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As Investigation Concludes, Allegations Against KB Home Remain Anyone’s Guess

This story is republished from CFOZone, where you’ll find news, analysis and professional networking tools for finance executives.

Finally some good news for KB Home.

The homebuilder said the Securities and Exchange Commission has concluded its investigation into the company’s accounting and disclosures and does not plan to recommend any enforcement action. The letter from the regulator concludes the SEC’s investigation, which began in October 2009.

“We are pleased to announce that the SEC has concluded its investigation,” said Jeffrey Mezger, president and chief executive officer of KB Home, in a statement.

There are no details about the nature of the allegations.


Same was true in October 2009 when the company first announced in its quarterly report that the staff of the SEC notified the company that a formal order of investigation had been issued regarding possible accounting and disclosure issues. At the time, it stressed that the probe should not be construed as an indication by the SEC that there has been any violation of the federal securities laws.

And this is exactly how it turned out.

What were the allegations? What prompted the SEC to look into the matter? Was it a disgruntled whistle-blower?

The answers would be instructive to other companies that could wind up as targets of SEC probes. Guess we’ll never know.

The good news here is that the SEC informed the company that the investigation was closed. Sounds basic, right?

Believe it or not until a few years ago the regulator did not often communicate to companies under investigation that the probe was completed and that no further action would be taken, leaving the company hanging and suspicion hovering for all potential customers and investors to speculate.

Their attitude at the time was that as a policy, the Commission does not disclose the existence of an investigation in the first place, so it typically won’t announce that one has ended.

KB Home, however, is no stranger to controversy.

The company was embroiled in the options backdating scandal. In April, former chief executive officer Bruce Karatz was convicted by a federal jury of four felony counts, including two counts of mail fraud, one count of lying to company accountants and one count of making false statements in reports to the Securities and Exchange Commission. He was acquitted on 16 other charges.

In September 2008, Karatz agreed to pay $7.2 million to settle civil charges for his role in the stock-option backdating scheme that benefitted himself and other KB Home officers and employees.

Last November, a Texas homeowner filed a class-action lawsuit today against KB Home, Countrywide Financial and LandSafe Appraisal Services, claiming the three conspired to rig housing prices in Texas and Colorado, costing home purchasers millions of dollars and pushing homeowners into dangerous loans.

Earlier, a lawsuit filed against the same parties alleged they fraudulently inflated sales prices of KB homes in Arizona and Nevada.

Ernst & Young Loses a Special Houseguest

Or a loudmouth neighbor depending on your political preference. Either way you look at it, 5 Times Square won’t be the same.

Giuliani Partners, the consulting business formed by the former mayor shortly after he left City Hall, has vacated the flagship office it had on a floor of the Ernst & Young offices in Times Square for nine years, consolidating space with the ex-candidate’s law practice, sources confirm.

Giuliani Partners closes Times Square office [Maggie Haberman/Politico]

The IRS-Free, Islam-Free America Movement Gets a Boost

There are two things that really stick in the craw of many Americans: 1) The freedom-hating IRS and 2) Muslims thinking that they can build mosques in this country wherever they want.

Well now, according to a report issued by The Investigative Project on Terrorism (“IPT”) there is reason to lump the two together because a report now shows that Imam Feisal Abdul Rauf – the leader of the Islamic Community Center planned two blocks away from Ground Zero – obtained a ‘sketchy tax break‘ for a religious group he founded.

The IPT investigation found that “Feisal Abdul Rauf filed for ‘church’ status to the IRS for his newly formed Islamic group in 1998 and listed an apartment building where he claimed in the federal application that 400-500 people worshiped there.”


More alleged chicanery detailed in the IPT press release:

[A] review of the building and real estate records indicates there is nowhere in the building to house that many congregants. ASMA lists its office address as 201 W. 85th St., Apt. 10E on the federal tax form, while it cites only the building address as its location for prayer services.

In the article, IPT also shows:

• Rauf’s American Society for Muslims Advancement listed its office as the apartment of Rauf’s wife, Daisy Khan.

• Khan was listed as an ASMA director living at 201 W. 85th St., Apt. 10E, in the group’s 1997 incorporation papers filed with the state of New York. A year later, the group’s IRS filing does not list Khan as a director but instead gives her home address as ASMA’s address.

• ASMA told the IRS in 1998 that it planned to build a prayer center that would hold up to 1,000 worshipers at a time. That was never built.

• Although ASMA has tax-exempt church status, its website shows it has no permanent prayer site and the group no longer touts religious services as part of its mission.

The Post – likely acting on orders from the News Corp. overlords – inflames things bit further (citing IPT’s report) pointing out all the benefits that the ASMA enjoyed as a result of the exemption:

“Church status” is more than just an exemption — it means never having to pay taxes, file returns or reveal the sources of a congregation’s money or how it’s spent, according to the Washington-based Investigative Project on Terrorism, which discovered the group’s startling claims on the IRS form it filed seeking the special status.

On that form, the organization said it held services at 201 W. 85th St.

That’s a 17-story apartment building with no public space big enough to accommodate the 450 to 500 worshippers the group claimed regularly showed up five times a day to pray.

