Category: News Feeds

A few weeks ago, when the Paycheck Protection Program (PPP) was announced, there was a mad frenzy for the money mainly because of the limited funds and the opportunity to have the loans forgiven. The money was depleted within a matter of days with many people being unable to obtain loans. There was a backlash against large, publicly traded companies that were able to get these loans due to suspicions of preferential treatment and because they had access to other sources of capital.

Now, with a new round of funding with a reminder of certain conditions from the Small Business Administration, the rush seems to have died down a bit. Large, public companies have either reconsidered applying or have returned the funds. A portion of the funds were allocated exclusively to smaller banks. And the large banks have upgraded their systems so that more smaller businesses can have their applications submitted. The latest reports indicate that $120 billion remains in the second round of funding.

Over the past few weeks, since the publication of my earlier column on the PPP loan, I helped a number of people obtain funding, and I want to share some common issues I have seen in the process.

Getting the loan amount right. Many people had trouble calculating the correct loan amount to determine their average monthly payroll. There are a number of reasons for this. Some people incorrectly added 1099 independent contractors as employees. Others were unable to produce necessary paperwork such as W-2s or Form 941s. S-corporation shareholders were only allowed to use their W-2 employee salary amounts instead of their total withdrawals for the year. And some of these people paid themselves a very low salary to avoid payroll taxes.

Others didn’t add correctly or just missed some numbers because they didn’t understand the rules since they had little time to read them. And in some cases, the banks did not want to follow the rules.

As a result, these people did not get the amount they hoped for.

Some of these problems can be remedied while others cannot. If you think you should get more, have someone familiar with the PPP rules review your loan application and supporting documents. You might have to change lenders if you suspect they are not following SBA guidelines.

Have an employment plan set up as soon as possible. Another common problem applicants had was that they had trouble maintaining previous employment levels, which is required to qualify for full forgiveness. This was usually because employees they previously laid off were unwilling to come back. This was because they found another job or they were financially better off not working due to the weekly $600 Pandemic Unemployment Assistance supplement to their unemployment benefits.

This can be remedied by hiring replacements for those unwilling to come back to work. Or, under a new SBA rule, the employer can make a good-faith rehire offer to the laid-off employee. If the employee refuses to return, then the loss of that employee will not count against the business’s loan forgiveness application.

But the more prudent thing to do is to have an employment plan for the next eight weeks following the receipt of PPP funding. This should be done before the application is submitted or soon afterward. Make sure the employees will be available for those eight weeks and plan to have replacements in case one of the employees does not want to come back to work or leaves in the middle of the eight-week period.

Have a budget and segregate PPP funds. For PPP funds to be forgiven, at least 75% of the proceeds must be used for payroll costs. The remaining 25% can be used for rent, business mortgage interest, and non-home-based utility costs. Ideally, 100% of the funds should be used for payroll costs, while the rent and utilities should be used as backup once payroll costs have been met.

So while you are setting up the employment plan described earlier, set up a budget to ensure that the funds will be used for forgivable purposes.

It is generally a good idea to have a separate bank account for the PPP funds for easier accounting and tracing. But if you plan to have only a few transactions during the eight-week period, a detailed journal with supporting documents should be enough. This tends to be the case for sole proprietors with no employees.

Do you really need the money? The CARES Act states that to qualify for PPP funding, the borrower has to certify that current economic conditions makes the loan necessary to support ongoing operations.

Recent SBA guidance states that the borrower must make this certification in good faith, taking into account their current business activity and their ability to access other sources of liquidity sufficient to support their ongoing operations in a manner that is not significantly detrimental to the business. The SBA guidance gives an example stating that a public company with substantial market value and access to capital markets is unlikely to make this certification in good faith.

The SBA recently made a similar determination for private companies with adequate sources of liquidity.

The SBA also stated that in consultation with the Department of the Treasury, it will audit all loans over $2 million and other smaller loans as appropriate.

With all of this scary language, is it appropriate to request the money if you have an existing credit line, a cash hoard, or another source of funding? It seems like the risk for government scrutiny is greater when the loan amount is higher and the size of the company (along with its reputation) is bigger.

Honestly, I don’t know. Every business’s situation is unique. Also, a lot of ambiguities require clearer guidance from the SBA. But in my opinion, I doubt that businesses that receive less than $1 million should be worried so long as they use the PPP money for the intended purposes.

