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Strip Club Owner, Sans High School Diploma, Blames His Accountant for Tax Troubles

Caleb Newquist
April 23, 2010

When you own a strip club there are certain things that you understand. Things like, knowing that there is large portion of the male species that will pay women to take off their clothes regardless of the fact that sex is not happening. And while this is going on, they’ll imbibe lots of booze. And eventually, they may get hungry and with the last sliver of will power they have left, pull themselves away to pay $5.99 for a prime rib buffet. AND since there’s no windows in the place these men will stay in your strip club and spend money until you throw them out or they’ve spent every last dime. Oh, and poles are imperative.

On the other hand, there are things that strip club owners are less savvy about. One of these things may be tax compliance. Accordingly, many proprietors find a local accountant, they swap services, everyone wins.

However, every once in awhile this traditional arrangement may run awry. Kevin Moury, owner of Kittens (NSFW), is suing his accountant, Michael Walsh, for negligence in preparing his returns that resulted in “criminal charges, penalties, costs, fines, loss of income, medical expenses, loss of life’s enjoyments, emotional distress and mental anguish.”

Okay, before we continue, we have to ask – “loss of life’s enjoyments” and “medical expenses” because of a CPA? Where do we draw the line people? Next thing you know, accountants will be blamed for the collapse of the entire financial system…

Anyhoo, Moury pleaded guilty in October to “federal charges of falsifying tax returns and failing to report substantial cash income.” He spent one night in jail, got nine months of house arrest and had to pay back taxes of $88k, etc. etc.

This all came up because Moury apparently thought it was a-okay to deposit money from various revenue streams like fining dancers for tardiness or bolting early, massages for customers, and Jell-O shots (you know, the usual stuff) and then not report it as income. Obviously the IRS was not cool with this, prosecutors threatened to go after his wife and daughters (all employees at Kittens, btw) and that got him to plead guilty.

As a result of his guilty plea, Moury lost a sweet $90k/year gig as a “superintendent of environmental management” (which sounds a lot like “boss of the garbage collectors” but whatevs) and this resulted in lost future earnings of $1.3 million, allegeth the lawsuit.

Regardless, this shit ain’t fair and the accountant needs to be held responsible (his attorney the allegations or “groundless”) and Moury’s attorney isn’t shying away from the stupidity defense:

The lawsuit claims Moury’s lack of formal education — he didn’t finish high school and has a high school equivalency certificate — led him to rely on Walsh to accurately report his income and prepare his tax returns.

“Mr. Moury gave his accountant anything and everything for his business, his real estate and the salary from his job with Methuen,” Cote said. “He signed the returns, but did he looked at them? No. Is he responsible? Yes.

Strip club owner blames accountant for his tax woes [Eagle-Tribune]

Three Ways Soon-to-be Accounting Grads Can Get Ready for the CPA Exam

Adrienne Gonzalez
April 23, 2010

With May graduation season nearly upon us, handfuls of future CPAs around the country are preparing to tackle one of the most important events of their careers: the CPA exam. Unlucky for them, few colleges adequately prepare accounting grads to enter the real world and though you may have the knowledge necessary to practice the art of accounting, chances are you’re completely lost on how to get started on the CPA exam.

Don’t worry, that’s why we’re here. Just a reminder that if you have a CPA exam question for us, do feel free to get in touch and we’ll do our best to help you along.

Anyway, soon-to-be grads, here’s what you need to be thinking about:

Confirm when your degree is posted – As with most things CPA exam, the rules and procedures vary depending on the state you will be sitting in. Few states allow you to sit with less than 150 semester units and even fewer allow you to sit without your degree posted to your transcripts so the first thing to do now is find out how long your school takes to post your degree. Some schools will let you pay an extra fee to expedite this process so if you are in a rush, inquire at your school if you can move this along.

Apply to sit for the exam with your state’s board of accountancy – Once you have your degree, you’ll need your school to send your transcripts to the board of accountancy to which you are applying (NASBA if you’re in a NASBA state, or CPAES – authorized provider of CPA exam qualification services for some states). You cannot send them in yourself (even sealed, official ones) and should submit any application fees and forms in at the same time as requesting your transcripts be sent.

The Board will match your application (and likely cash your check before doing anything else) with your transcripts and like magic, you’re authorized to sit for the exam. If you meet your state’s requirements, that is. It’s usually a good idea to look these up before leaving school just in case you need to sneak in Federal Taxation or Advanced Accounting to please your State Board.

