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Fired IRS Official Denies Intentional Targeting and Lying to Congress

Fired IRS Official Denies Intentional Targeting and Lying to Congress

 

Ousted IRS Official Denies Intentional Targeting and Lying to Congress
 
A significant increase in workload, as oppose to deliberate targeting, led to foolish mistakes and acts of political discrimination in the IRS as cited by an inspector general’s report, the agency’s outgoing commissioner claimed today. 
 
The testimony by Steven Miller, who was forced to resign as commissioner of the Internal Revenue Service earlier this week, was presented at the first congressional hearing on the controversy that has required President Obama’s administration on the defensive. 
 
Rep. Dave Camp, the chairman of the Republican-led panel, and other GOP members sought to paint the controversy as indicative of a government gone wild, with the IRS abusing conservative organizations and other political adversaries of the administration. 
 
Democrats on the committee also expressed disdain at the political targeting of conservative groups’ tax-exempt status; however, they noted that the top IRS official responsible for conducting affairs was appointed by Republican President George W. Bush.
 
The Democrats on the committee also noted that the inspector general’s report expressed that there was no evidence of any political influence from outside the Internal Revenue Service. 
 
Miller apologized for what he described as “horrible customer service,” he also rejected any accusation that it amounted to bringing politics into the Internal Revenue Service’s work and responsibilities. 
 
According to reports, the Internal Revenue Service developed and followed a defective policy to determine whether the applicants for tax-exempt status were engaged in legitimate political activities. If so, the organizations being reviewed would be disqualified from receiving tax-exempt status. 
 
The controversy started in early 2010 and continued for more than 18 months. The report ultimately declared that the IRS used inappropriate criteria to identify the Tea Party and other conservative groups as non-exempt. The report stated that the agency found these organizations as speculative bodies for receiving tax-emptions based upon their names or political positions as oppose to indications of potential political intervention. 
 
According to the report, IRS officials failed to consult anyone beyond the agency regarding the development of additional screening criteria. President Barack Obama called the findings “outrageous” and forced Miller’s resignation, which is set to take place in early June. 
 
 
Source: whitehouse.gov

Pump the Brakes: Hiring Slows Severely in March

Pump the Brakes: Hiring Slows Severely in March

 

 

 
Hiring in the United States slowed drastically in the month of March as the economy added only 88,000 jobs, the lowest monthly gain since June of last year. 
Economists were expecting an increase of approximately 190,000 jobs when the United States Labor Department issued their jobs report today. 
 
Experts expected the jobless rate to hover around the 7.7 percent level, but the drop in unemployment is not good news. Although the unemployment rate dropped to 7.6 percent, the amount of Americans leaving the labor market is on a steady rise; nearly 500,000 Americans dropped out of the labor market. 
 
That said, the report left many economists feeling somewhat optimistic; although the news is poor and surprising, many industry professionals expect hiring to continue at a steady pace for the remainder of the year. 
 
“Payrolls and hiring decisions are very volatile from month to month,” claimed Jim O’Sullivan, chief economist at High Frequency Economics, who believes monthly job figures will average approximately 175,000 for the rest of 2013. “I am not going to panic over one 88,000 report,” added O’Sullivan. 
 
Looking at the first quarter of 2013, companies expanded payrolls by an average of 168,000 a month, which is roughly in line with past two years. This statistic reflects one of the few bright spots in Friday’s report: hiring figures in January and February were revised upward by roughly 60,000 jobs. 
 
Economists and industry professionals earlier in the week forecasted employers to add 2.24 million jobs throughout 2013, and that 2.4 million jobs will be added in 2014. The same individuals expect the unemployment rate to dip to 7.4 percent by the end of 2013 and to improve to 6.7 percent by the end of 2014. These estimates are close to the 6.5 percent level that the Federal Reserve has announced it wishes to see before raising interest rates. 
 
In March, hiring was concentrated in only a few industries; growth was slowed by the retail sector, which lost nearly 25,000 jobs, and at the United States Postal Service, which cut 12,000 positions. The decline in retail was particularly alarming, because the sector had average an increase in roughly 32,000 jobs per month over the past 6 months. 
 
The construction industry was one of the bright spots on the report; the construction sector added over 18,000 jobs last month. 
 
