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Accounting News Roundup: SarbOx’s Clawbacks Disappoint;Tax Credits Boost Video Game Industry; Ex-E&Y Partner’s Conviction Sticks | 09.12.11

Posted on by Caleb Newquist

Clawbacks Without Claws [NYT]
Under the Sarbanes-Oxley Act of 2002, the Securities and Exchange Commission was encouraged to hit executives where it hurts — in the wallet — if they certified financial results that turned out to be, in a word, bogus. SarbOx was supposed to keep managers honest. They would have to hand back incentive pay like bonuses, even if they didn’t fudge the accounts themselves. That, anyway, was the idea.

At 9/11 ceremonies, tearful storytelling and still-vivid memories [WaPo]
The anniversary of the attacks — the first since the killing in May of Osama bin Laden — unfolded through tearful storytelling and still-vivid memories. Political and religious leaders urged the nation to recall the spirit of common purpose that defined that day and its immediate aftermath but which has faded amid the acrimonious debate over America’s response to the attacks and the effect that response has had on the nation’s politics, finances and values.

How to Make Business Want to Invest Again [NYT]
According to a 2008 study by the Organization for Economic Cooperation and Development, “Corporate taxes are found to be most harmful for growth.” Tax reform that reduced the burden on capital income and shifted it toward consumption would improve prospects for long-run growth and, in so doing, encourage greater investment today. Yet it would be overly optimistic to think that any single public policy, by itself, could lead to the kind of robust investment spending seen in previous recoveries. Myriad government actions influence the expected future profitability of capital. These include not only policies concerning taxation but also those concerning trade and regulation.

Capital gains tax rates benefiting wealthy feed growing gap between rich and poor [WaPo]
For the very richest Americans, low tax rates on capital gains are better than any Christmas gift. As a result of a pair of rate cuts, first under President Bill Clinton and then under Bush, most of the richest Americans pay lower overall tax rates than middle-class Americans do. And this is one reason the gap between the wealthy and the rest of the country is widening dramatically.

Rich Tax Breaks Bolster Makers of Video Games [NYT]
The United States government offers tax incentives to companies pursuing medical breakthroughs, urban redevelopment and alternatives to fossil fuels. It also provides tax breaks for a company whose hit video game this year was the gory Dead Space 2, which challenges players to advance through an apocalyptic battlefield by killing space zombies. Those tax incentives — a collection of deductions, write-offs and credits mostly devised for other industries in other eras — now make video game production one of the most highly subsidized businesses in the United States, says Calvin H. Johnson, who has worked at the Treasury Department and is now a tax professor at the University of Texas at Austin.

Westchester accountant pleads to tax charge in NYC [AP]
A Westchester County accountant has pleaded guilty to securities fraud, admitting cheating a dozen investors of more than $2 million. Laurence Brown entered the plea in federal court in Manhattan on Thursday. The 64-year-old Katonah, N.Y., resident faces up to 70 years in prison at a Nov. 17 sentencing. Prosecutors said Brown and a business partner carried out the fraud from 2008 to June 2010 by promising that investors’ money would be spent to upgrade a natural gas pipeline in Tennessee.


Ex-E&Y partner’s insider trading conviction upheld [Reuters]
A U.S. court upheld an insider trading conviction of a former partner at accounting firm Ernst & Young LLP, even though the trial judge failed to instruct jurors on a valid defense he had to securities fraud charges. The 2nd U.S. Circuit Court of Appeals in New York on Friday said the defendant James Gansman did not deserve a new trial because he was not prejudiced by the slightly different jury charge given by his trial judge. It also turned aside several other issues raised in the appeal.

‘We Need More Dogs. We Don’t Need No Cats’ [TaxProf]
I have no idea why the TaxProf posted this but I’m glad he did.

Posted in ANR

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Accounting News Roundup: Charlie Rangel Has a Primary Challenger; Does Your Salary Define You?; PCAOB Wants Auditors to Consider Big Weird Transactions | 04.08.10

• Rangel Challenged by a Historic Foe [WSJ]
Someone finally realized that Charlie Rangel’s constituents in New York’s 15th District have maybe had enough of Chuck and his “pay taxes as I wrote them, not as I pay them” ways. Rangs will be challenged in the primary by New York State Assemblyman Adam Clayton Powell IV, according to the Journal. Not only does Mr Powell have an upper hand in the ad campaign department but there’s a bit of history here.


Powell Number III, sire of IV, was defeated by ChaRang back in 1970 amid his own ethical trubs. ACP 4th Edition insisted to that this had nothing to do with sweet, sweet revenge, “It has nothing to do with revenge or anything like that. Anyone with that record in public service would be interested in higher office.”

It won’t be easy for ACP4 however. He was flicked away by Rangs in a primary challenge back in 1994 and was recently convicted of “driving while impaired,” which actually seems worse than hogging rent-controlled apartments, since that could result in, you know, someone getting killed.

