Whistleblower Confirms BP Gripes of McGladrey’s ‘Astronomical’ Fee for Audit of Deepwater Payments
Back in October, we learned that BP was upset with McGladrey over the firm's audit of BP's 2010 Deepwater Horizon spill victim compensation program. The problem? Money, of course: With audit costs allegedly running nearly tenfold over budget and no audit in sight, BP last week asked a federal court to force the claims administrator […]
Accounting News Roundup: GM Still Lacks Effective Internal Control System; The Ten Highest State Income Tax Rates; How to Know When Your Boss Is Lying | 08.20.10
GM filing warns on reporting [Detroit Free Press]
This may come as a shock but General Motors, despite filing paperwork for its IPO, admits that they still don’t have effective internal controls.
“[I]n regulatory filings about its upcoming initial public offering, GM warned potential investors that ‘our internal controls of financial reporting are currently not effective.’
Experts are divided on whether the warning — one of about 30 risk factors identified by GM in a document describing a planned sale of shares — is just an obscure accounting matter or a red flag that taints GM’s financial reporting
The 10 Highest State Income Tax Rates For 2010 [Forbes]
If you’re single and make $200k or $400k and married in Hawaii, you get dinged for 11%, the highest ranking state on the list. Dark horse Iowa comes in at #5 gets 8.98% of taxable income over $64,261. That’s above New Jersey and New York tied at #6.
Transocean accuses BP of withholding data on Deepwater Horizon and oil spill [WaPo]
Just when you thought the ugliness was slowing down (at least in the media coverage), ” Even as they work together to kill the Macondo well in the Gulf of Mexico, the oil giant BP and the deep-water drilling rig company Transocean are in an increasingly bitter battle over what went wrong on April 20 to trigger America’s worst oil spill.
The conflict flared Thursday when Transocean fired off a scathing letter accusing BP of hoarding information and test results related to the Deepwater Horizon blowout that killed 11 people, including nine Transocean employees. Signed by Transocean’s acting co-general counsel, Steven L. Roberts, the letter says that Transocean’s internal investigation of what went wrong has been hampered by BP’s refusal to deliver ‘even the most basic information’ about the event.
‘[I]t appears that BP is withholding evidence in an attempt to prevent any entity other than BP from investigating the cause of the April 20th incident and the resulting spill,’ the letter states, and it demands a long list of technical documents and lab tests.”
How to tell when your boss is lying [The Economist]
Apparently cursing is a good sign.
Koss reports smaller quarterly loss on 14% sales decline [Milwaukee Journal Sentinel]
The company lost $423,450 for the six months ended June 30th. They spent $1.12 million on legal fees related to Suzy Sachdeva.
Accounting News Roundup: How Is Deloitte Like HP?; Moss Adams’ Bunting Appointed to IIRC; Small Businesses Remain Pessimistic | 08.10.10
U.S., BP Near Deal on Fund [WSJ]
“The Obama administration and BP PLC are close to a deal to use future revenues from the oil giant’s Gulf of Mexico operations to guarantee its $20 billion cleanup and compensation fund, a move that would give both sides an incentive to continue production in the Gulf, scene of the U.S.’s worst-ever offshore oil spill.
The Justice Department and BP said Monday they had completed talks to establish the fund, which is designed to cover damage claims from residents and businesses hurt by the spill and clean-up efforts by state and local governments. BP paid $3 billion into the fund ahead of sch Hurd, Deloitte and Tone At The Top [Re: The Auditors]
“The auditors serve the role of independent watchdog, guardian of shareholders interests in the capital markets . Their relationship to management should be adversarial – not friendly, cozy and comfortable. They are hired and fired by the Board, also supposedly independent. Given the way auditors are compensated, directly by the companies they judge, they have a difficult job. Their regulators guard those guardians and are supposed to make sure they do it.
So how does a Vice Chairman, one of those guardians, “dupe” his fellow partners and professional colleagues more than three hundred times, as Deloitte’s lawsuit against him alleged?
Deloitte has a culture of non-compliance.”
Oracle Chief Faults H.P. Board for Forcing Hurd Out [NYT]
Meanwhile, Larry Ellison wrote an email to the Times, “The H.P. board just made the worst personnel decision since the idiots on the Apple board fired Steve Jobs many years ago. That decision nearly destroyed Apple and would have if Steve hadn’t come back and saved them.”
Moss Adams Partner Bob Bunting Helps Create Reporting Standards for Corporate Sustainability [Moss Adams]
“Bob Bunting, chairman of the Moss Adams LLP International Services Group and president of the International Federation of Accountants (IFAC), has been appointed to the steering committee for the newly formed International Integrated Reporting Committee (IIRC). The Prince of Wales’s Accounting for Sustainability Project (A4S) and the Global Reporting Initiative (GRI) announced the formation of the IIRC today.
‘In addition to the annual reports publicly listed companies are required to file, an increasing number of companies are voluntarily producing corporate social responsibility or sustainability reports,’ Bunting said. ‘It’s an honor to be tapped for this role and to contribute input to developing a single standard for these reports. It’s a natural extension of the work I’ve been involved with at IFAC to help drive adoption of a single set of global standards for accounting, auditing, and professional ethics. It’s also a pleasure to be working alongside so many thought leaders in the world of standards setting and corporate sustainability.’ ”
Small business optimism sags in July [Reuters]
“Small business owners became more downbeat in July as expectations of weaker economic growth in the second half of the year reinforced a reluctance to hire, according to a survey published on Tuesday.
The National Federation of Independent Business (NFIB) said its optimism index fell 0.9 point to 88.1 in July.
‘Virtually all of the decline was due to weaker expectations for business conditions six months from now,’ said William Dunkleberg, the group’s chief economist.”
SEC Charges Seattle-Area Company and Former CFO With Phony Accounting of Infomercial Sales [SEC]
When did the SEC start putting photos up of the Regional Directors?
The SEC alleges that Karl Redekopp, the former CFO of International Commercial Television Inc. (ICTV), turned millions of dollars of quarterly losses into profits by falsely accounting for ICTV’s sales of the Derma Wand, a skin care appliance that purports to reduce wrinkles and improve skin appearance. Redekopp fraudulently recognized revenue before the Home Shopping Network had actually sold or delivered the product to viewers. He also improperly recognized revenue before a free trial period offered by the company had expired, and failed to reverse revenue from products that had been returned. Redekopp’s misconduct caused the company to falsely report millions of dollars in excess revenue in 2007 and 2008.
” ‘Redekopp violated fundamental principles of accounting to fraudulently boost ICTV’s bottom line and conceal its true financial health from investors,’ said Marc J. Fagel, Director of the SEC’s San Francisco Regional Office. ‘Unfortunately, ICTV’s auditors turned a blind eye to the company’s financial irregularities and failed to fulfill their role in investor protection.’ ”
Accounting PACs spread the wealth [Web CPA]
“Political fundraisers in the accounting profession began shifting their largesse toward congressional Democrats after they won control over both the House and the Senate four years ago.
But now with Tea Party activists screaming for the heads of incumbents and Republican candidates showing strength across the country, is the accounting profession resurrecting its overwhelming partisan support for the GOP in time for the mid-term elections?”
Flight Attendant at JFK Pulls Emergency Chute, Flies Coop [NBC New York]
Steve Slater was hit in the head by some luggage, was cursed at by the passenger who refused to apologize for it and Slater then proceeded to flip out. He cursed at all the passengers over the PA system on JetBlue Flight 1052, grabbed two beers and slid down the emergency chute after inflating it.
He was later arrested at his home in Queens, “Police sources said that when authorities found Slater he seemed to be in the midst having sexual relations.”
Accounting News Roundup: Signs That You Should Quit Your Job; District Court Issues Order in Wesley Snipes Tax Case; LarsonAllen Moves Into the Northwest | 08.06.10
BP Completes Cementing Macondo Oil Well From Top [Bloomberg]
“BP Plc completed a cement plug at the top of its Macondo well in the Gulf of Mexico, sealing off the source of millions of gallons of oil spewed into the sea after a drilling rig exploded in April.
The procedure completes the so-called t stage for BP is to finish a relief well to inject cement at the bottom and ensure there’s no leakage inside the 13,000-foot-long (3,962 meters) well bore beneath the seabed, National Incident Commander Thad Allen said yesterday.”
Ten Signs It’s Time to Leave Your Job: The Finance Edition [FINS]
Check yourself for some of these symptoms: “You’ve been holding back from voicing your grievances.”; “You have no clue where the company is headed.”; “You start to believe you can’t do better.”
And that’s just in the first five listed.
Altus completes PricewaterhouseCoopers deal [Bloomberg BusinessWeek]
PwC sells their real estate appraisal management for, what we can only assume to be, a decent chunk of change.
H&R, Jackson Hewitt shares fall on new IRS rule [Reuters]
“Shares of top two U.S. tax preparers H&R Block Inc (HRB.N) and Jackson Hewitt Tax Service Inc (JTX.N) fell Thursday on the Internal Revenue Service’s decision to eliminate debt indicator for tax-refund loans.
On Thursday, the IRS said starting with next year’s tax filing season it will no longer provide tax preparers and associated financial institutions with ‘debt indicator,’ which is used to facilitate refund anticipation loans (RALs).”
