Does the Bank Loan Exception Apply to Non-U.S. Banks that Pledge Cash Collateral in Derivative Transactions?

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1 Does the Bank Loan Exception Apply to Non-U.S. Banks that Pledge Cash Collateral in Derivative Transactions? June 2006 Background A singularly important question in derivatives transactions between a non-u.s. 1 investor and a U.S. counterparty is whether the non-u.s. investor will be eligible for the portfolio interest exemption from the U.S. foreign withholding tax. The question is particularly important for investors from jurisdictions that either do not have a tax treaty with the U.S. or have a tax treaty that does not eliminate the U.S. withholding tax completely. This question is complicated by an ambiguity in the U.S. tax law, which creates the possibility that a non-u.s. bank s pledge of cash collateral in a derivative transaction with a U.S. counterparty may be deemed to constitute a loan made in the ordinary course of the non-u.s. bank s banking trade or business. In this situation, commonly referred to as the bank loan exception, U.S. source interest payments on the cash collateral would not be eligible for the portfolio interest exemption (and consequently would be subject to the U.S. withholding tax). This article focuses on two important questions raised by the bank loan exception for transactions using documentation standardized by the International Swaps and Derivatives Association, Inc ( ISDA ): (1) under what circumstances can the bank loan exception result in the application of the U.S. withholding tax regime to interest payments on cash collateral in derivative transactions, and (2) which party U.S. pledgee or non-u.s. pledgor bears the risk for any U.S. withholding taxes. 2 The U.S. Withholding Tax and the Portfolio Interest Exemption Generally, non-u.s. resident individuals and corporations are subject to a 30% U.S. tax (the U.S. withholding tax ) on certain types of fixed and determinable income (including, for example, interest and dividends) from sources within the IN THIS ISSUE Background The U.S. Withholding Tax and the Portfolio Interest Exemption The Bank Loan Exception ISDA Documentation Posting Cash Collateral: Pledge or Loan? Defining the Ordinary Course of a Banking Business U.S. Tax Consequences of the Bank Loan Exception Allocation of Risk for the U.S. Withholding Tax... 6 Conclusion STROOCK & STROOCK & LAVAN LLP NEW YORK LOS ANGELES MIAMI 180 MAIDEN LANE, NEW YORK, NY TEL FAX

2 United States. The U.S. withholding tax must be withheld by the person or persons having the control, receipt, custody, disposal, or payment of any of the items of income subject to this tax. As discussed below, the U.S. withholding tax is subject to several notable exemptions, including the exception for portfolio interest. In addition, most U.S. tax treaties eliminate the U.S. withholding tax with respect to interest. Others, such as the tax treaty between the United States and Canada, reduce, but do not eliminate, the U.S. withholding tax with respect to interest. The U.S. withholding tax does not apply to amounts classified as portfolio interest (the portfolio interest exemption ). In general, interest on an obligation constitutes portfolio interest if the obligation is in registered form and the payee provides the payor with a properly executed Form W- 8BEN. If the recipient of portfolio interest is an intermediary, the payor must receive a Form W- 8IMY as well, generally speaking, a Form W-8BEN from the beneficial owner of the interest on behalf of whom the intermediary acts. An obligation is in registered form if it is registered with the issuer or its agent as to both principal and any stated interest and either is transferable by the surrender of the old instrument and its re-issuance or, alternatively, if the right to the principal and stated interest is transferable through a book entry system maintained by the issuer or its agent. 3 The Bank Loan Exception Overview Under the so-called bank loan exception of section 881(c)(3)(A) of the Code, 4 interest received by a non-u.s. bank on an extension of credit made pursuant to a loan agreement entered into in the ordinary course of its trade or business is ineligible for the portfolio interest exemption, unless such interest is paid on an obligation of the United States. 5 The bank loan exception was intended to prevent U.S. banks, which are subject to U.S. tax on interest income, from suffering a competitive disadvantage vis a vis foreign banks that make loans to U.S. persons 6 and to prevent non-u.s. banks from channeling their U.S. lending away from their U.S. branches, which are subject to reserve maintenance requirements imposed by the Federal Reserve Board. The bank loan exception contemplates two separate requirements: (1) the recipient of interest subject to the exception must be a non-u.s. bank, 7 and (2) such interest must relate to a loan made in the ordinary course of the non-u.s. bank s trade or business. Legislative history to the bank loan exception provides that [w]hether a foreign bank will be considered to have extended credit pursuant to a loan agreement entered into in the ordinary course of its banking business will be determined, with respect to a particular obligation, under regulations prescribed by the Secretary. 