• My Paycheck, My Self? [FINS]
Does your salary define you as a human being? Or, at the very least, does it feel that way? Master pay czar Ken Feinberg had to snoop around some people that pull down some hefty scratch and he found out that the human psyche can easily be affected by their pay stub.

• PCAOB Issues Staff Audit Practice Alert on Auditor Considerations of Significant Unusual Transactions [PCAOB]
Don’t worry about the plain old vanilla transactions auditors, the PCAOB needs you to be on the lookout for significant unusual transactions. What that entails, we don’t really know but we’ll assume that means any transaction, and the PCAOB means any transaction, that looks remotely out of the ordinary, has a funny name (that may or may not include a “105”), requires smokey-filled room approval etc., definitely give it a second look. Or a third.

Accounting News Roundup: Deloitte Sued for $7.6 Billion in Mortgage Fraud Case; ‘Jersey Shore’ Tax Credit Goes Down; Income Tax History Cliff Notes | 09.27.11

Accounting firm Deloitte & Touche sued for $7.6 billion in massive mortgage fraud case [AP]
“They certainly did not do therney Steven Thomas, who represents those suing Deloitte. “This is one of those cases where the red flags are staring you in the face, and you’ve got to do a lot, and they did not.” Deloitte spokesman Jonathan Gandal responded that the company rejects the claims, calling them “utterly without merit.” The lawsuits were filed in Miami-Dade Circuit Court on behalf of the bankruptcy trustee for the fraudulent mortgage firm, Taylor Bean & Whitaker, and by Ocala Funding LLC, a company that purchased hundreds of millions of dollars’ worth of mortgages from Taylor Bean. The bankruptcy trustee is attempting to recover money for Taylor Bean creditors.

Big Four: cut down to size? [FT]
“Accountancy was my life,” ran the old advert. “Until I discovered Smirnoff.” Plenty of auditors could turn to the bottle after they see the reforms Brussels is considering. The changes, according to a draft circulating the European Commission, have caught the industry off guard. Most stunning is the suggestion that the Big Four – PwC, Deloitte, KPMG, and Ernst & Young – should spin off all their non-audit operations. Michel Barnier, internal market commissioner, also plans to mandate joint audits of large companies and make them rotate auditors far more frequently.

Groupon IPO Watch: Groupon Versus the Accounting Blogs [312]
Maybe the deal isn’t on.

Social Security Is a Ponzi Scheme [Grumpy Old Accountants]
From the Grumpies: “The essential feature of the Ponzi scheme, indeed the defining feature, is the payoff of a promised return to an investor class using funds acquired from a later class of investors. This is exactly how social security works. Retirees are paid benefits not from the actual funds that they put into the system (which were “misappropriated” for other government purposes), but rather from funds supplied by current workers. In turn, these current workers presumably will receive social security benefits when social security taxes are contributed by later workers. This works only as long as the government can con future workers (“new investors”) into funding the social security promise. So, yes, social security is a Ponzi scheme.

Obama gets a feel-good moment on jobs package [WaPo]
“My question is would you please raise my taxes?” the man deadpanned, to immediate laughter and applause. “I would like very much to have the country to continue to invest in things like Pell Grants and infrastructure and job-training programs that made it possible for me to get to where I am. And it kills me to see Congress not supporting the expiration of the tax cuts that have been benefiting so many of us for so long. I think that needs to change, and I hope that you will stay strong in doing that.”

Christie Blocks Tax Credit for ‘Jersey Shore’ [NYT]
Mr. Christie said he was “duty-bound” to see that taxpayers were “not footing a $420,000 bill for a project which does nothing more than perpetuate misconceptions about the state and its citizens.”


A Short History of the Income Tax [WSJ]
Whether the “millionaires and billionaires” are actually paying their fair share of taxes is a matter for the electorate to decide. After all, fairness is hardly an objective standard. Before the modern era, however, the federal tax system was manifestly unfair by any reasonable standard, grossly biased in favor of the well off. Ironically, attempting to fix that unfairness is what has brought us to the present moment, with a federal tax system that is grotesquely complex, often arbitrary, and corrupted by mutual back-scratching between members of Congress and influential lobbyists.

SEC Eyes Ratings From S&P [WSJ]
U.S. securities regulators are zeroing in on the use by Standard & Poor’s of fictitious “dummy” assets when it assigned a triple-A credit rating to a $1.6 billion mortgage-bond deal that imploded during the financial crisis, according to a person familiar with the matter. S&P’s parent company, McGraw-Hill Cos., said Monday that it had received a so-called Wells notice from the Securities and Exchange Commission. A Wells notice is the agency’s warning to financial institutions that they could face civil charges. McGraw-Hill said the SEC is weighing civil enforcement action against the firm for its ratings on a collateralized debt obligation called Delphinus CDO 2007-1 issued in July 2007 as the housing market was taking a turn for the worse.