PKF Pacific Hawaii completes purchase of Grant Thornton Honolulu office [Pacific Business News]
Name goes official on Monday. Here’s our original report from back in May.
Two UHY LLP Partners Recently Named to Prominent Standard-Setting Implementation Groups [Market Wire]
“The national CPA firm of UHY LLP announced today the recent appointment of Houston-based partner Ana Denena to the International Accounting Standards Board’s (IASB) Small and Medium-sized Entities Implementation Group. In a separate appointment, the firm announced that Maryland-based partner Jennine Anderson was named to the Financial Accounting Standards Board’s (FASB) resource group on non-profit entities.”
PCAOB Adopts New Risk Assess. Stds; Issues Release on Failure to Supervise [FEI Financial Reporting Blog]
As we mentioned yesterday, the PCAOB has been busy. Francine McKenna guest-blogged over at FEI and gives the rundown.
Fannie Quarterly Loss Is Smallest Since 2007 [WSJ]
FTW? “Fannie Mae posted a $1.2 billion net loss for the second quarter, the smallest loss in three years, amid signs that the massive wave of souring loans that brought down the mortgage-finance giant may be easing. But Fannie still asked the U.S. government for an additional $1.5 billion.”
District Court Issues Order in Snipes Case [TaxProf Blog]
Just when you thought it was over.
If you’re not getting cloud computing you’re a loser [AccMan]
That is, you’ve got almost nothing to lose by going for it.
Midwest accounting firm buying LeMaster Daniels [Spokesman-Review]
LarsonAllen brings its business to the northwest by purchasing Spokane-based LeMaster Daniels.
Deloitte leadership race reduced to two hopefuls [Accountancy Age]
“he contest to replace John Connolly as leader of Deloitte in the UK will involve just two members of the firm’s board.
The contenders vieing for the top job are Martin Eadon, head of audit, and David Sproul, head of tax. Sproul joined Deloitte when the firm acquired Andersen in the UK on the back of the Enron crisis
Both candidates gave presentations at the firm’s partner conference on 6 July but no further campaigning is expected.”
Accounting News Roundup: Insurance Accounting Is IASB’s Latest Puzzle; Former Deloitte CEO Catches a Keeper; Small Businesses Using Foursquare for Cheap Marketing | 08.04.10
IASB proposals aim to demystify insurance accounting [Accountancy Age]
“The international accounting standard setter has released new proposals for insurance contracts which seek to demystify one of the most complex areas of company reporting.
The rules, announced yesterday, aim to transform current rules, said to be all but indecipherable for investors, to a model which helps to communicate the contract economics.”
‘Static Kill’ Appears to Be Working in Well, BP Says [NYT]
“BP said Wednesday it had brought pressure under control in its stricken well in the r pumping heavy drilling mud into it, calling the development a “significant milestone” in its efforts to permanently seal the well.
The company began the effort, known as a static kill, on Tuesday afternoon and stopped pumping the heavy mud after about eight hours, saying that the procedure appeared to have reached the “desired outcome” of controlling pressure in the well.”
American Accounting Association and AICPA Create Pathways Commission to Study the Future of Accounting Higher Education [PR Newswire]
“The American Accounting Association and the American Institute of Certified Public Accountants together have formed the Pathways Commission to study possible future paths of higher education for those seeking entry into the accounting profession.
‘Interest in accounting as a career is the highest it’s ever been and underscores the need to make sure the educational infrastructure remains solid and able to meet the profession’s evolving requirements,’ said Barry Melancon, CPA, AICPA president and CEO, who served on the Human Capital Subcommittee of the U.S. Treasury Advisory Committee on the Audit Profession.”
Catch of the day: ESPN sells fishing organization [Bloomberg]
Apparently a former Deloitte CEO – Jim Copeland – is involved in a group buying the BASS fishing organization.
From Playboy to Biglaw: New Orrick CFO Has A Bitchin’ Resume [ATL]
A former Playboy CFO recently joined Biglaw firm Orrick, Herrington & Sutcliffe, presumably because access to a nice grotto is a must.
Getting Customers to ‘Check In’ With Foursquare [WSJ]
“Businesses of all sizes are trying the services out, looking to tap the networks’ ever-growing fan bases—Foursquare alone has 2.4 million users globally, and is growing 30% to 40% a month—and ability to harness enthusiasm for local establishments. For a small company with a limited marketing budget, the services are attractive because they’re free or cheap, require minimal time and effort, and appeal to loyal consumers who favor local businesses over big, cookie-cutter chains.”
Another Question about Timing of NBTY Insider Stock Purchases Prior to Announcement of Carlyle Acquisition [White Collar Fraud]
Sam Antar is still a little suspicious about the timing of the two NBTY directors that purchased stock right around the time that the Carlyle Group agreed to purchase NBTY stock. According to filings, NBTY executives met with Carlyle on May 11th and the two directors in question purchased their shares on May 13th and 18th. The next regularly scheduled board meeting was on May 21st.
Soooo, Sam wonders aloud, “At what point in time did Ashner and White know anything about the discussions with Carlyle and when did they find out about the confidentiality agreement? Often, such agreements are executed after the board has been notified. In this case, the confidentiality agreement was signed before Ashner and White purchased their NBTY shares.”
At Work, a Drug Dilemma [WSJ]
Even if you are legally able to purchase pot for medicinal purposes, your employer may still prefer you to pass on grass.
Tony Hayward Is a Lover, Not a Spiller
“I didn’t want to leave BP, because I love the company. Because I love the company, I must leave BP.”
~ Tony Hayward may, as some have suggested, have a future as a poet.
Accounting News Roundup: BP’s Tax Break Could Bring Congressional Belly Aching; Steinbrenner’s Will Postpones Decision Estate Taxes; KPMG Foundation Awards Minority Scholars | 07.28.10
BP Seeks Tax Cut on Cleanup Costs [WSJ]
“In releasing second-quarter results Tuesday, the London-based oil giant said it was taking a pretax charge of $32 billion to cover damages, business claims an the next several years.
That total will be offset against its U.S. tax bill, resulting in a $10 billion reduction in taxes, the company said. The tax reduction will cut the company’s anticipated net spill-related losses to $22 billion, the company said.
BP paid $10.4 billion in taxes world-wide last year, according to its 2009 annual report.
Tax experts said that BP’s filing reflected standard accounting practices, even if the sums involved were unusually large.”
The Boss’ will power [NYP]
“The Boss’ will stipulates that an undisclosed portion of his estimated $1.1 billion sports, shipping and racehorse-breeding fortune will go into a trust for his widow, Joan, 74.
And it assigns Steinbrenner’s lawyer, Robert Banker, to decide whether that trust pays federal estate tax for this year, or not until after Joan Steinbrenner dies.
Although there currently is no federal estate tax for 2010, that could change if Congress acts to close the loophole and enacts such a tax retroactively, putting Steinbrenner’s estate on the hook for $500 million or more.
But under the law, Banker would have nine months from Steinbrenner’s July 13 death to decide if the estate should pay estimated estate tax for a 2010 filing — or at the rate in effect whenever Joan dies. Banker can take another six months before deciding to make that move permanent.”
LinkedIn Value Tops $2 Billion After Tiger Global Investment [Bloomberg]
“Tiger Global Management LLC, a hedge fund founded by Chase Coleman, paid $20 million for a stake in LinkedIn Corp., valuing the professional-networking website at more than $2 billion, said two people familiar with the matter.
The purchase, at $21.50 a share for about a 1 percent stake, was from existing shareholders and doesn’t represent new investment, said one of the people, who declined to be identified because the sale has not been disclosed. LinkedIn, based in Mountain View, California, is closely held.”
Sexy SAP? Surely not!! [AccMan]
SAP is known for helping HUGE companies manage all of its resources including CRM, accounting, HR, etc. etc. with enterprise solutions. There’s no chance that a huge company like this with a slew of mega corp clients could have something sleek and flexible for your small business, right? Dennis Howlett would beg to differ:
“SAP has a reputation of being big, heavy, slow and expensive. Fine for the Nestlé’s and Colgate-Palmolive’s of this world but hardly a fit for an SME business. That’s simply not true. ByDesign can be used by companies as small as 10 users. 20 users would be nice but 10 is OK. If you’re moving from say Line 50 then implementation and data transfer can be handled for less than £10K. You’re going to do a good amount of work yourself in learning how this thing works but SAP has provided plenty of guided learning material to help.”
Including a video that DH has up over at AccMan today. So simple, the editor of an accounting blog can understand it. No more excuses, people.
KPMG Foundation Awards $470,000 in Scholarships to 47 Minority Accounting Doctoral Scholars [PR Newswire]
“The KPMG Foundation [on Tuesday] announced it has awarded a total of $470,000 in scholarships to 47 minority accounting doctoral students for the 2010–2011 academic year. Of the 47 scholarships, the Foundation named 12 new recipients and renewed 35 existing awards. Each scholarship is valued at $10,000 and renewable annually for up to five years.”
IRS Demands $45 Million From Billionaire McCombs [Forbes]
Clear Channel founder and former Minnesota Vikings owner, “Red” McCombs finds himself in a similar pickle with the IRS as Phil Anschutz.
