Accounting News Roundup: PwC Dealt a Blow on Penn. Healthcare Bankruptcy Ruling; Zipcar Going Public; Altria Gets Smoked by IRS | 06.02.10
PwC loses ruling on big Pa. healthcare bankruptcy [Reuters]
We’re a little late to the party on this one – holiday and all – but we’ll get you caught up. Allegheny Health, Education and Research Foundation (“AHERF”), a large Pittsburgh hospital system, sought Chapter 11 bankruptcy protection in 1998 with over $1.3 billion in debt. Unsecured creditors of AHERF accused Coopers & Lybrand of “conspiring with AHERF officials in the 1996 and 1997 fiscal years to hide the increasingly dire financial health of the Pittsburgh-based system.”
In 2007, a District Court in ruled that the creditors could not recover any damages from PwC on behalf of AHERF due to “a legal doctrine governing cases of equal fault, concluding AHERF was at least as much at fault as PwC.”
The Third Circuit Court of Appeals finally got the case on their docket and unanimously overturned the ruling saying that PwC could be liable if they had “not dealt materially in good faith with the client-principal.” The Third Circuit also disagreed with the lower court’s finding that misstated financial statements could have a short-term benefit to AHERF, saying “‘a knowing, secretive, fraudulent misstatement of corporate financial information’ cannot benefit a company.”
Zipcar Files for a $75 Million I.P.O. [DealBook]
The car-sharing company announced yesterday that it has filed for a $75 million offering to pay off debt and pay for general expenses as it plans to expand its business in the U.S. and Britain. DealBook reports that the company, founded in 2000, has lost money every year and warned in its S-1 filing that it might not become profitable as it incurs significant expenses in the expansion.
Man accused of ‘bomb bag’ threat at IRS office [SF Chronicle]
Lawrence Rios was charged yesterday for allegedly threatening an IRS employee after he handed the woman a note that read “bomb bag” and patted his backpack, insinuating that he had more than trail mix in there, in August of last year. This occurred after the employee had been assisting him for 10 minutes. We’d hate to see how he reacts at the post office.
SEC Is Boosting Scrutiny of Offshore Accounting, Fagel Says [Bloomberg BusinessWeek]
Shoddy accounting practices that were/are rampant in the U.S. – revenue recognition and outright fraud – have not been rooted out offshore, so the Commission is looking to tighten up the controls and practices of foreign subsidiaries. Marc Fagel, head of the SEC’s San Francisco office told Bloomberg, “They’re not doing that so much in San Jose, but they may have a Hong Kong office where they haven’t figured out they’re doing that, or that it’s a problem.” The San Fran office is looking to add a dozen attorneys and accountants to help with the Commission’s efforts.
Altria to pay $971 million in taxes, interest to IRS [Reuters]
The payment settles a dispute between the company (aka Philip Morris) and the Service over its 2000 to 2003 tax returns.