Watchdog

Tax

Apology for Accounting Failures May Have Been Premature

“I am sorry,” Daniel H. Mudd, interim chief executive of mortgage giant Fannie Mae to ld the Senate Banking Committee last week.
Tax

Credit Card Company Warns 180,000 of Potential Breach

The latest in a string of high-profile data thefts seems to have originated with retailer Polo Ralph Lauren Inc., the Associated Press reported.Data was reportedly stolen from the popular clothing retailer, forcing banks and credit card companies to inform 180,000 customers that their credit-card information may have been exposed.HSBC North America, a division of London-based HSBC Holdings PLC, has begun notifying holders of the HSBC-issued, General Motors-branded MasterCard that criminals may have obtained access to their credit card information and that the cards should be replaced, th
Tax

LexisNexis Breach Affects Hundreds of Thousands

Criminals who stole information from a LexisNexis database in the U.S. may have accessed the names, addresses, Social Security and driver license numbers of nearly 310,000 people, the Associated Press reported.The number of people affected is 10 times as many as publisher and data broker Reed Elsevier Group PLC had originally thought, the company acknowledged Tuesday. Last month, the company reported that personal information about 32,000 people had been accessed in a breach of LexisNexis' recently acquired Seisint unit.
Tax

Greenspan Urges Stricter Regulation of Fannie Mae, Freddie Mac

With the Fannie Mae and Freddie Mac's chief regulator acknowledging it could take years to straighten out accounting problems at Fannie Mae, Federal Reserve Chairman Alan Greenspan is now calling for strict limits on the companies' $1.5 trillion in holdings, the New York Times reported.Greenspan testified Tuesday before the Senate Banking Committee, taking issue with the enormous portfolios held by the two companies, which represent nearly a quarter of the home-mortgage market.
Tax

FBI Starts Investigation into Delphi Books

The FBI has started an investigation into irregular accounting practices at Delphi, the world's largest auto parts supplier.Delphi, based in Troy, Mich., announced last week that it had incorrectly accounted for $237 million in cash payments made in 2000 to General Motors, its former parent company. The errors, Delphi said, resulted in overstatement of pretax income by about $61 million in 2001, the Detroit News reported.The probe stems from an investigation launched by the Securities and Exchange Commission in August.
Tax

Accounting Troubles at AIG Appear Extensive

American International Group (AIG) is conceding it made numerous improper accounting transactions, including the deal it made with a unit of billionaire Warren Buffet's company, the New York Times reported.The deal in question occurred in 2000 between the insurance giant AIG and General Re, a unit of Buffett's company Berkshire Hathaway in which AIG's reserves were artificially inflated by $500 million. Reserves are important to investors and represent the funds an insurer puts aside to pay future claims, the Times reported.AIG now says its accounting for the deal was improper.
Tax

Fannie Mae Facing Another Class Action Lawsuit

On Friday, March 24, 2005, a class action lawsuit was filed against Fannie Mae in the District of Columbia federal court. Attorneys from the Law Office of Frank J. Johnson filed the complaint on behalf of traders in Fannie Mae stock options against the mortgage giant.The complaint alleges Fannie Mae and its top executives misrepresented or failed to disclose the troubled company’s true financial condition in public statements between April, 2001 and September, 2004.
Tax

Son of Boss Settlement Causes Firms to Refocus Priorities

With the nation's largest accounting firms returning to their core business of auditing publicly held companies, they seem to be moving away from the tax-shelter business that landed the firms-and their clients-in the hot seat with the Internal Revenue Service.The tax-shelter boom of the 1990s, complete with a marketing machine operating at full speed, seems to be phasing out as the IRS cracks down on abusive shelters, such as Son of Boss.Last Thursday, the IRS announced it had collected a record $3.2 billion in taxes and penalties from participants in an abusive tax shelter known as Son
Tax

FDIC Wants Banks to Notify Customers of Identity Theft

On Friday, March 18, 2005, regulators at the Federal Deposit Insurance Corp. (FDIC) voted 5-0 to approve a ruling that would force U.S.
Tax

SEC Charges Time Warner with Fraud

The Securities and Exchange Commission this week charged Time Warner Inc. (formerly known as AOL Time Warner) with materially overstating online advertising revenue and the number of its Internet subscribers, and with aiding and abetting three other securities frauds. The Commission also charged that the company violated a Commission cease-and-desist order issued against America Online, Inc. on May 15, 2000. In a separate administrative proceeding, the Commission charged Time Warner CFO Wayne H. Pace, Controller James W.
Tax

