From thee Tax & Business Law Commentary Blog comes this post about Dominatrix seeking a contract. Mr. Levine thinks:

Of course, the question that first occurred to me is: Is the "Dominatrix" an independent contractor or an employee? This has obvious income tax and FICA/SECA implications.

My first thought was this: might the contract be void as being for an illegal purpose? The commentator to Mr. Levin's blog answers the independent contractor/employee question correctly (well, correctly for Indiana). I had to some looking for my answer. The short answer is that it is not void for being a contract for an illegal act.

The longer answer requires looking at the prostitution statute (IC 35-45-4-2):

Prostitution
35-45-4-2 Sec. 2. A person who knowingly or intentionally:
(1) performs, or offers or agrees to perform, sexual intercourse or deviate sexual conduct; or
(2) fondles, or offers or agrees to fondle, the genitals of another person;
for money or other property commits prostitution, a Class A misdemeanor. However, the offense is a Class D felony if the person has two (2) prior convictions under this section.
As added by Acts 1976, P.L.148, SEC.5. Amended by Acts 1977, P.L.340, SEC.77; Acts 1979, P.L.301, SEC.1; P.L.310-1983, SEC.3.

Then just to be on the safe side checking the definition of "Deviate sexual conduct" at IC 35-41-1-9:

"Deviate sexual conduct" defined
35-41-1-9 Sec. 9. "Deviate sexual conduct" means an act involving:
(1) a sex organ of one person and the mouth or anus of another person; or
(2) the penetration of the sex organ or anus of a person by an object.
As added by P.L.311-1983, SEC.10. Amended by P.L.183-1984, SEC.1.

And, that is legal reasoning in 60 seconds. It does beg the question of why we lawyers think of such things when faced with has other more generally interesting features.

I have to laugh when I hear things like this, from everyone's favorite reverse-Howard Beale, CNBC's Rick Santelli:

"If there were contracts in place that when the government came in to put the money in AIG, they didn't take care of these issues -- a card played is a card played, as reprehensible as it is."

Huh?

This guy must not do much civil litigation.

Or work for a union, which had to have their contracts abrogated and modified as a condition for receiving automaker bailout funds. But that was so long ago!

Still, for those of you who live in the real world and are curious about the various legal strategies that could be employed to force these bonuses to be returned, the New York Times asked six legal experts for their opinion here.

No surprises, as the doctrines range from rescission, reformation, modification, unconscionability, frustration of purpose, changed circumstances, etc.

In other words, you are correct, Mr. Santelli -- their hands are completely tied!