G-20 Agrees to Cut Debt [WSJ]
“The wealthiest of the Group of 20 countries said they would halve their government deficits by the year 2013 and ‘stabilize’ their debt loads by 2016, a signal to international markets and domestic political audiences they are taking seriously the need to wean themselves from stimulus spending.”
Once you catch your breath from laughing, the President also cited the tax code specifically and his threatening to put some (i.e. Congress) in a tight spot:
“They might have to make deeper cuts in deficits to comply with its pledge. A White House statement said that government debt in the fiscal year 15, would be at an “acceptable level.” President Obama said that next year he would present “very difficult choices” to the country in an effort to meet deficit goals.
The president cited his disappointment with the U.S. tax code. ‘Next year, when I start presenting some very difficult choices to the country, I hope some of these folks who are hollering about deficits and debt step up, ’cause I’m calling their bluff,’ Mr. Obama said.”
Bank auditors eyed for whistleblower role [FT]
A paper from the UK’s Financial Services Authority puts forth the discussion of requiring auditors to work more closely with regulators on irregularities found during the bank’s audit engagement.
“Experts say bank executives are nervous about the prospect of increased bilateral discussions between regulators and auditors. Auditors have been fearful the paper could thrust the profession into a regulatory spotlight it has so far avoided.”
Koss Fraud: We didn’t bother to look at the endorsements on our own checks, but Grant Thornton should have! [Fraud Files Blog]
Fraud sage Tracy Coenen presents her latest view on the Koss fraud mish-mash and how Koss management has managed to make themselves “look like absolute morons.”
BP Loses $22 Billion in Legacy of Share Buybacks [Bloomberg]
“The sum represents the hole after the 52 percent plunge in BP shares since the Deepwater Horizon exploded and sank, resulting in the worst oil spill in U.S. history. BP bought back more than $37 billion of its stock in a bid to return money to investors between 2005 and 2008. Those shares are now worth $15 billion, excluding dividends.”
Martin Ginsburg, Noted Tax Lawyer and Husband of Justice Ginsburg, R.I.P. [ATL]
Mr Ginsburg was a tax law professor at Georgetown for many years and was known for his great sense of humor, as evidenced by his faculty bio, noted by our sister site, Above the Law:
Professor Ginsburg is co-author, with Jack S. Levin of Chicago, of Mergers, Acquisitions, and Buyouts, a semi-annually updated treatise which addresses tax and other aspects of this exciting subject. The portions of the treatise written by Professor Ginsburg are, he is certain, easily identified and quite superb.
Open Letter to the Securities and Exchange Commission Part 9: Overstock.com’s Excuses Simply Don’t Add Up [White Collar Fraud]
It appears Sam Antar has caught Overstock.com in another disclosure snafu but this time it isn’t really clear whether the company gave the wrong excuse, lied to the SEC or simply doesn’t know what they’re doing, “Overstock.com’s 2008 10-K report claimed that a reportable “gain contingency” existed as of November 7, 2008. However, the company contradicted itself and claimed to the SEC reviewers that reportable reportable ‘gain contingency’ did not exist on November 7, 2008.
If Overstock.com’s 10-K disclosure is true, the company’s explanation to the SEC Division of Corporation Finance can’t be true. Likewise, if Overstock.com’s explanation to the SEC Division of Corporation Finance is true, the company’s 2008 10-K disclosure can’t be true.”
Accounts bodies revise workplan [FT]
Convergence 2.0.
Today’s taxes aren’t too bad [Don’t Mess with Taxes/Kay Bell]
Kay Bell provides some perspective on tax rates over the last century. The following graphic should help clear up any confusion.
