Fast, Furious at MF Global [WSJ]At 4:53 p.m. five days before MF Global Holdings Ltd. collapsed, an employee in its Chicago office asked a co-worker to move $165 million from one of the securities firm's bank accounts to another. "Approved," came the response one minute later, according to an email reviewed by The Wall Street Journal. […]
Remember Weatherford International? That’s the oil services company that had a ton of material weakness around their tax accounting that led to $500 million error. This resulted in restatements, a humiliated CFO and the Chief Accounting Officer resigning “to pursue other opportunities.”
But now, four months later, everyone has moved on and the company has some new blood:
Weatherford International Ltd. […] announced today that John H. Briscoe has agreed to join the company as Vice President –Chief Accounting Officer. Mr. Briscoe will report to the company’s Chief Financial Officer.
Mr. Briscoe served as Vice President and Controller of Transocean Ltd. from October 2007 to present. He also fulfilled additional roles in internal audit, investor relations and field finance. Prior to joining Transocean in 2005, Mr. Briscoe served as Ferrellgas Inc.’s Vice President of Accounting and served in other senior roles during his eight years with the company. Mr. Briscoe also served as Controller for Latin America for Dresser Industries Inc. Mr. Briscoe started his career with seven years in public accounting beginning with the firm of KPMG and ending with Ernst & Young as an Audit Manager. Mr. Briscoe is a certified public accountant.
Yes, that Transocean.
GM filing warns on reporting [Detroit Free Press]
This may come as a shock but General Motors, despite filing paperwork for its IPO, admits that they still don’t have effective internal controls.
“[I]n regulatory filings about its upcoming initial public offering, GM warned potential investors that ‘our internal controls of financial reporting are currently not effective.’
Experts are divided on whether the warning — one of about 30 risk factors identified by GM in a document describing a planned sale of shares — is just an obscure accounting matter or a red flag that taints GM’s financial reporting
The 10 Highest State Income Tax Rates For 2010 [Forbes]
If you’re single and make $200k or $400k and married in Hawaii, you get dinged for 11%, the highest ranking state on the list. Dark horse Iowa comes in at #5 gets 8.98% of taxable income over $64,261. That’s above New Jersey and New York tied at #6.
Transocean accuses BP of withholding data on Deepwater Horizon and oil spill [WaPo]
Just when you thought the ugliness was slowing down (at least in the media coverage), ” Even as they work together to kill the Macondo well in the Gulf of Mexico, the oil giant BP and the deep-water drilling rig company Transocean are in an increasingly bitter battle over what went wrong on April 20 to trigger America’s worst oil spill.
The conflict flared Thursday when Transocean fired off a scathing letter accusing BP of hoarding information and test results related to the Deepwater Horizon blowout that killed 11 people, including nine Transocean employees. Signed by Transocean’s acting co-general counsel, Steven L. Roberts, the letter says that Transocean’s internal investigation of what went wrong has been hampered by BP’s refusal to deliver ‘even the most basic information’ about the event.
‘[I]t appears that BP is withholding evidence in an attempt to prevent any entity other than BP from investigating the cause of the April 20th incident and the resulting spill,’ the letter states, and it demands a long list of technical documents and lab tests.”
How to tell when your boss is lying [The Economist]
Apparently cursing is a good sign.
Koss reports smaller quarterly loss on 14% sales decline [Milwaukee Journal Sentinel]
The company lost $423,450 for the six months ended June 30th. They spent $1.12 million on legal fees related to Suzy Sachdeva.
House Vote Sends Finance Overhaul to Senate [WSJ]
“The House agreed Wednesday to a sweeping rewrite of the nation’s financial regulations, moving the initiative one step closer to becoming law.
Focus now shifts to the Senate, where questions linger about whether Democrats have nailed down enough support from the handful of Republicans needed to overcome a likely filibuster. The Senate won’t take up the bill until after the July 4 recess, creating an awkward pause in which the bill’s opponents will have one last chance to derail it.”
Google to Add Pay to Cover a Tax for Same-Sex Benefits [NYT]
“On Thursday, Google is going to begin covering a cost that gay and lesbian employees must pay when their partners receive domestic partner health benefits, largely to compensate them for an extra tax that heterosexual married couples do not pay. The increase will be retroactive to the beginning of the year.
‘It’s a fairly cutting edge thing to do,’ said Todd A. Solomon, a partner in the employee benefits department of McDermott Will & Emery, a law firm in Chicago, and author of ‘Domestic Partner Benefits: An Employer’s Guide.’
Google is not the first company to make up for the extra tax. At least a few large employers already do. But benefits experts say Google’s move could inspire its Silicon Valley competitors to follow suit, because they compete for the same talent.”
Senate chairman starts probe of Transocean’s taxes [AP]
Senator Max Baucus (D-MT) would like to know whether Transocean’s move offshore was an exploitation of U.S. tax law, “The chairman of the Senate Finance Committee is launching an investigation into the tax practices of Transocean Ltd., owner of the Deepwater Horizon rig that exploded in the Gulf of Mexico, leading to the massive oil spill.”
Sadly, this will lead nowhere since exploitation ≠ illegal in this case. Deplorable? Yes. Tax malfeasance? No. Political pandering? Absolutely.
Deloitte CEO Barry Salzberg Wins Executive of the Year – Services at the 8th Annual American Business Awards [PR Newswire]
It’s a Stevie award! BS beat out Jeffrey Bezos, chairman, president and CEO, Amazon.com; Dominic Barton, managing director of McKinsey & Company; and Joseph Neubauer, chairman and CEO of ARAMARK for the Stevie.
