MINUTES Texas State Board of Public Accountancy January 21, 2010 The Texas State Board of Public Accountancy met from 10:00 a.m. until 11:00 a.m. on January 21, 2010, at 333 Guadalupe, Tower 3, Suite 900, Austin, Texas 78701-3900. A notice of this meeting containing all items on the agenda was filed with the office of the Secretary of State at 8:42 a.m., January 8, 2010. (TRD #2010000173) (ATTACHMENT 1) Board Members Present Gregory L. Bailes, CPA Presiding Officer Treasurer John W. Dunbar, CPA Everett R. Ferguson, CPA James C. Flagg, PhD, CPA Secretary Dorothy M. Fowler, CPA Assistant Presiding Officer Jon R. Keeney David L. King, CPA Executive Committee member-at-large Evelyn M. Martinez, Esq. Maribess L. Miller, CPA Steve D. Peña, CPA James W. Pollard Thomas G. Prothro, CPA Catherine J. Rodewald John W. Steinberg, CFE Others Present Richard Forrest, Esq., CPA Robert Owen, CPA Sandra Bradshaw Andrea Carter, Esq. Ismael Castillo Karen Davis James Hamilton, CPA Alan Hermanson, CPA Donna Hiller Jean Keith Steven Mahaffey Virginia Moher, Esq., CPA Patrick Myers, Esq. Marisa Rios Barbara Stooksberry Lorna Schwimmer William Treacy I. Mr. Bailes, presiding officer, called the meeting to order at 10:00 a.m. II. III. Mr. Steinberg moved to approve the November 19, 2009, Board meeting minutes as presented. Ms. Fowler seconded the motion, and it passed unanimously. Mr. Bailes, Executive Committee chair, reported on the January 20, 2010, committee meeting. Members Present Gregory L. Bailes, CPA James C. Flagg, PhD, CPA Dorothy M. Fowler, CPA David L. King, CPA James Hamilton, CPA Alan Hermanson, CPA William Treacy A. Mr. Dunbar moved to approve the Board s financial statements as presented. Mr. Steinberg seconded the motion, and it passed unanimously. 1
B. The following SDSI matters were reported: 1. Ms. Fowler moved to approve the Board s Affirmative Action Report for CY 2009 as presented. Dr. Flagg seconded the motion, and it passed unanimously. 2. Mr. Peña moved to approve the Board s internal audit report of the Peer Review Program as presented. Mr. Dunbar seconded the motion, and it passed unanimously. C. Dr. Flagg moved for the Board to endorse the nomination of Mark P. Harris, CPA, of Louisiana, for NASBA vice-chair for 2010-2011. Mr. Prothro seconded the motion, and it passed, with Ms. Fowler recusing herself from voting on this matter. D. Ms. Fowler moved to approve the following professional service contract. Mr. Dunbar seconded the motion, and it passed unanimously. FY 2010 Amendment: State Office of Administrative Hearings: 9/1/09 8/31/10 $10,548 (increase contract by $10,548 from $14,452 to $25,000) E. Mr. Bailes reviewed general correspondence received by the Board. F. Mr. Bailes announced that an executive session would be held at the end of the general meeting. IV. Mr. Barrera, Rules Committee chair, reported on the January 20, 2010, committee meeting. Members Present Gregory L. Bailes, CPA ex officio Dorothy M. Fowler, CPA Jon R. Keeney Evelyn M. Martinez, Esq. Maribess L. Miller, CPA Member Absent Catherine J. Rodewald Others Present Gary S. McIntosh, CPA Robert Owen, CPA James W. Pollard Karen Davis James Hamilton, CPA Donna Hiller Jean Keith Steven Mahaffey Marisa Rios Lorna Schwimmer Barbara Stooksberry William Treacy A. Mr. Dunbar moved to authorize the executive director to publish in the Texas Register, for public comment, new Board Section 518.5 (Unlicensed Entities) of the Board s Rules. Mr. Steinberg seconded the motion, and it passed unanimously. (ATTACHMENT 2) B. Dr. Flagg moved to authorize the executive director to publish in the Texas Register, for public comment, the committee s proposed amendments to Section 520.3 (Institutions) of the Board s Rules. Ms. Fowler seconded the motion, and it passed unanimously. (ATTACHMENT 3) C. The following was presented: 1. Mr. Dunbar moved to authorize the executive director to publish in the Texas Register, for public comment, the committee s proposed amendments to 515.5 (Reinstatement of a License) of the Board s Rules. Mr. Steinberg seconded the motion, and it passed unanimously. (ATTACHMENT 4) 2
