We’re getting mixed reports on the email going out to Radio Station employees about canceling the one thing to look forward to in the month of December.
We heard the email got sent out to some offices in the West but also that New York hasn’t heard a peep so we’re getting suspicious if the big dogs in NY are reconsidering their Grinchiness.
Let us know whether or not your visions of sugar plums have been dashed or not in the comments.
We’re getting mixed reports on the email going out to Radio Station employees about canceling the one thing to look forward to in the month of December.
The PCAOB was kind enough to issue a couple of examples this week of what happens when you don’t take your role as auditor seriously.
We wouldn’t dream of putting them both in one post so we’ll give you one in the morning to ponder and save the second for
later right about the time you’re ready to flip out, so hang in there.
We’ve also done you the courtesy of reading (sort of) both of the orders so that you can remain fully chargeable (not counting the time you take to read this post of course):
Thomas Linden was a partner in the Chicago office of Deloitte and lead engagement partner on Navistar Financial Corporation (NFC). At the 11th hour, prior to filing the fiscal year 2003 10-K, the engagement team realized that assets, revenues, and net profits were overstated by $19.7 million.
Check out the rest, after the jump
Having a typical over-confident management team, NFC had already taken the liberty of announcing the fourth quarter earnings prior to filing the 10-K.
Because Tom Linden was a Big 4 Partner and thus impervious to any challenge he encounterd, he took the following action (all our emphasis):
• Initiated an increase of approximately 50 percent in Deloitte’s planned tolerance for misstatements in NFC’s reported financial results
• Authored, with the assistance of a member of the NFC engagement team, an NFC auditwork paper that inaccurately characterized the reasons for and circumstances surrounding the increase
• Failed to evaluate adequately the risk that NIC’s financial statements were materially misstated due to error or fraud
• Otherwise failed to act with the requisite due professional care and professional skepticism
Okay, so the last two are boring but the first two kinda, sorta give us this impression of what happened:
Dude finds out the numbers are bunk, client isn’t cool with telling their analysts (who NFC told that they had a kick ass quarter) that said numbers are bunk, so Dude up and decides to ABBACADABRA make the tolerance for misstatement 50% higher than it was for the entire audit (read: that’s a lot).
Then, after probably putting the proverbial (or possibly literal) gun to head of the “member of the NFC engagement team”, they wrote a workpaper that supposedly explained why the tolerance was all of sudden 50% higher but the rationale was something to the effect of “because we said so”.
So for all that tomfoolery (snap!), Linden gets fined $75,000 and can’t be associated with a registered accounting firm for two years and which point he can petition to be to be reinstated. Yow-za. To better times, Tom.
ORDER MAKING FINDINGS AND IMPOSING SANCTIONS In the Matter of Thomas J. Linden, CPA, Respondent. [PCAOB]
Apparently some suit had their headphones ripped out of their ears that caused their iPod to go flying one too many times because Thomas Pink is now presenting the commuter tie for your mp3 device.
Maintaining a stoic demeanor regardless of the circumstances thrown at you on your commute is crucial for any straphanger. The new commuter tie will now guarantee that you’ll be able to listen to Shakira uninterrupted while maintaining your Blue Steel that puts the rest of your fellow commuters to back the F off because I have headphones in and must be respected.
Big D is the now officially in the
toilet frozen pay camp, as we have received a tip that senior associates in the Northeast region will not receive raises this year. On the less-bleak side, B. Salz and his fellow partners are doling out bonuses out of 2.2% pool which will probably amount to barely enough to pay for one night of your now three day drinking binge.
Rumor is that the disappointing word for associates should come down tomorrow but if you’ve got the scoop for us early or have more details on the cold news let us know at firstname.lastname@example.org.
• Retail Sales Dipped in July Despite Clunkers Program – “U.S. retail sales unexpectedly fell in July despite the debut of the government’s ‘cash for clunkers’ program meant to jump-start the auto business and help turn around the economy.” [WSJ]
• France and Germany exit recession – FTW. [BBC]
• U.S. Initial Jobless Claims Increased to 558,000 Last Week – “Applications rose to 558,000 in the week ended Aug. 8 from a revised 554,000 the week before, the Labor Department said today in Washington, while staying under 600,000 for a sixth time. ” Under 600k? Does that mean the recession is over? [Bloomberg]
• Cheney Uncloaks His Frustration With Bush “[Bush] showed an independence that Cheney didn’t see coming.” [Washington Post]
• Ex-AIG CEO, others to pay $115 million to settle lawsuit: source – Tough month for Hanky [Reuters]
• UBS shares climb further on U.S. tax case deal – Closure helps. [Reuters]
• Fed Suggests Economy Is Stabilizing – “U.S. Federal Reserve officials on Wednesday left official interest rates near zero but suggested the economy is on more stable ground, more confirmation that the severe recession is either already over or will be very soon.” Does anyone know if this really means anything? Are we stabilizing in crappiness? [WSJ]
• Save This Store – A case for big bonuses. [Floyd Norris/NYT]
• Colonial: No 2Q report due to irregularities – FTW guys. [AP via Miami Herald]
• Simplifed Reporting: Forgotten in the Crisis? – An advisory group gave the SEC a 170 page report to recommend how to simplify accounting rules. Anyone see a problem here? [CFO]
• Presented Without Comment: Ragnar Danneskjöld Lives? Damn Swedes. [DB]
• Rivkah, an Israeli woman, paid $32K to fly her dog, Orchuk, in business class from Paris to Tel Aviv – ‘He is my child, not a dog. And he deserves the best.’ Appears reasonable. [NYDN]
Social networking has reached new heights people. Now there’s a professional networking site that is specifically for “accountants, lawyers, and lenders”. HubStreet.com allows you to network professionally without that guy in IT trying to add you as connection because god, he’s such a geek.
No, HubStreet is here to make sure that those lesser beings out there can’t impose upon you in the virtual networking universe because you must enter your license number to even be allowed to register with the site*.
Get more details on this new method of wasting time at work, after the jump
HubStreet also claims “Take the Work Out of Networking” because God forbid you talk to anyone face to face or leave your home or office to meet other people. Or actually call them on the phone. THE HORROR.
HubStreet just finds people that thinks you’ll interact well with professionally and puts you in contact with them. Unfortunately, there doesn’t appear to be any sort of physical attraction widget implemented yet so you will
probably most certainly continue to fail hooking up with your chosen “connections”.
Accounting Social Network Launches [Web CPA]
*Okay, not really
In another case of former a IRS Agent having reckless disregard for their old employer (i.e. the Federal Govt.), a 76 year-old former agent was sentenced to nearly four years in prison for his part in a fraudulent tax scheme that went on from 1998 to 2000. Thomas Steelman was also ordered to pay more than $10 mil back to the Service.
The old guy really worked hard at his craft too:
He took part in promotional meetings, conferences, rallies and telephone conference calls to promote Renaissance’s services and recruit clients, according to prosecutors. Steelman was also a featured speaker on Renaissance’s promotional videotapes.
From the sound of it, this guy Steelman was the
Peter Olinto Tim Gearty Rick Duffy of Renaissance, The Tax People, the defunct company he worked for. It disappoints us how the pleasure of serving your country, as crusader for tax compliance, would eventually lead to a life of a scofflaw and tax avoidance. We are truly saddened that there continues to be very few true tax heroes among us.
Ex-IRS Agent Sentenced to 46 Months for Tax Fraud [Web CPA via TaxProf Blog]
I read an article awhile back in CFO mag about Generation Y, or more specifically how large firms were preparing for this ‘special’ crop of soon-to-be new grads.
I’m not sure ‘panic’ is the appropriate word but let’s just say these kids had partners freaking out; technologically-inclined, lazy, and pre-programmed with a sense of entitlement normally reserved for royalty and Nobel prize winners, you knew something was up with these kids if management was stressing their arrival. The Big 4 went so far as to hold trainings for partners on how to tame this hyped generation as they prepared to descend on the corporate world.
More, after the Jump
Now that the first wave of Gen Yers have successfully penetrated the corporate fortress, we figured it might be a good time to check in and see how that’s working out.
‘Screw our SEC deadlines’ may not be an exact quote but that was the typical Millennial attitude impressed upon us by one of our sources, a 40-something CPA lucky enough to be stashed away in private accounting out on the East Coast. He also called working with Gen Y ‘horrid’ but private accounting can be horrid in and of itself so we won’t credit that fully to the Under 30 crowd.
Gen Y is driven by… Well we haven’t figured out if they are driven at all. All reports are that they think ‘work ethic’ means avoiding checking their Facebook pages on company time, expect the corner office as soon as the ink dries on their offer letter, and have absolutely no grasp on the concept of performance-driven bonuses.
What’s worse, say sources, is they don’t seem fazed in the least by economic turmoil. Though employers using performance above seniority as a lay off gauge naturally look to their poor performers as first in line to get sliced, the Millennials are so dosed on the illusion of their own greatness that they seem absolutely stunned when the pink slips come.
So why would the Big 4 continue the tradition of recruiting new hires from college campuses, blocking out the 35 year olds who understand that just getting up in the morning is not cause for a gold star?
You’ll have to talk to the hiring managers if you want an answer to that. Perhaps it’s that we’ve got them all wrong and the generalization itself is what’s driving the conflict.
In the meantime, we are looking forward to seeing how Gen Y breaks out of the stereotype to impress the pants off of us and inherit the empire. With all that ambition and talent, we’re sincerely hoping they learn to apply that to the Big 4 to shake things up for the better. Hopefully they can also bury the billable hour once and for all while they’re at it. Go, kids, go!
Try to control yourselves, the SEC continues to kick some ass. The Commission has charged Terex Corporation of Westport, CT with accounting fraud:
Check out the details, after the jump
The Securities and Exchange Commission today charged Terex Corporation, a Westport, Conn.-based heavy equipment manufacturer, with accounting fraud for making material misstatements in its own financial reports to investors, as well as aiding and abetting a fraudulent accounting scheme at United Rentals, Inc. (URI), another Connecticut-based public company.
The Commission had previously charged URI executives with fraud back in September when the company paid $14 mil to settle with M. Schape and the gang. Terex is settling for $8 mil.
The complaint alleges that both companies engaged in some shady revenue recognition which enabled them to meet earnings forecasts. It also states that from 2000 to 2004, accountants at Terex couldn’t figure out some of their inter-company transactions so they just decided to RAM some journal entries in there to make it work.
We understand that. Every once in awhile it’s 1 am-ish and you’re looking at a bunch of numbers that are getting blurry and you say “F THIS“. Entry gets made. Done.
Problem is, the SEC doesn’t like that.
SEC Charges Terex Corporation With Accounting Fraud [SEC.gov]
In what probably amounts to UBS caving out of pure exhaustion from the nagging of U.S. Tax authorities, the Swiss Bank reached an agreement in which it will turn over names of wealthy clients. The Wall St. Journal is reporting that it could be between 8,000 and 10,000 names which will likely get UBS on the list at Hop Sing’s with Ned Isakoff.
More, after the jump
The whole sitch has caused many to confess their offshore banking sins and may make for more
begrudgingly honest reporting of offshore accounts in the future but we hope that in hindsight, future Swiss negotiators see the wisdom of considering the undying power of the cocoa bean.
UBS Tax Lawsuit Settled by U.S., Swiss Governments [Bloomberg]
UPDATE: Read more at our sister site, Dealbreaker.
In a demonstration of spreading the wealth or possibly just a strategic international ploy, KPMG Europe is adding seven new nations to its firm.
Regardless of the motivation, it clearly demonstrates that the most positive news that the
Scrooge American firm is capable of announcing is that it is ruining everyone’s holiday season prior to the start of football season so you have plenty of time to get over it.
KPMG Europe will add Turkey, Russia, Ukraine, Kyrgyzstan, Kazakhstan, Armenia and Georgia to its stable of bean counters. They join the UK, Germany, Switzerland, Spain, Belgium and the Netherlands and will increase the Europe revenues to over £4bn which probably could pay for a few parties (but not full bar) in the States.
