the complaint that IP monies generated material benefit for the someone and their corporation simply because the money was in the someone's hands and put through this process may stand even if the principal was 'put back'.

Hypothetically. This could all be wrong. To explore.

 

[ThankYouGeneR]

I'm trying to get this straight. For this post I'm taking the defendant and Mr. Lane at their word.
Mr. Lane posts on his blog:

"1) [the defendant] has put in approximately $ 150,000 of his own money into [the production] over the past year"

Okay.
Mr. Lane further posts:

"2) [the defendant] has not kept a single dollar from donor funds, either in salary, or expense reimbursements. Any money [the defendant] received was paid back through the money he has been putting into [the production]."

So, and I'm trying to get this straight here so I am inviting correction where I've got this wrong, Mr. Lane is saying all these legally testified to expenses that I must presume came from the production Finance books entered into evidence by the defendant.... Mr. Lane is saying that all these expenses are totally covered (payed back, whatever) from the $150,000 the defendant has put into the production.

Right?
Okay.
And Mr. Lane further adds:

"1) [the defendant] is currently paying the $ 15,000 a month it costs to keep the studio open, out of his own pocket, as he has been doing since this for the past 6 months."

So, may I assume here, since these expenditures are within the last year that this amount are also included in the $150,000 sum the defendant alleges he has put into the production?

Or is Mr. Lane saying that 'in addition to the $150,000 put into the production' the defendant is also paying from his own pocket an additional amount of $90,000, as of the six months rent? (and will continue to do so until the defendant gets some financial relief)

Which also brings up an additional questions to me:
-Why is the defendant paying for the rent out of his pocket? Surely this rent & utilities is covered under production accounts the exact same way the production account covered each and every month's rent since moving into this building until six months ago when the defendant took on the responsibility to cover the rent. What is the reasoning behind paying the rent out of pocket now? The funds are 'not' frozen by the Court as far as I know.

And the injunction for further production activity at the studio was lifted months ago wasn't it? The production has literally been free from legal instruction to proceed however they want for months now? Right?

I mean, the production is even free to proceed with the original feature film if they want are they not, though that wouldn't be a wise choice at this juncture and they aren't. But it means the defendant is entirely free to hire out the studio for other film use, for, I don't know, science fiction 'stuff' gatherings, even for bat miztfas were they to so choose. They have this thing (don't remember what it is), this maybe game thing, set for December.

So why has the defendant been paying the rent for the last six months instead of using the production account to continue covering the rent? As had been done until six months ago. Which continued for months after the litigation against the production was brought because they're into eleven months of litigation as of this posting.

Or in lieu of that. hiring out the facility to cover this rent?

 

[muCephi]

I think when they chose the wording 'they put the money back', they branded themselves with the donors. You put back that which you borrowed or took and got caught with. You 'donate from your means' if the original assertion of salary and benefits was ethical to start with.

As for renting out the facility, there has been info that they weren't up to code to rent for the movie business. Perhaps they haven't been up to code at all except that for their own movie they would be willing not to turn themselves in. Perhaps the facility selection really was a disaster for the budget and they just had to come up with more money and got their foot snagged in WTF vines.

 

[carlosp]

I'm trying to get this straight. For this post I'm taking the defendant and Mr. Lane at their word.
Mr. Lane posts on his blog:

Okay.
Mr. Lane further posts:

So, and I'm trying to get this straight here so I am inviting correction where I've got this wrong, Mr. Lane is saying all these legally testified to expenses that I must presume came from the production Finance books entered into evidence by the defendant.... Mr. Lane is saying that all these expenses are totally covered (payed back, whatever) from the $150,000 the defendant has put into the production.

Right?
Okay.
And Mr. Lane further adds:

So, may I assume here, since these expenditures are within the last year that this amount are also included in the $150,000 sum the defendant alleges he has put into the production?

Or is Mr. Lane saying that 'in addition to the $150,000 put into the production' the defendant is also paying from his own pocket an additional amount of $90,000, as of the six months rent? (and will continue to do so until the defendant gets some financial relief)

Which also brings up an additional questions to me:
-Why is the defendant paying for the rent out of his pocket? Surely this rent & utilities is covered under production accounts the exact same way the production account covered each and every month's rent since moving into this building until six months ago when the defendant took on the responsibility to cover the rent. What is the reasoning behind paying the rent out of pocket now? The funds are 'not' frozen by the Court as far as I know.

