Watchdog

Tax

2005, the Year of the Restatement and the Year KPMG Survived

With a background of former executives seen entering courthouses, called to account for corporate scandals of previous years, and indictments announced against individuals and KPMG partners, corporate accounting issues surfaced in a less dramatic way in 2005, through restatements of financials, at giants like American International Group (AIG) and mortgage companies, Fannie Mae and Freddie Mac.
Tax

Don't Let Holiday Time Be Scam Time

Santa and his elves are not the only busy people at this time of year. Robbers, thieves, carjackers and shoplifters all seem to thrive during the holiday season.
Technology

Beware of E-mail Bearing Tax Refunds

The Internal Revenue Service (IRS) issued a consumer alert last week warning taxpayers of a “phishing” scam that attempts to trick e-mail recipients into disclosing personal and financial data. The scam uses e-mail messages, purportedly from the IRS, informing consumer of tax refunds and directing them to follow a link to a web site that requests personal information, such as Social Security Numbers and credit card information.
Tax

Corporate Fraud Still Widespread, Difficult to Detect

The number of companies around the world that reported incidents of fraud increased 22 percent in the last two years, according to a new Big Four survey.While layers of new controls have been implemented to improve corporate governance, fraud is still widespread, difficult to prevent, and detected many times by chance, according to the biennial survey by PricewaterhouseCoopers (PWC), which interviewed more than 3,000 corporate officers in 34 countries.Fraud was detected by 45 percent of the companies polled, which is up from 37 percent in 2003, Reuters reported.
Tax

Greenberg Won’t Face Criminal Charges

The former CEO of American International Group (AIG) will not face criminal charges initiated by New York Attorney General Eliot Spitzer. Spitzer may continue to pursue civil charges against Greenberg with an amended civil complaint containing new information. The civil suit is primarily based on AIG’s misuse of finite reinsurance polices that concealed reserve issues from AIG’s balance sheet, according to TheStreet.com. “The office decided months ago to pursue the case as a civil matter,” Spitzer spokesman Darren Dopp told USA Today.
Tax

Andersen Prosecution Abandoned: Enron’s Final Chapter?

When the Justice Department walked away from its prosecution of Arthur Andersen last week, was it finally closing the book on the Enron saga? The decision not to re-try the case comes only six months after the U.S. Supreme Court overturned Andersen’s 2002 conviction for obstruction of justice charges related to the Enron corporate fraud investigation and eventual collapse.
Tax

Companies Combating ID Thefts while Consumers Check Credit Reports

Lost or stolen credit cards still account for a large percentage of identity thefts as do scams such as credit-card skimmers used at restaurants and ATMs, says Chris Thoms, chief risk officer at MasterCard International, according to MarketWatch.com. These thefts can result from the consumer’s behavior. But well-publicized breaches of giant data systems like ChoicePoint, Bank of America and CardSystems Solutions could potentially affect 56.3 million people, MarketWatch reports.
Community News

Greed Is Going to Jail: Ex-Tyco Execs Sentenced

Former Tyco International CEO L. Dennis Kozlowski, whose lavish lifestyle has come to symbolize corporate greed, was sentenced Monday to 8 to 25 years in prison. He has also been ordered to pay $167 million in restitution and fines. Former Tyco CFO Mark H. Swartz, was also sentenced to 8 to 25 years but only owes $72 million in fines and restitution. Both men were taken immediately into custody.
Tax

Ebbers Out on Bail Pending Appeal; Ohio Settles for $94 Million

Bernard J. Ebbers did not go straight to jail despite being convicted on nine felony counts and sentenced to 25 year in prison. On Wednesday, U.S. District Judge Barbara S. Jones granted a defense request, delaying his entry into prison by at least six months.In her four-page order, Judge Jones found that Ebbers was unlikely to flee before his appeal and that the issue raised by his defense team was substantial and could lead to a reversal of the conviction or a new trial. Oral arguments in the appeal case could be heard by the U.S.
Tax

WorldCom Convictions Handed Down

Bernard Ebbers received 25 years for his part in the largest bankruptcy in U.S. history. He was sentenced in July after a jury of his peers ruled in April that he had engaged in fraud and conspiracy in connection with WorldCom’s $11 billion accounting scandal. It was the largest in U.S. history. WorldCom has since come out of bankruptcy as MCI. Verizon is expected to acquire the company later this year.Other men who helped convict Ebbers have had their sentences passed down recently. Scott Sullivan was WorldCom’s chief financial officer and the big fish after Ebbers.
Tax

