Legal issues | AccountingWEB

Legal issues


Implications of a KPMG Indictment

The number of the Big Four may be changing as the Justice Department considers the penalties for KPMG. The firm may be indicted for allegedly selling tax shelters later deemed to be abusive. The full enforcement of the law could mean a full collapse of the firm; very similar to what happened at Arthur Anderson after it was convicted of obstruction of justice connected with its Enron audits. “Its an awkward spot,” Jack Ciesielski, publisher of the industry newsletter, the Analyst’s Accounting Observer, told There are two sides to an indictment scenario.

Ebbers Sentenced but Investors Still Waiting

Former WorldCom CEO Bernard Ebbers was sentenced Wednesday to 25 years in prison for his part in the nation’s largest accounting fraud. U.S.
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PricewaterhouseCoopers Settles Federal Overcharging Claims

According to the U.S. Department of Justice (DOJ), PricewaterhouseCoopers (PwC) has agreed to settle allegations that they defrauded the government by overcharging for travel expenses over 11 years. The payment of $41.9 million settles a whistle-blower lawsuit initiated against the world's largest accounting firm in 2001. In a statement to the Associated Press, PwC spokesman David Nestor said the firm admitted no criminal misconduct in settling with the government.

A Conversation With...Barry Melancon

More than two years after federal law changed the way accounting firms conduct business, the head of the profession's advocacy says significant challenges remain.

Federal Court Backs GM in Pension Suit

A federal court is backing General Motors Corp. in its attempts to recover up to $253 million from the federal government for one of its underfunded pension plans.The Wall Street Journal reported Wednesday that Judge Nancy Firestone of the U.S. Court of Federal Claims made a first-of-its-kind decision in saying that the federal government should pay GM the “allocable amount” of the pension underfunding, even though no specific amount was given.The government owes GM because the company in 1993 sold a division called Allison Gas Turbine, which provided services to the government.
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Judge Refuses to Dismiss Deloitte's Parmalat Lawsuit

Big Four accounting firm Deloitte & Touche has lost its bid for dismissal of a class-action lawsuit by investors in Parmalat, the now-bankrupt dairy giant based in Parma, Italy.Deloitte had asked a federal court judge in New York to dismiss the suit brought against its U.S. and international arms, arguing that the firm's global affiliates cannot be responsible for the actions of other arms.
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Former HealthSouth CEO Scrushy Found Not Guilty

After 21 days of deliberation, an Alabama jury on Tuesday, June 28, 2005 found former HealthSouth CEO Richard Scrushy not guilty on all counts. The verdict comes only five days after one juror was replaced with an alternate juror forcing deliberations to begin anew. It is the first acquittal in a series of trials of high-profile CEOs accused of accounting fraud.Scrushy initially faced 85 charges of mail fraud, conspiracy, making false statements, money laundering, securities fraud and wire fraud resulting in a $2.7 billion inflation of HealthSouth’s profit numbers.

Kozlowski Blames Accountants For Excesses and Oversights

Although they are free on bail for the moment, former Tyco International CEO Dennis Kozlowski and former CFO Mark Swartz have been convicted of looting their corporate cow of more than $150 million. Both men are awaiting sentencing tentatively scheduled for August 2nd. To remain free until sentencing, each paid $10 million bail. Kozlowski and Swartz were convicted last week on 22 counts of conspiracy, falsifying business records, grand larceny, and securities fraud. After a trial lasting more than four months, the jury reached their decision in only eleven days.

HealthSouth’s Legal Odyssey Continues

On June 22, 2005, the federal appeals court in Atlanta, Georgia, vacated the probation sentences of former HealthSouth executives Mike Martin and Richard Botts sending the case back to a lower court for resentencing.

KPMG's Admission May Hurt Civil Tax Shelter Case

KPMG's acknowledgement of “unlawful conduct” in selling questionable tax shelters may help the firm it in its negotiations with criminal prosecutors, but it may make big civil fines more likely.Big Four accounting firm KPMG, in a statement last week, said it “deeply regrets” tax shelter abuses and “takes full responsibility.” Its admission may hurt the other defendants who also worked on selling the tax shelters and were sued by investors along with KPMG, the Wall Street Journal reported.The other firms include: Sidley Austin Brown & Wood, which provided advice to investors;
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KPMG, Justice Negotiating on Tax Shelter Case