The SBA should provide more detailed guidance on businesses using other sources of capital. Should the business owners be forced to exhaust their savings? Or should business owners be forced to take a loan against their retirement savings? Or max out their credit cards? Or all of the above before they finally qualify for PPP funding? I’ll tell you this much: a lot of business owners will just let most employees go instead of going into further debt or exhausting their savings. Only a few star employees will be kept.

Barry Melancon, the President and CEO of the American Institute of CPAs, in a blog post stated that it is nearly impossible to find a company whose financial situation has not been negatively impacted to some degree. The last thing this economy needs is small businesses laying off employees and closing shop for good because they chose to return PPP funds or not apply at all.

While the truly needy should be given priority, banning and punishing fiscally conservative small businesses that apply for PPP funds seems to send a message that saving for a rainy day is for suckers.

Businesses that want to make the most of their PPP money should plan to use it for its intended purpose and as allowed by law. To maximize forgiveness of the loan, they should borrow no more than necessary, have a spending plan before funding is received and make sure that all of their employees will be available. I believe that most small businesses should apply for the loan because the down economy will affect them eventually. But for those who feel that the PPP money is not for them, they have until May 14 to return the funds with no questions asked.

Steven Chung is a tax attorney in Los Angeles, California. He helps people with basic tax planning and resolve tax disputes. He is also sympathetic to people with large student loans. He can be reached via email at sachimalbe@excite.com. Or you can connect with him on Twitter (@stevenchung) and connect with him on LinkedIn.

Post published in: Business

Online tabloid ZimLive has provided a leaked copy of a letter which Mutodi wrote to Moyo, who said in a statement released to state media on Monday that Mutodi’s comments made on Twitter “do not reflect the government’s position nor policy.”

“With due respect to your highly regarded office, I wish to remind you that our two ministries operate on a divergent yet complimentary role, with your foreign affairs ministry outward looking while my information ministry is inward,” Mutodi wrote to Moyo in a May 12 letter.

Mutodi said his tweet which praised President Emmerson Mnangagwa’s handling of the coronavirus outbreak, while appearing to mock Tanzania’s, was designed for the Zimbabwean voter.

“While my ministry is worried about the public perception on the national leadership, its image, electability and the public approval ratings of the president, your ministry focuses on foreign cooperation and diplomatic engagement, otherwise our two ministries should have been merged if they served the same purpose,” he wrote.

Moyo called a meeting with information minister Monica Mutsvangwa and information secretary Ndavaningi Mangwana on Wednesday to explain his actions.

The foreign minister told Mutsvangwa and Mangwana that he was forced into issuing the statement after the Tanzanian embassy in Harare raised objections to Mutodi’s May 4 tweet, which he had not deleted by Wednesday.

Mutodi had tweeted: “His Excellency John Pombe Magafuli’s Tanzania now has 630 Covid-19 cases with prayers but without a lockdown, while His Excellency President E.D. Mnangagwa’s Zimbabwe only got 31 cases with a lockdown and masks. An insight into how managers can be game changers.”

Moyo publicly censured Mutodi, saying in his statement: “Each government is implementing policies that best suit their unique domestic environments in line with the guidelines of the World Health Organisation (WHO)… In this context, there was no basis whatsoever to compare the policies of the two presidents.”

In his letter to Moyo, Mutodi maintains that the fallout could have been contained without going public – and exposing the government to public ridicule.

He claims in his letter that he was right to draw the contrast because the World Bank was initially critical of Zimbabwe and South Africa’s response to the coronavirus outbreak, while praising Tanzania.

In the United States, President Donald Trump has described the virus as a “Chinese virus”, but members of his cabinet who may have reservations about the description have not objected in public, Mutodi went on.

“Your public statement, which could have been sufficiently dealt with by a diplomatic correspondence to the Tanzanian embassy, if it mattered, has divided public opinion, first on the definition and meaning of government and whether you had become its Prime Minister in charge of the two ministries,” Mutodi added in his stinging letter to Moyo.

On Wednesday, Mutodi declined to comment on his letter, but minutes after our enquiry, he wrote on Twitter: “Living in fear of the Chris Mutsvangwa-SB Moyo coalition. I hope it won’t resort to wartime tactics. Appealing for prayers.”