Banker Pleads Guilty in Tax Shelter Case

Federal prosecutors investigating abusive tax shelters struck a plea agreement with a banker on Thursday in the first criminal charges brought in the case, according to the Washington Post. Domenick DeGiorgio, the former managing director of HVB Group, pleaded guilty to four counts of conspiracy, wire fraud and tax evasion relating to his participation in selling a tax shelter known as BLIPS or Bond Lined Issue Premium Structure, created and marketed by KPMG. DeGiorgio said he knew the tax structure lacked economic justification.
Tax

Civil Complaint Against MBIA May Be Close

Federal and state authorities are reviewing a draft civil complaint against bond insurer MBIA Inc., the Wall Street Journal reported Thursday.The newspaper, citing people familiar with the matter, said authorities may file civil fraud charges connected with MBIA's accounting for reinsurance, with a settlement possible in coming weeks.Attorneys in New York Attorney General Eliot Spitzer's office and the Securities and Exchange Commission are reviewing the complaint, the Journal reported.Separately, the U.S.
Tax

SEC Settles With College Savings Plan

The Securities and Exchange Commission (SEC) has settled a cease-and-desist lawsuit against the Utah Educational Savings Plan Trust (UESP). The UESP administers Utah’s educational savings plan. The settlement resolves the first ever charges against a Section 529 savings plan. The charges stem from an investigation of the plan’s former director, Dale C. Hatch. Flaws were found in the savings plan’s operations and internal accounting controls. Investigators found that the savings plan failed to fully allocate investor gains and losses to investor accounts.
Tax

First WorldCom Accountants Sentenced

Two of the lowest ranking officials participating in the conspiracy responsible for the $11 billion fraud that brought down WorldCom were sentenced on Friday, August 5. Three more former WorldCom executives, accounting director Buford Yates, controller David Myers and chief financial officer Scott Sullivan, will be sentenced this week.Betty Vinson, a former mid-level accounting manager at WorldCom, was sentenced to five months in prison to be followed by five months of house arrest.
Tax

Whistleblowers Pay a Heavy Price

While whistleblowers are protected under the Sarbanes-Oxley Act, the financial and emotional toll remains alarmingly high.Just ask David Windhauser, the former controller for Trane, the heating and cooling company. He was the first person to receive a U.S. Department of Labor order requiring his former employer to rehire him under Sarbanes-Oxley. He complained in 2003 that managers were committing fraud by recording fake expenses on financial statements. He was fired one month later.
Tax

Comprehensive Market Research on SOX Supporting Technology

Technology supporting Sarbanes-Oxley compliance, fraud detection and financial statement audits has developed into a booming niche market in recent years. Although many publications and organizations offer lists of technologies, few comprehensive market research studies have been done. Cash Recovery Partners, LLC, published one of the few last week.“Anyone looking to use technology in improving the efficiency of their Sarbanes-Oxley engagements or enhancing their audit-related activities can learn something from this research.
Tax

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 TheStreet.com. There are two sides to an indictment scenario.
Tax

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.
Tax

Deloitte’s Navistar Audit Being Investigated

Deloitte & Touche LLP is being investigated by the Public Company Accounting Oversight Board (PCAOB) for auditing discrepancies in their 2003 audit of Navistar Financial Corporation. The two-page order, issued in May, was inadvertently disclosed by the Securities and Exchange Commission (SEC) which oversees the PCAOB. Navistar Financial is a unit of Navistar International Corporation. “The order was misdirected to the public file,” said SEC spokesman John Heine in a statement to Bloomberg News.
Tax

FEMA Wants $27M Back from Floridians

The Federal Emergency Management Agency (FEMA) says it has overpaid more than 6,000 Floridians whose homes were damaged by last summer's four hurricanes, and the agency wants more than $27 million back.FEMA is trying to recoup overpayments from 6,579 people who received federal aid after Hurricanes Charley, Frances, Ivan and Jeanne hit Florida last August and September. FEMA said it paid for items like generators and appliances that were later covered by property-insurance policies.

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