A Missed Opportunity on Financial Reform [WSJ] But that’s not all! Mr Levitt outlines pic failure including: • “Chuck Schumer’s wise idea to let the Securities and Exchange Commission (SEC) become a self-funded agency will likely be killed by appropriators who are unwilling to give up the power of the purse.” • “Barney Frank’s (D., Mass.) effort to pass a new law to overcome the legal precedent of the 2008 Supreme Court’s Stoneridge decision, which allows third-party consultants, accountants and other abettors of fraud to avoid liability. Again, another sellout of investor interests.” • “Congress didn’t deal with the massive problems of Fannie Mae and Freddie Mac. It’s one thing to fail to see trouble before it happens. Now, there’s no excuse. The central role played by these two organizations in the financial crisis is indisputable. Congress had a chance to fully restrict these agencies from anything but the most basic market-making activities, and it didn’t.” What does all this (and more!) mean? Oh, nothing really. Levitt says that we’ll just have to wait for the next financial apocalypse to get it right. InfoLogix Announces the Engagement of KPMG, LLP as the Company’s Independent Registered Public Accounting Firm [PR] BP Relied on Faulty U.S. Data [WSJ] The government models, which oil companies are required to use but have not been updated since 2004, assumed that most of the oil would rapidly evaporate or get broken up by waves or weather. In the weeks since the Deepwater Horizon caught fire and sank, real life has proven these models, prepared by the Interior Department’s Mineral Management Service, wrong.” Davis will take the place of Jarod Allerheiligen, who will become the managing partner of the Grant Thornton operations in Minneapolis. The change in responsibilities is scheduled to take place Aug. 1.” Ex-Detroit Mayor Kwame Kilpatrick indicted by feds on 19 mail fraud, tax counts [Detroit Free Press] Prosecutors contend he failed to report more than $640,000 in taxable income while mayor that he received in the form of cash, flights on private jets and perks paid for out of the civic fund.” $2 million payment to Phila. tax-amnesty program [Philadelphia Inquirer] Feinberg to quit pay czar post to focus on BP fund [Reuters] New Accounting Rules Ruffle the Leasing Market [NYT] “The two boards have come up with a new standard, which will be completed next year and enacted in 2013, that will require companies to book leases as assets and liabilities on their balance sheets. Currently, American and foreign companies list many leases as footnotes in their financial statements. As a result of the change, public companies will have to put some $1.3 trillion in leases on their balance sheets, according to estimates by the Se e Commission. Because many private companies also follow GAAP accounting, the number could be closer to $2 trillion, experts said.” Middle-Class Tax Boost Is Broached [WSJ] The Journal reports that the GOP has different ideas, including House Orange leader John Boehner is quoted in the Journal, “Mr. Hoyer’s speech brought a round of criticism from Republicans, who emphasize spending cuts instead, and oppose allowing any Bush tax cuts to expire. House GOP Leader John Boehner of Ohio said Mr. Hoyer was admitting ‘that he supports raising taxes on the middle class to pay for more government spending.’ “ Rep. Oompa Loompa obviously didn’t hear the part of the speech where Hoyer addressed the “cut spending” broken record, “The eagerness of so many to blast spending in the abstract without offering solutions that come close to measuring up to the size of the problem.” When the vehicle is moving the license plate would look like the ones we’re used to now, but when the vehicle stops for more than four seconds a digital ad or other message would flash. The license plate number would always be visible.” Madoff crony sprung [NYP] A grizzled-looking DiPascali refused to answer questions about the report in Monday’s Post that Madoff told fellow jailbirds that DiPascali knows the identity of three people the Ponzi king gave money to shortly before his arrest. A judge initially refused prosecutors’ requests that DiPascali be released so he could assist in their ongoing probe, but in February he won a $10 million bail package based on his extensive cooperation.” BP confirms Bob Dudley in key Gulf clean-up role [AP] Business Leader Slams ‘Hostile’ Policies on Jobs [WSJ] Mr. Seidenberg’s comments are particularly notable because he heads the Business Roundtable, a group encompassing the chief executives of the nation’s largest listed companies whose members have enjoyed frequent access to the president and his top aides. Its leaders have advised the White House on topics from economic recovery to health care to clean energy.” SEC Self-Funding Is A Mistake! [The Summa] What they don’t mention is that the budgetary review process provides an opportunity for Congressional oversight of the SEC. When the SEC is performing poorly, say due to the atrocious leadership of the Chairs (i.e., Cox and Schapiro), a Congressional budget cut is a natural and effective response. Of course SEC chairs want self-funding, it gives them a pass from oversight. Who wouldn’t want that?” As Congress Mulls SOX Exemption, Survey Suggests Acceptance [Compliance Week] The legislation is currently awaiting sign/veto from MO Governor Jay Nixon. Opponents argue that the state’s very economic recovery is at stake, “Club owners and dancers say that the venues rarely attract crime, and that the new rules would be so strict that hundreds of jobs and millions of dollars in state revenue could be lost at a time when Missouri’s economy is struggling to recover from the recession.” JP Morgan Names Doug Braunstein CFO in Shake-Up [AP] Tropical Storm May Pose Threat to BP Spill Cleanup [Bloomberg] Thunderstorms in the Caribbean may strengthen into a tropical storm this week before heading into the Gulf between Mexico and Cuba, said Jim Rouiller, a