Chris Mutsvangwa is the husband of Mutodi’s boss, Monica Mutsvangwa. Relations between Mutodi and Monica Mutsvangwa are reportedly strained.

Post published in: Featured

* An Ohio lawyer has been suspended for allegedly stealing millions of dollars from clients to pay for his wife’s breast implants, trips to Vegas, a Mercedes, jewelry, and other extravagances. Hope he saved enough money for a good attorney… [ABA Journal]

* Ikea is facing a class-action lawsuit for allegedly-defective dressers. [USA Today]

* A lawyer is in hot water for telling a federal judge that his client has COVID-19 to get an early release when the client had in fact already recovered from the disease. [New York Post]

* Another Texas attorney has put her law practice on hold to be a nurse in an area hard hit by COVID-19. [Fox News]

* President Trump’s lawyers were grilled at Supreme Court oral arguments this week over the release of President Trump’s tax returns. [The Guardian]

* Skadden Arps has reportedly paid around $11 million to avoid a lawsuit involving the former Prime Minister of Ukraine. That’s a lot of cheddar, even for Skadden. [Hill]

Jordan Rothman is a partner of The Rothman Law Firm, a full-service New York and New Jersey law firm. He is also the founder of Student Debt Diaries, a website discussing how he paid off his student loans. You can reach Jordan through email at jordan@rothmanlawyer.com.

A Mini-Parliament Sat Briefly on Tuesday 5th May

Both Houses Will Sit Again on Tuesday 19th May

Both Houses of Parliament met on Tuesday afternoon, 5th May, but in reduced numbers.  The reduction in the number of members was in accordance with the earlier decision of the Committee on Standing Rules and Orders [CSRO], as described in Bill Watch 22/2020 [link].  The official Votes and Proceedings for the afternoon show that 120 members were present in the National Assembly, and 32 in the Senate.

Both sittings lasted less than twenty minutes and were limited to announcements by the presiding officers, including notifying vacancies [see below] in terms of section 129(1)(k) of the Constitution.  Both Houses then adjourned until Tuesday 19th May.

What will happen on 19th May?

As for what will happen on 19th May, and whether sittings and committee meetings will then be resumed, the country will have to wait and see.  The brief statement made by the Speaker in the National Assembly on Tuesday afternoon makes it clear that while contingency plans to allow Parliament to function are being pursued, much will depend on the lead given by the Government in reviewing the success or otherwise of the current Level 2 National Lockdown, due to end at midnight on Sunday 17th May.

The Order Papers for Tuesday 19th May have been produced and a great deal of business is listed – but this should probably be regarded as provisional, depending on developments during the week.

The National Assembly

The Speaker made two announcements.

Parliamentary business in the wake of the COVID-19 pandemic

After opening prayers in the National Assembly the Speaker made the following statement on Parliament business in the wake of the COVID-19 pandemic:

“I would like to thank the Hon. Members who have come from the designated areas because of the Coronavirus pandemic which is ravaging human kind throughout the world.  It is important therefore, that we as legislators observe the World Health Organisation injunctions as well as our own national strategy as pronounced by Government to observe the requirements that may help in containing, to some degree, the impact of the Coronavirus.  We, as Parliament are obligated to play our oversight role in the circumstances and accordingly, the Committee on Standing Rules and Orders has exercised its mind regarding the arrangements that will make it possible for Parliament to function with minimum degree of disruption while at the same time fulfilling its constitutional mandate.

That is why as you will notice, your Order Paper is extremely thin and business will be restricted accordingly today and Parliament will engage the stakeholders, particularly the hotels so that adequate arrangements are made for Members of Parliament to be accommodated accordingly.  It is hoped that we will get further direction in the next two weeks from the Government on the way forward. Meanwhile, administrative measures are being worked out by the Clerk and Staff of Parliament to ensure that the wheels of function in Parliament do take place accordingly.”

