Andersen to pay $25M for Global Xing
Defunct accounting firm Arthur Andersen LLP will pay $25 million to settle a lawsuit brought by investors over its role in the collapse of telecommunications company Global Crossing Ltd.
Lawyers for Andersen announced the deal in early August, and said that the company has denied it committed any crime and decided to settle in order to eliminate the uncertainties and expense surrounding protracted litigation.
In March, Citigroup, one of Global Crossing's financial advisors, settled its share of the lawsuit for $75 million. The Andersen settlement will bring the total to $345 million that defendants have agreed to pay to investors. The investors named in the lawsuit accused Global Crossing, its former officers, directors and advisors of falsifying financial filings to hide losses.
KPMG partners may face tax charges
Federal prosecutors have notified as many as 20 former partners at Big Four firm KPMG LLP that they may face criminal charges for selling illegal tax shelters.
According to reports, "tough concessions" from KPMG are likely to be the price of any settlement, although lawyers are still investigating individual executives and weighing whether or not to press criminal charges against the firm. Reports said that negotiations between KPMG and prosecutors were continuing and a resolution could be weeks away.
Earlier this year, New York prosecutors recommended that KPMG face criminal charges, but Washington Justice Department officials pointed to the 2002 failure of Arthur Andersen LLP and expressed concerns about the prospect of another major accounting firm collapse.
In January 2004, KPMG announced congressional scrutiny into its past shelter activities after a November 2003 report showed that KPMG collected roughly $124 million in fees from shelters from 1997 through 2001. Earlier this summer, KPMG issued a statement apologizing for "unlawful" activity by former partners and pledged to cooperate with investigators. The firm turned over batches of documents, pressured dozens of tax executives to resign, and imposed caps on attorney fees.
Errors at Block lead to restatement
Tax preparation giant H&R Block Inc. has said in a filing with the Securities and Exchange Commission that it overstated net income for 2003 and 2004 by $91.1 million, due mostly to accounting errors. Most of the revisions came from errors in the way Block accounted for its acquisition of Olde Financial Corp., a discount brokerage business and online trading company that Block purchased in late 1999.
In June, the company announced that it would restate its results for 2003 and 2004, but its estimates of a cumulative 2-cent decrease in earnings per share were far off. In the filing, the company said that the anticipated change would be closer to a 50-cent decrease per share. For 2003, Block's net income was reduced by $102.4 million to $477.6 million. In 2004, earnings rose by $11.4 million to $709.2 million.
Block said that the bulk of the restatements would include corrections of two accounting errors, one resulting in a $12 million reduction in the provision for income taxes for 2004 and another erroneously calculating a gain on the sale of previously securitized residuals in 2003, resulting in a net overstatement of revenue for that year of about $36 million.
The Web site and listserv addresses for CPAs Reforming Our Profession in "Crop: AICPA financials need serious examination" (Accounting Today, July 25-Aug. 7, 2005, page 6) included hyphens because they broke between two lines due to length. The addresses without hyphens are:
* Web site: www.cpas4reform.com; and,
* Listserv: firstname.lastname@example.org.
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