senior energy meteorologist at Planalytics Inc. in Berwyn, Pennsylvania. “The first named tropical storm of the 2010 season appears more likely to form over the northwestern Caribbean late this week and will go on to represent a formidable threat to the Gulf, along with heightening concerns about the oil slick,” Rouiller said in an e-mail yesterday. Forecasters are predicting this year’s Atlantic hurricane season, which runs from June 1 to Nov. 30, may be among the most active on record and hamper the U.K. oil company’s efforts to plug the leaking well. AccuWeather Inc. forecast at least three storms will move through the region affected by the spill. New Jersey Democrats fail to extend millionaires tax [Reuters] SEC Crazy Talk [Portfolio/Gary Weiss] The SEC wanted documents, emails etc. from both Antar and Fraud Discovery Institute founder Barry Minkow on companies that have been covered by both men. The information relates mostly from information obtained from short-sellers. However, Gary Weiss writes that the SEC also asked for emails that the two exchanged with two reporters and from Antar’s ex-wife. Gary thinks that this poking around by the Commission is all too familiar, “Well, I think what we may be seeing is a repeat of the [David] Einhorn fiasco, and then some,” referring to the SEC’s investigation into Einhorn’s criticism and short-selling of companies. Einhorn was eventually vindicated and the companies – most notably Allied Capital – outed for their shady practices. Why the SEC is digging around the very people trying to help them isn’t quite clear but then again the SEC doesn’t have the greatest track record. Accounting Body Picks New Chief [WSJ] New York Reaches Deal to Raise Cigarette Tax [NYT] The proposal would raise $440 million this year, according to the Times. The state’s budget deficit is approximately $9 billion. This trifecta has Sam concerned enough that he’s asking the SEC to poke around a little more than they did the last SEC review in 2007, when the SEC found…nothing. BP Chief Draws Outrage for Attending Yacht Race [NYT] BP, Transocean tap a well of Washington lobbyists and consultants [WaPo] UBS Customers May Have `Mere Hours’ to Report to IRS [Bloomberg] “For UBS account holders, they have mere hours to run to the IRS and hope they can disclose the account before the Swiss hand the data over,” said Asher Rubinstein, a partner at Rubinstein & Rubinstein LLP in New York who said he’s been “getting panicked calls all week.” The lesson to be learned here, it appears, is that he IRS on a bluff, you are likely to be wrong, wrong, wrong. Doug Shulman doesn’t like to be take for a fool, “We will immediately follow up on the information we receive from the Swiss and we will vigorously enforce the laws against those who have attempted to evade their tax responsibilities by hiding their assets offshore.” Campbell Recalls SpaghettiOs [WSJ] 600 Parish investors sue accounting firm [Charleston Post Courier] Oh, You Mean Like the Same Fed Audits We Already Have? Way to Go, Congress! [JDA] Firing squad execution sobering, but dramatic [AP] Restrictive bank covenants keep the Big Four on top [Accountancy Age] Buried in the 81-page credit agreement for US-based healthcare provider Amedisys is a 22-word stipulation that highlights a problem some fear is threatening the stability of the global economic system. “Audited consolidated balance sheets of the group members… [must be] reported on by and accompanied by an unqualified report from a Big Four accounting firm,” the phrase reads. There’s no telling how many loan agreements have this exact language but “Big Four” is often replaced by “reputable” so it’s not if the “Big 4 covenant” is cooked right into the template. That being said, AA reports that the Big 4 + GT and BDO admitted last month that the covenants do exist in the UK. Strangely enough, Amedisys is currently in the cross-hairs of Crooked CFO-turned-Forensic sleuth Sam Antar. CFOs on vacation: Fewer call office [San Francisco Business Times] Swiss Parliament Backs UBS Pact [WSJ] The Journal reports that a Swiss government is prepared to release an additional 1,200 names following the initial 500 released last year. Lawmakers Weigh Changes to stor Protections [Bloomberg BusinessWeek] Ray died unexpectedly yesterday. He was on vacation in Orlando with his nine-year-old grandson doing what he loved—visiting Disney World. Before his retirement six years ago, Ray spent more than 40 years with McGladrey. He practiced in a number of locations, including a long stop in the national office as national director of accounting. He retired as partner in 2004 but continued to work for the national office part-time in Rockford, Ill. During his long career, he served in a number of professional standard setting groups, including the AICPA’s Accounting Standards Executive Committee, the Financial Accounting Standards Board’s Emerging Issues Task Force, and on the Financial Accounting Standards Advisory Council. Ray is best remembered for being the consummate professional and his easy-going style. He was very well respected in the accounting profession. Comments coming in from those that knew him include: “Ray was one of the true gentlemen of the accounting profession,” and “Ray was about as fine a human being as there is.” He was a great mentor to many colleagues in the national office. His style of giving his complete attention to whomever he was talking to, providing understandable explanations for complex topics, probing deeply for all the facts, and his uncanny ability to help draw a conclusion with full understanding will be greatly missed. Ray could convey the message to someone that they were getting to the wrong conclusion with such delicacy that you didn’t even feel it, and felt good about the answer. He knew many of the “back stories” about how and why some of the most complex accounting standards came about, which is often important to understand what they mean. Ray will be greatly missed