KPMG Europe spreads wings to take in seven nations [Accountancy Age]
• Economists Call for Bernanke to Stay, Say Recession Is Over – “Economists are nearly unanimous that Ben Bernanke should be reappointed to another term as Federal Reserve chairman, and they said there is a 71% chance that President Barack Obama will ask him to stay on, according to a survey.” Sure, why not? [WSJ]
• U.S. Firms Probed in Mexico Oil Scam – “The probe is part of a broader two-year joint U.S.-Mexican investigation into a network of Mexican oil smugglers supported by the Gulf drug cartel, one of Mexico’s most powerful and brutal criminal organizations.” Appears reasonable. [WSJ]
• Lying Low After a Layoff – Are you really going out of your way to look employed? [Washington Post]
• Amex, Discover to end fees going over credit limit – Back to maxing out! [AP via Miami Herald]
• Feinberg’s Pay Decisions May Set the Template for Wall Street – “companies must tell him how they plan to pay the 25 top-earning employees. Feinberg will rule on the plans within 60 days after they’re completed.” Uh oh. [Bloomberg]
A quick correction:
We mentioned yesterday how nice a lady Frank DiPascali’s sister was for putting her house up for bail. We’re sure she is very nice but the judge wasn’t convinced that DiPascali wouldn’t bolt so he didn’t let him out on bail regardless of the agreement prosecutors had with defense attorneys.
• Bankruptcy Filing Near for Taylor Bean – “The motion, submitted in the U.S. District Court for the Northern District of West Virginia, was filed on Aug. 6, one day after the privately owned Ocala, Fla., company ceased its lending operation and dismissed most of its work force.” No surprise, but that sucks guys. Try to keep truckin. [WSJ]
• Benmosche Said to Start AIG Tenure With Croatian Trip “plans to spend part of his first month leading the insurer in Croatia on vacation, according to two people familiar with the situation.” The guy’s got stones, that’s for sure. [Bloomberg]
• IRS Impostors Burglarize House “The IRS impersonators made off with a weed trimmer, chain saw, jewelry and a utility trailer.” [Web CPA via TaxProf Blog]
• The Sweet Sixteen: A List of Audits I Need in my Life [Accounting Nation]
Ralph Janvey, the court appointed receiver in the Allen Stanford “where’s the f’n money Lebowski” case is what some people might call, shrewd.
Janvey is fighting to have certain brokerage accounts held by investors frozen because the holders of said accounts made principal withdrawals prior to the uncovering of the fraud.
The SEC kinda, maybe thinks that this is a little overboard and filed papers opposing Janvey’s suing of what the Commission calls “innocent fraud victims”.
We’re thinking that since Janvey is on the wildest of wild goose chases, he has had to resort to suing regular people that had the fortunate dumb luck to pull their money out of a Stanford
Bank Institution garbage bag prior to the poop + fan.
SEC Opposes Motions in Stanford Case [WSJ]
It’s offish. DiPascali pleaded guilty to all ten counts against him and faces 125 years in prison, just quarter century short of Boss Ponz. However, because he is cooperating with the U.S. Attorney, DiPascali may be lucky enough to get a sentence under the century mark.
The bright side for Frank DiPascali is that he gets to spend his last few days as a free man courtesy of a very nice sister who put up her house for the $2.5 million bond. Sentencing is tentatively set for May 2010.
DiPascali was the man that many Madoff investors corresponded with directly so it’s clear to us that he was LYING A LOT.
Per the WSJ:
The former chief financial officer for Bernard Madoff says he helped the disgraced financier and others “carry out a fraud that hurt thousands of people”…Mr. DiPascali said at the plea hearing that the transactions were “all fake. It was all fictitious. It was wrong, and I knew it was wrong at the time.”
Okay then, nothing really new there but we will be waiting patiently to hear the other names. Next bean counter up for book throwing is David Friehling, who was kind enough to rubber stamp the Madoff financial statements for around $14k a month. Bright side for Friehling is that he’s looking at 50% less time in jail then Bernie.
And by that we mean money. We’ve started hearing rumors about the starting salaries for new associates and we don’t know what the hell to believe, so we need your help to set us straight.
We’ve heard $50k in Atlanta, $52k in Houston, $57k in DC and $61k in New York. Nothing yet from the left coast, so help us out. Sounds like signing bonuses are either significantly reduced and in some cases completely eliminated. Nothing has been firm specific but we’re guessing they’re all pretty close.
Talk to your fellow newly minted bean counters and find out the sitch on this year’s salaries and how it compares to last year’s newbies for your respective city. Also let us know if your start date has been pushed back. Discuss in the comments or send us the deets at email@example.com.
Huron Consulting, after cleaning house, admitting to some book cooking, and having multiple class action suits filed against it, now has a brand new SEC investigation to look forward to. This new investigation is in addition to a separate investigation the SEC was conducting related to its chargeable hours.
The new investigation relates to the accounting hocus-pocus that led to the announcement that three years of financial results were being restated. On top of all this, the 10-Q, due yesterday, has yet to be filed. The company said everything is cool though and that it will be filed…
who the hell knows as soon as possible.
Huron crossed its heart and hoped to die that it would cooperate with the new investigation. After all, they’ve won new business since the scandal dropped, so not everybody thinks they’re crooks.
SEC investigating Huron accounting errors [Chicago Tribune]
As we mentioned last week, Frank DiPascali, the Chief
Financial Officer Accounting Officer Number-Maker-Upper is going to be arraigned today on multiple counts of fraud, conspiracy and other bad stuff that will earn him a permanent wardrobe of bright orange or heavy denim jumpsuits. We’ll update you on the sitch after 3 pm EDT.
With the firms cracking down on expenses of every sort, including canceling the Holidays prior to the autumnal equinox, hopefully the following story doesn’t occur to any of you. At the very least, it can show what can happen when you have blatant disrespect for your firm’s expense reimbursement policy:
More, after the jump
A former Deloitte Consulting manager who disappeared on the day of her sentencing for bilking her employer out of more than $500,000 was found dead in a Costa Mesa park Saturday morning, authorities said….[Jamie] Watkins, a former operations manager for the Santa Ana office of Deloitte Consulting LLP, faced up to 10 years in federal prison after abusing the company’s expense reimbursements to steal about $550,000 to pay for things including property taxes and furniture.
As tragic as this story is, it serves as example to those of you that find yourself regularly explaining to an HR rep the $500 lunches you had at Bobby Vans and the theatre tickets that ended up on your last expense report. This may be where you are headed if you don’t shape up.
Deloitte manager hangs self [Orange County Register]
A few weeks back we dabbled into the sex lives of those of you that call yourselves accountants. Several comments
eluded alluded that national trainings are about as a good opportunity as some of you are going to get.
National trainings are not only a great time to make awkward sexual advances, they’re also a great opportunity to get together with hundreds of your peers and drunkenly complain about your superiors and subordinates. It’s also an opportunity to make a complete ass out of yourself in front of those same peers.
National trainings have also been known for chicanery such as but not exclusive to:
Check out the idiocy, after the jump
• All night excursions to the strip club where one person passes out in the bathroom and somehow the whole night ends up on your manager’s expense report.
• A night of bottle service that results in dragging several lifeless bodies back to the hotel but thanks to some friendly hotel staff, everyone ends up safely back in their rooms.
• Training Instructors showing up to class over an hour late, wearing clothes from the previous day and smelling like Mel Gibson.
• A week where, instead of spending your time learning accounting/tax/audit updates, you spend the entire week in your hotel room working a normal 12 to 14 hour day because your manager’s whip somehow has the range.
So because summer is winding down and national trainings are coming to end for another year, we’d like some stories to order to get an idea of how good/bad/ugly your trainings this year.
We’ve heard that some firms have shortened some of the trainings to just a few days rather than a full week and also that the firms are seriously clamping down on the expenses so maybe your city’s blowout party got axed or you got charged back for the round of shots you bought for everyone. Regardless share your experiences in the comments and send us other gossip that you want us to put up at firstname.lastname@example.org.
It goes without saying that the lack of stage and screen productions of anything related to accounting is no accident.
We Americans crave the spoon-fed Hollywood experience and don’t have much patience for cerebral art. The Brits, on the other hand, have decided that accounting fraud is truly meant for the stage because Enron will start showing at the Royal Court Theatre on September 7th and run through November 7th, according to the Theatre’s website.
Get the details, after the jump
The comedic tragedy stars Samuel West as Jeff Skilling and it has gotten excellent reviews in previews, indicating that they avoided the accounting aspects completely.
No word on the whether the play will make its way to the States but if it did we’d suggest James Gandolfini as Skilling, merely for the crucial scene where Skilling has a vein pop out of his forehead when he blows a gasket on an earnings call with skeptical analysts. We’d pull for Hugh Jackman as the Arthur Andersen partner but we’re guessing that it would end up being Philip Seymour Hoffman.
Discuss your casting choices in the comments and if you’re in London, you can see the play for as cheap as ten quid so go get yourself some culture.
Enron…The Play [Bruce Carton/Compliance Week]
• ‘Urgency’ Drives SEC Crackdown – Does this woman look like she has a shred of urgency? [WSJ]
• CIT delays report, could have to file for bankruptcy – Can someone please handle this? Thanks. [Reuters]
• BofA Judge Seeks More Data on SEC Bonus Deal – Judge Rakoff certainly doesn’t feel the urgency. [WSJ]
• AIG’s Liddy Heads Toward Retirement With ‘$1, a Few Bruises’ – And with any luck, won’t ever appear in front of a Congressional committee ever again. [Bloomberg]
E&Y’s Dallas office sure appreciates their new associates because they’ll be the only ones getting pay raises this year. It’s either that or they want to the put them in the position for additional ridicule until the fresh batch of new associates comes on.
According to the tip we received, the announcement was made at the townhall meeting today and this is first office of any firm that we’ve heard of to make an official announcement to employees that pay was being frozen.
Those being promoted to a new level (e.g. SA to Manager) will receive bonuses but no details were given. We’ll update as we learn more.
• Bank of America Will Pay $55 Million to Settle Claims – In other news, Angelo Mozilo still appears that he has, at least partially, descended from Oompa Loompas [Bloomberg]
• U.S. recession seen ending in third quarter – Hold your breath in 3…2…1…[Reuters]
• Huron Shareholders Sue over Accounting Scandal – Yes, P. Dubya is named. [Web CPA]
• Swiss Cabinet Discusses UBS’s Legal Woes – It’s pretty clear that IRS is just going to nag the living crap out of the Swiss Government until they give the Service all the bloody names. [WSJ]
• OMG I HATE MY JOB!! Facebook bitching about work will get you insta-fired. – Best to stick to the trite statements about your weekend plans, hating Mondays, how nice/crappy the weather is, etc. [Adland]
Guest 6 @ 1:03 informs us that interns may be returning from their little rendezvous with their international counterparts to find out if they made the cut of those receiving full time offers. This is clearly a matter of “win or lose, we still booze”.
So whether you’re a proud new E&Y’er or you dreams of being a CPA-rock star have been blown to smithereens, let us know the details. If you’ve got the scoop on salaries and numbers discuss in the comments or send us tips to email@example.com
Obviously not wanting to ruin its grandmotherly image, the IRS has announced that will extend its deadline for certain taxpayers to submit their “Report for Foreign Bank and Financial Accounts” or FBAR.
The administrative relief is for “taxpayers with signature authority over, but no financial interest in, a foreign financial account, and taxpayers with a financial interest in, or signature authority over, a foreign commingled fund.”
Perhaps realizing that putting the gun to the collective head of taxpayers that have foreign bank accounts isn’t the best approach or coming to the conclusion that the drop dead filing date of September 23rd just didn’t make any damn sense, the new deadline is now June 30, 2010.
IRS Extends FBAR Filing Deadline Again [Web CPA]
A quick follow-up on the layoffs we mentioned in last week’s firm watch that went down at the PwC Denver office. We heard over the weekend that it was approximately a dozen employees that got the boot and it occurred at all levels including at least one senior manager.
The layoffs, which occurred last month, were deemed to be “performance related” which has been P. Dubs’ consistent story regarding cuts. Similarly, everyone seems to consistently disbelieve that story. If you have more details regarding these layoffs or if there were recent layoffs at your office, let us know at firstname.lastname@example.org.
To round out the year, KPMG is kindly reminding everyone about the SPEND SMART initiatives implemented this year and with just two months to go in the fiscal year, the Radio Station has decided that some additional belt tightening is necessary.
We understand that the email we received will be sent out by each Office Managing Partner to each individual office. We have not received confirmation that employees have received the email.
We are reaching out to KPMG for co rong>See the Firm’s statement below.
According to the email obtained by GC, Radio Station’s leadership has decided that all offices will suspend this year’s holiday office parties. Instead offices will host “community service events” between Thanksgiving and New Year’s. We find this commendable that the firm wants to give back in this fashion but we imagine some of you probably would probably still like to get your holiday party drink on.