And the injunction for further production activity at the studio was lifted months ago wasn't it? The production has literally been free from legal instruction to proceed however they want for months now? Right?

I mean, the production is even free to proceed with the original feature film if they want are they not, though that wouldn't be a wise choice at this juncture and they aren't. But it means the defendant is entirely free to hire out the studio for other film use, for, I don't know, science fiction 'stuff' gatherings, even for bat miztfas were they to so choose. They have this thing (don't remember what it is), this maybe game thing, set for December.

So why has the defendant been paying the rent for the last six months instead of using the production account to continue covering the rent? As had been done until six months ago. Which continued for months after the litigation against the production was brought because they're into eleven months of litigation as of this posting.

And/or in lieu of that. hiring out the facility to cover this rent?

My guess is that you can't pay rent out of a production account that has no money in it.

 

[BillJ]

As for renting out the facility, there has been info that they weren't up to code to rent for the movie business.

Since they were all experts, shouldn't they have known what it took to build a usable movie studio?

They have carpet!!!

 

[Potemkin_Prod]

Ok, lets try it this way. Let me preface this as a hypothetical from my armchair perspective, to be vetted by professionals:

1. receive donation into for profit corporation (you can do this), pay tax on it as income.
2. pass it through to someone as salary and expenses and get your taxes back at the deduction rate for payroll and writeoffs for expenses (probably canceling out the taxes in 1). Pay only enough that the employee will not incur their own income tax; while providing a generous expense budget on which they will not pay taxes if they can get the corporation to declare it 'overtime mandatory meals', compensation for business expenses, compensation for externally acquired but covered benefit of health insurance, etc.
3. that someone eventually donates the money back in. they can't take a writeoff, and the corporation pays taxes on the donation as income.
5. corporation, due to such expenses, reinforces its ability to claim tax writeoffs due to running at a loss (it costs so much to operate that we can't make a profit).

net: 1000 donation remains a taxable 1000 donation to the corporation, but generates:

- in effect, an interest free, tax free loan for someone in salary and perks
- the corporation's owner gets the benefit of the net worth being grown by the someone
- payroll and expense writeoffs for the corporation
- potential operating loss claims for the corporation
- separation of the money from accountability to the original donor. the original donor's money was spent on operating expenses. the corporation's liability profile is reduced since that donation was spent on 'a valid operating expense'.

Finally, if the someone owns the corporation, all the benefits of sending the money out and taking it back in accrues to that someone legally, and there's no one outside the loop who might want to reveal it to others. Its just a donation that allowed someone to work for the corporation, and another donation later. Its only incidental that the other benefits accrued, ignore them.

In the end, this may in principle be why one can't say that 'puttting the money back as donations' is a net zero result in every way. The original donor may see no net harm except a delay, but the owner of the IP that generated the money did not collect any of the utiliity value of that money during the time it was being put through this process.

Someone else may have accrued that benefit, in interest free personal loans, paid for facility resources and personnel to build their corporation's assets using other donations in additional leveraged ways like building out physical assets, providing free resources to other corporations of the owner, or the like, and additionally, opportunities to obtain tax advantages accruing to net worth of the corporation that would not have occurred in a volunteer operation.

The IRS may just see this as a small corporation's typical operation. I don't know. But the complaint that IP monies generated material benefit for the someone and their corporation simply because the money was in the someone's hands and put through this process may stand even if the principal was 'put back'.

Hypothetically. This could all be wrong. To explore.

See, I'd never go through these steps. and I doubt anyone at Axanar had any forethought about this either.

Of course, when we get a donation, I usually send an email thanking them and explaining what the funds were used for. We don't collect more than we need, and we certainly don't spend it on gas, health insurance or even sushi.

 

[KennyB]

I'm trying to get this straight. For this post I'm taking the defendant and Mr. Lane at their word.
Mr. Lane posts on his blog:

Okay.
Mr. Lane further posts:

So, and I'm trying to get this straight here so I am inviting correction where I've got this wrong, Mr. Lane is saying all these legally testified to expenses that I must presume came from the production Finance books entered into evidence by the defendant.... Mr. Lane is saying that all these expenses are totally covered (payed back, whatever) from the $150,000 the defendant has put into the production.

Right?
Okay.
And Mr. Lane further adds:

So, may I assume here, since these expenditures are within the last year that this amount are also included in the $150,000 sum the defendant alleges he has put into the production?

