Taxing charges for Jackson Hewitt

There must have been an awful lot of hardworking, honest accountants and financial advisers out there who experienced more than a little schadenfreude last week when the Department of Justicecharged a number of Jackson Hewitt Tax Service Inc. sites with “pervasive fraud” that it said caused more than $70 million in combined losses in federal tax revenue.
It filed civil lawsuits — charging a wide range of fraud — against five corporations that operate franchises of the Parsippany, N.J., tax preparation firm, as well as several dozen managers and employees in Georgia, Illinois, Michigan and North Carolina.
Allegations include filing returns claiming refunds based on phony wage forms, using fabricated businesses and business expenses on returns to claim unwarranted deductions, and fraud related to the earned-income tax credit.
Even better news for honest accountants and advisers: Congress may expand regulation of paid preparers. Senate Finance Committee Chairman Max Baucus, D-Mont., said that the Jackson Hewitt situation “underscores the need for closer oversight.”

Europe’s stock soars
The rise of international markets reached a high-water mark last week when Europe eclipsed the United States in stock market value for the first time since the beginning of World War I.
Capitalization of two dozen stock markets in Europe, including Russian and the emerging markets of eastern and central Europe, rose to $15.7 billion last week, according to data from New York-based Thomson Financial, exceeding the $15.6 billion market value of the United States.
The shift underscores Europe’s fast-growing economy and the rise of the euro against the dollar. What’s more, the German stock markets outperformed the Standard & Poor’s 500 stock index in the first quarter, and, according to Absolute Strategy Research Ltd. of London, return on equity for European companies last month was 17.5%, compared with 16.5% for American companies.

Blaming Cox
Critics of the Sarbanes-Oxley Act rejoiced last week as the Securities and Exchange Commission approved a framework for changes to rules of the anti-fraud law, which would ease requirements for companies and their auditors.
But according to Benn Steil, director of international economics at the Council on Foreign Relations in New York, blame for the exodus of equity from the U.S. markets should be placed directly (or indirectly) on SEC Chairman Christopher Cox. Writing in the Financial Times last week, Mr. Steil pointed to a commission headed in 1999 by Mr. Cox, then a California congressman, that reported on Chinese military links to commercial and financial activities in the United States.
The resulting hysteria, he wrote, led to the creation of an Office of Global Security Risk at the SEC, which investigates the activities of foreign companies listed on American markets. The problem, Mr. Steil argued, is that Wall Street saw such “foolish forms of domestic market regulation” as politicizing the capital markets.
Thus, he concluded, “Christopher Cox became the most important founding father of the capital markets sanctions movement … earning pride of place in the pantheon of diplomatic dopiness.”

Boomer blitz
Advisers can soon expect a marketing blitz from Philadelphia-based Lincoln National Corp. in the wake of last week’s launch of its Unified Product Portfolio, which targets baby boomers in all stages of retirement planning.
Lincoln has decided to focus on the 90 million U.S. consumers who are expected to retire in the next decade, offering them variable annuities and other products that guarantee lifetime income.
In a note to clients last month, Edward Spehar, an analyst with Merrill Lynch & Co. Inc. of New York, said he expects Lincoln to keep gaining market share with such products and “reinvigorated wholesaling efforts.”

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