Bramwell's Lunch Beat: Morgan Stanley's Boo-Boos
Here are “Bramwell’s Lunch Beat” menu items for December 4.
IRS nominee gets hearing next week
The Hill on Tuesday confirmed that the Senate Finance Committee has scheduled a nomination hearing on December 10 for John Koskinen, President Obama’s pick as the next commissioner of the IRS.
Lawmakers will surely grill Koskinen on what he will do to make sure the IRS doesn’t single out conservative groups’ tax-exempt statuses again, as well as how he will rebuild taxpayer confidence in the agency.
Morgan Stanley’s non-scandalous accounting gaffes
Jonathan Weil of Bloomberg reported on how Morgan Stanley last year corrected a classification error that had a large effect on the numbers the financial services firm showed on its cash-flow statement. Cash flows from operating activities for 2011 were revised to $15.9 billion from $6.7 billion. Cash flows from investing activities for 2011 were changed to negative $11.2 billion from negative $2 billion.
“Morgan Stanley deemed the correction to be immaterial for accounting purposes. Based on that determination, the company didn’t formally restate its financial reports,” Weil wrote. “The company cited a bunch of justifications after the SEC challenged its conclusion. Namely, the correction had no effect on earnings or the company’s balance sheet. The SEC seems to have given Morgan Stanley a pass and let the matter drop, at least for now.”
While Morgan Stanley’s accounting might not be perfect, Weil said in this instance, the accounting rules are worse.
Madoff behaved like a lunatic over fund probe, jury told
Bernie Madoff began swearing and “throwing himself around the office like a lunatic” after hearing the Florida investment firm that funneled $441 million into his Ponzi scheme was being probed for failing to register its promissory notes as securities, Frank DiPascali, Madoff’s ex-finance chief, told a jury in federal court on December 3, as reported by Bloomberg.
In one incident involving an unexpected audit by KPMG, a fake trading report was hot because it had just been printed, according to DiPascali. The report was tossed around by three of the other defendants in the case –- Joann Crupi, George Perez, and Jerome O’Hara –- “like a medicine ball” to make it look worn instead of new, and then put in a refrigerator to cool off, DiPascali testified.
Supreme Court sides with IRS in tax shelter penalty case
Chalk up a win for the IRS, after the US Supreme Court on December 3 ruled in favor of the agency and socked a taxpayer who used a 1990s tax shelter with a 40 percent penalty, Forbes reported.
“The decision, US v. Woods, reversed a 5th Circuit opinion which held that the 40 percent penalty did not apply in sham partnership cases and declared the issue ‘well settled,’” the article stated.