Tony Hayward Goes Out on a High Note
“We have followed the IRS regulations as they’re currently written.”
~ The outgoing BP CEO, explaining the $9.9 billion tax credit the company took in the second quarter.
Accounting News Roundup: BP’s Ugly 2nd Quarter; Bernanke Backs Extending Some Tax Cuts; Back-to-school Sales Tax Holidays | 07.27.10
BP replaces CEO and posts $17 billion quarterly loss [Reuters]
“Oil giant BP Plc launched a plan to repair its battered image in the United States on Tuesday, ditching its xecutive and promising to slim down by trebling an asset sale target to $30 billion.
However, the company, the target of public anger over its Gulf of Mexico oil spill, tempted further ire by denying it needed cultural change and offsetting the costs of the spill, including expected fines, against its taxes.
The tax move will cost the U.S. taxpayer almost $10 billion.”
Northern Rock CFO Banned And Fined GBP320,000 Over Bad Loans [Dow Jones]
“David Jones, the former chief financial officer of Northern Rock PLC, was Tuesday fined GBP320,000 and barred from working in finance after the Financial Services Authority found he misled investors about the bank’s bad loans in the lead-up to the bank’s eventual collapse.
Jones most recently was CFO at Northern Rock Asset Management PLC, the “bad bank” of the nationalized lender after a restructuring of its operations. He left the company in April because of the FSA investigation, a week after two former colleagues were fined and banned for their roles in making the bank’s 2006 bad-loan figures appear better than they were.”
Where will those next gen clients come from? [AccMan]
And what will ask of their professional service providers? Right now, Gen X and Millenials don’t compromise much of the client base but that will change quickly when Baby Boomers start retiring en masse. What these new business owners will ask of their service providers is not quite clear. Similar to the demands currently placed on employers, service providers will have to be flexible and innovative.
Bernanke Says Tax-Cut Extension Maintains Stimulus [Bloomberg]
“Federal Reserve Chairman Ben S. Bernanke said extending at least some of the tax cuts set to expire this year would help strengthen a U.S. economy still in need of stimulus and urged offsetting the move with increased revenue or lower spending.
‘In the short term I would believe that we ought to maintain a reasonable degree of fiscal support, stimulus for the economy,’ Bernanke said yesterday under questioning from the House Financial Services Committee’s senior Republican. ‘There are many ways to do that. This is one way.’ ”
Accounting firm Kaufman Rossin & Co. settles case for $9.6M [Miami Herald]
Kaufman Rossin was the auditor of the two Palm Beach funds that invested over a billion dollars with convicted Ponzi Schemer Tom Petters.
And in case you forgot, convicted forensic accountant and suit lover Lew Freeman was the Chief Restructuring Officer for the Palm Beach funds. Quite the cesspool.
How Low Self-Esteem Can Cost You The Job [Forbes]
Are you a low talker? No one is suggesting that you don’t know what you’re talking about but the perception could be that you don’t and in turn, It could be affecting your career.
Lords to probe audit market [Accountancy Age]
“A recent report from the FRC and FSA criticised the role of auditors during the crisis saying they had failed to tackle management bias.
The Lords investigation will look at basic questions such as wether Big Four dominance increases the price of audit and whether the market needs to be opened up.”
Oracle’s Ellison: Pay King [WSJ]
$1.84 billion over the last ten years is not too shabby.
Sales tax holidays 2010 [Don’t Mess with Taxes]
Kay Bell has a rundown of the sixteen states that are having sales tax holidays right before the kids go back to school.
Accounting News Roundup: Geithner Is Ready to Let Tax Cuts Die; Hayward on His Way Out?; PwC Wants Glitnir Lawsuit Tossed | 07.26.10
No new recession, let tax cuts die: Geithner [Reuters]
“The economy is not likely to slip back into recession but letting tax cuts for t ans expire is necessary to show commitment to cutting budget deficits, Treasury Secretary Timothy Geithner said on Sunday.
In appearances on several Sunday talk shows, Geithner said only 2 to 3 percent of Americans — those making $250,000 or more a year — will be affected when tax cuts enacted under former President George W. Bush end on schedule this year.”
BP Said to Prepare Dudley as CEO as Board Looks for Recovery [Bloomberg]
“BP Plc plans to name Robert Dudley to succeed Tony Hayward as chief executive officer as the board looks to recover the company’s position in the U.S., two people with knowledge of the matter said.
Dudley, the director of BP’s oil spill response unit, is ready to be announced as the company’s first American chief and to take the helm Oct. 1, one of the people said, asking not to be identified because a final decision hasn’t yet been made. The decision was reached in discussions with board members about how best to take BP forward and rebuild its U.S. position, the person said.”
Madoff Investors Brace for Lawsuits [WSJ]
“Irving Picard said he could wind up suing about half the estimated 2,000 individual investors he has called “net winners” from their dealings with Mr. Madoff. Such investors withdrew more from Mr. Madoff’s firm than the amount of principal they invested.
‘The people who made money, who got more, have made money at the expense of the people who didn’t,’ said Mr. Picard, who has the power under federal bankruptcy provisions to pursue money withdrawn from Bernard L. Madoff Investment Securities LLC before it collapsed in December 2008 and redistribute the funds fairly among victims.
Mr. Picard must file any so-called clawback lawsuits by December, the two-year anniversary of Mr. Madoff’s arrest and the filing of regulatory proceedings against him. ‘We’re not going to wait until the last minute,’ Mr. Picard said.”
Change the world or go home [AccMan]
Dennis Howlett implores you that if you want your firm or business to really stand out then it’s going to take more than a catchy slogan or a boilerplate email to get people’s attention. You best recognize an opportunity when you see one.
“I’ve lost count the number of times I’ve said but it is worth repeating. When disruption like SaaS comes along, it represents an opportunity. From a professional standpoint it should mean that firms can further commoditize what they do by using accounting dashboards that show them the status of their clients’ activity. It is a short step to seeing how this might be integrated into fees, billing, customer satisfaction measurement and the like.”
If You’re Going To San Francisco…AAA Will Be There [FEI Financial Reporting Blog]
Edith Orenstein has the lowdown on this year’s American Accounting Association’s (AAA) annual meeting. This year’s event is in AG’s backyard (she loves giving directions, btw) from July 31 to August 4th and will feature Francine McKenna and Professor Albrecht on one of the panels.
Join Me For a Nice Little CPA Exam Chat on August 3rd! [JDA]
Speaking of Adrienne, she’ll be over at CPA Exam Club to take your questions on everyone’s favorite test on August 3rd. Yes, that’s one week from tomorrow.
PwC Demands Dismissal of Glitnir Lawsuit [Iceland Review]
PwC’s lawyers argue that Glitnir and the firm agreed to do any legal wrangling in Iceland if the poo hit the fan. Late last week they requested that the lawsuit in New York be tossed.
Saltzman Hamma firm details merger with RubinBrown [Denver Business Journal]
“Saltzman Hamma Nelson Massaro LLP, a century-old Denver accounting firm, is merging with St. Louis-based RubinBrown LLP to form what’s expected to be among the 50 largest accounting firms in the United States, principals were set to announce on July 23.
The new entity, which will operate as RubinBrown, will employ 375 people in offices in Denver, St. Louis and Kansas City, Mo. The merger will be effective Aug. 1.”
District Court Denies Charitable Deduction for Donation of Home to Fire Department [TaxProf Blog]
Just donate a car next time. It’s a far worse investment than a house.
IRS Proposes PTIN Fees [JofA]
$50 for your very own preparer tax identification number! Of course there’s also a ‘reasonable fee’ on top of that from “a third-party vendor that will administer the application and renewal process,” that gets thrown in for good measure.
My Life as a White-Collar Criminal [White Collar Fraud]
Sam Antar went on Canadian TV last week to talk about how much fun it is to be a crook. Except the whole possibility of prison part.
Accounting News Roundup: Liberty Tax CEO Hints at Combination with H&R Block; Former NABA President Killed in Skydiving Accident; Sam Antar Has a Question | 07.20.10
Liberty Tax CEO Floats Combining With H&R Block [AP]
John Hewitt, CEO of Liberty Tax, is hinting that maybe he’d like to merge with H&RB, “John Hewitt, founder and CEO of Liberty Tax Service, said Monday he is trying to contact departing board member Thomas Bloch to discuss the potential for combining his privately held company with Kansas City, Mo.-based H&R Block.
‘With my leadership and the name and backing of the Bloch family, we could put a great company going back in the right direction,’ said Hewitt.”
We didn’t say it was a subtle hint.
SEC May Add 800 New Positions as Part Of Reform [Reuters]
At least try to keep the porn enthusiasts out, “The top U.S. securities regulator will need to add about 800 new positions to carry out its part of the massive financial reform legislation, the head of the agency said in testimony to be delivered on Tuesday.
Mary Schapiro, chairman of the U.S. Securities and Exchange Commission, said the agency is still crunching the numbers on costs and hiring, and expects the upcoming rulewriting task to be ‘logistically challenging and extremely labor intensive.'”
