Professor Elam

Another Nominee, Another Tax Problem

The Governor of Kansas, up for Health and Human Services, and her husband, a Federal Magistrate Judge, discovered another $7K in taxes owed. The question all this should prompt is

if a governor and her Federal Judge Husband cannot understand the tax return process, who can?

How about some real change, an elimination of the Tax Coded altogether? I would favor a repeal of hte 16th amendment or we would end up with both a sale sand income tax.   A national sales tax would be preferable but then of course politicians could not dispense tax favors for campaign contributions.

Vallejo CA can void Union Contracts

A bankruptcy judge has ruled that Vallejo, CA can void its contracts with union workers while the City is in Bankruptcy.  

The Vallejo, CA Chapter Nine case is being closely watched by cities across the country. Its historic parallel is New York city in 1975-6. Back then the garbage workers making $45,000 finally did bankrupt the City, along with other unworkable union contracts. Vallejo is paying many city firemen and police six figure salaries. No doubt the Unions will appeal this decision, but I suspect it will be upheld. 

Unions in Vallejo and at the UAW are discovering the deflation party has arrived. 

Local Housing Official Embezzles $131 K

Laura Morales  estimates that she embezzled some $131,000 from a Section 8 Housing Fund. 

The numbers mentioned in the article run much higher. 

I have noted the importance of internal auditing in class. The importance of internal audit will only grow in the future what with SARBOX. And in a declining economy there will be more people 'tempted' to embezzle. While internal audit does not necessarily exist to uncover fraud,this is an increasing component of its focus. SARBOX rules require external auditors to make a statement about potential fraud. 

It took five years to bring the case against Morales, makes one wonder how many more have not been caught or managed to leave the scene....

Banks Back Away from Foreclosure

Now banks are failing to foreclose on homes, the cost of demolition is more than the value of the house.

This NY Times article is getting a lot of buzz on CNBC this morning.  This is true deflation.The value of the collateral goes not just to zero, it goes negative. The cost of demolition makes the property have a negative value. Rather than face that cost, the bank refuses to foreclose and the homeowner is faced with that cost.

Note however that the value of the debt remains on someone's books. The mountain of debt remains, the asset values evaporate.

GM CEO Resigns

Rick Waggoner resigned at the Admin request. 

He was not able to get the unions and the bond holders to an agreement that removes enough of their claims to go forward, in the view of just about everyone. The Administration appears to be moving as one observer said this morning to an airline type managed bankruptcy. 

The Admin provided aid for suppliers last week.

The Admin is committed to GM surviving. 

Fritz is an interim, Board members will be resigning, all this is to send a big message that everyone needs to come to the table or bankruptcy is going forward. 

Look for the Admin to force GM to go to the Toyota Three model lineup, this is in contrast to

Chevy Pontiac Buick Caddy Hummer GMC Saab Saturn

I suspect we end up with

Chevy Caddy and something in between I do not know what it would be called or perhaps the third is just a light truck division, who knows

Or with Washington running it maybe the third division is some sort of Green Car

Dennis

Chrysler meanwhile must make a deal with FIAT for capital for they look like toast. I don't know if FIAT wants to make the deal now, or, wait to buy what they might want out of Chrysler in  a Chrysler bankrutpcy. Chrysler has always been a weak company, hard for me to advise FIAT. 

Trump Decries Madoff

Donald Trump has a blog. He writes about Madoff as follows.

 The sad thing is that so many people trusted him, and unfortunately some of them trusted him completely. Some people gave 100 percent of their money to this guy, and now they’re literally selling their houses in order to live. It’s a great lesson in doing your due diligence. Some very smart people were taken in by him. Just because someone is well established doesn’t mean they’re not above being a total crook.

Hmm, speaking of due diligence and taking people in, let's look at TRMP. That WAS the symbol for the NYSE listed Trump Resorts, lately it is bankrupt and now trades in the pink sheets as TRMPQ at 8.5 cents!  But back in 2005 The Donald took these casinos public at $24. He got Wall Street to sell his soon to be bankrupt casinos to the public for $24 a share. To make sure you don't miss the point, those are the same shares trading for 8.5 cents today. Writing for Fortucast we speculated a couple of years back that after housing, casinos would be the next to fail. I even mentioned TRMP as a likely candidate but regrettably failed to buy long term puts. Ironically some of Trump's Apprentice Television shows featured lavish interior views of these vary casinos. now connect the dots

today Trump decries Madoff and tell readers to perform due diligence

Trump's own Casinos are broke but at least he was smart enough to cash in on investor confidence in him, he got the $24 a share (she got the gold mine, I got the shaft as Jerry Reed crooned)

Trump was the very icon of real estate investing with his Apprentice show, once real estate collapsed the show went off for a couple of seasons, in another ironic turn

the show is back on with Celebrity Apprentices, Joan Rivers no less among them, good thing this group won't need a high paying job after the series, it would be interesting to know just how much equity Trump has in 'his' properties or is he a Madoff, luring lenders to his various deals?

A Different Take on Accounting

I spotted this review in the Books Section of the SA Express News. 

Roberto Escobar   is clearly and admirer of his brother, Pablo, of the Medellin Cartel fame. 

He became the accountant running a ten person staff. They quickly exhausted the the world capacity for secure bank accounts. So the money was hidden in warehouses and homes of cartel members. Rodents and mildew got a lot of it, so much so that spoilage of currency was an annual ten percent write off. I guess contribution margin was high enough they operation could stand this. One wonders why they did not start their own island country with its own banking system, this was the case for Panama until we overthrew its leader. 

Reviewers note this is not an apology, in deed Roberto seems to admire Pablo.

To me this story is an account of the total and complete failure of the so called War on Drugs that now terrorizes our neighbors to the South. If operators can write off ten percent of the gross due to mildew, it is hard to see how you and I can support this War....

Realistic Ways to Help Detroit

Jerry Flint lists common sense ways to get the car business back on its feet.

Olympus Goes Into Space

Crescenio shoots digital with a Sony, Efton uses a Nikon D 90, I use an Olympus 510. If one started photography back in the chemical laden days of black and white photography, color digital is an amazing transition.

Olympus is promoting its flagship E 3 on the latest Space Shuttle Mission.  The Japanese PhD in Japan's first Space Station Module will be using the E 3 to record the event and of course capture the unusual striking photos fo the earth from space.

I am old enough to remember the initial excitement of space travel. These days it is passe. We simply have not been very far, and it does not appear that there is other life in this solar system. But the photos and projects remain fascinating.   Olympus wil be updating the site as the Mission progresses.

Internal Audit Directions

A new survey by the Institute of Internal Auditors  takes a look at the direction risk investigation is taking.
The focus of modern internal auditors is on the greatest risk the organization is liable to face.
Now attention is turning to risks the recession may bring, a fine study, take a look. As I have said in clas, the fastest growing segment of accounting is internal audit.