Start studying for the exam when you apply to sit – Though it’s probably wise to focus on finals for now if you are graduating this spring, you can get a jump on studying by starting your CPA exam review around the same time you submit your application. Always check with your state to see how long this might take (generally 4 – 6 weeks) as you don’t want to start studying for BEC 4 months before you will actually be able to sit. Keep in mind that just because you are authorized to sit for the exam you will not necessarily begin testing immediately and will still have to factor in wait times for your payment coupons (NASBA wants their money) and Notice to Schedule (NTS). Generally these take 10 business days each to arrive.

So start the application process as soon as you qualify. A summer off can turn into 2 or 3 years of procrastination and next thing you know you are trying to remember which side debits go on and still no closer to your goal of CPA licensure.

Hope that helps and good luck to all of the soon-to-be new grads!

Accounting News Roundup: Ernst & Young Settles with HealthSouth Bondholders; SEC Accountant Tried to Access Porn 16,000 Times in a Month; The Best Accounting Rules Won’t Fix Everything | 04.23.10

Caleb Newquist
April 23, 2010

UBS to Pay $217 Million to Settle HealthSouth Case [Bloomberg BusinessWeek]
After the better part of a decade, Ernst & Young has finally settled with the bondholders of inpatient service provider HealthSouth. Bloomberg is reporting that the firm agreed to pay the Company’s bondholders $33.5 million after settling with shareholders last year for $109 million. HealthSouths’ investment bank, UBS settled with shareholders and bondholders for $117 million and $100 million respectively.

The $2.7 billion fraud resulted in guilty pleas from 15 executives, including five former CFOs but an acquittal of CEO Richard Scrushy. Scrushy managed to wind up in prison on bribery charges instead and is currently serving 6 years and 10 months. As is typical in these matters, both UBS and E&Y ponied up yet denied any wrongdoing.

GOP ramps up attacks on SEC over porn surfing [AP]
The official SEC porn report has been leaked and some interesting things that are new include:

• One guy had so much porn on his computer that he had to bring in CDs and DVDs to help expand the collection. He thought it wise to keep these at the office.

• “An accountant” was blocked from accessing sites 16,000 times yet still amassed a “collection of ‘very graphic’ material on his hard drive by using Google images to bypass the SEC’s internal filter.” He refused to ” testify in his defense” and was suspended for fourteen days.

• Seventeen employees were “at a senior level” with the highest salary reported over $222k.

Darrell Issa (R-CA) is not amused by this porn bonanza, saying, “[it is] disturbing that high-ranking officials within the SEC were spending more time looking at porn than taking action to help stave off the events that put our nation’s economy on the brink of collapse,” according to the AP. Based on this response, it wouldn’t be surprising to find Issa ensnarled in a porn scandal of his own before this year’s election.

Best accounting rules are not enough [FT]
A reader responded to the epic article published by the Financial Times, raising the notion that “one set of high quality accounting standards” will not solve the world’s problems.

Those who prepare and use accounts very often have a different perspective on accounting questions from accountants as such, whether or not they have had an accounting qualification in the past…

[T]he report on Lehman explicitly did not address the question of accounting arbitrage. This was because Lehman used an accounting rule to disguise from the markets the weaknesses in the balance sheet in a way which, as the examiner reported, was invalid even if the rule itself was completely valid in all jurisdictions.

This points to the fact that the best accounting rules possible are not enough – the financial reporting chain has other links: corporate governance, auditing and regulation.

Quote of the Day

CAQ to Senators Dodd and Shelby: Don’t Screw with Sarbanes-Oxley

Caleb Newquist
April 23, 2010

“We are writing to urge you in the course of your efforts to reform the financial sector to resist efforts to weaken protections for investors in the Sarbanes-Oxley Act of 2002 (SOX). Specifically, we oppose exempting smaller public companies from compliance with Section 404(b) of the Act. Further, we are troubled by evidence of a proposal to roll back to an arbitrary market capitalization point strengthened internal controls requirements for larger companies that are already in compliance with the provision.”

~ The Center of Audit Quality, in a letter to Senate Banking Chairman Chris Dodd (D-CT) and Ranking Member Richard Shelby (R-AL).

Audit

Here’s What Happens When You Lie to Your Auditors

Caleb Newquist
April 23, 2010

There’s been a fair amount kvetching, Monday-morning QBing, and just plain hating on auditors lately. Most of it deserved. That said, there are still laws on the books that say you can’t dismiss them entirely and tell them bald-faced lies whenever you want.

