Category: ANR

• Investors Dissed as Two Appointed to IASB [The Summa]
Investors appear to have been short-changed by the latest appointments to the IASB. Dr. Elke König and Darrel Scott both have corporate accounting backgrounds and represent decidedly different ideas about what accounting rules should be, according to Prof. Albrecht, “Corporations prefer flexible accounting rules so that similar transactions can be accounted for differently by companies or even by a single company. Investors prefer more rigid accounting rules so that transactions are accounted for in a uniform manner.”

Further, the purpose of financial reporting is quite different between the IASB and the FASB, “In the United States, the purpose of financial accounting is widely viewed as providing information to investors so they can make the best investment decisions. In contrast, the purpose of financial accounting under the IASB is to help companies raise capital.”

• Fixing Seasons of California Discontent [WSJ]
California is approaching the last few months of its fiscal year and that means one thing: another huge budget shortfall! The Journal reports on the State Legislature trying to fix it’s impotent ways:

Two groups are pushing ballot initiatives they say would purge that chaos from Sacramento’s budget process. A bipartisan group, California Forward, is pushing a reform to let legislators pass budgets by a simple majority instead of the current two-thirds threshold. Repair California, which is affiliated with a pro-business group, is gathering support to hold a constitutional convention to rewrite state laws. Such a convention could alter the budget process and other facets of governance in California.

California Forward would like to put a measure on the November ballot that allow the legislature to pass budgets with a simple majority but require a two-thirds majority to raise taxes. That sounds like something, plus these IOUs are just plain embarrassing:

“We just have to stop the madness of these IOUs being issued and these horrible budget delays,” said Bob Hertzberg, a former Democratic speaker of the California Assembly who is co-chair of California Forward. “It sends a message…that California is dysfunctional.”

Yeah, we’ve gotten that message; specifically about the legislature.

• S.E.C. Enforcers Focus on Avoiding Madoff Repeat [NYT]
The Times profiles members of the new SEC Dream Team where Bernie Madoff is not to be spoken, “Many here refer to the scandal…as ‘the event’ or ‘the incident.'”

It was an incident all right.

Of course, the mind-numbing bureaucracy didn’t help, “Under Ms. Schapiro’s predecessor, Christopher Cox, investigators had to get approval from the five S.E.C. commissioners to negotiate financial penalties against corporations. She lifted that restriction. Enforcement lawyers had always had to get permission from the commission to open an investigation involving subpoenas. She has authorized the enforcement division to do that on its own.”

Now that Team Khuzhami can get down to business without all the rubber stamping, we’re expecting great things. It’s not like they can get worse.

• European Union, China Resist PCAOB Audit Inspections [Compliance Week]
PCAOB inspectors have had a helluva time getting access to the necessary information they need in Europe and China and it has caused the international inspections to fall way behind. Because they wanted to be upfront about it, the Board issued a list of the firms that should have had inspections performed in the past four years.

The majority of the firms on the list are international affiliates of the Big 4 and many of the remainder are affiliates of second-tier firms like Grant Thornton and BDO. The PCAOB didn’t give any particular reason that it was being stonewalled in its press release last week, just that “information necessary to conduct inspections was, and continues to be, denied”.

• IRS clears Schwarzenegger of $80,000 tax lien [AP via Mercury News]
As he promised, Arnie has been cleared of the $80k tax lien that was issued to him last November.

At the time, it was claimed that it was a “paperwork snafu” which looks to have been more or less correct as “[Scharzenegger] was not notified until late last year because the IRS had sent mail to his home instead of his office. Due to security precautions, the governor does not receive mail at his home.” For the trouble Ah-nuld has to pay $20.50 of administrative fees which might get the IRS an extra box of shotgun shells.

• Private equity firms brace for tax battle [Reuters]
Private equity firms have a tendency to be easy targets for a federal government that is looking to increase tax revenues. Following that idea, last week’s budget rollout proposes taxing carried interest at the ordinary rate of 35% that would raise $24 billion over the next ten years. As you might expect this is not a popular idea:

while high-profile buyout firms may seem an easy target, the question is a controversial one. Critics argue that raising the taxes paid by the private equity industry will also hit small partnerships and venture capital, and may not even raise as much revenue as governments hope.

$2.4 billion a year for 10 years doesn’t seem to be all that much in federal government dollars and we’re not sure the government will spend it better than the private equity but it serves is an easy target for politicians pandering during their election year “look how I’m taking on the greedy” speeches.

