Going Concern

Layoff Watch ’10: H&R Block Cutting 400 Positions, Closing 400 Locations

Caleb Newquist
May 20, 2010

Has the risk of violence become too much?

No, it’s actually quite a bit more boring than that – cost savings. The company states that it will decrease its operating expenses $140-$150 million by 2012. CEO Russ Smyth was quoted in the Kansas City Star that “There aren’t as many people who need their taxes done when there are a lot fewer W-2s going out,” referring to the higher unemployment rate in the company’s customer base.

HRB’s headquarters in Kansas City will cut 165 of the 400 jobs lost.

The timing of this announcement is interesting because we’ve heard a few rumors (but virtually no details) about layoffs at RSM McGladrey, an HRB subsidiary, but they aren’t as forthcoming with the press releases and aren’t returning our calls. If you have any details about layoffs at RSM or its on-again off-again affiliate, McGladrey & Pullen, get in touch with us.

Full HRB press release:

KANSAS CITY, Mo. – H&R Block (NYSE:HRB) today announced a broad strategic realignment of its field and corporate support organization. Overall, the company expects these changes to decrease annual operating expenses by $140 – $150 million per year by the end of fiscal year 2012.

Russ Smyth, president and chief executive officer of H&R Block, said, “We operate in a challenging and competitive environment, and to be successful we must find new ways to provide better value to our clients. This requires that we narrow our focus and invest in a few key initiatives that will have the greatest impact on attracting and retaining clients in our retail and digital channels, while eliminating other activities and their related costs.”

Approximately 400 positions are being eliminated throughout the organization as part of the measure. The company also has closed approximately 400 under-performing tax offices out of its network of 11,000 retail tax locations.

“Changes like these are never easy and we appreciate the hard work and loyalty of the affected associates,” Smyth said.

“However, these steps are necessary to improve our business performance and better serve our clients.”

H&R Block expects to incur a pre-tax charge for severance-related costs of approximately $28 million, most of which will be incurred in the fiscal quarter ending July 31, 2010.

News
Tax

Getting Regular Sex in Denmark May Have Cost Søren Hansen About $2.6 Million

Caleb Newquist
May 20, 2010

Back in March we told you about non-Phil/Tiger golfer Søren Hansen, who was looking at jail time for dodging about 10 million kroner in taxes.

He managed to avoid the Danish joint but a judge did order him to pay 8 million in back taxes and an additional 8 million in fines. This works out to $2.6 million which is around what Tiger Woods spends on hookers in a weekend. So in other words – a chunk.

Hansen maintained throughout the ordeal that he was not a resident of Denmark because he changed his residence to Monaco in 1999 (it’s on his Wikipedia page for crissakes! What’s it going to take?!?) and thus not subject to the tax. The judge didn’t buy it because “he used his summerhouse in Hornbæk for residential purposes, as well as stayed over in his girlfriend’s Copenhagen apartment regularly.”

Obviously Hansen could have moved his g/f to Monaco to avoid all the trips back but that would have put a serious damper on the Monaco tail situation.

Golfer hit for 16 million kroner [Copenhagen Post]

KPMG

Let’s Speculate About What KPMG’s Summer Blast Is

Caleb Newquist
May 19, 2010

Because we asked around and no one has a clue.

KPMGsSummerBlast

But we’ll take a stab at it:

A) More communication blasts from JVeih and Co.

B) Flying all Klynveldians to watch Phil Mickelson continue his Grand Slam tour (and in the process, win back his love).

C) Pool parties at your local OMP’s pad.

D) Doing some hallucinogenics and running through a sunflower field:

E) You tell us.

Announcements

Thanks to This Week’s Advertisers

GoingConcern
May 19, 2010

A quick word of thanks to this week’s advertisers on Going Concern:

• Bisk Education

• Delta

• Serenic Software

• Sunshine Suites

If you’re interested in advertising on Going Concern, email us at advertising@breakingmedia.com.

Thanks!

PricewaterhouseCoopers Suggests You Put Your Money on Brazil to Win the World Cup

Caleb Newquist
May 19, 2010

Leave it to an accounting firm to make a conservative pick on the biggest sporting event in the world. The firm tries to make the point that wealthy countries do not outperform poorer ones in the football tournament. The most poignant (and blatantly obvious) example being that the United States sucks and Brazil is a heavyweight:

“The US football team performs well below expectations based on the size of its economy or population relative, for example, to Brazil. This reflects the ascendency of football in Brazil as contrasted to the greater popularity of sports such as American football and baseball in the US.”

However, P. Dubs manages to give England a fighting chance, “England seems a reasonable bet to reach the quarter finals based on its current FIFA world ranking and past World Cup performance, but it will do well to get beyond that point – which it has never done before when playing outside Europe.” That’s especially shocking since the firm has a vested interest in at least one English lad.

But as we mentioned at the outset, P. Dubs suggests the safe money is on Brazil, “Brazil remains the favourite to lift the World Cup this summer as the number one ranked footballing nation and the only country that has won the tournament outside its home region.” If you want some sweet action, take the home team.