Two 70-somethings, Theodore Wilson and George Flynn, killed after mid-air skydiving collision [NYDN]
Messrs Wilson and Mr Flynn were both experienced jumpers and were having textbook jumps until something went wrong with approximately 100 feet to go. Mr Wilson was born and raised in the Bronx and he was a former president of the National Association of Black Accountants.
Job Hunting Is Often One Step Forward, Two Steps Back [FINS]
A recent study from the University of Minnesota suggests that people on the hunt for a new job are their own worst enemies, “The results won’t be news to anyone who has ever returned from a jog and mauled a chocolate cake or followed up a productive hour of work with some heavy Facebooking.”
In other words, if someone has a good interview, they’re likely to return home and vedge for the rest of the day, feeling good about their prospects, when the best thing would do is to land the next interview with another prospect.
BP Weighs New Way to Kill Gulf Well [WSJ]
“Oil giant BP PLC was Monday considering yet another method to kill its ruptured Gulf of Mexico oil well amid concerns that the cap it installed last week could be allowing oil and gas to seep out the sides.
Meanwhile, a federal panel investigating the disaster heard that the Deepwater Horizon drilling rig suffered a series of power outages and seized-up computers in the months before it exploded.
BP’s new containment cap has stopped the flow of oil since Thursday, but with the well now sealed at the top, government officials are worried that oil and gas could now be escaping elsewhere.”
Facebook Claimant Must Answer `Where Have You Been?’ to Succeed [Bloomberg]
“Paul Ceglia, the western New York man who says a 2003 contract with Facebook Inc. founder Mark Zuckerberg entitles him to 84 percent of the company, will have to answer a critical question to pursue his claim, lawyers said.
‘The first thing that comes to mind is, where have you been all this time?’ asked Los Angeles litigator Bryan Freedman, who isn’t involved in the case.”
Answer: Been busy on Facebook.
Nokia Conducting Search for New CEO [WSJ]
Get your résumé in now.
I Have A Question [White Collar Fraud]
If Sam Antar is asking a question, something usually stinks. This time he’s wondering if someone had the NBTY Directors jumped the gun on some stock purchases prior the company’s purchase by the Carlyle Group, “If [CNBC’s David] Faber’s reporting is correct, does ‘early May’ mean before or after Michael Ashner and Peter White bought their NBTY shares?”
The IRS Is Giving Gulf Oil Spill Victims Their Full and Undivided Attention This Saturday
Attention “self-reliant nonconformists who don’t pay much heed to everyday rules and regulations”! The IRS is offering you help with your nonconformist ways this very Saturday!
If you’re not interested in conforming with, you know, the Internal Revenue Code, then the Service might be a little bit less accommodating. Sure, it’s a Saturday but this is the government offering you help for free. No physical harm intended.
The Internal Revenue Service announced the locations of Taxpayer Assistance Centers in seven Gulf Coast cities that will be open this Saturday, July 17 to provide help to taxpayers impacted by the BP oil spill.
The following locations will be open from 9 a.m. to 2 p.m. Central Time:
1110 Montlimar Drive, Mobile, Ala.
651-F West 14th St., Panama City, Fla.
7180 9th Ave. North, Pensacola, Fla.
2600 Citiplace Centre, Baton Rouge, La.
423 Lafayette St., Houma, La.
1555 Poydras Street, New Orleans, La.
11309 Old Highway 49, Gulfport, Miss.
Individuals who have questions about the tax treatment of BP claims payments or who are experiencing filing or payment hardships because of the oil spill will be able to work directly with IRS personnel at any of these locations on Saturday.
Accounting News Roundup: Financial Reform Inches Closer; Small Biz Continues with Bleak Outlook; Kwame Kilpatrick Gets Tax-Funded Counsel in Tax Fraud Case | 07.13.10
Finance Bill Close to Passage in Senate [WSJ]
“Two Senate Republicans said Monday they would support the Obama administration’s financial-overhaul legislation, and Democrats now believe they have the 60 votes needed to push the sweeping bill into law by the end of the week.
Sens. Scott Brown of Massachusetts and Olympia Snowe of Maine both said they would vote for the measure when Democrats bring it to a vote, which could happen as soon as this week. Democrats and administration officials believe this gives them the necessary backing to overcome a potential filibuster after weeks of uncertainty and unexpected pitfalls.”
Abu Dhabi May Make BP Investment, Crown Prince Says [Bloomberg]
“Abu Dhabi Crown Prince Sheikh Mohammed bin Zayed Al Nahyan said the emirate is considering making an investment in BP Plc.
‘We are still thinking about it,’ he said in an interview in Abu Dhabi today, when asked about potentially buying a stake in the London-based oil producer. ‘We are looking across the board. We have been partners with BP for years.’
BP Chief Executive Officer Tony Hayward said on July 7 that he had a “very good” meeting with the crown prince as analysts said the oil producer may be looking for support from Middle East investors. BP shares have gained 26 percent since the start of July as the company gets closer to containing its leaking well in the Gulf of Mexico, the worst oil spill in U.S. history.”
Small Businesses Get More Pessimistic [WSJ/Real Time Economics]
“Small businesses continue to feel highly pessimistic about the U.S. economic outlook, according to a report Tuesday that showed a monthly indicator of their sentiment turning weaker in June.
The National Federation of Independent Businesses said its Small Business Optimism Index dropped 3.2 points to 89.0 last month, more than erasing the modest 1.6-point gain it saw in May. The report, which was compiled by NFIB Chief Economist William Dunkelberg, described the decline as ‘a very disappointing outcome.’ ”
Kilpatrick expected to ask for court-appointed counsel for fraud case [WXYZ]
Kwame Kilpatrick needs taxpayers’ help in his tax fraud case, namely paying for a lawyer. Since he cannot afford one, the people of Michigan will be picking up the tab.
Man Claims Ownership of Facebook [WSJ]
Today in wild-ass lawsuits, “A New York judge has issued a temporary restraining order restricting the transfer of Facebook Inc.’s assets, following a suit by a New York man who claims to own an 84% stake in the social-networking company.
Paul D. Ceglia filed a suit in the Supreme Court of New York’s Allegany County on June 30, claiming that a 2003 contract he signed with Facebook founder and Chief Executive Mark Zuckerberg entitles him to ownership of the company and monetary damages.”
Accounting News Roundup: BP in Talks to Sell Assets, Including Alaska Ops; Koss Lawsuit Details Embezzlement ‘Spurts’; The Estate Planing Debacle | 07.12.10
BP Mulls Selling Off Billions in Assets [WSJ]
“BP PLC is in talks with U.S. independent oil and gas pr on a deal worth as much as $10 billion that could include stakes in BP’s vast Alaska operations, according to people familiar with the matter.
A deal, which would go a long way to helping BP cope with the financial stress of paying for the clean-up of the Gulf oil spill, could be reached in the coming weeks, though there is no guarantee it will succeed, one of these people said.”
Bank Profits Depend on Debt-Writedown `Abomination’ [Bloomberg]
This abomination has an official name, SFAS 159, The Fair Value Option for Financial Assets and Financial Liabilities
“Bank of America Corp. and Wall Street firms that notched perfect trading records in the first quarter are now depending on an accounting benefit last used in the depths of the credit crisis to prop up their results.
Bank of America, the biggest U.S. bank by assets, may record a $1 billion second-quarter gain from writing down its debts to their market value, Citigroup Inc. analyst Keith Horowitz estimated in a June 23 report. The boost to earnings, stemming from an accounting rule that allows banks to book profits when the value of their own bonds falls, probably represented a fifth of pretax income, Horowitz wrote.”
Koss embezzlement ran in spurts, lawsuit says [Milwaukee Journal-Sentinel]
The most impressive “spurt?” $478,375 over three days in 2006. According to Koss’ lawsuit against S-squared and Grant Thornton, $145,000 also disappeared from the petty cash fund over the years, amongst other “unauthorized transactions.”
Bias At Work: To Sue or Not to Sue? [FINS]
Harassed? Discriminated against based on age, sexual orientation, race et al.? Of course suing your employer is an option. This is America after all, where the opportunity to slap someone with a lawsuit is your god-given right. But is it always the right move?
Bolt running from the taxman – Usain snub for British meeting [Daily Mail]
The fastest man in the world would prefer to keep a little money for himself, “Under present tax rules, if Bolt competes once in Britain and only five races elsewhere, the British taxman will demand one-sixth of everything he earns, whether in Britain or not. His taxable earnings would not only include his considerable appearance fees but also his hefty endorsement contracts.”
The Big Four’s UK Firms Pick Up Non-Executive Directors — And Then …? [Re:Balance]
Jim Peterson expands on his thoughts about the Big 4 non-executive directors in the UK, “Not only can good governance not be inflicted or imposed, in other words, because resistant leaders will find ways to disturb or subvert the purpose, but a virtuous culture will display its legitimacy without the need for pietistic overlays.”
Too Rich to Live? [WSJ]
The estate tax debate has gotten even more morbid than it would ordinarily be, ” ‘You don’t know whether to commit suicide or just go on living and working,’ says Eugene Sukup, an outspoken critic of the estate tax and the founder of Sukup Manufacturing, a maker of grain bins that employs 450 people in Sheffield, Iowa. Born in Nebraska during the Dust Bowl, the 81-year-old Mr. Sukup is a National Guard veteran and high school graduate who founded his firm, which now owns more than 70 patents, with $15,000 in 1963. He says his estate taxes, which would be zero this year, could be more that $15 million if he were to die next year.”