In his own words, “I am very honored by this recognition, which truly is a testament to Deloitte’s progress and the industry-leading work of our more than 40,000 people in the United States. Although we have faced challenging economic times in the past few years, Deloitte’s diverse portfolio of quality services and investment in talent continue to drive our business and differentiate us in the marketplace. We are eager to approach the opportunities that await us and our clients in the economic upturn.”
GAAP and IFRS: Six Degrees of Separation [CFO]
That is, six major differences between the two sets of rules that will have to be ironed out. Namely: error correction, LIFO, reversal of impairments, PP&E valuation, component depreciation and development costs. After that, this convergence thing will be a breeze.
Accounting Body Picks New Chief [WSJ]
“Former Italian Finance Minister Tommaso Padoa-Schioppa has been named to head the group that oversees international accounting rulemakers. Mr. Padoa-Schioppa will assume the chairmanship of the trustees of the International Accounting Standards Committee Foundation in July. The foundation’s monitoring board appointed him chairman for a three-year term. The IASC Foundation oversees the London-based International Accounting Standards Board, selects its members and raises funds for its operations. It also helps promulgate the move toward a single set of accounting rules used world-wide.”
New York Reaches Deal to Raise Cigarette Tax [NYT]
Smokers might want to start hoarding cartons as Governor David Paterson and legislators have reached a tentative agreement to raise the cigarette tax in New York. Taxes on cigarettes in NYS, currently $2.75 a pack, would rise an additional $1.65. Taxes in New York City would rise to $5.85 a pack, marking the first city in America with a tax of greater than $5 on cigarettes.
The proposal would raise $440 million this year, according to the Times. The state’s budget deficit is approximately $9 billion.
Open Letter to the Securities and Exchange Commission: Is Medifast Complying with Revenue Accounting Rules? [White Collar Fraud]
Sam Antar is a little skeptical about a plethora of Medifast’s financial reporting and disclosures including: revenue recognition policy, “the company is possibly recognizing revenue up to 8 business days too early”; their low allowance for doubtful accounts, “the $100,000 reported for such an allowance does not seem reasonable enough given Medifast’s volume of revenues and the dates it either ships or delivers its orders to customers after processing them.”; and lack of deferred revenue liabilities, “Medifast’s financial reports going back to 2004 disclose no deferred revenue liabilities for customer orders processed before each fiscal year ended and either shipped or delivered after those respective fiscal years.”
This trifecta has Sam concerned enough that he’s asking the SEC to poke around a little more than they did the last SEC review in 2007, when the SEC found…nothing.
BP Chief Draws Outrage for Attending Yacht Race [NYT]
Probably seemed like a nice idea at the time, “BP officials on Saturday scrambled yet again to respond to another public relations challenge when their embattled chief executive, Tony Hayward, spent the day off the coast of England watching his yacht compete in one of the world’s largest races.”
BP, Transocean tap a well of Washington lobbyists and consultants [WaPo]
The obvious solution to CEOs attending yacht races, Joe Biden-esque articulation and such is paying someone a lot – a lot – of money to rep these companies. It’s pretty much the only option they have left.
While BP continues to get murdered in the press for its role in the Deepwater Horizon nightmare in the Gulf of Mexico, we bring you a new reason to hate on another big player in this mess, Transocean. Martin Sullivan writes in Tax Analysts’ Tax Notes about the billions in taxes Transocean has managed to avoid since moving its domicile offshore – first to the Cayman Islands and then to Switzerland.
For those of you not completely up-to-speed on your Deepwater Horizon cast of baddies, Transocean was the owner and operator of the De BP was the project operator (think of a general contractor) of the rig, paying Transocean $500,000 a day to drill the well.
Sullivan writes in his piece that despite Transocean being legally domiciled in Zug, Switzerland, (a transaction known as an inversion or corporate expatriation) it really does very little to change the substance of the company’s operations, “These tax-motivated restructurings occur with little or no real change in day-to-day business operations. Top executives, key personnel, and all significant business operations in the United States before the transaction remain in
the United States.”
The transactions were controversial to be sure, and companies that engaged in them were likened to Benedict Arnold by politicians when the came under fire back in the early Aughts. To get an idea of Transocean’s savings, Mr Sullivan presents data that shows the company’s preinversion average effective tax rate of 31.6% and its postinversion tax rate of 16.9%. This saved the company just over $1.8 billion in taxes over the last ten years.
Transocean consummated their inversion back in 1999, so they were far ahead of the curve, as the tax benefits for inversions were stripped out in the code effective for transactions that occurred after March 4, 2003 but the savings have added up over the years as the company saved over $750 million just last year.
But Transocean has largely stayed out of the spotlight in this whole shitshow and has been in CYA mode virtually the whole time, consistently citing an indemnification agreement with BP, filing to limit its liability:
As set forth under Federal Law, the complaint also asks that the companies be judged not liable on claims for certain, defined losses or damages relating to the casualty or, if they are judged to be liable, that the liability for such claims be limited to the value of their interest in the Deepwater Horizon rig and its freight including the accounts receivable and accrued accounts receivable as of April 28, 2010. The petitioners assert in the filing that the entire value of their interest does not exceed $26,764,083.
And scoffing at any notion of not paying its dividend, reminding everyone that they declared it long before explosion on the rig they were operating, “Transocean will honor all of its legal obligations arising from the Deepwater Horizon accident. The dividend proposal was announced on February 16, 2010, described in the preliminary proxy statement which was filed with the Securities and Exchange Commission on March 1, 2010, and approved by shareholders at the company’s annual general meeting on May 14, 2010.”
Throw the decade or so of tax savings and it sounds like Transocean has it made in the shade. How’s that for corporate responsibility and accountability? It’s not like we’re dealing the largest environmental disaster ever.