It’s probably safe to say that billionaire hedge fund manager Leon Cooperman doesn’t get poor service very often. As the founder of Omega Advisors and #655 by Forbes‘ last count, the man has arguably earned the right to demand only the best, especially when it comes to something as important as tax services.
How that Cooperman is just the latest billionaire to have tax issues (McCombs, Anschutz have had troubles recently) that might cause a less prudent mega-rich person to flip their lid (e.g. Ted Turner, Steve Jobs).
Cooperman recently received a letter from the IRS informing him that despite the generous gift of $43 million to his own foundation, the contribution could not be allowed because the donation was a non-marketable security made to a private foundation, which is not allowed by the IRS. Had he made the donation to say, NORML (he looks like he could get behind it, couldn’t he?), or some other public charity everything would have been hunky-dory.
Unfortunately for Mr Cooperman, this isn’t the case and the IRS sent him a bill for $14 million in back taxes and $5 million in penalties. Understandably, this aggression will not stand and the “plain-speaking” Coop has taken the case to court to insist that he relied on his accountants to get this shit right. It’s complicated, after all. It’s not about the money, it’s the principle. Coop would gladly schlep in suitcases of consecutively numbered hundos to settle this here and now but the penalties are uncalled for and he’s bound and determined to prove that. But who actually is to blame?
The lawsuit says Cooperman’s two personal returns claiming the deductions were prepared by his longtime accountant, Mark I. Gittelman, a CPA with Gittelman & Co., Clifton, N.J. The formal appraisals to support the claimed deductions were done by RSM Business Services and Duff & Phelps, Cooperman’s suit adds.
McGladrey does tax work for other Cooperman entities, including his hedge fund, Omega Advisors. Cooperman told Forbes that McGladrey knew he was planning to donate a nonmarketable security to his private foundation and take a deduction when the firm rendered its appraisal for a fee that Cooperman said was about $20,000.
Again, the money isn’t important but for crissakes, McGladrey, you just don’t half-ass your work for Leon Cooperman. Forbes was all over this issue back in ’04. Where were you in 2004? Stumping for John Kerry?
Of course we all know where this is eventually going – litigation! When rich people get wronged, someone inevitably pays and it sounds like LC is happy to sit tight and let the tax court do its thing. Once that’s resolved, he’ll turn his sights towards the responsible parties:
Cooperman clearly is thinking about malpractice litigation. He acknowledged McGladrey is likely to assert it didn’t prepare or sign the tax returns with the disallowed deductions, although the firm’s formal appraisal was attached.
Best of luck to everyone involved!
One unhappy Mickey G’s employee would like to get something out there:
Now that salary adjustments have been communicated to employees, many are griping at McGladrey – and for good reason.
More than a few people are grumbling about the recent golf signings and ridiculous sports marketing platform as well as the fact the company spent money on a 144-foot cake, but only gave thousands of people 1 to 3% raises.
Combined with the fact that no one got raises last year, and with inflation, rising costs of benefits and everyday living expenses, well, many employees are not too happy about this slap in the face. Let one thing be said, if you are not looking out for yourself with this company, then you are doing yourself a disservice. The company doesn’t care about you, they only act like they do.
The great place to work platform is BS – it’s a marketing crock.
McGladrey? Heck, I’d rather be McLuvin and at work at McDonald’s…they treat employees better.
Leftovers of the freakishly repulsive cake that McGladrey rolled out for its rebranding was apparently not shared with other offices because the crew in Phoenix/Las Vegas took it upon themselves to come up with another method of celebration.
“After we returned from brand champion training in Orlando, the three of us met to brainstorm for ideas to make our local brand launch fun and memorable. We wanted to focus on more than just the launch. We wanted employees to know that a brand launch is only successful if the brand becomes part of everything they do.”
What exactly was the idea? Another cake? A surprise appearance by Natalie Gulbis? Keeping your jobs?
No, the creative minds in Phoenix/Vegas decided that gathering everyone together and asking them to drink blue Kool-Aid™ was the best way to show everyone that they are in this together. DO OR DIE.
“Asking employees to ‘drink the McGladrey Kool-aid’ sends the message that we all need to be in this together,” says ——. “And there’s no opting out if we’re going to make this effort a success.”
Pardon what is about to follow but…WHAT. THE. FUCK? Forget about the literal manifestation of a corporate metaphor, which is all sorts of lame (no on is schlepping an 800 lb. gorilla into HQ, are they?). Ever heard of Jonestown? Aren’t we all just a little too trusting with this “drink this” attitude? “Hey, just drink this Dixie cup that’s full of what we say is blue Kool-Aid™ because it will bring us all together.”
And you know how they got a lot of people to get on board with this? FREE T-SHIRTS!
“As an added incentive, employees who drank McGladrey Kool-aid from a Dixie cup received their very ownMcGladrey t-shirt.”
All we can say is, don’t walk but run away.
Hell, they did even go with another woman. They figured making Davis Love III the third dude golfer to be sponsored by McGladrey was the best route.
