“And then I said, ‘It’s accrual world!'”
Earlier this year, we discussed a tradecrafty story out of The Wall Street Journal of a BDO auditor who “casually wandered around the accounting firm’s New York offices, striking up conversations with colleagues.” Little did anyone know, the auditor recorded those conversations for the Federal Bureau of Investigation with “a tiny recording device disguised as an ordinary Starbucks gift card” about AmTrust Financial Services, an audit client.
You see, AmTrust’s accounting practices have come under scrutiny of many interested parties besides the FBI, including the Securities and Exchange Commission, Harry Markopolos’s merry band of fraud-busters, and a slew of short-sellers. This scrutiny has put lots of pressure on the company. AmTrust announced a big restatement back in April, and its stock has been trading near its 52-week low ever since.
And now a new story from the Journal reports that some “mysterious strangers” have been popping around AmTrust’s most notable critics. One of these involved an analyst at research firm at GeoInvesting, and his suspicions grew for a very obvious reason:
Chris Irons, an analyst at research firm GeoInvesting LLC, which has published several reports critical of AmTrust’s accounting practices, said he was contacted in July by a woman who identified herself as a London-based consultant to a European software multimillionaire seeking contributors to a new investment website. He agreed to meet at a Philadelphia-area restaurant.
At the dinner, Mr. Irons said, the woman, whom he described as gorgeous, plied him with drinks and slipped in several questions about critiques of AmTrust and its accounting methods. “It was the second or third follow-up question on AmTrust that gave me a lot of pause,” he said, adding that she “laughed at many things I said that probably weren’t that funny.”
Okay, maybe we took some liberties with the headline, but if a gorgeous woman is throwing liquor at you, asking questions about a company’s questionable accounting, some corny wisecracks are going to get thrown in. That’s just a fact. Of course, if she keeps asking about the accounting, and the jokes keep getting worse, even the densest of men will recognize when the laughs start ringing hollow.
In this case, the analyst’s suspicions were right. “Diana Ilic” turned out to be a phony name and the consulting firm she purportedly worked for had a mailbox drop as its London address. This suspicious encounter was one of many experienced by critics of AmTrust since last summer, but the only one that we suspect to have involved the enjoyment of accounting humor under false pretenses.