Going Concern

Homebuyer Credit to Continue Helping People Get into Crazy Debt?

Caleb Newquist
October 29, 2009

Maybe! The opportunity to take advantage of the current credit expires on November 30th. Luckily, the brain trust known as the U.S. Senate is all over this and is going to get a new plan in place come hell or high water.
The best part is that under the Senate’s latest proposal, the credit will now be “extended beyond first time buyers,” as reported by Bloomberg.
So, if you’ve lived in your current shack for five years and you’re looking to upgrade, you’ll be eligible for a $6,500 credit. First time homebuyers will still receive an $8,000 The new extension of the credit would be available for home purchases under contract by April 30, 2010 and close by the end of June.

But that’s not all! Under the new plan, the credit would be available for individuals earning $125k up from $75k and couples earning $250k up from $150k. Presumably more McMansions will get purchased this way.
More good news: this thing has bipartisan support:

Senate Minority Leader Mitch McConnell, a Kentucky Republican, agreed that most lawmakers support the unemployment and homebuyer measures. “We’re not that far away from an agreement,” he said earlier today.

Who knew it was possible? The problem is, not everyone thinks this is a good idea, including Joe Kristan over at Tax Update Blog:

It’s nice to know that a majority of the millionaires in the Senate think it’s wise to spend $40,000 to $80,000 of our money for each new home sale caused by the credit, even though the credit is rife with fraud.
The credit extension would be tied to an extension of unemployment benefits; the provisions may still be changed, and it has to be reconciled with a House bill that has no homebuyer credit provision.
If they extend it this time, does anybody believe they won’t try to extend it again every time it is set to expire?

And Tax Girl:

Does that cover everybody? Does everyone get a tax credit now? Cause we wouldn’t want to be handing out that free money and leave someone out.

And Don’t Mess with Taxes:

My concern is that if people need the credit to get into a first home or move up to a larger one, are they getting in over their heads in debt? And isn’t that what got us into the economic trouble we’re in now?

Call us party poopers but we’ll go with accountants over the U.S. Senate any day.
Homebuyer Credit Extension a Done Deal? NOL Carrybacks Enhanced? [Tax Update Blog]
First Time Homebuyer’s Credit Likely Expanded [Tax Girl]
Reconfigured home buyer tax credit [Don’t Mess With Taxes]
Also see: Lawmakers Find A Way To Outfox 4-Year Old Tax Cheats [DB]

Fraud

Judge, Possibly Fearing a TP’d House, Denies Bail for Madoff CFO

Caleb Newquist
October 29, 2009

Poor Frank DiPascali. The man’s name will be forever connected to largest Ponzi schemer (with, allegedly, the smallest penis) in history and he feels terrible about that.
Looks like DiPascali, who was a “CFO” in Ponzi World but in reality was probably just the best liar, will remain eating his meals with a spork until the end of his days.
His attorneys were trying bust the guy out so he can help investigators find a new Madoff cohort to put front and center but a judge denied bail yesterday despite a boatload of conditions:

Mr. DiPascali’s failed bail attempt came despite a new proposal presented by defense lawyers and prosecutors that included a $10 million bond, co-signed by nine people, including members of the DiPascali family, and the pledge of about $2 million in personal property. The new proposal required Mr. DiPascali to wear an electronic device that would plot his location by satellite. It also barred him from leaving home without an escort from the Federal Bureau of Investigation, except in a medical emergency.

Maybe the judge isn’t big on satellite technology but with Halloween on Saturday, it could have been a decision made on a more personal level. Those Madoff victims are a touchy bunch.
Court Denies Madoff Aide’s Request for Bail [NYT]

Deloitte

Lawsuit Against Deloitte Gets New Life

Caleb Newquist
October 29, 2009

Deloitte has managed to keep its name out of the news lately, except for breaking ground at its version of Animal House and releasing the number of employees it has on LinkedIn.
On a more litigious note, Deloitte has managed to keep its name out of well publicized lawsuits, whether they relate to Madoff feeder funds or subprime lenders. Until now, that is.

