Fannie Mae finds more errors
More errors have been unearthed by the seemingly never-ending review of home mortgage lender Fannie Mae's accounting. Fannie Mae also said that it will miss a regulatory deadline for filing its financial report for the first quarter, and that is doesn't expect the government-ordered accounting review to be finished before the second half of 2006.
Fannie Mae said that the newly disclosed accounting errors involve certain transactions in its business of buying home mortgages from banks and other lenders and bundling them into securities, and the guaranty fees it charges the banks and other lenders. There was no dollar estimate of how the mistakes could affect the expected restatement of earnings from January 2001 through the second quarter of 2004. The company also expects an upcoming internal report to show that its financial controls remained insufficient up to the end of last year.
IRS targets down-payment scams
Organizations that provide seller-funded down-payment assistance to home buyers do not qualify as tax-exempt charities, the Internal Revenue Service said in a recent ruling.
Down-payment assistance programs can qualify as tax-exempt organizations in some instances. In Revenue Ruling 2006-27, the agency provides a detailed discussion of guidelines on how to meet the tests for exemption, along with a trio of examples. The IRS has said that it has increasingly found that organizations claiming to be charities are being used to funnel down-payment assistance from sellers to buyers through self-serving, circular-financing arrangements.
The IRS is examining 185 organizations that operate down-payment assistance programs. The agency has also denied applications for tax exemption from over 20 organizations.
Former Gemstar CEO to pay $22M
In one of the largest fines ever handed down to an individual charged with accounting fraud, a federal judge has ordered the former chairman and chief executive of Gemstar-TV Guide International Inc. to pay $22 million in penalties, interest and restitution. Henry C. Yuen plans to appeal the ruling, handed down in Los Angeles federal court. In a civil trial in December, Yuen was found guilty of securities fraud for inflating the company's revenues. He was also barred from serving as an officer or director of a public company.
The fine levied by the Los Angeles judge covers $10.6 million Yuen received in bonuses and trading profits, plus a civil penalty of $10.6 million and $1.2 million in interest.
Bush nominee for tax policy post
The Treasury Department announced that President Bush has nominated Treasury official Eric Solomon to be the department's assistant secretary for tax policy, filling a post that has been vacant since February 2004. Solomon is currently deputy assistant secretary for tax policy and has worked at the Treasury since 1999. Treasury Secretary John Snow said that Solomon had played a crucial role over the past five years in the design and implementation of the president's tax cuts. Previously, Solomon was a partner at Ernst & Young. Before the Big Four firm, he worked at the Internal Revenue Service for five years, serving as corporate assistant chief counsel.
Correction
In "Too important to leave to chance," (May 1-14, 2006, page 32), a sidebar to our feature on forensic accounting, the title of the book by Thomas Golden, Steven Skalak and Mona Clayton was incorrectly shortened; its full name is A Guide to Forensic Accounting Investigation. Also, a quote in the article implied that the survey on fraud of 3,600 firms was done for the book; in fact, it was done for PricewaterhouseCoopers' Global Economic Crime Survey.
