The Latest

XBRL International, the global consortium, which promotes and develops the use of the Extensible Business Reporting Language, or XBRL, has named Tony Fragnito as chief executive of the 22-jurisdiction concern. The appointment was made at the 15th annual XBRL International Conference, here. Fragnito comes aboard the organization from the Bethesda, Md.-based Federation for American Societies for Experimental Biology, where he served as deputy director and chief financial officer. He is also a CPA licensed in Virginia. In other XBRL International news, France has become the latest jurisdiction to join the international group.

Two months after the Justice Department filed lawsuits accusing more than 125 franchised offices of tax-prep company Jackson Hewitt of helping falsify tax returns, the company disclosed that it has come under investigation by the Internal Revenue Service. Accrording to The New York Times, the Parsippany, N.J.-based company said that it was cooperating with the IRS inquiry. The four DOJ lawsuits --filed in federal courts in Chicago, Atlanta, Detroit, and Raleigh, N.C. against five corporations operated under franchise agreements with Jackson Hewitt, allege that the businesses cost more than $70 million in losses to the U.S. Treasury. One of the individual defendants, Farrukh Sohail of Atlanta, wholly or partly owned each of the five corporations, with those franchises filing more than 105,000 federal income tax returns last year. According to the complaint, Sohail and other defendants "created and fostered a business environment" at the franchises, "in which fraudulent tax return preparation is encouraged and flourishes." Jackson Hewitt subsequently launched an in-house review of its practices and retained Fred T. Goldberg, a former IRS commissioner, to head the investigation.

After resurrecting its Professor in Residence program earlier this year, the Internal Revenue Service has selected Gregg D. Polsky as its 2007-2008 PIR. Polsky recently joined the faculty at Florida State University's College of Law as the Sheila M. McDevitt Professor of Law. He also spent six years on the faculty at the University of Minnesota Law School. Polsky was also in private practice with the firm of White & Case LLP. He succeeds Calvin Johnson, whose term ended May 31. Polsky's term begins in September. Dormant since the late 1980s, the Professor in Residence program provides a forum for legal academicians to contribute and develop legal tax policy and administration. The professor in residence reports to IRS chief counsel Donald Korb.

Tax, audit and accounting software and services provider CCH, a Wolters Kluwer Co., had added a Sarbanes-Oxley Section 404 internal controls library to its proprietary Accounting Research Manager database. The new offering includes materials such as: * The American Institute of CPAs: professional standards related to internal controls;*The COSO Internal Control Integrated Framework;* Institute of Internal Auditors' "Designing and Writing Message-Based Audit Reports";* Public Company Accounting Oversight Board auditing standards related to internal control; and,* Securities and Exchange Commission rules and releases related to internal controls. For more information, go to www.accountingresearchmanager.com

The allegations in the criminal indictment of two former and two current Ernst & Young partners for tax fraud conspiracy and related crimes arising out of tax shelters promoted by E&Y makes for some very interesting reading. All four worked in a E&Y group first named VIPER (Value Ideas Produce Extraordinary Results), and later renamed SISG (Strategic Individual Solutions Group). One was the former national director of E&Y’s Center for Wealth Planning, another the national director of E&Y's Personal Income Tax and Retirement Planning practice. The basic premise of the U.S. attorney, as stated in the press release, is: “In order to maximize the appearance that the tax shelters were investments undertaken to generate profits, and to minimize the likelihood that the IRS would learn the transactions were actually designed to create tax losses and deductions, the defendants and their co-conspirators created and assisted in creating transactional documents and other materials containing false and fraudulent descriptions of the clients' motivations for entering into the transactions, and their motivations for taking the various steps that would yield the tax benefits.” The tax shelters are described as “cookie-cutter products that would eliminate, reduce or defer large tax liabilities.” One of the allegations is that the defendants worked with law firms to provide E&Y's clients with opinion letters that claimed the tax shelter losses or deductions would "more likely than not" or "should" survive IRS challenge, and the defendants knew those opinions were based upon false and fraudulent statements that omitted material facts. The indictment also alleges that the defendants and their co-conspirators undertook these actions so E&Y could participate in the highly lucrative tax shelter market in which other accounting firms were already participating. In response to the indictment, E&Y issued a press release stating those indicted are two former partners and two partners who have been on administrative leave, that they were part of a small group within the firm that disbanded years ago, and that E&Y voluntarily made many changes and enhancements to their tax practice. It also mentioned that some changes were made pursuant to a 2003 agreement with the IRS, which E&Y proudly proclaimed the IRS Commissioner called a "model for agreements with practitioners.” The indictment explains in detail how the shelters worked and were marketed, contains numerous quotes attributed to the defendants, and has an allegation the fees charged were based on a percentage of the tax savings obtained. Interestingly, there is a claim that three defendants utilized a fraudulent tax shelter with regard to the proceeds they received when E&Y sold its consulting business to Cap Gemini. The more I read, the more it reminded me of Enron’s downfall. As with Enron, there is an accounting firm involved, law firms certifying the validity of very complicated transactions, and financing from a third party. What is different is, unlike in Enron, the originator of the transactions is the accounting firm. I consider this difference to be very significant. But it is obvious, after the demise of Andersen, the government has decided to go after individuals criminally, rather than the firm, so as not to put the future of a Big Four firm in jeopardy. If it goes to a jury trial, how will the government simplify the transactions? What are the perceived smoking guns that it will present? With regard to the defense, will they claim the tax shelters weren’t criminal but very aggressive attempts at tax savings, similar to 1031 exchanges? If successful, the government will probably feel those in accounting firms, because of fear of criminal prosecution, will reign in a firm from engaging in fraudulent activities. I wonder if the government has successfully made that point already simply by indicting four former or current partners of a Big Four firm. A copy of the indictment is at http://online.wsj.com/public/resources/documents/EYIndictment20070530.pdf. The government’s press release is at usdoj.gov/usao/nys/pressreleases/May07/eyindictmentpr.pdf.

Republican presidential candidates Rudy Giuliani and Sen. John McCain, R-Ariz., have each refused to sign a pledge not to raise taxes if either is elected as the nation’s chief executive.

Richard Caturano, chief executive at Boston-based regional CPA and business advisory firm Vitale Caturano & Co., has been elected CEO of accounting and consulting network Baker Tilly USA, effective immediately. Caturano will continue in his role as CEO of VC&C. Caturano's appointment was announced at the Baker Tilly International North American Regional Conference, here. Formed in 2006, Baker Tilly USA is a network of 23 independent accounting and consulting firms. It is the U.S. affiliate of Baker Tilly International, which represents 126 member firms in 93 countries.

The American Institute of CPAs named Karin Wiberg to the position of director of the Office of Strategy Management. In that role, she will manage the Institute's strategic planning processes and evaluate the organization's performance. Prior to coming aboard the AICPA, Wiberg most recently served as strategic planning director at Principal Financial Group.

Small businesses, those companies with less than 50 employees, increased their payrolls by 58,000 in May, according to the Small Business Report from payroll provider ADP. Highlights from the May report show that the service-providing sector added 61,000 jobs in May, while there was a loss of 3,000 in the goods-producing sector for a net gain of 58,000. Additional charts on monthly job growth and job levels, along with historical data, are available at http://www.smallbusinessreport.adp.com. ADP said its June report would be released July 5.

A bill that is now before the Connecticut State Senate would give its state comptroller the legal authority to establish GAAP for the state’s financials, thereby sidestepping the Governmental Accounting Standards Board — the standard-setter for governments and municipalities.