8 To date, the Secretary of the Internal Revenue Service (the Service or the IRS ) has not issued any such regulations. Until the regulations are issued, the scope of the bank loan exception remains something of a question mark. What is a Bank? The term bank is not defined by the Code for purposes of the bank loan exception and legislative history offers no clues as to the types of institutions that may be covered. However, the fact that Congress used the narrow term bank rather than making the exception applicable to any banking, financing, or similar business (a phrase that appears elsewhere in the Code) suggests that Congress did not intend the bank loan exception to apply broadly to non-u.s. corporations that happen to extend credit to U.S. counterparties in the ordinary course of their trade or business. The IRS has adopted just such a narrow interpretation of the bank loan 2

3 exception, stating that the term bank must be construed narrowly and must be given a meaning that distinguishes it from all other entities that make commercial loans. 9 In those rulings, the IRS used the definition of the term bank found in section 581 of the Code. 10 Under section 581 an entity is deemed to be a bank if (1) accepting deposits and making loans constitutes a substantial part of such entity s business, and (2) the entity is regulated, supervised, and examined as a bank. 11 If the forthcoming regulations under the bank loan exception adopt the Section 581 definition of the term bank, then the bank loan exception will be relevant only to non-u.s. entities that are regulated as banks and that accept deposits in the ordinary course of their trade or business. Other non- U.S. entities that extend credit to U.S. counterparties in derivative transactions entered into in the ordinary course of their trade or business, including those with substantial lending and financing activities, will be able to rely on the portfolio interest exemption. 12 If, on the other hand, the IRS adopts a more expansive view of what constitutes a bank for purposes of the bank loan exception, the issue may remain open to question. What is a Loan Agreement Section 881 of the Code also is silent concerning the types of activities that constitute a loan agreement for purposes of the bank loan exception and, as mentioned previously, the IRS has not released guidance addressing this issue. While the legislative history generally is uninformative regarding the definition of the term loan agreement, it specifies that [i]nterest on any obligation that performs the function of a loan entered into in the ordinary course of a banking business will be ineligible for the [portfolio interest] exemption. 13 (Emphasis added). On the other hand, the legislative history states that [i]interest on an obligation that does not perform that function for example, a Eurobond held by a foreign bank as an investment asset may be eligible for the exemption. 14 Taken together, these statements seem to indicate that Congress intended the bank loan exception to cover only loan agreements or similar instruments that typically are entered into by a bank in the ordinary course of its banking business, and not to agreements entered into by a bank pursuant to its other business activities, such as writing insurance policies or entering into swap transactions. To resolve the ambiguity, the Section of Taxation of the ABA has pressed the Service to adopt in future guidance on the bank loan exception a definition of the term loan agreement that encompasses only negotiated bank loans. 15 For purposes of distinguishing loan agreements from instruments acquired for other purposes, the ABA advocates the use of a factor-based analysis that gauges the extent of negotiations between the bank and the borrower with respect to the terms of a loan. 16 However, though the ABA made recommendations to the IRS concerning the treatment of certain medium term notes and loan syndications, it did not address the proper treatment, for purposes of the bank loan exception, of cash collateral under standard ISDA documentation. ISDA Documentation The vast majority of over-the-counter derivative instruments issued today use documentation standardized by ISDA, a global trade association representing participants in privately negotiated (overthe-counter) derivative transactions. For example, during the taxable year ending December 31, 2005, derivative instruments with an estimated notional amount of $213.2 trillion were executed using ISDA documentation. 17 3

