Feds Sue Colorado Tax Preparer, Alleging $55M in Bogus Refund Claims

From Bizjournals.com:

The U.S. Justice Department has sued a Colorado tax preparer, alleging he made at least 141 claims for fraudulent refunds for clients totaling more than $55 million.

In the civil complaint filed Tuesday in U.S. District Court in Denver, federal authorities seek an injunction barring Curtis L. Morris of Elizabeth, and his company, Numbers and Beyond, from preparing and filing tax returns.

Morris has not been charged with a crime.

According to the complaint, Morris filed fraudulent refund claims on behalf of clients in Colorado, California, Arizona, and New Mexico in 2008 and 2009.

It says the returns Morris prepared for the customers "fabricate the amount of federal income tax withheld," and that he sometimes filed false Forms 1099-OID with the IRS to support fraudulent claims.

"In reality, Morris' scheme fraudulently reports that tax was withheld on behalf of his customers and then claims refunds based on that non-existent withholding," the complaint said.

One bogus refund request totaled $1.7 million, the complaint says. Officials said the IRS issued $1.9 million in erroneous refunds as a result of Morris' filings.

Fed Rejects Geithner Request for Study of Governance, Structure

From Bloomberg.com:

The Federal Reserve Board has rejected a request by U.S. Treasury Secretary Timothy Geithner for a public review of the central bank’s structure and governance, three people familiar with the matter said.

The Obama administration proposed on June 17 a financial- regulatory overhaul including a “comprehensive review” of the Fed’s “ability to accomplish its existing and proposed functions” and the role of its regional banks. The Fed was to lead the study and enlist the Treasury and “a wide range of external experts.”

Some top central bank officials, after agreeing to the review, saw a potential threat to Fed independence after the Treasury released the proposal, two of the people said. The Obama plan said the Treasury would consider recommendations from the review and “propose any changes to the Fed’s governance and structure.”

“It is not obvious at all why that is a Treasury responsibility or even appropriate why the Treasury would undertake that kind of study,” said Robert Eisenbeis, chief monetary economist at Cumberland Advisors Inc. in Vineland, New Jersey, and a former Atlanta Fed research director. “The Fed was created by Congress and it is not part of the executive branch.”

Wall Street Profits from Trades with Fed

From FT.com:

Wall Street banks are reaping outsized profits by trading with the Federal Reserve, raising questions about whether the central bank is driving hard enough bargains in its dealings with private sector counterparties, officials and industry executives say.

The Fed has emerged as one of Wall Street’s biggest customers during the financial crisis, buying massive amounts of securities to help stabilize the markets. In some cases, such as the market for mortgage-backed securities, the Fed buys more bonds than any other party.

However, the Fed is not a typical market player. In the interests of transparency, it often announces its intention to buy particular securities in advance. A former Fed official said this strategy enables banks to sell these securities to the Fed at an inflated price.

The resulting profits represent a relatively hidden form of support for banks, and Wall Street has geared up to take advantage. Barclays, for example, e-mails clients with news on the Fed’s balance sheet, detailing the share of the market in particular securities held by the Fed.

“You can make big money trading with the government,” said an executive at one leading investment management firm. “The government is a huge buyer and seller and Wall Street has all the pricing power.”