According to AM Law Litigation Daily, a judge in Seattle has allowed a revised lawsuit to proceed that lists “Washington Mutual officers and directors, underwriters, and the auditing firm Deloitte & Touche” as defendants.
The revised lawsuit was trimmed down to a “concise” 267 pages from the original 388 that the judge described as “verbose” and “disorganized”.
The plaintiffs allege that “offering documents contained “materially misstated financial returns for WaMu” and that “offering documents contain false or misleading statements as to WaMu’s internal controls”.
Specifically — without getting into too many gory details — the plaintiffs say that WaMu did not have a sufficient loan allowance in a “manner commensurate with the quality of its home mortgage products” and that their “Loan Performance Risk Model” that determined the allowance, was basically bunk.
Deloitte, as the auditors, was supposed to call WaMu on all this shoddy work and the plaintiffs aren’t satisfied with the job they did. Unfortunately, this all amounts to a pretty major (and long) headache for Deloitte but their attorneys at Latham and Watkins are probably grateful.
Let us be the first to welcome Deloitte back to the high-profile litigation party.
Second Time’s the Charm for Plaintiffs in Washington Mutual Complaint [AM Law Litigation Daily via Law Review]
Wamu.pdf

Preliminary Analytics

Preliminary Analytics | 10.29.09

Caleb Newquist
October 29, 2009

• Doing deals between angry parties – ‘Shouting Is Good – or at Least Not Necessarily Bad’ [BBC]
• Economy in U.S. Expands for First Time in More Than a Year – There is the unemployment thing… [Bloomberg]
• Galleon paid banks millions for ‘edge’ – $250 mil just last year. [FT]
• Accountant Sentenced to House Arrest in UBS Tax Case – Stephen Rubenstein is the first UBS scofflaw to be sentenced. [AP via NYT]
• Ask the taxgirl: Donating an Engagement Ring – Somebody wants it. [Tax Girl]

Review Comments

Review Comments | 10.28.09

Caleb Newquist
October 29, 2009

• Auditing Firms Should Pay Closer Attention to Spreadsheets – That’s according to a person who is no an auditor. [Web CPA]
• McKinsey Begins Internal Probe in Galleon Case – According to McK, this their first problemo with securities law violations. Traditions are meant to broken anyway. [WSJ]
• House Plans to Roll Out Its Health Care Bill on Thursday – Please end this. [Prescriptions/NYT]
• Picard says $21.2bn lost in Madoff schem – That’s not so bad. [FT]
• Sam Zell: ‘With some reasonable luck,’ Tribune Co. will exit bankruptcy in early 2010 – We’re disappointed, Sam. [CT]
• CIT Takes $4.5 Billion Loan, Shunning Icahn Offer – CIT “wasn’t confident in the solidity of Mr. Icahn’s proffering”. [DealBook]

Five Really Simple Facts About the CPA Exam

Adrienne Gonzalez
October 29, 2009

Editor’s Note: Want more JDA? You can see all of her posts for GC here, her blog here and stalk her on Twitter.
The CPA exam is full of myth and legend due in large part to the fact that you’re not supposed to discuss what’s actually on it. Of course everyone does and rumors fly around firms (“I heard IFRS is being tested in simulations…” “Tim in tax was thrown out of Prometric for wearing a hoodie to the exam…”) until they’ve been transformed into CPA exam nightmare tales based entirely in fiction. Knock it off, kids, let’s stick with the facts.