Overall, the private sector struggled as it added only 95,000 jobs, while the public sector slashed over 7,000 positions. The poor jobs data ended a week of disappointing labor news; a report released Thursday revealed that initial unemployment claims rose 28,000 for the last week in March. Stocks declined sharply on Friday in response to the jobs report. 
 
Source: AP

SEC Charges Father and Son Conducted Cherry-Picking Scheme at Investment Company

SEC Charges Father and Son Conducted Cherry-Picking Scheme at Investment Company

 

The Securities and Exchange Commission charged a father and son and their Chicago-based investment advisory business with defrauding clients via a cherry-picking scheme that reaped them approximately $2 million in illegal profits, which they used to purchase vehicles, vacations, and luxury homes. 
 
The United States Securities and Exchange Commission alleges that Charles Dushek and his son Charles Dushek Jr. placed several million dollars in securities trades without identifying in advance whether they were executing trades for themselves or their clients. The father and son delayed allocating trades to cherry pick winning trades for their personal accounts and drop losing trades on the accounts of clients at Capital Management Associates. 
 
According to the complaint filed in Chicago, the scheme took place from 2008 to 2012. During this period, the Dusheks finalized in excess of 13,500 trades totaling more than $350 million. The Dusheks often waited to distribute the trades for at least one day, which was ample time to evaluate the success of the transaction. The father and son kept most of the winning trades and placed the losses on their clients. During the time of trading, the Dusheks did not keep written documentation of whether they were trading personal funds or client funds. 
 
The incredible success the father and son procured reflects the breadth of their illegal activities. For 17 consecutive quarters, the two reaped positive returns while their clients suffered negative returns–one of their personal accounts increased by a ludicrous 25,000 percent from 2008 to 2011 while the majority of his clients’ accounts decreased sharply in value. 
 
The illegal profits garnered from their personal accounts were the only source of consistent income for the pair. 
 
The complaint charges the father and son with fraud and seeks judgments that would require the pair to return all illegal gains with interest and penalties. 
 
 
Source: SEV.gov

Shodan: The most Diabolical Search Engine on the Internet

Shodan: The most Diabolical Search Engine on the Internet

 

 
“When Internet users do not find their inquiries on Google, they think no one can find them; this is simply not true.”
 
This is according to John Matherly, the creator of Shodan, which is widely regarded as the scariest search engine on the Internet.  
 
Dissimilar to Google, which crawls the Web searching for websites, Shodan navigates the Internet’s back channels. Shodan is in essence a “dark” Google, looking for the printers, webcams, serves, routers and all the other things that is connected to and makes up the broader Internet. 
 
Shodan operates 24 hours a day, seven days a week to perpetually collect information on roughly 500 connected devices and services each month. 
 
Users and industry professionals claim Shodan offers stunning search results even from the basic of inquiries. Seemingly countless security cameras, home automation devices, traffic lights and heating systems are connected to Internet and easy to locate through a Shodan search. 
 
Shodan searches can find control systems for water parks, gas stations, and even a hotel wine cooler. Cyber security researchers were even able to locate command and control systems for nuclear power plants and particle accelerating cyclotrons by accessing Shodan. 
 
What is truly impressive about Shodan’s ability to locate all of these things, and the characteristic that makes Shodan so scary is that many of the aforementioned devices have legitimate security systems built into them. 
 
“You can access a scary amount of the Internet with a default passcode,” said HD Moore, the chief security officer of Rapid 7, which operates a private version of a database similar to Shodan for personal research purposes. 
 
A basic search for “default password” reveals countless serves, printers and system control devices that utilize “admin” as their user name and “1234” as their password. Several other connected systems require no credentials at all; for these systems all you would need is a Web browser that is connected to them. 
 
In a speech at last year’s Defcon cyber security conference, independent security penetration tester Dan Tentler revealed how he used Shodan to locate control systems for evaporative coolers, garage doors, and pressurized water heaters. 
 
Tentler located a car wash that be turned on and off and a hockey rink that could be defrosted with the click of a button. A city’s entire traffic control system was found to be connected to the Internet, allowing a hacker to put it into “test mode” with a single command entry. Tentler also located a control system for a hydroelectric plant in France with turbines generating over 3 megawatts each. 
 