Some other cost cutting measures for August and September include:
Check out the entire text of the email, after the jump
To: All Partners and Employees
From: ANY OMP
Additional SPEND SMART Initiatives
First, I want to thank everyone in the ANY office for following the many SPEND SMART initiatives that the firm has implemented this year. Your compliance with the firm’s travel and meetings policies, as well as careful management of other costs, has enabled the firm to reduce our expenses by hundreds of millions of dollars.
In spite of some indicators that the economy may have hit its lowest point, businesses everywhere are still feeling the impact of the economic crisis, and that includes our firm. And while there are indications that the economy is at the beginning of a recovery, no one can accurately predict how long that will take.
With that in mind, the Operations Committee has identified some short-term cost management initiatives for travel and meetings that–if implemented immediately–can help us begin FY 2010 in a stronger position. Those measures are outlined below and remain in effect until October 1, unless otherwise noted.
During the next two months, the firm will be reviewing all of our Time and Expense policies to align with our cost structure for FY 2010 and beyond. However, we’ve made one decision now that will impact the way we celebrate the holiday season.
Community Service Event
The end of the calendar year is traditionally the time when KPMG offices hold parties to celebrate the holiday season. A great deal of time and planning go into these events and they are a great opportunity for all of us to get together in a festive atmosphere. However, given the impact of the economy on so many people’s livelihoods, people throughout the firm–at all levels–questioned whether there would be other ways we could create this same sense of community during the holiday season while giving back to those in need. After careful thought and consideration, firm leadership has decided that all KPMG offices will suspend this year’s holiday office parties and instead host a community service event between Thanksgiving and the New Year.
You may recall that last year, in lieu of a holiday gift, the firm donated a full week of meals to families in need through an organization called Feeding America. In total, we donated 1.6 million meals in the communities where we live and work.
This is a tremendous way for all of us to come together to help make a meaningful difference for people in need during the holiday season. You’ll be hearing more about this effort and how you can get involved later this fall.
In the meantime, please do all you can to follow the SPEND SMART guidelines we announced in October and the additional initiatives I’ve outlined below.
Meetings and Travel
· Additional Travel Restrictions – Airfare is one of our largest travel expenses. Currently, our policy provides partners and employees with a choice of airlines when traveling. Until October 1, the travel team will book the lowest cost flight for your destination and travel times, regardless of the airline. We also ask that you continue to limit non-client travel as much as possible, and verify the criticality of all international travel.
· Car Service – Until October 1, car service may only be used when a taxi or one’s own car is not available. We also ask that you use taxis for transportation to and from airports, rather than a car service. If taxi service is not available in your city or area, or the cost of using a taxi exceeds that of using a car service, a car may be used. We will continue to honor our car service policy for employees required to work past 8:00 p.m. during winter and 9:00 p.m. in the summer; however, we expect that during August and September the need for this service will be rare. Click here for information about our transportation policy.
· Meal Reimbursements – During August and September, we are putting the following policies in place regarding meal reimbursements:
Lunch – Lunch for partners and employees while traveling will not be reimbursed since this is a meal that one would buy during the workday regardless of location. We will continue to reimburse lunch meetings with clients.
Non-client Meals – During these two months, the firm will not reimburse non-client meals held outside our offices. Meal expenses for those traveling for internal training or meetings are subject to the expense limits allowed by our meal policy. As always, team leaders should use their judgment when ordering meals for groups working overtime.
Cell Phones, PDAs, and Other
· One Mobile Device per Person – Effective August 1, we will no longer reimburse individuals for both a cell phone and a TreoTM or Blackberry®. People who have both devices have the option of adding phone service to their PDA. If you wish to keep both devices, you will be charged the full price of service for one. In addition, per our existing policy, we will deduct $20 a month from everyone using firm-supplied cell phones or PDAs. We also encourage you to review your current plan to determine whether you need all the features to which you’ve subscribed. To learn more about the various mobile plans available to you, please click here.
· Inter-office Mail: Use Scanning and e-Fax – Going forward, we will be looking at ways we can reduce the cost of handling interoffice mail, including the frequency of delivery. In the meantime, we encourage you to make use of all the technology available within the firm to send documents between offices, including scanning documents that can then be e-mailed to colleagues or clients. When scanners are not available, make use of our e-Fax capabilities. Check with your local OneStopOps group to learn more about these services.
In closing, both the ALL partners and I want to thank all of you for your ongoing support of our SPEND SMART initiatives. Your efforts have made a difference and we continue to welcome suggestions to help our office and the firm run more efficiently.
Even more important, we want to thank you for your high-quality service to our clients. We all know that these are difficult times, but that is why our clients are depending on us to deliver our highest standards of service and professionalism.
Thank you for your continued support.
UPDATE, 5:51 pm EST: We reached out to KPMG regarding the Grinchiness and we were provided with this statement:
“Like businesses everywhere, we’re identifying cost-saving opportunities that will provide the most benefit while still allowing us to provide high quality service to our clients.”
We know public accounting is hard. The unpaid overtime (*cough* perhaps PwC can tell you about that *cough*), busy season, the misconception that all CPAs are number-crunching mathletes, and, of course, the inconvenience of having to answer everyone’s obscure tax questions. “Dude, I don’t even WORK in tax, I’m an auditor.” “Yeah but I just have this quick question about a deduction…”
As bad as the CPAs may have it, they’ve got it easy compared to this guy. Poor Ken Lewis. Someone invite him to waste a few years in public accounting please, he’s getting pounded from every angle over here, poor bastard.
Let’s check the timeline – please compare to your busy season and see who has it worse if you’re still regretting your decision.
More on KL’s banner year, after the jump
Ken Lewis’ year started sucking in January after the Merrill bonus scandal erupted. This got NY State Attorney General Andrew Cuomo on his back, eventually leading to the Fedgate scandal in which Lewis claimed Ben Bernanke and Hank Paulson “threatened” the Bank of America CEO or kept him on a short TARP leash or some such “OMG did he really just say that?” revelation. He’d already come off a pretty rough year previous but you already know that story.
Bernanke and Paulson didn’t take getting fronted off too kindly (we can only assume) and Lewis hasn’t really gotten a break since. The guy couldn’t even sell his Porsche without feeling the heat. Now a judge is blocking the $33 million settlement he’d love to make with the SEC and some Citigroup reject is being groomed as his replacement. Burn. Oh, and then there are the JP Morgan analysts saying Bank of America will service the loans that TBW cannot since, well, it was raided by Federal agents and barred from making loans by the FHA.
So how bad do you really have it? We told you it could be worse. Next time you’re out there ticking and tying wondering how in the hell you’re going to spend the rest of your life that way, just think about Bank of America and remember you could be Ken Lewis right about now.
What we’d really like to know is: will Lewis be able to limp along for the next 3 years and make it to retirement before totally flipping out?
Last week we checked in with those of you working on 10-Q’s for the second quarter and it sounded like it was pretty quiet.
Large accelerated filers have until 5:30 EST today to get their 10-Q’s submitted. Any last minute meltdowns out there? Anyone going on 48 hours of no sleep to pull this one off? Let us know in the comments or email us at email@example.com.
Eli Mason, a driving force for the independence of accountants and an outspoken critic of large accounting firms, died last week at the age of 88.
He was a CPA for more than 60 years, starting his own firm in 1946 with two clients. He served on the NYS Board for Public Accountancy for ten years, including two as the chair. He was also the President of the NYS Society of CPA’s for 1972-1973.
According to the New York Times obituary:
Mr. Mason went to the business school of the City College of New York, where he studied accounting with Emanuel Saxe, a distinguished professor and one of the accounting world’s stars at the time. He graduated in 1940 and was a lifelong supporter of the college, now Baruch College of the City University of New York , where he endowed a chair for accounting in 1992 and financed the restoration of the school’s biggest auditorium, now called Mason Hall.
More, after the jump
Mr. Mason was taking on the big firms before most of us were born:
In 1979, he helped found the National Conference of C.P.A. Practitioners, which consisted of 1,500 small firms, and became one of the profession’s most vocal critics of the big accounting firms, then known as the Big Eight. In particular he resented the practice he referred to as lowballing, or aggressively cutting prices, sometimes below cost, to attract new clients.
He also saw the danger of firms offering consulting services and the consolidation of the large firms when the mergers began in the 1980s:
He also spoke against the industry’s mergers in the 1980s, which reduced the number of major firms to five, and he was critical of large firms that offered consulting services as well, fearing this would erode their independence from their clients. Many of his fears turned out to be justified later when the accounting scandals of Enron and WorldCom highlighted the cozy relationship between some of the world’s top accounting firms and the companies they were supposed to audit. Arthur Andersen was one, having been Enron’s accounting firm.
Mr. Mason was known as an accounting purist and earned the nickname “the conscience of the profession”, something we could certainly use more of. Follow this link to read an interview he did with the CPA Journal in 1999. He will be missed and our condolences go out to his family.
Eli Mason, 88, Outspoken Accountant, Is Dead [New York Times]
Over the weekend we received an email that basically confirmed our suspicions that many of you were working over the weekend. Considering the time of year, it doesn’t come as much of a surprise that hours are starting to pile up and you’re spending at least one hour a night deciding where you’re ordering take out from.
We received word over the weekend that tax groups at
KPMG PwC all the major firms are working like crazy already in anticipation for the September 15th and October 15th filing deadlines.
There have also been whispers among some in the tax practice at KPMG that layoffs may occur after the deadlines due to large number of idle hands that will be around after the deadlines pass.
Tax associates out there, let’s know what your hours have been, what you’re hearing about post-deadline layoffs, and where you don’t want to get take out from ever again.
• Paulson’s Calls to Goldman May Have Tested Ethics – “During the week of the A.I.G. bailout alone, Mr. Paulson and Mr. Blankfein spoke two dozen times, the calendars show, far more frequently than Mr. Paulson did with other Wall Street executives.” Paging Representative Waters. [DealBook]
• Textbooks Offered for iPod, iPhones – “A provider of subscription e-textbooks for college students is making its 7,000-plus titles accessible on Apple Inc.’s iPhone and iPod Touch as interest heats up in the digital-textbook arena.” [WSJ]
• States End Up Losers in Gambling Pullback – Now, everyone loses! [WSJ]
• Expert: Madoff Victims May Wait 15 Yrs. For Full Payout – “…some non-wealthy clawback subjects paying $50 to $100 a month in an installment plan.” [New York Post]
• Even sex tough to sell in this recession – BAIL-OUT! BAIL-OUT! BAIL-OUT! [Greg Burns/Chicago Tribune]
The summer weekends are running out people. So what are you up to? BBQ? Beach? Baseball?
10-Q’s? TAX RETURNS?
Here’s an email we received late last night:
Check out one accountant’s plans, after the jump
I am working both days this weekend. On top of that, I had to work (although not explicitly enforced) on a holiday. The problem is upper management says all these things about maintaining a healthy balance at work but in reality it can never be realized. They say to eat your lunch in peace but they also say do a boat load of work by the end of the day. No sane human can even take an hour in the middle of a day to do such a thing. The duplicity is beyond annoying. Shitty management across the board. Nothing is sacred to these people except for the revenue generated from a bunch of stupid clients.
Sounds like a party. Are you working this weekend? Let us know what’s going on at firstname.lastname@example.org. If you know someone that is working this weekend, pass this along so we can get the scoop on how much fun they’re having.
10-Q’s are due Monday, Corporate tax deadline is just a month away, sleep is becoming optional but GC is here for you. Let it out. You’ll feel better.
• Don’t forget to join our group on Facebook!
• Enforcement push gives SEC image boost Let it be known that we still think very lowly of the SEC. [FT.com]
• Ethics Panel Clears Dodd in Countrywide Refinancing If only Chris Dodd had that Angelo Mozilo glow there might have been more of an obvious connection. [Bloomberg]
• A Defense of Bank of America’s Chief FTW Ken Lewis! [DealBook]
• Former Rabbi Charged in $35M Tax Fraud Scheme 3,300 tax returns using the names of prison inmates. [Web CPA via TaxProf Blog]
• D.C. Circuit Slams IRS, Opens Door to Billions of Dollars Telephone Excise Tax Refunds [TaxProf Blog]
Frank DiPascali, Bernie Madoff’s
CFO Number-Maker-Upper is going to be charged in connection with some money gone missing. DiPascali has agreed to skip the grand jury and get down to business, according to Bloomberg, indicating that he might flip. DiPascali seems to be taking a cue from another pseudo-bean counter who’s only plausible defense is stupidity.
