August 19, 2018

Accounting News Roundup: Hacks, Rio Tinto, and ‘What was owed to him’ | 10.18.17

accounting news rio tinto hacks

Hacks

Joe Kristan pointed us to this disturbing story in Tax Notes (sub req’d) featuring IRS Commissioner John Koskinen:

“Our estimate has been that before that breach, information on over 100 million Americans was already in the hands of criminals,” Koskinen told reporters during a press conference on the IRS security summit preparations for the upcoming tax return filing season.

“My advice to people is that you should assume your name, Social Security number, and address are already in the hands of criminals, and then act accordingly,” the IRS commissioner said.

On the one hand, if you’re an accounting firm that has lots of client info lying around and you’re unsure about how safe it is, this kinda causes you to throw up your hands. On the other hand, HOLY SHIT. One-third of the population’s personal information was compromised before Equifax? I guess it’ll be fun to see how many houses are bought in my name that I’ll never set foot in FOR THE REST OF MY LIFE.

SEC enforcement

The SEC has charged Rio Tinto and two of its former executives with a slew of charges related to inflating the value of billions in assets:

The SEC’s complaint, which was filed in federal court in Manhattan, alleges that Rio Tinto, its former CEO Thomas Albanese, and its former CFO Guy Elliott failed to follow accounting standards and company policies to accurately value and record its assets. Instead, as the project began to suffer one setback after another resulting in the rapid decline of the value of the coal assets, they sought to hide or delay disclosure of the nature and extent of the adverse developments from Rio Tinto’s Board of Directors, Audit Committee, independent auditors, and investors.

Here’s the 60-page complaint if you have a slow morning. The SEC says that Albanese had lost a bunch of money on an acquisition called Alcan, and then he swung and missed again on an investment in Mozambique:

The second acquisition was also unsuccessful as it was based on the incorrect assumption that Rio Tinto could inexpensively mine, transport, and sell large quantities of high-quality coal, chiefly using barges for shipping. The SEC’s complaint alleges that the project suffered setbacks almost immediately, as Rio Tinto, Albanese, and Elliott learned that there was less coal and of lower quality than expected, and that Mozambique had rejected its barge application. The complaint alleges that the drop in quantity and quality of coal, coupled with the lack of infrastructure to transport it, significantly eroded the value of the acquisition.

This seems to be the point where the funny stuff started happening with the numbers, and it preceded a $5.5 billion debt offering. As this was happening, the SEC says, Albanese and Elliott were told: “that the [Mozambique] subsidiary was likely worth negative $680 million.” Yeesh.

Accountants behaving badly

It probably goes without saying that if you’re a partner in a CPA firm, you shouldn’t steal from your fellow partners. Not only does that much for your professional relationships, but your freedom could wind up at risk:

State sheriff deputies took the former managing partner of what was one of Hawaii’s largest accounting firms into custody today after a state judge sentenced him to prison for stealing more than $400,000 from the company.

Circuit Judge Rom Trader sentenced Patrick Oki to 20 years in prison for multiple counts of theft, money laundering, forgery and using a computer to commit the crimes. Trader found Oki guilty on all counts following a two-week nonjury trial in February.

Oki admitted to claiming false reimbursements and lying to his partners but testified he only took from PKF Pacific Hawaii LLP what was owed to him.

Going Concern history buffs will recall our previous coverage of Mr. Oki’s activities, but also might remember that he was with Grant Thornton and helped start its successor firm in Honolulu: PKF Pacific Hawaii. The firm has since changed its name because, ya know.

Previously, on Going Concern…

I wrote about the PCAOB and Big 4 legal services. In Open Items, someone is preparing for a phone interview for a senior analyst position at a university. Another user is “worried that possible tax reform and more automated programs will start to decrease the demand for future CPAs.”

In other news:

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