U.S. government parolee, Citigroup, announced today that it's expanding its board of directors to include Gary Reiner, a former CIO at GE, and Jim Turley, EY's beloved former DJ, fashion-forward footwear-er, and Chuck Norris nemesis. This transition is par for the course when it comes to Big 4 CEO/Chairs, with Tim Flynn and Sharon Allen serving […]
The long-awaited PCAOB inspection report of KPMG came out on Friday and while we were excited for this unveiling, the Board managed to issue the report at around 4 pm on Friday. Since the Board lacks any sense of timing whatsoever, we opted to punt on our respective post until today because well, we’re human and not a soulless blogging robot as likely perceived by TPTB at the PCAOB.
It’s worth mentioning that this is the first PCAOB report that has been issued since the SEC’s final rule on the inspections that allows audit firms to postpone the release of the report simply by taking issue with any of the findings. Since any appeal could reportedly delay the report by “30 to 100 days,” it’s safe to assume that, with a report date of October 5th, KPMG didn’t have a beef with the findings. You could also assume that since the SEC is taking a peek at these reports now, there’s going to be a ten day lag on the release of the report to allow the Commission enough time to give it their extra-special sniff test.
Anyway, back to the matter at hand –
KPMG had eight issuers noted in the Board’s inspection report and the first two are doozies. “Issuer A” runs approximately two pages and includes failure on testing of “allowance for loan losses” to “test[ing] the issuer’s estimates of fair values of financial instruments” and goodwill impairment.
“Issuer B” is a little more interesting since one of the failures the Board found was related to deferred tax assets which makes us wonder if this is Citi, since analyst Mike Mayo was loudly questioning the bank’s treatment of its DTA. Francine McKenna not-so-subtly solicited guesses on Friday as to who this “bank” might be (even though no issuer is identified as such) but it does make us wonder.
The Board cites run-of-the-mill failures for the rest of the issuers (e.g. fair value testing, pension plan testing, failure to confirm cash[!]) and the House of Klynveld’s response letter was cordial and anticlimactic.
But if you’re KPMG, do you really care what the PCAOB thinks when you’ve got an adorable gnome-ish looking analyst giving you the tepid thumbs-up (despite not knowing your name)? That’s the only endorsement we would need.
“Citi still seems to have aggressiveness with financial targets (well above historical), accounting (tax credits) and corporate governance. Also, the strategy does not always seem in sync with execution and/or financial reporting.”
And you know he’s not messin’ because that’s what he told Charlie Gasparino and God knows you best not lie to the Fox Business Network’s ace reporter. Sure Bové didn’t actually say “KPMG” (hell, he’s probably never heard the name) but he’s giving credit to auditors which is about as unheard of as Tiger Woods using Trojans with hookers.
Bové may have mentioned some other things about Mike Mayo, Citi, Deferred Tax Assets so on and so forth but we’re sure you’re not worried about that.
Btw, if you need to get caught up on just who Dick Bové is, go here. Courtesy of FBN:
On Citi’s apparent cold shoulder towards analyst Mike Mayo:
“It’s totally wrong. Mike Mayo is a brilliant analyst. He’s been in this business for a long period of time and does a superb job of following the industry. To say he can’t come in and speak to the company in my view is absolutely and totally incorrect.”
On whether Mike Mayo’s accusations against Citigroup’s risk management lapses are accurate:
“Absolutely. In September of 2008, Citigroup was effectively bankrupt. The reason why it was bankrupt was the reason that Mike cites. It was that the risk management procedures had completely broken down and it was not effectively managing its portfolio. Mike is right on that comment.”
On why we should believe Citi on its accounting reports:
“We don’t have to take Citigroup’s answer to Mike Mayo. We can take a look at the fact that this company is audited by an exceptional group of auditors. They are regulated by a large number of bank regulators…and they actually are being audited for their tax issues right now by the IRS. All three of these groups agree with the public statements of Citigroup concerning DTAs.”
“What is the basis for saying that these three groups which have seen the numbers don’t know what they are talking about, whereas people that have not seen the numbers, do know what they are talking about.”
On whether Citi has been given a clean bill of health by the SEC, IRS and the Fed:
“We do have an audited financial statement which is not questioning the DTAs. We do have bank regulators who could have memorandums of understating with Citigroup if they believed there was a problem. Citi is estimated to earn by Mike Mayo $9 billion this year. Next year he estimates the company to show a 33 percent increase in earnings to $12 billion. If there is a DTA problem, why is there a belief that the company can jump its earnings by 33 percent from 2010 to 2011?”
We’ve been assured by the wonderful people at Fox that we will have video of this momentous (and perhaps unprecedented) occasion just as soon as it’s available.