2. Mr. Steinberg moved to authorize the executive director to publish in the Texas Register, for public comment, the committee s proposed amendments to 515.9 (Collection of License Fees Following Disciplinary Action) of the Board s Rules. Mr. King seconded the motion, and it passed unanimously. (ATTACHMENT 5) V. Mr. Bailes reported that the Qualifications Committee meeting had been cancelled and will be rescheduled for a later date. VI. Ms. Fowler, Behavioral Enforcement Committee chair, reported on the January 11, 2010, committee meeting. Members Present John W. Dunbar, CPA Donna J. Hugly, CPA Jerry L. Love, CPA Jimmie L. Mason, CPA Maribess L. Miller, CPA Steve D. Peña, CPA John W. Steinberg, CFE Member Absent Dorothy M. Fowler, CPA Andrea Carter, Esq. A. Mr. Pollard moved to dismiss the following investigations based on insufficient evidence. Mr. Keeney seconded the motion, and it passed. 1. Investigation No. 09-08-06L 1 2. Investigation No. 09-08-04L 1 3. Investigation No. 09-09-02L 1 4. Investigation No. 09-09-09L 1 5. Investigation No. 09-08-10L 1 6. Investigation No. 09-08-01L 1 B. Dr. Flagg moved to dismiss the following investigations based on voluntary compliance. Mr. Keeney seconded the motion, and it passed. 1. Investigation No. 09-10-06L 1 2. Investigation No. 09-07-07L 1 3. Investigation No. 09-08-08L 1 4. Investigation No. 09-09-20L 1 5. Investigation No. 09-08-09L 1 C. Other The committee took no action on 10 other investigations the committee had considered. VII. Mr. Barrera, Technical Standards Review I Committee chair, reported on the January 12, 2010, committee meeting. Members Present Ben W. Bender, CPA James C. Flagg, PhD, CPA Maribess L. Miller, CPA W. David Rook, CPA Edward L. Summers, PhD, CPA Members Absent Michael McConnell, CPA James W. Pollard Virginia Moher, Esq., CPA William Treacy A. Mr. Dunbar moved to dismiss the following investigations based on insufficient evidence. Mr. Steinberg seconded the motion, and it passed. 1. Investigation No. 09-02-05L 2 2. Investigation No. 08-04-19L 2 3. Investigation No. 08-04-18L 2 B. Other The committee took no action on six other investigations the committee had considered. VIII. Ms. Moher, staff attorney, reported on the status of the Enforcement Division s probation monitoring system. 3
IX. Mr. Hill, general counsel, reported on the status of investigations of violations of Subchapter J of the Public Accountancy Act regarding the unauthorized practice of public accountancy. X. The Board took the following actions on agreed consent orders, agreed cease and desist orders, agreed settlement for failure to abide by cease and desist order, and proposals for decision: A. Agreed Consent Orders Behavioral Enforcement Committee Dr. Flagg moved to approve the following Agreed Consent Orders as presented. Mr. Steinberg seconded the motion, and it passed. 1. Investigation No.: 09-10-12L Hometown: Houston Jason Ashley Sparks Certificate No.: 085461 Rule Violations: 501.90(4) and 501.91 Firm No.: T09534 Act Violations: 901.502(6), 901.502(10) and 901.502(11) Respondent entered into an Agreed Consent Order with the Board whereby Respondent s certificate and firm license were revoked in lieu of further disciplinary proceedings. In addition, Respondent must pay $417.21 in administrative costs within 30 days of the date the Board ratifies the order. On December 19, 2008, Respondent was convicted of two counts of aggravated assault, a felony offense. As a result, Respondent was sentenced to five years of confinement. Further, Respondent failed to report the conviction within thirty days of the event. 2. Investigation No.: 06-05-28L Hometown: Frisco DeWayne Todd Ahner Certificate No.: 072266 Rule Violations: 501.90, 501.90(5), 501.91 and 519.7(b)(3) Act Violations: 901.502(6), 901.502(10) and 901.502(11) Respondent entered into an Agreed Consent Order (ACO) with the Board whereby Respondent s license was reinstated. However, for a period of two (2) years; Respondent was placed on probated revocation. Prior to the reinstatement becoming effective, Respondent must complete, and submit proof of completion, 120 hours of continuing professional education. In addition, Respondent must sign, and have notarized, an affidavit regarding the nature of his practice on or before January 1 and July 1 of each year of his probation. 3 3. Investigation No.: 09-05-07L Hometown: Merkel Billy Elvin Clark Certificate No.: 031173 Rule Violation: 501.90(4) Act Violations: 901.502(6), 901.502(10) and 901.502(11) Respondent entered into an Agreed Consent Order with the Board whereby Respondent s certificate was revoked in lieu of further disciplinary proceedings. In addition, Respondent must pay $337.44 in administrative costs within 30 days of the date the Board ratifies the order. On March 18, 2002, Respondent pleaded guilty to lewd or indecent proposals/acts to a child, a felony offense. As a result, Respondent was placed on 10 years criminal probation. Further, Respondent failed to report the conviction to the Board within 30 days of the event. 