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September 27, 2023

Accounting News Roundup: Whistleblower Intimidation and Things Looking Up for the IRS? | 01.20.17

Whistleblower intimidation

If you've ever wondered how to NOT handle a whistleblower complaint, let HomeStreet, a Seattle-based bank, show you how it's done:

The bank, according to the SEC, made unsupported adjustments to its hedge effectiveness testing to ensure it could continue using favorable accounting treatment. The SEC also alleged that after HomeStreet employees reported concerns to management about accounting errors, the company concluded the adjustments to its effectiveness tests were incorrect. When the SEC contacted HomeStreet in April 2015 seeking documents related to hedge accounting, the bank assumed it was in response to a whistleblower complaint and it started trying to identify the tipster, the agency said.

One person considered to be a whistleblower, the SEC said, was told that the terms of an indemnification agreement could allow the bank to deny payment for legal costs during an SEC investigation. And the bank required former employees to sign severance agreements waiving potential whistleblower awards, or risk losing their severance payments.

And if that's not enough, let HomeStreet CEO Mark Mason demonstrate a skillful downplay of his company's errors and evading any responsibility for the whistleblower intimidation:

“We are pleased that the SEC’s investigation of non-material accounting errors the company voluntarily disclosed in 2014 after its own investigation by an independent special committee of the Board has now been concluded, and that the SEC did not allege that the company or any of its officers acted with an intention to defraud or deceive. This is consistent with the special committee’s conclusions that these were mere accounting errors. To the extent that the SEC’s press release implies that the Treasurer and Chief Investment Officer acted with anything other than a sincere belief that he was properly testing hedge effectiveness according to his understanding of the economic correlation of the loans and swap contracts, we believe that such an implication would be inconsistent with the allegations contained in the Settlement Agreement.”

It's like he was so upset by the tone of the SEC press release that he completely forgot the company got employees to sign contracts under duress. That's some impressive delusion right there. 

Hiring Watch '17: IRS?

During his confirmation hearing yesterday, Treasury Secretary nominee Steven Mnuchin said something interesting:

“I was particularly surprised, looking at the IRS numbers, that the IRS headcount has gone down quite dramatically, almost 30 percent over the last number of years,” Mnuchin said in response to a question from Sen. Orrin Hatch, a Utah Republican. “I don't think there's any other government agency that's gone down 30 percent, and especially for an agency that collects revenues, this is something that I'm concerned about.

“Now perhaps the IRS just started with way too many people,” Mnuchin added. But he suggested that “staffing of the IRS is an important part of fixing the tax gap.”

If there are two things I can support in a Trump administration it's: 1) Keeping John Koskinen as the IRS commissioner; 2) Hiring more people at the IRS. I simply can't not get behind the chance for the irony of a Republican administration taking actions that would troll Congressional Republicans.

In related news: TaxProf is ending its "IRS scandal" coverage today.

Previously, on Going Concern…

Rachel Andujar wrote an advice column to an intern with an uncertain future.

In other news:

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Image: Office of the President-elect/Wikimedia Commons 

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