Accounting News Roundup: Are “Tax-Aware” Juries the Solution to Deductible Punitive Damages?; Financial Fake Twitter Feeds; Deloitte’s Czech Problem | 07.02.10
Damages Control [NYT]
Because BP could end up paying a metric asston in punitive damages over the Deepwater Horizon whathaveyou, the Senate recently approved a repeal of punitive damages awarded in civil disputes being deductible for tax purposes.
The problem is that it probably won’t work, as Gregg Polsky and Dan Markel, two law professors at the University of North Carolina at Chapel Hill and Florida State University write in an op-ed in today’s Times:
“When plaintiffs and defendants reach a settlement before a trial, which happens in most cases, they aren’t required to specify which parts of the settlement are punitive and which are compensatory; there ne number. That allows defendants to disguise the amounts that they would have paid as punitive damages as additional compensatory damages.
And because the measure maintains the deductible status of compensatory damages, nearly all punitive damages will remain, as a practical matter, deductible. This easy circumvention surely explains the meager revenue projections from the measure: $315 million over 10 years.”
The solution, according to Polsky and Markel is to make juries “tax aware” so that they may adjust their findings appropriately, “the prospect of tax-aware jurors would also raise the amounts of settlements before trial — when, again, most cases are actually resolved. This is because the amount of a settlement depends on the amount that a jury is expected to award after a trial. If tax-aware juries became the norm, plaintiffs would push for higher settlements, and thus both settling and non-settling defendants would bear the correct amount of punishment. Under the Senate’s approach, in contrast, only the very few non-settling defendants would bear that punishment.”
Five Fake Finance Twitter Feeds [FINS]
These are far better reasons to be on Twitter than Ashton Kutcher or Kim Kardashian.
Charities fail to communicate in annual reports: Deloitte [Accountancy Age]
Whatever they are communicating, it’s still more informative than a “Transparency Report.”
More cloud accounting benefits [AccMan]
“It is becoming increasingly obvious that clouding computing benefits as they apply to the accounting arena stretch way beyond the ability to save time, effort and cost. As I meet with more customers, I am discovering benefits that only customers can express.”
Apollo Said to Hire PricewaterhouseCoopers’s Donnelly as CFO [Bloomberg BusinessWeek]
“[Gene] Donnelly, who starts in his new role today after 29 years at New York-based consulting firm PricewaterhouseCoopers LLP, fills a vacancy left by the departure of Kenneth Vecchione in January, said the person, who asked not to be identified because the hiring wasn’t announced. Barry Giarraputo, the company’s chief accounting officer, had been serving as interim CFO.”
Deloitte answers fraud reports [The Prague Post]
Francine McKenna tweeted about this story yesterday, where Deloitte has been cited by one Czech newspaper as being investigated by Czech anti-corruption police.
“Deloitte has been put on the defensive since the June 28 report in the daily Lidové noviny (LN) that quoted unnamed sources alleging a slush fund used to bribe public officials and fraudulent accounting that gave clients better financial results. Deloitte says the results of an internal review highlighted ‘certain deficiencies in management reporting,’ but considers the results an internal matter and will not make any comments.”
Accounting News Roundup: Auditors ‘Portray Worrying Lack of Skepticism’; Are Tax Strategies Patentable?; Method Man Pleads Guilty, Cuts Check for NYC Tax Evasion | 06.29.10
FSA accuse auditors of failing to question management bias [Accountancy Age]
The Financial Services Authority has decided that it was about time it called out a few people, “Auditors have become yes men who don’t adequately question management bias according to concerns raised by the UK’s chief financial regulators. The Financial Services Authority (FSA) and the Financial Reporting Council today released a scathing discussion paper into the profession following concerns raised in the wake of the financial crisis. Among its concerns is that auditors ‘portrays a worrying lack of skepticism’ when scrutinising potential management bias.”
Not onl ef=”http://www.accountancyage.com/accountancyage/news/2265630/fsa-audit-report-regulator”>FSA wants new enforcement powers including the ability to ” fine, censure or disqualify audit firms.” The FSA also wants to meet with auditors several times a year, rather than just once, as well as direct access to audit committees.
Alex to Become Hurricane as Swells Reach Gulf Spill [Bloomberg]
“Tropical Storm Alex, the first named system of the Atlantic hurricane season, strengthened today, forcing the evacuation of rigs in the Gulf of Mexico and pushing swells toward the worst U.S. oil spill.
The storm, packing maximum sustained winds of 70 miles (110 kilometers) per hour, was 460 miles southeast of Brownsville, Texas, before dawn today, moving north-northwest at 8 mph, the U.S. National Hurricane Center said in an advisory. The circulating winds were near reaching hurricane status of 74 mph.”
New York state may tax out-of-state hedge fund execs [Reuters]
Desperate idea of the day from the brain trust in Albany, “Recession-hit New York could raise an extra $50 million a year by collecting income taxes from people who work for hedge funds in the state but live elsewhere, according to a legislative plan to raise revenue…A spokesman for Democratic Assembly Speaker Sheldon Silver said by telephone on Monday that it means hedge fund managers would be treated the same way as other commuters.”
Aprill: The Impact of Bilski on Tax Strategy Patents [TaxProf Blog]
In non-PCAOB SCOTUS news, the decision in Bilski v. Kappos addressing “Whether a ‘process’ must be tied to a particular machine or apparatus, or transform a particular article into a different state or thing (‘machine-or-transformation’ test), to be eligible for patenting….” was examined by Ellen P. Aprill of Loyola-L.A. regarding the impact on tax strategy patents:
“Bilski is at best a mixed bag for those who think tax strategies should be patentable. It gives little help and does allow business method patents, albeit somewhat begrudgingly. It demonstrates that for those who believe that tax strategies should not be patented, legislation is needed.”
Method Man pleads guilty to NYC tax-evasion charge [AP]
“Hip-hop star Method Man pleaded guilty to a tax-evasion charge Monday, writing a check on the spot for the final $40,000 restitution payment after owing about $106,000.” What, no cash?
U.S. Court to Hear Janus Appeal In Securities Case [Reuters]
“The lawsuit, brought on behalf of those who bought Janus stock from mid-2000 through early September 2003, alleged that the prospectuses of several of Janus funds created the misleading impression that the company would adopt measures to curb market timing, when in fact secret arrangements with several hedge funds permitted such transactions, to the detriment of long-term investors.”
Accounting News Roundup: G-20 to ‘Stabilize’ Debt by 2016; Auditors May Be Forced into Whistleblower Role on Banks; Yes, Taxes Are Historically Low | 06.28.10
G-20 Agrees to Cut Debt [WSJ]
“The wealthiest of the Group of 20 countries said they would halve their government deficits by the year 2013 and ‘stabilize’ their debt loads by 2016, a signal to international markets and domestic political audiences they are taking seriously the need to wean themselves from stimulus spending.”
Once you catch your breath from laughing, the President also cited the tax code specifically and his threatening to put some (i.e. Congress) in a tight spot:
“They might have to make deeper cuts in deficits to comply with its pledge. A White House statement said that government debt in the fiscal year 15, would be at an “acceptable level.” President Obama said that next year he would present “very difficult choices” to the country in an effort to meet deficit goals.
The president cited his disappointment with the U.S. tax code. ‘Next year, when I start presenting some very difficult choices to the country, I hope some of these folks who are hollering about deficits and debt step up, ’cause I’m calling their bluff,’ Mr. Obama said.”
Bank auditors eyed for whistleblower role [FT]
A paper from the UK’s Financial Services Authority puts forth the discussion of requiring auditors to work more closely with regulators on irregularities found during the bank’s audit engagement.
“Experts say bank executives are nervous about the prospect of increased bilateral discussions between regulators and auditors. Auditors have been fearful the paper could thrust the profession into a regulatory spotlight it has so far avoided.”
Koss Fraud: We didn’t bother to look at the endorsements on our own checks, but Grant Thornton should have! [Fraud Files Blog]
Fraud sage Tracy Coenen presents her latest view on the Koss fraud mish-mash and how Koss management has managed to make themselves “look like absolute morons.”
BP Loses $22 Billion in Legacy of Share Buybacks [Bloomberg]
“The sum represents the hole after the 52 percent plunge in BP shares since the Deepwater Horizon exploded and sank, resulting in the worst oil spill in U.S. history. BP bought back more than $37 billion of its stock in a bid to return money to investors between 2005 and 2008. Those shares are now worth $15 billion, excluding dividends.”
Martin Ginsburg, Noted Tax Lawyer and Husband of Justice Ginsburg, R.I.P. [ATL]
Mr Ginsburg was a tax law professor at Georgetown for many years and was known for his great sense of humor, as evidenced by his faculty bio, noted by our sister site, Above the Law:
Professor Ginsburg is co-author, with Jack S. Levin of Chicago, of Mergers, Acquisitions, and Buyouts, a semi-annually updated treatise which addresses tax and other aspects of this exciting subject. The portions of the treatise written by Professor Ginsburg are, he is certain, easily identified and quite superb.