3 4. Investigation No.: 09-05-18L Hometown: Webster Jeffrey Ben Colwell Certificate No.: 084778 Rule Violations: 501.74, 501.81, 501.90(11) and 527.4 Act Violations: 901.502(6) and 901.502(11) Respondent entered into an Agreed Consent Order with the Board whereby Respondent was reprimanded. In addition, Respondent must pay an administrative penalty of $4,000.00 and $442.44 in administrative costs within 30 days of the date the Board ratifies the order. Further, Respondent shall comply with all state and federal laws pertaining to the practice of public accountancy. Respondent failed to complete a client s audit engagement and failed to respond to the client s inquiries within a reasonable time without good cause. In addition, Respondent is performing attest services through an unregistered entity and has failed to participate in a peer review program. 3 4
TECHNICAL STANDARDS REVIEW I COMMITTEE Mr. Peña moved to approve the following Agreed Consent Order as presented. Mr. Dunbar seconded the motion, and it passed. Investigation No.: 05-03-40L Hometown: Dallas KPMG, LLP Certificate No.: P04938 Rule Violation: 501.60 Act Violation: 901.502(6) Respondent firm was a defendant in two related class action lawsuits entitled Lenore M. Schmick Trust, et. al. (Schmick) v. KPMG LLP and Werner, et. al. v. KPMG LLP, et. al. The Board performed an independent review of the allegations made by the plaintiffs regarding failure to adhere to auditing standards. Without admitting or denying the applicable finding of fact, Respondent firm agrees to the Board Order that the Respondent firm be Reprimanded and pay $14,003.95 in administrative costs within 30 days of the date of the Board Order. 4 TECHNICAL STANDARDS REVIEW II COMMITTEE Mr. Dunbar moved to approve the following Agreed Consent Orders as presented. Mr. Steinberg seconded the motion, and it passed. Investigation Nos.: 09-02-04N and 09-02-05N Hometown: Indianapolis, IN Respondents: Gregory Nowling and Temporary Permits: TP0770 & Comer, Nowling and Associates, P.C. TP2147 Rule Violations: 501.60 and 501.61 Act Violation: 901.502(6) Respondents came to Texas to perform an audit for a Texas Public Housing Authority for the fiscal year ending June 30, 2006. Respondents did not comply with applicable auditing standards in the following ways: their working papers did not document an analysis and determination of the reporting entity and its component units in accordance with GASB Statement no. 14; they did not adequately test certain compliance requirements under the Housing Choice Voucher Program and the Shelter Plus Care Program; they did not obtain sufficient information or perform sufficient tests to support Respondents opinion regarding the client s financial statements; they did not substantiate in their working papers that the client filed completed data collection forms for the fiscal years 2004 and 2005; they did not modify their audit opinion despite the fact that the client s financial statements contained material departures from GAAP; and they did not qualify their audit opinion despite the fact that certain required note disclosures were omitted or did not conform with GAAP. Respondents agreed to be Reprimanded by the Board. Respondents agreed that they must pay an administrative penalty of $1,000 within 30 days of the date of the Board Order. In addition, Respondents also agreed that any application to the Board for a firm license must first be reviewed and approved by the TSRII Committee before the issuance of such a license. Respondents must also comply with all requests for information made by the TSRII Committee during such a review and comply with any requirements imposed by the Committee in order to obtain its approval of the firm license application. 5 B. Mass Hearings Mr. Steinberg moved to approve the following proposals for decision as presented. Mr. Dunbar seconded the motion, and it passed unanimously. 1. Respondents: In The Matter of Disciplinary Action Against Certain Licensees for Nonpayment of Professional Fees for Three Consecutive License Periods The respondents failed to pay their licensing fees for three consecutive license periods. Following the public hearing, an Administrative Law Judge (ALJ) of the State Office of Administrative Hearings recommended that the certificate of each respondent still not in compliance be revoked without prejudice. Each respondent may regain his or her certificate by paying all license fees and penalties and by otherwise coming into compliance with the Act. The ALJ found that the respondents violated Section 901.502(4) (failure to pay license fees for three consecutive years) of the Act. The respondents, although properly notified, failed to appear, and were not represented at the hearing. No Board Committee considered these actions. (ATTACHMENT 6) Docket Investigation Numbers Scheduled Hearing 457-09-5126 09-08-10001through- 09-08-10036 September 29, 2009 457-09-5797 09-09-10001 through 09-09-10039 October 27, 2008 5