4 Most derivative transactions are collateralized. 18 Collateralized derivative transactions typically are documented using the 2002 ISDA Master Agreement form (the Master Agreement ), 19 which sets forth the major terms of the relationship between the parties, the Credit Support Annex to the Master Agreement (the CSA ), which specifies the terms relating to any collateral pledged by the parties to the Master Agreement, confirmations of transactions entered into under the Master Agreement, and various ISDA Definitions. 20 Under the CSA, each party to a derivative transaction may be required to secure its obligations under the Master Agreement by pledging certain collateral to the other party. By pledging collateral, each party (as the pledgor) grants to the other (as the secured party) a continuing security interest in, a lien on, and a right of set-off against, all the pledged collateral, as discussed further in the following section. The CSA provides further that, if the pledgor defaults on its obligations under a transaction covered by the Master Agreement, the secured party has all the rights and remedies with respect to the collateral that are generally available to a secured party under applicable law. For example, the secured party can choose to liquidate the collateral and to apply the proceeds to satisfy any amounts payable to it by the pledgor. Posting Cash Collateral: Pledge or Loan? Overview Whether the bank loan exception applies to derivative transactions in which cash is posted as collateral turns, in part, on whether posting cash collateral is deemed to be equivalent to making a loan. The following sections discuss some of the relevant factors to consider in addressing that question. The CSA permits the use of collateral consisting of cash 21, negotiable debt obligations issued by the U.S. Treasury Department, and certain other instruments agreed upon by the parties. Generally, the amount of collateral that a party may be required to pledge is inversely related to that party s credit rating. Accordingly, all other things being equal, if a party to a derivatives transaction has, for example, a high S&P credit rating (e.g., AAA), such party typically will be required to pledge less collateral than would a party with a lower S&P credit rating (e.g., BBB-). Under the CSA, each secured party may have the right to sell, invest, and otherwise dispose of its collateral as it sees fit. 22 However, even if a secured party chooses to exercise this right, it is considered under the CSA to hold all collateral, and, where collateral consists of securities, to receive all payments of principal and interest due under the securities. Where collateral consists of U.S. Treasury obligations or other securities, the secured party is required to distribute to the pledgor all payments of principal and interest, or other distributions of cash or property, with respect to such securities. However, where parties to a derivative transaction secure their obligations using collateral in the form of cash, pursuant to the CSA each secured party must pay to the pledgor a certain agreed upon rate of interest that generally does not depend on the rate of return generated by the secured party on its actual use or investment of the cash collateral. 23 As will be discussed below, the fact that distributions to the pledgor are not linked to the actual returns earned by the secured party on cash collateral sets this arrangement apart from a traditional pledge and makes it possible conceptually to bifurcate it into two parts, one consisting of a loan and the other of a pledge. Posting of Cash Collateral Although the use of cash collateral is described under ISDA documentation in terms of a pledge, the use of cash collateral is distinguishable in several 4

5 respects from a typical pledge of property. In general, a pledge is a delivery of personal property by a pledgor to a secured party to secure the performance by the pledgor of an obligation to the secured party. 24 Although the secured party obtains a right of possession in the pledged property, legal title to the pledged property remains with the pledgor. The secured party cannot liquidate the pledged collateral unless and until the pledgor defaults. In addition, in the absence of an agreement to the contrary, the secured party generally must account to the pledgor and pay over all income and profits accruing with respect to the pledged property. In contrast to a typical pledge, a secured party in a derivative transaction governed by the CSA generally is obligated to pay to the pledgor a pre-agreed rate of interest (e.g. LIBOR) with respect to the cash collateral. However, because the CSA does not stipulate the manner in which the secured party can invest cash collateral, or require it to pay over to the pledgor its returns with respect to such collateral, the secured party s rate of return with respect to the cash collateral can differ from the rate it is obligated to pay to the pledgor. In effect, the pledgor loans the cash collateral to the secured party, which uses the cash collateral to leverage certain other investments. In return, the pledgor receives a stated rate of interest, as would a lender. This bifurcated arrangement is illustrated by the following diagram: Secured Party (borrower) Note + Interest at X% Cash + Pledge of the Note Pledgor (lender) However, although the terms and conditions for posting cash collateral in a derivative transaction governed by the CSA differ in several respects from terms and conditions of a typical pledge agreement, neither do they correspond entirely to a traditional loan. A debt instrument typically provides for payments of principal and interest to which the lender is unequivocally entitled. In contrast, neither party in a collateralized derivative transaction has an absolute right to the cash collateral (i.e. the principal ). Indeed, the