June 22, 2018

Accounting News Roundup: Deloitte Spies, Stock-based Comp and an SEC Chair Contender | 12.20.16

Deloitte spies

Here's a fun story from CNBC reporter Eamon Javers on an espionage group inside Deloitte that helped gather information on Bearing Point, the old KPMG Consulting spinoff. The story says the group was "generally known as the competitive intelligence unit" and was led by a former CIA guy named Gordon "Gordy" Welch. Essentially, this is what they do:

"Our job was to spy on Ernst & Young, PriceWaterhouseCoopers, KPMG and some of the consulting competitors," said a person who worked in the unit. "We were trying to steal their pricing models, how they determined discounts, and especially new product lines or service lines." The team developed networks of ex-employees as sources and traveled to trade shows to gather information.

Obviously, I have all sorts of questions now: 1) Does Deloitte have its own version of Q Division? 2) Did their missions have accounting-inpsired code names? 3) Are there elaborate physical challenges that applicants must pass in order to qualify for a position? I'll think of more, but those seem most pressing.

Anyway, when Bearing Point was in financial trouble about 10 years ago, word got round to Deloitte's intelligence team and they sent two operatives down to Orlando to get the scoop. It mostly involved them blending in and getting stressed out Bearing Point partners to give them the scoop: 

On the ground, the two Deloitte employees assessed the situation. BearingPoint was clearly in crisis mode, and the firm's partners appeared in to be disarray. This offered an opportunity for the two collectors from Deloitte: At various points over the coming days, the two Deloitte employees walked in and out of the convention center and stationed themselves at a bar, picking up scraps of conversation from the distraught BearingPoint partners.

And while liquor will certainly get people talking, apparently there's an even better place to pick up information:

According to a person familiar with the operation, the two agents also spent a considerable amount of time in the men's and women's bathrooms — hiding out to avoid detection, and taking notes on conversations they overheard. "You can't believe what people will say while they're in there," said a person who participated in the operation.

Accountants yakking between stalls like Beavis and Butthead does seem about right, doesn't it?

Adventures in non-GAAP accounting

Investor's Business Daily found at least one analyst who is encouraged by some tech companies backing away from non-GAAP reporting:

"Throughout 2016, we have seen an increasing number of internet companies — Facebook, Amazon, Priceline, and GoDaddy (GDDY) — de-emphasize non-GAAP financial reporting. We think this is a healthy trend," RBC analyst Mark Mahaney wrote in a research report.

He's talking about excluding stock-based compensation, of course. Notable companies that aren't as eager to give up excluding SBC are Twitter, Zillow and Netflix.

SEC contenders

Bloomberg reports that Debra Wong Yang is Donald Trump's leading candidate to lead the SEC. Ms. Yang currently works as a partner at law firm Gibson, Dunn & Crutcher leading their crisis management group. George W. Bush appointed her as a US Attorney in 2002 and she served on his corporate fraud task force after the Enron scandal.

Accountants behaving badly

James Carey, a CPA and forensic accountant in Boston, was charged with tax fraud after he helped himself to money that wasn't his. Specifically, he administered bank accounts for insurance companies and in one case it's alleged that "a customer of one of the insurance companies sent [Carey] a payment of $594,217 intended for the insurance company, but found that almost all of that money had been used by Carey for his own purposes."

Elsewhere in ABB: Roberta Czap allegedly pulled off an elaborate scheme for quite awhile at her employer. It involved moving company funds to her personal accounts and laundering it through local casinos. 

Also! A PwC tax partner, William O’Hagan, has been charged with tax fraud and failure to file in a timely manner for his 2010-2012 tax returns.

Previously, on Going Concern…

Rachel Andujar wrote about firms that say they're "paperless" but still use processing sheets. In Open Items, someone wants to know if their offer will get rescinded.

In other news:

  • Uber may lose $3 billion this year.
  • SEC Punishes Company Over Restricting Would-Be Whistleblowers
  • European Officials Accuse Facebook of Misleading Them on WhatsApp Deal
  • Female doctors are better at treating patients.
  • “Colleges are REQUIRING people to spend money taking general education courses to learn about the quadratic formula (and other shit they will never use) when they could be giving classes on MARRIAGE and HOW TO DO YOUR TAXES.”

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