<![CDATA[PA Professional License Defense - Blog]]>Mon, 11 Dec 2017 05:36:14 -0800Weebly<![CDATA[The Governmental Auditor and Right-to-Know Requests]]>Wed, 13 Aug 2014 20:44:10 GMThttp://palicensedefense.com/blog/the-governmental-auditor-and-right-to-know-requestsBelow is a link to my latest article which was published in the Summer 2014 Pennsylvania CPA Journal.


If you have any questions about Right-to-Know requests, this case, or an auditor's response please contact me at jmcguire@c-wlaw.com.
<![CDATA[Pennsylvania Lawyers Required to have More Ethics]]>Fri, 07 Feb 2014 19:34:55 GMThttp://palicensedefense.com/blog/pennsylvania-lawyers-required-to-have-more-ethicsThis is not a joke.  This is a good thing.  Beginning in the compliance periods with deadlines in 2015 all Pennsylvania lawyers will be required to obtain 2 ethics credits during each year in order to maintain our licenses.  Our total CLE hours will remain twelve per year.  These changes were adopted by Regulation changes by the Pennsylvania Continuing Legal Education Board this month.  In addition, the Pennsylvania Supreme Court has by Order changed Pa.R.C.L.E. Rule 108(e) to provide that Lawyers may obtain six credits via alternative means (rather than live in-person) rather than four.  This allows half the CLE credits to be obtained through distance learning and/or computer based education.

The CLE Board Chair Kenneth Argentieri states "We hope that these changes will help lawyers to better serve their clients and the administration of justice in our Commonwealth.  Ethics and professionalism is the heart of what we do."

As an ethics instructor I wholeheartedly agree.  Although I do not agree with the lawyer jokes, and I am of the opinion that lawyers are more ethical than we are given credit for, more ethics credits will not hurt anyone and will hopefully help Pennsylvania lawyers avoid future ethical issues.

If you have any questions about ethics or are in need of a presenter please contact me at jmcguire@c-wlaw.com.]]>
<![CDATA[Your License Can Now Be Denied Suspended or Revoked for Failure to Pay Fines or Costs]]>Thu, 23 Jan 2014 16:00:46 GMThttp://palicensedefense.com/blog/-your-license-can-now-be-denied-suspended-or-revoked-for-failure-to-pay-fines-or-costsWell almost.  Some Pennsylvania licensing boards have that power now, but it was unclear if others did.  Therefore, the law is being amended.  House Bill 261 has passed both the House and the Senate and, as of January 15, sits on Governor Corbett’s desk for signature.  All indications are that he will sign this bill.   Once signed, the bill will go into effect sixty (60) days later.

The bill will provide the authority for each licensing board to deny, suspend or revoke any license for failure to pay any fines, interest, or costs assessed as a result of a disciplinary proceeding.  It also provides that if the amount due exceeds one thousand ($1,000.00) dollars and remain unpaid the board has the ability to enter the amount as a civil judgment against the individual or corporate entity.  This judgment remains of record and does not need to ever be revived.  The board has up to sixty (60) months to enter such a judgment.  Further, once paid the board has up to ninety (90) days to satisfy their judgment.

In my opinion, this is good fix because certainly the intention has always been to be able to discipline a licensee for failure to pay their fines. I do not see the requirement for entering the fine as a judgment but generally this should never be an issue for a licensee.  I have been able to negotiate payment terms in cases where payment was difficult.

If you have any questions about licensing please contact me at jmcguire@c-wlaw.com.

Note:  The Governor signed this bill on February 4, 2014.
<![CDATA[What To Do If Your CPE Hours Are Audited]]>Fri, 17 Jan 2014 14:10:25 GMThttp://palicensedefense.com/blog/what-to-do-if-your-cpe-hours-are-audited        So you've timely and properly renewed your license.  You've taken all the CPE credits required and you checked the box saying that you took them.  Now you've received a letter stating that your renewal application has been accepted for a CPE audit.  What should you do?  These letters will start going out after the Board Staff has processed all the renewal applications.  As you can imagine with all the renewals at one time in Pennsylvania, this is a busy time of the year for them.

        First, don't panic.  According to the information I have received the Accountancy Board will audit approximately ten (10%) percent of individual licensees as they have done after past renewals.  You are not the only one in this position.  I recommend you consult with an attorney because of the problems I have seen arise when licensees try to handle these situations on their own, but I understand that you probably won't want to go through the cost and aggravation of an attorney when you believe you have taken all the required CPE and can demonstrate that to the Board.  The issues of course are whether you have in fact taken all the required CPE and can demonstrate that.  