Open Letter to the Securities and Exchange Commission Part 9: Overstock.com’s Excuses Simply Don’t Add Up [White Collar Fraud]
It appears Sam Antar has caught Overstock.com in another disclosure snafu but this time it isn’t really clear whether the company gave the wrong excuse, lied to the SEC or simply doesn’t know what they’re doing, “Overstock.com’s 2008 10-K report claimed that a reportable “gain contingency” existed as of November 7, 2008. However, the company contradicted itself and claimed to the SEC reviewers that reportable reportable ‘gain contingency’ did not exist on November 7, 2008.
If Overstock.com’s 10-K disclosure is true, the company’s explanation to the SEC Division of Corporation Finance can’t be true. Likewise, if Overstock.com’s explanation to the SEC Division of Corporation Finance is true, the company’s 2008 10-K disclosure can’t be true.”
Accounts bodies revise workplan [FT]
Convergence 2.0.
Today’s taxes aren’t too bad [Don’t Mess with Taxes/Kay Bell]
Kay Bell provides some perspective on tax rates over the last century. The following graphic should help clear up any confusion.
U.S. Lawmakers Reach Accord on New Finance Rules [WSJ] “After more than 20 hours of continuous wrangling, Congressional Democrats and White House officials reached agreement on the final shape of legislation that would transform financial regulation, avoiding last-minute defections among New York lawmakers that had threatened to upend the bill. After months of uncertainty about how the U.S. would craft new rules, the agreement offers th ince the financial crisis of how markets and the government will interact for decades to come. The common thread: large financial companies are facing a tougher leash.” Just in case you missed it yesterday, former SEC Chairman Arthur Levitt isn’t nearly as excited as some people about the bill. The President is expected to sign the bill before July 4. Sidenote on this one: how the Journal managed to slip Maxine Waters through as one of a dozen “players” in this bill should cause you to question – if even for just a minute – the credibility of the paper. Florida Appeals Court Turns Down Heat, For Now, On BDO Seidman [Re: The Auditors] In other words, the “idea” of fraud being a kickback or a bribe is obvious and was defined. Manipulating mark-to-market and off-balance sheet accounting rules or “something else equally outrageous” were not and thus the law was unconstitutional. Long story/short, Norris writes, is that Funny story on the way to this Skilling outcome – if the SCOTUS rules against the PCAOB (it is expected on Monday), “It will blame Congress for writing bad laws,” Norris writes. And who forced Congress into action on Sarbanes-Oxley? BP: Oil-Spill Cost Hits $2.35 Billion [WSJ] Caturano being acquired by RSM McGladrey [Boston Business Journal]
Accounting News Roundup: Financial Reform Finalized; Banco Espirito v. BDO 2.0; Small Win for Skilling, Big Loss for PCAOB? | 06.25.10
By the end of this one, can’t you picture an exhausted Barney Frank with his tie loosened to mid-torso, pants undone with fly wide open open and some staffer dabbing his sweaty brow?
Francine’s take on the decision by the Florida 3rd District Court of Appeal to order a trial in the Banco Espirito v. BDO case. An event she isn’t thrilled about, “My doubts about the efficacy of a new trial are based on the disappointing, frustrating and completely unsatisfying way the court and the judges in this case have proceeded. Some of the additional comments raised by the Appeals Court do not bode well for this plaintiff’s chances next time around.”
Supreme Court Rolls Back a Law Born of Enron [NYT/Floyd Norris]
In more Congressional ineptitude (at least in the eyes of the SCOTUS), former Enron CEO Jeff Skilling won his case at the high court, arguing that “the concept of committing fraud through depriving an employer of ‘honest services’ was not adequately defined in the law,” Floyd Norris writes.
Has anyone handicapped this? Obviously the $20 billion reserve is a good ballpark figure but the overs have to be a pretty solid bet on that. Takers?
The firm fka RSM McGladrey purchased Caturano and Company, the fifth largest firm in Boston. The deal, if approved by H&R Block, would make RSM McGladrey…the fifth largest firm in Boston.
Accounting News Roundup: Financial Reform Fail; KPMG Wins Latest Round of Auditor Musical Chairs; Philly Tax Amnesty Close to Reaching Goals | 06.24.10
A Missed Opportunity on Financial Reform [WSJ]
Former SEC Chairman Arthur Levitt is none too pleased with the financial reform bill that’s likely to get approved by the Senate and he says exactly why in an op-ed in today’s Journal, “One of many bad ideas that made it into the bill: Public companies will now have a wider loophole to avoid doing internal audits investors can trust. This requirement was the most important pro-investor reform of the last decade, and it worked. Of the 522 U.S. financial restatements in 2009, 374 were at small firms not subject to auditor reviews.”
But that’s not all! Mr Levitt outlines pic failure including:
• “Chuck Schumer’s wise idea to let the Securities and Exchange Commission (SEC) become a self-funded agency will likely be killed by appropriators who are unwilling to give up the power of the purse.”
• “Barney Frank’s (D., Mass.) effort to pass a new law to overcome the legal precedent of the 2008 Supreme Court’s Stoneridge decision, which allows third-party consultants, accountants and other abettors of fraud to avoid liability. Again, another sellout of investor interests.”
• “Congress didn’t deal with the massive problems of Fannie Mae and Freddie Mac. It’s one thing to fail to see trouble before it happens. Now, there’s no excuse. The central role played by these two organizations in the financial crisis is indisputable. Congress had a chance to fully restrict these agencies from anything but the most basic market-making activities, and it didn’t.”
What does all this (and more!) mean? Oh, nothing really. Levitt says that we’ll just have to wait for the next financial apocalypse to get it right.
InfoLogix Announces the Engagement of KPMG, LLP as the Company’s Independent Registered Public Accounting Firm [PR]
McGladrey resigned on June 10th and the company’s filing stated that were no disagreements yada, yada, yada although McGladrey had identified a material weakness in the company’s internal controls and their most recent audit opinion included a going concern paragraph. It wasn’t enough to spook KPMG, who got the blessing from InfoLogix’s audit committee on Tuesday. Enjoy.
BP Relied on Faulty U.S. Data [WSJ]
“BP PLC and other big oil companies based their plans for responding to a big oil spill in the Gulf of Mexico on U.S. government projections that gave very low odds of oil hitting shore, even in the case of a spill much larger than the current one.
The government models, which oil companies are required to use but have not been updated since 2004, assumed that most of the oil would rapidly evaporate or get broken up by waves or weather. In the weeks since the Deepwater Horizon caught fire and sank, real life has proven these models, prepared by the Interior Department’s Mineral Management Service, wrong.”
Leadership changes at Wichita Grant Thornton office [Wichita Business Journal]
“Lori A. Davis is the new managing partner at the Grant Thornton office in Wichita, the company announced Wednesday.
Davis will take the place of Jarod Allerheiligen, who will become the managing partner of the Grant Thornton operations in Minneapolis. The change in responsibilities is scheduled to take place Aug. 1.”
Ex-Detroit Mayor Kwame Kilpatrick indicted by feds on 19 mail fraud, tax counts [Detroit Free Press]
“Despite Kilpatrick’s repeated claims to the contrary, the indictment says he used fund money for campaign and personal expenses, ranging from polling to yoga and golf lessons to college tuition for relatives.
Prosecutors contend he failed to report more than $640,000 in taxable income while mayor that he received in the form of cash, flights on private jets and perks paid for out of the civic fund.”
$2 million payment to Phila. tax-amnesty program [Philadelphia Inquirer]
Philly’s tax amnesty program received a $2 million payment on Tuesday, it’s biggest since the program started on May 3. Collections so far have reached $18 million, according to city officials. They also expect to reach their goal of receiving between $25 and $30 million by the end of the program on Friday.
Feinberg to quit pay czar post to focus on BP fund [Reuters]
This guy is a glutton for punishment.
Accounting News Roundup: New Rule from FASB, IASB Will Bring Leases on Balance Sheet; California’s Latest Revenue Idea; Madoff CFO Released to House Arrest | 06.23.10
New Accounting Rules Ruffle the Leasing Market [NYT]
The convergence efforts by the FASB and the IASB have managed to produce a consensus on lease accounting and it has repercussions on both sides of the balance sheet.
“The two boards have come up with a new standard, which will be completed next year and enacted in 2013, that will require companies to book leases as assets and liabilities on their balance sheets. Currently, American and foreign companies list many leases as footnotes in their financial statements. As a result of the change, public companies will have to put some $1.3 trillion in leases on their balance sheets, according to estimates by the Se e Commission. Because many private companies also follow GAAP accounting, the number could be closer to $2 trillion, experts said.”
Middle-Class Tax Boost Is Broached [WSJ]
Reaction to Steny Hoyer’s call in a speech for Congress to quit lying to themselves was not met with enthusiasm.
The Journal reports that the GOP has different ideas, including House Orange leader John Boehner is quoted in the Journal, “Mr. Hoyer’s speech brought a round of criticism from Republicans, who emphasize spending cuts instead, and oppose allowing any Bush tax cuts to expire. House GOP Leader John Boehner of Ohio said Mr. Hoyer was admitting ‘that he supports raising taxes on the middle class to pay for more government spending.’ ”
Rep. Oompa Loompa obviously didn’t hear the part of the speech where Hoyer addressed the “cut spending” broken record, “The eagerness of so many to blast spending in the abstract without offering solutions that come close to measuring up to the size of the problem.”
