Carl Levin’s Tax Tempest in a Teapot: Dividend abuse?

Sex abuse has so dominated the headlines of late that I was beginning to miss stories about tax abuse. But tax abuse aficionados now have something to chatter about thanks to the justifiably obscure Permanent Subcommittee on Investigations of the U.S. Senate’s Committee on Homeland Security and Governmental Affairs (“PSIHSGA”).  Apparently for political effect, PSIHSGA Chair Carl Levin timed for September 11, 2008 this shocking (not) exposé on dividend abuse. Continue reading

SEC blotter: Former KBR CEO pleads in Nigerian bribery case

Yesterday, the SEC charged former Kellogg, Brown & Root, Inc. (KBR) executive Albert Jackson Stanley with participating in a “scheme” to win more than $6 billion in construction contracts by bribing Nigerian government officials. According to the SEC, “The contracts were awarded to a four-company joint venture of which The M.W. Kellogg Company, and later KBR, was a member.

The SEC’s complaint in the case — filed at Houston, in the U.S. District Court for the Southern District of Texas — can be accessed here and the SEC’s press release, here. Continue reading

DOJ loses thirteen KPMG tax indictments through prosecutorial misconduct

The U.S. Department of Justice took another ethical black eye yesterday, this time from the 2nd Circuit Court of Appeals in Manhattan. The court held — in a widely watched KPMG tax fraud case — that DOJ attorneys illegally interfered with the defendants’ access to legal counsel which is protected under the 6th Amendment to the United States Constitution.

At its launch in October 2005, the DOJ touted the case — against thirteen KPMG partners and employees — as “the largest criminal tax case ever filed.” Perhaps they should have christened it “The Titanic.” In the related press conference, U.S. Attorney Michael J. Garcia proclaimed with requisite gravitas: Continue reading

T.J. Rodgers: FASB regulates to death wealth-creating companies

U.S. accounting standards setting is truly out of control. Despite the constant drumbeat from special interests — mostly analysts and retirement plans who demand ever-increasing complexity and sophistication in accounting standards — what we get in the form of new accounting pronouncements in this country is largely indecipherable geek-speak. Continue reading

Why does the FASB hide its audio archives?

When it comes to understanding the rationale of board or committee decisions and holding board members accountable, nothing beats a video or audio recording of the meeting. Meeting minutes, by contrast, are notorious for doing more to obfuscate and obscure than inform. Continue reading

Free Enterprise Fund v. PCAOB: Kavanaugh dissents

Today, a three-judge panel of the D.C. Circuit Court of Appeals handed down a much-anticipated 2-1 decision in Free Enterprise Fund v. PCAOB.  The panel, in my view, reached the wrong conclusion, holding in essence that the PCAOB can rule over the world of U.S. accounting and auditing while immune from constitutional checks and balances.  The crowning irony is that the PCAOB, supposedly designed to promote accountability, is itself so unaccountable for its actions.

Likely, the case will be reheard en banc and/or decided by the Supreme Court.  Meanwhile, the best, most coherent reading is found in Judge Kavanaugh’s eloquent 57-page dissent: Continue reading

Price of oil falls, U.S. SEC to investigate short-sellers

Well, not really. But you’d think, based on the SEC’s virulent reaction to the decline in banking stocks, they or the Treasury or DOJ or somebody would act to protect oil investors, as well.  These poor souls lost another $4 per barrel on Tuesday. But maybe not all investors are created equal after all. If you invest in oil and get caught in the market whipsaw, you deserve to lose money. Or maybe if you short-sell oil futures, you deserve to make it.  Either way, the government’s response to the crisis in mortgage banking seems dysfunctionally two-faced.

Former HP VP Malhotra admits stealing trade secrets

Atul Malhotra, former VP of imaging and printing services at Hewlett Packard (HP) pleaded guilty today to stealing trade secrets in a joint prosecution by federal and California authorities. Federal trade secrets prosecutions are relatively rare but — like most federal white collar crimes — they bring a super-sized penalty. Continue reading

FASB: SocGen’s Kerviel accounting was right?

Société Générale has been treated to all kinds of abuse for recognizing in 2007 Jerome-Kerviel losses “incurred” in 2008 just after the 2007 year-end cutoff. Floyd Norris has been especially critical of the French bank’s use of the “true and fair view” exception which he calls an IFRS “loophole.”

Well, as they say, what goes around comes around. In the Alice-in-Wonderland world of financial reporting standards setting the current U.S. financial accounting standards-setter (the FASB) is on the verge of effectively ratifying SocGen’s 2007 treatment of those Kerviel losses. This ratification comes in the form of an Exposure Draft — for lay readers, an “ED” is a draft of a new accounting standard — on the Disclosure of Certain Losses and Contingencies. More on that below. Continue reading

Wisdom of Earl Long: Don’t write, don’t phone, don’t talk!

Earl LongBefore he died, in 1960, Earl Long managed to serve three times as Governor of Louisiana and — despite widely acknowledged corruption — not a day in prison. In the context of today’s plague of litigation and over-zealous white collar prosecution, some might find helpful this advice of Governor Long:

Don’t write anything you can phone. Don’t phone anything you can talk. Don’t talk anything you can whisper. Don’t whisper anything you can smile. Don’t smile anything you can nod. Don’t nod anything you can wink.