• PwC auditor Srinivas gets bail in Satyam case [The Economic Times]
According the Economic Times, the Supreme Court in India “said since the case was based on documents, all of which has already been seized by the Central Bureau of Investigation (CBI), it would be of no use to keep the accused in jail, where he had been lodged since his arrest in January 24 last year.” They also report that the “chargesheet [runs] over 55,000 pages” which seems like a good enough reason to just forget this whole thing.

Seriously, they were just able to come to the conclusion that he didn’t need to be in jail because the documents were TLDR? What army of accountants is on this thing? Will this never end?

• Ex-Broadcom Officials off SEC Hook [WSJ]
Despite all the horn tooting the SEC has been doing, they still manage to mess things up pretty regularly. After criminal charges were dropped against Broadcom executives due to “evidence in the criminal case showed prosecutors tried to influence the testimony of three key witnesses, improperly contacted witnesses’ attorneys and leaked information about grand jury proceedings to the media,” the civil charges have been subsequently dropped.

The Broadcom case if you recall, involved a back-dating scandal but far more interesting were the allegations that Broadcom co-founder William Nicolas III was “conspiring to distribute illegal drugs, including methamphetamine and cocaine,” and providing prosties to clients in underground quarters built specifically for said purposes.

But now Nicolas is sober and it’s all been thrown out and the SEC once again looks like idiots. Sobriety and an incompetent SEC makes for a feel good story.

• PCAOB Launches a Redesigned Web Site [PCAOB Press Release]
It was official yesterday although the new look seems to have been up all week. Acting Chair Dan Goelzer managed to wake from his nap to throw in his boilerplate statement, although by the looks of the guy, were not sure he knows how to use email let alone give an opinion on the website: “The redesigned Web site enhances the PCAOB’s transparency efforts by making registration, inspection, standard setting and enforcement information more accessible and user-friendly to the investors, auditors and other interested parties who use our site.”

In other news, it appears that despite the decent salary no one wants to be the non-acting Chairman. Not that it’s an important position or anything.

• Global accounting rules may face big delays [Reuters]
Here’s a shocker: the convergence of accounting rules may not get done in a timely fashion. Considering that the SEC seems to be avoiding the issue and everyone seems to be waiting on them:

“The next six months are going to be defining,” said Deloitte Touche Tohmatsu CEO James Quigley, who describes his position as more hopeful than confident that a single set of standards will be agreed soon. “The key is what the SEC’s position is going to be,” he said.

Great to know. Plus, the timeline keeps getting longer. Forget 2011; Bob Moritz says we’ll be lucky if we get this wrapped up by the end of the decade, “[Moritz] said that the original date of 2014 for one set of rules could easily extend to 2020.” A show of hands for just throwing this on the scrap heap along with tax reform?

• Where Not To Die In 2010 [Forbes via TaxProf Blog]
So if you’ve been enjoying the impotence of Congress with regards to the federal estate tax, thinking that it won’t be long before that rich uncle of yours will kick the bucket and you’ll dodge the estate tax. Sure they could retroactively reinstate the tax but it’s worth the gamble isn’t it? Plus, we’re still talking about the likes of Charlie Rangel. It’s possible that he could have forgotten that there’s problem. If a Rangel can forget about his financial situation he can surely do the same for the good of his country, can’t he?

Despite Rangs and Co., there are nineteen states out there that can still get a little piece of your rich relative’s action, whether it’s an inheritance tax or an estate tax:

Maybe this isn’t reason enough to the pull up the stakes but now you can’t say you weren’t warned.

• National accounting competition begins in Winnipeg [Winnipeg Free Press]
We weren’t aware such a thing existed in the world, let alone our own continent. Plus, what does “an accounting-focused case competition” consist of? We’ve obviously not been paying attention because this is the 9th go-round for the Gathering of Accounting Associates Professionals and Students Conference (GAAPS).

Since Winnipeg doesn’t have a hockey team anymore, it’s understandable that they would like to attract people to their city for something; but this?

• Obama’s Budget Plan to Create Government Finance Jobs [FINS]
The biggest beneficiary of CFOs not hiring may be the Federal Government. We mentioned in the routhe SEC got a decent boost in the POTUS’ proposed budget and likewise, so did the Treasury Department, “Department employment levels are projected to increase by 253 workers since 2009. Last year’s headcount of 1,089 workers is expected to grow to 1,266 in 2010, and reach an estimated 1,342 workers in 2011.”