by his daughter, son, four grandchildren and other family and friends. McGladrey and the accounting profession have also suffered a great loss. Inquiry Ends on Cassano, Once of AIG [WSJ] Senator sees big reporting gap in stock options [AP] The two are a little rankled about the $52 billion gap between the amount of stock option expenses recognized for financial reporting purposes and the expense reported for tax purposes. Guess who’s getting the short end on that one? Bank auditors were fully involved in developing report [FT] As chairman of the ICAEW working group that produced the proposals, I would like to correct this impression. Bank auditors from the six largest audit firms were fully involved in developing the report and supportive of all its recommendations, including the proposal that banks develop summary risk statements which auditors would then give comfort over. Feel better? U.K. Scraps FSA in Biggest Bank Overhaul Since 1997 [Bloomberg] Intuit Works to Restore Online Access [WSJ] Fannie Mae, Freddie Mac to delist from NYSE [CNN] UK watchdog launches Lehman audit probe [Reuters] E&Y, completely familiar with this drill, is sticking to their guns, “Ernst & Young’s audit opinion stated that Lehman’s financial statements for that year were fairly presented in accordance with the relevant accounting standards, and we remain of that view.” The Journal reports that Senator Charles Grassley (R-IA) announced on Tuesday that an investigation into the practice had recently been launched by the Inspector General David Kotz, “[W]e are currently conducting an investigation of allegations very recently brought to our attention that a prominent law firm’s significant ties with the SEC, specifically, the prevalence of SEC attorneys leaving the agency to join this particular law firm, led to the SEC’s failure to take appropriate actions in a matter involving the law firm,” Mr Kotz said. The Journal reports that law firm in question “could not be determined.” There have been several instances of quick transitions of former Commission staffers to new representing their new firms, including the most recent example of an attorney leaving the Division of Trading and Markets for the Chicago-based high frequency trading firm Getco, LLC and an accountant from the enforcement division who represented his new employer in a nonpublic investigation. IRS hatches new assault on ‘Survivor’ [Tax Watchdog] The CAE’s real challenge – ethics, courage, and complacency [IIA/Marks on Governance] Mr Marks questions this notion in its entirety, “It’s fine to supplement essential assurance activities with the tangible value-adding programs…But, the assurance work has to be covered or (in my opinion) internal audit is failing to do its job. When that is a conscious decision, I have to question the ethics – and the courage – of the individuals involved.” Swiss Upper House Rejects Call for Referendum on UBS Pact [WSJ] Class Action Complaint against Amedisys uses Sarbanes-Oxley Act Corporate Governance Provisions to Battle Alleged Corporate Malfeasance [White Collar Fraud] The SEC rules under Sarbanes-Oxley for public company codes of ethics broadly define corporate malfeasance by senior financial officers, requires such companies to promptly report any misconduct, prohibits companies from ignoring any misconduct, and makes it relatively easy for investors to sue for misconduct. Swiss Parliament Backs UBS Pact [WSJ] There’s one small problem remaining – the lower house wants to put the agreement to a popular referendum while the upper house in parliament is opposed to the idea. The two have until Friday to reconcile their differences, otherwise another vote will be necessary to settle the referendum issue. The problem with the referendum is that it could take months for happen and it could cause the Swiss to miss the August deadline that it agreed to. This could lead to fresh charges against UBS and further extending a story that pretty much everyone has grown tired of. Former CIO Laura Pendergest-Holt’s motion to have her trial severed describes RAS’ conduct as ‘egregious and circus-like conduct,’ using the term “circus” at least eight times. So while a circus is infinitely fun for the rest of us, it doesn’t really do co-conspirators any good when they are trying to get a fair trial. Dealing With a Toxic Resumé [FINS] For starters don’t bad mouth the old company, even though they probably deserve it. Secondly, you might attach an addendum to your resumé in order to explain the whole sitch and you can always turn the situation into a positive by explaining how you’ve learned from working at such a lousy company. Keep your chin up, you’ll be back to being a white collar working stiff in no time. Duke boy dodges tax hazard [Tax Watchdog] Zynga Receives $147 Million Investment From Japan’s Softbank [Bloomberg BusinessWeek] BP unlikely to cancel dividend, but mulls several ideas: source [Reuters] Auditors to reveal bank talks under new plans [FT] The Big 4 have historically resisted these types of proposals, arguing that it will expose them to additional legal liability. Suggestions cited include assurance on the “front half of annual reports,” as well as an audit of the banks’ summaries of risks. The ICAEW said it was aware that this would add to the auditors’ workload. Ernst & Young had issued a going concern opinion for the company back in February, warning that continued lack of cash flow would have to be remediated quickly for any possibility for the continuation of the business. How the New Wealth Taxes Will Hit You [WSJ] The 0.9% tax is on any wages over $200k/$250k. For example, if you are single and made $300,000, your additional tax would be $900. Similarly, the investment income tax would tax any investment income in excess of the $200k/$250k threshold and the 3.8% tax would be applied. What’s investment income you ask? Interest, except municipal-bond interest; dividends; rents; royalties; and capital gains on the sales of financial