U.S. to File Charges Against DiPascali, Ex-Madoff CFO [Bloomberg]
In, oh for the love of God make it stop, news, Judge Alan Gold has allowed the IRS and UBS more time to hammer out a deal over 52,000-someodd names of American account holders.
There was supposed to be a deal today but then the judge said the 10th would be fine. Now the 12th is the date and if that doesn’t work, then they have until 17th. OH to hell with it. Who needs a drink?
U.S. and UBS Get More Time to Reach a Deal [DealBook]
We have failed again to avoid deceased King of Pop news. Turns out the doctor who is suspected of providing Jackson with drugs that may have killed him is also is a tax scofflaw.
Dr. Conrad Murray is facing a $20k tax lien to the State of California, who, we’ve heard, needs the money. It was filed nine days before Jackson died which will likely add to the batsh!t crazy conspiracy theories surrounding his death.
Michael Jackson Doctor Faces Tax Lien [Web CPA]
So all that fuss over at Colonial Bank? Accounting irregularities, natch. According to Reuters, “Colonial BancGroup Inc (CNB.N) said it faces a criminal probe by the U.S. Department of Justice (DoJ) related to accounting irregularities at its mortgage lending unit, and the struggling lender warned it may be put under receivership.”
The SEC is also taking a peek at the bank’s participation in TARP. Book cooking for taxpayer funds may have its poster child. Top notch, Colonial. Top notch.
Colonial BancGroup faces criminal probe, FDIC action [Reuters]
Editor’s note: Adrienne Gonzalez is founder and managing editor of Jr Deputy Accountant as well as regular contributor to leading financial/investment sites like Seeking Alpha and GoldmanSachs666. By day, she teaches unlicensed accountants to pass the CPA exam, though what she does in her copious amounts of freetime in the evening is really none of your business. Follow her adventures in Fedbashing and CPA-wrangling on Twitter @adrigonzo but please don’t show up unannounced at her San Francisco office as she’s got a mean streak. Her favorite FASB is 166.
In honor of Bank Fail Friday, let’s take a look at our doubt over the FDIC continuing as a going concern. Sure, we know it’s technically a government agency and therefore not subject to the same sorts of worries as public companies but there is certainly something brewing here.
We are not in the business of auditing the financial statements of the FDIC, even if they provided such information. Frankly, if they did, we really aren’t equipped to analyze said statements. Be that as it may, you don’t need to be an expert to see that the FDIC is in a whole shit ton of trouble (yes, that is our qualified opinion).
More, after the jump
Remember Colonial Bank? Surely Sheila Bair has been up late since the news broke on Monday that they’d cooked their books, or something about TARP fraud (though the bank never received TARP funds after that TBW deal for $300 million fell through Friday). Maybe it was undercapitalization? Who keeps track of these things?
Anyway, the point here is that the FDIC well has run dry and there’s no magically conjuring up a Treasury line of credit. While Congress has offered up a $500 billion “line of credit” to our friends at the FDIC, that money technically does not exist. (Psst: hate to break it to Congress but yours truly is only a tad concerned that there may be trouble in the bond market ahead).
I’m no mathlete but this should be fairly simple to understand:
Colonial has about $25.5 billion in assets, while the FDIC has about $13 billion remaining in the fund. According to Sheila’s math, new FDIC fees levied against Too Big to Fail will net the fund about $27 billion this year. To put this into perspective, the FDIC lost $33.5 billion in 2008 to cover 25 bank failures. Add it up, as we’ve had 69 bank failures in 2009 to date. Carry the 1 and I believe we arrive at the following figure: the FDIC is screwed.
Like I said, someone might want to check my numbers but it doesn’t look good.
I could also point out that perhaps the FDIC should have chosen the “proactive” route and collected insurance premiums for the last 10 years instead of assuming the good times would last forever but again, not my jurisdiction.
Disclosure: the author has long since diversified her “investments” in the First National Bank of Her Mattress, thankyouverymuch.
According to Reuters columnist, James Pethokoukis, that is. JP argues that the FASB’s most recent attempt to go balls to the wall with mark-to-market will endanger the economy:
“What if an upgraded mark-to-market standard forced slowly healing banks to set aside huge sums to cover paper losses and further crimp lending? Not FASB’s problem.” He also argues that the FASB is motivated by the ideology around transparency as opposed to “practicality and experience”.
The problem, as we see it, with this argument is that JP sees mark-to-market as an inconvenient rule considering the circumstances that the economy is under. That very well may be but we would ask, what the hell is the alternative? “Massaging” the rules every so often, as he puts it? So making the rules less principled when they are inconvenient is the solution? Accounting rules are not written so that we can change them when they don’t work in our favor.
Make no mistake, we’re not crazy about the current system as it exists. GAAP continues to look more and more like the U.S. Tax Code, so the FASB’s sloth-like attempt to develop a “principles system” is
promising encouraging something. Mark-to-market is the best reflection of that something. The idea that tweaking of the rules under duress is an acceptable form of determining the direction of financial reporting is what drives accountants f’n berserk.
America’s Most Dangerous Man? An Accountant [James Pethokoukis/Reuters]
So here’s our little wrap up on the firms we covered this week. Pretty difficult to figure out who’s really got it the worst out there, as every firm seems to have its own skeletons. God knows that we’ll continue to dig through as many closets as we can find in order to keep you all informed, especially as we approach the fiscal year ends for raises and bonuses (or lack thereof) and the incoming new hires get razed.
See the rank /em>
Taking a Beating
1. PwC – On top of everything that PwC is already dealing with, rumor has it that this year’s new hires got their starting pay cut but it’ll be spreading over the next 24 months to ease the pain. PwC is, for the lack of a better comparison, the Goldman Sachs of the accounting firms. They’re always going to take the most heat and be scrutinized the most. So with that in mind, they top our first ranking as the firm that seems to be taking the most serious beating.
2. E&Y – Judging by the comments, sounds like E&Y has had the most significant layoffs. Somehow the firm still finds the cash to throw a monster international rager for interns. The Lehman Brothers lawsuits haven’t really even gotten started. Our suggestion: Sneak down to Orlando and party on the company dime while you can.
Bloody but Somehow, Still Standing
3. BDO – BDO has got to figure what to do about the $520-odd million they owe Banco Espirito. Considering the fact that they won’t be getting help from the
International Firm Global Cooperative, this may be a hell of a problem. Other than the TTT comments, BDO-ers aren’t saying much. Get your friends that work there to spill their guts here.
4. KPMG – Rumors of another reduction in force in October, forced PTO, teams are short staffed. We would like more info on those cell phone chairs please. The Radio Station troops are doing a lot of belly aching, which we love, that’s what were here for. Keep it up Blue! Obviously, the big risk here is the New Century lawsuit which includes the “we’re going to piss everyone off” quote. Considering the pace of these lawsuits, we’ll be talking about it well into next decade.
5. Deloitte – Deloitte, while canning plenty of people, partners not sharing the love and losing some big clients, does not have any major litigation pending that we can see so they fall near the bottom of our list at this point in time. Oh sure you could say that Parmalat is out there but does anyone give a damn? They make extra long-shelf-life milk. That’s a fraud in it’s own right.
6. Grant Thornton – Sounds like G to the T is able to keep their layoffs pretty quiet but they possibly have had it the worst. Keep enlightening us with those details. Refco is out there but those guys were cheats, liars, and thieves. A public defender could get you out of that. However, the biggest strike we see against is trying to squeeze into cool kids club with the coining of “Global 6 Accounting Organization”. Nice try GT.
So there you have it. P. Dubs and E&Y take the top two spots in our very first Firm Watch ranking. Radio Station and BDO have got serious issues to work and Big D and GT seem to fall to the bottom of the ranking by having less bad issues than the other firms.
Give us your thoughts. Reshuffle completely? Any more tips? Send them to email@example.com. We’ll do the firm watch every so often as big events unfold. In the mean time, keep sending us tips, dirt, and ridiculous emails that inform you about paper clip rationing and the such.
We’re not trying to ruin your Friday but at the very least, this might encourage some of you to get your drink on a little earlier than planned.
Rumor received late last night that a Big 4 CEO was asked about compensation and bonuses at some grin n’ grip and he responded that the compensation adjustment and bonus pools for all the Big 4 firms was going to be down 90%.
This fits together nicely with the rumors of freezing and/or cutting pay that have been going around. Okay, now try to get some work done or figure out where you’ll be having that three martini lunch.
• Obama likely in no rush to nod on Bernanke’s fate Apparently this is the one thing that doesn’t need addressed immediately. [Reuters]
• U.S. Payroll Losses Slow, Unemployment Rate Declines 247,000 lost, 9.4%. Is that green shoots? [Bloomberg]
• France targets bankers’ bonuses – Soon, pols are going to have to find something else to pander to the masses with. [BBC]
• AIG Posts $1.82 Billion Profit, First Since 2007 – You can just sign that over to the us, thankyouverymuch. – U.S. Taxpayer [Bloomberg]
• Willis Group Sued by Stanford’s Venezuelan Clients – Sure, why not? [DealBook]
• Judge Approves Lawyer Fees in Madoff Liquidation – In other news, Madoff victims are still pissed. [DealBook]
• North Korea Wanted Only Bill Clinton for Mission to Free Women – And Bill Clinton wanted the mission to free women. Worked out great. [Bloomberg]
• Senate Votes 68-31 to Confirm Sotomayor – Senator
Stuart Smalley Al Franken presided over the vote, which Bill O’Reilly will hate, which we, in turn, will love. [ATL]
• AIG’s Hank Greenberg Pays $15 Million to End SEC Suit [Bloomberg]
• Unemployed Man Getting Really Good At Unemployment Not surprisingly, it’s pretty easy. [The Onion]
All right, so this is it for our firm watch. We realize loading three firms into one day wasn’t such a good idea but we procrastinated out of habit.
We wrap up with BDO Seidman, who some of you probably consider to be TTT-1 but whatevs.
See BDO’s list, after the jump
• Lawsuits – BDO
International Global Cooperation hit the lottery when a jury in South Florida bought the wedding planner defense in the Banco Espirito lawsuit. That left the U.S. firm to deal with the $520 million verdict in the original case. The U.S. firm just reported revenue results of $622 million. No word on how that will reconcile.
• Madoff Exposure – Listed as a defendant in seven lawsuits.
• Overtime Lawsuits – List as a defendant in one lawsuit.
• Layoffs, etc. – Same dealio as GT. We’ve only heard of minor layoffs but as high as 200 in the UK. Get us up to speed if you’ve got details.
• Miscellaneous – Global CEO Jeremy Newman has a blog that is frequently TLDR. The U.S. CEO has been compared to a special version of Ricardo Montalban and a former partner had to recently give up his boat.
Finally. That catches you up on all the firms that you’ll see regularly around here. They all seem doomed but also have the tenacity of cockroaches. You’ll see our totally unfair, unrealistic ranking tomorrow with some updates that we’ve gotten throughout the week. Before then, continue to send us your tips to firstname.lastname@example.org.
God bless the PCAOB. Back in 2004, they created the Office of Internal Oversight and Performance Assurance (IOPA) just in case those smartass Peekaboo inspectors were getting a little too self-righteous all over your audit.
Apparently, the fact that the PCAOB has its own internal oversight board is supposed to make all of you auditors comfortable. That assumes you knew about it in the first place. We sure didn’t know this internal affairs-esque board-within-a-board existed.
Maybe realizing that the IOPA had virtually no identity among anyone, anywhere, the PCAOB did everyone the courtesy of updating its “About” section of its website today reminding us of the internal watchdog. So whether you’ve got a legitimate complaint or you’re just seeking sweet, sweet revenge on that know-it-all dick questioning your tickmarks and indexing method, now you can give the PCAOB a taste of their own medicine.
Internal Oversight [PCAOBUS.org]
Now that we’ve dispensed with the Big 4 on our Firm Watch, we’ll throw in the two major
second next non-Big 4 firms to demonstrate our willingness to spread the love hate coverage.
Get acquainted with GT
TT, after the jump
• Lawsuits – The lawsuits worth mentioning for GT are Parmalat and Refco. While Deloitte was able to get the suit tossed, GT wasn’t so lucky. Investors in the never-go-bad dairy company are allowed to proceed with their lawsuit which will guarantee that this case continues on to the end of time. As far as Refco goes, well, we’ll be damned if we can find anything that is even remotely recent as it relates to GT. Help us out if you can.