Some of the areas within the Treasury that could benefit have yet to be created under the Financial Reform Initiatives including the Office of National Insurance and the Financial Services Oversight Council. We’re sure that Congress will get their act together in time so some of you can consider these potential employers.

One group in the Treasury that won’t have to wait is the Office of Terrorism and Financial Intelligence who was appropriated just over $1 million for new personnel. Whether or not you get to carry a weapon is not clear so just take it easy with all your 24 fantasies. Besides, financial people are the ones who usually end up dead on that show.

• Why Overstock.com and David Chidester Parted Ways [White Collar Fraud]
Sam Antar would like to know why David Chidester and Overstock.com came to a “mutual agreement” for Chides to leave the company. With new Overstock auditor KPMG on board, someone with eleven years experience at the company, that functioned as both the CFO and the Senior Vice President Internal Reporting and Information, might be able to help make the transition easier. Nope!

Sam postulates that the Chidester might have known too much, ” I believe that their so-called ‘mutual agreement’ is based on Patrick Byrne not wanting David Chidester to stay around and David Chidester not wanting to be around to answer questions as KPMG continues its audit of the company’s financial reports.”

KPMG is playing catch up with this new engagement and now they are dealing with a new CFO, Steve Chesnut, who Sam reports, “joined the Overstock.com in January 2009, was not around when most of the financial reporting improprieties under investigation were committed by management,” and isn’t a CPA. He’s got a less enviable job than KPMG.

• Obama’s Tax Reform Commission: RIP [Tax Vox]
Remember President Obama’s Tax Reform Commission? They asked you, the American Taxpayer, to give them ideas on tax reform and, by God, you delivered. After going through all that ingenuity, the commission announced that it get back to those ideas “after the holidays” to get crackin’ on our tax code.

Well! It appears that was time well spent because now it sounds like the tax reform commission is being put out to pasture. Tax Vox reports this exchange from yesterday’s budget briefing with Office of Management and Budget dreamboat Peter Orszag:

“Q: The President was supposed to receive tax reform recommendations in December and that was delayed indefinitely. Is there a possibility that that could be folded into the fiscal commission’s review, or is it just on the back burner?

DIRECTOR ORSZAG: I would imagine that it will be folded into the fiscal commission. I would imagine that — again, the commission will be examining a variety of things, including tax reform.”

We’ll just assume everyone’s ideas are being thrown on the scrap heap. Thanks for your help though!

• Obama Seeks 12 Percent Budget Increase for SEC [AP via NYT]
Figuring the troops could use some help, PBO’s new budget will increase the Commission’s budget to $1.3 billion, including $419 million for new enforcement personnel.

In addition to the feds generous appropriation, the Commission is also budgeting for $1.7 bil in fees from new stock registration for 2011. Mary Schapiro seemed pleased saying that the truckloads of budget dollars will “do a great deal to help us keep pace with the continuing growth of the markets and provide necessary resources to support important regulatory initiatives in 2011.”

Whether or not $3 billion is going to save the sinking ship will remain to be seen although the “throwing money at the problem” solution seems to be in full effect.

• We need more disclosure from audit committees: PwC [Accountancy Age]
Someone had to say it! PwC seems to have had enough of the give, give, give action they’ve been doing and would like a little transparency sent their way courtesy of the audit committee.

In a submission to the UK’s Auditing Practices Board P. Dubs “believes there should be new disclosures which articulate the principles that audit committees apply in deciding whether the auditor should provide non-audit services.”

It’s not good enough that you won’t engage us for non-audit services, we want to know why! It’s important that we know. And for those of you that feel that non-audit services undermine independence, you simply don’t have all the facts, and therefore should BTFO.

• Madoff’s Ex-Finance Chief to Give Up NJ Home [NYT]
Frank DiPascali, not so much a CFO as he was a really good liar, has agreed to sell his home in Bridgewater, New Jersey. The feds will being doing the honors and it will come with all the appliances, furniture, etc. which probably makes for a decent deal. This is possibly where one would insert a Jersey Shore reference but we don’t know anything about the show other than most people on it aren’t from New Jersey. Happy hunting.

• Obama Offers $3.8 Trillion Budget With Focus on Boosting Jobs [Bloomberg]
The $3.8 trillion budget calls for an additional $100 billion in stimulus spending and would increase the federal deficit to $1.6 trillion. “The $1.6 trillion deficit forecast for the current year represents 10.6 percent of the U.S. gross domestic product, making it the biggest by that measure since World War II, according to administration figures.”