Of the two communications, only one is graded. Lucky you, you don’t know which one. Candidates get all bent out of shape over the communications but all you have to do is write a standard business letter. You don’t even have to answer the question correctly, you just have to stay on topic! Easy ten points, don’t blow it and do the communications first.
The research portion is only worth 1 point so if you don’t have time, blow it off. Yes, I said blow it off. If you’re crunched to complete a simulation, this is the last thing you want to spend your time on. Skip it unless you have lots of time.
The CPA exam is NOT graded on a curve, your score is not a percentage and is on a “plus point” basis. This means if you don’t know an answer, guess. Never leave a question blank, everyone starts with 0 points and earns up from there. More difficult MCQ earn you more points when answered correctly and no, the AICPA doesn’t reveal the secret psychometric formula that it uses to determine this.
There are no “easy” multiple choice. You only get moderate or difficult. Every exam starts moderate and MCQ testlets will get more difficult if you are doing well or stay the same if you’re bombing. So yours could be moderate, difficult, moderate or moderate, difficult, difficult or if you really didn’t study: moderate, moderate, FAIL. Sorry, made that last one up. You get the point.
14 – 16% of the exam isn’t even graded. Outrageous as it may seem, the AICPA loves pre-testing things that you have never learned just to scare the shit out of you. Actually, they’re testing new questions and gauging candidate reaction so good for you if you know XBRL but sorry, you’re not getting any credit for it. If you get bizarre MCQ, now you know why.
Thanks to my day job, I guess I’m some sort of CPA exam expert so I encourage Going Concern readers who are interested in CPA exam content to get in touch with us and let us know if there’s something you’d like to see us cover on this subject. Good times, kids, good times!

Rumor Mill: Ernst & Young’s Latest Attempt to Boost the Morale

Caleb Newquist
October 29, 2009

Not feeling hot about your career lately? Needing some love from TPTB? Apparently one E&Y office is taking a stab at a solution. Not a Starbucks card. Not a year’s subscription to the jelly-of-the-month club. And sorry, Christmaskah is still cancelled. No, this is a completely arbitrary way to win your love.
According to a tip we received, in the Dallas office, all positions that are manager and above are now known as “executives”. As if you didn’t need another reason to stick around until making manager.
Despite the much needed kick-start this may give to the psyche of managers, won’t this cause confusion among the staff?
Manager, director, partner. Simple. If everyone is considered an “executive” the whole hierarchy might become meaningless. And if there’s no hierarchy, we very well may have chaos.
The other problem is that some people take their title very SERIOUSLY. Ever called a “senior manager” a “manager” by mistake? You haven’t known the wrath of an unmerciful, passive-aggressive God if you haven’t. Now if you accidently forget that someone is also an “executive”…Watch out.
It’s not entirely clear if this is a firmwide thing so run it by Steve-o tonight or discuss your feelings on this latest attempt to rally the troops (some of you anyway) in the comments.

Lesson of the Day: When Requesting a Bogus Tax Refund, Avoid an Excessive Amount

Caleb Newquist
October 28, 2009

It makes sense that financial crimes increase during a recession. People get desperate and they start taking crazy-ass chances. Crazy-ass chances like, let’s request a tax refund for a couple hundred million dollars.
Justice.gov:

Papers filed in the cases say the defendants prepared tax returns requesting a total of $562.4 million in bogus refunds. One defendant – Dick Jenkins, of Heber City, Utah – allegedly holds himself out as a CPA and requested a $210 million fraudulent refund for one customer. The Internal Revenue Service (IRS) catches the vast majority of the bogus tax returns and blocks the claimed refunds…Altogether, according to the IRS, redemption scheme participants (including customers of the defendants in the seven lawsuits filed this week) have requested a total of $3.3 trillion in fraudulent refunds.

According to the AP, “Officials say the tax preparers often falsely tell customers the government maintains secrets accounts of money for its citizens that can be accessed by filing false returns.”
So your tax preparer tells you that by filing a fake tax return you’ll be able access a secret pile of money. Is this remotely believable? Believable to the point of saying, “Excuse me, Internal Revenue Service, you owe me $210 million”?
Some discretion, people.
DOJ Charges Seven With Seeking $562m of Bogus Tax Refunds [TaxProf Blog]
Feds file suits over $562 million bogus tax claims [AP]

Uncategorized

Your 2009 Halloween Costume: Zombie Phil Mickelson

Caleb Newquist
October 28, 2009

It’s only three days until Halloween and most of you are probably procrastinating on costume ideas. Fortunately we’ve come up with an idea that will incorporate your profession/firm and maybe your love of golf.
Inspiring examples, after the jump

You can go black:

Or white:

Small problem: The only place that we’ve been able to find a KPMG golf hat is on eBay and the auction doesn’t end for four days. Good news is that’s going for grand total of $0.01. So if you don’t already own one of these beauties, it’ll have to wait until next year.

