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Accounting News Roundup: SEC Didn’t Hit Books Hard Enough in Deloitte Case; China Seems to Enjoy Being Uncooperative; Rude and Crude IRS Agents | 03.14.13

Posted on by Caleb Newquist

US SEC stumbles in Deloitte's Chinese audit case [Reuters]
U.S. securities regulators faltered at times in federal court on Wednesday as they sought to convince a judge to force a Chinese unit of audit firm Deloitte to hand over documents in connection with a fraud investigation. It is unclear whether the Securities and Exchange Commission's halting performance in U.S. district court could hurt its efforts to pursue fraud investigations into Chinese companies listed on U.S. stock exchanges. But it raises questions about the agency's ability to handle the complex and delicate legal matters when it comes to China. During oral arguments in a U.S. district court, SEC attorney David Mendel was unprepared to answer several questions from Magistrate Judge Deborah Robinson about which federal rules the SEC relied on when it served Deloitte China's U.S.-based attorney with a subpoena in May 2011. "I am going to suggest you review the rules so you can answer my questions more specifically," Judge Robinson told Mendel.

Payroll Audits Put Small Employers on Edge [WSJ]

Internal Revenue Service auditors showed up with little warning at Brian Robinson's staffing firm in Atlanta a year ago, seeking to verify that a dozen outside contractors he had hired to handle his information-technology services weren't, in fact, full-time staffers. The audit was part of a government crackdown on employers who misclassify workers as independent contractors to avoid paying payroll taxes, and other employment-related expenses. Mr. Robinson says the auditors ultimately found that his 30-year-old family business, TRC Staffing Services Inc., with its 100 permanent employees and up to 20 temporary workers, was in the clear. But he says the audit was "nerve wracking" because tax law doesn't make it easy to distinguish between full-time staff and independent contractors doing full-time work. He says the legal distinction can be confusing even for an employer with his decades of experience in the labor market.

Beijing to Sideline Top Securities Regulator [WSJ]
China's new leaders plan to reassign the country's top securities regulator, who has sought to clean up the country's stock markets and attract foreign capital, after only 18 months on the job, say Communist Party officials with knowledge of the decision, raising questions about how quickly and deeply leaders want to reform the financial sector and take on powerful interests.

Another U.S./China regulatory battle [CAB]
Try to act surprised when you read Paul Gillis' post about China not wanting to cooperate with the IRS on FATCA.

Class Calls IRS Rude, Crude and Abusive [CNS]
A lurid but vague class action accuses corrupt and abusive IRS agents of stealing 10 million people's medical records without a warrant – including "intimate medical records of every state judge in California." John Doe Company sued 15 John Doe IRS agents in Superior Court. "This is an action involving the corruption and abuse of power by several Internal Revenue Service ('IRS') agents (collectively referred to as 'defendants' herein) during a raid of John Doe Company, in the Southern District of California, on March 11, 2011," the complaint states. "In a case involving solely a tax matter involving a former employee of the company, these agents stole more than 60,000,000 medical records of more than 10,000,000 Americans, including at least 1,000,000 Californians. […] To top it off, the IRS agents were rude, childish and arrogant, the complaint states: "Adding insult to injury, after unlawfully seizing the records and searching their intimate parts, defendants decided to use John Doe Company's media system to watch basketball, ordering pizza and Coca-Cola, to take in part of the NCAA tournament, illustrating their complete disregard of the court's order and the Plaintiffs' Fourth Amendment rights.

Michigan expected to announce takeover of Detroit finances [Reuters]
Michigan Governor Rick Snyder is expected to announce on Thursday an emergency state takeover of Detroit, putting a lawyer with extensive experience managing corporate bankruptcies in charge of the destitute city's finances. The dramatic move will culminate the long decline of the once thriving center of the U.S. auto industry and birthplace of the Motown trend in popular music. Republican Snyder is "highly likely" to name an emergency financial manager for Detroit at a news conference scheduled for 2 p.m. local time on Thursday, a source with direct knowledge of the decision said. The top candidate for the job is Kevyn Orr, 54, a partner in the Washington, D.C., law firm Jones Day, who has long experience handling corporate bankruptcy and restructuring cases, said another source with direct knowledge of the choice.

Senate begins bipartisan meetings on tax reform [WaPo]
The parties may be at war over the federal budget, but Republicans and Democrats are locking arms over taxes: Key committees in the House and now the Senate have launched a bipartisan campaign to lay the groundwork for a comprehensive rewrite of the tax code. On Thursday, the full membership of the tax-writing Senate Finance Committee will hold the first of more than a dozen private meetings to review options for overhauling the code, with the hope of producing legislation later this year.

Shaking up S corporation and partnership tax [Tax Update]
Some details on this week's proposal.
 
Polish Up Your Guccis [Tax Analysts/Christopher Bergin]
President Ronald Reagan personally believed in tax reform. President Barack Obama doesn’t know what tax reform is. He just thinks it’s a way to get more money. Visionary leadership matters. But in fairness to President Obama, President Reagan was an extremely powerful and popular president during the days of ’86 tax reform. He won 49 states in his last election for president. President Obama doesn’t have that clout. Many Democrats and Republicans worked together to get the 1986 tax reform. Was that because they were all best buddies? Hardly. Enough of them saw something in tax reform for, well, them. There were alignments of interests. Our current lawmakers don’t have that, at least not enough of that.
 
Powering Down Google Reader [GRB]
It's a sad day, friends.
Posted in ANR

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SEC Probes China Auditors [WSJ]
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