Justice Department officials are mulling whether to seek a criminal indictment against KPMG for obstruction of justice and the sale of abusive tax shelters, the Wall Street Journal reported Thursday.Talks between federal prosecutors and KPMG could determine the fate of the Big Four accounting firm, the Journal reported, citing lawyers briefed on the case.If the firm is indicted, KPMG could suffer the fate of now-defunct Arthur Andersen, which could not withstand a Justice Department obstruction of justice indictment and its association with scandal-ridden Enron Corp."In light of the A

HealthSouth Agrees to $100M Fine; Scrushy Jurors Remain Deadlocked

While jurors remain at an impasse in Richard Scrushy's $2.7 billion corporate fraud trial, the company he founded, HealthSouth Corp., agreed to a $100 million settlement with the Securities and Exchange Commission.Jurors adjourned Wednesday with instructions to resume deliberations Monday. Scrushy is accused of coordinating a scheme to inflate earnings from 1996 through 2003 and faces a 36-count indictment.Also Wednesday, the company settled civil charges with the SEC, which sued the company in 2003, claimed earnings were overstated by at least $1.4 billion.

Colleges Caught when Donors Touched by Scandal

Recently, the Associated Press reported that 47 American colleges and universities have endowments exceeding $1 billion. How much of those endowments, and of the many donations made to less financially well off schools have a whiff of scandal to them. After all, some of the high-flying CEOs and much sought after alumni donors of only a few years ago find themselves embroiled, accused and even convicted of financial misdeeds today.Schools across the country are finding themselves tied to the recent string of corporate scandals like Enron, Tyco, WorldCom and others.
Community News

Enron Related Problems Not Over Yet

The Palo Alto City Council is debating whether the city’s budget should be amended to reflect the agreement to pay $21.5 million to Enron. The settlement, which contributed to utility rate increases, concludes a story begun in 2001. The story, and Palo Alto role it, has primarily been told behind closed doors.Palo Alto entered the story when the city, along with ten other communities in the Northern California Power Agency (NCPA), formed an alliance with the energy giant to manage the agency’s power supply and sales.

Frivolous Cases Lead to Tax Court Fines

Taxpayers using the judicial system to delay tax collections could pay a stiff price if they file cases simply as a delaying tactic, the Internal Revenue Service (IRS) says.Since the beginning of 2004, the IRS reports that the U.S. Tax Court imposed penalties totaling more than $117,000 against taxpayers filing frivolous cases in order to delay tax collections. Since 2001 the total amount of such penalties exceeds $378,000. The Second, Ninth and Tenth Circuit Appeals courts have upheld six earlier Tax Court decisions with penalties totaling an additional $15,600.The U.S.

Burn it, Pulverize it or Shred it, Don't Just Toss it

Employees' personal information must be destroyed to prevent identity theft under a new law that went into effect Wednesday.Business owners who don't own a shredder should consider buying one because it's no longer good enough to rip up personal documents and throw them away.

High Court Overturns Andersen Conviction

Calling jury instructions too vague, the U.S. Supreme Court unanimously overturned the 2002 obstruction of justice conviction of the once-mighty Arthur Andersen LLP.The accounting firm, which shredded documents connected to the fallen Enron Corp., was convicted after jurors were told that Andersen could be found guilty even if they determined that the accounting firm "honestly and sincerely believed that its conduct was lawful,” the New York Times reported.
Community News

No Settlement for H&R Block

U.S. District Court Judge Elaine Bucklo rejected the proposal to settle a class-action lawsuit brought against H&R Block’s tax-refund loan program on Wednesday, May 25, 2005. The proposed $360 million settlement covering more than 28 million customers and 55 million transactions, was the second settlement proposal blocked by Judge Bucklo, according to the Associated Press.

Suit Alleges PWC Missed 'Key Warning Signs' at AIG

The decades-long relationship between PricewaterhouseCoopers (PWC) and American International Group (AIG) is being scrutinized as regulators allege the accounting firm overlooked problems and issued false audit reports.Advertisement

PCAOB Takes First Disciplinary Action

In its first disciplinary action, the Public Company Accounting Oversight Board (PCAOB) on Tuesday revoked the registration of a public accounting firm, barred the managing partner of the firm from association with any registered accounting firm and censured two former partners of the firm. New York accounting firm Goldstein and Morris CPAs, P.C. was notified in September 2004 that the firm would be inspected by the PCAOB in November 2004. The Board found that after managing partner Edward B. Morris and two partners Alan J. Goldberger and William A.


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