“A hacker or evil person could really do some serious damage with this information and control,” Tentler said in a severe understatement. 
 
Source: CNN

Apple Facing the Heat: Tech Giant Questioned over Tax Havens

Apple Facing the Heat: Tech Giant Questioned over Tax Havens

 

 
Apple executives defended the tech giant’s tax strategy on Capitol hill today, claiming that the corporation pays one of the highest effective tax rates of any major company in the United States. 
 
A Senate panel called the hearing to investigate what committee leader’s claims was the company’s strategy of shifting income to an Irish subsidiary to avoid paying American taxes. Apple executives claim the money resided with its international operations, including those in Ireland, and not to avoid taxes because of the growth of the company’s sales overseas. 
 
Apple CEO Tim Cook said the tech company paid an effective tax rate of nearly 31 percent on profits it made on sales within the United States. Mr. Cook said the company paid over $6 billion in U.S. corporate taxes for the fiscal year of 2012 and expects to pay an even greater some this year.
 
“I am often asked if Apple still regards itself as an American company,” Cook said. “My answer will always be an emphatic yes. We are more than proud to be an American company, and equally proud of our contributions to the economy of the United States. 
Cook claimed that Apple has never considered moving its headquarters outside of the United States. “It is beyond my imagination, and I have a pretty crazy imagination,” Cook said. 
 
Carl Levin, chairman of the U.S. Senate’s Permanent Subcommittee on Investigations and John McCain both started the hearing with strong remarks of Apple’s practice of shifting income to foreign nations to avoid paying American taxes. 
Levin called Apple’s practice an utter “sham,” while McCain said that the company’s claim that its use of the Irish subsidiary did not diminish its U.S. taxes is “completely false.”
 
“American corporations cannot continue to avoid paying their share in taxes,” said McCain. “Our armed forces units cannot afford it, and our economy cannot endure it. Moreover, the American people will not tolerate it.” 
 
McCain asked Cook, “Can you see that there is a perception of an unfair advantage with what you do?”
 
In response, Cook said “honestly, I do not see it as being unfair; I am not an unfair person, and that is not who we are as a company.”
 
Cook claims that his company strongly supports corporate tax reform and that he was happy to testify at the hearing if it would advance the change of said reform being passed. 
 
 
Source: Internal Revenue Service

Jay-Z’s Latest Venture: The World of Sports

Jay-Z’s Latest Venture: The World of Sports

 

 
Rap star and businessman Shawn “Jay-Z” Carter, officially became a sports agent last week, kicking off his latest venture with a superstar client—New York Yankees second baseman Robinson Cano. 
 
Roc Nation, the entertainment business created by Jay-Z in 2008 is launching Roc Nation Sports, a management company that will team-up with Creative Artists, to represent the star baseball player and other top athletes. 
 
Cano, who previously was represented by Scott Boras, is due to be a free agent at the of this year’s major league season, which will allow the star infielder to sign with any team in the majors. Cano is expected to be the most coveted player of this year’s free agent class, and his expected nine-figure contract means a massive payday for not only Cano himself, but also for his new agency. 
 
Roc Nation has revolved around the music industry, managing songwriters, artists, engineers and producers; however, it is also in the business of music touring, merchandising, publishing and managing its own label, Roc-A-Fella-Records. 
 
Jay-Z was named one of Fortune’s 50 business people of the year in 2012; the rap star turned entrepreneur recently sold his clothing line Rocawear, to Iconix for roughly $205 million.
 
The creation of the sports management company is not Jay-Z’s first foray into athletics; he is the current minority owner of the Brooklyn Nets. 
 
“As a result of my love for sports, the creation of the sports management company was a natural progression to form a company where we can help premiere athletes in the same way we have been helping artists in the music industry,” said Jay-Z. 
The signing with jay-Z marks an unusual setback for Cano’s former mega-agent, Scott Boras. 
 
Boras has a reputation for being one of the most aggressive sports agents in professional athletics. This aggression often earns him and his client’s top dollar for their services. 
 
Source: AP

Not So Sunny: SEC Charges City of South Miami with Fraud

Not So Sunny: SEC Charges City of South Miami with Fraud

 

The Securities and Exchange Commission today charged South Miami with defrauding bond investors regarding the tax-exempt financing eligibility of a mixed-use paring and retail structure being constructed in its downtown commercial area. 