Three vacancies declared following “recall” of MPs

Next, the Speaker announced that Parliament had on 3rd April been notified “by the Movement for Democratic Change-Tsvangirai Party [MDC-T]” that three MPs – Chalton Hwende [constituency MP for Kuwadzana East], Thabitha Khumalo [proportional representation MP for Bulawayo Province] and Chapfiwa Prosper Mutseyami [constituency MP for Dangamvura-Chikanga] – had ceased to be members of the MDC-T party and had therefore ceased to represent its interests in Parliament.  Referring to section 129(1)(k) of the Constitution, the Speaker then informed the House that the MPs’ seats had become vacant “by operation of law”, i.e. in terms of that section, and that the President and the Zimbabwe Electoral Commission [ZEC] would be informed accordingly.  [See note headed “Filling the Vacancies?” below]

Hansard records “inaudible interjections” at one point of this announcement, but there was no discussion before the House adjourned until 19th May.

The Senate

The President of the Senate, Hon.Chinamona, made preliminary remarks about the reason for the limited number of Senators present – the need to maintain social distancing within the Senate chamber – and welcomed the presence of the Minister of Foreign Affairs and International Trade.  She then made three announcements:

Senate to Reconsider Third Reading of 2017 Constitution Amendment (No. 1) Bill

Hon Chinomona notified the Senate that on 31st March 2020 the Constitutional Court had decided that this Bill had been unprocedurally passed by Parliament on the 1st August 2017, and had ordered that the Bill be referred back to the Senate at the Third Reading stage.  Parliament would, the Senate President said, comply with the court order.  The Order Paper for 19th July duly lists the Third Reading of the Bill as item 4 for consideration.

Explanation  This bulletin is not the place for an unpacking of the Constitutional Court’s decision in this case [Gonese and Majome v Parliament of Zimbabwe, the Speaker of the National Assembly, the President of the Senate, and, in their official capacities, the then Vice-President/Minister of Justice, Legal and Parliamentary Affairs (Mr Mnangagwa) and the then President (Mr Mugabe), Judgment No. CCZ 4/2020 [link].  But a brief explanation is necessary in view of the time that has elapsed since the Constitution Amendment (No. 1) Bill was passed and the resulting Act 10/2017 gazetted on 7th September 2017.  Readers may recall that Veritas warned at the time that questions could be raised about the validity of the Senate vote for precisely the same reason now relied on by the Constitutional Court; see, for example, Bill Watch 26/2017 [link].

Section 328(5) of the Constitution states the number of votes required for a Constitution Amendment Bill to be passed by Parliament as “the affirmative votes of two-thirds of the membership of each House”.  The Constitutional Court interpreted “the membership” as the number of members allocated to each House by the Constitution, i.e. 270 members in the National Assembly and 80 members in the Senate.  Parliament mistakenly took the view that the two thirds majority applied to the 79 incumbent Senators [there was an unfilled vacancy caused by a death] and that therefore the 53 vote for the Bill was a two-thirds majority.  In fact the 53 votes was just short of the two-thirds of the constitutionally defined membership of 80 Senators. The Bill was passed.  In doing so, the Constitutional Court said Parliament had erred.

Instead, however, of simply setting aside the passing of the Bill as invalid, the court suspended its declaration of invalidity for 180 days [i.e. until the end of September 2020] and ordered that the Senate be allowed another opportunity to vote on the Third Reading of the Bill, this time applying the 54 affirmative votes requirement.  Failure within the 180 days to achieve 54 affirmative votes on a second attempt, the court said, would result in the declaration of invalidity of the passing of the Bill becoming final.

Note for readers with long memories  The National Assembly’s passing of Constitution Amendment (No. 1) was also in issue in this case.  The applicants alleged that the affirmative votes count in the National Assembly had, as a matter of fact, fallen well short of the required 180 votes.  The evidence submitted by Parliament admitted that it had been necessary for Parliament to “revise” errors in the records of the count – including serious errors in the official printed but “uncorrected” Votes and Proceedings released the day after the vote.  After considering all the evidence, however, the court declared itself satisfied that the revision had been properly made and that the 180-vote threshold had been satisfied.

