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Accountants donated to Nunez's appointee for regulatory panel

Former lawmaker Rudy Bermudez has also carried legislation for the profession.

October 26, 2007|Michael Rothfeld | Times Staff Writer

SACRAMENTO -- Assembly Speaker Fabian Nunez has appointed a former Democratic legislator to the state board that regulates accountants, despite the ex-assemblyman's sponsorship of a controversial bill last year on behalf of the accounting profession.

The bill sponsored by two-term Assemblyman Rudy Bermudez (D-Norwalk) would have gutted state accounting regulations and exposed Californians to illegal tax shelters had it been passed in its initial form, consumer groups and former Atty. Gen. Bill Lockyer warned at the time.

Now Bermudez, who left the Legislature after losing a Senate bid last year, is one of eight public members on the 15-seat Board of Accountancy, which by law is supposed to protect consumers. Bermudez received nearly $50,000 over five years in contributions from accountants, more than most legislators collected from the industry in that period.

But in an interview, he said he owes nothing to the accounting industry.

"I have a history of protecting the public from harm, and I'm going to continue to do so," Bermudez said.

His bill, AB 1868, contained a section that would have allowed out-of-state certified public accountants to provide "tax services" in California without a license or notice to state regulators, which Lockyer and consumer groups criticized as a broad and undefined loophole in state regulations. After the complaints, the provision was stripped from the legislation before it passed in the Senate and was signed by Gov. Arnold Schwarzenegger. The bill as passed clarified prior legislation on the state's licensing system.

Bermudez said the legislation was a "work in progress" when it contained the provision that consumer groups opposed.

"We can't judge his competency based on one bill," said Emily Rusch, an advocate for the California Public Interest Research Group. "However, the fact that he carried a bill that originally would have weakened the ability to enforce our strong accounting reform laws, that gives us some pause."

Accounting board members serve four-year terms. Two are appointed by the Senate Rules Committee and two by the assembly speaker. The governor, who appoints the other 11, wields the most influence over the board, and Schwarzenegger has received $280,000 in political contributions from the accounting profession, records show.

Nunez, a Los Angeles Democrat, voted for Bermudez's AB 1868 as it was first proposed, when it passed overwhelmingly in the Assembly. But the speaker, who made the appointment late last month, said in an interview that he did not know enough about the bill to comment and was unaware that Bermudez had even carried legislation for the California Society of Certified Public Accountants.

"He called me several times enlisting my support to appoint him," Nunez said. "If somebody can make a good case to me that he has a conflict of interest, I'd ask him to step aside."

In his application, Bermudez said he had not "been affiliated in any capacity with any institutions in the past five years that might present a potential conflict of interest or appearance of conflict of interest" with the appointment.

Since the Enron accounting scandal and others like it, the state board has been a battleground between consumer groups seeking better protection and industry lobbyists complaining of over-regulation.

"The law says the purpose of the board is to protect the public, not the accounting profession," said Julianne D'Angelo Fellmeth, who directs the Center for Public Interest Law at the University of San Diego.

In recent months, the board has considered changes that Fellmeth, who attends its meetings, said are beneficial to the accounting industry, including allowing CPAs to hold majorities on board committees, loosening licensing requirements of out-of-state accountants and reducing reporting rules. The current board president, Los Angeles CPA David Swartz, said the board is trying to improve efficiency and eliminate burdensome and ineffective regulations.

"We're really there for the consumer," Swartz said. "We're not trying to make it easier on accountants. We're trying to reduce redundancy and things that make no sense."

As he pushed for AB 1868 last year, Bermudez received more than $18,000 in campaign contributions -- his most ever in a year from the accounting industry -- including the four big national accounting firms and individual accountants, state filings show. He received $30,000 from the accountants between 2002 and 2005.

KPMG, one of the "Big Four" firms and a Bermudez contributor, agreed two years ago to pay $456 million in fines to avoid federal indictment for providing illegal tax shelters similar to those that consumer advocates said might have been used in California had AB 1868 not been amended.

This summer, a federal judge dismissed criminal charges against 13 KPMG partners, including two in Southern California, saying federal prosecutors had denied them their constitutional rights.

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