Or is Mr. Lane saying that 'in addition to the $150,000 put into the production' the defendant is also paying from his own pocket an additional amount of $90,000, as of the six months rent? (and will continue to do so until the defendant gets some financial relief)

Which also brings up an additional questions to me:
-Why is the defendant paying for the rent out of his pocket? Surely this rent & utilities is covered under production accounts the exact same way the production account covered each and every month's rent since moving into this building until six months ago when the defendant took on the responsibility to cover the rent. What is the reasoning behind paying the rent out of pocket now? The funds are 'not' frozen by the Court as far as I know.

And the injunction for further production activity at the studio was lifted months ago wasn't it? The production has literally been free from legal instruction to proceed however they want for months now? Right?

I mean, the production is even free to proceed with the original feature film if they want are they not, though that wouldn't be a wise choice at this juncture and they aren't. But it means the defendant is entirely free to hire out the studio for other film use, for, I don't know, science fiction 'stuff' gatherings, even for bat miztfas were they to so choose. They have this thing (don't remember what it is), this maybe game thing, set for December.

So why has the defendant been paying the rent for the last six months instead of using the production account to continue covering the rent? As had been done until six months ago. Which continued for months after the litigation against the production was brought because they're into eleven months of litigation as of this posting.

And/or in lieu of that. hiring out the facility to cover this rent?

To quote my grandfather "That dawg just don't hunt!"

 

[TrekFanProductions]

See, I'd never go through these steps. and I doubt anyone at Axanar had any forethought about this either.

Of course, when we get a donation, I usually send an email thanking them and explaining what the funds were used for. We don't collect more than we need, and we certainly don't spend it on gas, health insurance or even sushi.

And that Randy is why you are one of the good guys and a production to look up to.

 

[muCephi]

See, I'd never go through these steps. and I doubt anyone at Axanar had any forethought about this either.

Of course, when we get a donation, I usually send an email thanking them and explaining what the funds were used for. We don't collect more than we need, and we certainly don't spend it on gas, health insurance or even sushi.

As I think everyone would like it to be.

A far as planning ahead, one can't be sure, but people who build a corporation and make a for profit business plan are likely to walk themselves through the possible ways to tax-advantage their particular situation. I suspect they only thought about how to channel donations into net tax free compensation to the maximum degree, both through salaries/expenses, and through creating material assets not owned by the donors, and claiming writeoffs on the operation to help support the disbursements and build out. Even that much creates the utility value lost by the studios. Putting the money back does not compensate the studios for this utility value. I suspect team Axanar knows this much, and its a reason they want to put out their own spin document to bury it.

By their reasoning, they should also put back into the Axanar budget the value of the physical assets they bought with donations - the studio. They claimed at one point this happened. So where is that quarter million or more? That alone would have paid the rent through this year and part of next.

Something is really not adding up here.

 

[Professor Zoom]

See, I'd never go through these steps. and I doubt anyone at Axanar had any forethought about this either.

Of course, when we get a donation, I usually send an email thanking them and explaining what the funds were used for. We don't collect more than we need, and we certainly don't spend it on gas, health insurance or even sushi.

I don't know. You're missing you. Sushi paid for by Fan Donations is the best Sushi of All.

 

[ThankYouGeneR]

My guess is that you can't pay rent out of a production account that has no money in it.

And that's where my own thinking keeps landing. There is no money in that account. That all aprx $1.2-$1.5 million raised by soliciting donations from fans of Star Trek that were raised in crowdfunding, at conventions, in private donations, in the donor store, possibly donated to by the defendant.... that all, everything, is gone. I can find no other way to reconcile the abrupt six months ago switch to the defendant assuming responsibility to cover the studio's rent and utilities.

Which then circles my thinking back to the other questions I keep having:
-Is the six months' rent (as of this posting) that's been paid by the defendant being included by the defendant as part of the $150,000 he has allegedly put

1)... into Axanar over the past year.

Or on the other hand
-Is the $150,000 the defendant and Mr. Lane alleges the defendant has put into the production equal to the expenses that have been

"2)....paid back through the money he has been putting into Axanar."

if, in fact, all the account money is gone?