One vacancy declared following “recall” of Senator Timveos

Next, Senate President Chinomona announced that Parliament had on 3rd April been notified “by the Movement for Democratic Change-Tsvangirai Party (MDC-T)” that Senator Lillian Timveos [a proportional representation Senator for Midlands Province] had ceased to be a member of the MDC-T party and had therefore ceased to represent its interests in Parliament.  Referring to section 129(1)(k) of the Constitution, Hon Chinomona then informed the Senate that the Senator Timveos’ seat had become vacant “by operation of law”, i.e., in terms of that section, and that the President and the Zimbabwe Electoral Commission [ZEC] would be informed accordingly.  [See note headed “Filling the Vacancies?” below]

Unsuccessful attempted “recall” of Senators Mwonzora and Komichi

Finally, Hon Chinomona announced that on 6th April Parliament received a letter from Hon. Hwende dated 3rd April, 2020 to recall Senators Mwonzora and Komichi in terms of section 129(1)(k) of the Constitution.  She then informed Senators that:

“Having studied the said section of the Constitution and the recent court judgment in the case of MDC and Others versus Mashavira and Others, No. S.C. 56/2020, I am satisfied that the purported recall is null and void for its lack of compliance with the Supreme Court ruling cited herein.”

Judgment No. S.C. 56/2020, of course, is the much-discussed Supreme Court decision of 31st March that upset the leadership arrangements in the MDC party by:

nullifying

1)   the appointment of Messrs Chamisa and Mudzuri as Deputy Presidents of the MDC party by party President Morgan Tsvangirai before his death;

2)   Mr Chamisa’s later elevation, by party organs after Mr Tsvangirai’s death, to Acting President and later President of the party;

3)   all Mr Chamisa’s appointments, reassignments and actions in his purported capacities as Deputy/Acting or incumbent President; and

declaring Mrs Khupe the acting party President.  The remedy ordered by the Supreme Court for was for Mrs Khupe to convene an Extraordinary Congress of the MDC party by the end of June to elect a new President in succession to Tsvangirai.  Should Mrs Khupe fail to comply, the former National Chairman of the party, Morgen Komichi [automatically reinstated by the Supreme Court order], will have to convene the congress by the end of July.  [Note: Mrs Khupe has recently announced the convening of the Extraordinary Congress for 31st July].

Filling the Vacancies?

Legal proceedings to challenge the recalls of the four MPs and Parliament’s acceptance of the recalls – and, of course, Parliament’s rejection of the two attempted recalls – now seem inevitable.  If legal proceedings are launched, that may cause delays in completing the necessary proceedings to fill the declared vacancies [i.e. appointments by the Zimbabwe Electoral Commission [ZEC] of party nominees for the two proportional representation [PR] seats, and by-elections for the two constituency seats].

PR vacancies require appointments

The Chief Electoral Officer has already said that ZEC received notification of the vacancies on 7th May.  Subject to any delays resulting from possible legal proceedings, there seems no reason for ZEC not to proceed with the relevant pre-appointment procedures despite the current COVID-19 lockdown.  Section 39 of the Electoral Act [link] details the steps to be taken.

Constituency vacancies require by-elections

Vacancies in constituency seats have to be filled by by-elections.

Calling by-elections is for the President to do after consultation with ZEC.  Holding by-elections, however, would present obvious practical problems should the COVID-19 lockdown continue much longer, because section 158(2) of the Constitution provides that a by-election must be held within 90 days of the occurrence of a vacancy, whether it be in Parliament or on a local council.

ZEC chairperson on the 26th March announced the suspension of all by-elections on account of the COVID-19 pandemic, as the Chief Electoral Officer reminded us on 7th May.  [Note: postponing a by-election may not be constitutional]

If the by-elections are postponed, how binding is the 90-day requirement?  As a matter of fact, the 90-day requirement has not been consistently complied with over the years since 2013, and no-one has suggested that results of late by-elections were invalid solely because the polling occurred later than it should have.

Veritas makes every effort to ensure reliable information, but cannot take legal responsibility for information supplied.

Post published in: Featured

Excerpts from reports generated by Heal Zimbabwe Trust and Community Radio Harare have also been incorporated in this report.

3.0       Emerging issues 
The following issues have emerged as a result of the level 2 lockdown:

             3.1       Returnees
The Permanent Secretary in the Ministry of Information, Publicity and Broadcasting Services, Nick Mangwana indicated there are currently 197 returnees at Beitbridge quarantine centre. The returnees consist of 111 male, 64 females, 11 boys and 11 girls. However, 8 people absconded the quarantine facility whilst 22 people were discharged from the quarantine facility. It was reported that Courtney hotel in Harare which is also being used as a quarantine centre has 18 returnees. Of the 18 returnees, 2 have done their mandatory quarantine stint and are due to be discharged. The other 16 were received on 9 and 10 May respectively.