California could turn license plates into ad revenue space [Silicon Valley/San Jose Business Journal]
The latest out of the brain trust in Sacramento, “As California faces a $19 billion deficit, the Legislature is considering whether to allow license plates to become traveling ad spaces.
When the vehicle is moving the license plate would look like the ones we’re used to now, but when the vehicle stops for more than four seconds a digital ad or other message would flash. The license plate number would always be visible.”
Madoff crony sprung [NYP]
“Earlier yesterday, former Madoff CFO Frank DiPascali Jr. was released to house arrest.
A grizzled-looking DiPascali refused to answer questions about the report in Monday’s Post that Madoff told fellow jailbirds that DiPascali knows the identity of three people the Ponzi king gave money to shortly before his arrest.
A judge initially refused prosecutors’ requests that DiPascali be released so he could assist in their ongoing probe, but in February he won a $10 million bail package based on his extensive cooperation.”
BP confirms Bob Dudley in key Gulf clean-up role [AP]
Knock ’em dead!
Business Leader Slams ‘Hostile’ Policies on Jobs [WSJ]
“In comments marking one of the sharpest breaks between top executives and the Obama White House, [Verizon Communications CEO Ivan] Seidenberg used a speech at Washington’s Economic Club to unleash a list of policy grievances over taxes, trade and financial regulation.
Mr. Seidenberg’s comments are particularly notable because he heads the Business Roundtable, a group encompassing the chief executives of the nation’s largest listed companies whose members have enjoyed frequent access to the president and his top aides. Its leaders have advised the White House on topics from economic recovery to health care to clean energy.”
SEC Self-Funding Is A Mistake! [The Summa]
“In support of SEC self-funding, SEC chairs always argue in public that they lack sufficient and consistent funding to enforce securities laws and regulations. As proof, they point out that Congress occasionally cuts back on SEC funding.
What they don’t mention is that the budgetary review process provides an opportunity for Congressional oversight of the SEC. When the SEC is performing poorly, say due to the atrocious leadership of the Chairs (i.e., Cox and Schapiro), a Congressional budget cut is a natural and effective response. Of course SEC chairs want self-funding, it gives them a pass from oversight. Who wouldn’t want that?”
Gulf Coast Workers Not Really Down with Taxes on Their BP Payments
Wait! You mean we have to pay taxes if we receive cash? When the hell did this happen? What if you’re part of the “self-reliant nonconformists who don’t pay much heed to everyday rules and regulations” community? Does that earn you a pass?
The AP reported on some workers on the Gulf Coast who are simply not aware of the notion of income taxes and would very much like to keep it that way:
Out-of-work Gulf Coast shrimper Todd Pellegal spent his first $2,500 check from BP quickly, paying off bills and buying groceries for his family.
He never even considered putting some of it away for taxes.
Now he’s among the people up and down the Gulf Coast reeling from the oil spill disaster who are surprised — and frustrated — to find out the Internal Revenue Service may take a chunk of the payments BP PLC is providing to help them stay afloat.
Many were already angry about how long the oil giant took to cut the checks. So when they got the money — generally about a few thousand dollars each so far — they spent it fast.
“If they’re going to pay you a lump sum, like for a year, then bam, take the taxes out of the check,” said Pellegal, of Boothville, La. “But a little bit at a time, they shouldn’t.”
Right, because withholding taxes from a paycheck isn’t how it works for every other person in the country who pays income taxes. Whoever heard of “net pay”?? But don’t bother suggesting planning for such a phenomenon as being paid by check:
“They should do a projection of their taxable income and determine if there is going to be a tax liability and have enough to cover that,” said Crystal Faulkner, a partner in the Cincinnati-based accounting firm of Cooney Faulkner & Stevens LLC.
That doesn’t sit well with Cherie Edwards, who is now only working one day a week at her job booking charter fishing trips at Zeke’s Landing in Orange Beach, Ala. The lost hours due to the oil spill are costing her about $270 week.
She said she got her claim number from BP on Thursday and plans to file an application in the coming day. So far, she said, no one has mentioned to her about a potential tax liability.
“I haven’t even thought about taxes. Wow. That makes me mad,” said Edwards, who has one child in college and another in high school. “I’m already losing money, and now I’ve got to figure out how to hold back money to pay taxes?”
Jesus lady, you’re right. Getting used to the $0 tax liability and then all of a sudden learning that you are required by law to pay them would piss off just about anyone.
IRS May Tax Payments to Gulf Coast Victims [AP via Tax Lawyer’s Blog]
Accounting News Roundup: IASC Names New Chairman; New York Tax on Smokes To Get Even Higher; Medifast’s Revenue Recognition to Get Another Look? | 06.21.10
Accounting Body Picks New Chief [WSJ]
“Former Italian Finance Minister Tommaso Padoa-Schioppa has been named to head the group that oversees international accounting rulemakers. Mr. Padoa-Schioppa will assume the chairmanship of the trustees of the International Accounting Standards Committee Foundation in July. The foundation’s monitoring board appointed him chairman for a three-year term. The IASC Foundation oversees the London-based International Accounting Standards Board, selects its members and raises funds for its operations. It also helps promulgate the move toward a single set of accounting rules used world-wide.”
New York Reaches Deal to Raise Cigarette Tax [NYT]
Smokers might want to start hoarding cartons as Governor David Paterson and legislators have reached a tentative agreement to raise the cigarette tax in New York. Taxes on cigarettes in NYS, currently $2.75 a pack, would rise an additional $1.65. Taxes in New York City would rise to $5.85 a pack, marking the first city in America with a tax of greater than $5 on cigarettes.
The proposal would raise $440 million this year, according to the Times. The state’s budget deficit is approximately $9 billion.
Open Letter to the Securities and Exchange Commission: Is Medifast Complying with Revenue Accounting Rules? [White Collar Fraud]
Sam Antar is a little skeptical about a plethora of Medifast’s financial reporting and disclosures including: revenue recognition policy, “the company is possibly recognizing revenue up to 8 business days too early”; their low allowance for doubtful accounts, “the $100,000 reported for such an allowance does not seem reasonable enough given Medifast’s volume of revenues and the dates it either ships or delivers its orders to customers after processing them.”; and lack of deferred revenue liabilities, “Medifast’s financial reports going back to 2004 disclose no deferred revenue liabilities for customer orders processed before each fiscal year ended and either shipped or delivered after those respective fiscal years.”
This trifecta has Sam concerned enough that he’s asking the SEC to poke around a little more than they did the last SEC review in 2007, when the SEC found…nothing.
BP Chief Draws Outrage for Attending Yacht Race [NYT]
Probably seemed like a nice idea at the time, “BP officials on Saturday scrambled yet again to respond to another public relations challenge when their embattled chief executive, Tony Hayward, spent the day off the coast of England watching his yacht compete in one of the world’s largest races.”
BP, Transocean tap a well of Washington lobbyists and consultants [WaPo]
The obvious solution to CEOs attending yacht races, Joe Biden-esque articulation and such is paying someone a lot – a lot – of money to rep these companies. It’s pretty much the only option they have left.
BP CFO Explains the Ixnay on the Ividenday
“It’s an extraordinary thing for a company to do, but it’s an extraordinary thing we’re in.”
~ BP CFO Byron Grote, on the company’s decision to suspend its dividend, on a conference call with investors.
Transocean Saved Billions in Taxes by Moving Legal Domicile Offshore
While BP continues to get murdered in the press for its role in the Deepwater Horizon nightmare in the Gulf of Mexico, we bring you a new reason to hate on another big player in this mess, Transocean. Martin Sullivan writes in Tax Analysts’ Tax Notes about the billions in taxes Transocean has managed to avoid since moving its domicile offshore – first to the Cayman Islands and then to Switzerland.
For those of you not completely up-to-speed on your Deepwater Horizon cast of baddies, Transocean was the owner and operator of the De BP was the project operator (think of a general contractor) of the rig, paying Transocean $500,000 a day to drill the well.
Sullivan writes in his piece that despite Transocean being legally domiciled in Zug, Switzerland, (a transaction known as an inversion or corporate expatriation) it really does very little to change the substance of the company’s operations, “These tax-motivated restructurings occur with little or no real change in day-to-day business operations. Top executives, key personnel, and all significant business operations in the United States before the transaction remain in
the United States.”
The transactions were controversial to be sure, and companies that engaged in them were likened to Benedict Arnold by politicians when the came under fire back in the early Aughts. To get an idea of Transocean’s savings, Mr Sullivan presents data that shows the company’s preinversion average effective tax rate of 31.6% and its postinversion tax rate of 16.9%. This saved the company just over $1.8 billion in taxes over the last ten years.
Transocean consummated their inversion back in 1999, so they were far ahead of the curve, as the tax benefits for inversions were stripped out in the code effective for transactions that occurred after March 4, 2003 but the savings have added up over the years as the company saved over $750 million just last year.
