Bramwell’s Lunch Beat: IRS May Know Where Massive Data Breach Originatedby
Wall Street watchdog says Labor Department broker rule ‘not the way to go’
A US Labor Department plan to reduce conflicts with brokers who offer retirement account advice drew criticism from the chief of the Financial Industry Regulatory Authority (FINRA) on Wednesday, who said it would shift enforcement from regulators to investors, wrote Suzanne Barlyn of Reuters. The plan, unveiled in April, aims to ensure that brokers offering retirement account advice do not steer customers into high-fee products that boost brokers' commissions. Brokers would sign contracts, promising to act in investors' best interests. But at FINRA’s annual conference, Chairman and CEO Richard Ketchum said the plan is “not the way to go.” Investors who believe their retirement account brokers did not meet the standard would have to file arbitrations or class-action lawsuits to enforce the contracts, he said.
IRS believes Russians are behind tax return data breach
The IRS believes the major cyberbreach that allowed criminals to steal the tax returns of more than 100,000 people originated in Russia, CNN reported. On Tuesday, the IRS announced that organized crime syndicates used personal data obtained elsewhere to access tax information, which they then used to file $50 million in fraudulent tax refunds, according to an article by Chris Frates. The IRS said its Criminal Investigation Unit and the Treasury Inspector General for Tax Administration are investigating the origins of the breach. The agency also alerted the Homeland Security Department of the breach. The news that the IRS data breach is believed to have originated in Russia comes on the heels of the disclosure that Russian hackers had recently infiltrated both the White House and State Department computer systems. The roughly 100,000 taxpayers whose tax information was accessed will be offered free credit monitoring, the IRS said.
IRS data breach draws Capitol Hill scrutiny
Lawmakers are stepping up their scrutiny of computer security at the IRS in the wake of the agency’s data breach, wrote John D. McKinnon of the Wall Street Journal. Senate Finance Committee Chairman Orrin Hatch (R-UT) on Wednesday asked for a private briefing from the IRS concerning the theft of prior-year tax return information. Hatch said a “key concern” for lawmakers is the “growing threat” of stolen-identity refund fraud, where crooks file fake returns using real people’s names, Social Security numbers, and other stolen data. The latest theft of the prior-year return data from the IRS may be aimed at helping criminals concoct the fake returns. The Senate Finance Committee also announced late Wednesday that it would hold a hearing next Tuesday on the incident. A House Ways and Means Committee oversight panel also is probing the theft, according to Rep. Peter Roskam (R-IL), who is the subcommittee’s chairman.
IRS cyber-theft tactics could work at any agency
The digital theft of more than 100,000 old tax returns from the IRS has shed light on a method hackers could wield to easily hit any federal agency using minimal technical skill, according to experts, wrote Cory Bennett of The Hill. The digital thieves didn’t actually break into the IRS's database. They simply imitated individuals using information culled from the vast trove of personal data being traded on the dark Web after numerous company data breaches in recent years. Any federal agency with valuable data could fall victim to the same maneuver, experts explained. Security specialists pointed to agencies where online accounts can be used to access financial information and credit reports as attractive targets for a similar scam. At the US Treasury Department, for instance, people can open online accounts to buy Treasury notes, bills, and bonds.
Prosecutor alleges Dewey & LeBoeuf cooked the books for years
New York prosecutors allege that ex-Dewey & LeBoeuf LLP CFO Joel Sanders worked together with ex-Chairman Steven Davis and ex-Executive Director Stephen DiCarmine to oversee a yearslong ploy to mask the true nature of the now-defunct law firm’s finances, wrote Sara Randazzo of the Wall Street Journal. A 2008 dinner that involved Sanders and two of the firm’s finance department employees resulted in a document called the “Master Plan.” It spelled out the accounting adjustments that could help the firm to appear to meet crucial covenants on its bank debt, prosecutors told jurors on Tuesday. That document led to falsely reducing expenses, falsely increasing revenue, and falsifying invoices, among other improper adjustments. Rather than accusing Sanders, Davis, and DiCarmine of manipulating the firm’s books directly, prosecutors alleged the trio directed lower-level employees to make tens of millions of dollars in false accounting adjustments.
Top 0.01% of US households gain as income clusters at peak
The top 0.01 percent of Americans – fewer than 14,000 households – received 5.6 percent of adjusted gross income in 2012, according to data released on Wednesday by the IRS that underscore the increasing concentration of income, wrote Richard Rubin of Bloomberg. It was the biggest share of income clustered at the very top of the distribution scale since 2007. Those in that group had a minimum income of $12.1 million, up from the $8.8 million it took to reach that club in 2011. The average tax rate of that group – with a minimum income of $62.1 million – was 17.6 percent. That’s lower than the average rate for the top 10 percent of the US population, a demonstration of the power of preferential tax rates on investment income. The data provide fodder for the 2016 presidential campaign, with candidates from both parties searching for policies that would reduce income inequality.
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