• Madoff Exposure – G to the T’s UK office is running down assets across the pond. That unenviable task could almost qualify the firm for sainthood.
• Overtime Lawsuits – Listed as defendants in two cases.
• Layoffs – This is where we need your help, GT-ers. As far as we can tell, not a lot of blood has been spilled at G to the T. If you’ve details on rumors on anything upcoming or layoffs that have gone down recently, let us know.
• Miscellaneous – GT’s partners in the UK have interns sign off on audit reports and the Midtown New York office as a diabolical address. Oh, and the lame attempt by their PR team to coin “Global 6 Accounting Organization” as the new tag for accounting firms.
There’s the study on passionate folks at GT. Get us caught up on stuff we’re missing at email@example.com. We can’t imagine it’s that boring to work there.
We just picked up one of the few Tweets that has made it through today:
This type of event will likely lead to many things including international hookups, late night skinny dipping (and probably urinating) in the pool, and widespread drunkenness of epic proportions.
If you’re down in Orlando this weekend for this three day extravaganza, send us your stories of debauchery to firstname.lastname@example.org. According to the website, the festivities are at Disney World, so don’t embarass
your firm yourself and try to keep the nudity out of the view of children.
International Intern Leadership Conference [EY.com]
We’ve heard some rumors that all the firms are giving serious consideration to freezing pay this year and possibly pay cuts in the Northeast and Mid-Atlantic regions. This would follow the Radio Station rumors that we mentioned last week.
Top performers and promotees, determined by God knows how, may be getting bumps but we haven’t heard anything definite. If you’ve got some deets or just more rumors, shoot us an email to email@example.com.
The last of the Big 4 Horsemen of the Bean Counter Apocalypse is Big D-period. Catch up on the rest of the usual suspects: Radio Station, P. Dubya, and E&Y to get the gist of this little exercise.
Deloitte’s got a pretty similar list as the rest of the firms but with a couple twists so let’s get down to brass tacks:
Get the details, after the jump
• Losing Clients – We’ve heard that firms are low-balling their RFP’s so it’s no surprise that some clients are switching but Deloitte seems to have had worse luck than others. UAL, Heelys (for the kids), Bear Stearns, Merrill Lynch, and Washington Mutual have all disappeared from D-period.
• Lawsuits – Believe it or not, the Parmalat debacle is not a done deal, as some lawsuits against the US and Internationalfirms are still out there as a judge ruled in January that the agent/agency issue was worth a closer look.
• Madoff Exposure – All week we’ve been referring you to the list of Feeder Fund Lawsuits over at D&O Diary. In a small water into wine moment, Deloitte does not appear on the list once. Nice bullet dodge Big D.
• Overtime Lawsuits in California – Deloitte is listed as the defendant in three of the cases.
• Layoffs, performance reviews, etc. – So, as we saw yesterday, this is where Deloitte’s sitch gets, pret-tay, pret-tay, pret-tay ugly. Layoffs were reported in both December and March nationwide. The
performance stealth cuts are common here too and more may occur. All this is going on while an out-going CEO is talking to the press about how bad things have been in the last five years and the UK CEO is having Scrooge McDuck pool parties.
• Miscellaneous – The worst drug dealers in the world used to work for Big D.
So that does it for Deloitte, God bless ’em. And that does it for the
Final Big 4. We’ll throw in GT and BDO in for good measure but if you want to throw some more jabs at the big boys, email us at firstname.lastname@example.org. You’ve got until around high noon tomorrow before we’ll start coming up with our completely unfair and unscientific ranking.
Are you a young bean counter totally apathetic towards your career choice? Do you wake up thinking that if you have to look at spreadsheets for one more day you might just go mental on everyone in your office?
Well, the gods are shining on you today:
See the role, after the jump
Casting for the short thriller “A Paper Trail”
A group of friends finds a large sum of money hidden away in the woods. Unfortunately the owners come looking for what is theirs.
Casting for the male and female leads:
Matt – A competent accountant who decides that the best course of action will be to keep the money.
Stacey – She is nervous and has her reservations about taking the money.
Send an email with your headshot and resume. We will be casting on Sunday, August 9th, from 12-5 @ The Rosendale Youth Center!
Sorry lady number crunchers, unless you’re capable of summoning your inner-Hillary Swank, this one is for the gents.
So dudes, basically no acting involved. Show up, looking however you normally look and act how you normally act: Competent. Best course of action is to keep the money. Completely natch.
Not a thespian? Then tell us what you’d rather be doing than pulling sample selections or researching 1031 exchanges. SHUDDER. Anything has gotta beat the hell out of what you’re working on right this second.
Casting for a Short Thriller film (Rosendale) [Craigslist.org]
The two P. Dubs-India partners rotting in a prison because, according to them, we’re duped by the geniuses at Satyam, got their vacation extended to August 19, according to The Business Standard. We have no idea if India’s prisons are the PMITA variety but at the very least, it’s crazy-ass hot.
Hyd court extends Raju’s remand till August 19 [The Business Standard]
• Businesses Learn To Make Do With Fewer Workers – Sound familiar to anyone? [NPR]
• Judge raps $33m bank bonus fine – “A US judge has refused to approve a $33m (£19m) fine that Bank of America agreed to pay to settle charges that it misled investors about bonuses.” [BBC]
• SEC Asks to Self Fund to Allow for Better Enforcement – OH, that was the problem. [naked capitalsm]
• AIG Breakup Is Fee Bonanza – Bankers, lawyers, accountants. Everybody’s happy. Oh wait. Taxpayers. [WSJ]
• Madoff Victims Said to Start Getting Tax Refunds – Anger will only subside briefly. [DealBook]
• Who Will Defend R. Allen Stanford? – There’s always…hmmm, anyone? [DealBook]
• Judge Orders Sale of Creation Science Theme Park to Pay Evangelist’s Tax Debts Agnostic judge probably. [TaxProf Blog]
• The alleged grifter who duped corporate giants – The fairer sex, taking it to the man. [Fortune]
• A Battle of Goliaths: Michael Bloomberg and His Gun Control Group Take on the NRA – At least this is a fair match. [Washington Post]
• Huron’s ex-CEO cashed out $8.3 million since last July But it wasn’t about the money. [Greg Burns/Chicago Tribune]
• IRS Commissioner Joins alliantgroup [Press Release]
• Bernard Madoff and the Solo Auditor Red Flag [Ross D. Fuerman]
Going Concern is now on Facebook! Join the group.
Nineteen individuals have proven their passion for the business of accounting (as well as an intrepid attitude towards liability) as G to the T admitted new partners and directors effective August 1.
The press release is your standard trite lexicon but we can’t help but notice GT taking the opportunity to slip in their favorite moniker, “Global 6 accounting organization” or a derivative of such. GT is bound and determined to get this to catch fire even though no one outside of the GT press team has probably uttered the phrase.
Grant Thornton LLP admits 19 new partners and principals to the firm [Press Release]
Sir David Tweedie, IASB Chairman, would sure appreciate it if the SEC would make up its damn mind about whether or not to commit to converging U.S. GAAP with IFRS. He spoke at the American Association of Accountants (AAA) annual meeting in New York yesterday and figured he might as well call out the SEC, who seems to be stonewalling him. He’s giving them until 2011 to figure it out.
Tweedie has been making like some kind of financial reporting missionary, going all around the world preaching the good word of IFRS. He’s said he’ll have 150 believers by 2011. But everywhere he goes, all anyone can talk about is whether the U.S. is converted yet.
More, after the jump
“That is a question I am asked all around the world. The convergence program is designed to reduce the cost of transition. FASB is riding two horses: US GAAP and trying to converge at the same time, but so are we.”…If you’re going to have global standards, we need the US, but it can’t go on indefinitely,” he said
We’re impressed that the knighted bean counter is putting his foot down here. We figured the SEC and the FASB could just continue doing whatever it is they do and Tweedie would just keeping asking them about it every month or so like they owed him fifty bucks.
Tweedie Warns of 2011 Deadline for IFRS Choice [Web CPA via Accountancy Age]
Things that could be perceived as bad:
• Your auditor is putting a going concern paragraph in your audit opinion.
• You agree with your auditors when they tell you that you have a material weakness in internal controls.
• It’s August 5th and you haven’t filed your 10-K..
Along with everything listed above, Venture Financial Group entered into an agreement with the Federal Reserve Bank of San Francisco that lists a bunch of stuff that Venture can’t do. Plus they get to report to Fed-SanFran every quarter how they’re doing such a good job at not doing anything they’re not supposed to.
More, after the jump
Apparently all this was more excitement than Moss Adams could stand because they’re kicking Venture to the curb after the 2008 agreements are finished. The firm broke the news to Venture on July 24th and the SEC got the filing just last week.
Accounting firms being the dumper and not the dumpee is usually a good sign of damaged goods. Best of luck to Venture Bank in its quest to find new auditors.
Firm bows out of Venture audit [The News Tribune via Jr. Deputy Accountant]
dissecting opining on sliming P. Dubs and E&Y, we’re moving on to KPMG in round three. We’ll dispense with the pleasantries and get right to the list:
• New Century Lawsuit – This is the ball buster for KPMG. A $1 billion lawsuit filed back in April that alleges “grossly negligent audits”. This tale also includes a
smoking gun quote from an email sent from New Century engagement partner to a specialist, “As far as I am concerned, we are done. The client thinks we are done. All we are going to do is piss everybody off.” We’re not sure if it’s possible to take that out of context.
Check out the rest of the Radio Station’s list, after the jump
• Madoff Exposure – Per D&O Diary, the Radio Station is named as a defendant in at least ten lawsuits as a result of auditing the Madoff feeder funds.
• Overtime Lawsuits – Listed as a defendant in five lawuits.
• Layoffs, Pay Freezes, etc. – Allegedly, the word that pay was being frozen was slowly leaked from the top on down. Layoffs have been pretty steady for the last twelve months including rounds in November and March in the audit and advisory practices. In addition, the ubiquitous trend of performance rating cuts is in full effect, and we just learned that by the this time last year, audit interns had heard yay or nay on receiving a full time offer. That probably makes for some
nervous intoxicated co-eds.
• Miscellaneous – Phil Mickelson, the Radio Station’s walking billboard, was a bridesmaid at the U.S. Open for a
third fourth fifth time.
Done-zo. Anything else you want to see tacked on? Drop us the dirt at email@example.com and we’ll get it in for the final tab.
Being accountants, we don’t have too may rock stars among us. Oh sure, maybe Tim Flynn is the cock of the walk at the Radio Station or Barry Salzberg can’t walk around Big D’s office without associates crawling all over each other to touch his clothes but these men pale in comparison to the immortal we are about to present to you.
If you saw this man on the street, his swagger would make your knees week, his impeccable attire would cause you to stare uncontrollably and the sound of his voice might overcome you with so much nervous excitement that you might projectile vomit all over him.
Find out who this man-god is, after the jump
We present you with this:
Now we realize that the mere thought of Tim Gearty and Bob Herz on a cruise at the same time is probably more than most of you can handle but we had to share with you that the oracle of Becker Review was on Twitter bestowing encouragement and wisdom. All of you out there working to dominate the CPA exam can now rest easy that Tim will always be available in the Twitterverse.
Editor’s note: Adrienne Gonzalez is founder and managing editor of Jr Deputy Accountant as well as regular contributor to leading financial/investment sites like Seeking Alpha and GoldmanSachs666. By day, she teaches unlicensed accountants to pass the CPA exam, though what she does in her copious amounts of freetime in the evening is really none of your business. Follow her adve and CPA-wrangling on Twitter @adrigonzo but please don’t show up unannounced at her San Francisco office as she’s got a mean streak. Her favorite FASB is 166.
There’s nothing we appreciate more than a really juicy tale of crappy auction rate securities, fire sales ignored by regulators, and bankruptcy when the scam runs out, especially when the perps happen to be audited by a Big 4 firm you may have heard of (there are only 4, just throw a dart).
Excuse our bad grammar and run-on sentences, we just don’t know where to start with this.
More, after the jump
Once upon a time not that long ago when a tarp was just something you brought camping, LandAmerica was at the top of the 1031 exchange game. That entire story is a tad too long for today’s 140 character attention span so let’s fast-forward to the part where there are even entire forums dedicated to discussing why regulators missed LandAmerica. In short: LandAmerica exchangers are pissed off.