But Transocean has largely stayed out of the spotlight in this whole shitshow and has been in CYA mode virtually the whole time, consistently citing an indemnification agreement with BP, filing to limit its liability:
As set forth under Federal Law, the complaint also asks that the companies be judged not liable on claims for certain, defined losses or damages relating to the casualty or, if they are judged to be liable, that the liability for such claims be limited to the value of their interest in the Deepwater Horizon rig and its freight including the accounts receivable and accrued accounts receivable as of April 28, 2010. The petitioners assert in the filing that the entire value of their interest does not exceed $26,764,083.
And scoffing at any notion of not paying its dividend, reminding everyone that they declared it long before explosion on the rig they were operating, “Transocean will honor all of its legal obligations arising from the Deepwater Horizon accident. The dividend proposal was announced on February 16, 2010, described in the preliminary proxy statement which was filed with the Securities and Exchange Commission on March 1, 2010, and approved by shareholders at the company’s annual general meeting on May 14, 2010.”
Throw the decade or so of tax savings and it sounds like Transocean has it made in the shade. How’s that for corporate responsibility and accountability? It’s not like we’re dealing the largest environmental disaster ever.
Transocean: Better at Tax Planning Than Oil Drilling [TaxProf]
Accounting News Roundup: BP Weighing Options on Dividend; Will the “New Wealth Taxes” Affect You?; Medifast Keeps Things Vague | 06.14.10
BP unlikely to cancel dividend, but mulls several ideas: source [Reuters]
They may defer it, pay it in shares or “pay into a ring-fenced account until the oil spill liabilities become clearer.” All of which will please absolutely no one.
Auditors to reveal bank talks under new plans [FT]
Proposals by the ICAEW would require auditors to disclose their private discussions with bank audit committees afte showed that “the value of bank audits had shown investors especially were dissatisfied by the audit report. The internal process involved was perceived as helping to keep bank executives in check, but investors felt the report was only a box-ticking exercise.”
The Big 4 have historically resisted these types of proposals, arguing that it will expose them to additional legal liability.
Suggestions cited include assurance on the “front half of annual reports,” as well as an audit of the banks’ summaries of risks. The ICAEW said it was aware that this would add to the auditors’ workload.
Vantis trading suspension follows difficult financial period [Accountancy Age]
The court-appointed liquidator for Allen Stanford’s bank, Vantis, has had trading of its shares suspended by the AIM after the company was unable to obtain any funds for their services related to the Stanford case, among other financial difficulties.
Ernst & Young had issued a going concern opinion for the company back in February, warning that continued lack of cash flow would have to be remediated quickly for any possibility for the continuation of the business.
How the New Wealth Taxes Will Hit You [WSJ]
Are you one of those “rich” people? That is, do you have an adjusted gross income of $200,000 or more ($250,000 for joint filers)? If so, you’ll probably want to know that two new tax levies will come your way in 2013 as a result of the new healthcare legislation – a 0.9% levy on wages and a new 3.8% tax on investment income.
The 0.9% tax is on any wages over $200k/$250k. For example, if you are single and made $300,000, your additional tax would be $900.
Similarly, the investment income tax would tax any investment income in excess of the $200k/$250k threshold and the 3.8% tax would be applied. What’s investment income you ask?
Interest, except municipal-bond interest; dividends; rents; royalties; and capital gains on the sales of financial instruments like stocks and bonds. The taxable portion of insurance annuity payouts also counts, unless it is from a company pension. So do gains from financial trading, as well as passive income from rents and businesses you don’t participate in. All are subject to the 3.8% tax on amounts above the $250,000 or $200,000 threshold, as described above.
Income that is not considered investment income include: distributions from IRAs, pensions and Social Security, annuities that are part of a retirement plan, life-insurance proceeds, muni-bond interest, veterans’ benefits, and income from a business you participate in, such as a S Corporation or partnership.
KPMG considering move to 1801 K [Washington Businsess Journal (subscription required)]
KPMG might move their Washington, DC office location to 1801 K St. NW from 2001 M St. NW according to “real estate sources.” KPMG’s spokesman said that the firm is continuing to “examine all of our options.” The situation is fluid.
Open Letter to the [SEC]: Why You Must Review Medifast’s Revenue Accounting Disclosures [White Collar Fraud]
Sam Antar would like to put the SEC on notice that Medifast seems to be less than transparent when it comes to its disclosures, “it seems that Medifast is recognizing revenue upon shipment and not delivery. As a minimum, Medifast, like Overstock.com, should be required to expand and clarify its disclosures to avoid confusing investors.”
Accounting News Roundup: Dell Looks to Settle SEC Probe; BP’s Request for Tax Docs Causes Issues for Fishing Communities; Salesforce CFO: We Need Sales People! | 06.11.10
Dell, CEO Are in Talks to Settle SEC Probe [WSJ]
The SEC’s probe, launched in 2006, into Dell had initially focused on some accounting manipulation that has now ensnared founder and CEO Michael Dell focusing on disclosure and omissions related to Intel Corp. and negligence-based fraud charges.
The Journal reports that the possible fraud charges “suggests that the SEC may suspect that Mr. Dell unintentionally made statements that he should have known were misleading.”
In anticipation of the settlement, the company will restate its most recent earnings report, reducing its net income by $100 million.
The fishermen and the tax man [Los Angeles Times]
BP is requesting tax records from people in fishing communities in order process claims of lost work related to the Deepwater Horizon spill. Those seeking payment need to submit a commercial fishing license, proof of residence and tax statements. The problem is that many of these people do not keep tax records since they are paid in cash for their work.
More than 25,000 claims have been submitted so far and payments to about 12,000 have been made, totaling $36 million, according to the LA Times.
BP, through Graham MacEwan says that there’s a plan although like most of this crisis, the company isn’t sure how it will be fixed, “BP Chief Operating Officer Doug Suttles has been telling parish council members over the past few days that if someone’s tax documents are not available, we will find other metrics. I don’t know exactly how we are going to do that yet.”
Salesforce CFO: Company Aggressively Hiring Sales Staff [Dow Jones]
Cloud trailblazer Salesforce.com is looking to add more sales personnel, having added 18,000 new customers over the last 12 months according to CFO Graham Smith.
Mr Smith also said the company is rolling out two new products in the near future including Chatter, a “a social-networking application for office collaboration” and VMforce, a collaboration with VMware, Inc. that will give Java developers a new way to deploy applications over the web.
Accounting News Roundup: Alaska Union Criticizes Lost Data Deal with PwC; Levin Appointed to Ways & Means Chair; E&Y Received £35m in Audit Fees from BP | 03.05.10
• First things first: Don’t forget that it’s National Employee Appreciation Day 2010. [GC]
• Public employees union criticizes data loss deal [AP via CNBC]
Remember how PricewaterhouseCoopers lost the records of 77,000 Alaska public employees and retirees? PwC, trying to be a standup corporate citizen, took responsibility for the slip-up and promised those affected all kinds of stuff including identity theft protection, credit mo ty freezes. Hell, they said they would even reimburse any losses that occurred due to identity theft.
Shockingly, that wasn’t good enough for some people. The Alaska State Employees Association is pretty bent out of shape about the deal the state took and wants them to go back and get more. MORE. MORE!
Specifically, it wants the affected people to be automatically enrolled into the firm’s credit protection services, instead of being required to opt-in. The union also questioned why those services will only be available for a minimum of two years, though consequences of the data loss may pop up long after the services expire.
“We think that’s shortsighted to put a two-year period on it,” said union business manager Jim Duncan. “It doesn’t adequately protect our members or retirees.”
Alaska’s Department of Law is perfectly okay with the deal and if they could have gotten P. Dubs to give everyone lifetime guarantees, by God, they would have. But it wasn’t in the cards, “[Assistant attorney general Ed Sniffen] characterized it as a generous settlement that the Department of Law is pleased with. And unless new information indicates the parties weren’t negotiating in good faith, renegotiation is unlikely.”
Besides, if an employee becomes an identity theft victim, they can still sue PwC for damages. And that’s really what this country is all about; the ability to blame someone else and sue their ass.
• Levin To Chair Tax-Writing Ways And Means Panel [AP via NPR]
Representative Sander M. Levin (D-MI) will serve as the new Chair of the House Ways & Means Committee after Charlie Rangel gave up the Chairmanship under pressure for ethics violations.
Mr Levin represents the 12th district in Michigan and has served in Congress since 1982 and is the older brother of Senator Carl Levin (D-MI).
Levin takes the gavel after House Speaker Nancy Pelosi initially appointed Pete Stark of California. It’s entirely possible that Speaker Pelosi realized that Mr Stark might not be the most diplomatic member of the House; he has a history of just saying whatever comes to mind like:
• Calling Rep. Nancy Johnson (R-CT) a “whore for the insurance industry.”
• Arguing with Rep. Scott McInnis (R-CO): “You think you are big enough to make me, you little wimp. Come over here and make me, I dare you. You little fruitcake.”
• That former President George W. Bush was amused by soldiers getting their heads blown off in Iraq.
Among other things.
• BP pays E&Y £54m in fees [Accountancy Age]
Now before you start screaming about the money, you should know that the fees are actually down significantly from the last two years. In ’08 E&Y got £67m and £75m in ’07. Beyond Petroleum says they’re doing things more efficiently in the ‘audit process’ and reducing tax and other services. See? Tough times all around.