What did we learn this week? Well, I think one thing we learned is that when the President of the United States fails to pick a side between white supremacists and people protesting white supremacists, most CEOs need a few days to say, “We can’t be associated that guy.” And on the one hand, business people are thoughtful, methodical types who don’t rush to judgment on many decisions. But on the other, distancing yourself from someone who is unsure about opposing Nazis should take about two seconds.
Michael Rapoport reports at The Wall Street Journal on the memo EY Chairman and CEO Mark Weinberger sent to employees, describing his experience:
“I have been trying to balance the tremendous contribution our great organization can make against the appearance that our engagement on these issues is seen as tacit approval of unrelated policies and statements being made,” Mr. Weinberger said.
He said it had been “a very stressful time for me” in the wake of Mr. Trump’s recent remarks. He said that many EY employees had reached out to him to share their thoughts and concerns, and said their opinions were taken into consideration in his decision to endorse disbanding the panel.
“Groups who stand for bigotry and hate have no place in our society and should consistently be denounced, forcibly and loudly, without equivocation,” Mr. Weinberger wrote in the memo. There is “no moral equivalence” between them and those who oppose them, he said.
He added that “I was also disappointed by President Trump’s reaction to these events. I believe leaders should unite rather than divide people.”
I don’t doubt Mr. Weinberger’s intentions. I believe that he believes that EY had the opportunity to make a “tremendous contribution” by virtue of his presence on the forum. That’s the infectious optimism of a chief executive. Every person on that forum has it. But they’re also realists; pragmatic decision-makers who, in ordinary circumstances, wouldn’t do business with Donald Trump if their lives depended on it. It just so happened that Donald Trump became president, and that meant playing along for the good of their businesses.
Until the Nazis, of course. Ultimately, this caused the business leaders to disband the forum. They don’t deserve anyone’s praise; rather this is a statement of fact. They did abandon the president; which is more than we can say about a lot of politicians right now.
How’s tax reform coming along?
About those politicians:
“At the end of the day, President Trump will be incredibly crucial to the success of this,” House Ways and Means Committee Chairman Kevin Brady (R-Tex.) told reporters here Wednesday. “Tax reform is the signature issue of this presidency.”
Is it? Right now I think the signature issue of Donald Trump’s presidency is Donald Trump. He’s so preoccupied with projectile vomitweeting and equivocating on white supremacists that he’s single-handedly sabotaging his presidency. And he doesn’t seem to know it!
Lots of people want Donald Trump to succeed in passing tax reform. But Trump seems incapable of doing what it takes to make it happen. Passing tax reform will take discipline, expert negotiating skills, patience, allies in both parties, and a whole lot of luck. Trump possesses NONE of these things. If I were Kevin Brady, I’d be thinking of every conceivable way of getting tax reform done without Donald Trump. Which is to say, Brady should be praying to Saint Thomas More every day if he isn’t already.
KPMG and Wells Fargo
Wells Fargo is a mess. Last fall we learned that the bank spent years opening accounts without its customers’ permission thanks to a high-pressure sales environment. And this year we learned that the bank failed to refund insurance payments to a bunch of people who paid off their car loans early, and forced a bunch of other car-owners into delinquency, including nearly 25,000 repossessions, by requiring unneeded insurance. Bad, bad, bad.
Anyway, KPMG has been there through all of this as Wells Fargo’s auditor. This Market Watch report states the firm tried explaining to Senator Elizabeth Warren, D Mass., what they knew and when they knew it:
KPMG wrote it did become aware, as early as 2013, of “instances of unethical and illegal conduct by Wells Fargo employees, including incidents involving these improper sales practices.” But the firm said it was “satisfied that the appropriate members of management were fully informed with respect to such conduct.”
Yet the auditor said nothing about these issues to investors, either in its audit opinion, its opinion on the bank’s internal controls, or elsewhere.
Instead, KPMG told the senators, its view is that “not every illegal act has a meaningful impact on a company’s financial statements or its system of internal controls over financial reporting. From the facts developed to date, including those set out in the CFPB settlement, the misconduct described did not implicate any key control over financial reporting and the amounts reportedly involved did not significantly impact the bank’s financial statements.”
Oh, but it did significantly impact the bank’s reputation, which is now a punchline. KPMG’s explanation is a go-to for audit firms whenever a relatively small fraud crops up at a huge company. For whatever reason, KPMG’s people couldn’t fathom the possibility that a bunch of bank employees creating accounts illicitly would upset a lot of people and therefore, turn into a major problem for the bank. Then again, maybe they did fathom it and decided that because it was quantitatively immaterial that people would shrug and move on.
Still, there are over 6,000 Wells Fargo branches in 40 states in the U.S. That accounts for a lot of elected officials who have a lot of constituents who bank with Wells Fargo. Even if the illegal act wasn’t going to be material to the bank’s financial statements, there should’ve been little doubt that it would be material to a great number of people.
(Full disclosure: I formerly worked at KPMG, currently bank at Wells Fargo, and equally hold them in contempt. Just kidding, mostly Wells Fargo.)
I don’t even know what to say about this:
Robert Cortez Marshall raised at least $5.7 million from approximately 200 investors residing in several states in an unregistered offering of the securities of his company, Adz on Wheelz. Marshall allegedly told investors that Adz would buy cars to display advertisements on large computer monitors installed into the car’s doors, roof and trunk. The SEC alleges that Marshall and Adz promised investors “guaranteed weekly royalty” payments totaling over 200% a year and told them that they could receive a full refund at any time.
Similar to my feeling about businesses with names suggesting that they are the absolute best, I’m immediately suspicious of businesses who come up with an obvious name and replace all the S’s with Z’s. I’ll be using this case as evidence to support my theory.
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