Professor Paul Griffin
Professor Paul Griffin served as an expert witness in the Federal Court of Claims case, Bank of America v. The United States, 2005. In this precedent-setting case Bank of America sued the federal government for taxes it might pay on breach-of-contract damages. This breach was the result of federal regulations instigated following the deregulation of the savings and loan industry in the early 1980s. Griffin weighed in significantly on the court’s decision to not allow Bank of America to collect the additional taxes as damages. The deregulation of the savings and loan industry perpetuated several years of unmitigated graft and fraudulent investments that destabilized the market. In response the federal government imposed regulations in the form of several acts, including the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA), which slapped investment institutions with a series of rules that conflicted with previous contractual agreements with the government. For instance, a common practice during company acquisitions prior to this regulation was the regulatory accounting principle known as “supervisory goodwill.” In the post-FIRREA era, financial institutions have not been allowed to use this accounting principle, prompting several to file lawsuits against the government. Most financial institutions won the breach-of-contract cases, but some decided to take it further by suing for the taxes they might pay in the future on damages because their supervisory goodwill was taken away. Bank of America sought claims of $100 million in lost capital due to the disallowed supervisory goodwill, and also demanded millions of dollars of taxes that might be paid under the new regulations. Griffin argued that a tax gross-up, or tax reimbursement, was inappropriate in this instance because the damages Bank of America was seeking constituted the replacement of lost capital and, as such, cannot be the subject of taxation. The court agreed that no tax gross-up should be awarded—and Griffin’s recommendation saved tax payers millions of dollars.