The SEC investigation found that the city of approximately 11,000 residents located in Miami-Dade County borrowed roughly $12 million in two pooled, conduit bond offerings through the state’s Municipal Loan Council. The city’s participation in these offerings enabled it to borrow funds at generous tax-exempt rates. The city claimed that the project was eligible for tax-exempt financing in several documents for the second offering that were trusted upon by bound counsel in generating its tax opinion.

However, the city failed to disclose that it had jeopardized the tax-exempt status of the bond offerings by illegally loaning proceeds from the first offering to a private contractor and restructuring a lease agreement before the second offering. 

The city of South Miami agreed to settle the charges and keep an independent third-party consultant to oversee its procedures, policies, and internal controls for municipal bond disclosures. 

“The city’s fraudulent conduct put bondholders in considerable danger of incurring substantial additional costs associated with their investments,” said Elaine Greenberg, the Chief of the SEC’s Enforcement Division of Municipal Securities and Public Pensions Unit. 

According to the agency’s order, the city of South Miami sought financing to construct a public parking garage. The project ultimately become a mixed-use public parking and retail structure that was intended to be developed by a for-profit developer—South Miami was responsible for all construction costs save for the retail aspect of the structure. The city retained control over the maintenance and operation of the garage portion and all revenues generated from parking. The developer’s limited role was pivotal to the city procuring the benefits of tax-exempt financing. Under IRS rules and regulations, the project was allowed to be financed on a tax-exempt basis only if the for-profit developer used it on a limited basis. 

According to the agency’s order, the city approved financing for the construction of the tax-exempt portion of the building and moved ahead with its bond pool offering. However, the bond counsel identified a tax issue with the mixed-public retail aspect of the project, and during subsequent conference calls, bound counsel informed the city that no funds from the offering could be utilized to finance the retail aspect of the structure. 

The SEC found that city finance directors were unaware of these discussions or how the lease contact affected the bond’s tax status. 

Source: sec.gov

 

Axed: J.C. Penney CEO Shown the Door

Axed: J.C. Penney CEO Shown the Door

 

 
The Ron Johnson tenure at J.C. Penney is official over. 
 
The troubled department store announced late yesterday that Johnson is stepping down as CEO and leaving the company after just 18 months at the helm. Johnson is being replaced by his predecessor, Mike Ullman, who led the corporation for seven years prior to Johnson’s hiring. 
 
J.C. Penney announced that Johnson’s departure is not the result of a conflict or disagreement with the Board of Directors or the company itself on any matter relating to operation, practices or policies. 
 
J.C. Penney char Thomas Engibous said via a statement that the company is fortunate to have new CEO Mike Ullman take the reins at the distressed retailer. 
 
Ullman said in a statement that J.C. Penney has traversed through choppy waters, but that the store remains a leader in American retailing and is an asset the can be leveraged and built upon. 
 
J.C. Penney shares surged following the news of Johnson’s departure, but dropped off after it was announced that Ullman would replace him. Ultimately the stock dipped 7 percent by Monday night. 
 
“The selection of Mike Ullman, puzzled a lot of people,” said William Frohnhoefer, an analyst with BTIG, noting that Johnson’s hiring two years ago was viewed as an attempt to change course following Ullman’s tenure. 
 
J.C. Penney shares have dropped more than 50 percent over the past year as Johnson, a former Apple executive struggled to drive a turnaround effort. 
 
Johnson offered a series of new initiatives, including redesigned store layouts, overhauled prices, and even free haircuts for children, in an effort to revitalize the company. Johnson ditched older brands and announced plans to terminate checkout counters in favor of self-checkout lanes and mobile devices. 
 
“Johnson tried to do too much too soon,” Frohnhoefer claimed. “Johnson had a slew of radical and bold ideas, and he attempted to execute them all at once.”
 
Johnson received a compensation package worth nearly $54 million for 2011, $53 million of which came as a special stock award. Johnson earned roughly $2 million in 2012, receiving only 44 percent of his target cash compensation in light of the company’s poor performance. 
 
New CEO Mike Ullman is scheduled to receive an annual base salary of $1 million, J.C. Penney announced on Monday. 
 