UPDATE: AS WE SUSPECTED! Not only was the initial report mis-transcribed, check out Dick’s reaction to Gasparino’s question, “It’s KPMG I believe, correct?” around the 2:37 mark:
Pretty obvious that the dude has never heard of KPMG in his life.
Citi is looking for someone to join their Citi Capital Advisors (CCA) Financial Control unit as an Expense Controller. The position’s responsibilities center around budgeting, forecasting and reporting actual results for all operating expenses and headcount.
It requires a minimum of six years experience and is located in New York. Get more details after the jump.
Title: Financial Control – Expense Controller
Location: New York, NY
Description: Financial Control is responsible for a variety of activities related to the firm’s financial reporting and controls. The team is divided into different areas of specialization where each member is responsible for a unique set of responsibilities that include both analytical and accounting roles.
Responsibilities: This position will assist in all aspects of expense management and legal vehicle reporting within the Citi Capital Advisors (CCA) Financial Control unit; The primary responsibility will be to drive the core expense management processes and assist the CCA Finance management team to create a best-in-class robust and controlled financial reporting process for both management and legal books. These responsibilities will be centered around budgeting, forecasting and reporting actual results for all operating expenses and headcount; The candidate will have significant input to streamline all aspects of the expense reporting processes.
Qualifications: Bachelor’s degree in Finance or Accounting degree required; 6 to 10 years of experience in financial control or related function required.
• Does New 10% Tanning Tax Discriminate Against Whites? [TaxProf Blog]
Are you being unfairly taxed just because you want some extra Vitamin D?!?
• Dubai World, Nakheel Get $9.5 Billion Injection [WSJ]
For now at least, it appears that Aidan Burkett, Deloitte’s rock star restructuring expert has saved the day at Dubai World. DW will get $9.5 billion from the Dubai Government and plans to pay $26 billion to its creditors that include HSBC, Lloyds, Standard Chartered and RBS.
The complex deal that has taken months to draw up involves Dubai World issuing two tranches of new debt and converting $8.9 billion, or 38%, of its existing obligations into equity, the company said.
The new debt won’t be guaranteed by Dubai government, which has previously been a thorny issue between creditors and the city-state’s advisors.
• Citi Loses Bid to Move EMI Trial [WSJ]
Remember Guy Hands, the founder of Terra Firma Capital, who hates taxes so much that he asks that his family come to visit him in Guernsey so that he doesn’t risk his non-resident status for England?
Well, you’ll be happy to know that Citi’s bid to get the trial moved to London was rejected by Judge Jed Rakoff so Hands won’t have to worry his pretty little head. Had the motion to move the trial been granted, Hands’ non-resident status could have been jeopardized and he may have had to pay taxes due to England. And, God forbid, do some of the traveling to see his family.
• JPMorgan, Citigroup Helped Cause Lehman Collapse, Report Says [Bloomberg]
There’s so much blame to go around: Dick Fuld! Every Lehman CFO that ever worked there! JP Morgan, Citi, Ernst & Young (who we’ll get to shortly), you’re all at fault too! But mostly Dick Fuld. He was putting lots of pressure on Lehman’s balance sheet magicians to reduce the bank’s debt. The report states that Fuld was “at least grossly negligent” and if it gets worse than that, you’ll certainly hear about it.
According to the Bankruptcy Examiner’s report, there was plenty of parties that didn’t help matters. JP Morgan and Citi were demanding more collateral from Lehman as the firm tried to stave off death while E&Y sat back as LEH got all hocus-pocus with their accounting. So pick a company or person you don’t like and point the finger. It sounds like an argument can be made.
All this amounts to largest bankruptcy in history and boy will it sell a helluva lot of books, movie tickets, and HBO subscriptions. Silver lining!
• Trader faces up to 6 1/2 years in prison [Bloomberg via Boston Globe]
Former Boston Provident CFO Ezra Levy pleaded guilty to securities and wire fraud after being accused of stealing $3 million from New York-based Boston Provident Partners, LP. Levy told the judge that he used the money to pay ‘personal expenses’ although no word on what the loot was. Presumably not a fleet of limos.
• We Bought A Toxic Asset; You Can Watch It Die [NPR]
Ever dreamed of owning just a small piece of a toxic asset just watch the slow, agonizing death? Of course! Some reporters at NPR chipped in to invest $1,000 in a bond with over 2,000 bad, really bad mortgages all for the sake of journalistic interest. If the team somehow manages to make money it’s going to charity.
Citi needs an experienced accounting professional to join its Citi Capital Advisors Financial Control unit. This position will be responsible for maintaining and improving financial reporting processes for the unit’s management team.
Candidates should have a minimum of six years experience and a CPA license.
Get more details on the position, located in New York, after the jump.
