Auditing

Martha Stewart Company Asked about Tax Fees

Proxy-services provider ISS wants to know if payments covered consulting work by the company's auditor, Ernst & Young.
Stephen TaubJune 14, 2004

Institutional Shareholder Services (ISS) asked Martha Stewart Living Omnimedia Inc. to supply added information about tax fees the company paid to its independent auditors, Ernst & Young LLP, according to an 8-K filed by the Stewart company.

The embattled media company reported that it paid out a total of $770,969 to E&Y, including $325,000 in audit fees and $29,900 in audit-related fees. Further, the company paid $394,769 in tax fees related to $226,434 in tax-audit fees. It also paid $21,300 in all other fees.

If the tax fees “are for consulting services as opposed to more ministerial acts like filing, it tends to run in violation of our approach to looking at audit fees,” Patrick McGurn, senior vice president of ISS, a leading provider of proxy and corporate-governance services provider, told Reuters. “It calls upon you to be pitcher and umpire at the same time.”

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“You’re going to give the company tax advice, then you’re going to have to opine on that advice through the course of the audit,” McGurn added. “We don’t consider those types of fees properly associated to the audit process itself.”

Meanwhile, Martha Stewart, who was convicted earlier this year for conspiring with her stockbroker to lie about her sale of stock of Imclone Systems, last week asked a federal judge for a new trial because her verdict was “corroded” by a government witness who lied on the stand, according to published reports.

She sought the new trial one day after a grand jury indicted Secret Service laboratory director Larry Stewart — he’s unrelated to Martha Stewart — for providing false testimony at Stewart’s trial.

Martha Stewart’s sentencing was delayed by three weeks to provide her lawyers more time to file a motion for a new trial.