instruments like stocks and bonds. The taxable portion of insurance annuity payouts also counts, unless it is from a company pension. So do gains from financial trading, as well as passive income from rents and businesses you don’t participate in. All are subject to the 3.8% tax on amounts above the $250,000 or $200,000 threshold, as described above. Income that is not considered investment income include: distributions from IRAs, pensions and Social Security, annuities that are part of a retirement plan, life-insurance proceeds, muni-bond interest, veterans’ benefits, and income from a business you participate in, such as a S Corporation or partnership. KPMG considering move to 1801 K [Washington Businsess Journal (subscription required)] Open Letter to the [SEC]: Why You Must Review Medifast’s Revenue Accounting Disclosures [White Collar Fraud] Dell, CEO Are in Talks to Settle SEC Probe [WSJ] The Journal reports that the possible fraud charges “suggests that the SEC may suspect that Mr. Dell unintentionally made statements that he should have known were misleading.” In anticipation of the settlement, the company will restate its most recent earnings report, reducing its net income by $100 million. More than 25,000 claims have been submitted so far and payments to about 12,000 have been made, totaling $36 million, according to the LA Times. BP, through Graham MacEwan says that there’s a plan although like most of this crisis, the company isn’t sure how it will be fixed, “BP Chief Operating Officer Doug Suttles has been telling parish council members over the past few days that if someone’s tax documents are not available, we will find other metrics. I don’t know exactly how we are going to do that yet.” Salesforce CFO: Company Aggressively Hiring Sales Staff [Dow Jones] Mr Smith also said the company is rolling out two new products in the near future including Chatter, a “a social-networking application for office collaboration” and VMforce, a collaboration with VMware, Inc. that will give Java developers a new way to deploy applications over the web. Volcker upbeat on “reasonable” reform bill [Reuters] So from Big Paul’s POV, there is no option other than to get your shit together on this even though the two boards seem to be moving in the exact opposite direction. Oh, and could you do that ASAP? Reuters quoted him “What appeared to be two organizations converging … now looks like a collision. I hope they can come together by the end of the year.” One of his points was that internal auditors have been humiliated – because nobody has held them to blame to any degree for the collapse of the banking sector, the failures in corporate governance and risk management, and the tremendous loss in value of investors’ shareholdings all over the world. Richard pointed out that the Walker report (in the UK) on the causes of the banking crisis didn’t even mention internal audit. We are irrelevant. Mr Marks takes exception with this, saying that internal auditors do deserve some blame and that if the NYSE and others get around to issuing some requirements around the function of internal audit, the recognition will come with it. U.S. Faces ‘Severe’ AIG Losses, Says Panel [WSJ]
Accounting News Roundup: Financial Reform Fail; KPMG Wins Latest Round of Auditor Musical Chairs; Philly Tax Amnesty Close to Reaching Goals | 06.24.10
Former SEC Chairman Arthur Levitt is none too pleased with the financial reform bill that’s likely to get approved by the Senate and he says exactly why in an op-ed in today’s Journal, “One of many bad ideas that made it into the bill: Public companies will now have a wider loophole to avoid doing internal audits investors can trust. This requirement was the most important pro-investor reform of the last decade, and it worked. Of the 522 U.S. financial restatements in 2009, 374 were at small firms not subject to auditor reviews.”
McGladrey resigned on June 10th and the company’s filing stated that were no disagreements yada, yada, yada although McGladrey had identified a material weakness in the company’s internal controls and their most recent audit opinion included a going concern paragraph. It wasn’t enough to spook KPMG, who got the blessing from InfoLogix’s audit committee on Tuesday. Enjoy.
“BP PLC and other big oil companies based their plans for responding to a big oil spill in the Gulf of Mexico on U.S. government projections that gave very low odds of oil hitting shore, even in the case of a spill much larger than the current one.
Leadership changes at Wichita Grant Thornton office [Wichita Business Journal]
“Lori A. Davis is the new managing partner at the Grant Thornton office in Wichita, the company announced Wednesday.
“Despite Kilpatrick’s repeated claims to the contrary, the indictment says he used fund money for campaign and personal expenses, ranging from polling to yoga and golf lessons to college tuition for relatives.
Philly’s tax amnesty program received a $2 million payment on Tuesday, it’s biggest since the program started on May 3. Collections so far have reached $18 million, according to city officials. They also expect to reach their goal of receiving between $25 and $30 million by the end of the program on Friday.
This guy is a glutton for punishment.Accounting News Roundup: New Rule from FASB, IASB Will Bring Leases on Balance Sheet; California’s Latest Revenue Idea; Madoff CFO Released to House Arrest | 06.23.10
The convergence efforts by the FASB and the IASB have managed to produce a consensus on lease accounting and it has repercussions on both sides of the balance sheet.
Reaction to Steny Hoyer’s call in a speech for Congress to quit lying to themselves was not met with enthusiasm.
California could turn license plates into ad revenue space [Silicon Valley/San Jose Business Journal]
The latest out of the brain trust in Sacramento, “As California faces a $19 billion deficit, the Legislature is considering whether to allow license plates to become traveling ad spaces.