The most impressive part is that the WH blew all the other forecasts out of the water, “The White House deficit projection exceeds other forecasts. The Congressional Budget Office has forecast this year’s shortfall at $1.35 trillion. The median of 39 analysts survey by Bloomberg News is for $1.37 trillion this year and $1.10 trillion next year.” Look! We’re going to dig the hole way deeper than anyone thinks!

As we mentioned last week, the spending freezes that will dig us out of said hole that were proposed last week would aim to cut that deficit to less than $1.3 trillion in 2011 and $828 billion in 2012; just in time for the election.

• Leaders in Davos Admit Drop in Trust [DealBook]
After all the chocolate, blondes, and awkward interviews, the other thing that is pretty obvious is that no one knows what the hell is going to happen, “the one certainty seemed to be continued uncertainty.” It’s nice to be confident about something.

Plus, everyone pretty much agrees that if you’ve got even a sliver of power in government or business, you are not to be trusted. Ordinarily this wouldn’t be a news flash, what with the near financial apocalypse and all but Tim Flynn said we were moving towards the green light of trust. Is this not the case? Did TF just figure, “I’m out of here, I’ll just say whatever I feel like.”? One can’t help but wonder if he’s shooting from the hip a little bit. Oh well; all in all, good times. Good Davos times. See you next year (right?)!

• The Top Five Tax Accounting Blogs [FINS]
For those of you that are inclined towards the tax side of the house, FINS presents its top five picks for wonky tax goodness that you should be reading if you’re not already. TaxProf Blog, The Tax Policy Blog and Don’t Mess with Taxes are three that we are intimately familiar and a couple we just discovered: Tax Watch and A Taxing Matter.

• IASB plans no fair value changes for EU-chairman [Reuters]
Sir David Tweedie has put his foot down again, so listen up. The IASB is not going to bend over backwards for you, the EU, or the FASB when it comes to fair value, get it? The world is at stake here. You non-knights out there need to just BTFU and let the man do his job. Tweeds told reporters in Brazil that the EU can stick it, “‘We cannot always allow Europe to tell us what to do. This is global. We are the IASB, not the European accounting standard board'” Got it?

You too, FASB. SDT said that he won’t converge accounting standards at ‘all costs,’ because he knows not everybody likes to place nice and seems to be okay with that. The man has short-timer’s so he doesn’t really care what you do. Have a nice life, Bob Herz.

• Woman charged with posing as IRS agent [San Francisco Chronicle via The Tax Lawyer’s Blog]
Sheryl Lynn Vertoch had been staying at the Inn Marin Hotel in Novato, California for over seven years telling the staff there that she was an IRS agent. Among her many adventures working in fantasyland, were testifying in the Enron case and being only one of six IRS agents that could investigate large public companies.

This all sounded good enough for the staff at Inn Marin, until Ms. Vertoch couldn’t pay her bill starting in 2008. The story was the IRS was getting stingy and wasn’t going to pay her until her current investigation was over. The owner of the hotel — finally fed up with an apologetic IRS — phoned the cheapskates up to complain because this was an outrage to hang this hardworking federal employee out to dry.

The IRS blew Vertoch’s “cover” and she’s now been arrested for impersonating a federal employee and she’s got a $55,000 hotel bill to deal with.

• Trump says he’ll jump at StuyTown takeover [NYP]
The Post is reporting that Stuy Town may become Trump Town, although it’s not entirely clear where we’ll see the iconic Trump name on the equally iconic brick buildings. The Donald joins many other high profile investors interested in the property including Wilbur Ross and WinnCompanies. One thing is for sure, whoever comes out top in this thing will certainly have no trouble following the Tishman/BlackRock fiasco.

• Tax Portions of President Obama’s State of the Union Speech [TaxProf Blog]
The POTUS gave his first State of the Union address last night and he talked about a lot of things over his 70 minute chat. Luckily if you didn’t manage to watch, listen, or were simply screaming at the TV during the whole thing, Paul Caron summed up the tax portions for you, “Let me repeat: We cut taxes. We cut taxes for 95 percent of working families. We cut taxes for small businesses. We cut taxes for first-time homebuyers. We cut taxes for parents trying to care for their children. We cut taxes for 8 million Americans paying for college.”