It was reported that Simukai Rehabilitation Centre in Mutare has 8 children under quarantine. 2 of the children have since been transferred to Harare to reunite with their families whilst family tracing for the remaining 6 children is underway. It was further reported that Jairosi Jiri Bulawayo is accommodating 27 children who were living and working on the streets. To date, 3 children have been successfully reunited with their families and family tracing is in progress for the remaining 24 children.

         3.2       Lockdown enforcement
Reports received from Bulawayo, Gweru, Mutare and Harare indicate that most roads leading into the city centres have checkpoints manned by police and army officers. It is alleged that community members without face masks and exemption letters are either being turned back or arrested where there are liable to a fine of up to ZWL 500.00. In Harare CBD, illegal foreign currency dealers were observed around 5^th street and major bus termini  including Copacabana and Market Square. It is alleged that illegal foreign currency dealers are paying bribes of up to ZWL500 to police officers and soldiers manning checkpoints and patrolling the streets to allow them to operate.

          3.3       Lockdown Defiance
In Mazowe, community members were observed loitering at shopping centres and in the streets without wearing masks or observing social distance. Vendors were observed selling their commodities at street corners disregarding social distance and hygiene. Community members were not allowed access into supermarkets without face masks, this resulted in community embers exchanging face masks, tying shirts to their faces whilst some were reported to have tied cardboard boxes.

Similar reports were received from Umguza and Beitbridge were community members were not allowed entry into supermarkets such as N.Richards wholesale without face masks.

In Guruve, community members under Chief Bepura attended a funeral in the area without taking note of the stipulated numbers of people allowed to congregate, social distance and hygiene. Community members were also observed fetching water at community boreholes without wearing face masks.

3.4       Impact on Communities
The majority of basic commodities consumed in Zimbabwe including cooking oil and rice are imported from neighbouring countries such as Mozambique and South Africa. Due to the national lockdown, most shop owners are unable to import goods to restock their supplies. This has led to shortages of basic commodities and the increase in prices of the available commodities. In Muzarabani, reports indicate that prices of basic commodities have drastically increased whilst most retailers are selling commodities in foreign currency. It was reported that 10kg mealie meal is now going for USD10, 2litres cooking oil USD3, and bathing soap USD0.70.

Amidst the increase and scarcity of basic commodities, reports from Muzarabani indicate that ZANU PF official Joseph Gweshe is politicizing social welfare food aid. It was alleged that the ZANU PF official hijacked a food distribution process by giving employees from the Ministry of Public Service, Labour and Social Welfare a distribution list to be used for food distribution in the area. Known MDC supporters were not part of the list that Gweshe shared with the Ministry of Public Service, Labour and Social Welfare employees. As a result, MDC members were side-lined from the food distribution process.

3.5       Impact on business  
Statutory Instrument (SI) Statutory Instrument 99 of 2020 Public Health (COVID-19 Prevention, Containment and Treatment) (National Lockdown) (Amendment) Order, 2020 (No. 5) stipulated that public buses are the only mode of public transport allowed. Omnibuses like combis and smaller taxis are still not permitted to operate. This has resulted in a critical shortage of transport for workers commuting to and from their respective places of employment. As a result, most employers have enlisted transport companies to ferry their employees to work and back, which is an additional cost on companies that are trying to resume operations.

Private transport operators have been negatively affected by the pronouncement. According to the Minister of Local Government and Public Works, July Moyo, private transport operators to be classified as official service providers have to register with ZUPCO so that they can operate during the lockdown period. However, coercing private transport operators to join ZUPCO is an unfair practice and private transport operators have seen the move as a hostile takeover of their businesses.

            3.6       Aid and support  
A plane carrying a consignment of medical supplies together with a team of experts in fighting COVID-19 from China arrived in the country. The consignment of medical supplies includes sundries such as gloves, face masks, and other medication. The team of Chinese experts is expected to visit various health institutions nationally and share expertise with local medical practitioners.

