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When Booking Bogus Revenue, Ideally Your CFO Is the Type to Not Give a Rat’s Ass
- Caleb Newquist
- August 31, 2011
James Li and David Chow used to run a shop called Syntax-Brillian Company as the CEO and Chief Procurement Officer respectively. They sold high-def, LCD TVs under the Olevia brand in China. Problem was, they didn’t really sell TVs under the Olevia brand in China. According to the SEC:
[F]rom at least June 2006 through April 2008, Li and Chow engaged in a complex scheme to overstate Syntax’s financial results by publicly reporting significant sales of LCD televisions in China, when in fact the vast majority of these sales never occurred. Li and Chow initially concealed the scheme through the use of fake shipping and sales documents.
Of course, they couldn’t do it alone. They needed a CFO. A CFO who would backdate things when asked and ignore obvious signs of bogus revenue. That man was Wayne Pratt who, from the sounds of it, wasn’t too concerned about ANYTHING:
The SEC alleges that Wayne Pratt, Syntax’s Chief Financial Officer, ignored red flags of improper revenue recognition and participated in preparing backdated documentation that was provided to Syntax’s auditors to support fictitious fiscal 2006 year-end sales. Pratt also ignored indications of impaired assets, agency sales, and potential collectability issues.
So, budding criminals, get on the look out for a guy/gal who is accustomed to shrugging their shoulders and responding “Meh. Whatever.” to your demands. Should work out well for you.
Litigation Release [SEC]
Complaint [SEC]
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Berkshire CFO Attempts to Kill SEC Curiosity
- Caleb Newquist
- October 25, 2010
When you’re a folksy billionaire octogenarian, you can afford to have others do your dirty work. In the case of the Warren Buffet, he has Charlie Munger hate on accountants for anything and everything under the sun.
Similarly, when the SEC comes calling, the Sage of Omaha can ring up Berkshire CFO Marc Hamburg. On the one hand, you might expect WB to shoot the breeze with the SEC employees since they likely share a fondness for a certain film genre.
However, when the conversation turns to business, the old man probably claims that he has an interview on tax cuts, a bridge match with WHGIII or a lunch date with Z-Knowles. This allows him to turn the SEC scamps over to Hamburg who plays a little bit of a bad cop to the Buffet’s chatty, dirty Grandpa. The CFO then lets the SEC know, in no uncertain terms, that they’re barking up the wrong tree:
In an April letter, the SEC asked Berkshire why it was not recording write-downs on shares with $1.86 billion in unrealized losses, all of which had been in that position for at least a year.
Given the duration of those losses, the SEC said they appeared to be more than temporary and as such should have been written down.
In a detailed response, Berkshire Chief Financial Officer Marc Hamburg said most of the losses with more than 12 months’ duration as of December 31 were concentrated in Kraft and U.S. Bancorp, shares it had acquired in 2006 and 2007.
Hamburg said that as of December 31, Berkshire determined both companies had enough earnings potential that their share prices would eventually exceed the original cost of the stock. It also has the “ability and intent” to hold the shares until they recovered, he said.
“We believe it is reasonably possible that the market prices of Kraft Foods and U.S. Bancorp will recover to our cost within the next one to two years assuming that there are no material adverse events affecting these companies or the industries in which they operate,” Hamburg said.
And if this doesn’t work, they’ll just schedule Munger for another speech.
SEC questioned Warren Buffett’s Berkshire on loss accounting [Reuters]
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You Can Forget About Landing That CFO Position at the SEC
- Caleb Newquist
- May 21, 2010
Mary Schapiro took some time out of her fraud fighting Friday to ask Kenneth Johnson to quit acting as the Commission’s CFO and to take on the official responsibility of running the Office of Financial Management.
Mr Johnson (KenJo?) vehemently accepted the offer and threw in a shout out to the boss, “I’m honored to accept this new role at such an important time for the agency. Chairman Schapiro is deeply committed to strong financial management, and I’m proud to lead the agency’s initiatives in this area.”
Presumably, the CFO position isn’t a kicking-down-doors type job so Johnson’s first order of business should be to determine the savings on a group rate at one porn site that can appropriate service all tastes.
Washington, D.C., May 21, 2010 — Securities and Exchange Commission Chairman Mary L. Schapiro today announced that Kenneth A. Johnson has been named Chief Financial Officer for the agency.
Mr. Johnson has been serving as acting CFO for much of the past year. The agency’s CFO is responsible for leading its Office of Financial Management, which handles the budget, finance, and accounting operations for the SEC.
“I’m delighted that Ken has agreed to take on this role at the SEC,” said Chairman Schapiro. “His deep experience in the financial arena will be incredibly valuable as we grow as an agency.”
Mr. Johnson added, “I’m honored to accept this new role at such an important time for the agency. Chairman Schapiro is deeply committed to strong financial management, and I’m proud to lead the agency’s initiatives in this area.”
Mr. Johnson, 37, joined the SEC in 2003 as a Management Analyst in the Office of the Executive Director. In that role, he advised on all aspects of the budget process, developed strategy initiatives, and responded to inquiries from the Office of Management and Budget (OMB) and Congress regarding the SEC’s budget and financial operations. He became Chief Management Analyst in 2006.
Mr. Johnson has served as a valuable staff expert on legislative proposals, and he managed the development of the SEC’s long-range Strategic Plan that would guide agency policy through 2015.
Prior to joining the SEC staff, Mr. Johnson worked as a Commerce Analyst at the Congressional Budget Office. His primary responsibility in that role was to analyze and report on the budgetary effects of committee-approved legislation.
Mr. Johnson earned his Masters in Public Policy from the Kennedy School of Government at Harvard University, and earned his BA at Stanford University.