“Earlier yesterday, former Madoff CFO Frank DiPascali Jr. was released to house arrest.
Knock ’em dead!
“In comments marking one of the sharpest breaks between top executives and the Obama White House, [Verizon Communications CEO Ivan] Seidenberg used a speech at Washington’s Economic Club to unleash a list of policy grievances over taxes, trade and financial regulation.
“In support of SEC self-funding, SEC chairs always argue in public that they lack sufficient and consistent funding to enforce securities laws and regulations. As proof, they point out that Congress occasionally cuts back on SEC funding.Accounting News Roundup: More Execs Say Benefits Sarbanes-Oxley Outweigh Costs; New Jersey Millionaire Tax Fails; Has the SEC Learned Anything? | 06.22.10
Just when Sarbanes-Oxley compliance was about to get torpedoed by the financial reform bill, a new study comes out that shows companies are starting to see benefits from the legislation, “In its 2010 Sarbanes-Oxley compliance survey, Protiviti says 70 percent of executives in at least their fourth year of working to comply with Sarbanes-Oxley say they believe the benefits outweigh the costs. That’s a big swing from the first year the firm asked the same question and heard only 39 percen benefits greater than the costs.”
Showdown Over Strippers [WSJ]
Some people in the Show Me State are not interested in living up to that name, “Last month, the Republican-controlled legislature passed one of the nation’s toughest state laws aimed at strip clubs and other adult-entertainment venues. It would ban nude dancing and the serving of alcohol in adult cabarets, force strip clubs to close at midnight and forbid seminude dancers to touch patrons.”
“JPMorgan Chase said Tuesday it is shuffling the positions of three executives, including naming a new chief financial officer. The shake up is part of a program JPMorgan Chase has put in place to have executives work across multiple divisions to broaden their experience. Doug Braunstein is taking over as CFO. He was previously head of the bank’s investment banking division in the Americas. Braunstein, 49, replaces Michael Cavanagh, who had served as CFO since 2004. Cavanagh was named head of the bank’s treasury and securities services business.”
The first storm of the Atlantic hurricane season may enter the Gulf of Mexico as soon as next week, possibly disrupting BP Plc’s efforts to clean up the worst oil spill in U.S. history.
Garden State millionaires rejoice!
Sam Antar recently turned over 37,000 documents to the Securities and Exchange Commission but not because the SEC was getting nostalgic for the Crazy Eddie days. Accounting News Roundup: IASC Names New Chairman; New York Tax on Smokes To Get Even Higher; Medifast’s Revenue Recognition to Get Another Look? | 06.21.10
“Former Italian Finance Minister Tommaso Padoa-Schioppa has been named to head the group that oversees international accounting rulemakers. Mr. Padoa-Schioppa will assume the chairmanship of the trustees of the International Accounting Standards Committee Foundation in July. The foundation’s monitoring board appointed him chairman for a three-year term. The IASC Foundation oversees the London-based International Accounting Standards Board, selects its members and raises funds for its operations. It also helps promulgate the move toward a single set of accounting rules used world-wide.”
Smokers might want to start hoarding cartons as Governor David Paterson and legislators have reached a tentative agreement to raise the cigarette tax in New York. Taxes on cigarettes in NYS, currently $2.75 a pack, would rise an additional $1.65. Taxes in New York City would rise to $5.85 a pack, marking the first city in America with a tax of greater than $5 on cigarettes.
Open Letter to the Securities and Exchange Commission: Is Medifast Complying with Revenue Accounting Rules? [White Collar Fraud]
Sam Antar is a little skeptical about a plethora of Medifast’s financial reporting and disclosures including: revenue recognition policy, “the company is possibly recognizing revenue up to 8 business days too early”; their low allowance for doubtful accounts, “the $100,000 reported for such an allowance does not seem reasonable enough given Medifast’s volume of revenues and the dates it either ships or delivers its orders to customers after processing them.”; and lack of deferred revenue liabilities, “Medifast’s financial reports going back to 2004 disclose no deferred revenue liabilities for customer orders processed before each fiscal year ended and either shipped or delivered after those respective fiscal years.”
Probably seemed like a nice idea at the time, “BP officials on Saturday scrambled yet again to respond to another public relations challenge when their embattled chief executive, Tony Hayward, spent the day off the coast of England watching his yacht compete in one of the world’s largest races.”
The obvious solution to CEOs attending yacht races, Joe Biden-esque articulation and such is paying someone a lot – a lot – of money to rep these companies. It’s pretty much the only option they have left.Accounting News Roundup: UBS Clients Have ‘Mere Hours’ to Come Clean; Dixon Hughes Sued for ‘Comfort Report’; “Big 4 Only” Bank Covenants – Revealed! | 06.18.10
Since the Swiss Parliament were finally able to give the OK on the agreement to disclose UBS client names to the U.S., it’s only a matter of time until the IRS starts kicking down doors in the middle of the night.