        I recommend putting each of your courses in a spreadsheet with the dates taken and categories each course satisfies.  CPAs must remember that you need at least twenty (20) credits in each calendar year in addition to the hours in ethics, taxation, and accounting and auditing.  You will need to gather each of your certificates of attendance.  Your provider is required to provide you with a certificate and is most likely able to provide you with a replacement if you have misplaced the original.  You need to review each certificate and make certain it provides the amount of credits, the type of credits, the date(s) of attendance, and the providers ID number(s).

        CPAs and other professionals have found themselves in trouble when the course provider is not approved or the specific course is not approved.  Your certificate of completion or attendance should state the provider's approval numbers and what entity or entities have approved the course.  It is the licensee's responsibility to make certain that the courses were approved.  For CPAs in Pennsylvania, that generally means approved by NSBA or one of the State Boards of Accountancy.   In practice, most CPAs do not look at their certificates and do not check if the provider is approved to provide CPE in Pennsylvania.  It is too late after the fact to make up any missing CPE after 12/31 of the renewal year.

        Of course if you did not take all your required CPE you will find yourself in trouble with the Board.  This is a situation several CPAs find themselves in after each renewal period.  You will certainly have to make up the missed CPE and will most likely find yourself with a licensing violation and fine.  This will be reported on your record and available to anyone who looks up your license.  Unfortunately, at this time, there is no means to have this removed from your license.   However, legislation has been introduced that would allow for a one time expungement of violations like these.  See SB 619 at the following link.   http://www.legis.state.pa.us/cfdocs/legis/PN/Public/btCheck.cfm?txt&sessYr=2013&sessInd=0&billBody=S&billTyp=B&billNbr=0619&pn=0595 

        Keep in mind that if you have taught a course you may be entitled to additional credits for your time preparing your materials and your presentation.  This has on occasion saved a licensee from a license violation and fine if these additional credits can satisfy what was otherwise missing.  Further, if Pennsylvania does not accept some or all of your credits, you do have an equitable argument that you attempted in good faith to obtain the proper credits and that your actions do not deserve punishment.

        If after the audit the Board is not satisfied that you have taken the required CPE, then an Order to Show Cause will be filed against you and a prosecutor from the Bureau of Professional and Occupational Affairs will seek a determination by the Board that you have violated the CPA Law and that you should be subject to discipline which will certainly include a fine, notice of violation, and possibly costs of prosecution.  In extreme cases, like not taking any CPE but stating that you did, they might seek to have your license revoked.  Frankly, any time there is a question from the Board concerning your license or request by a Board investigator to meet you, should have the advice of counsel.  But, if you recieve an Order to Show Cause, you really must seek legal advice.

If you have any questions about licensing please contact me at jmcguire@c-wlaw.com.]]>
<![CDATA[A Captive Insurance Company or Investment Plan Warning]]>Mon, 29 Jul 2013 13:06:06 GMThttp://palicensedefense.com/blog/a-captive-insurance-company-or-investment-plan-warning            
This is a follow up to an article that I wrote in March of this year concerning captive insurance companies. I simply write this as a warning or  caution to emphasize that the IRS is aggressively reviewing these companies,  even more so when they are used as investment plans.

The IRS is aware  that captive insurance companies have been used improperly. They believe captive insurance companies are being used as fraudulent tax shelters. While many of these captive insurance companies serve legitimate purposes, some do not. The IRS has assessed additional taxes, penalties and/or interest on thousands of taxpayers. The IRS rules require filing Form 8866 for these investments so please see a knowledgeable CPA about these matters. The penalties for failing to file Form 8866 can be $200,000 for a business and $100,000 for an  individual.