To get a hint at just how pissed off, take a peek at what the forum has to say:
Then LandAm files Bankruptcy proceedings on their 1031 subsidiary, saying: “…you 1031 clients of ours are ‘…going under the wheels of the Bankruptcy bus” because “we” made bad decisions in $290 million ARSs. Wow! a $300 million “wash.” A “Back-Door” merger without the “toxic” ARS funds. LandAm1031 clients get hosed!
Burn! Those are some wild accusations, is it fair to spit such venom at LandAmerica?
Well… um… yeah, actually. And
LandAmerica has due diligence to blame Fidelity has due diligence to thank.
On November 24th, 2008 LandAmerica went into free-fall after Fidelity announced that it would be pulling out of the tentative deal (subject to final due diligence). Given the BBB mark of the beast by Fitch shortly thereafter, LandAmerica slumped off to bankruptcy court. Meanwhile, those who found themselves at the short end of LandAm’s 1031 exchange stick started getting letters from the IRS while their money was off in SunTrust accounts getting killed by illiquid auction rate securities without their knowledge. You’d think more people would be discussing something that involves millions of misappropriated investor dollars but who are we to judge?
As with most (alleged) Ponzi schemes, the “scheme” escapes detection until the money runs out. And when Fidelity backed out of the LandAmerica deal, LandAmerica had what can only be called a Madoff Moment.
Making this saga even better is, that for some completely bizarre reason that escapes us, the Richmond Fed has decided to hire LandAmerica’s former legal counsel Michelle Gluck to serve on their team as Chief Legal Officer (perhaps they are taking a cue from the Fed Board of Governors who hired an ex-Enron PR girl awhile back?). We truly
love hate to wildly speculate here but this goes against logic, which we are generally used to seeing from Richmond Fed President Jeffrey Lacker and his bank. “With her broad range of leadership experience and extensive legal expertise, I know she’ll make great contributions to the Bank and to the Federal Reserve System,” he said of his new hire.
So what exactly is Richmond trying to do here? With credentials like that, I’m only slightly concerned now.
We’ll let you know if we ever figure that out. The SEC couldn’t be bothered to comment about it and reminded me why I don’t like picking up the phone.
We did however speak with one angry LandAmerica creditor who has a lot of questions and no answers and we’d be happy to update you with his comments as the investigation unravels. Oh wait, who said there was an investigation? Could someone kindly forward this to the SEC? Some of us have a day job.
Arlen Specter is many things. Senator. Cancer survivor. Some might say, turncoat. And since he is a newly minted Democrat, Specter is expected to prove his political stripes.
Well, Specter has decided that the best way to earn those stripes is to embrace the recent investor outrage and introduce legislation that will allow investors to sue accountants, lawyers, and investment banks, that provide, what Specter calls “substantial assistance” in a fraud.
More, after the jump
According to Bloomberg:
Shareholders are barred from suing parties that have only an indirect role in a fraud after Supreme Court decisions that limited liability to those directly and publicly involved in the scheme.The Specter measure would upend rulings in Stoneridge Investment Partners LLC v. Scientific-Atlanta Inc. of 2008 and Central Bank of Denver v. First Interstate Bank of Denver. Prior to the rulings, investor lawsuits against fraud accomplices were common, Langevoort said. The 1994 Central Bank decision was a “major gift” to individuals and corporations that aided in a fraud
The Refco scandal is right at the heart of this debate as attorneys, auditors, and investment bankers were all misled by Philip Bennet, Refco’s then-CEO. Suits against PwC, Grant Thornton, KPMG, and E&Y were dismissed back in April along with suits against several investment banks. Refco’s outside counsel Joseph Collins of Mayer Brown is currently involved in a lawsuit that is being reviewed by the SEC.
We’re all for making accountants responsible when they screw the pooch but if clients just flat out lie and go way the hell out of their way cover those lies up, there’s very little that can be done.
And if there’s one thing that keeps Big
5 4 partners up at night it’s the threat of litigation. The premise that this legislation would increase that litigious exposure is, at the very least, disconcerting to partners.
Specter Law Would Let Investors Sue Fraud Accomplices [Bloomberg]
• Donald Trump Faces Bondholder Battle in Bid to Reclaim Casinos – Our advice: Don’t mess with this
hair ego man. [Bloomberg]
• ADP Says U.S. Companies Decreased Payrolls by 371,000 – The trend of lesser bad news continues. [Bloomberg]
• Banks Get Picky In Doling Out Credit Cards – Postal workers rejoice. [WSJ]
• Chinese survey finds prostitutes more trusted than officials – More bang for your buck. [The Raw Story via Naked Capitalism]
• Kim Pardons Journalists – Arkansas moxie does it again. We never doubted it for a second. [WSJ]
• SEC accuses GE of accounting fraud – Cue a smug but probably still unsatisfied Bill O’Reilly. [FT Alphaville]
• PayPal Users Hit by Global Service Outage – How will anyone pay for the Lehman schwag? [WSJ]
• SEC set to target flash trading – “The US Securities and Exchange Commission is preparing to clamp down on lightning-fast “flash” trades made on electronic trading systems amid growing concerns that the practice puts some investors at a disadvantage.” And disadvantages are not the American way. [FT.com]
As you may know, the mere thought of Congress legislating accounting rules makes us nauseous to the point of passing out. Barney Frank, in an attempt to alleviate this common malady among accountants, has been quoted by Web CPA saying that “We will never legislate accounting while I’m chairman [of the Financial Services Committee]”.
According to the piece, Barn says that when he, and the rest of the committee, whipped Bob Herz, FASB Chairman, into submission over changes in mark-to-market rules, this was not legislating, this was “exerting pressure”.
Depending on who you ask (ahem, Hank Paulson), exerting pressure could easily be confused with “threatening” and threatening is clearly how legislation gets done in this country, whether it’s got a signature on it or not. So call it what you like, Barney-boy, we’re on to your doublespeak .
The temptation to discuss the Big 4 Horsemen of the Apocalypse here is obvious, as many of you toil for those firms.
In order to give the non-public number crunchers out there a chance to gnash some teeth, we are inviting those of you that work on the private side of the bean counting universe to vent your frustrations here with your public counterparts.
As we mentioned earlier, accelerated filers have the Q2 filing deadline on Monday so we know you’ve been up to your ass in auditors for some time now and we imagine your irritation levels are somewhere between googolplex and critical mass.
We’re looking for stupid auditor questions, awkward sexual advances by the engagement team’s intern, whatever you got. This is your chance, non-public accountants. Make haste before you’re beaten to the chance.
Nicolas Cage is keeping his reputation as a tax scofflaw intact, as he currently owes the IRS $6.2 million due to a lien the Service slapped on his house in New Orleans. Last September, Cage settled with the Service for the diabolical sum of $666,000 after he improperly deducted $3.3 million in personal expenses, including must-haves like limo service and a Gulfstream.
Our advice to Cage would be to seriously consider going full frontal in his next film, Bad Lieutenant, Port of New Orleans. If not out of pure artistic principal and respect for the original version, do it for the extra scratch, man. A johnson shot has got to be worth, what, a couple mil?
Nicolas Cage Hit with $6.2 Million Tax Lien [Web CPA]
For those of you working on accelerated filers, you’re probably counting down the
days hours until Monday’s deadline for the second quarter.
So, if you’ve already filed, make all the other workhorses out there jealous by telling us where you’re going to happy hour the rest of the week.
If you’re working down to the wire, let us know what color your sleeping bag is or where you’ll be ordering take out. Or maybe how many days you’ve been wearing the same shirt. Has anyone put in 40 hours this week yet? You get the idea. All right, now get back to it. Regulators are waiting…
Apparently Deloitte was feeling a little left out of the populist outrage because after the news that Big D UK reported shrinking revenues yesterday, today we learn out that John Connolly, Big D CEO across the pond, earned £5.22 million this past year.
Not too shabby even though that’s a little less than his earnings last year of £5.69 million, according to the London Evening Standard.
Big John should probably send some biscuits over to the Royal Bank of Scotland for the payday as RBS paid Deloitte nearly £59 million this past year, up from the £31 million in the year prior. RBS has received billions of bailout funds from the UK government, so some crazy taxpayer wrath headed in the direction of Big D would not be outside the realm of possibility.
Deloitte boss rakes in £5.2m after the bailout of RBS [London Evening Standard]
Round two of our Firm Watch this week covers everybody’s favorite resident of Times Square, Ernst & Young. We’ll get started on E&Y’s trubs with the Schein lawsuit where the firm was recently found to be marginally negligent and were ordered to pay a smidge over $10 mil as a result. NBD really, as E&Y probably spends that much money screwing up the spelling of their name on cheesy coffee cups.
The more serious stuff on E&Y, after the jump
Here’s some major stuff that probably keeps some E&Y partners awake at night:
• Lehman Brothers – E&Y’s role in the collapse of Lehman Brothers has got little attention in the press, however, suits have already been filed by San Mateo County in California, the City of Long Beach, California and the Southern District of Texas. It wouldn’t be unreasonable to speculate that more suits are likely to be filed.
• Madoff Exposure – E&Y also has significant Madoff exposure, as the auditor of several feeder funds. D&O Diary has them listed as defendants in at least ten different lawsuits.
• Layoffs – There have lots of reports of layoffs at E&Y in the last month or so, many of which occurred in the tax practices in the Northeast, and many of those getting the axe were supposedly on visas. Real classy. This was a follow-up to layoffs that also went down in February. As if that’s not enough, there were also rumors of layoffs occurring monthly since September ’08 in the Detroit office. Plus, with lots comments about stealth layoffs at all levels, it sounds like it has been a bloodbath at E&Y.
So that seems to be the major stuff, from our view, for E&Y. Again, we want to know what we’re missing. We’re looking for tips and dirt on any of the things we discussed above and everything we didn’t mention. Email us at firstname.lastname@example.org and we’ll get all your additional gripes on here.
Huron Consulting, who cleaned house late on Friday and is restating three years of financial statements, is likely going to be named in a class-action lawsuit, according to Reuters.
Huron, who need we remind you, is not a CPA firm and does not perform attestation services, what with all those pesky independence rules and whatnot, has seen its stock price drop from just over $44 last week to hovering around $15.
More, after the jump
Huron was founded by two dozen Andersen partners, according to the report, including the resigning CEO, Gary Holdren. So, natch, these guys were probably viewed as having not so sterling reputations, and now, well, this is a little awkward.
more than likely pretty much a certainty that this particular accounting mishap will bring more heat on auditors, in this case, P. Dubya, as management seems to be able to manipulate their reporting, regardless of what the auditors try to do.
We reached out to PwC on this story, who would not comment on client matters. We thinks this might become a PwC matter before long…If you’ve got any information on this story shoot it our way at email@example.com.
In Huron scandal, shadows of Arthur Andersen [Reuters]
Editor’s Note: Teri Buhl is a Wall Street investigative reporter who has written for the New York Post, Trader Monthly and HousingWire.com. Her big scoops include breaking news on all things wrong at IndyMac, calling out Bob Steel for lying to investors about losses on CNBC, and shining a light on Wells Fargo for manipulating earnings with paper accounting gains. She resides in lower Fairfield County, CT and actually earned an accounting degree from U er case of the Feds proping up zombie banks, sources have reported that an SEC memo has stated that the FDIC will seize Guaranty Bank (GFG: 0.123, -5.38%) and it will not be sold as previously rumored.
This continues the trend of bank seizures occurring with virtually no warning. According to one prominent hedge fund manager:
“The problem is that the regulators know that if they call these things anything worse than “well capitalized”…it is a kiss of death. In many ways it is the same issue as rating agencies (curse of the AAA) that know that if they downgrade certain types of companies, they are putting them out of business. As a result, many banks are “well capitalized” until the day they are seized. It is absurd.”
More, after the jump
Austin, Texas based Guaranty Bank just updated its bank reports to show a $1.8 billion loss for the 1st quarter, of which $1.6 bil was due to “Other-Than-Temporary Impairment Charges on Debt and Equity Securities”. Um, not good.
What’s worse is that, according to our OTS sourcing, this will be a full shutdown. This means that after insured deposits are returned the bank will be unwound and put out to pasture. No cash rich private equity groups will sweep in to offset losses and clean up the regulator’s mess this time.
The updated bank regulatory reports show Guaranty’s assets are now $13.35 billion, with over 70% of those assets being real estate related. There are $2.1 billion in deposits listed as uninsured. Guaranty operates 164 branches and employs around 1,700 people.