KPMG chief calls for audit reform [Accountancy Age]
John Griffith-Jones, who wishes everyone would get comfortable with the idea of the Big 4, does admit that the question about the purpose of audit is a legit one that should not be ignored, “What is the point, they and others ask, of doing extensive and increasingly elaborate audits of the financial accounts of our banks, when audits failed to identify the huge and systemic risks which led to the near collapse of the Global banking system in the Autumn of 2008?”
UH OH…
Dixon Hughes is being sued by 600 investors of convicted mini-Madoff Al Parish for their “Comfort Report.” “The lawsuit alleges that the firm claimed to compile the report from brokerage statements, when it received statements generated only by Parish that ‘summarized imaginary account balances.’ ” Oops.
“As any accountant will tell you, we perform audits each year to ensure the comparability of financial statements for the sake of investors. Since there is no comparing Fed statements and there are no investors (excluding the banks with mandated stock holdings in the Fed banks they are regulated by), basically all we’re doing is jerking off with our left hands pretending it is someone else doing the jerking.”
And who doesn’t like drama?
“Big 4 only covenants” in lending agreements are blackballing smaller firms according to BDO International CEO Jeremy Newman and others. Nonsense, you say? AA presented an example:
God forbid.Accounting News Roundup: UBS Set to Release More Names as Standoff Ends; SEC Drops Cassano Inquiry; Levin, McCain Want Stock Option Gap Closed | 06.17.10
After a short standoff in Swiss parliament, Swiss lawmakers approved the agreement with the U.S. to turn over the remaining names of UBS clients, per the agreement between the two countries. The lower house dropped the referendum proposal that would have delayed the release of the names and likely caused UBS to miss the August deadline which would have resulted in new charges against the Swiss behemoth.
Congress is kicking around the possibility of an office within the SEC to respond to whistleblower complaints. Brilliant!
McGladrey Mourns the Loss of Former Partner Ray Krause
Mr Krause passed away on Monday after 40 years of service to both McGladrey and the accounting profession. He served on many professional standard setting groups including AICPA’s Accounting Standards Executive Committee, the Financial Accounting Standards Board’s Emerging Issues Task Force, and on the Financial Accounting Standards Advisory Council. H was memorialized by his friend and colleague Jay Hanson, McGladrey’s National Director of Accounting:
The SEC has dropped its investigation of Joseph Cassano, the former head of AIG’s Financial Products Unit, which means he won’t face civil charges in the unit’s role in financial crisis. The SEC is also declining to pursue charges against another AIGFP executive, Andrew Forster, who was also under scrutiny.
Senator Carl “Shitty Deal” Levin and new Snooki BFF John McCain “have proposed legislation that would require that the tax deduction for stock options not exceed the expense for options reported in financial statements.”
John Hitchens, head of the Institute of Chartered Accountants of England and Wales (ICAEW) and a PwC Partner would like to dispel any notion that auditors will resist reform after taking it on the chin for the financial crisis:
Chancellor of the Exchequer George Osborne will do away with the Financial Services Authority, replacing it with three new regulatory bodies and giving most of its oversight powers to the Bank of England.
Any individuals or small businesses that use TurboTax, Quicken and QuickBooks have been in a world of hurt as online access has been down, down, down. “Some Intuit websites were beginning to come back online late Wednesday afternoon,” according to an Intuit spokesperson. The situation is fluid.
Meant to mention this yesterday since it was the DoD but you know how it goes. Anyway, see you another life FNM and FRE.Accounting News Roundup: UK Launches Probe of E&Y’s Final Lehman Audit; Revolving Door at SEC Scrutinized; Swiss Upper House Rejects Referendum | 06.16.10
The UK’s Accountancy and Actuarial Discipline Board (AADB), investigative and disciplinary body for accountants, has started an investigation into the Ernst & Young’s final audit of Lehman Brothers’ UK operations for the year ending November 30, 2007.
SEC ‘Revolving Door’ Under Review [WSJ]
Currently, the SEC does not have a cooling off period for former staffers that take a position with a private firm. Former staffers (i.e. lower-level employees) need only to provide a written letter disclosing the fact that they will be representing their new employer in an investigation.
Thanks reality TV gods, Richard Hatch is still in our lives. He still owes $1.7 million in taxes from 2000 and 2001.
Norman Marks responds to a commenter that believes that a Chief Audit Executive need not focus on auditing and communicating those results and risks but instead “be conscious of and responsive to management expectations,” and basically substantiate that internal audit isn’t a giant waste of money.
The upper house in Swiss Parliament would like their counterparts in the lower house to leave their popular referendum idea wherever they found it. Presumably everyone understands that super secret Swiss banking as the world knows it is over and lower house is a little slow to catch on. They’re supposedly debating the referendum circa now.