Board Members Pay to Settle WorldCom Suit

In a settlement that has sent shock waves through corporate boardrooms, 11 former WorldCom Inc. board members have agreed to pay $20.2 million of their own money to settle a lawsuit tied to the company's $11 billion accounting fraud.The Wall Street Journal reported that the settlement, once sidelined by a legal technicality, was reached on Friday.It is highly unusual for board members to have to tap into their own resources to pay settlements such as this, and the WorldCom settlement, first announced in January, shocked many corporate boards.
Tax

SEC Charges Former Qwest CEO and Eight Others with Massive Fraud

The Securities and Exchange Commission this week charged Joseph P. Nacchio, former co-chairman and chief executive officer of Qwest Communications International Inc., and eight other former Qwest officers and employees with fraud and other violations of the federal securities laws.
Tax

Settling WorldCom Lawsuit Will Cost J.P. Morgan $2 Billion

J.P. Morgan Chase will pay $2 billion to settle a class-action investor lawsuit that alleges the bank failed to investigate WorldCom's financial health when it sold bonds just before the company imploded amid scandal.J.P. Morgan Chase is the last of 14 bond underwriters to settle the case, led by New York Comptroller Alan Hevesi, who oversees the New York State Common Retirement Fund.
Tax

Ebbers Found Guilty in Massive WorldCom Fraud Case

In a closing chapter in what has become the nation's largest accounting fraud, former WorldCom chief executive Bernard Ebbers was found guilty today on all counts, the Wall Street Journal reported.The verdicts were a major victory for Justice Department prosecutors who spent nearly three years investigating the $11 billion fraud that pushed the company into bankruptcy and decimated a stock that was once worth $100 billion. The company, now known as MCI, emerged from bankruptcy in 2004 and is courting acquisition offers from Verizon Communications Inc.
AccountingWEB Life

Federal Court Bars Three From Promoting 'Sham Trust' Tax Scam

The Justice Department announced last week that a federal court in Florida has permanently barred Fred J. Anderson and Deborah A. Martin, of Lehigh Acres, Florida; and Richard A. Walters, of Arlington, Texas, from promoting sham trust tax schemes or any other tax fraud scheme.The court also barred Martin, a tax return preparer, from preparing returns for customers that assert unrealistic positions. The court in January barred Tax Strategies, Inc., a company the three defendants ran, from promoting sham trust or other tax fraud schemes.
Tax

SEC Charges Two Former Buddies of ImClones' CEO With Insider Trading

The Securities and Exchange Commission today charged Zvi Fuks and Sabina Ben-Yehuda, two friends of the former CEO of ImClone Systems Inc., Samuel Waksal, with insider trading in ImClone securities in December 2001. The Commission charged that Ben-Yehuda and Fuks sold ImClone stock after receiving an illegal tip from Waksal just before the FDA denied approval of ImClone's cancer treatment drug.Fuks is the Chairman of the Department of Radiation Oncology at Memorial Sloan Kettering Hospital in New York, and in December 2001 was a member of the ImClone Scientific Advisory Board.
Tax

Consumer Information Stolen From Another Data Broker

Names, addresses, driver's license records and Social Security numbers of about 30,000 consumers may have landed in the hands of criminals.LexisNexis, a major compiler of public consumer information, said the theft occurred at its subsidiary, Seisint, the New York Times reported. The announcement comes on the heels of other security breaches. Data broker ChoicePoint said records of about 145,000 consumers were accidentally sold to criminals.
Technology

Tips to Guard Against Identity Theft Vulnerability

The average victim of identity theft spends about $4,800 and 30 hours to rectify effects of the crime, according to a recent Federal Trade Commission (FTC) study. Identity theft is the fastest growing crime in the U.S., and has spurred new legislation requiring businesses and even consumers to destroy certain documents before throwing them away.
Tax

Abusive Tax Scheme Halted in Nationwide Sweep

Washington DC - The Justice Department this week sued Nicholas P. Magalhaes, of Altamonte Springs, Florida, formerly of Smithtown, New York, to bar his alleged promotion of an abusive tax shelter for employers. The government’s complaint, which was filed in the U.S. District Court for the Eastern District of New York, contends that Magalhaes and his businesses -- Asset Accumulation, Inc., Pinnacle Wealth Group, L.L.C., Strategic Ventures, Inc., and Pinnacle Wealth Concepts, Ltd. -- sell what they purport to be voluntary employees’ beneficiary association (VEBA) plans to employers.
Tax

Washington State Trust Promoters Indicted for Tax Conspiracy

Eileen J. O’Connor, Assistant Attorney General for the Tax Division, United States Department of Justice and John L. McKay, United States Attorney for the Western District of Washington, announced this week that a federal grand jury in Seattle, Washington returned an indictment against David C. Stephenson and Michael J. Shanahan. The indictment charges the defendants with conspiring to defraud the United States by impeding and impairing the Internal Revenue Service in the ascertainment and collection of income taxes. The indictment also charges Mr.

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