Title: P&A Manager
Location: New York
Description: Financial Control is responsible for a variety of activities related to the firm’s financial reporting and controls. The team is divided into different areas of specialization where each member is responsible for a unique set of responsibilities that include both analytical and accounting roles. This position will assist in the management reporting and legal vehicle reporting within the Citi Capital Advisors (CCA) Financial Control unit.
Responsibilities: The primary responsibility will be to drive the core processes and assist the CCA Finance management team to have a robust and controlled financial reporting process for both management and legal books. This will include the estimate process, regulatory reporting for corporate and external purposes and monthly deliverables to both the CCA business and Citigroup Corporate Reporting. Additionally, this role will be responsible for leading the entire CCA finance division (controller and planning and analysis departments) in the 2010 rated audit, as well as the ongoing quarterly monitoring performed by internal and external audit teams.
Qualifications: Bachelor’s degree in Finance or Accounting degree required; CPA a requirement; 6 to 10 years of experience in financial control or related function required;
They already share a first name.
Other than that, they probably don’t have much in common but does anybody else have a problem with the fact that the head of the energy trading unit that Citigroup sold to Occidental last year is setting up a hedge fund?
It would be an entirely different situation if Andrew Hall were leaving Occidental to do this, but he isn’t. Instead, he will wear both hats simultaneously.
That sure sounds like a clear conflict of interest to us. After all, fee structure of a hedge fund clearly incentivizes Hall to favor its investors over Occidental’s, though the oil company has a 20 percent equity stake in the fund.
The FT doesn’t explore this issue for some reason, referring merely to the fact that the two companies will be run “separately” and that the trades will be done “in parallel,” whatever that means.
And the article’s point about this deal having an air of history about it seems woefully misplaced.
Forget the fact that Hall’s hedge fund, Astenbeck, is named after a village near the historic German castle he owns. The more telling historical reference has to do with the conflict of interest. Indeed, the last time we saw a conflict this clear-cut was when Andrew Fastow ran some of Enron’s key off-balance-sheet partnerships while serving simultaneously as its CFO.
It was the disclosure of that particular factoid in a footnote that helped prompt short seller James Chanos to question Enron’s financial results back in early 2001.
And maybe this is just a coincidence, but Enron was an energy trading company as well. Remember Get Shorty?
As a side note, my colleague Matt Quinn wonders if Hall’s hedge fund will attract a lot of Citigroup’s former fund investors, and even draw Citigroup itself as an investor. That would certainly make sense if the bank is forced to get out of proprietary trading, as the Obama administration is proposing. Plus the bank would get to benefit from trading without having to reflect the risk on its balance sheet.
But the big question is, would Citi and its investors be treated better than Occidental’s shareholders?
If busy season is already kicking you in the teeth and nothing has been able to motivate you, then perhaps it’s time to try something new. Or perhaps you just woke up and you realized you’ve got to pull your life together.
Whichever applies, Citi is looking to fill a Financial Accounting Analyst position with a minimum of five years experience in New York. Get the rest of the details after the jump.
Title: Financial Accounting Lead Analyst
Location: New York
Minimum experience: 5 years
Responsibilities: Participate in analyzing and advising on the regulatory capital implications of broad Corporate strategic initiatives (including, for instance, potential M&A activities); Partner with the Corporate Regulatory Reporting team in addressing regulatory capital and reporting issues of significance; Interface with Corporate staffs (e.g., Accounting Policy, Treasury, Corporate Reporting) regarding certain regulatory capital matters; Garner exposure to Clearing House discussions as well as those with the U.S. banking agencies (Fed and OCC) regarding complex and/or nuanced regulatory capital or other relevant regulatory matters of significance.
Skills: Bachelor of Science Degree – Accounting Major; CPA; 5 – 10 years professional experience, preferably a combination of public (ideally Big 4) and private within the financial services industry (commercial or investment bank); Preferably GAAP Accounting Policy or Regulatory Reporting or Advisory experience
• Ben Bernanke: Time’s “Person of the Year” – The JDA almost fools you into thinking that she wasn’t that upset over Time’s selection. [JDA]
• BofA Taps Moynihan as CEO – The search is now on for the location for the Ken Lewis send-off. [WSJ]
• Proxy Disclosure Of Stock-Based Comp To Change Under SEC Final Rule Approved Today [FEI Financial Reporting Blog]
• SAC Capital, Steve Cohen (And His Brother) Sued By Ex-Mrs. C – She’s alleging insider trading, concealing of assets during their divorce, and wants $300 mil for her trouble. [DB]
• Citi to Suspend Foreclosures for 30 Days – “The New York-based bank said Thursday the suspension will run from Friday through Jan. 17. It applies only to borrowers whose loans are owned by Citi. Borrowers who make payments to Citi but whose loans are owned by other investors are out of luck.” [AP via NYT]