So now that the IRS has been twisted (albeit marginally) into the Burlington Coat Factory Mosque controversy, opponents of one or both will likely be reenergized for their holiday weekend protesting plans. Although, since the IRS has already been accused of anti-Israel it should make things slightly more interesting.

IPT Investigation Uncovers Problems in Mosque Leader’s IRS Status [PR Newswire]
Sketchy tax break for GZ imam ‘prayer pad’ [NYP]

At Least One Grant Thornton Office Doesn’t Think It’s Too Early To Discuss Holiday Parties

From the mailbag, straight out of H-town:

Today, sept 1st, I got a save the date for the 2010 Christmas party. So yes GT Houston is having a Christmas party this year and apparently they are so excited about it, they wanted to let everyone know way in advance! Woot!

Is this some sort of retention tactic? Probably too little too late…..


Grant Thornton’s timing of this announcement is interesting on several counts. First, Christmaskuh was canceled by KPMG last year in early August. Since this is the first Holiday Ho down news we’ve received for any firm, this may be a good sign.

Second, our source’s suspicion is noted – is GT Houston employing a free booze morale booster here? Will the promise of catering, free hard liquor (at the very least beer and wine) and the opportunity for awkward sexual advances help rally that office back to indifference as opposed to downright morbidity? Oh and watch out for a certain PwC partner who might try to crash the party since he’ll likely be kept away from the booze at his own.

Discuss the early holiday cheer. And keep us informed about your firm’s/office’s holiday rager status.

Accounting News Roundup: Young, Single Women Make More Than Male Counterparts; A Burger King Buyout; Heiress Getting Visits From Accountant | 09.02.10

Young Women’s Pay Exceeds Male Peers’ [WSJ]
“The earning power of young single women has surpassed that of their male peers in metropolitan areas around the U.S., a shift that is being driven by the growing ranks of women who attend college and move on to high-earning jobs.

In 2008, single, childless women between ages 22 and 30 were earning more than their male counterparts in most U.S. cities, with incomes that were 8% greater on average, according to an analysis of Census Bureau data released Wednesday by Reach Advisors, a consumer-research firm in Slingerlands, N.Y.

The trend was first identified several years ago in the country’s biggest cities, but has broadened out to smaller locales and across more industries. Beyond major cities such as San Francisco and New York, the income imbalance is pronounced in blue-collar hubs and the fast-growing metro areas that have large immigrant populations.”

Burger King to be bought out at $24/share – CNBC [MarketWatch]
Whopperland’s stock is up 20% on the news that private equity shop 3G will shell out $24 a share.

KB Home says SEC investigation over [Los Angeles Times]
“Shares of Los Angeles-based KB Home soared on Wednesday after the home builder said an investigation by the Securities and Exchange Commission into the company’s accounting and disclosure procedures had concluded and no enforcement action would be taken.

The company said in a statement Wednesday that it had received a letter from the commission closing the investigation, which began in October. Details of the inquiry weren’t disclosed. KB Home closed at $11.45, up $1.14, or 11%.

‘We are glad to share with our investors and employees that the matter is now behind us, as we continue to focus on restoring the sustained profitability of our home building operations and generating future growth’ KB Home Chief Executive Jeffrey Mezger said.”


Heiress’ shady visitor [NYP]
“An accountant being investigated for his handling of 104-year-old Huguette Clark’s vast fortune has visited the hospitalized heiress in the past several days trying to get her to sign legal documents, The Post has learned.

Sources said they did not know if the accountant — convicted sex offender Irving Kamsler — obtained Clark’s signature on the documents after going to see her at Beth Israel Medical Center, but speculated that those files include a last will for the copper heiress.”

Bloomberg Stands By “Cowboy” Remark in State Cigarette Tax Dispute with Seneca Tribe [Tax Foundation]
Hizzoner isn’t apologizing to the Seneca Tribe after suggesting Governor David Paterson get a ‘cowboy hat and a shotgun’ to enforce New York’s cigarette tax. The Seneca Tribe wants an apology. Bloomy says it isn’t happening.

Five More Facebook Fan Pages For Accountants

Our friends at FINS recently posted some must-fan Facebook pages specifically for accountants and though we agree with their suggestions, we thought it would be prudent to add a few of our own.

Before we get to those, though, let’s talk about the five FINS listed.


1. The Big 4 (all of them, if you’re really really excited to land that dream public accounting gig you’ve always dreamed of… hooRAH!)
2. AICPA
3. Journal of Accountancy
4. CPA Technology Advisor
5. Local CPA Societies

These are all great suggestions but let’s be real about it, a good number of us use our Facebook pages for so much more than professional networking. So how about some real-world suggestions for the accounting folk out there?

1. Vodka. I don’t care if you prefer martinis or homebrew, by fanning vodka you are reiterating your commitment to professionalism in all you do as per the AICPA Code of Professional Conduct. Trust us, it’s a lot easier to be ethical and bring in clients when you’ve been on a weekend-long bender and simply don’t care anymore.