pledgor cannot recover its collateral unless it satisfies its obligations. Furthermore, in collateralized derivative transactions, the creditworthiness of the pledgor (the lender) and not the secured party (the borrower) determines many of the crucial terms relating to the cash collateral (the debt). This distinction argues against treating the posting of cash collateral as a loan. In the absence of guidance from the IRS, it is difficult to predict whether the posting of cash collateral in a derivative transaction will be characterized by the IRS as a loan. As discussed above, posting cash collateral displays characteristics of both a loan and a pledge of property. However, even if posting cash collateral were deemed to be a loan, such a loan would not fall within the bank loan exception unless it was pursuant to a loan agreement entered into in the ordinary course of [a non-u.s. bank s] trade or business. 25 In other words, the bank loan exception should not to apply to a derivative transaction secured by cash collateral unless that transaction was entered into in the ordinary course of a non-u.s. bank s business, and as discussed above this business should be its banking business. Defining the Ordinary Course of a Banking Business At present, there are neither IRS rulings, regulations, nor other IRS guidance discussing the types of activities that are in the ordinary course of a banking business, nor whether entering into over-the-counter derivative transactions is among such activities. Nonetheless, precedents from the Passive Foreign Investment Company ( PFIC ) regime 26 are somewhat instructive. 5

6 Under the PFIC regime, certain income earned by non-u.s. corporations that are active securities dealers or brokers or that conduct an active banking business is treated as non-passive. For purposes of this provision, the Proposed Regulations under Section 1297 (the Proposed PFIC Regulations ) differentiate between certain banking activities of banks and securities activities of securities dealers and brokers. The Proposed PFIC Regulations contemplate that not all activities of a bank are banking activities. The list of banking activities in the Proposed PFIC Regulations consists primarily of traditional banking activities, such as lending, negotiating customers notes, and providing charge and credit card services to clients. 27 Similarly, the list of securities activities includes typical broker-dealer activities, such as purchasing or selling stock and debt instruments, and [a]rranging futures, forwards, options, or notional principal contracts for, or entering into such transactions with, customers. 28 The distinction between banking and non-banking activities is somewhat blurred, however, in the case of interest rate and currency derivative transactions. Under the Proposed PFIC Regulations, such transactions are included in both categories. Thus, if the IRS were to adopt definitions similar to those in the Proposed PFIC Regulations, interest rate and currency derivative transactions might be deemed to be banking activities. In that case, they likely would be subject to the bank loan exception, making interest on cash collateral in such transactions ineligible for the portfolio interest exemption. It should be noted, however, that the Proposed PFIC Regulations were designed to address concerns in an entirely different area of the law, and it may not be appropriate to draw exact parallels to the bank loan exception. Strong arguments can be made that lumping currency and interest rate derivative transactions into a broadly defined category of banking activities would unduly expand the breadth of the bank loan exception. It should also be noted that the Proposed PFIC Regulations are not final IRS regulatory guidance. U.S. Tax Consequences of the Bank Loan Exception If the posting of cash collateral by a non-u.s. bank in a derivative transaction were deemed to be a loan in the ordinary course of its banking business, the U.S. tax consequences to such bank could be significant. First, all interest on the cash collateral (the note in the above illustration) would be deemed to be received on an extension of credit made pursuant to a loan agreement entered into in the ordinary course of [the non- U.S. bank s] trade or business and, therefore, subject to the bank loan exception. As a result, interest payments with respect to cash collateral would not be eligible for the portfolio interest exemption from the U.S. withholding tax. If the non-u.s. bank were domiciled in a jurisdiction without a tax treaty with the United States, or whose tax treaty with the United States did not completely shield interest payments from the imposition of the U.S. withholding tax, the secured party would be obligated to withhold from payments of interest with respect to cash collateral, amounts for the payment of U.S. taxes. This would significantly diminish the rate of return on the non- U.S. bank s investment, impose an administrative burden on the U.S. secured party and, as discussed below, subject such secured party to the risk of being required to make an additional gross-up payment to the non- U.S. bank on account of the tax. Allocation of Risk for the U.S. Withholding Tax Assuming for the moment that payments of interest with respect to cash collateral are subject to the U.S. withholding tax, it is worth exploring whether the non-u.s. bank as the pledgor, or its U.S. counterpar- 6

