Gov. Matt Bevin's New Tax Chief Left Lexmark Amid Accounting Mess
Gov. Matt Bevin’s newly appointed commissioner of revenue left his last job, at Lexmark International, after the Lexington-based technology company found a host of accounting errors and declared its internal financial controls to be deficient and in need of remediation.
Bevin named Daniel Bork to the Revenue Department job on Monday. In a news release, he said Bork “recently retired” as Lexmark’s vice president of tax, a job he had held since 2001. Bork’s LinkedIn profile says he worked there until September.
“His expertise in the tax field will serve the cabinet and the administration well,” Bevin said Monday. The Revenue Department administers tax laws, collects revenue and provides services to other state agencies and citizens.
At Lexmark, Bork left behind an imbroglio that has forced the company to conduct a top-to-bottom overhaul of its accounting controls for income taxes. In its annual report for 2014, Lexmark said it “did not maintain effective monitoring and oversight of controls over the completeness, existence, accuracy and presentation and disclosure of our accounting for income taxes.” Lexmark did not put a dollar amount on the resulting bookkeeping errors.
The discovery of “material weakness” in the company’s financial reporting controls did not lead to any immediate revisions of past earnings results. But Lexmark conceded in its annual report that the weakness “could result in misstatements” of profits and other financial data. Last month, just as it predicted, Lexmark issued corrections of the earnings it reported in the third and fourth quarters of 2014.
To cure its ailing internal financial controls, Lexmark announced a number of moves in March. The publicly traded company said it would expand monitoring controls of its income tax review processes, enhance the formality and rigor of review and reconciliation procedures, hire outside tax accounting experts and upgrade its tax software. It did not estimate how long it would take or how much it would cost.
In its latest financial report, filed with the Securities and Exchange Commission on Nov. 9, Lexmark said it had spent $3.2 million in “professional fees” related to the remediation effort. It said the task “will take time to be fully integrated and confirmed to be effective and sustainable.”
No one will say what role, if any, Bork played as Lexmark’s tax accounting controls fell into disrepair. Bork, who lives in Jessamine County, did not return calls and requests for comment.
In announcing Bork’s appointment on Monday, the Bevin administration noted Bork was “responsible for worldwide tax matters, including compliance, planning and strategy to ensure favorable tax rates and improved cash flow.”
Bevin spokeswoman Jessica Ditto declined to comment about the administration’s vetting process or about Bork’s work at Lexmark.
Lexmark wouldn’t discuss Bork either.
“I’m not answering questions about an ex-employee,” said Lexmark spokesman Jerry Grasso. “We don’t talk about human relations issues at Lexmark.”
Finance Secretary William M. Landrum III lauded Bevin’s move.
“Daniel Bork has years of tax experience under his belt -- experience that will be valuable in his role as Commissioner,” Landrum said in the news release. “I look forward to working with him.”
Publicly traded corporations customarily disclose the annual compensation of their top five executives, as well as separation payments upon their departure. Because Bork was not at that level, terms of his retirement package are not available for public scrutiny.
Declarations of the ineffectiveness of internal financial controls are serious red flags to a publicly traded company’s lenders, investors and potential buyers of its stock. Often, such statements lead to downward revisions of past earnings and, with it, drops in stock price.
Kelly Buckley, managing principal at Spectrum Financial Alliance, an investment adviser in Nicholasville, said the cost of restoring Lexmark’s financial controls is already significant. He thinks the company could share more information about financial impacts.
“If I was an investor, that would be a source of concern,” Buckley said, adding that he does not own Lexmark shares. “I think Lexmark does need to issue a statement explaining that in greater depth.”
Through the first nine months of 2015, Lexmark posted a $29.7 million net loss on $2.6 billion in revenue.
Bork joined Lexmark as tax director in 1996 and was senior tax director for Cray Research and director of international tax services for the former Coopers & Lybrand in Minnesota. He served two six-year terms on the Kentucky Chamber of Commerce board of directors and served as president of the Kentucky chapter of the Tax Executives Institute. He is a certified public accountant.
Kentucky Public Radio reporter Ryland Barton contributed to this story. Reporter James McNair can be reached at email@example.com or (502) 814.6543.