If you are starting a captive insurance company or considering investing in one make sure you get a good legal opinion that there exists a legitimate purpose for the entity. If you are selling shares in a captive insurance company as an investment or tax shelter to your clients, another opinion as to the legitimacy of the business purpose is warranted.
Also, if you received a notice from the IRS, simply stopping additional funding into the captive insurance company or investment plan in the captive insurance company does not solve the problem. This is because you are continuing to receive a tax shelter for the money already invested. An IRS notice is definitely cause to seek counsel and an experienced CPA.
If you have any questions about captive insurance companies please contact me at jmcguire@c-wlaw.com.]]>
<![CDATA[Professional Malpractice, Golf and Women]]>Mon, 22 Jul 2013 13:56:53 GMThttp://palicensedefense.com/blog/professional-malpractice-golf-and-womenPicture
If you Google him, you will find that Hank Kuehne is “an American former U.S. Amateur champion and professional golfer who enjoyed some success on the PGA Tour.”  If you scroll down you will even see that he was, until recently, engaged to Venus Williams. Page down far enough and you will see that he apparently dated Paula Abdul before Venus.  Seems great so far . . . golf and women, two wonderful things.  Well . . . you have to page down pretty far, and it is well hidden but, if you persevere, you will find an example of what not to do as a financial advisor, tax preparer, and CPA.  This is exactly how you make a mountain out of a molehill.
It seems that Hank Keuhne has sued his accountant[i]in the Federal District Court for the Southern District of Florida.  This case appears to be a classic example of what not to do and why not to cover it up. According to the Pleadings in the case, the accountant, Thomas J. Bertsch, held himself out as an expert in local, state and federal taxes and agreed to prepare Mr. Kuehne’s tax returns and provide him with financial advice.  However, despite inquiring as to the status of his taxes, it was not until Mr. Kuehne fired Mr. Bertsch in 2011 that he learned for the first time that he owed tax liabilities and penalties to the IRS for the years 2006 and 2007.[ii]  It was also at that time that Mr. Kuehne learned that Mr. Bertsch had made an offer in compromise to the IRS to settle these debts for $90,000.  However, the IRS countered with a demand in settlement for $342,715.  This reduced demand lapsed because Mr. Bertsch failed to respond to the IRS.
This is a classic example of a simple, albeit large, tax error that was compounded by the failure to promptly reveal and resolve the matter.  If this matter was properly handled in conjunction with his attorney and the insurance company, the result would have been much different.  However, I suspect that since Mr. Bertsch failed to advise his client, he also failed to advise his employer, his attorney, or his insurance company.
Now instead of simply being potentially responsible for the interest and penalties Mr. Bertsch is faced with a lawsuit in which he is facing fraud for his improperly claimed expertise, fraud for the cover up, and punitive damages, in addition to the now increased interest and penalties. Further, there is a possibility that the insurance company might deny coverage in light of the cover up and delayed reporting.  In addition to all that he now has an ethics violation and licensing violation that may cost him whatever licenses he might hold.
I will assume that his supervisors and the owners of the company did not know what was happening.  Perhaps there should have been greater controls.  Who opens the mail?  Perhaps IRS notices should be reported to the responsible accountant and the supervisor or some other owner.  In any event, they must be concerned about the suit and coverage issues as the firm is a named defendant to several of the counts in the Complaint.
When faced with this situation you should contact your attorney immediately. Your attorney can assist you in navigating your ethic and legal duties regarding reporting both to your insurance carrier as well as your client.  When handled properly from the beginning you can prevent the molehill  from ever becoming a mountain!
If you have any questions or I can be of any assistance, please contact me at jmcguire@c-wlaw.com.
[i] Mr Bertsch does not appear to be or have been a CPA, but I have been unable to verify this.
[ii]There is also an allegation that Mr. Kuehne owes California state taxes over some gambling income.