Bruce Karatz was the CEO of KB Homes and he was convicted for, among other things, lying to Ernst & Young:

Karatz was involved in a backdating scheme in which he awarded himself and other execs millions of dollars in stock-based compensation, a jury found. Background on Karatz is here and here.

The 64-year-old faces 80 years in prison after being convicted of four felony counts including wire fraud and lying to his company’s auditor, Ernst & Young, about the matter, according to the U.S. attorney’s office in Los Angeles. He was acquitted on 16 other counts.

Jesus, 80 years? We’re no expert on sentencing guidelines but using simple arithmetic, that’s 20 years per count. We’re all for justice but that’s some serious FPMITA prison time. And the way judges have been handing out sentences lately, we wouldn’t expect leniency.

After Backdating Setbacks, Feds Chop Former KB CEO Karatz [Law Blog]

DWB
News

Cash-strapped Clients Could Force Accounting Firms to Come Up with Creative Cost Savings

Daniel Braddock
April 23, 2010

Because times weren’t already cheerful enough around GT, they recently released a study which found that businesses are generally pessimistic about raises and bonuses this year.

From the press release:

The firm surveyed 496 U.S. CFOs and senior comptrollers from March 22 through April 5, and found that 53% plan no salary changes in the next 6 months, while 32% plan to decrease and 15% plan to increase. On the bonus front, there is also equal pessimism, 47% plan no change, 44% plan to reduce, and only 8% plan to increase.

Well – that certainly sucks.

We know raises are the last thing on the minds of higher-ups at GT, but come on, really? Imagine being a no-name staffer at GT grinding away on a report about how your clients are a collective group of Negative Nancy’s. With headcount discussions ongoing in several GT offices, one would be – and should be – concerned.

The freezes in salary and bonuses don’t really apply to the accounting firms because – as it has already been discussed here in great length – money should be flowing your way this summer. The underlying concern with this report is this – if your client isn’t giving its own employees a bump in pay, there’s no bloody chance your firm is getting a bump in fees, either.

Any and all resources will be applied to minimizing any talent exoduses from occurring.

So how will the firms find enough cookies in the jar to “support the current pipeline?” I checked in with a Big 4 auditor in New York who had this to share:

During casual conversation with my mentors, word is the firm will be pushing for leaves of absence again this summer for everyone who has not completely passed the CPA. The hope is for a decent percentage of staff members to do this to save on salaries.

Makes sense-ish. Temporarily cut staff salaries during a relatively quiet audit period. Will this be enough to cover raises and bonuses while client fees remain stagnant? Heavens no but it’s a start. As always, let us know if you learn of ways your firm plans to pinch pennies.

News

Web CPA Breaks Down the Latest AICPA Survey So You Don’t Have To

Caleb Newquist
April 22, 2010

Writing and covering accounting isn’t the easiest thing in the world. Trying to communicate complex accounting and taxes issues without sound like the latest edition of Kimmel, Weygandt, and Kieso is no small feat.

So when the AICPA released results of a survey that showed that half of Americans are able to save money while the other half are unable to save, the gang at Web CPA decided that this particular bit of data needed to be further broken down for those accountants whose brains are complete mush post-busy season.

Accordingly, they presented this story with the following headline:

“Half of Americans Save, Half Don’t”

Now you may be asking yourself, can this be possible? Is there some way that this equation be disproven? That is, can Americans somehow save and not save at the same time and thus the 50/50 split is rendered ludicrous? We’ve searched the entire Internet and unfortunately this is the only thing we’ve found, and since we’re not engineering experts it’s not so helpful.

One can safely assume that most of Web CPA’s visitors are accountants and, as mentioned above, now that busy season is over, asking them to crunch any more numbers would be a disservice to the readership.

Half of Americans Save, Half Don’t [Web CPA]

Great Big Drawbacks to Getting Your PhD in Accounting

Joe Kristan
April 22, 2010

The post the other day on getting an accounting PhD was so inspirational that I devoted several whole seconds to the idea…

Not for me.

Sure, being a professer has its attractions, especially at the end of filing season. Easy hours, nice gym facilities, trampy co-eds — how I miss the world of higher education. And yet I’m not sold.

Right now I have a good job. There’s also a family I want to maintain (sorry, trampy co-eds) and kids to get through school. To get a PhD would require me to walk away from my decently-paid position in this “most profitable small business.” But I must pay attention to the benefits, too, as Caleb related:

“Professors are constantly learning” – To become a PhD would require an odyssey beginning in a university town somewhere, taking boring courses in statistics to prepare me to write some enormous research project that nobody outside of my doctoral committee (poor bastards) would ever read. Sure, all of the practical tax stuff I’ve learned in 25 years of practice would become stale from disuse, but I’d be constantly learning to develop visionary statistical correlations.