7 ty, as the secured party, bears this tax and what rights, if any, the non-u.s. bank has in this eventuality under ISDA documentation. The Gross-Up Requirement Under the Master Agreement, if the payment of any amount due in a derivative transaction is subject to an Indemnifiable Tax, the U.S. payer has an obligation to pay to the non-u.s. counterparty a gross-up amount. This gross-up amount is intended to fully compensate the non-u.s. party for the U.S. withholding tax and put it in the same position as if no withholding were required. Pursuant to the CSA (the terms of which appear to supersede those of the Master Agreement with respect to the gross-up), the pledgor is obligated to pay all taxes imposed with respect to the collateral. 29 Therefore, if the bank loan exception does apply to a derivative transaction in which a non-u.s. bank posts cash collateral, the non-u.s. bank ultimately will bear responsibility for paying the U.S. withholding tax. As discussed below, however, the non-u.s. bank is not without remedies. Termination of a Derivative Transaction upon a Change in Tax Law ISDA documentation offers participants in derivative transactions an escape route in the event that an adverse change in U.S. tax law 30 affects their obligations. Pursuant to the Master Agreement, a U.S. payer may terminate a derivative transaction if a change in U.S. tax law occurs and this change requires, or there is a substantial likelihood that such change requires, the U.S. payer to make a gross-up payment to its non-u.s. counterparty. The non- U.S. payee can also terminate the derivative transaction if a change in U.S. tax law requires it to accept a payment without the gross-up, or there is a substantial likelihood that this will occur. Accordingly, if a non-u.s. bank as pledgor determines that a change in U.S. tax law has occurred and that there is a substantial likelihood that this change will reduce interest payments with respect to its cash collateral, the non-u.s. bank may terminate any affected derivative transactions. 31 Conclusion It remains an open question as to whether the bank loan exception applies to interest received by non- U.S. banks on cash collateral. This issue will not be resolved until the IRS releases guidance on the subject. It is possible that in forthcoming IRS guidance, cash collateral will be deemed a loan issued in the ordinary course of a banking business. If so, interest on cash collateral would be subject to the bank loan exception and would not be entitled to the benefit of the portfolio interest exemption from U.S. withholding taxes. Even if the IRS were to issue such guidance, non-u.s. banks that have entered into derivative transactions with U.S. counterparties could choose to substitute other collateral for U.S. cash, or to terminate the transaction, rather than accept diminished returns. Lastly, parties entering into a derivative transaction can seek to modify the standard ISDA documentation to change the allocation of risk in the event of an adverse change in tax law. By Micah W. Bloomfield, a Partner in the Tax Practice Group and the Derivatives and Commodities Practice Group of Stroock & Stroock & Lavan LLP, and Dmitriy Shamrakov, an associate in Stroock s Tax Practice Group. 1. All references herein to U.S. are references to the United States of America. 2. This article does not deal with the withholding rules applicable to payments under derivatives contracts that are not an interest for U.S. federal income tax purposes. There are special, favorable rules for payments under notional principal contracts. See Treas. Reg

8 3. Other exemptions from the U.S. withholding tax that may be applicable in certain situations include the exemptions for qualified bank deposit interest and original issue discount on certain short-term obligations. See Sections 871(g) and (i). 4. All references herein to the Code are references to the Internal Revenue Code of 1986, as amended. 5. The portfolio interest exemption is also not applicable to loans the interest on which is effectively connected to a U.S. trade or business of the lender. 6. Staff of the Joint Comm. on Tax n, 98th Cong., General Explanation of the Revenue Provisions of the Deficit Reduction Act of 1984, at 393 (Joint Comm. Print 1984) ( 1984 Blue Book ). 7. The bank loan exception applies only to entities that are corporations for U.S. federal income tax purposes. Therefore, interest paid to a foreign individual under the circumstances specified in the bank loan exception would get the benefit of portfolio interest treatment. 8. Id. 9. See Priv. Ltr. Rul (Feb. 10, 1998); see also Priv. Ltr. Rul (Feb. 10, 1998). 