July 15, 2018

incompetence

Disgraced CEO Claims Stealing $665 Million Was Just Incompetence, Not Theft

You wonder sometimes why these guys say anything at all instead of just keeping their traps shut: A former investment CEO was sentenced Friday to 14 years in prison and ordered to pay $665 million in funds lost to his former clients. “I may be incompetent, but I’m not a thief,” Eric Bloom, 50, said […]

PwC Audit Finds That Nairobi City Council Is Nearly 100% Incompetent

Two questions: 1) Isn't this pretty representative of local governments everywhere? and 2) When did PwC start auditing humans for competency?  An audit by PriceWaterhouseCoopers has revealed that 92 percent of the City Council of Nairobi workforce is incompetent. The appraisal commissioned in 2010 has recommended that the council trims its large and inefficient workforce. Town Clerk […]

Navistar Says Deloitte Sucks at Auditing; Deloitte Not Amused

Last week Navistar International Corp. sued Deloitte for $500 million alleging “fraud, fraudulent concealment, breach of contract and malpractice” on audits from 2002 to 2005. That, in and of itself, isn’t too unusual. What is pretty fun (not fun in a “man, the circus is fun” kind of way but in “you’ve gotta love this stuff” kind of way) is when a company comes right out and says that Deloitte lied about its competency to provide audit services.

Bloomberg reports:

In other words, not only is Navistar saying that Deloitte is a buncha liars, they’re saying, “Biggest accounting firm in the world, you say? How about the suckiest accounting firm in the world?” They’re saying that Deloitte isn’t qualified to be in business. In essence, that the firm shouldn’t even exist. Because such fighting words simply can’t be taken sitting down, Deloitte spokesman Jonathan Gandal emailed the ‘Berg (which is good because he never calls us back) to express the firm’s position:

“A preliminary review shows it to be an utterly false and reckless attempt to try to shift responsibility for the wrongdoing of Navistar’s own management,” Gandal said in an e-mailed statement. “Several members of Navistar’s past or present management team were sanctioned by the SEC for the very matters alleged in the complaint.”

HA! Now who’s a bunch a liars? So who’s really to blame here in this round of ‘liar, liar pants on fire’? Well, over at Fraud Files Blog, our friend Tracy Coenen tries to shed some light on this spat:

Navistar’s story about the fraud seems to keep changing. Early on in the case, the company denied wrongdoing and said the problem was with “complicated” rules under Sarbanes-Oxley. I’m not sure how SOX is to blame for management having secret side agreements with its suppliers who received “rebates.” Or improperly booking income from tooling buyback agreements, while not booking expenses related to the tooling. Or not booking adequate warranty reserves. Or failing to record certain project costs.

And now the company says Deloitte is to blame.

Here’s what’s funny about lawsuits like this: They essentially say… Our employees committed fraud and actively took steps to avoid discovery by the auditors. The auditors did not discover the fraud (at all, or soon enough), and now we’re going to hold them responsible for that failure.

In the case of Navistar, the each of the fraudulent accounting schemes above are nearly impossible to detect. The company failed to book items or provide information about them to the auditors, yet they are suing the auditors for failing to find the items.

So it appears that Navistar was expecting Deloitte to have some magical powers of fraud detection that even the likes of Tracy or Sam Antar don’t possess. Does that make them incompetent? You tell us.

Navistar Sues Its Former Auditor Deloitte & Touche [Bloomberg]
Navistar v Deloitte: Blame the auditors for fraud committed and concealed by employees [Fraud Files Blog]

Jackson Hewitt Doesn’t Appreciate the Implication That They Suck at Preparing Tax Returns

Call it the discount 1040 wars (or something):

Jackson Hewitt Tax Service Inc sued H&R Block Inc to stop a new advertising campaign that it said misleads customers about tax refund loans and disparages Jackson Hewitt’s competence.


How disparaging? How about “two-thirds of the tax returns are wrong” disparaging:

According to the complaint, H&R Block falsely claimed that its “Second Look Review” program, which reviews past tax returns prepared by rivals, found that two-thirds of prior returns prepared by Jackson Hewitt contained mistakes.

“H&R Block’s 2 out of 3 claim necessarily implies the false claim that two out of three Jackson Hewitt customers who are entitled to refunds have been short-changed due to Jackson Hewitt errors or incompetence,” the complaint said.

Jackson Hewitt sues H&R Block over ads [MSNBC]