<![CDATA[Nolo Contendere - Consider┬áBefore You Plead]]>Thu, 11 Jul 2013 17:12:07 GMThttp://palicensedefense.com/blog/-nolo-contendere-considerbefore-you-pleadLicensed professionals need to give serious consideration as to whether they shall enter a Nolo Contendere Plea.  There are serious implications on ones ability to continue to practice their profession.  Most if not all of the licensing statutes allow the Licensing Board to revoke, suspend, limit, or otherwise restrict a license.[i]
The Latin phrase Nolo Contendere means “I will not contest it.” The idea behind a plea of Nolo Contendere is that the criminal defendant will accept in the criminal court the charges as presented and subject themselves to the appropriate punishment as determined by the court.  However, it is also supposed to only have that effect in the criminal court.  The Nolo Contendere plea is not supposed to have any impact or relevance outside of the criminal court, particularly in civil actions.  
The Pennsylvania courts have determined that the professional licensing boards are “watchdogs” of the professions and therefore are empowered to maintain the high standards, which the people of this Commonwealth have a right to expect from their professionals, and therefore, the courts have held that the Boards have the ability to admit a certified copy of the docket entry of a plea of Nolo Contendere at an administrative hearing, and that a Nolo Contendere plea is evidence of an admission of guilt of a crime.
It should be noted that there are lots of reasons why an individual might plead Nolo Contendere in the criminal setting, including the high cost to defend the criminal case, the emotional toll of a criminal trial, and the risk of a guilty verdict and the attendant jail time that would ensue being some of the  most common.
While the courts have held that the Nolo Contendere plea is admissible in the administrative hearing, they have also held essentially that this Nolo Contendere plea is simply a presumption of guilt and leaves the door open for the professional to submit evidence that they are not guilty.  Obviously, having a rebuttable presumption is better than facing the licensing board with a guilty plea or criminal conviction, but the burden of establishing innocence may be difficult indeed.  Remember that your audience will ultimately be a licensing board and will initially be the prosecutor and possibly hearing officer, all of whom are likely to have never faced criminal charges and who might find it difficult to believe that a person would plead Nolo Contendere or, in their minds, essentially a guilty plea, if they were not guilty.  The reality of the situation will be that it is most likely that even an innocent person who pleads no contest, will have some disciplinary action taken upon their license.
It is important for any professional faced with a criminal charge to consider the effect of a Nolo Contendere plea.  Obviously, the primary focus when facing criminal charges is going to be to maintain one’s freedom and avoid jail time.  However, as a professional, you must keep in mind the effect the criminal charges will have on your ability to practice your chosen profession.  Also, please keep in mind that most criminal defence attorneys will not understand the implications of a Nolo Contendere plea upon a professional license.  The reality is that most criminal defense attorneys do not handle professional licensing matters.  
Ultimately, my advice is to weigh all your options and understand the potential implications of a Nolo Contendere plea before you enter it. It may very well be the right decision to make, but understand the impact it could have upon your professional license.
[i]For example, see the Pennsylvania Accountancy Law, Section 9.1 (5), which states that a CPA can be disciplined for entering a plea of Nolo Contendere for a felony under any federal or state law or the laws of any foreign jurisdiction.  
<![CDATA[Recent Articles Posted Elsewhere]]>Thu, 13 Jun 2013 14:17:51 GMThttp://palicensedefense.com/blog/recent-articles-posted-elsewhereThe Pennsylvania CPA Journal - link to article - http://goo.gl/Y3FKu

        link to video - http://t.co/g1AYoHRXCc

Comfort letters – the fight continues. . . CPAs beware. . . 
Unfortunately, the federal Consumer Financial Protection Bureau has muddied the waters while implementing the Truth in Lending Act.  Although not even in effect, lenders are already pointing to the new regulations as justification for the need for a comfort letter.  Are you prepared to respond?

C & W Website - link to article - http://goo.gl/dDQkw

Two CPA firms “not guilty” of practicing without a license
The Pennsylvania Board of Accountancy has dismissed prosecutions against two of my clients for practicing without a license.  In both instances, the prosecutor was seeking substantial fines of $5,000 or more. However, the CPAs had done what they thought was required and the Board appropriately dismissed each case. 

<![CDATA[What is a Captive Insurance Company?]]>Tue, 19 Mar 2013 13:47:54 GMThttp://palicensedefense.com/blog/what-is-a-captive-insurance-companyCaptive insurance companies are becoming more widespread in business today.  We see captives being used to save businesses money by reducing premiums, they have been used in asset protection plans, and they have been used as tax shelters.  Just what is a captive insurance company?

In its essence and simplest form, a captive insurance company is a wholly owned subsidiary of a parent company.  The parent company pays premium to the captive that would otherwise have been paid to an outside insurance company.  The captive then covers the claims made against the parent company.  This is the self-insured use of the captive that large companies have used for many years.  Most major companies and universities have formed their own captive.  Today, captives can be much more diverse and do not have to be owned by one parent company.

When used as insurance, the idea is that the parent company benefits from the good performance of the company rather than the outside insurance company.  If the premium is $10,000, for example, and there is $5,000 in claims in a given year, the company will have a $5,000 surplus.  If, on the other hand, there is $15,000 in claims paid on that same premium there would be a $5,000 loss.  For this reason, most captives will purchase reinsurance or excess insurance to cover claims in excess of a certain amount.  Alternatively, some captives have reserves that have grown large enough over the years that they can absorb such losses.