“Professors want to make a difference in the world” – Yes, the difference between what I’d be making in my compensation as a graduate assistant for five years and what I make now would be a difference in the world – even a world of difference.

“Life as a professor is full of flexibility” – Yes, especially until you get on a tenure track. You have the flexibility of moving from a one-year fill-in position at Eastern West Dakota State to a similar position at the Utah School of Mines and Home Economics. But no “substantial financial risk,” at least once you’ve thrown away your perfectly good private sector job. No money, no worries.

I’m convinced the whole PhD system is just the same racket as the new IRS preparer regulations – a way for insiders to erect barriers to entry to enable them to raise their prices and milk their customers. But it does protect those poor students from being instructed by anybody with actual fresh knowledge of what a CPA firm looks like from the inside, so thank goodness for that.

Career Center

Job of the Day: Deutsche Bank Needs a Principal Auditor – Assistant Vice President

GoingConcern
April 22, 2010

Deutsche Bank is looking for an experienced auditor to join their Group Audit Legal, Risk and Captial team. The primary role of this position will focus on the Credit Risk Management, Market Risk Management and Treasury functions.

The position is located in New York and requires a strong finance/accounting background with 5 to 8 years experience.

Company: Deutsche Bank

Title: Principal Auditor – AVP

Location: New York, NY

Description: The role is for a Principal Auditor for the Group Audit LRC (Legal, Risk and Capital) team which covers the following functions: Risk Management (Credit, Market, and Operational), Corporate Security and Business Continuity (CSBC), Treasury & Capital Management, Legal and Compliance. The primary focus of this role will be on Credit Risk Management, Market Risk Management and Treasury.

Responsibilities: Successful implementation of risk-based audits both regionally and globally, with audit work that is appropriately risk assessed and aligned to the LRC audit strategy; Undertakes audit assignments and may review audit work completed by other team members and drafts audit reports for review by LRC Audit management, identifying and escalating issues and recommending audit ratings for approval by the PAM and Chief Auditor. Presenting and agreeing key findings with Client management; Contributes to dynamic planning through business monitoring of the areas of their responsibility; Demonstrates understanding of the client’s business; Facilitates issue tracking and validates closure of issues; Continues to develop technical expertise relevant to LRC and Group Audit, including market and regulatory developments; Enhance team’s position as a center of excellence for LRC related activities and Issues; Assists with training for Group Audit, prepares updates for GA Senior Management and provides on-going advice to Client management.

Qualifications: The candidate will ideally have an Audit background, however those with considerable experience in Risk would also be considered. Five to eight years of relevant experience is desired. He/she should have knowledge and experience with financial services products and operations, and an understanding of the regulatory framework for DB. Detailed technical knowledge of valuation techniques and risk modelling are considered a plus; He/she will have a strong academic background in finance or accounting; Advanced knowledge of Microsoft Office products, and experience using flowcharting applications. Experience with CAATs is also a plus.

See the entire description over at the GC Career Center and visit the main page for all your job search needs.

Small Business

PwC Report: Venture Capital Activity in New York Jumps While Silicon Valley Sees a Slide

GoingConcern
April 22, 2010

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

Silicon Valley is still central headquarters for venture capital activity in the US. But it looks like the New York City area is trying to play catch up.

A new report shows an increase in the region both in the amount of startup funding and the number of deals for two consecutive quarters, while activity in Silicon Valley dropped.

The report, from PricewaterhouseCoopers and the National Venture Capital Association, found that financing for companies in and around the Big Apple increased to $566 million in the first quarter. That was an 18.9 percent rise from the previous quarter, also a 34 percent year-over-year increase. A total of 75 firms received money in the first quarter, up 13.6 percent.

In Silicon Valley the story was very different. Investment dollars and numbers still won out over New York, of course. But the trend was down. Total funding of $1.5 billion in the first quarter represented a 21.4 percent drop from the fourth quarter 2009, while the number of deals fell 24.6 percent over the same period.

Overall share of VC money also rose in New York and fell in Silicon Valley. In New York, it reached 12 percent, up from 9.2 percent in the fourth quarter 2009, compared to 32.3 percent for Silicon Valley, down from 37.5 percent.

This New York- area investment growth reflects recent efforts by venture capitalists and the New York City government to rev up funding.