Sourcing inside the regulator said,”Considering the OTS let the bank defer taking write-downs, I’m sure there will be skeletons that will embarrass the OTS again.”
The seizure will hit the FDIC’s budget to the tune of at least $5.3 bil according to sources within the OTS. Another top bank analyst has predicted the hit to be closer to $8 billion.
This, on top of what’s going on with Colonial Bank failing, should wipe out what’s left of the FDIC’s budget. As a result, they are going to have to borrow from the Treasury and then add that cost to our nation’s banks, which we all know just gets passed on to the taxpayer in the form of higher banking fees.
Paul Miller, analyst for FBR Capital Markets, told Going Concern, he believes that banks will be assessed a fee of 5 bps of total assets this fall in order to fund the FDIC’s empty coffers. This new fee assessment will raise $5 billion for the FDIC’s bank seizure budget.
We’ll continue to update this story as we learn more.
• UBS CEO Expects Swiss Government to Sell Stake by Year-End – Does this mean that the Swiss are better at capitalism than the Americans? [WSJ]
• Geithner Vents at Regulators as Overhaul Stumbles – Sounds like someone needs a hug. Can anyone recommend a good shrink for T. Geith? [WSJ]
• Biggest Banks Come Up Short on List of Mortgage Modifications BofA. Citi. Meh. [Bloomberg]
• Bill Clinton Lands in North Korea, May Ease Tension – “Former President Bill Clinton arrived in North Korea on a surprise visit that may help defuse tension over the communist regime’s nuclear program and secure the release of two U.S. journalists sentenced in June to 12 years.” Arkansas moxie to the rescue. [Bloomberg]
• Sizzling summer for white shirts – So sayeth Charlie Tyrwhitt [BBC]
• Goldman Princes Told: Spend Like Paupers – Apparently, LB is concerned that pubic hangings may regain popularity. [New York Post]
Editor’s note: Adrienne Gonzalez is founder and managing editor of Jr Deputy Accountant as well as regular contributor to leading financial/investment sites like Seeking Alpha and GoldmanSachs666. By day, she teaches unlicensed accountants to pass the CPA exam, though what she does in her copious amounts of freetime in the evening is really none of your busines ures in Fedbashing and CPA-wrangling on Twitter @adrigonzo but please don’t show up unannounced at her San Francisco office as she’s got a mean streak. Her favorite FASB is 166.
The Colonial BancGroup audit group is going to have some ‘splaining to do when all’s said and done. Proof that you really don’t want to mess around when it comes to $700 billion taxpayer injections.
SIGTARP top cop Neil Barofsky said early on “I hope we don’t find a single bank that’s cooked their books to try to get money but I don’t think that’s going to be the case” but evidently forgot to knock on a nearby piece of wood in the Treasury basement when he did as SIGTARP agents have raided two Florida offices in conjunction with possible TARP fraud.
The whole thing, after the jump
“I can confirm for you that our office, the Office of the Special Inspector General for the Troubled Asset Relief Program, has executed two search warrants today in the state of Florida,” said Kristine Belisle, communications director. “It’s our investigation. It’s our agents that have executed search warrants.”
Belisle said the warrants were sealed.
“I can’t provide any further information because of the nature of an on-going investigation,” Belisle said.
While Belisle is hesitant to get into the details, we’d be happy to catch you up for now.
The story, as we understand it, goes something like this: Colonial BancGroup, finding itself under increased pressure by both federal and state regulators including the FDIC, Federal Reserve, and the Alabama State Banking Department to bump up capital, thought it had a $300 million deal in the bag with Florida-based Taylor, Bean & Whitaker. We’d like to point out here that while the author enjoys stirring up trouble wherever possible, it’s never a good idea to do so when Federal regulators are involved, especially when they toss out demands like this:
WHEREAS, on July 15, 2009, the board of directors of BancGroup at a duly constituted meeting adopted a resolution authorizing and directing Simuel Sippial, Jr. to enter into this Order on behalf of BancGroup, and consenting to compliance with each and every provision of this Order by BancGroup and its institution-affiliated parties (blah blah blah)
(a) The consolidated organization’s and the Bank’s current and future capital requirements, including compliance with the Capital Adequacy Guidelines for Bank Holding Companies: Risk-Based Measure and Tier 1 Leverage Measure, Appendices A and D of Regulation Y of the Board of Governors (12 C.F.R. Part 225, App. A and D) and the applicable capital adequacy guidelines for the Bank issued by the Bank’s federal regulator;
Our emphasis/edit. Long story short, the Taylor, Bean & Whitaker deal was never a go and Colonial shares have been in full-on death watch ever since. But wait, there’s more!
As of about 11a EST this fine Monday morning, SIGTARP agents have crawled around both Colonial and TBW offices in search of… well, we don’t know exactly what they were looking for as company reps and regulators have been fairly tight-lipped since this story broke but we’re pretty sure they aren’t trying to track down Michael Jackson’s body.
Not so coincidentally, Colonial (CNB) reported a $606 million loss on Friday. The phrase “going concern doubt” was probably invented just for cases like this, although we have our own phrasing that we like to use including “totally screwed!” and “Just Big Enough to Fail”
This is the first large SIGTARP case that we are aware of and if Colonial is closed by regulators, it will be the largest bank failure of the year. No disclosures, though we will be excited to see what else Barofsky’s office is cooking up (no pun intended).
Feds raid Colonial Bank office in Florida [Reuters]
• Ruth Madoff Can’t Spend $100 Without Telling Trustee – Don’t forget to call before buying that Metrocard Ruthie. [Bloomberg]
• Investor Ross: ‘Washington Is The New Wall Street’ – Blasphemy. [NPR]
• BofA settles Merrill bonus case with SEC for $33 million – Classic case of not admitting or denying charges, just throwing money at the problem. End of story. [Reuters]
• A.I.G. Appoints a New Chief Executive – The self-loathing is contagious today. [DealBook]
• Antidepressant Use in U.S. Doubled Over Decade to 10% in 2005 – Depressing news. Where the hell is our Prozac? [Bloomberg]
In what appears to be serious case of self-loathing, former Citigroup CFO, Sallie Krawchek has just taken a position to run the global wealth and investment division at Bank of America.
It’s rumored that Krawchek left Citi because she and Vikram couldn’t play nice, so apparently she thinks that working for a rarely sober Ken Lewis will be a much more manageable.
Former Citi CFO takes Bank of America job [AP]
Big D’s UK revenue was down 2% to £1.93 bil for the latest fiscal year, marking the first time a Big 4 firm has reported declining revenues in six years.
Partners are still doing okay though, as they will receive £601 million. That’s an average of £883,000 per partner. Not too shabby, even though that’s down over 7%.
Leaders within the firm are expecting another rough year ahead for the economy but are still planning for “growth not contraction”. We’re not sure how that fuzzy math will work but whatevs.
Oh, and little D’s, don’t worry, you got a shout-out from John Connolly the UK CEO: “our success will continue to be the product of our exceptionally talented people being relentlessly committed to our clients, to market leading, innovative service and to an obsession with quality”.
Relentlessly committed. Obsession with quality. Sounds like they must have re-instituted the tradition of shipping the
criminals lesser performers down under.
Deloitte revenue drops in `extremely tough’ market [Accountancy Age]
Deloitte’s UK revenues shrink 2% [FT.com]
We’re not going to debate about healthcare here because after about one-tenth of a nanosecond we’d consider jumping out the window. What we would like to discuss is Barry Salzberg, CEO of Deloitte-period, giving imaginary advice to the President on how to proceed with his strategy in getting support behind his reform efforts.
Check out some real advice, after the jump
Bar lays out his advice for B to the O in classic accountant fashion, ” I would counsel more patience.” and “Measured haste, you might call it. My advice to the president would be to find that balance of urgency and patience.” Haste. Balance. VOMIT. Wouldn’t you like to see one of these stoic Big 4 CEO’s just give completely batsh!t crazy advice on something, JUST ONCE?
Like if Salz advised that Obama’s strategy should consist of hosting Lebowski Fest at the White House. Bowling, white russians, chicks in viking costumes. That’ll get the people behind your plan Bam.
Measured haste. Pfffft. Is it any wonder everyone thinks accountants are boring? Feel free to discuss your favorite Big 4 CEO and all their words of wisdom they’re constantly bestowing upon you.
Rumor out of Deloitte down-under, where, supposedly, some associates got canned because of organizing drug deals on Big D’s premises. Details are pretty scarce but this got us thinking:
More, after the jump
1. They were probably tax associates. They’re an unassuming bunch.
2. Is the pay so bad in Australia that Big D associates are resorting to illegal means of earning supplemental income? Wouldn’t turning tricks be easier?
3. How in God’s holy name did these f’n amateurs get busted? We’re they walking around soliciting potential customers like they were at a Phish concert?
We reached out to a Deloitte spokesperson who said they won’t comment on rumors. If you hear of other extracurricular activities going on at any of the firms, shoot us the scoop at firstname.lastname@example.org
The task of keeping Allen Stanford out of hell no longer falls on Dick DeGuerin. Clearly DeGuerin didn’t appreciate his client’s crusade to vindicate his name and reputation because he couldn’t even get the guy A/C.
Robert Luskin, a managing partner at Patton Boggs now gets the honor of leading Sir Al’s defense team. At the rate things are going, we’ll handicap the over/under on the number of attorney changes prior to 2010 at 4. Any takers?
Allen Stanford replaces criminal defence lawyer [Reuters]
The Radio Station is throwing caution to the wind in the UK, accepting a new arrangement with Rentokil Initial, that brings out the ghosts of accounting scandals past. Under the new agreement, the firm will serve as both the external auditors and take on internal audit work, working alongside the client’s internal audit staff.
Prior to the new agreement with KPMG, Rentokil’s external auditor was PwC and internal audit services were provided by Deloitte.
Last we checked, audit textbooks still state that external auditors are to be independent in fact and appearance but KPMG UK must have got their hands on an edition that was printed in auditor bizarro world.
Rentokil’s KPMG deal raises eyebrows [FT.com]
This week we’re putting together a series of posts on the six largest accounting firms to give you an idea what their latest image seems to be based on the latest news and rumors we’ve read or heard about them. At the end of the week we’ll wrap up with a completely unscientific and probably unfair ranking which you will be
allowed expected to take exception with.
We’ll start with P. Dubs because they seem to have had the uncanny ability to attract bad news lately:
Get the gory details, after the jump
• Satyam Fraud in India – $1b fraud, two auditors rotting in jail, Satyam throwing the Firm under the bus every chance it gets. This is the story that will definitely not go away.
• Discrimination Suit in London – GBP 40 million lawsuit, including alleged sexual harassment. P. Dubs is saying the lawsuit is “without merit” but at the very least there are a number of bigots working there.
• Rumors of PwC interns working 60 hour weeks in the New York office. Might as well give them an idea of what they’re in for, right?
• Chosen to take a
suicide mission contract in Somalia to monitor the incoming aid
• Wage and hour lawsuits in California – Listed as defendant in three cases
• Huron Consulting Restatement – P. Dubs isn’t mentioned in this debacle. YET.
• Madoff exposure – listed as a defendant in over a dozen lawsuits.
As for layoffs, we haven’t heard much lately. There was a rumor that the PwC Denver office had let some associates go in the past few weeks but we don’t have any more details than that. Layoffs that have occurred in the past year at PwC we’re rumored to be of the stealth variety and not related to the recession which nobody really believes.
So, that does it for P. Dubya for now. What are we missing? Whatever office you work out of, send us the latest scoop on layoffs, performance reviews, promotions, pay raises, bonuses, juicy gossip, scandalous stories, etc. to email@example.com and we’ll update the posts appropriately throughout the week.
Fridays are great for lots of reasons. They’re especially great for announcing bad news long after everyone has left work to get their drink on.
Huron Consulting announced late last Friday that the CEO, CFO, and Chief Accounting Officer were all quitting and that their financial results for 2006-2008 were being restated. The restatements result in total net income for that period being reduced by nearly 50% from $120 million to $63 million.
According to Reuters:
The restatements are being made because Huron’s board audit committee discovered that shareholders of four businesses that Huron acquired between 2005-2007 redistributed portions of their acquisition-related payments among themselves and to certain Huron employees.
More, after the jump
Soooo, regardless of what Huron is saying,
the CEO, CFO, and CAO sounds like someone might have been taking kickbacks, which we totally understand considering the economy and whatnot.