Whoa, what was that part about small businesses? ” I am also proposing a new small business tax credit — one that will go to over one million small businesses who hire new workers or raise wages. While we’re at it, let’s also eliminate all capital gains taxes on small business investment; and provide a tax incentive for all businesses, large and small, to invest in new plants and equipment.”

Is he talking about — GASP — bonus depreciation? And eliminating capital gains taxes? Maybe! Regardless, the President has his work cut out for him since he’s dealing with an angry populous and negotiating with some resistant players across the aisle (who would likely propose the same ideas).

• SEC Issues Interpretive Guidance on Disclosure Related to Business or Legal Developments Regarding Climate Change [SEC.gov]
Don’t worry, this doesn’t mean that companies will get all Al Gore on you with Climate Change talk but they will have to expand on the existing disclosures. Mary Schapiro isn’t interested in their opinion on the matter anyway; she’d rather that issuers just explain the impact of certain areas that may require disclosure. Pesky regulation, treaties with foreign countries, impacts on their business, you get the idea. Filings aren’t complex enough anyway.

• PwC Chairman Nally Says CEOs Are `Cautiously Optimistic’ [Bloomberg]
Looks a little cold over there in Toblerone land but Dennis looks like he’s enjoying himself. He also isn’t surprised that people aren’t as freaked out as, say, a year ago but dang it, things are still a little hairy.

• Open Letter to KPMG: The Ties That Bind Overstock.com and Patrick Byrne With Deep Capture LLC [White Collar Fraud]
Patrick Byrne’s indirect stalking of his critics on Facebook through the Deep Capture website has now been brought to the attention of KPMG, courtesy of Sam Antar:

You must investigate Overstock.com’s (NASDAQ: OSTK) relationship with Deep Capture LLC as part of your continuing audit of the company and take steps to require management to make disclosures under Statement of Financial Accounting Standards No. 57 (SFAS No. 57) governing “Related Party Disclosures.”

At the direction of Overstock.com CEO Patrick Byrne, the company has used Deep Capture’s resources, such as its web site, as a conduit to intimidate, harass, threaten, smear, and pre-text company critics. For example, Deep Capture Managing Partner Judd Bagley violated Facebook’s Statement of Rights and Responsibilities and deceptively posed as “Larry Bergman” in an effort to gather personal information and spy on Overstock.com ‘s and Patrick Byrne’s critics, including me (See Item 3 Safety and Item 4 Registration and Security).

Altogether, Judd Bagley posted on DeepCapture.com the names of 7,483 “Facebook friends” of Patrick Byrne’s critics and that list included spouses, minor children, and other people that have nothing to do with Overstock.com, Patrick Byrne, or Byrne’s delusional short selling conspiracy theories.

• IRS Plans New Disclosures on Uncertain Tax Positions [Compliance Week]
The IRS, in a surprise move, is now requesting more information from corporate taxpayers when they take uncertain tax positions. Now before you start belly-aching, Doug Shulman would like everyone to know that he could have been a lot harder on you:

“We could have asked for more – a lot more – but chose not to,” Shulman said. “We believe we have crafted a proposal that gives us the information we need to do our job without trying to get in the heads of taxpayers as to the strengths and weaknesses of their positions.”

That almost sounds like an apology, Doug. Are you getting soft on us?

Building a Blog Following [Blogging Suits]
Yours truly did his best to give some advice to the budding accounting bloggers out there over at Blogging Suits:

Despite the reaction of strangers, the content and purpose of your blog is yours to decide and there are certain techniques that can be utilized that will keep your readers engaged and coming back (no matter how “boring” a subject might seem):

• Blog regularly – For any blog to be successful, regular content is paramount. I’m not suggesting that you dedicate your entire day to posting but you should commit to posting to at least twice a week. Long periods without posting will turn readers off and they’ll assume that you’re not serious about keeping them informed.

Don’t get excited, no one is expecting you to keep the schedule we do here at GC. Besides, we have taskmasters walking around that shock us every 20 minutes to keep us going.