In Mashonaland East, Citizens Initiative and the Rozario Memorial Trust delivered Personal Protective Equipment to health institutions. The health institutions that benefited include Jekwa clinic, Chitate clinic, Chitowa clinic, Murehwa Poly Clinic and Dombwe clinic.

4.0       Summary of violations
The table below summarises human rights violations documented by the Forum Secretariat and Forum Members from 30 March 2020 to 11 May 2020.

Ed. note: Welcome to our daily feature, Trivia Question of the Day!

According to data collected by ALM for their 2020 Am Law 100 ranking, which Biglaw firm had the biggest decrease in their revenue per lawyer?

Hint: RPL was down 5 percent, to $1,206,000 per lawyer, which still gives them the 33rd highest revenue per lawyer.

See the answer on the next page.

WASHINGTON: New revelations from Amazon and analysis from experts explain why the online giant filed a puzzling protest with the Pentagon earlier this week. Like a set of Russian nesting dolls, the protest fits inside Amazon’s larger strategy in its ongoing lawsuit over the JEDI cloud computing contract.

Officially, the so-called “agency protest” is an appeal to the Pentagon, asking it to clarify its criteria for a do-over of what was – as DoD itself admits — a flawed portion of the evaluation that awarded JEDI to Microsoft over Amazon Web Services last year. An Amazon blog post this morning said that “We asked multiple times for clarification, to which the DoD was unresponsive…. This could have been easily avoided if they had chosen to be responsive in any of the multiple requests we’ve made in the last two weeks.”

Charles Tiefer

But wait a minute. If the Department of Defense didn’t respond to Amazon’s satisfaction on repeated prior occasions – actually going back to Amazon’s original request last year for a debriefing on why they lost the contract in the first place – DoD was hardly going to change course just because Amazon filed this protest, and Amazon’s lawyers had to know that, one would think.

In fact, agency protests have no legal force and rarely get the agency to do anything, said Baltimore University law professor and former congressional counsel Charles Tiefer. “Agency protests are generally not made on their own because they are such a long shot,” Tiefer told me. “Rather, they are a step in the process of going to court or to the GAO.”

In effect, an agency protest puts the protesting company on record that it objects to how the contracting agency handled the award. That way the company’s lawyers can tell Congress’s Government Accountability Office and/or a federal judge that they tried and failed to get the agency to fix the problem before they escalated the matter to the GAO or the court.

The Pentagon’s plan to consolidate many — but not all — of its 500-plus cloud contracts into a single Joint Enterprise Defense Infrastructure (JEDI).

But last fall, when the Pentagon awarded the Joint Enterprise Defense Infrastructure contract – worth up to $10 billion over 10 years – to Microsoft in an upset victory, Amazon went immediately to court. That skipped what’s normally Step 1, an agency protest, and Step 2, a GAO protest. So why file a protest now?

In fact, once you escalate to GAO or the Court of Federal Claims, you normally can’t go back and file an agency protest. As an authoritative Congressional Research Service report put it in 2018: “Interested parties that disagree with GAO or procuring agency decisions generally can still bring claims before the COFC, whereas the reverse route is generally not permitted.” (Emphasis ours).

But in this particular case – and it’s a strange case indeed – Amazon did have a new opportunity to file a protest, because the Defense Department has taken a new action.

“Think of this as a subroutine within a large, complex software program,” said Andrew Hunter, a former Pentagon acquisition official now at thinktank CSIS. “AWS is exercising all of its rights within the ‘subroutine’ process even as it litigates at the Court of Federal Claims on the entire program.”

Specifically, having admitted that it messed up one narrow, highly technical portion of the award process known as Price Scenario Six, DoD won the judge’s permission for a do-over of that specific scenario. (Amazon had objected to the other scenarios as well). Part of that do-over involved Amazon and Microsoft both submitting revised bids for Price Scenario Six. But Amazon says DoD “didn’t clearly define… the new [data] storage requirement,” even when Amazon repeatedly asked them for clarification. Hence the protest.

Here’s all the Pentagon would say publicly on the matter: “DoD continues to execute the procedures outlined in the Motion for Voluntary Remand [i.e. the do-over] granted last month with the intent of delivering this critically-needed capability to our warfighters as quickly as possible.”

The studious blandness of that statement should be no surprise. Again, Amazon’s protest isn’t really about getting the Pentagon to change its mind, but about what Tiefer calls “due diligence” in getting its objections on the record for the judge to see.

