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Oh For God’s Sake, Bank of America’s Former CFO Is Being Appointed Chairman of a Council That Advises the FASB

Chuck Noski was CFO of BofA for only one year and is still a vice chairman at the bank and is probably a very competent individual but Jesus, has the Financial Accounting Foundation no sense of the reputation of this particular bank? Further, have they heard nothing about the collective reputation of banks these days?


Guess not:

Mr. Noski’s appointment was announced by John J. Brennan, chairman of the Board of Trustees of the Financial Accounting Foundation (FAF). The FAF is responsible for the oversight, administration, and financing of the FASB and its counterpart for state and local governments, the Governmental Accounting Standards Board (GASB).

“With his breadth of experience in corporate finance across a range of industries, Chuck Noski will bring to the FASAC a deep understanding of the complex issues facing the FASB as it seeks to serve the best interests of all those who use, prepare, and audit financial statements,” Mr. Brennan said. “We are very pleased to welcome him as the new FASAC chairman.”

At least the ABA will have a direct line for their hate mail now.

[via FAF]

Berkshire Hathaway: Wall St. Journal Is Wrong About Our Taxes on Bank of America Deal

Last week, folksy octogenarian (81 years today!) billionaire Warren Buffett announced that he was going to invest $5 billion in Bank of America. Some are questioning The Oracle’s intentions with this investment but considering WB came up with the idea in a place where all good ideas originate – the tub – it’s plausible that this investment will turn out okay for Berkshire shareholders (isn’t that the point?).

Regardless, some don’t think a guy who says that he doesn’t want to be “coddled” and needs – nay, WANTS! – to pay higher taxes shouldn’t be throwing around money and should just put his money where his Blizzardhole is. Accordingly, The Wall St. Journal published an editorial today accusing Buffett of being a little dodgy when it comes to Berkshire’s tax liability as it relates to his BofA investment.

Mr. Buffett’s recent decision to invest in Bank of America represents another tax-avoidance triumph for the Berkshire chief executive. U.S. corporations are subject to a top federal income tax rate of 35%, the second highest in the world. But the Journal’s Erik Holm notes [Ed. note: Thanks for linking!] that Mr. Buffett and the Berkshire bunch won’t pay anything close to that on their investment in BofA preferred shares.

That’s because corporations can exclude from taxation 70% of the dividends they receive from an investment in another corporation. This exclusion is intended to prevent double- or even triple-taxation as money is earned by one company, paid to another company and then ultimately paid out to shareholders. The policy makes sense; we only wonder why the exclusion isn’t 100%.

With the 70% exclusion for Mr. Buffett and his fellow shareholders, Berkshire will enjoy an effective tax rate of 10.5% on the $300 million in dividends it will receive each year from Bank of America.

So, a 10.5% effective rate. Not bad, right? Well, Berkshire says it’s wrong and issued a brief press release to rebut the Journal’s op-ed account and not so subtly suggests that they bone up on tax law:

An editorial in today’s Wall Street Journal says that “Berkshire Hathaway will enjoy an effective tax rate of 10.5% on the $300 million in dividends it will receive each year from Bank of America.” That statement is incorrect.

Virtually all of the stocks that Berkshire owns are held in its property-casualty subsidiaries, and that will be the case with the Bank of America preferred.

The tax treatment for dividends paid by U.S. corporations to property-casualty insurance companies was materially changed by a law passed in 1986. The changes were described in detail in the chairman’s letter included in Berkshire’s 1986 annual report.

A minor change in rate was made in 1993. Since that time dividends that insurers receive from U.S. companies incur an effective tax rate of 14.175%. For Berkshire, that rate will apply to dividends it receives from Bank of America.

So, in other words, suck it editorial board. If you know Buffett like you should know him, then you know that if he could save that 3.675%, he would.

Buffett’s Latest Tax Break [WSJ]
Berkshire Hathaway Inc. News Release [Business Wire (a Berkshire Hathaway Compay!)]

What Do We Make of All These Non-Accountant CFOs?

John Carney points out that Bank of America, JP Morgan and Wells Fargo have all appointed new CFOs recently that are not accountants. It harkens him back to a time when another bank made a similar change.