2. Respondents: In The Matter of Disciplinary Action Against Certain License Holders for CPE Delinquencies The respondents failed to comply with CPE reporting requirements found in Chapter 523 of the Rules and Section 901.411 of the Act. Following the scheduled public hearing, an Administrative Law Judge (ALJ) of the State Office of Administrative Hearings recommended that the license of each respondent still not in compliance be suspended for a period of three years, or until he or she complies with the licensing requirements of the Act, whichever is sooner. Additionally, the ALJ recommended a $100 penalty be imposed for each year a respondent is not in compliance with the Board's CPE requirements. The ALJ found that the respondents violated Sections 501.94 (mandatory CPE) and 523.111(mandatory CPE reporting) of the Board's Rules, and 901.411 (CPE) of the Act. The respondents, although properly notified, failed to appear, and were not represented at the hearing. No Board Committee considered these actions. (ATTACHMENT 7) Docket Investigation Numbers Scheduled Hearing 457-09-5127 09-08-10037 through 09-08-10234 September 29, 2009 457-09-5798 09-09-10040 through 09-09-10218 October 27, 2008 3. Respondents: In The Matter of Disciplinary Action Against Certain Certificate Holders for Failure to Complete License Notice The respondents failed to complete the renewal of their licenses required under Section 515.1 of the Board's Rules, engaged in the practice of public accountancy without a license issued by the Board as required by Section 501.80 of the Board's Rules and failed to substantively respond to Board communications as required by Section 501.93 of the Board's Rules. Following the public hearing, an Administrative Law Judge (ALJ) of the State Office of Administrative Hearings recommended that the certificate of the respondents not in compliance be revoked without prejudice until such time as the respondent complies with the requirements of the Act. The ALJ found that the respondents violated Sections 501.80 and 501.93 of the Board's Rules well as Sections 901.502(6) (violation of a rule of professional conduct) and 901.502(11) (conduct indicating lack of fitness to serve the public as a professional accountant) of the Act. The respondents, although properly notified, failed to appear, and were not represented at the hearing. No Board Committee considered these actions. (ATTACHMENT 8) Docket Investigation Numbers Scheduled Hearing 457-09-5127 09-08-10235 through 09-08-10268 September 29, 2009 457-09-5799 09-09-10219 through 09-09-10248 October 27, 2008 C. Agreed Cease and Desist Orders Mr. King moved to approve the following Agreed Cease and Desist Orders as presented. Mr. Prothro seconded the motion, and it passed unanimously. 1. Investigation No.: 09-07-08N Hometown: Austin Julie A. Barnes 2. Investigation No.: 09-10-10N Hometown: North Miami Mario A. Beckles and Beckles International, Inc. Beach, FL Respondent used the CPA designation and the term accounting, although Respondent does not hold a license in Texas. 6
3. Investigation No.: 09-10-11N Hometown: Houston Christine Huong Vu and CPA Tax Services 4. Investigation No.: 09-10-15N Hometown: Freeport Judy T. Worrell Act Violations: 901.451, 901.452, 901.453 Respondent used the terms CPA, public accountant, accounting, and accountant, although Respondent does not hold a license in Texas. 5. Investigation No.: 09-10-31N Hometown: Houston Jaswant Gill and Gill & Company LLC Respondent used the CPA designation, offered compilations, and used the term accounting, although Respondent does not hold a license in Texas. 6. Investigation No.: 09-11-35N Hometown: Houston Johnwin Sim and T-Accounting Bookkeeping Services Respondent used the CPA designation and the term accounting, although Respondent does not hold a license in Texas. 7. Investigation No.: 09-11-02N Hometown: Johnson City Wesley A. Lokken Respondent offered reviews and used the term accounting, although Respondent does not hold a license in Texas. 8. Investigation No.: 09-11-03N Hometown: Cedar Hill Leslie H. Wallace 7