EY
On Campus

Memo to E&Y’s Steve Howe: Choose Your Ice Breaker Carefully

Caleb Newquist
October 28, 2009

If you’ve got nothing going on tonight and you’re in the Chapel Hill, NC neck of the woods, Steve Howe, E&Y’s Americas Area Managing Partner will be speaking at UNC tonight starting at 5:30. Don’t worry, it’s scheduled to end at 7:00 sharp so you’ll have plenty of time to get home in time for baseball or whatever else is on TV these days.
We’re mostly curious how Steve-o will break the ice with the audience, considering it’s been an awkward moment for some of his fellow partners in the past. We’re confident he’ll be fine though, especially since he’s not phoning in the speech and leaving a voicemail for everyone.
It’s not clear if there will be a Q&A, so if you have questions that you’d like to ask Steve-o, kindly leave them in the comments and we’ll pass them along.
Dean’s Speaker Series – Steve Howe, Americas Area Managing Partner of Ernst & Young [UNC Kenan-Flagler Business School]

Uncategorized

Accounting Rulemakers Already Talking Plan B on Fair Value

Caleb Newquist
October 28, 2009

Sounds like Bob Herz and Sir David Tweedie are phoning it in with regards to fair value rules.
Herz and Tweedie and their respective accounting wonks met in Norwalk, CT on Monday and they’re all but admitting that there’s no chance that they’ll get on the same page:

At a joint meeting in Norwalk, Connecticut on Monday, members of the London-based International Accounting Standards Board (IASB) and U.S. Financial Accounting Standards Board (FASB) sparred over whether fair value, or “mark-to-market,” accounting rules should be expanded to a broader array of financial assets, such as loans and deposits.
In a move opposed by the banking industry, the FASB has proposed that all financial instruments be valued at market levels, while the IASB has proposed to have those assets valued at “amortized cost,” which would mostly provide information about expected cash flows.
“If FASB and IASB can’t agree on mixed model or full fair value model … the next best thing is something to move between the two,” Sir David Tweedie, chairman of the IASB, said on Monday…”By the end of 2010… if we can’t get it together, we should be appreciably together,” Tweedie said.

Plan B is already in full effect! Instead of one fair value rule, the two standard setters will provide a “presentation for fair value for more financial assets on corporate balance sheets so that investors would be able to quickly reconcile numbers in U.S. Generally Accepted Accounting Principles (GAAP) or International Financial Reporting Standards (IFRS).”
Some board members are worried that this approach may be too confusing, however. Confusing financial statements? That’s only a problem for average investors. No biggie.
Oh, well. We know 2010 is coming up fast and those politicians get impatient when the bank lobbyists are threatening to cut off the money. Thanks for trying guys. You did your best.
Accounting boards try to reconcile fair value views [Reuters/Emily Chasan]

Preliminary Analytics

Preliminary Analytics | 10.28.09

Caleb Newquist
October 28, 2009

• GMAC Asks for Fresh Lifeline – Third round of bailout aid should be the charm. [WSJ]
• Ex-Chief of AMD Is Linked to Galleon – So far, Hector Ruiz isn’t in any trouble but this certainly doesn’t look good. [WSJ]
• World Series Games Add $15.5 Million Each to NYC, Agency Says – Much of which goes to Billy’s and Stan’s. [Bloomberg]
• Pitchfork Watch: Couple Charged With Torturing Suspected Mortgage Fraudsters – Mortgage brokers, this is your warning. [Naked Capitalism]
• Madoff victims lobby judge to deny Frank DiPascali Jr. bail – Surprise. [NYDN]
• It may be BYOB as fewer firms plan holiday parties – Roll in with the High Life. [Reuters]

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