Huron was ranked 43rd on Fortune’s list of 100 fastest growing companies just last year. They help their clients “face complex matters that demand extraordinary combinations of financial, technical, and industry expertise.” Clearly they are not using any of this expertise on their own books but whatevs, nobody’s perfect.
What’s also strange is that Huron really goes out of their way to put the universe on notice that they are not a CPA firm and do not provide attestation services.
“Huron is a management consulting firm and not a CPA firm, and does not provide attest services, audits, or other engagements in accordance with the AICPA’s Statements on Auditing Standards.” This is stamped at the bottom of virtually every page on the website because THEY WANT TO MAKE THAT CLEAR.
Btw, Huron’s auditors are PwC, who really don’t need any additional bad publicity. If any of you Chicago P. Dubs peeps got any inside info on this story, shoot it our way to firstname.lastname@example.org. The stock is getting hammered today so we’ll continue to watch this to see how it plays out.
Huron CEO, CFO quit as restatements slash profits [Reuters]
• UBS not to pay fine in U.S. tax settlement: reports Chocolate solves everything. [Reuters]
• Jobless graduate sues her college Worth a shot, no? [BBC]
• Goldman Sachs’ reputation tarnished – Being referred to as a “vampire squid on the face of humanity” certainly couldn’t have helped. [FT.com]
• HSBC, Barclays profits hit by surge in bad debt [Reuters]
• Bank Spy Scandal Widens – “A detective at the center of the Deutsche Bank AG spying affair says the international banking giant’s effort to monitor its critics was more extensive than previously disclosed in that it involved a plan to target as many as 20 people, including a number of investors.” We’re thinking that a spy scandal is probably the last thing the banking industry needed. [WSJ]
• House Votes to Extend ‘Clunkers’ Program – We just printed more money. It’s fine. [WSJ]
• U.S. House Passes Bill Allowing Ban on Incentive Pay None of that printed money will be going to bankers. [Bloomberg]
• Court Orders Shorter Sentence For Ex-Qwest CEO – Might have been worth it had there been some adultery involved. [NPR]
• Nothing like a little shameless PR… – Deloitte providing accounting services, pro bono [Accounting Nation]
We know you’ve all been shaking with anticipation about the tchotchke results and frankly, we expected more of you. P. Dubs and Deloitte turned out squat and they’re the top two dogs, so that really dashed our hopes. Grant Thornton and BDO are zeros too. Are you all working too much? Regardless here are some results from our experiment:
Check out the schwag after the jump
Bandage container for those E&Y Dads who have kids that wear harnesses and helmets.
Radio Station magic 8-ball so the employees can get answers on whether they’ll have jobs in the next six months.
Rubik’s cubes are way more difficult than anything a 2nd year associate does.
Chairs that Radio Station partners with Napoleon-complexes sit.
We do things with so much quality we don’t bother using spellcheck.
Congress seems hella determined to keep accountants from writing accounting rules. HR 1349, aka the Federal Accounting Oversight Board Act, which was introduced in the Spring would create a board that would consist of the chairs of the Fed, SEC, FDIC, PCAOB, and the Secretary of the Treasury.
This merry band of bureaucrats would basically get to slap the FASB around whenever they want. According to Newt “My head isn’t that big” Gingrich, a supporter of the bill, because of the FASB’S independence, politicians can’t torpedo accounting rules that are “destructive”.
More, after the jump
This gem of legislation has 14 co-sponsors, including seven members from the House Financial Services Committee, along with Gingrich and Paul Volcker. It has been referred to the Financial Services Committee so it will getting some Barney Frank lovin’ soon enough.
Say what you will about the wonks in Norwalk but we’re of the strong opinion that handing over the accounting rule bazooka to this board could possibly be the worst legislation since…anything Maxine Waters has introduced.
Congressional Bill Supports Federal Takeover of Financial Reporting [FinCriAdvisor via Jr. Deputy Accountant]
Big 4 firms dodge a bullet in the UK as the highest court dismissed a negligence lawsuit against an accounting firm that failed to detect fraud that brought down a trading company. The ruling will significantly limit the firms’ liability in cases “where a determined criminal drives a company to financial ruin”.
Doesn’t make sense to us, since if you can’t make auditors accountable, who the hell is accountable? Hey, whatevs, we’re sure the Big 4 and other accounting firms won’t be celebrating long anyway, since a ruling like this won’t happen in the States, which is where the serious money gets handed over.
Auditors win ruling over Madoff-style frauds [FT.com]
UBS is going to name names, albeit not all of them, bringing us to ever so close to the bitter end of the whole IRS/UBS standoff.
All the gory details are expected to be released on August 10th, when hopefully everyone will kiss and make up officially.
The focus of the settlement will be around 7,000 or so accounts that are associated with offshore companies and trusts that are possibly tied to some financial shenanigans. Under the potential settlement, UBS won’t turn over any names until after September 23rd, which is the last day for offshore account holders to confess their sinful ways.
Deal Reached in UBS Tax Battle [WSJ]
Wealthy taxpayers now have some legit data that allows them to give the finger to all the rabid populist outrage that’s been going around. According to the most recent data provided by the IRS, the top 1% of taxpayers pay more taxes than the bottom 95%. The wealthiest 1% picks up 40.4% of the tax bill while the bottom 95% gets 39.4%.
This amounts to pretty inconvenient data for lots of
Democrats politicians who have been screaming for years that the wealthiest Americans need to pay more taxes.
Tax Burden of Top 1% Now Exceeds That of Bottom 95% [Tax Policy Blog via TaxProf Blog]
Ex-BDO partners that were involved with the firm’s tax shelters are continuing to drop like flies. This time, Mark Bloom, a hedge fund manager and former BDO partner that worked in the Tax Solutions group, pleaded guilty to several charges.
Bloom agreed to forfeit assets as part of his plea agreement including a boat and two Steinway pianos which Bloom performed versions of his favorite songs on:
Check out the song selection, after the jump
Following up on yesterday’s post on KPMG’s slashing of ratings, we checked with a source that gave us the lowdown on the rating system at Deloitte:
“From what I heard, all of the 4s and 5s have already been shown the door. D&T is known to suppress ratings, so I doubt that there will be a lot of 1s or even 2s this year.”
So we asked them to elaborate on “suppress ratings”:
Get the details, after the jump
Your Senior and your manager will give you a rating. Lets say that you are good and they give you a 2. They will need to justify this rating to the entire firm when they have the review meeting (I forget the exact name). Since every Senior thinks that their staff is the shit, a lot of the 2s tend to get pushed down to 3s because if everyone is performing at a higher level, then that is the average. Then, they have a limited number of 2s to fight over…2s get paid more and I think that they get some kind of performance bonus. So they have an incentive to limit the number of 2s given out every year.
Sound familiar to anyone? Discuss.
We’re smack in the middle of performance review time so email us any shady changes, adjustments, throwing people under the bus, etc. going down to email@example.com
BDO Seidman’s revenue for the fiscal year end June 30 dropped nearly 6% to $620 million and dammit, we’re disappointed. Sure tax revenue is up 6% but assurance revenue was down 9% and consulting revenue was down over 15%. What’s the reason for this? According to BDO’s CEO Jack Weisbaum it’s…wait for it…yes, the recession. What a news flash.
According to Web CPA, BDO’s revenue breakdown is 60/25/10 for audit/tax/consulting and the remaining 5% is a grab bag of stuff. Point is, BDO is a whore for audit and considering how the whole Banco Espirito thing turned out…
Speaking of Portuguese banks, BDO is still on the hook for $522 million. No word on how that fits into the firm’s plans to bounce back in fiscal year 2010.
BDO Seidman Revenue Falls Due to Recession [Web CPA]
• Buffett Posts $1 Billion Profit on China Hybrid Carmaker BYD – “The automaker has jumped fivefold in Hong Kong trading since the deal was announced on Sept. 27, helped by Buffett’s investment and rising demand for fuel-efficient vehicles.” – YAWN. [Bloomberg]
• ‘Cash For Clunkers’ Lacks Cash For Clunkers [NPR]
• U.S. Recession Worse Than Previously Estimated, Revisions Show – “The first 12 months of the U.S. recession saw the economy shrink more than twice as much as previously estimated, reflecting even bigger declines in consumer spending and housing, revised figures showed.” Government data estimates not even close? THE HORROR. [Bloomberg]
• Regulators Are Getting Tougher on Banks -“Federal regulators have escalated the number of wounded banks they have essentially put on probation, with some of the targeted banks complaining that the action is too harsh.” [WSJ]
This is our initial coverage of the overtime lawsuits against some of the major accounting firms doing business in California. For those of you not up to speed, these suits were filed by non-licensed associates who believe they were misclassified under California law as exempt professionals and are due overtime and other benefits due to non-exempt employees.
The suits are all in various stages but the key case that may determine how the other cases will proceed is Campbell v. PricewaterhouseCoopers.
Campbell is currently awaiting argument before the 9th Circuit Court of Appeals. The primary issue before the court has to do with whether or not, under the professional exemption, an associate is required to be licensed by the state of California in order to qualify for exempt status. Counsel for Campbell essentially argues that only licensed or certified accountants can qualify for exempt status in California while PwC argues that uncertified accountants who can qualify as “learned professionals” are exempt employees and thus not eligible for overtime pay.
The U.S. District Court of the Eastern District of California granted summary judgment on liability in favor of Plaintiff Campbell and ruled that attest associates must have a license in order to be exempt. The court further held that they may not qualify for exempt status under the “learned professional” section of the exemption. However because the trial court felt it was a close question, it certified the matter to the 9th Circuit Court of Appeals for interlocutory appeal.
According to Bill Kershaw, of Kershaw, Cutter, Ratinoff LLP, lead counsel for the plaintiffs, the ruling in this matter could have significant repercussions for other remaining wage and overtime lawsuits. Mr. Kershaw believes that if 9th Circuit does rule in the favor of the plaintiffs, then the likelihood of the case resolving itself prior to trial would substantially increase.
If the court of appeals rules that learned professionals can be defined as exempt, PwC (and likely the other defendant accounting firms) will center their argument back in the trial court on the appeals court’s ruling that unlicensed accountants are indeed “learned professionals.”
We contacted Dave Nestor, Head of Communications for PwC in the U.S. and he provided us with the Firm’s statement:
PwC believes that its attest associates are professionals who spend the majority of their time engaged in challenging work requiring the use of their intellectual abilities, judgment and discretion. Based on these and other factors, PwC’s attest associates are properly considered exempt under applicable law, and are therefore appropriately compensated.
We’ve provided a list below of all the cases against accounting firms currently in the courts in California for your information. Check the list for your firm and please remember that it is your right to participate in any of the class action lawsuits if you meet the criteria set forth in the case. Even if you are still employed by the firm being sued, they cannot retaliate against you.
Likewise, you can participate in the case on behalf of the defendants if you are approached and choose to do so. You also have the right to not participate at all if you so choose.
If you receive any correspondence from your firm regarding the overtime and wage lawsuits, please let us know using firstname.lastname@example.org. We’ll always keep you anonymous.
We’ll be covering this story as it progresses and continue to check back here for periodic updates.
• N.Y. Attorney General Details Bonuses At Bailed-Out Banks – Cue populist outrage [NPR]
• Subpoenas Issued to Goldman Sachs, JPMorgan, U.S. Senator Says – YES! Political theatre to ensue [Bloomberg]
• CNBC Viewership Down 28% – DB has some ideas on how to get a boost (maybe literally) [Zero Hedge]
• Exxon Reports Lowest Profit Since 2003 – “earnings of $3.95 billion” Meh. [WSJ]
• Glenfiddich 50-Year $16,000 Whisky Tempts Investors – Who loves scotch? [Bloomberg]
In some very comforting news, CFO’s in a recent poll said they’re unsure about how at transition to IFRS would affect their company.
More scary stats include 8% of those surveyed said that they are “very familiar” with how their company will be affected and 43% said they were not familiar at all. So what does all of this IFRS ignorance mean?
Check out the list after the jump
A) Lots of CFO’s don’t give a rat crap
2) Lots of CFO’s don’t really believe IFRS will come to the States
D) Lots of CFO’s need to work on their qualifications
The obtuseness may work out though. At the pace the conversion debate is going, by the time the conversion gets done we’ll all be dead.
Survey: CFOs unsure how international rules will affect U.S. business [DBJ]
This is the final call for your firm’s schwag. The following submission is especially nice because someone at Ernst & Young was cool with a less than perfect item.
See this high-quality piece, after the jump
Quality in Everything We Do – Damn straight.