NY Rep. Grimm indicted on tax fraud charges
Representative Michael Grimm (R-NY) surrendered to federal authorities in New York this morning to face criminal charges related to his Healthalicious restaurant, Catalina Camia and Kevin Johnson of the USA Todayreported.
In a 30-page indictment unsealed Monday, Grimm – in an apparent scheme to avoid tax payments – is charged with underreporting income from Healthalicious, where he allegedly employed workers who were illegally in the country. In addition to the tax fraud allegations, the 20-count indictment includes conspiracy, obstruction, mail fraud, perjury, and the unlawful employment of illegal immigrants, the article stated.
According to court documents, between 2007 and 2010, “Grimm concealed more than $1 million in Healthalicious gross receipts alone, as well as hundreds of thousands of dollars of employees' wages, fraudulently depriving the federal and New York state governments of sales, income, and payroll taxes.”
His lawyer, William McGinley, said in a statement that the government has pursued “a politically driven vendetta” against Grimm, who has said he has done nothing wrong.
“When the dust settles, he will be vindicated,” McGinley said, according to the article.
No accounting skills? No moral reckoning
How much do Americans even understand about finance? Few can do basic accounting and fewer still know what a balance sheet is. But before a serious debate about financial accountability can occur, we first need to learn some essentials, Jacob Soll, a professor of history and accounting at the University of Southern California and author of The Reckoning: Financial Accountability and the Rise and Fall of Nations,wrote yesterday for the New York Times.
If we want to know how to make our own country and companies more accountable, we would do well to study the Dutch, he said. The spread of double-entry accounting to the Netherlands during the early 1500s made the country the center of accounting education, world trade, and early capitalism. Well-accounted-for provincial tax returns allowed the Dutch to float bonds at dependable 4 percent interest rates. The Dutch trusted their managers to know how to keep good books and make regular interest payments, while paying off state debt, Soll wrote.
He also noted that every level of Dutch society practiced double-entry accounting – from prostitutes to scholars, merchants, and even the Stadholder, Maurice of Nassau, Prince of Orange.
“A population well-versed in double-entry accounting will not immediately solve our complex financial problems, but it would allow average citizens to understand the nuts and bolts of finance: balance sheets, mortgage interest, depreciation, and long-term risk,” Soll wrote. “It would also give them a clearer sense of what financial accountability really means and of how to ask for and assess audits. The explosion of data-driven journalism should also include a subset of reporters with training in accounting so that they can do a better job of explaining its central role in our economy and financial crises.”
Race is on to restore tax breaks
The House Ways and Means Committee on Tuesday will consider permanently extending six separate tax provisions that expired at the end of 2013, including the popular research and development credit used by a number of corporate heavyweights, Bernie Becker of The Hillreported yesterday.
Getting a deal on the tax extenders, the common term for the more than 50 incentives that expired at the end of last year, is widely seen as the one chance Congress has to enact major tax legislation this year, Becker noted.
In all, the Joint Committee on Taxation says that extending all those tax breaks over the long-term would cost around $310 billion between 2014 and 2024, with half that total coming from just the research credit.
Ways and Means will also consider measures to permanently extend a tax break for small business expensing known as Section 179, and other preferences for both small businesses and multinational corporations, the article stated.
House Republicans set May vote on holding Lois Lerner in contempt
In a memo sent to his colleagues on April 25, Majority Leader Eric Cantor (R-VA) said the full House plans to vote to hold former IRS official Lois Lerner in contempt for her refusal to testify before Congress about the targeting of Tea Party groups, Russell Berman of The Hillreported.
The vote on Lerner, who led the agency’s Exempt Organizations division, follows a party-line contempt referral by the House Oversight and Government Reform Committee, which has tried for nearly a year to get Lerner to answer questions on the grounds that she waived her Fifth Amendment right against self-incrimination, he noted.
Lerner defended herself in an opening statement at a hearing last year but took the Fifth to avoid answering follow-up questions from lawmakers, and Cantor said the House would hold the contempt vote unless she changed her mind.
Cantor’s memo said Lerner could avoid the contempt vote if she agrees to testify before the Oversight panel. Lerner’s lawyer, Bill Taylor of Zuckerman Spaeder, has said previously that he doesn’t expect his client to testify and has scoffed at GOP efforts to hold her in contempt, the article stated.
Tax dodgers – at the IRS
The editorial staff at the Boston Heraldprovided its take yesterday on the IRS bonuses controversy that surfaced last week: “The workings of the federal bureaucracy never cease to dismay. An inspector general in the IRS reports that 1,146 employees who failed to pay their federal income taxes on time, failed to pay at all, or underpaid what they owed received more than $1 million in bonuses over a 27-month period.
“This is no way to rebuild depleted public trust in the IRS.
“In all, more than 2,800 employees received $2.8 million in awards from October 1, 2010, to December 31, 2012, despite disciplinary actions against them in the year before the award.
“That’s not a high misconduct rate. The IRS has almost 100,000 employees and a payroll a bit less than $7 billion. What dismays is that the agency hasn’t seemed to care and uses feeble weapons against its bad apples.”
[Click here to read an article from Forbes tax and litigation contributor Robert W. Wood about the bonus controversy.]
Big US banks make swaps a foreign affair
Katy Burne of the Wall Street Journalreported yesterday that as regulators tighten rules on the US swaps market, large American banks – such as Bank of America Corp., Citigroup Inc., Goldman Sachs Group Inc., JP Morgan Chase & Co., and Morgan Stanley – are maneuvering to take some of the business overseas.
According to people with knowledge of the situation, these banks are changing the terms of some swap agreements made by their offshore units so they don't get caught by US regulations.
The moves mean the US parent bank is no longer the guarantor of some swaps issued by its foreign affiliate. Instead, any liability for those swaps lies solely with the offshore operation, she noted. Without that tie to the US parent, those contracts won't fall under US jurisdiction and so won't be subject to new, stricter rules that include reporting and a requirement that the historically telephone-traded contracts be traded on US electronic platforms.
Having swaps come under European oversight is more attractive because derivatives trading rules on the Continent aren't likely to be implemented until 2016 at the earliest, allowing the swaps mostly sold in London to be conducted in relative secrecy, according to the article. Even then, some bankers anticipate the European rules won't be as strict.
US regulators are aware that banks are making these changes and so far haven't raised objections, Burne wrote.
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