10. Id. 11. See Sections 581 and 585(a)(2)(b). The American Bar Association (the ABA ) has urged the Service to adopt the definition of the term active bank used in Proposed Regulation Section (b). See ABA Tax Section, Comments Regarding Need for Guidance on Portfolio Interest Rules Under Sections 871(h) and 881(c) of the Internal Revenue Code 34 (March 18, 2004), available at (ABA Tax Section Portfolio Interest Comments). Pursuant to this provision a foreign corporation is an active bank if it is licensed by federal or state bank regulatory authorities to do business as a bank in the United States, or, if it lacks such license, it is licensed or authorized to accept deposits from the residents of the country in which it is chartered and to perform certain banking activities in such country. In addition, to constitute an active bank an entity must regularly accept deposits and make loans in the ordinary course of its trade or business. See Prop. Treas. Reg (b)-(e). 12. Non-bank affiliates of non-u.s. banks that engage in lending activities with U.S. persons may be subjected to the bank loan exception if they are deemed to be a conduit pursuant to section 7701(l) of the Code and Treas. Reg Blue Book, at Id. 15. ABA Tax Section Portfolio Interest Comments, at Id. at See ISDA Market Survey Results, available at See 2006 ISDA Margin Survey, available at According to the 2006 ISDA Margin Survey, the percentage of over-the-counter derivative transactions supported by some collateral is approximately 92% for fixed income, 90% for foreign exchange, 68% for equity, and 72% for credit derivatives. 19. All references in this article to a Master Agreement are to the 2002 ISDA Master Agreement and the 1992 Agreement. All references to an ISDA Credit Support Annex or the CSA are to the 1994 Credit Support Annex to ISDA Agreements subject to New York law only. 20. ISDA Confirmations based on templates set forth the economic terms of the derivative transaction; the ISDA Definitions booklets for particular products define terms used in the Confirmations of the relevant transactions. 21. According to the 2006 ISDA Margin Survey, cash is the most popular form of collateral in over-the-counter derivative transactions, comprising approximately 75% of all collateral used in such transactions. The CSA defines cash as the U.S. dollar. 22. This article does not address the tax consequences of such sale, investment, or other disposition of collateral. 23. There are at least two instances where payments of interest on cash collateral will correspond to returns earned on such collateral: (1) where cash collateral is held by a custodian; and (2) where applicable law or regulation requires the secured party to pay the pledgor the amounts earned on the cash collateral. 24. See 72 C.J.S. 2 (2004). 25. Assuming that the ABA s interpretation of Congressional intent is correct, the loan would also have to be an actively negotiated loan. However, as the terms of typical over-the-counter derivative instruments are extensively negotiated, the latter condition will not protect interest on cash collateral from the application of the bank loan exception. 26. Very generally, the PFIC regime requires current inclusion of income by U.S. shareholders in foreign corporations that meet certain defined thresholds for passive income or assets. 27. See Prop. Treas. Reg (f)(2). 28. See Prop. Treas. Reg (e)(2). 8

9 29. Amendments to English Law (Transfer) and NY Law Credit Support Annexes published on August 9, 2004 would explicitly exclude withholding tax on interest payments with respect to cash collateral from the definition of the term Indemnifiable Tax. ISDA has noted that these amendments were drafted to address concerns of the Japanese Collateral Committee and clarify, rather than change, the burden of the withholding tax. In so doing, ISDA confirmed a prior industry consensus that generally the non-u.s. counterparty to a derivative transaction bears the burden of any U.S. withholding tax that may be due on collateral. 30. According to the Master Agreement a change in tax law means the enactment, promulgation, execution or ratification of, or any change in or amendment to, any law (or in the application or official interpretation of any law) that occurs after the parties enter into the relevant derivative transaction. 31. Of course, because the non-u.s. bank s determination is subjective, it is open to challenge in court by the U.S. counterparty. New York 180 Maiden Lane New York, NY Tel: Fax: Los Angeles 2029 Century Park East Los Angeles, CA Tel: Fax: Miami Wachovia Financial Center 200 South Biscayne Boulevard, Suite 3100 Miami, FL Tel: Fax: This Stroock Special Bulletin is a publication of Stroock & Stroock & Lavan LLP 2006 Stroock & Stroock & Lavan LLP. All Rights Reserved. Quotation with attribution is permitted. This Stroock publication offers general information and should not be taken or used as legal advice for specific situations, which depend on the evaluation of precise factual circumstances. Please note that Stroock does not undertake to update its publications after their publication date to reflect subsequent developments. Stroock & Stroock & Lavan LLP is a law firm with a national and international practice serving clients that include investment banks, commercial banks, insurance and reinsurance companies, mutual funds, multinationals and foreign governments, industrial enterprises, emerging companies and technology and other entrepreneurial ventures. For further information about Stroock Special Bulletins or other Stroock publications, please contact Richard Fortmann, Senior Director-Legal Publications, at