A few examples:

Last spring, New York law firm Lowenstein Sandler started First Growth Venture Network, which provides mentoring for newbie CEOs from venture capital firms, angels and more-seasoned executives.

Last fall, they announced the first 15 CEO mentees. Late last year, seven successful entrepreneurs launched the Founder Collective to make $50,000 to $1 million investments in very early-stage ventures in New York, as well as the Boston area.

In early 2009, NYC Seed, a partnership of venture capital, non-profits and universities, made its first investments in several seed-stage ventures.

Last week, I wrote about trends in angel investing and noted that such financing provides more money for startups than venture capital. Still, although VCs invest in a small percentage of all new companies, they do support enterprises with potential to become real powerhouses. So, the New York area economy clearly benefits both in the short and long-term from this financing activity.

Although it’s doubtful these firms will ever match the contribution in tax dollars and jobs provided by Wall Street.

News

Grant Thornton Employees Can Expect Handwritten Thank You Notes Any Day Now

Caleb Newquist
April 22, 2010

It’s been awhile since we shared some of Stephen Chipman’s blog musings (mostly because we were too busy watching dust accumulate) but he was probably saving the more interesting stuff for post-April 15th.

“Interesting” obviously being a relative term but in his latest epic, he was not short on praise for those of you that remain with the firm:

Having just passed April 15, the first words I want you to read are “Thank you!” As we move through our busiest season, I continue to be impressed by the long hours, personal sacrifices and collaboration I read about in my e-mail, on our home page and by special letters and words of praise and thanks from our clients. As I’ve met with clients recently, one after another client executive raves about our people. It’s customary in the firm to say that clients rave about “our service,” but what they’re referring to is “you.” They are raving about each of you. The individuals for whom you work and with whom you have formed strong relationships based on excellence and trust are taking the time to tell me how valuable you have been to their respective businesses. Every time you show up, speak up and stay up late, you are demonstrating our global values: collaboration, leadership, excellence, agility, respect and responsibility. You are making a difference.

In case you missed it, your mere ability to drag yourself out of bed every morning, get to work at a decent hour, manage to utter a coherent sentence, and sacrificing your own health by depriving yourself of sleep you are making a difference. Your clients have noticed this by way of your wrinkled clothes, scuffed shoes, that expanding paunch, and your the all around zombie-esque qualities you exhibited every day during busy season (never mind this was all done for very little money).

And because of all those raving clients, Steve-o sent a little nudge to GT partners to make sure that they know, that you know, that they appreciate it because as it stands, they’re not doing that bang-up of a job:

Thank you.

These two simple words make a profound difference.

Feedback from the Voice Your Experience survey indicated that we need to continue to improve how we recognize our people. Interestingly, research shows recognition is not only about money and that a personal acknowledgement is especially powerful in motivating people to achieve exceptional results.

Please use the enclosed stationary to write your people notes of appreciation. By modeling this behavior, you play a key role in perpetuating a spirit of acknowledgement that benefits both our people and our business.

As always, thank you for all you do to make a difference every day.

/s/ Stephen

Okay people, illegible thank you notes (on extra-special stationary!) should be coming your way. Gratitude by way of money is cold and impersonal anyway.

Deloitte Playing Superhero to Group Hoping to Buy Manchester United

Adrienne Gonzalez
April 22, 2010

Let’s stop digging E&Y for five minutes and talk about Deloitte trying to sex itself up as tax advisory coaches to the group hoping to purchase Manchester United.

Guardian:

Deloitte, which has worked hard to build up its sporting credentials with its annual audits of football’s finances and consultancy work for a host of clubs, is understood to have become the latest big financial hitter to become associated with the Red Knights, the would-be buyers of Manchester United, in an advisory capacity.

Alongside Freshfields, which is supplying legal expertise, and Nomura, the Japanese investment bank that has been responsible for contacting all the 40 or so wealthy individuals who expressed concrete interest in the plan, Deloitte is believed to have been supplying advice on tax structures and how to structure any bid most efficiently.

Yeeeeeeeeeeah I can see it now, “casual football Friday” memos circulated around Deloitte’s UK offices about appropriate garb for the field and some hokey “We Are the World” sing-a-long at the end when Manchester United kicks whomever’s ass (I don’t watch the stuff). Excellent.

In the spirit of not discriminating when ripping on the Big 4, this Deloitte flick nearly brought me to tears. Maybe it was the faux hawk or the overgrown baby beard. Perhaps it was the fucking cape. You decide.

The Green Dot FTW!

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