Audit Notes: Statute of limitations, whither The Daily, Romney’s taxes

The WSJ on how the clock may (or may not) be running out on the SEC

The Wall Street Journal is good to keep an eye on the statutes of limitation clocks that are running out on Wall Street fraud.

The paper reports that a federal court ruled last year that the five year statute of limitations “start to tick only when wrongdoing becomes apparent or should have been discovered, not when it occurred”:

Nevertheless, the SEC has asked Standard & Poor’s Ratings Services, which bestowed a triple-A rating on the Delphinus deal, to waive its right to seek dismissal of any civil suit against it on the grounds that alleged misconduct by S&P occurred beyond the statute of limitations, people close to the investigation said. Targets of SEC probes often sign such “tolling agreements” in hopes of persuading the agency not to proceed with formal enforcement action.

An S&P spokesman declined to comment. The McGraw-Hill Cos. unit said last year that the SEC had warned S&P it could face civil charges over Delphinus. Talks between the two sides over possible charges are continuing, according to a person close to the investigation.

People close to the Delphinus investigation said the SEC’s plan is to file civil suits against at least some of the firms and individuals involved before July 19 rather than delay the deadline through tolling agreements, though the strategy could change.

— Rupert Murdoch’s iPad newspaper The Daily, reported to be on the ropes last week, says it’s doing just fine:

As for the latest misinformed, untrue rumors of our imminent demise, I would urge you to ignore them. Since before we launched, our dear friends at competing media outlets have done their best to wish us ill and gleefully ‘report’ on what they think is going on here. The truth is we have over 100,000 paying subs who are renewing their subscriptions at a 98% rate and fantastic advertisers who love our brand and keep coming back for more because they get results. Pay attention to them, not the haters.

A hundred thousand subscribers isn’t bad at all for a fifteen-month-old publication on a limited platform. iPad penetration is growing fast, but fewer than one in eight Americans have one at last count, and its iPhone and Galaxy tab editions are still relatively new.

But it’s worth noting that this “more than 100,000” subs is the same number The Daily touted back in February. That’s about $4.5 million a year based on the breakdown of weekly-versus-annual subscribers Mashable reported then. It’s unclear what kind of advertising revenue The Daily brings in, but it can’t be that much, since its audience is limited to those 100,000 or so subscribers.

If it really wanted to show its viability, it would tell folks how fast subscriptions and ads are growing.

The New Yorker’s John Cassidy walks through possible scenarios for why Mitt Romney won’t release more of his tax returns:

Romney’s filings indicate that his effective federal income-tax rate in 2010 was 13.9 per cent, and his estimated rate for 2011 is 15.4 per cent. Those figures reflect the fifteen-per-cent tax rate on capital gains and dividend income. But it is perfectly possible that in earlier years he paid even lower rates. Since his 2010 and 2011 returns were prepared during an election campaign, it seems likely that his accountants took a conservative approach to deductions and other aspects of his finances. In prior years, they may well have been more aggressive. And maybe at some point Romney suffered some investment losses that enabled him to reduce his tax burden in subsequent years. Obviously, we don’t know. But there may have been a year in which Romney’s federal tax rate was in the single figures, and possibly even close to zero.

This seems pretty unlikely. But, hey, as (Republican strategist) Matthew Dowd noted, “there’s obviously something there, because if there was nothing there, he would say, ‘Have at it.’ ”

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Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at Follow him on Twitter at @ryanchittum. Tags: , , , ,