9. Investigation No.: 09-11-04N Hometown: Farmers Branch Joseph Quezada 10. Investigation No.: 09-11-05N Hometown: Houston J. Michael Gross D. Agreed Settlement for Failure to Abide by Cease and Desist Order Dr. Flagg moved to approve the Agreed Settlement for Failure to Abide by Cease and Desist Order as presented. Mr. Dunbar seconded the motion, and it passed unanimously. Investigation No.: 09-05-21N Hometown: Schertz Richard M. Soto Respondent, in accordance with Sections 901.553, 901.554 and 901.601 of the Act, agreed to pay the Board $2,500 in penalties. Respondent violated an agreed cease and desist order by using the CPA designation on his business cards, office marquee, fax cover sheets, and an income tax return. E. Proposals for Decisions King moved to approve the following Proposals for Decision as presented. Mr. Keeney seconded the motion, and it passed unanimously. 1. Investigation Nos.: 08-03-20L Hometown: Fairfax SOAH Docket No.: 457-09-4498 Certificate No.: 087887 Linh Khan Nguyen Ho Rule Violations: 501.90(13) and 501.90(4) Act Violations: 901.502(6), 901.502(10) and 901.502(11) The State Office of Administrative Hearings issued a Proposal For Decision whereby the Administrative Law Judge (ALJ) found that Respondent violated Board Rules 501.90(13), and 501.90(4) and Act Sections 901.502(6), 901.502(10), and 901.502(11). The ALJ recommends that the Board revoke Respondent s certificate and assess administrative penalties in the amount of $20,000 and administrative costs in the amount of $469.74. On June 20, 2002, Respondent was convicted of the Class 1 Misdemeanor of Battery of her husband. On June 20, 2006, Respondent submitted a Reciprocal Application to the Board for a certificate and license in Texas (Application). In that Application, Respondent signed an affidavit that certified, under penalty of perjury, that she had never been arrested or charged with a felony misdemeanor. This certification was untrue because Respondent had been arrested and charged with misdemeanor assault and battery on May 11, 2002. Further, on June 13, 2007, Respondent pled guilty to, and was convicted of obtaining money under false pretenses, a felony offense. Although Respondent was given an opportunity to appear and respond to the allegations against her, she did not appear and she was not represented at the hearing. 6 2. Investigation No.: 06-08-02L Hometown: Weatherford SOAH Docket No.: 457-09-0740 Certificate No.: 026360 Gary B. Williams Rule Violations: 501.90(5), 501.62(4), 501.93(a) and 501.93(c) Act Violations: 901.502(6) and 901.502(11) 8
The State Office of Administrative Hearings issued a Proposal For Decision whereby the Administrative Law Judge (ALJ) found that Respondent violated Board Rules 501.90(5), 501.62(4), 501.93(a) and 501.93(c), and Act Sections 901.502(6) and 901.502(11). The ALJ recommends that the Board revoke Respondent s certificate and assess administrative penalties in the amount of $5,000.00 and administrative costs in the amount of $385.76. On May 16, 2006 Respondent pled guilty to the Class A misdemeanor charge of failure to pay taxes collected $10,000 - $20,000. Further, Respondent failed to respond to Board communications dated August 4 and October 2, 2006, within 30 days of the dates of the Board communications. 7 XI. The Board went into executive session at 10:45 a.m., pursuant to Texas Government Code Section 551.071, to seek the advice of the Board s attorney concerning the litigation styled Bauer, Bass & Grutzmacher v. TSBPA and Beakley v. TSBPA. The full Board reconvened at 10:58 a.m. XII. XIII. Mr. Bailes reviewed the schedule of future Board meetings. Mr. Bailes adjourned the meeting at 11:00 a.m. ATTEST: Gregory L. Bailes, CPA, Presiding Officer James C. Flagg, PhD, CPA, Secretary 1 2 3 4 5 6 7 Mr. Barrera, Mr. Dunbar, Ms. Fowler, Mr. Peña, Ms. Miller and Mr. Steinberg recused themselves from participating in this matter. Mr. Barrera, Dr. Flagg, and Ms. Miller recused themselves from participating in this matter. Mr. Barrera, Mr. Dunbar, Ms. Fowler, and Ms. Miller recused themselves from participating in this matter. Mr. Barrera recused himself from participating in this matter. Mr. Ferguson, Mr. Keeney, Mr. King, Mr. Peña and Mr. Prothro recused themselves from participating in this matter. Mr. Bailes, Mr. Barrera, Mr. Dunbar, Ms. Fowler, and Mr. Steinberg recused themselves from participating in this matter. Mr. Bailes, Mr. Dunbar, and Ms. Fowler recused themselves from participating in this matter. 9