Of course Carney is talking Lehman Brothers and Erin Callan. Oh and Ian Lowitt too. Both served as Lehman’s CFO prior to the bankruptcy. Funny thing – Francine McKenna wrote a post about the problematic situation of having a CFO with no accounting experience three months before Lehman went bankrupt. But BofA, JPM and Wells aren’t Lehman are they? GAAP is really NBD, right? [CNBC]

A Few People Are Not Satisfied with the $624 Million Countrywide Settlement

And, unfortunately for Bank of America and KPMG, that could mean digging through the couch cushions.

Several large institutional investors have rejected a court settlement where Countrywide Financial Corp. had agreed to pay $600 million to a number of national pension funds. Those pulling out of the agreement include BlackRock Inc.; the California Public Employees Retirement System, or Calpers; T. Rowe Price Group Inc.; Nuveen Investments Inc.; and the Maryland State Retirement and Pension System, according to a document from the suit filed in U.S. District Court in Los Angeles. The investors decided the settlement, initially agreed to last May, wasn’t enough and will seek their own terms with the mortgage originator and its current owner Bank of America Corp., as well as Countrywide’s auditor KPMG LLP. KPMG had committed another $24 million to the settlement.

In typical HofK fashion, the firm didn’t bother commenting for the Journal’s story however BofA managed to express their disappointment, “It is unfortunate that some investors chose to opt out of what we believe is a fair and equitable agreement to settle these issues.” Right. Because the likes of BlackRock and Calpers should be tickled pink with the pleasure of splitting $624 million with dozens of other investors.

Big Investors Refuse Countrywide Settlement [WSJ]

Accounting News Roundup: Brits Investigating Services KPMG Provided BAE Systems; How Many Times Did Harry Reid Vote to Increase Taxes?; PwC Scoffs at ‘Big 5’ Idea | 10.25.10

BofA Finds Foreclosure Document Errors [WSJ]
The Charlotte, N.C., lender discovered errors in 10 to 25 out of the first several hundred foreclosure cases it examined starting last Monday. The problems included improper paperwork, lack of signatures and missing files, said people familiar with the results. In certain cases, information about the property and payment history didn’t match.

KPMG investigated over BAE audit [Accountancy Age]
The investigation by the Accountancy and Actuarial Discipline Board (AADB) focusBritish Aerospace/BAE Systems between 1997 and 2007, looking at commissions paid by BAE to subsidiaries, agents or other companies.

Any professional advice, consultancy or tax work provided to BAE by KPMG during that period will also come under the microscope in relation to commission payments. The investigation will focus on commissions connected to three legal entities: Red Diamond Trading; Poseidon Trading Investments; and Novelmight.

Key Tax Breaks at Risk as Panel Looks at Cuts [WSJ]
The tax benefits are hugely popular with the public but they have drawn the panel’s focus, in part because the White House has said these and other breaks cost the government about $1 trillion a year.

At stake, in addition to the mortgage-interest deductions, are child tax credits and the ability of employees to pay their portion of their health-insurance tab with pretax dollars. Commission officials are expected to look at preserving these breaks but at a lower level, according to people familiar with the matter.

Harry Reid Voted to Raise Taxes ‘Only’ 51 Times [TaxProf Blog]
Apparently there was some talk that it was actually in the ballpark of 300.


Reflections on the Basel Committee Principles for Enhancing Corporate Governance [Marks on Governance/IIA]
News you can use.

Business leaders press administration for repeat on tax break [On the Money/The Hill]
The National Association of Manufacturers and other groups argue allowing companies to “repatriate” money earned abroad to the U.S. at a lower tax rate could spur the economy by providing businesses with a burst of cash they could invest in their companies.

“The business community is looking at ways to jumpstart the economic recovery and here is one you could do without increasing the deficit,” Dorothy Coleman, vice president of tax and domestic economic policy for the manufacturers.

PwC slates FRC idea to create Big Five [Accountancy Age]
Paul Woolston, head of public sector assurance at PwC, criticised the Financial Reporting Council’s suggestion the Audit Commission be used to create a fifth player in the audit industry, currently dominated by the Big Four – PwC, Ernst & Young, Deloitte and KPMG.

“It is at least ironic that the FRC has said what it has, in that the Audit Commission itself has operated with a large monopoly,” he said.