• Flat-pack accounting [The Economist via TaxProf Blog]
Oh the Swedes. They’re pretty clever with the flat-packed furniture but the entity structure is a whole other matter. The Economist reports that IKEA’s profits are largely sheltered from taxes by virtue of its holding company, which just happens to be organized as a foundation. The foundation’s stated purpose is to more or less educate you on matching the drapes with the paint you chose for the living room:

If Stichting Ingka Foundation has net worth of at least $36 billion it would be th charity. Its value easily exceeds the $26.9 billion shown in the latest published accounts of the Bill & Melinda Gates Foundation, which is commonly awarded that accolade.
Measured by good works, however, the Gates Foundation wins hands down. It devotes most of its resources to curing the diseases of the world’s poor. By contrast the Kamprad billions are dedicated to “innovation in the field of architectural and interior design”. The articles of association of Stichting Ingka Foundation, a public record in the Netherlands, state that this object cannot be amended. Even a Dutch court can make only minor changes to the stichting’s aims.
The Kamprad foundations compare poorly with the Gates Foundation in other ways, too. The American charity operates transparently, publishing, for instance, details of every grant it makes. But Dutch foundations are very loosely regulated and are subject to little or no third-party oversight. They are not, for instance, legally obliged to publish their accounts.

This allows IKEA to pay as little as 3.5% tax on its profits. Ragnar Danneskjöld would be proud.
• Obama to Call for Three-Year Freeze on Some Federal Spending [Bloomberg]
In case you’re unaware, the POTUS is giving a big speech tomorrow evening where he’ll talk about, amongst other things, a three-year spending freeze for domestic programs to get the deficit under control.

The Environmental Protection Agency and the Commerce, Interior and Justice Departments are among the executive branch agencies subject to the freeze, officials said, while the Defense Department, Department of Homeland Security, Veterans Affairs and unspecified international affairs programs would be exempt.

With the DoD and DHS exempt from the freeze, one would think that GOP types would be pleased with this idea. Not so.

A spokesman for House Republican leader John Boehner of Ohio was critical of Obama’s plan. “Given Washington Democrats’ unprecedented spending binge, this is like announcing you’re going on a diet after winning a pie-eating contest,” the spokesman, Michael Steel, said yesterday.

Wait a minute. Wouldn’t going on a diet right after the pie-eating contest be the perfect time?
• How Many Ways Can You Say Goodbye to a Job? [WSJ]
The temptation to go out in a blaze of glory by virtue of a BodySuit man type stunt is only for the boldest of souls. The Journal has plenty of advice on how to bow out gracefully, despite the temptation to use all your vacation, return to work and then give notice.

Some 60% of workers say they intend to leave their jobs when the economy improves, according to a survey by Right Management, a talent and career-management consulting firm in Philadelphia. It might be tempting to give the boss an earful if you land a new job in the coming months. But the way you quit can have a long term impact on your career.

Taking your fancy Swingline isn’t such a good idea either.

• Obama signs H.R. 4462 making Haiti donations deductible on 2009 tax returns [AccountingWEB]
The bad legislation officially becomes law with the POTUS’ signature. The new law applies only to cash contributions and you still have to provide documentation to substantiate your claim. For those of that donated by text message, your phone bill that shows the donation will suffice.
• Open Letter to KPMG: A Warning About Overstock.com, Your New Audit Client [White Collar Fraud]
There’s no doubt that the new audit team has a difficult task on its hands, taking Overstock.com as a new client. Sam Antar sent KPMG an open letter giving the firm some advice:

I believe that you should cut your potential exposure and resign. Some clients are simply not worth the risk. Since I don’t believe that you will resign, I feel that I owe you some advice just for old time’s sake to avoid another audit meltdown similar to what happened at Crazy Eddie.

However, I have my doubts that any firm can properly audit Overstock.com given its apparent lack of effective internal controls, its management integrity issues, and its continued willingness to violate GAAP and SEC disclosure rules.

There’s no way to be certain how all this will work out. Maybe KPMG will solve all of Overstock’s problems and everything will be fine and dandy. Regardless, we’ll be watching.
• At SEC, a Scholar Who Saw It Coming [WSJ]
Henry Hu will head the new Division of Risk, Strategy and Financial Innovation at the SEC. Mary Schapiro found this latest member of the Commission’s dream team in a somewhat unorthodox fashion:

In a Wall Street Journal opinion article in April 2009–which Ms. Schapiro says prompted the job offer from the SEC–Mr. Hu suggested Goldman Sachs Group Inc. used a kind of derivative called a credit default swap to turn itself into an empty creditor of AIG. He wrote that this may have encouraged Goldman to push for extra collateral from AIG, even when that threatened AIG’s existence.

The Journal reports that Mr. Hu wrote an article in 1993 warning about derivatives so while there would be an urge to chide the SEC for ignoring warning signs but we’re used to that.