Audit Notes: Kent State Court, Corporate Taxes, the Communion Wafer Industry

Hats off to The Daily Kent Stater and reporter Doug Brown for exposing how the university was about to name its basketball court after a donor who had a nasty bit of securities fraud in his past:

According to SEC records, (Jason M.) Cope opened a branch of A.C. Financial in Pittsburgh in 1999 and soon began to sell phony stocks to investors sent to him by Ira Monas, the president of Milan Capital Group in New York, who reportedly hatched the plan right before serving an unrelated prison sentence for grand larceny.

Milan Capital Group, led by Monas, and A.C. Financial, led by Cope, “offered and purportedly sold to investors shares of four ‘hot’ IPOs,” — highly publicized initial public offerings of securities — and received $8.7 million from 190 investors, according to SEC litigation.

Investors thought they were purchasing shares of Worldwide Wrestling Federation Entertainment, United Parcel Service, Inc., FogDog, Inc. and, Inc., court records show. Cope and Monas did not have access to those shares.

Brown reports that the university was aware of Cope’s prior trouble with the law and was going to name the court after him anyway, like UCLA with Lowell Milken. They don’t have that dilemma anymore: Cope yanked his million-dollar donation after the college newspaper started asking questions.

(h/t Jim Romenesko)

The Wall Street Journal’s John D. McKinnon has an important page-one story today on the rise of tax-free corporations, which pass profits through to owners, saving big money on corporate taxes.

The percentage of U.S. corporations organized as nontaxable businesses has grown from about 24% in 1986 to about 69% as of 2008, according to the latest-available Internal Revenue Service data. The percentage of all firms is far higher when partnerships and sole proprietors are included…

By some estimates, more than 60% of U.S. businesses with profits of $1 million are structured as pass-throughs, the highest rate among developed countries. Their popularity is one big reason why federal corporate tax collections amounted to just 1.3% of GDP in 2010, well below their mark of 2.7% in 2006 and far beneath their peak of 6.1% in 1952.

This one’s off the beaten path a bit, but very much a business story.

Rowan Moore Gerety writes for Killing the Buddha on the commodification of the Communion wafer, tracing the history of the Cavanagh company that dominates the sector and the tension it’s created with the cloisters that still make altar bread.

This passage on how the firm dealt with a rash of knockoff wafers has a priceless quote (emphasis mine):

This hasn’t hurt Cavanagh’s sales, but it did prompt the company to launch a blanket advertising campaign (cited by the Poor Clare sisters) to churches and distributors across the country, aimed at establishing that their “altar bread is far superior to generic copies.”

Clergy and producers alike are adamant that the bread is just bread prior to consecration (a Cavanagh employee used to joke that there was a priest waiting on the loading dock to bless the wafers as they came off the assembly line), but there is something uncanny about embracing advertising for a product destined to become the body of Christ. Predictably, Cavanagh’s general manager sees it differently: “Advertising our altar bread is a positive thing for Cavanagh Company. We take a lot of pride in putting our family name on a product that will eventually become the body and blood of Jesus.”

Fascinating piece.

(h/t Catherine Rampell)

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Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at Follow him on Twitter at @ryanchittum. Tags: , , , ,