Ben Bernake Warns against Raising Interest Rates too soon

Ben Bernake Warns against Raising Interest Rates too soon

 

 
Federal Reserve Chairman Ben Bernanke warned the American public of the risks associated with raising interest rates too soon. Mr. Bernanke also urged the U.S. Congress to do more to help the economy. 
 
The United States’ economy is doing far better than it was a year ago, but Bernanke wants to be cautious not to squash the recovery now. 
 
“A premature tightening of our monetary policy could cause interest rates to rise temporarily, but it would also carry a significant risk of slowing or ending our economy recovery and causing inflation to drop further,” Bernanke told the U.S. Congressional Joint Economic Committee on Wednesday. 
 
The Federal Reserve has maintained its fundamental short-term interest rate close to zero since December of 2008, and expects rates to stay at this level there for a “considerable amount of time” as the recovery continues to strengthen, Bernanke said. 
The Fed is also engaged in a controversial stimulus practice known as quantitative easing, where the central bank purchases $85 billion a month in Treasury bonds and mortgage-backed securities. This policy is meant to reduce long-term interest rates to stimulate the economy through a variety of avenues. 
 
Low mortgage rates, for example, have played a vital role in the housing recovery, enabling some homeowners to refinance or provide an incentive to prospective buyers to purchase a home. 
 
The housing recovery has provided a significant boost to the construction and real estate employment markets; since 2011, these industries have added roughly 420,000 jobs, according to the Federal Bureau of Labor Statistics. 
 
That said, it is unclear how effective the policy has been in boosting the overall labor market. The economy lost roughly 8.7 million jobs following the financial crisis, and has since gained only about 6.2 million jobs back. 
 
As of last month, the unemployment rate was 7.5 percent, which is an improvement from the peak of 10% during the crisis, but still well below the pre-recession level. 
Bernanke cited his concerns about not just the labor market, but also underemployment—roughly 8 million Americans are working part-time even though they are willing to engage in full-time work. 
 
Meanwhile, the policy is widely credited for boosting stocks to record highs. 
The Federal Reserve is aiming to keep short-term interest rates close to zero until the unemployment rate dips back to 6.5 percent or inflation exceeds 2.5 percent per year. By the central bank’s own forecasts, this scenario is not likely to happen until at least 2015. 
 
 
Source: whitehouse.gov

Another One Bites the Dust: IRS Official Lois Lerner Placed on Administrative Leave

Another One Bites the Dust: IRS Official Lois Lerner Placed on Administrative Leave

 

 
The official of the Internal Revenue Service responsible for overseeing the unit that targeted conservative groups for a number of years starting in the spring of 2010 has been placed on administrative leave, according to a statement released by both the Republican and Democratic parties. 
 
Mrs. Lerner was the director of exempt organizations when the Internal Revenue Service filtered applications for tax exempt status for words such as “tea party” and “patriot.”
 
Mrs. Lerner publicly revealed the targeting two weeks ago when she gave an answer to a planted question at a bar association event in Washington shortly prior to the issuing of an inspector general report that made the issue a public matter. 
 
The Internal Revenue Service’s new acting director announced late today that he would be appointing Ken Corbin to oversee the exempt organizations unit. Mr. Corbin was previously a part of the agency as a deputy director of a department that processes payments and tax returns. 
 
Lerner appeared before the House Oversight Committee earlier this week and stated she had not broken any of the agency’s regulations or laws of the United States. Mrs. Lerner then invoked her Fifth Amendment right against self-incrimination and refused to answer any questions. 
 
Members of the Republican Party questioned whether Lerner had waived that right by issuing her opening statement. Committee Chairmen Darrel Issa will call Mrs. Lerner back to testify before the committee, his spokesman said in a statement released earlier today. 
 
Lerner was made aware of the scandal in June of 2011, according to a report by the agency’s inspector general. Lerner ordered agents of the IRS to scrap the criteria, but later they expanded to include groups that promoted the Bill of Rights and the Constitution. 
 
The singling out finally halted this month, when top agency officials claimed they found out and ordered agents to adopt legitimate criteria for determining whether tax-exempt groups were overly political. 
 
 
Source: IRS.gov
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