Although no terms were disclosed on DL-cubed’s deal, we’re guessing it’s a decent deal, not Phil Mickelson money mind you, but he won’t be starving either.
And DL3 is pretty flippin’ pleased to be the third amigos, “Following the great work McGladrey has done with the Davis Love Foundation, it was a natural progression for me to join Team McGladrey and proudly support their brand in the way they’ve supported my Foundation. It was great to kick off my new sponsorship with McGladrey in style with a good showing at the U.S. Open, and I look forward to continued success on and off the course as a member of Team McGladrey.”
Likewise, C.E Andrews is pumped to have a 3rd join the team “Davis and the rest of our Team McGladrey Foursome demonstrate the values of integrity, excellence, understanding and teamwork – values that mirror our company’s approach to serving and understanding our clients.”
[caption id="attachment_13910" align="alignright" width="260" caption="All alone in the boys club."][/caption]
Unfortch for all of us, D Love stayed on script and didn’t mention Natalie Gulbis specifically which just reeks of a “bros before hoes” mentality. If McGladrey wants to sponsor a boys club, that’s their business but you can’t tell us that adding another lady on the team wouldn’t have worked just as well, if not better. Oh well. We’re sure Natalie will enjoy watching the three dudes ice each other at the joint appearances.
H&R Block announced its earnings for fiscal 2010 yesterday which included the details for the fka RSM McGladrey. The company’s press release basically says that times are tough but RSM had some good reasons for that.
For starters, the small tiff with M&P sort of put a damper on things and a nasty goodwill write-off:
RSM McGladrey reported fiscal 2010 pretax income of $58.7 million, down nearly 39 percent from $96.1 million in the prior year. Revenues declined 4.2 percent to $860.3 million, primarily due to the impact of the overall weak economic environment, which continues to pressure billable rates and hours within the industry. Profitability was negatively impacted by costs associated with previously resolved arbitration proceedings involving McGladrey & Pullen and other costs of litigation totaling $14.5 million in the aggregate, as well as a $15.0 million goodwill impairment charge at our capital markets business unit.
A 39% drop in profits could explain the nationwide layoffs at McGladrey that we reported on earlier this month. It’s a good thing they didn’t have the ginormous golf cake in this year’s numbers, otherwise the results would have been worse.
But if you ignore all that, things were essentially flat and everyone knows that flat is the new up!
Excluding these charges, pretax income would have been approximately $88 million and pretax margin for the segment would have been 10.3 percent, essentially flat with the prior year. The shortfall in revenues was partially mitigated by cost reduction efforts throughout the year. These efforts included headcount reductions to reflect lower client demand, as well as other non-client facing cost reduction initiatives.
OH! There’s the layoffs and they’re citing “lower client demand.” Thoughts on that, anyone?
H&R Block Reports Fiscal 2010 Financial Results [Market Wire]
U.S. Lawmakers Reach Accord on New Finance Rules [WSJ]
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?
“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]
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.
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]
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?
Caturano being acquired by RSM McGladrey [Boston Business Journal]
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.
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.
In the best example that we’ve seen of accounting firm make-up sex, today the RSM McGladrey and McGladrey & Pullen announced that they will now be branded under one name…McGladrey. Since the deciders on the name checked imagination at the door, the firms make it up to all of us with the best possible solution – building a giant putting green cake.
One of the duffers sponsored by McGladrey, Chris DiMarco, will attempt to chip in on the green later today and with any luck you’ll be able to watch it above as it happens.
As exciting as that is, it isn’t entirely clear whether or not this also serves as a tasty distraction from the layoffs and restructuring that is going on McGladrey. Kick that around if you like but also consider the fact that Natalie Gulbis doesn’t seem to be jumping out of this thing at any point in time, and that is a travesty that cannot go unnoticed.
UPDATE: We’ve been assured that the cake’s tastiness or lack thereof will be communicated to us later today. Whether or not there will be pre-cake jays, gallons of Vitamin D milk to wash it down or couches to pass out on has not been determined. Discuss and keep us updated. Spare no details – flavor, frosting, texture, etc.
UPDATE 2: Okay you guys – who witnessed this sorry-ass display? Natalie wouldn’t have disappointed the crowd like these losers. And then someone skulls one right into the camera? Video is completely gone right now. Unbelievable. Get back to us on this cake.
UPDATE 3: The report on the cake is in:
1) The cake is, actually, pretty big. And, it’s all cake, except for the part of the logo, which is made of rice krispie treats.
2) As for a slice of that cake…quite good, actually. The cake part is marble, and very soft and tasty. I nabbed what might be a corner piece with the “rough” frosting. It’s a lot of frosting. A lot.
I’d give the cake a solid A-. There will be a lot to save in the next few days!
Two minutes later we got his follow-up:
I had to stop eating it halfway through — I think I’d go into diabetic shock if I ate any more of it. The grade gets downgraded to a B+.