“It is odd that the FRC is concerned about any one organisation having the market share.”

SEC Aims to Streamline Complaint Process [WSJ]
The launch is a step in the agency’s efforts to avoid bottlenecks and duplication in the handling of complaints, which traditionally have been fielded by individual SEC offices and filed there. Complicating matters is the variety of forms in which such complaints come—mail, phone calls, emails and interviews.

“This process is going to ensure that it’s all transferred into a structured format so that it can be more easily searched and analyzed,” Robert Khuzami, director of enforcement, said in an interview.

“We will have all of it in one place, searchable, which will do a lot for us in the long run,” he said.

Thus Far under Obama, the Only Individuals Paying Higher Taxes Are Smokers and Tanners, But They May Have Company Soon [Tax Foundation]
Jersey Shore quips go here.

Accounting News Roundup: Bank America Lands a CFO; FASB, IASB Can’t Guarantee Convergence; Maine to Tax Medical Marijuana | 04.14.10

Bank of America Names an Outsider as CFO [WSJ]
Charles Noski will be the new Bank of America CFO, effective May 11th. He most recently was the CFO at Northrup Grumman, which he left in 2005 and prior to that held the same position at AT&T. He has also served as a advisor to Blackstone Group and is currently a director at Morgan Stanley and Microsoft. It is reported that he will give up his director seat at competitor Morgan Stanley. Noski began his career at Haskins & Sells (now Deloitte) for seventeen years and was a partner.

This ends BofA’s quest to land a CFO after former finance bigwig Joe Price moved into a new role under new CEO Brain Moynihan back in January.


IASB says “no guarantee” of full US accounting convergence [Accountancy Age]
The FASB and IASB, try as they might, have announced that they simply cannot guarantee that they will pull off 100% unadulterated convergence. The two boards have struggled to get their cerebral minds together on a number of “important technical issues” and are holding out for the possibility that they may not resolve any of their remaining differences.

The two boards issued a statement which warned, “Although our recent experiences with joint meetings show that we have been able to resolve differences on several projects, there is no guarantee we will be able to resolve all, or any, of our differences on this project.” The two cite “different imperatives that pushed our development timetables out of alignment,” in the struggle for converging the two sets of rules. While the FASB and IASB are warning that accounting rule convergence may be impossible, the statement indicates that the two still aim to finalize their work by the mid-2011 deadline.

Medical pot users to pay sales tax [Bangor Daily News via Tax Policy Blog]
The Pine Tree State will taxing its medical green that is sold at state-sanctioned dispensaries. The Maine Revenue Service had argued that since marijuana is currently issued for medicinal purposes, that the it should be treated as a prescription drug and thus, not taxed. However, since a prescription isn’t necessary to obtain medical marijuana, Maine lawmakers disagreed and ultimately decided to administer a levy on the sale of state-issued grass.

Job of the Day: Bank of America Needs a CFO But Not Just Anyone Because This Is a Pretty Major Gig

Brian Moynihan is shopping around for a CFO and he needs a good one ASAP. The Post reports that Moynihan will go with someone from outside BofA so that means you’ve got a shot! Now before you get ahead of yourself and think you’re the BSD to turn this ship around, consider some of your responsibilities.

You’ve got to be the numbers jockey for the biggest bank in the known universe that is constantly being given the stink-eye by Tim Geithner, Barack Obama, Ken Feinberg, et al., plus an angry American populous that will not hesitate to call you names and picket your house. Oh, and you may or may not have to move to Charlotte. Maybe that’s not a sticking point for some of you but if you don’t like NASCAR then we’d suggest passing on this one.


See? Trying to come up with a good and willing candidate will not be an easy task. After all, getting someone to takeKen Lewis’ chair wasn’t exactly a piece of cake and CFO is actually a real job.

Naturally, soon-to-be former KPMG Chairman Tim Flynn comes to mind but Moynihan may want to go with some with a little less sweater vesty and he doesn’t really have the mane to match. Former Lehman CFO Erin Callan is busy hanging out with firefighters and Andy Fastow is still unavailable. Better put a call in to Robert Half.

Serious search party [NYP]
Earlier:
Ex-Bank of America CFO Is in Cuomo’s Crosshairs