Power v passion: Wealth comes second to location and tradition when projecting World Cup winners [PwC]

News
Tax

You Can Forget That Deal on the Estate Tax

Caleb Newquist
May 19, 2010

Yes, the brain trust known as the U.S. Senate has managed to prolong the agony on the estate tax. There was a deal on the table as of yesterday but you can forget it! Hard to believe this could happen. Was it a fundamental disagreement on the proposal? Was it because everyone was broken up that Arlen Specter?

No, it’s mostly because some people (the R’s) don’t like that other people (the D’s) are being fraidy cats about not having enough votes:

Senate Minority Whip Jon Kyl (R-Ariz.) said the accord, which was all but forged a week ago, began to dissolve Monday night and broke down Tuesday after talks between leaders in both parties.

After talks with Senate Finance Chairman Max Baucus (D-Mont.) and Senate Minority Leader Mitch McConnell (R-Ky.), they scrapped a plan to move forward with the tax that expired at the end of 2009.

The reasoning, Kyl said, is that Senate Democrats aren’t allowing any legislation to reach the floor that doesn’t have support from the majority of its members.

“We no longer have an agreement because the Democratic side has decided that unless a matter has a guaranteed majority of Democratic votes going in, they’re not going to allow it on the floor, at least not voluntarily,” he said. “So we have to find a way to get a reasonable permanent estate tax reform to the floor where members can vote on it.”

For crissakes. This is this biggest case of “I’m taking my ball and GOING HOME” we’ve seen this week.

Joe Kristan does put the whole thing in perspective however, “Congress has been botching the estate tax for almost ten years now; why should they start getting anything right now?”

Kyl: Senate deal off on estate tax [On the Money/The Hill via TaxProf]
Estate Tax Deal? Not so Fast [Tax Update Blog]

Panera Bread Combines Free Markets and Nonprofits in Missouri

Adrienne Gonzalez
May 19, 2010

In a test run to see if expenses can get covered at the end of the day, Panera Bread has opened a unique new location in Clayton, MO that combines the benefits of nonprofit status with the fundamental principle of the free market system: let the market determine what an item is worth. But it adds a unique qualifier to the traditional concept of the need determining price: human nature.

The menu is exactly the same as other Panera locations (sick foodies can check that out here if they aren’t familiar with Panera’s offerings) but instead of charging a fixed price for each item, this special little spot will ask only what customers can afford. “Take what you need, leave your fair share,” says the sign at their entrance, just in case one is confused by such a foreign transaction model. No prices? Do we even know how to value items independently any more?

Panera is hopeful that the “Cares Cafe” model will thrive and grow to a series of donation-based stores that rely more on empathy than capitalism. “Hopefully we’ll be able to open them across the country, but our original St. Louis location must succeed first!” tweeted the fine folks behind Panera’s official Twitter account.

Can someone confirm Missouri rules on sales taxes related to the sale of food? And is it a sale if the exchange is really a donation? I’m really confused.

Anyway, not everyone is thrilled about this concept. Though it is obviously well-intentioned, the donation model may not necessarily transfer outside of St Louis. Trends consultant Marian Salzman reality-checked USAToday saying “while young people are very much attuned to helping out and making a difference, if they find themselves sitting next to other customers with whom they don’t feel comfortable, they’re not coming back.” You know, as in the possibility of homeless and otherwise destitute individuals (of which our country has plenty nowadays) lounging around with the nerve to eat a cheap meal.

Hedging against operating losses, this particular location has one slight difference from other Panera stores: its bread (except for sandwich bread) is really day old product from other locations around the St Louis metro. Hey, nothing wrong with getting the most out of inventory with a horrible turnover rate.

In the end, it’s hard to say whether this nonprofit experiment will float but if it does, Panera wants to open two more within six months. Good luck with that.

Adrienne Gonzalez is the founder of Jr. Deputy Accountant, a former CPA wrangler and a Going Concern contributor . You can see more of her posts here.

Accounting News Roundup: FASB, IASB May Be Overachieving on Convergence; PwC Wants Your Fat; Who’s Betting on Legal Internet Gambling? | 05.19.10

Caleb Newquist
May 19, 2010

FEI Implores FASB, IASB to Slow Down [Compliance Week]
Financial Executives International is concerned that the FASB and IASB have gotten a little too ambitious in their convergence efforts and has written a letter to the Boards’ respective Chairmen that basically says, “Easy, tiger.”

Everyone knows that those knowitalls at the G-20 were insisting the accounting rule mavens to make convergence happen by next summer but FEI is trying to take pragmatic approach to this:

Arnold Hanish, chairman of FEI’s Committee on Corporate Reporting, said in his letter to the two boards the group is concerned about the “unprecedented volume as well as the complexity of proposed standards” that the two boards are developing. The committee fears the vast scope and aggressive timeline for the proposals will not allow adequate analysis of how the rules will work, which will lead to implementation problems and amendments further down the line.