2. Accountants do it with double-entry. There’s no need to perpetuate stereotypes of the boring accountant, go ahead and shock your conservative pals by fanning this group to show that you DO, in fact, have a sense of humor and even choose to exercise it every now and then.

3. Accountants are sexy. Well? They are, dammit, especially if you followed our advice and got into the vodka. A couple of those and that mousy chick in the cube next door will be EXTRA sexy.

4. Stuff Accountants Like. Even though SAL has taken a possibly permanent vacay from blogging, reading through past entries is still entertaining if you haven’t read them before. Great for when you’re taking a break between vodka and reconciliation.

5. Going Concern. Listen, FINS, we aren’t offended that you accidentally left us off your list. But don’t expect us to share any of our vodka with you.

Two Days After the IRS Took His Favorite Scarface Poster, Young Buck Filed for Chapter 13 Bankruptcy

Look, maybe if shotgun-toting IRS Agents kicked down your door and took your video games, a five-figure watch and a movie poster that has far more sentimental value than any of you can appreciate, then you might know Young Buck’s frame of mind.

If not, then you best button it.

Two days after every material possession in your house is taken away (and if you’re a hip-hop artist, material possessions are pretty much everything) you’re bound to re-examine your life.

Brown proposes having his label, Cashville Records, dock his pay $12,500 a month for 60 months, for a total of $750,000. The bankruptcy filing claims Brown earns a total of $19,170 a month.

The entertainer filed for Chapter 13 on Aug. 5. U.S. Bankruptcy Judge George C. Paine accepted the proposed plan and ordered the payroll deductions Aug. 20. Brown will be free to keep his additional income, including royalty payments.

In other words, he’ll be back to Scarface wallpaper in no time.

Rapper Young Buck files for Chapter 13 bankruptcy after IRS raid [The Tennessean]

Sir David Tweedie Would Appreciate It If You Quit Complaining About the New Accounting Standards

This means you PricewaterhouseCoopers. You’re acting like this convergence/IFRS adoption is just happening too fast, well, Tweeds isn’t having it.

As for you companies out there that actually have to keep their books in tiptop shape, Sir Tweeds isn’t so amused by your bellyaching either. And for the love of God, would everyone quit playing dumb:

“Let’s look at what we’ve got out there at the moment – leases, revenue recognition and insurance. If you’re not an insurance company you’ve got two. Big deal,” he said.

“I’m not terribly sympathetic. It’s not as thought these have sprung out of no where, we’ve been working on these, they’ve seen the drafts coming, they know what we’re doing.

Furthermore, maybe if you got some of your people on this instead of writing a comment letter every two seconds, this wouldn’t seem like such monumental task.

“It’s tough, but goodness it’s tough for us too. We can’t keep getting all this advice. We always get conflicting advice. ‘You must have these done by June 2011, but don’t give them to us all at once’,” he said.

Tweedie “not terribly sympathetic” to concerns of standard-overload [Accountancy Age]

My GPA Sucks! Is My Accounting Career Over?

Today in “My life is falling apart and I’m an accountant” we have another poor sap that is plagued by a low GPA. Are they doomed for mediocrity? We’ll get to that, right after…

Are you wondering what your next career move is? Are you an auditor trying to put the moves on someone in tax and have no idea what to say? Wondering whether you should put the kibosh on your vegan lifestyle at your next partner lunch/dinner since you think it’ll make you look like a complete weirdo? Email us your inquiry to advice@goingconcern.com and we’ll put you at ease.

Back to our slacker du jour:

My undergrad GPA was a 2.99 cumulative and that’s been a killer in my application and job process. I’m currently with a very small CPA firm. Is there a point on continuing even if I pass my CPA? It seems no one really cares about any accounting experience for public unless it’s big 4 or mid-tier. My 2.99 has been a killer since the majority of firms are looking for a 3.00+. I’m looking at options at grad school, but I’m not sure if it would help if I wanted to go Big 4 still. I also believe I should pass my CPA first if I’m looking to go for a one year MBT or MACC (Masters of Accounting) program, but honestly I don’t know that I would get in considering my GPA unless I got stellar GMAT scores.


First of all, we’re not quite sure why you’re looking for a job when you already have a job. Do you intensely dislike this “very small CPA firm”? Our guess is yes since you’re writing us but take a serious look at your current situation and consider the experience that you are getting at your current firm. It may not be exactly what you’re looking for but the work experience you obtain will be valuable.

That being said, you then moving on to “Is there a point on continuing even if I pass my CPA?” Do we need to call the suicide hotline for you? Get your CPA. That will go a long ways to bolstering your career prospects, 2.99 GPA or not.

We definitely take exception with your “no one really cares about any accounting experience for public unless it’s big 4 or mid-tier.” There are plenty of Big 4 whores around these parts that might say that but don’t forget that small firms differ from the Big 4/second tier in some positive ways, so don’t dismiss the opportunity you have right now.

As far as Grad School goes, wait until you’ve got some work experience and CPA. Do you really want to rush right back to school? If you get some good work experience and you have some decent professional accomplishments, the graduate schools will take that into account. Yes, killing your GMAT will help your chances but you’re not doomed, friend; you’ve just got an uphill climb.