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Green Mountain Coffee Roasters Must Not Mind That Their Audit Firm Is Also a Strategic Partner for a Presentation That Includes a Blogger That Doesn’t Say Particularly Nice Things About Their Financial Reporting

Posted on by Caleb Newquist

As most of you know, convicted-fraudster-turned-accounting-sleuth and all-around ham Sam Antar now spends his days blogging, exposing companies whose financial reporting and disclosures strikes him as a little too familiar to some of the tricks he pulled in his Crazy Eddie days. 

Sam also spends a fair amount of time educating the less criminally-inclined on how to bust people like him, giving presentations, interviews, everything short of shouting from the top of a bucket in Times Square, to anyone who wants to hear the sheisty ways of a reformed sheister. Later this month Sam will be interviewed by Crowe Horwath's Jonathan Marks, the firm's leader of the Fraud, Ethics, & Anti-corruption Practice. Yesterday, a little bird pointed out to us that PwC, often a target of Sam's mockery, is a strategic partner for the event:

Appears reasonable. PwC certainly has a well-established forensics practice and being affiliated with this presentation makes sense from a marketing perspective.

However, as is the case in all things corporate or political, the situation makes for strange bedfellows. You see, after spending years tormenting Patrick Byrne and Overstock.com, Antar has found a new muse in Vermont-based Green Mountain Coffee Roasters. Sam has been exposing dodgy financial reporting, missing disclosures, and sometimes poor arithmetic at GMCR for well over a year now. Since Sam has been writing about GMCR, hedge fund manager David Einhorn has spoken out against the company's financial reporting practices and the company has been on the defensive ever since.

PwC is the auditor for GMCR. 

In a recent motion to dismiss (in full below) a lawsuit brought by shareholders, GMCR cites Sam's blogging as part of their problem:

The Amended Complaint also cites a rogue’s gallery of blog postings, as well as a presentation authored by an anonymous blogger who goes by the pseudonym “TheLongShortTrader.” AC ¶¶ 18, 93-97. One of the bloggers cited is Sam Antar, a “former CFO convicted of fraud” and whom Plaintiffs themselves characterize as being openly “critical” of Green Mountain. AC ¶ 18. These blog posts are rife with conclusory conspiracy theories, including claims that the Company’s practices are “downright ludicrous” and that Green Mountain has engaged in “stealth restatements.” Id. ¶¶ 94-95. Such speculative commentary cannot overcome the absence of factual allegations that support a cogent and compelling inference of scienter. See Hershfang v. Citicorp, 767 F. Supp. 1251, 1255 (S.D.N.Y. 1991) (the “gratuitous commentary of outsiders” cannot substitute for scienter allegations); see also In re Pfizer, Inc. Secs. Litig., 538 F. Supp. 2d 621, 630-31 (S.D.N.Y. 2008) (“In addition to identifying the source, the source must be shown to have been likely to know the relevant facts. There is no reason to believe that the author of this blog, identified only as RADmanZulu, is likely to have known the relevant facts.”).
So really, who feels the most sheepish here? Certainly not Sam. He doesn't care. PwC? Meh. Audit and forensics (more specifically, the people making marketing decisions for the group) are completely separate from each other, so there's little chance that forensics knew the connection between the firm and GMCR and the further connection of Sam to GCMR.
 
Green Mountain, on the other hand, looks pretty silly. Casting blame towards bloggers is bad enough. (They could have learned their lesson from Patrick Byrne.) But when your audit firm is affiliated with a presentation that one of these bloggers will give, who will no doubt discuss things that are similar in nature to the allegations made by the people suing you…that's awkward. 

Motion to dismiss – Horowitz v. GMCR

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What Happens When the “Numbers” People Can’t Count?

Thumbnail image for Thumbnail image for Thumbnail image for accountant.jpgThere was some quiet chatter here at GC about Ernst & Young’s closure of its Greensboro, NC office this past December, right around the Merry Happy holidays. Thanks Ernie.
This is nothing new. Smaller offices have been getting shut down for years. Years. Years.
You’ll probably find this to be a shocker but your feelings are not the main problem facing the firms due to the combination of recent closings and endless rounds of cuts. The problem is – it’s the theme of any busy season – firms finding themselves short staffed.
Many readers have commented that engagements are understaffed heading into the cold winter months. Albeit this is typically the unofficial “norm,” but slashed fees are only compounding the problem this year. The troubles of ’09 will be used as firm scapegoats for 2010. Move along, kids. Nothing more to see here.
Serious trouble is brewing for at least one Big 4 firm, however. A source confirmed that their Big 4 Beast is outsourcing work in the Carolinas to smaller regional firms because they are so understaffed:

The combination of layoffs a year ago and people leaving now that the market is turning around is causing the firm to hire outside help just to get through busy season.


