Problems At Kentucky Revenue Chief's Old Job Continue To Hound Lexmark
Lexmark International, the printer and imaging systems company based in Lexington, says it has spent $10.7 million trying to cure accounting deficiencies in the tax department formerly headed by Kentucky’s new revenue commissioner, Daniel Bork.
Bork was Lexmark’s vice president of tax until last September, then resurfaced as a Gov. Matt Bevin appointee three months later. Bork left Lexmark as it was grappling with income tax-related accounting problems that forced the company last March to admit that it could not vouch for the integrity of its financial reporting to the investing public. (Read " Gov. Matt Bevin’s New Tax Chief Left Lexmark Amid Accounting Mess")
In itslatest annual report, filed last month with the U.S. Securities & Exchange Commission, Lexmark disclosed that it still had not resolved its income tax accounting deficiencies as of Dec. 31. As a result, it said, there remains a “reasonable possibility” of a “material misstatement” in its financial reporting.
“Management concluded that the company did not maintain effective monitoring and oversight of controls over the completeness, existence, accuracy, valuation and presentation and disclosure of our accounting for income taxes, including the income tax provision and related tax assets and liabilities as of Dec. 31, 2015,” the company said in its report.
Lexmark spokesman Jerry Grasso would not say whether Bork was held accountable for the tax deficiencies. The annual report, however, states that “tax leadership and personnel changes” were among the fixes made in 2015.
“Lexmark does not publicly discuss current or former employees,” Grasso said.
Kentucky’s Revenue Cabinet administers tax laws, collects revenue and provides services to other state agencies and citizens.
With $3.6 billion in sales last year, Lexmark is one of the biggest companies based in Kentucky. It was ranked sixth onThe Lane Report’s list of the state’s largest publicly traded companies last year. The company employs 2,300 people in Lexington and about 14,000 worldwide.
Lexmark said in its annual report that it has been “undertaking significant efforts” to repair the “material weakness” in its accounting for income taxes. Those efforts cost the company $7.5 million in “remediation-related charges,” in 2015, contributing to a $40.4 million full-year net loss. It spent $3.2 million on the remediation in 2014.
Other steps taken by Lexmark last year were clarifying duties of tax accounting workers, revising income tax review processes, instituting better income tax accounting controls and implementing “new technology tools” for income tax accounting.
As the year went on, the tighter controls led to the discovery of errors that required the restatement of earnings from the third and fourth quarters of 2014. It has not revised financial data for any periods in 2015.
Lexmark said in the annual report that it expects to continue the accounting remediation process during the first half of 2016.
“The company believes it is important to finalize remediation efforts in 2016 and confirm that the new processes and controls that were put in place as part of the remediation are fully operational and consistently applied for a sufficient period of time in order to provide the company with adequate assurance of a sustainable and reliable control environment related to income tax accounting,” it said.
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.
Reporter James McNair can be reached at firstname.lastname@example.org or (502) 814.6543.