Which circles my thinking to
-If, in fact, the aprx $150,000 in does equal an aprx $150,000 out... is the defendant saying he removed/borrowed/whatever word from the production account (which allegedly has all now been returned --- and therefore is all gone if the production account has no money to even pay the rent) almost $150,000 for personal cell phone bills for himself, the fulfillment person, and Mr. Burnett... as well as the personal expense of gas used for almost two years for the defendant and the fulfillment person.... as well as the personal expense of tire purchase, insurance, servicing, & annual AAA memberships for the defendant's car... as well as the personal expense of health insurance for himself... as well as personal travel expenses to conventions both in the U.S. and internationally... as well as his personal expense for the TSA fee.... as well as the personal expense of tens of thousands of dollars in meals... as well as the $37K-$64K (depending on the transparent Financial production account or the legally testified to Financial accounting entered into evidence by the defendant) salary/not a salary? So is the defendant indicating he borrowed or whatever $150,000 for personal use from the production account "which account was populated with funds contributed by Star Trek fans"?

 

[Ion]

My guess is that you can't pay rent out of a production account that has no money in it.

Didn't they say something about having the money in escrow? Or was that disproven?

Depending on how things were set up, having the money in escrow might mean they can't touch it. But then, AFAIK we don't know the details of the supposed escrow account, why it was created, etc...

 

[Red Shirt]

And that's where my own thinking keeps landing. There is no money in that account. That all aprx $1.2-$1.5 million raised by soliciting donations from fans of Star Trek, raised in crowdfunding, raised at conventions, raised in private donations, raised in the donor store, possibly donated to by the defendant.... that all, everything, is gone. I can find no other way to reconcile the abrupt five months ago switch to the defendant assuming responsibility to cover the studio's rent and utilities.

Which then circles my thinking back to the other questions I keep having:
-Is the six months' rent (as of this posting) that's been paid by the defendant being included by the defendant as part of the $150,000 he has allegedly put


Or on the other hand
-Is the $150,000 the defendant and Mr. Lane alleges the defendant has put into the production equal to the expenses that have been

if, in fact, all the account money is gone?

Which circles my thinking to
-Did the defendant removed/borrowed/whatever word from the production account (which allegedly has all now been returned --- and therefore is all gone if the production account has no money to even pay the rent) almost $150,000 for personal cell phone bills for himself, the fulfillment person, and Mr. Burnett... as well as the personal expense of gas used for almost two years for the defendant and the fulfillment person.... as well as the personal expense of tire purchase, insurance, servicing, & annual AAA memberships for the defendant's car... as well as the personal expense of health insurance for himself... as well as personal travel expenses to conventions both in the U.S. and internationally... as well as his personal expense for the TSA fee.... as well as the personal expense of tens of thousands of dollars in meals... as well as the $37K-$64K (depending on the transparent Financial production account or the legally testified to Financial accounting entered into evidence by the defendant) salary/not a salary? So is the defendant indicating he borrowed or whatever $150,000 for personal use from the production account "which account was populated with funds contributed by Star Trek fans"? Is that what the defendant is saying he did?

1) Alec Peters has put in approximately $ 150,000 of his own money into Axanar over the past year. He is currently paying the $ 15,000 a month it costs to keep the studio open, out of his own pocket, as he has been doing since this for the past 6 months.

2) Alec has not kept a single dollar from donor funds, either in salary, or expense reimbursements. Any money Alec received was paid back through the money he has been putting into Axanar. This means, Alec has worked full time on Axanar for over 2 1/2 years and not received a dime in salary, benefits or expense reimbursements.

AP, through Mike, is admitting he took money he shouldn't have. Not exactly the admission one should publicly make while facing two lawsuits. The LFIM moniker is well deserved. L&L have the goods on AP and taking into consideration AP doctored his financials and hid e-mails during the discovery phase, his already abysmally low credibility is now worth dog spit. The result is sophistry and damage control on AP's part so I certainly haven't and don't believe anything he says trying to save himself.

 

[ThankYouGeneR]

Didn't they say something about having the money in escrow? Or was that disproven?

Depending on how things were set up, having the money in escrow might mean they can't touch it. But then, AFAIK we don't know the details of the supposed escrow account, why it was created, etc...

There is no evidence that I've yet heard about that supports or disproves that.

On the other hand, the person quoted as 'saying' that, Rand Johnson, has now been reported to have said that he was on multiple occasions 'told' what to post by the defendant. Sometimes told exactly what to post. Which is data to consider when assessing the validity of his (I believe it was) FB assertion that the funds were safe in an escrow account.

On the other hand there is also no evidence that I've come across that supports or disproves Mr. Johnson has even been saying that he was on occasion told what to say.

So at this time.... no evidence one way or the other. Just data to keep track of.