Ummm. How did this happen? Is this firm (or any other firm for that matter) initiating rotations from staff “heavy” areas like Chicago and New York to cover the lapses in smaller areas like Buffalo or Greensboro? If so spread the winter cheer, because that sounds downright awful.
The public accountant’s mind is a simple one with regards to job searching:
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The middle area is commonly referred to as “run through a venti latte on the client and debate.”

The market is moving ever so steadily from red to green. This time is now, and no one, not even leadership, is denying that. Firm leaders have been talking, talking and talking some more about the upswing of 2010. If they are handing out the Kool-aid, doesn’t SOMEONE take a moment to think, “Hey guys, should we really have cut so much staff six months ago?”
Someone, somewhere underestimated staff needs or overestimated staff loyalty. Or both. So now, cutting into the already razor thin fees will be the misguided expense of hiring outside help just to get by. The situation is only going to get worse in the coming months; money is starting to move, financial firms are beginning to reinvest, and jobs are going to be created and filled by your colleagues.
How can a firm’s leadership whose fundamental – and societal stereotyped – sole function is numbers be so off the mark? This is elementary, is it not?

KPMG Is Going to Buy Itself Some Indentured Servants in the UK

There’s nothing like buying your loyalty. I’m not saying Big 87654 programs like this aren’t somewhat good for the morale and worth the firms’ dime(s) not just to buy loyal servants but also to help prepare future capital market servants in general but it’s sort of a scam. Sometimes, these education programs don’t work out and the slaves revolt, as happened with this young man in an undisclosed market somewhere in a state that ends in tts.

Anyway, KPMG wants to recruit a whole bunch of 18 year-olds into its work/school program (across the pond they call this a “scheme,” which makes it exponentially more funny) by next September. The House of Klynveld will pay these kids’ tuition fees and pay them a whopping starting salary of £20,000 ($31,460 in Fed Funny Money).

Here’s a brief and completely related link to an article on indentured servitude: “Servants typically worked four to seven years in exchange for passage, room, board, lodging and freedom dues. While the life of an indentured servant was harsh and restrictive, it wasn’t slavery. There were laws that protected some of their rights.”

Sound at all familiar?


According to The Telegraph, the course opens its doors to 90 students for the first time this month, with two-thirds of entrants coming from state schools or colleges, compared with around half from the traditional graduate entry route.

More than 1,000 would-be ex-KPMGers applied for the program, and that number is expected to rise year over year. They say that’s because tuition is up to £9000 a year (about $14,153 but there’s a Fed meeting fast approaching, that number is subject to change) but my guess is mediocre performers need jobs and accounting isn’t that bad of a gig for some of them. I’d also guess that a few of these program “graduates” actually go on to have successful careers.

If you remember, one former participant of a similar program once (allegedly but eloquently) wrote to his former colleagues “I’m pretty sure it would have been easier to escape from Auschwitz than a YMP contract. I knew from the second week I start here that this wasn’t going to work out.” Ernst & Young’s Your Master Plan nurtured one hell of a profanity-laced, poetic farewell email, a true testament to its power. One requirement for the program was advanced written and verbal communication skills… it’s a wonder Uncle Ernie didn’t call Craig immediately and ask him to come back with a fat raise.

Anyway, the head of audit at KPMG told the Telegraph “At a time when many young people, graduates included, are finding it difficult to gain employment, this programme represents a credible alternative to mainstream university education and provides an attractive route into employment for talented students.”

I highly – and I mean highly – recommended checking out the comments on the Telegraph article, as it finally identifies the link between public accounting and anal rape that we have been trying to pinpoint for years. It’s the one that starts off with “If you work at a large accounting firm, beware, it is perfectly acceptable for the large accounting firm to tell massive lies about you such that you will be butt raped repeatedly…” You can’t miss it.