Amedisys got caught red-handed by the Wall St. Journal abusing the Medicare system and Sam Antar hopes that this is a sign of things to come:
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Hopefully, more lawsuits will cite code of ethics violations by public company senior financial officers in the future. Accounting News Roundup: UBS Deal Back on Track; Allen Stanford’s Circus Causes Problems for Co-Defendants; Zynga Lands $147 Million | 06.15.10
After telling U.S. and IRS to drop dead last week, the lower House of Swiss Parliament has approved the deal to turn over 4,450 names as part of UBS’ settlement involving their assistance to taxpayers in the U.S. evade their obligations through offshore accounts.
Stanford’s Co-Defendants Try to Flee the ‘Circus’ [DealBook]
Stanford’s Chief Investment Officer, Chief Accounting Officer and Controller are all attempting to sever themselves from Al’s proceedings because he’s an absolute drama whore.
How can you move past a job with a tax company like Stanford, Countrywide, Bear Stearns et al.? You might just want to GIVE UP (and that could be advisable if you were a perp) but there are some things you can do to wash away that taint on your resumé.
John Schneider, aka Bo Duke, and his wife owe California about $28,000 in back taxes. Turns out his old accountant left him ‘high and dry’ so he’s working it out with Arnie.
Memo to Farmville Haters: it’s here to stay and there will be more to come.Accounting News Roundup: BP Weighing Options on Dividend; Will the “New Wealth Taxes” Affect You?; Medifast Keeps Things Vague | 06.14.10
They may defer it, pay it in shares or “pay into a ring-fenced account until the oil spill liabilities become clearer.” All of which will please absolutely no one.
Proposals by the ICAEW would require auditors to disclose their private discussions with bank audit committees afte showed that “the value of bank audits had shown investors especially were dissatisfied by the audit report. The internal process involved was perceived as helping to keep bank executives in check, but investors felt the report was only a box-ticking exercise.”
Vantis trading suspension follows difficult financial period [Accountancy Age]
The court-appointed liquidator for Allen Stanford’s bank, Vantis, has had trading of its shares suspended by the AIM after the company was unable to obtain any funds for their services related to the Stanford case, among other financial difficulties.
Are you one of those “rich” people? That is, do you have an adjusted gross income of $200,000 or more ($250,000 for joint filers)? If so, you’ll probably want to know that two new tax levies will come your way in 2013 as a result of the new healthcare legislation – a 0.9% levy on wages and a new 3.8% tax on investment income.
KPMG might move their Washington, DC office location to 1801 K St. NW from 2001 M St. NW according to “real estate sources.” KPMG’s spokesman said that the firm is continuing to “examine all of our options.” The situation is fluid.
Sam Antar would like to put the SEC on notice that Medifast seems to be less than transparent when it comes to its disclosures, “it seems that Medifast is recognizing revenue upon shipment and not delivery. As a minimum, Medifast, like Overstock.com, should be required to expand and clarify its disclosures to avoid confusing investors.” Accounting News Roundup: Dell Looks to Settle SEC Probe; BP’s Request for Tax Docs Causes Issues for Fishing Communities; Salesforce CFO: We Need Sales People! | 06.11.10
The SEC’s probe, launched in 2006, into Dell had initially focused on some accounting manipulation that has now ensnared founder and CEO Michael Dell focusing on disclosure and omissions related to Intel Corp. and negligence-based fraud charges.
The fishermen and the tax man [Los Angeles Times]
BP is requesting tax records from people in fishing communities in order process claims of lost work related to the Deepwater Horizon spill. Those seeking payment need to submit a commercial fishing license, proof of residence and tax statements. The problem is that many of these people do not keep tax records since they are paid in cash for their work.
Cloud trailblazer Salesforce.com is looking to add more sales personnel, having added 18,000 new customers over the last 12 months according to CFO Graham Smith. Accounting News Roundup: Volcker Says Convergence Is Looking Like a ‘Collision’; Internal Audit Battles Relevancy Question; AIG to Remain Ward of the State | 06.10.10
Former Fed Chair Paul Volcker took note of the FASB and IASB’s divergence on fair value and he’s not too thrilled about it, “[Volcker]…said that U.S. and international accounting standard setters must reach an agreement on how banks value the loans on their books.”
Is Internal Audit Irrelevant? [Norman Marks on Governance, Risk Management and Internal Audit]
The question about the relevancy of the Big 4’s audit business (at least for public companies) has been questioned but now the role of internal auditors is in question. Norman Marks cites a recent presentation at the IIA’s International Conference in Atlanta:
Even though the bailout of AIG probably prevented us from bartering over food in a barren wasteland with cars on fire everywhere, taxpayers ‘remain at risk for severe losses.’ A Congressional Oversight Panel also stated that the U.S. Government will continue to be a “significant shareholder through 2012.” The Beard is more optimistic however, saying “AIG, I believe, will repay.”