In 2002, the IRS issued guidance on how to establish a captive in compliance with the tax code.  This allowed many smaller companies to save money by establishing captives.  For instance many companies have formed captives to administer their health insurance.  This has also opened the door for other legitimate uses by smaller companies.  In addition, several companies and/or individuals can get together and form a captive of their own.

When marketed as an investment vehicle or asset protection device, the fact that a captive can potentially reduce income taxes and be transferred estate tax free to heirs are strong selling points.  However, the idea behind the captive is not to use it solely as an investment or asset protection vehicle.  My firm can assist you to form a captives for companies to insure against potential risks.  The IRS does look for abuses such as a captive that insures for a risk that the parent company does not have.

If you are considering a captive you will want to consider how it will be established and run.  You should have an attorney, CPA, and actuary who are familiar with the process during the formation.  There are companies that, for a fee, will administer the insurance program for you.  You must be prepared to handle claims and comply with insurance regulations, so having an experienced administrator is important.  There are also companies that will adjust your claims and handle the entire claims process.  No company should do this on their own.

Additionally, when considering a captive you need to determine which risks you wish to insure.  You may only want to cover health insurance or maybe worker’s compensation.  Also, a benefit of a captive is that you may be able to insure more than traditional insurance would insure if you choose to do so.  Many traditional insurance policies have exclusions that prevent a recovery and you do not have to write those into your own policy.  Waiting periods and caps can be changed to suit your preference and potentially cover your true business loss.

There is a strong potential for abuse through misuse of a captive.  They are subject to audit but the IRS does not audit a large percentage of the captives that currently exist. However, that may change as the IRS continues to look closer at captives.  Therefore, it is important that the company be set up and administered properly.

If you have any questions about captives please contact me at jmcguire@c-wlaw.com.

<![CDATA[TheNoisy Withdrawal]]>Mon, 18 Feb 2013 14:24:47 GMThttp://palicensedefense.com/blog/thenoisy-withdrawalThe noisy withdrawal has long been a tool for attorneys in balancing their legal and ethical responsibilities with their
knowledge of a client’s improper activity.  It has also become a common issue for CPAs.  The basic concept is that the professional having become aware of a client’s improper activity (such as employee theft) withdraws from the representation and notifies the proper authority of their withdrawal.  The withdrawal is done in such a way that the authorities are alerted to the fact that there may be a problem. If the client has caused the professional to give their professional opinion on some false information or pretenses the withdrawal will often be accompanied by a withdrawal of the opinion.

This is most often noticed in large public company settings because of the public scrutiny that can essentially arise in almost any situation.  Further, the Securities Exchange Commission (“SEC”), particularly through the Sarbanes-Oxley Act of 2002 [“SOX”],has requirements, in certain circumstances, for a noisy withdraw.  The SEC even has an Office of the Whistleblower.  http://www.sec.gov/whistleblower

SOX requires that attorneys report “evidence of a material violation of securities law or breach of fiduciary duty” to the chief legal counsel or chief executive officer of the company.   If there is no appropriate response then report to the board of directors or appropriate committee of the board of directors.   This is referred to as “up the ladder”reporting.  In addition, it is both a good practice and requirement to attempt to resolve the issues with the client before making a noisy withdrawal.  
SOX requires a noisy withdrawal by an outside attorney if the company has not responded appropriately, the violation is ongoing or about to occur, and the likely result will be substantial injury to the investors.  In this situation, the attorney has one day to withdraw, indicating that the withdrawal was “based on professional considerations,” and must disaffirm any statements the attorney has made to the SEC which may be false or misleading.  In house attorneys must disaffirm but are not required to resign their employment.  
An issue arises as to how one disaffirms a statement and what confidential client information may be disclosed.  The SEC permits the disclosure of confidential information without the client’s consent. However, this rule is in conflict with various state rules.  The important thing is to make the withdrawal and any disaffirmance while revealing as little confidential information as possible. It is quite possible that the intent can be accomplished without revealing any confidential information.

The SEC has expanded the requirement for noisy withdrawal to CPAs in certain circumstances as well. Without getting into all the details, investment advisors, who are qualified custodians, must have an audit. The auditor is required to notify the SEC within one business day of any material discrepancies and make a noisy withdrawal.

There are other circumstances in which a noisy withdrawal would likely be appropriate for both attorneys and accountants, and following the SEC rules would go a long way to demonstrate that an accountant or attorney handled the matter properly.  The law in this area is still developing so if you find yourself in this situation, handle it very carefully.

I can be contacted at jmcguire@c-wlaw.com.