In other words, this isn’t quantum mechanics, but it’s not Fisher Price either. Mr Hanish did his best to remind Bob Herz and Sir David Tweedie just how overambitious this little project is:

Our member companies are extremely concerned with the 10+ Exposure Drafts (EDs) that are in final stages and will be released for public comment through the third quarter of 2010. During any single period in time in its 38-year history, the FASB has had no more than 3 or 4 significant EDs out for public comment.

FEI doesn’t seem convinced that this unprecedented overachieving by Herz and Tweeds is going to result in the “one set of high quality standards.” They would prefer that hte Boards get this right the first time so they don’t have to slap the proverbial duct tape all over the efforts later.

Cabbies, Accountants Look to Chip-Fat Fuel on Cost, Environment [Bloomberg]
PricewaterhouseCoopers’ London office is trying to do its best for the environment by using local chip-fat converted into biodiesel to supplement its energy needs:

PwC is seeking local sources for 45,000 liters of biodiesel to meet one quarter of its monthly office fuel needs, said Jon Barnes, head of building and facilities services at the firm.

“I’m trying to locally source used chip fat from restaurants,” he said. “It’s a pretty pointless exercise of using biofuel if it’s been all round the world on a ship.”

Sounds like a bang-up idea but P. Dubs is always looking for an angle, “Having a renewable source for some of PwC’s office’s energy needs could help the company sell its services to clients wanting to do the same.”

House Holds Hearing Today on Tax and Internet Gambling [TaxProf Blog]
The House Ways & Means Committee is holding a hearing today to kick around the possibility of legalizing Internet gambling here in the US of A (and taxing it, of course). It kicks off at 9:30 am ET and with any luck, you’ll be legally losing your mortgage payments for the 2010 football season.

Quote of the Day

The IRS Outreach to Nonprofits Didn’t Go So Hot

Caleb Newquist
May 19, 2010

“The IRS has conducted an unprecedented outreach effort in the tax-exempt sector on the 2006 law’s new filing requirements, but many of these smaller organizations are just now learning of the May 17 deadline.”

~ Doug Shulman, IRS Commissioner

Fraud
News

Despite Being a ‘Wreck of a Man,’ Allen Stanford Managed to Fire Another Attorney

Caleb Newquist
May 19, 2010

Things are not going so well for the Stan as he awaits trial in H-town.

For starters, he managed to fire another lawyer, which is not going to go over well with Judge David Hittner. Judge Hittner warned Stan about his Steinbrenner-ish ways last month, “You’ve had 10 attorneys attempt to enter this case on your behalf. I will not entertain any further substitutions.”

And secondly, Al doesn’t seem to be very good at making friends:

When Mr. Stanford surrendered to authorities, he was a healthy 59-year-old man,” Stanford’s Houston-based lawyer, Robert Bennett, wrote in a brief on which Harvard Law Professor Alan Dershowitz consulted.

“Mr. Stanford’s pretrial incarceration has reduced him to a wreck of a man: he has suffered potentially life-impairing illnesses; he has been so savagely beaten that he has lost all feeling in the right side of his face and has lost near-field vision in his right eye,” Bennett said.

Naturally, AS’s lawyers want him out and placed on house arrest ASAP since his trial doesn’t start until January but so far no one is convinced that Al won’t bolt the second he gets outside the prison walls.

“Savagely beaten” Stanford asks to be freed [Reuters]

KPMG

Exodus Watch ’10: KPMG New York

Caleb Newquist
May 19, 2010

From somewhere deep inside 345 Park Ave:

“Damage control beginning – 3 managers and 3 SAs out.”

It’s our understanding that this is the audit side of the house in financial services. No indication at this point whether it’s promotion de-nied related or if it’s has something to do with the unconfirmed compensation rumors we’re hearing.

If you’ve got details on comp, promotions, or lack thereof, email us with the details.

Imprisoned Russian Billionaire Shows Americans How To Protest Tax Injustices

Caleb Newquist
May 19, 2010

If you’re formerly the richest man in Russia and you’ve been wrongfully imprisoned (sayeth he) you’re not going to take this shit lightly. Flying a plane into a building is cowardly; shooting at another person – what does that accomplish?; Bulldozer? That guy is an idiot.

No, if you’re seriously going to show these tax happy bastards that you mean business, only explicit self-loathing will suffice.

Mikhail Khodorkovsky is serving an eight year prison sentence for tax evasion and fraud and he was recently dealt a blow in his attempt to land a new trial:

Mikhail Khodorkovsky has gone on hunger strike in protest at an order extending his detention ahead of a new trial. In a statement quoted by his lawyer, Khodorkovsky said the order violated legal amendments that had been approved by President Dmitry Medvedev. He has vowed to continue his protest until President Medvedev confirms that he is “fully aware” of the situation.

All he wants an acknowledgment from the President of the country and then he’ll get back to eating with a spork.

Russian oil tycoon Khodorkovsky on hunger strike [BBC]

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