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KPMG Congratulates KPMG On the Rothstein Kass Acquisition

Posted on by Adrienne Gonzalez

Becoming number one in the hedge fund space wouldn't be an impressive achievement without a masturbatory press release celebrating it. KPMG delivers!

KPMG LLP, the U.S. audit, tax and advisory firm, has completed its acquisition of certain assets of Rothstein Kass and the admission of most of the former Rothstein Kass principals and employees. The combination brings together KPMG's expansive alternative investments presence and global reach with Rothstein Kass's hedge fund industry expertise and personnel. With the addition of Rothstein Kass's capabilities and team members, KPMG becomes a market leader in providing the highest level of service to hedge funds of every size and at every stage of growth, while also enhancing the firm's already strong position in the alternative investment space – including private equity, real estate, infrastructure and hedge.

"Certain assets" — as in not certain family office folks who high-tailed it out of there as soon as the virtual ink was dry on the Wall Street Journal's announcement of the merger. As recently as March, Rothstein Kass added eight new hires to the Family Office Group, two of them senior level. "The moves demonstrate the firm’s continued commitment to expanding its footprint and professional capabilities in the high-growth family office market," RK said at the time. But forget all that, we all know why KPMG wanted RK.

"Adding Rothstein Kass's team to KPMG significantly enhances the services we provide to hedge funds of all sizes, all around the globe, and at every stage of the fund lifecycle," said John Veihmeyer, Global Chairman of KPMG.  "With the explosive growth of capital moving into hedge funds, enhancing trust has never been more important to investors, regulators, and the broader industry. The global reach and market-leading expertise KPMG now offers will be vital to hedge funds operating around the world and complying with a multitude of regulatory and legal requirements."

KPMG's Alternative Investments practice, with more than 6,000 partners and professionals worldwide, provides audit, tax and advisory services to hedge, private equity, real estate, and infrastructure funds, and is an integral part of the firm's Financial Services business line.

"The deal is a powerful demonstration of KPMG's expanding strength in and commitment to serving the broader Alternative Investments industry and capital markets," said P. Scott Ozanus, Deputy Chairman and COO of KPMG.  "The enhanced team not only offers clients and prospects an unparalleled client experience, but it also extends to them an ability to leverage the expertise of the largest auditor of hedge funds."

That last line is a little odd. Post-acquisition, KPMG is in fact the largest auditor of hedge funds, assuming all their clients came along for the Big 4 experience. Prior to the acquisition, KPMG was #5, with 1,616 hedge fund clients; Rothstein Kass came in third with 2,063. So yeah, mash those two up and obviously you get a behemoth. In reality, EY is only about 100 some hedge fund clients behind them in second place (first place, pre-merger). So there, KPMG, you aren't the only ones who can leverage the expertise.

We assume this press release means we can put this puppy to rest and speak no more on the acquisition itself. Of course, if you have juicy details to share with the class such as layoffs, merger problems, contention in the ranks, anti-KPMG notes left in the break room, etc, do get in touch.

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Mike Mayo Is of the Opinion That Citigroup ‘May Have Violated Sarbanes-Oxley’

Last week we heard from a number of people on the topic of Citigroup’s internal controls that while it didn’t sound like they were quite up to snuff, KPMG was somehow cool with it and Vikram Pandit signed his name to it, saying that everything was hunky dory.

Now along with bloggers and journalists, the scourge of Citigroup, CLSA analyst Mike Mayo, has decided to get into the act:

Citigroup may have violated Sarbanes-Oxley with its 2007 10-K submission, in our opinion. The new information relates to letters from regulators that were only revealed earlier this year as part of the FCIC archive. We believe these letters between Citi and the Fed, Citi and the OCC, and the OCC with internal staff, imply that Citi should have known about internal control shortfalls for the year 2007 and was directly told about them by the OCC only eight days before the 10-K was signed. Also, Citi reported large unexpected losses with less than two months left in the year. Thus, the lingering question in our mind is why Citi signed off on its 2007 10-K as having effective controls in light of such problems. This information is still relevant today because it reflects on the magnitude of the risk shortfalls and what we feel is the higher-than-perceived task of turning them around.

That’s from Mayo’s update on the bank, dated today, and along with the “opinion” on a Sarbanes-Oxley violation, he has a few questions:

To what extent was the audit committee and board at Citi aware of the concerns voiced by various regulators at the time, and who gave the advice to sign the 10-K? To what extent has Citi’s board examined the issue since the release of letters from the FCIC? Has the SEC and DOJ looked into this matter?

We bolded that portion since it might – just might – be referring to KPMG and the apparent disregard everyone had for the letter sent to Citigroup from the OCC. Of course, not everyone always agrees with Mayo, namely Dick Bové who has gave HofK the thumbs up although it was obvious that he’d never heard of the firm. Bové hasn’t weighed in on this particular report but it’s only Monday.

Anyway, Citigroup remains steadfast in their thoughts on the matter, telling The Street’s Lauren Tara LaCapra that the “certifications were entirely appropriate,” although things increasingly seem to be pointing to the possibility that wasn’t the case. A message left for Marianne Carlton, a KPMG spokeswoman, hasn’t been returned.

Former KPMG Employee Now a Bean Slinger; May Have the Best Burrito in London

It’s my understanding that burritos are hard to come by in London. Apparently they just opened the first Chipotle there. For many of you, a life without burritos slapped together in 90 seconds (not including the wait on line) isn’t a life worth living. The Brits have managed to survive for a number of centuries without tortillas overstuffed with sour cream and free-range pork. And while Chipotle can certainly churn out a fine burrito, if you happen to find yourself in Spitalfields, East London you might check out Poncho No. 8. It was started by Nick Troen and Frank Yeung, Troen being the ex-Klynvedlian and Yeung a former equities trader at Goldman Sachs.

The friends spent the next three years living together, talking about going into business one day. After a brief separation — Troen worked for KPMG, the accountancy firm, and Innocent, the smoothie maker, before doing a masters, while Yeung worked for Goldman Sachs, the investment bank — they quit their jobs, moved back in together and four months ago launched a Mexican restaurant.

Although it is early days, Poncho No. 8 (Poncho Ocho), their pocket-sized restaurant in Spitalfields, East London, employs a staff of nine, sees 300 customers a day queue down the street for “gourmet” burritos and took £100,000 in its first quarter.

Troen and Yeung are unashamedly influenced by Innocent, the wildly successful fruit drink company also started by graduate friends. “It was always a company we admired. The branding and style had a big impact on us,” Troen says.

Poncho was a typical back of the envelope idea — “we looked at the numbers and thought ‘why has no one done this?’, ” Yeung says — brought to life via the same mix of ingenious, vaguely hippy branding and healthy ingredients. The restaurant features a green-painted “Guac Shack” while the website offers a “countdown to lunch” for bored office workers.

Starting a new Mexican wave [Times via BI]