Andrew Hunter

“Protesting the revised evaluation of Price Scenario Six officially registers that AWS believes that the evaluation process is still unfair,” Hunter told me “If they didn’t protest the evaluation criteria now, it could be presumptively deemed that they accept the new terms as fair.”

There’s one more weird wrinkle to this story, however. Microsoft promptly published its own blog post and was, in fact, the first to mention the protest in public. Since agency protests are confidential, it’s actually unclear if Amazon or DoD intended to make this public prior to Microsoft announcing it.

You see, unlike protests to GAO or the Court of Federal Claims, agency protests are not public record, they’re confidential. When Microsoft objected to Amazon’s protest being “out of view of the public,” well, that’s how agency protests are supposed to work. “There are no comprehensive publicly available data on protests before procuring agencies,” CRS wrote, “[and] agency protest decisions are not published.”

In fact, agency protests are often resolved completely in confidence between the protester and the agency, although in some cases competing bidders have to be notified. Microsoft’s blog post says “We received notice on Tuesday that Amazon has filed yet another protest.”

Now, Microsoft didn’t reveal the confidential content of Amazon’s protest – in fact the blog post says they haven’t seen it – just the fact that it exists. And, as far as I know, it is not illegal for Company A to publicly discuss Company B’s agency protest, even if Company B hasn’t said anything publicly itself. But it is definitely unusual.

For the Byzantine battle over JEDI, however, “unusual” has become the new usual.

The NCAA is not impressed with the Department of Education’s new rules to better “protect” students from sexual harassment and assault under Title IX. Apparently, the organization is not convinced that limiting the number of mandatory reporters will magically make student athletes safer from sexual violence. And if the billion dollar non-profit that hoovers up cash selling athletes’ images while excommunicating them if they accept a free pair of sneakers is recoiling in horror, chances are the DOE’s new rule is pretty bad.

As ESPN’s Paula Lavigne notes, the changes finalized last week relieve coaches and athletic staff of the pesky obligation to report allegations of sexual abuse or assault the school’s Title IX coordinator. Last year the Department fined Michigan State $4.5 million for systemic failure to address horrific abuse of gymnasts by Dr. Larry Nasser, and yet the new regulations seem to have been designed to create more people who can look the other way with impunity.

But Secretary DeVos has a perfectly good explanation for a rule that would have allowed Jim Jordan to (allegedly) chortle about wrestlers being molested by the Ohio State University’s team doctor with no obligation to do anything about it, and it is … AUTONOMY.

Every situation is unique, and individuals react to sexual harassment differently. Therefore, the Final Rule gives complainants control over the school-level response best meeting their needs. It respects complainants’ wishes and autonomy by giving them the clear choice to file a formal complaint, separate from the right to supportive measures. The Final Rule also provides a fair and impartial grievance process for complainants, and protects complainants from being coerced or threatened into participating in a grievance process.

Perish the thought that an athlete whose scholarship and athletic career are dependent on staying in the good graces of the coaching staff be “coerced or threatened into participating in the grievance process” by mandatory reporting requirements!

The new regs only impose the reporting obligation on staff who have “authority to institute corrective measures,” a power which schools can optionally confer on athletic staff. Clearly the Department’s curriculum includes fantasy novels where organizations voluntarily increase the pool of staff members who can incur millions of dollars in federal fines and civil damages. Nevertheless, NCAA rules will still impose a reporting requirement on all collegiate athletic staff.

“The campuses will retain the responsible employee mandatory reporter standard that they have because that’s the better practice,” W. Scott Lewis, co-founder of the Association of Title IX Administrators told ESPN.

“The department is not under an obligation to conform these final regulations with NCAA compliance guidelines and declines to do so,” sniffed the Department in its response. And then it went back to discussing a plan to protect students from sexual assault by passing out millions of copies of “Atlas Shrugged,” useful as a weapon to fend off an attacker and a paean to the vaunted “autonomy” Secretary DeVos values above all else.

New Title IX regulations change how colleges must respond to sexual misconduct complaints [ESPN]
New Title IX regulations no longer require coaches to report sexual misconduct [Yahoo]

Elizabeth Dye (@5DollarFeminist) lives in Baltimore where she writes about law and politics.