• Former SEC Top Cop Sees More Lawsuits [CFO]
Former head of SEC enforcement Linda Thomsen believes that the Commission will be looking to charge more companies for “aiding and abetting actions,” which means accountants, attorneys and investment banks will find themselves privy to more lawsuits.

Last summer Senator Arlen Spector introduced legislation that would expand the ability of plaintiffs to sue those that indirectly assist the commitment of fraud.

Ms. Thomsen cited the “scheme liability” theory in Enron cases against the likes of Citi, J.P. Morgan, and Merrill Lynch as being the most successful in holding aiding companies responsible for furthering a fraud.

• Morningstar acquires footnoted! [Footnoted.org]
Morningstar, the financial research firm, acquired footnoted.org the blog that digs through SEC filings to find little nuggets of treasure from obscene executive pay packages to shareholders cursing in letters to their board of directors.

Terms were not disclosed on the deal but founder Michelle Leder did state that “While I negotiated mightily for the keys to the Gulfstream, the corporate apartment in Paris, the company yacht, the lifetime consulting contract and, of course, a tax gross up — all crazy perks we’ve written about in various M&A deals — I came up empty handed. That’s because Morningstar doesn’t believe in those sorts of things. Nor do I.”

This was a perfect opportunity for the ultimate ironic moment but alas, it has passed. Congrats to Michelle and the rest of the footnoted team.

• Citigroup Courts Gazprom [FINS]
Being in business with a state-owned energy company can’t be a bad thing. Citigroup has been courting the Russian behemoth, Gazprom “to buy energy-intensity credits from three Tianjin heating utilities that had exceeded efficiency targets set by the city. The savings were then bundled into carbon-emissions allowances that could be sold or traded to other buildings that had over-polluted, according to the Journal.

The bank sees that this is an opportunity to get in on the bottom of the cap-and-trade schemes, “The bank and gas giant are effectively laying the framework for carbon trading to take off in Asia,” and teaming with Gazprom will allow that to happen.

• 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.